Once this bill (H.R. 3221) is signed it will eliminate seller assisted down payment programs, such as Nehemiah. These programs have been used for years to assist homebuyers with purchasing while using an FHA loan, in effect, creating 100% financing. Unfortunately, while many Realtors and Lenders used these programs responsibly, many others did not; inflating home values, increasing listing prices, there were many issues and cases of fraud.
Having worked with many first time homebuyers over the last 8 years, and utilizing Nehemiah, I am sad to see it go, when used responsibly and in the spirit in which it was created, it is an amazing tool.
So what now?
1. If you were thinking of buying a home using the program, act real fast.
2. The state of Colorado has more than 25 city, county and state run programs to provide assistance with down payment and closing costs. Most of them considered ‘difficult’ by lenders not authorized to use them, and side stepped because ‘seller assisted downpayment’ programs were so easy. THESE PROGRAMS STILL EXIST, WORK, AND ARE NOT AS DIFFICULT AS YOU MAY HAVE HEARD. Yes, there are income limitations, but not as low as you might think. These programs are working for many buyers.
FOR EXAMPLE: CHFA 3% downpayment. 0% interest. No payments first 9 years. We are closing these loans, they work and are great. Currently there are very few lenders (you have to be a mortgage bank, closing and funding your own loans to meet their requirements) set up with CHFA – we are one and it’s going to become more important.
3. If you have VA eligibility – this is your absolute best 100% loan.
I’m sure many of you have questions about this – call or e-mail – and we’ll get you answers!
Here’s information from Nehemiah’s site.
H.R. 3221 Housing and Economic Recovery Act of 2008
Today, the House of Representatives passed H.R. 3221, a wide sweeping piece of legislation that addresses a variety of housing related issues. The bill is headed for the President’s desk where his prompt signature is expected.
On pages 479 – 481 of the bill, the elimination of down payment assistance is cited (SEC. 2113) with an end date of October 1, 2008. The specific language states that the law “shall apply only to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.” The full language of SEC. 2113 is included below with a link to the bill at the bottom of this section.
SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE.
- Paragraph (9) of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended to read as follows:
- (9) CASH INVESTMENT REQUIREMENT-
- (A) IN GENERAL – mortgage insured under this section shall be executed by a mortgagor who shall have paid, in cash or its equivalent, on account of the property an amount equal to not less than 3.5 percent of the appraised value of the property or such larger amount as the Secretary may determine.
- (B) FAMILY MEMBERS – For purposes of this paragraph, the Secretary shall consider as cash or its equivalent any amounts borrowed from a family member (as such term is defined in section 201), subject only to the requirements that, in any case in which the repayment of such borrowed amounts is secured by a lien against the property, that —
- (i) such lien shall be subordinate to the mortgage; and
- (ii) the sum of the principal obligation of the mortgage and the obligation secured by such lien may not exceed 100 percent of the appraised value of the property plus any initial service charges, appraisal, inspection, and other fees in connection with the mortgage.
- (C) PROHIBITED SOURCES.—In no case shall the funds required by subparagraph (A) consist, in whole or in part, of funds provided by any of the following parties before, during, or after closing of the property sale:
- (i) The seller or any other person or entity that financially benefits from the transaction.
- (ii) Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause (i). This subparagraph shall apply only to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.’’