President Bush signed H.R. 3221 Housing and Economic Recovery Act of 2008 into law on July 30, 2008. Included in this bill was the elimination of downpayment assistance (DPA) programs.  Borrowers who are credit approved prior to October 1, 2008 can receive downpayment assistance and have their loan FHA-insured.

While H.R. 3221 was intended to “rescue” the housing industry, the elimination of the DPA program will have the exact opposite effect of its intended purpose.  Not only did it eliminate DPA programs, it also instituted a downpayment requirement increase from 3 percent to 3.5 percent.  This combination is a recipe for disaster and will further hurt the already crippled housing market.

Preserve downpayment assistance programs for families who are credit-worthy, but lack the savings necessary to fulfill their homeownership goals, protect the already fragile economy, improve the current housing market, and save jobs.

Currently, roughly 40 percent of the monthly FHA loan origination volume utilizes downpayment assistance to help lower-income Americans meet the previously mandated 3 percent downpayment requirement.  It is estimated that 10-25% of potential homebuyers (approximately 50,000 nationwide) will have no way of securing homeownership with DPA programs. With the stroke of the president’s pen, millions of deserving Americans are now left with zero alternatives for attaining homeownership.

In order to save downpayment assistance programs, we need to come together NOW to convince Congress to pass H.R. 6694 that allows downpayment assistance to continue indefinitely.

On July 31, 2008, a new bill, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) was introduced by several members of Congress.  Representatives Maxine Waters, Gary Miller, Al Green and Christopher Shays sponsored the bill that if passed and signed into law will allow downpayment assistance to continue indefinitely.

Act Now! Contact your elected officials and urge them to support H.R. 6694 that allows downpayment assistance to endure. Failure to act now will ensure the death of all private downpayment assistance programs.

Here is the email response I received from Colorado Senator Ken Salazar regarding his view on this issue~

Dear Ray:

Thank you for contacting me with regard to down payment assistance programs in H.R.3221, the Foreclosure Prevention Act. I appreciate hearing from you.

Down payment assistance programs are intended to help families who would otherwise struggle to come up with the down payment necessary to qualify for Federal Housing Administration (FHA) mortgages. However, both HUD officials and a number of members of Congress have raised concerns about the way some of these organizations fund their activities.

These concerns are based on the fact that many of these non-profits work actively with sellers, often receiving reimbursements for down payments made from the sellers themselves in the form of donations. They also usually charge the seller a service fee, which amounts to millions of dollars in revenue.

In light of these concerns, H.R.3221 forbids FHA from insuring mortgages in which the borrower’s down payment comes from a private down payment assistance provider. The bill passed the Senate with my support and was signed into law by President Bush on July 29, 2008.

Again, thank you for writing. Please be assured that I am supportive of efforts to encourage homeownership, especially those aimed at families who struggle to afford their own homes, and that I will keep your thoughts in mind should the Senate consider legislation pertinent to this issue in the future.

Sincerely,

Ken Salazar
United States Senator

To send him a personal message on your beliefs and viewpoints on how he should support this new bill visit:  http://salazar.senate.gov/contact/email.cfm