A federal judge in Utah said at a hearing last week that he would be granting a motion to delay the implementation of changes to the Federal Housing Administration’s down payment assistance rule as a debate over the new guidance rages on in federal court.

At issue is new guidance published by the Department of Housing and Urban Development in April that clarified the documentation required for borrowers using funds from another person or entity to cover part of the FHA’s minimum down payment requirement of 3.5%.

But while HUD labeled the new rules as merely “informal guidance” intended to bring more clarity, a group of Utah-based Native Americans took issue with the mandate, which claimed that the rules effectively put its down payment assistance program out of business.

That led to a lawsuit filed against HUD on behalf of the Cedar Band of Paiutes, a federally recognized American Indian band that operates the Cedar Band Corp. and the CBC Mortgage Agency.

According to the suit, HUD’s new guidance “unlawfully targets American Indian tribes and bands by prohibiting them from participating in home-purchasing assistance programs and thus threatens a critical source of revenue for the Cedar Band.”

The lawsuit sought an order to immediately halt the policy’s enforcement on the grounds that it was adopted without issuing proper notice and opportunity for comment, and that it stands in violation of federal law.

Immediately following the suit’s filing, HUD issued a 90-day stay to review the policy in light of the Cedar Band’s claims.

Now, as the battle continues in court, a federal judge is formally halting the implementation of the new rule until the case can be decided.

Helgi Walker, lead counsel for the group and a partner Gibson Dunn, said the Cedar Band was happy to see the mortgagee letter delayed.

"We are pleased with the district court's attentive and thoughtful approach at the hearing on our motion for a preliminary injunction against the HUD Mortgagee Letter,” Walker said. “We are extremely gratified that the court orally indicated it would grant our motion, and we look forward to reviewing the forthcoming opinion. This relief is critically important to Chenoa, CBCMA, and the Cedar Band, as well as the borrowers who rely on CBCMA for down payment assistance.”

The Cedar Band Corp. operates the CBC Mortgage Agency, which provides down payment assistance to borrowers nationwide through its Chenoa Fund.

Through its programs, CBC Mortgage Agency earns money that goes to the Cedar Band, which uses the money to fund economic, cultural, and educational programs, and maintain the Cedar Band’s buildings on a reservation.