Editors Note: Back in 1997 during our last real estate slump I wrote about how to quickly sell your house using a Down Payment Assistance Program to “Get Full Price and Cut Your Holding Costs in Half.” This was an innovative program run by nonprofits (such as Nehemiah) who would accept a charitable gift from the seller and in turn gift a portion of it to fund your buyers down payment with a new FHA mortgage. It was a great idea that really helped a lot of buyers into their first home. Then in 2007 the IRS ruled many of these non-profits are not really non-profit and HUD issued a ban on these programs – and we thought the “Nehemiah Program was Gone?” Nehemiah fought back and they won. This is a big win for investors, as we can now use this great tool to help sell our properties in this tough market.
United States District Judge Paul L. Friedman filed a preliminary injunction temporarily barring the Department of Housing and Urban Development (HUD) from enforcing a ban on seller-financed down payment assistance programs Oct. 31, 2007. The ban had been set to go into effect that same day.
HUD filed the ruling banning the use of seller-financed down payment assistance programs in conjunction with FHA loans Oct. 1, 2007. The ban was spurred by HUD’s findings that homebuyers who made use of these programs were twice as likely to default on their mortgages as those who did not.
(For more information on the ban itself, see our previous article Down Payment Assistance Ban Alters Housing Market.)
Nehemiah Corp. of America supports homeownership education for loan applicants AmeriDream Inc. and Nehemiah Corp. of America–the two most prominent down payment assistance charities–along with several other such groups immediately sued HUD in an attempt to block the ruling. Their claims were upheld in court.
Judge Friedman ruled that the ban would put seller-financed down payment assistance charities out of business, that HUD had failed to consider reasonable alternatives and that HUD had “failed to provide a rational basis in support of [the ban].”
“We applaud the Court for recognizing… the important role down payment assistance providers like Nehemiah play in ensuring the future of homeownership for families working to reach the American dream,” Scott Syphax, president and CEO of Nehemiah, said in a statement. “Going forward, we welcome the opportunity to work constructively with HUD toward the mutual goal of serving America’s underserved families.”
Syphax said there are some issues to be addressed in the programs. Some improvements Nehemiah supports are homeownership education for loan applicants and appraisals done “at arm’s length” according to The Washington Post.
The new ruling will keep the down payment assistance ban from going into effect pending a further hearing date, which is yet to be set.
For up to date information please visit Nehemiah at: http://www.getdownpayment.com/updates/insidetrack.asp
