Housing Bill Limits Government Agencies in Ability to Resell Foreclosed Homes to...

Housing Bill Limits Government Agencies in Ability to Resell Foreclosed Homes
to Local Homebuyers
Legal Analysis Confirms Downpayment Assistance Ban Stretches Beyond Non-Profit
Groups

SACRAMENTO, Calif., Sept. 2 /PRNewswire-USNewswire/ -- According to legal
analyses conducted by two Washington D.C.-based law firms, language within the
Housing and Economic Recovery Act that ends seller-financed downpayment
assistance (DPA) for FHA loan borrowers by non-profit groups, does not make
exceptions for government agencies or local governments that still want and
are able to provide DPA. The result is that many such government agencies or
local governments also will be stopped from providing DPA by that new
language.
Simultaneously, the Act allocates $4B for local governments to purchase,
refurbish and sell foreclosed properties, making homeownership more attainable
for working class families. However, the Act, by eliminating seller funded
downpayment assistance, will cripple local governments' ability to sell those
very same homes in combination with an FHA mortgage should those families
receive a downpayment from the agency selling the home.
"As towns and cities work to recover from the housing crisis, this
overlooked but critical element within the Bill greatly limits these entities
from being able to buy and sell the swath of abandoned or foreclosed homes to
needy families," said Scott Syphax, president and CEO of Nehemiah Corp. "The
Bill overlooks the fact that many of these families will be first-time
homebuyers without access to a downpayment. Traditionally, local governments
and agencies would help by providing this downpayment assistance. However,
because of overly broad language, this will often no longer be an option for
many of these transactions, should the homebuyer want to receive an FHA
insured mortgage."
According to a letter written by Weiner Brodsky Sidman Kider PC,
affordable housing funds of government agencies, housing finance agencies or
Federal Home Loan Banks cannot be used to provide DPA to worthy FHA loan
borrowers if those agencies providing that DPA also "financially benefit" from
the sales of the homes. For example, when a local government agency
rehabilitates a foreclosed home and sells it, as part of its neighborhood
stabilization or recovery plan, it cannot also help the buyer purchase that
home with an FHA loan by providing DPA to that buyer. If it did so, when that
government agency (or its sister agency) then receives transfer or real estate
taxes following that home sale, it would "financially benefit" from that sale.
The Act does not permit a provider of DPA to do that.
In addition, the analysis by Patton Boggs LLP states that since the
mortgagor must pay not less than 3.5% of the appraised value of the property
in cash or its equivalent on an FHA-insured loan, any donation by a government
entity toward this 3.5% downpayment requirement is prohibited if it has
obtained those funds either directly or indirectly from the seller of the
property.
Danette O'Neal, formerly the Commissioner, Louisiana Housing and Finance
Agency serving under Governor Kathleen Blanco stated, "In an already severely
depressed state like Louisiana, limiting aid to local families in need is
preposterous." Ms. O'Neal continued, "I can only imagine the devastating
impact the October 1 ban will have on the state. As we approach the third
anniversary of Hurricane Katrina, the citizens are still facing a shortage of
decent housing, a lack of affordable housing loan products, and insurance
prices that severely affect affordability. The downpayment assistance programs
have helped hundreds of families regain some sense of normalcy in our
Hurricane ravished state as well as regain confidence in the American dream.
Reinstating these programs is a must and Congress needs to revisit this issue
for the sake of towns and cities nationwide."
"By limiting the pool of homebuyers to only those who are able to provide
their own down payment, the Administration is shooting itself in the foot,"
Mr. Syphax said. "This is yet another example of how the Administration has
overlooked and underestimated the integral role DPA plays in not only
providing necessary help for a high percentage of first-time homebuyers, but
also its place in steadying the housing market. Folks on all sides of the
equation are going to have a much harder time come October 1 unless DPA is
reinstated - and quickly."
On June 31, Representatives Maxine Waters, Gary Miller, Al Green and
Christopher Shays on July 31, 2008 introduced a bill that would reinstate DPA.
If passed and signed into law, the FHA Seller-Financed Downpayment Reform and
Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) will allow
downpayment assistance to continue indefinitely. Visit www.dpagroundswell.org
for more information.
The firms Patton Boggs LLP, and Weiner Brodsky Sidman Kider PC were
retained by Nehemiah Corporation of America, the largest provider of
seller-funded downpayment assistance. The full analysis is available upon
request.
About Nehemiah Corporation
The Nehemiah Corporation of America is committed to rebuilding communities
from the inside out. Along with a variety of programs and affiliate
organizations like the Nehemiah Community Foundation, the Nehemiah Corporation
leads the nation in urban revitalization and redevelopment. Founded in 1994,
the Sacramento-based nonprofit organization operates programs nationwide,
including The Nehemiah Program(R), the country's largest downpayment
assistance program that has given free downpayment gifts to more than 300,000
families and individuals who are now proud homeowners.
Contact:
Emily Parker
212-446-1889
eparker@sloanepr.com

SOURCE The Nehemiah Corporation of America

Emily Parker, +1-212-446-1889, eparker@sloanepr.com, for The Nehemiah
Corporation