WASHINGTON, Nov 15 (Reuters) - Community activists on Thursday called on Senate Democrats to help stop the U.S. government from banning certain mortgage down payment assistance programs designed to put low income and minority families into home ownership.
The ban, set out by the Department of Housing and Urban Development, has drawn tough criticism and legal action from the groups that provide this mortgage assistance to low-income home buyers. Lawmakers in the House, opposed to this ban, have introduced measures to keep this homeowner assistance in place but there has been no specific action so far in the Senate.
“If there are concerns by HUD that there is need to change the program, then we should mend it not end it,” said the Rev. Al Sharpton at a joint briefing here with Nehemiah Corp., one of the key organizations specializing in this assistance.
“Thousands upon thousands of people have used this program and have achieved home ownership,” said Sharpton whose organization, the National Action Network, sent a letter to Senate Banking Committee Chairman Chris Dodd, a Democrat from Connecticut, asking him to help keep this mortgage assistance in place.
These down payment assistance programs aid borrowers who qualify for government-backed FHA loans but do not have access to the minimum down payment requirements of at least 3 percent.
According to Nehemiah Corp. president and chief executive, Scott Syphax, down payment assistance programs have helped nearly a million families become homeowners.
Nehemiah is a nonpartisan, faith-based organization and the oldest privately funded, down-payment assistance provider. It has provided gifts to nearly a quarter of a million families.
“This is a critical public policy issue,” Sharpton said.
In announcing this ban in September, FHA chief Brian Montgomery said these down payment assistance programs would be discontinued because borrowers who receive the aid have a higher default rate.
“I have visited working families across the country, not just in my own community, but in Latino communities as well as other poor neighborhoods and I can testify that down payment assistance programs are turning cycles of poverty into legacies of wealth,” Sharpton wrote in a letter to Dodd.
In the midst of the subprime mortgage crisis, Sharpton warned that now is not the time to keep homebuyers from accessing safer mortgages through the government’s FHA program.
The FHA, set up in 1934 during the Great Depression, was designed to help first-time home buyers win favorable loan terms by guaranteeing mortgage payments to lenders.
Lawmakers are now considering reforms to FHA designed to assist subprime borrowers in finding better financing. A Senate measure would reduce down payment requirements from 3 percent to 1.5 percent, but in so doing, the pricing for these loans could be risk-based and this too has drawn criticism from community and housing activist groups who fear that minority and low-income families would be saddled with higher mortgage rates. (Reporting By Joanne Morrison; Editing by Neil Stempleman)