DEL.ICIO.USDown payment assistance program to end
The Atlanta Journal-Constitution
Saturday, September 06, 2008
The path to home ownership could become a little harder for some to travel beginning next month.
Effective Oct. 1, an initiative that helps home buyers with down payments will no longer exist.
PHIL SKINNER/pskinner@ajc.com
Home seller Harry Hayes checks the information box on the for sale sign in front of his Cumming home while wife Lori (center) and real estate agent Carol LaBranche watch. On Oct. 1 a popular program that helps home buyers with down payments ends.
That’s because one of the provisions of the Housing and Economic Recovery Act of 2008 signed into law in July was the elimination of seller-funded assistance on Federal Housing Administration-backed mortgages.
FHA loans require buyers to have a down payment, one of the largest barriers to home ownership, said Ann Ashburn, president of AmeriDream, a Maryland-based nonprofit that helps buyers pull the money together through seller assistance. Ashburn estimates that almost 40 percent of new home buyers use such programs, which receive no federal subsidy. But lawmakers axed the programs because a number of FHA borrowers who went into foreclosure in the past year had down payment assistance. Current home buyers must have their FHA loan applications approved before Oct. 1 to use the seller assistance programs.
In an already slow housing market, that makes it tougher for sellers like Harry and Lori Hayes of Cumming.
They are eager to sell their four-bedroom home because they are moving out of Georgia in the coming weeks.
The Hayes home is listed at $309,900, and a potential buyer who pays the asking price and uses an FHA loan would have to make a down payment of $9,297, which is 3 percent of the price. Their real estate agents, Carol and Joe LaBranche, suggested using down payment assistance as a marketing strategy to eliminate or greatly reduce that amount for potential buyers.
The house has been on the market less than a week and it typically takes 30 to 60 days for a house in that price range to sell, Carol LaBranche said.
The FHA does not allow sellers to provide assistance directly to buyers, but the government ruled in 1998 that money routed through a nonprofit doesn’t conflict with that prohibition, allowing such programs to surge in popularity.
The Hayeses have signed up to use the Nehemiah Program, a product of the Nehemiah Corp., based in Sacramento, Calif. The Nehemiah Program, and others like it, require home sellers to give between 1 percent and 6 percent of the final contract sales price or a flat amount to the organization. The organization then passes that amount on to the buyer to cover down payment and closing costs, after charging the seller a processing fee — typically around $400 to $600 — for its services.
Ashburn and others with interest in the programs are lobbying senators and congressional representatives to repeal this provision of the Act before Sept. 30 so down payment assistance can continue.
If the assistance provision is not repealed, there won’t be many options for people who need help making a down payment, said Scott Syphax, president and chief executive officer of Nehemiah. Syphax said programs like Nehemiah and AmeriDream are the “safety net programs for those who don’t come from wealthy families.”
“Don’t get me wrong, there are a number of great city and state programs that offer down payment assistance,” he said. “But those programs are only able to help a very limited number of people.”
Additionally, the minimum down payment for an FHA-insured loan is scheduled to go up from 3 percent to 3.5 percent on Oct. 1. That means buyers will have to come up with an extra $1,075 to buy a $215,000 home, the median asking price of a new home in the metro Atlanta area according to housingtracker.net. The Web site tracks real estate inventory and asking prices of single family homes and condos across the country.
— The Associated Press contributed to this story
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