What’s Going To Happen To Those Buyers Come Oct. 1?
I suggest the topic of coming changes in the down payment assistance program. ABC 15, “A ban on seller-funded down payment assistance programs will kick in October 1 when the new Housing Bill takes effect. Critics say the programs, which basically allow sellers to pay for a buyer’s down payment, artificially inflate home prices. Supporters say they are the best way to get a buyer into a home.”
“‘We have to get the loan figured out before the 1st of October because that’s when the AmeriDream program ends,’ said David Mills.”
“David and his wife Julie have four kids and are expecting a fifth. They are looking for a home after learning the home they have been renting is about to go to the auction block in October.”
“It took two months to look for a home, but according to their RE/MAX realtor Danielle Martinez, it only took about a week to sign a contract and make a deal.”
“Martinez said, ‘We are advising our sellers to be as aggressive now with pricing to make sure we get the buyers in, because we basically need to have them in Escrow with in the next week to close by September 30. FHA loans take a little bit longer so we need the full month of September to close them.’”
“David added, ‘I hope it all works out because when you buy a house you’re pretty well stuck with it.’”
From KTAR.com. “A hot program responsible for a big chunk of home sales is about to disappear. The Down Payment Assistance Program was the last zero-down program available for people looking to buy a home, but a new housing bill eliminated the program, which had sellers donate the downpayment to a charity which then passed it on to the buyer.”
“The program was supposed to end Oct. 1, but Valley mortgage broker Dean Wegner said it’s happening sooner.”
“‘Banks are pulling out right now,’ Wegner said. ‘If you’re approved and you’re looking for a house, using down payment assistance, you should have a house in escrow in at least the next 10 days and close on or before Sept. 15 — Sept. 20 at the very latest.’”
“Wegner said 30 to 40 percent of all home sales have used down payment assistance. Uncertainty about the future of mortgage giants Fannie Mae and Freddie Mac is responsible for banks getting out of the program fast, Wegner said.”
“‘The banks are pulling out six to seven weeks ahead of HUD’s announcements because they are furious that if they go to sell it (a mortgage) to the FHA, the FHA’s not going to buy it and they’re going to get stuck with a loan that is totally unsellable to anybody,’ he said.”
The Reno Gazette Journal. “The median sales price for an existing single-family in Washoe County in July was $251,000, a 5 percent decrease from June and down 22 percent from July 2007.’
“Washoe County reported 386 existing single-family home sales in July, an increase of 6 percent from the previous month and up 31 percent from the same period last year. Besides increased affordability due to lower median prices, the uptick in sales is also likely the result of buyers trying to get in before key changes from the Housing and Economic Recovery Act of 2008 take effect this October, said Ken Wiseman, broker-owner of Reno Rancho Realty.”
“One change will close the loophole that allowed down payment assistance programs such as Nehemiah and Ameridream to be used with Federal Housing Administration or FHA loans, Wiseman said. The programs basically make it possible for home sellers to indirectly contribute the 3 percent down payment required by the FHA to home buyers.”
“The changes, combined with the fact that they will take effect in a month when housing sales traditionally start to slow, could have a negative impact on home sales in October, Wiseman said. But they are also spurring more sales now.”
“‘Word is out on the street now that if you’re looking to do an FHA loan with down payment assistance, you better hurry up,’ Wiseman said. ‘About 40 percent of all the offers I get now are for FHA loans with down payment assistance. What’s going to happen to those buyers come Oct. 1? I guess we’re going to find out.’”
The Pioneer Press. “The clock is ticking on the popular no-money-down “gift” programs for people lacking cash for a down payment on a home. The country’s new housing law bans seller-funded down payment assistance starting Oct. 1, adding another dash of turmoil to the nation’s reeling housing market and sparking alarm - or cheers - depending on whom you talk to.”
“Nonprofit gift assistance is a critical safety net for working Americans, they say, including more than 15,000 Minnesota homebuyers estimated to have gotten their down payments through just one such group, Nehemiah Corp. of America.”
“‘It’s a program that’s really for the little people,’ said Scott Syphax, president of Sacramento, Calif.-based Nehemiah, one of the largest down-payment assistance charities.”
“The FHA criticizes the deals as circular financing schemes that can take advantage of vulnerable homeowners and claims the loans default much more frequently.”
“Seller-funded down payment programs are almost exclusively used with FHA-insured home loans. The ‘gift’ is money provided by so-called charities working with home sellers, not gifts from relatives or public agencies. The nonprofit essentially forwards money for the down payment from the seller to the buyer via a donation the seller makes to the nonprofit.”
“The nonprofit pockets a fee, typically about $400. The seller unloads a property. The buyer gets into a home with no money out of pocket.”
“Such deals took off in the Twin Cities in the past few years as other subprime loan products fell by the wayside, said Chris Galler, chief operating officer of Edina-based Minnesota Association of Realtors. Agents are reluctant to let go of any option for borrowers given the shrinking bag of mortgage tools available, Galler said, but they realize it’s best for homeowners to have skin in the game and generally support the ban.”
“‘Long term, we would say it’s the right thing for the marketplace,’ Galler said. ‘Short-term, I think it’s going to be a headache.’”
“To Patti Mazzara, that’s an understatement. Mazzara, a mortgage broker in Edina, said she anticipates fallout from the ban as would-be buyers get cut off from a market sinking in excess inventory. There is a real need for 100 percent financing, Mazzara said, because it is so difficult for many working-class people to save for down payments at today’s higher home prices.”
“‘These are still proven, qualified homebuyers. We’re not pushing people who have bad credit,’ Mazzara said.”
“Her clients Aaron and Amanda Swanson are buying a $132,000 split-level in Big Lake with an FHA-insured mortgage and $7,920 from Nehemiah for the 6 percent down payment. Amanda, 27, is a stay-at-home mom while her husband works in a machine shop making steel tubing. They rent a townhome in Coon Rapids and simply couldn’t save enough for a down payment, she said.”
“Amanda said she’s never owned a home and has always wanted the security. ‘We never lived in a house that was ours,’ she said. ‘For my daughter’s sake, I wanted something she could live in and stay in and have as her own.”
“‘I’ve told everybody I can to try to get a house, if they want a house, before October 1,’ she added.”
“The FHA has made it clear the charity programs are a problem. Federal Housing Commissioner Brian Montgomery has said data show FHA-insured loans made to borrowers relying on seller-funded down-payment assistance ‘go to foreclosure at three times the rate of loans made to borrowers who make their own down payments.’”
“Studies have shown that some sellers stick the extra ‘gift’ down payment onto the end of the loan, increasing the price and loan amount, meaning buyers pay for it over the life of the loan.”
“The IRS ruled in 2006 that the specialized groups don’t qualify as tax-exempt charities when they are paid by sellers to simply funnel money from seller to buyer in a self-serving circular loop. Since then, the IRS has revoked the tax-exempt status of more than two dozen nonprofit down payment assistance groups.”
“The average down payment gift is about $4,500, Syphax said, which works out to about $20 a month. ‘Down payment assistance is the safety net provider for housing opportunity in this country,’ Syphax said. ‘Cutting that net out from underneath working families is going to kill housing opportunity. The ripple impact across the economy is going to be enormous.’”
The Star Telegram. “Qualified buyers who act quickly can move into a new Legacy home with no out-of-pocket expenses at Lakes at Lost Creek.”
“‘Qualified buyers who purchase a completed home by Sept. 15 and finance with MTH Funding are eligible for both a zero down payment and $5,000 in closing costs, so the majority of our buyers pay no out-of-pocket costs,’ said Curt Fletcher, community sales manager. ‘But the government is ending the federal Down Payment Assistance Program next month, so visit us today before it’s too late.’”
“Lakes at Lost Creek features Legacy homes priced from the $130s to the $170s and Meritage homes priced from the $170s to the $200s. Home sizes range from approximately 1,550 to 3,000 square feet.”
“The zero down payment promotion is available only on completed homes. Buyers who prefer to build from the ground up can receive a dream package valued up to $20,000. Buyers who contract by Sept. 15 to build a new Legacy or Meritage home at Lakes at Lost Creek will receive popular designer features.”
From Reuters. “Known as ’seller-funded down payment assistance,’ builders could pay up to 6 percent of a home’s sale price. The ban is a near-term negative for the industry, since it will shrink the pool of potential buyers, raise cancellation rates and weigh on already-depressed builders’ shares.”
“The chief executive of the largest U.S. home builder, D.R. Horton Inc, said he ‘got suicidal’ over the ban.”
“‘I’m absolutely shocked by it. And I’m upset by it,’ Horton CEO Don Tomnitz told analysts on a recent call. ‘To take 10 percent, 20 percent, 30 percent of the buyers out of the home buying decision, at a point in the economy that they did, it’s absolutely ludicrous.’”
“While the new law contains a $7,500 tax credit for first-time buyers, that will not offset the ban on down payment assistance, which had no such restrictions, National Association of Home Builders CEO Jerry Howard said.”
“What’s more, builders had come to rely increasingly on down payment assistance as the credit crunch forced more buyers into the very government mortgages affected by the ban, Morningstar analyst Eric Landry said.”
“Assisted down payments secure about a third of the Federal Housing Authority’s portfolio today, up from 18 percent five years ago, said Housing and Urban Development spokesman Lemar Wooley.”
“In reducing the number of potential buyers, whether or not they could afford down payments, the ban ‘could cause another leg down’ for builders by depressing home prices further and forcing them to write off the value of more land, JP Morgan analyst Michael Rehaut said on a conference call for clients.”
“Also, cancellation rates could rise because agreements to buy homes struck before October 1 could see any assistance invalidated by a routine credit recheck after that date, said Bill Renner, NAHB’s director of single-family finance.”
“Builders such as Horton and Centex Corp, which both target first-time buyers, will especially feel the loss because more of their customers need either financial help or a government-backed loan, or both.”
“Horton assisted 21 percent of buyers in its latest quarter, up from 7 percent in all of fiscal 2007, while Centex assisted buyers in a quarter of closings. Lennar Corp tops the big builders with about a third of its closings using down payment assistance in the second quarter, spokesman Scott Shipley said.”
“Even luxury builder Toll Brothers Inc, which does not offer down payment assistance (DPA), will be hurt as owners struggle to trade up, CEO Bob Toll said on a conference call. ‘We would expect that the whole daisy chain of the market will be impacted to some extent,’ he said.”
“Still, some builders see the logic in the ban.”
“‘The end of DPA will probably pressure industry sales in the near term, but over time, our buyers and the market will adjust,’ Centex Chief Financial Officer Cathy Smith said on a conference call. ‘We continue to believe that a return to more normal qualification standards is a very good thing long term, even if it carries with it a little short-term pain.’”
“‘We have to get the loan figured out before the 1st of October because that’s when the AmeriDream program ends,’ said David Mills.”
“Ameridream” I had never heard of this program or progrum as most people pronounce it today. Good to hear it going the way of the Dodo though. It may save a number of fools from committing housing hara-kiri.
Perhaps this part of the housing bill made it palatable to Congresspeople who one would have expected to vote against a full-on bailout. Once again, we see legislation with PR value for politicians, but which will have little net effect (it gives with one hand and takes with the other).
Local Realtors here in N. Cal. have been touting the coming $7500 “tax credit” for new buyers, while failing to mention the simultaneous demise of these “down-payment assistance” scams.
“Local Realtors here in N. Cal. have been touting the coming $7500 “tax credit” for new buyers,”
Some of the local realt-whores with no conscience know that it’s really just a 15 year loan, but fail to mention that little qualification. I’m so happy to see these worthless realt-whores take a pay cut over the past several years and hopefully many more in the future, and eventually the “profession” eventually goes away.
Ameridream has three times the rate of foreclosures as reg. FHA with no subsidy from the sellers. The home builders just want to sell product, the realtwhores and lenders want to close escrows for their commish. Whats wrong with that? hehehehehehe
WTF? Why are people still having FIVE KIDS? I don’t care if you can afford to raise them — my wealthy sister has four kids — when they are grown up they will be competing for the limited resources along with the rest of us…more traffic, more pollution, etc. I don’t care what your religious affiliation is…we all have the responsibility of not adding to overpopulation of this already overpopulated country. Zip it up!
As much as I dislike these kinds of schemes, I feel this kind of government intervention is not necessary. If the banks don’t do a good job verifying income and down payment, let them fail. If investors still buy those toxic loans, let them lose all they have. Making schemes illegal does not eliminate the need for basic business sense.
I posted a quote from a UHS south of the Bay Area in CA a few weeks ago stating this would eliminate 80-90% of current buyers. This program should have been killed years ago. Ohio and Michigan railed against it as early as 2005! It was a scam, pure and simple. Builders would tack on the ‘gift’ to the purchase price and people who couldn’t save would get a loan. The fact that the default rate was triple the norm proved this couldn’t go on. Good riddance.
I looked it up, you’re right, nothing but a scam to benefit home builders.
http://www.ameridream.org/Newsroom/PressReleases/2008/HomeBuildersPredictDevastatingImpact
As a lender I have actually no problem with allowing sellers to give buyers a second mortgage…provided the sale price is at or below comps. In such cases, the sellers themselves are taking the risk that the property may not retain its value. I don’t really see how that differs from the program described. Of course, I’m not trying to sell any of my 9% notes to FHA, nor would I agree to sell them unless FHA were buying them above my book value.
What you are saying goes along with the fact that there have always been subprime loans. But only 1-2% of the market, and everyone accepts the resulting 12-14% default rate. It was the wide acceptance of these schemes that has put so many ‘less than creditworthy’ folks into houses they can’t afford and helped drive up prices. As we go along, it seems to me that things have a way of working toward sustainability. This is re-equilibrium in action, IMO.
You don’t see how it’s different???? In the case that you are positing, the seller is taking the risk on the second. With these DPA programs, the TAXPAYER is taking the risk, as there is no second, only an FHA insured first for an inflated price.
BTW - FHA doesn’t “buy” mortgages. FHA “insures” mortgages.
Pottery barn rules: You insured it, you bought it.
az lender –
Why is it that so many people are against the notion of allowing private citizens - i.e., individuals - assume the risk of the choices they make?
If a seller opts to pay for closing costs in a real estate transaction in order to get his or her property sold, whose business is it other than the two individuals/parties involved?
If the seller is willing to take a potential bath, why the hell should the government care?
If the seller is willing to take the risk, why should the taxpayer cover his or her ass?
I want governments to mind their own business. Their business is NOT to interfere with the private citizen’s right to self-determination. That’s OUR business.
Maybe because there are more than two parties to the transaction? Like the insurer, for instance? And when the insurer is the FHA, then the taxpayer is a party to the transaction. In transactions where government is minding it’s own business sellers and buyers can do whatever the hell they want.
Of course.
But who says insurers should have any fiscal ties to government (well, other than the insurers and the government, who love to swipe taxpayer money)? Taxpayers never should be forced to support/bail out insurers who make poor decisions.
Costs of creating/designing/developing/providing insurance should be borne directly by those involved in the transaction. If those costs are too high, then the insurance company is free to go out of business, or the parties involved are free to nix the transaction.
If the insurance/legal costs are prohibitive to a transaction taking place, tough. The transaction won’t happen. Everyone can pretend they’re Hank Williams and drop a tear in their beer.
Governments can regulate insurers to meet industry/legal standards - fine - but goverment shouldn’t regulate the TRANSACTION.
See the difference?
Government has grown big taking care of us and will continue to look for ways to get bigger.
When the government IS the insurer then the insurer (who is the government) gets to write the standards for the transaction. As a taxpayer you will find yourself in a world of hurt if you don’t buy that.
mort -
It’s not whether I buy it or not.
It’s that the government can stick a gun in my face and tell me that I MUST buy it, whether I like it or not.
Such action is not what a freedom-espousing government does. It’s what a patronizing, control-oriented, power mad entity does.
Why millions have no qualms about having their lives mandated by someone other than themselves is beyond me.
I really don’t get what you’re talking about. FHA inuring down payment assisted loans IS, in effect, the government sticking a gun in your face and telling you that you have to support these transactions. Come Oct. 1 the use of these things in FHA transactions will be prohibited. In other words, the government will no longer be sticking a gun in your face and telling you that you have to support incredibly risky transactions, only sticking a gun in your face telling you that you have to support moderately risky transactions. Why don’t you view this as a step in the right direction?
The government won’t my car…but plenty of companies will. Maybe the lack of alternative insurers for these loans says something.
Think about it.
I didn’t say I didn’t.
What I AM saying is that FHA shouldn’t exist - PERIOD. Taxpayers should not have to provide protection for the stupidity and criminal intent of others conducting real estate transactions. If Joe/Jill6 is stupid, distracted or a crook, and finds him or herself up a creek for being so, let them find their own damn paddle.
This Oct. 1 thing is good - and it’s patently obvious that it is so. Only a moron or a crook thinks otherwise. The problem with October 1 is that this is a drop in the proverbial bucket.
I like where you’re headed Got Rocks, but you might not like my response to it.
My response: Who says homeowners have a right to affordable homeowner insurance?
If people can’t afford homeowner insurance - or can’t go without insurance because they stupidly locked up all of their assets in material possessions - maybe they should rent instead of own. Or, maybe they should buy a house, NOT insure either the building or possessions, not invite their litigious-minded “friends” over for a game of poker, and simply take their chances.
Or, maybe they should live in a 1,500 square foot, $125K house in Nebraska and put a sizable chunk of money aside for a rainy day. And not live in a 4,500 square foot McMansion and blow wads of money on golf club memberships, Starbucks and annual trips to DisneyLand.
Got Rocks, I think that if more Joe and Jill 6 packs do a better job of managing their own finances (by living more modestly), you’d see a great many more insurance companies entering the fray.
The problem is that the insurers have been able to suckle on the teet of the feds — doing so in response to being unable to fulfill insurance obligations to 150 million indebted Americans. If Americans were to salt their money away like the Japanese do, there’d be a great many more local, regional and national insurers offering product at much lower cost.
az lender
I am putting a bid in on a home today,final judgement on Wednesday $480,000 , sold for $190,000 in 95, $151,000 brand new in 82, my written bid submitted is $150,000 the realtor taking the bid says I have a shot 2 other offers have trouble with their applications.
My question for you, I called Bank of America and applied for a mortgage the other day , after 20 minutes of questions I was approved in three minutes 20% down 30 yr. fixed at 6.65% 1.25 points supposedly no other closing cost besides doc stamps. What do you think of the loan ?
“I posted a quote from a UHS south of the Bay Area in CA a few weeks ago stating this would eliminate 80-90% of current buyers.”
It sounds like another massive wave of price declines is in the cards.
Might already be underway.
Jon Lansner’s OC blog has a weekly post with numbers from DataQuick, more or less a monthly moving average for the period ending about a fortnight before the post.
For all sales, there was a $15,000-odd decline in the median price for the 22 business days ending 6th August, compared to the 22 business days ending 28th July. Existing condo resale prices were relatively static, but existing sfh resale prices were down $20K and new construction prices were down $55K.
I couldn’t help thinking sale prices for the first week in August must have taken a real hit to drag down a multi-week median by THAT much. It will be very interesting to see what next week’s numbers show.
Exactly right! It won’t eliminate buyers….it will LOWER PRICES!
The only way to make housing affordable? Lower the DAMN PRICES!
Ben:
You really caught some great quotes from the homebuilders…
Their panties are in a twisted bunch~
Exactly, Professor Bear. There will be another big wave down this fall and winter in the Bay Area largely because there will be so few buyers:
1. More people are losing their jobs or are worried about losing their jobs. The unemployment rate in California is already 7.3% as the phony, debt-based economy keeps imploding. People concerned about their employment prospects do not buy homes.
2. Downpayment assistance programs will no longer exist.
3. Most lenders apart from the VA and the FHA require 20% down payments to buy in the Bay Area. How many potential buyers in the Bay Area have $100K in cold cash for a down payment on a $500K starter home?
4. Mortgage interest rates have been rising, making homes less affordable. Rates are about 6.5% for conforming mortgages and 7.7% from jumbo mortgages.
5. Most important of all, more potential buyers are realizing that even after the price declines of the past two years, they can rent a place today for 50% to 60% of what it would cost to buy it!
I expect Bay Area prices to drop 20% from current levels by next fall.
Keep the popcorn popping,
Red Baron
‘Down payment assistance is the safety net provider for housing opportunity in this country,’ Syphax said. ‘Cutting that net out from underneath working families is going to kill housing opportunity. The ripple impact across the economy is going to be enormous.’
Why not just give poor folks the home with a $100.00 down payment?
You know the same technique that they use for ink jet printers…$25.00 for a brand new printer…and the “opportunity” to purchase $43.00 2 oz black & color ink cartridges for the next 5 years.
Just give poor folks the home. That way, there will be no political blowback later on when a bunch of low income families who only qualified thanks to government downpayment assistance get foreclosed.
But there will no doubt be blowback b/c all these poor folks got stuck in bad neighborhoods. At which point there will no doubt be some new regulation to “fix” that problem at the cost of even more victims of govt handouts.
It’s NOT a safety net. It’s a hangman’s noose.
“A hot program responsible for a big chunk of home sales is about to disappear. The Down Payment Assistance Program was the last zero-down program available for people looking to buy a home, but a new housing bill eliminated the program, which had sellers donate the downpayment to a charity which then passed it on to the buyer.”
Pardon my French, but all this f*cking convoluted sh*t replacing the some other thing of the same quality is getting very tiresome.
Memo to all the policos, industry hucksters and patronizing, hand-patting, there-there do-gooders out there: GET THE HELL OUT OF THE REAL ESTATE BUSINESS. YOU ARE A DETRIMENT. YOU ARE MAKING THINGS WORSE, NOT BETTER. Stand aside and let the market do its thing. Go home andwatch the grass grow. You’d be more productive and less caustic that way.
if you don’t have 20% down or need down payment assistance then you don’t NEED to be buying a house.
exactly den.
What’s especially amusing about it is…
They are essentially buying the very last tickets for the sailing of the Titanic, and so desperately want to make sure they’re on board.
“if you don’t have 20% down or need down payment assistance then you don’t NEED to be buying a house.”
Amen. If people can’t even save for a down payment, how on earth are they going to pay for repair/maintenance?
Damn straight.
“AmeriDream” seems to have left the station without any ‘can’ do, when it came to middle of the word management.
“Critics say the programs, which basically allow sellers to pay for a buyer’s down payment, artificially inflate home prices.”
True.
“Supporters say they are the best way to get a buyer into a home.”
What does “best” mean?
The use of “best” in statement two amounts to doublespeak. The comment suggests that handing a downpayment to a prospective buyer who cannot manage to save one for himself is a surefire way to generate a sale. But isn’t the inability to save up a downpayment a red flag for a low probability of loan repayment?
Is it really a worthwhile policy objective to prod every (potential) buyer into a purchasing home, regardless of their ability to afford to repay the mortgage, or their history of repaying previous credit obligations?
Supporters seem happy to overlook these pesky credit underwriting concerns, as home ownership is unequivocally better than throwing away money on rent.
“The FHA criticizes the deals as circular financing schemes that can take advantage of vulnerable homeowners and claims the loans default much more frequently.”
Who’d've thunk?
“But isn’t the inability to save up a downpayment a red flag for a low probability of loan repayment?”
“Red Flag” is putting it lightly.
I’ve said this before, hope I’m not wearing it out, but…
This bubble NEVER would have got any legs if:
All mortgage loan applicants HAD TO HAVE VERIFIABLE 10-20% DOWN PAYMENTS. Not “gifts” or kick-backs, but money they actually saved over months or years in a trackable bank account.
And furthermore, you can bet your a** the hard work and discipline it takes to save that kind of money alone would’ve made the hordes of newly minted “foreclosure victims” steer clear of the suicide loans they signed if they had had to save and plunk down that kind of cash.
This whole thing is one big cluterf**k of laziness and greed. And now we’re all going to deal with the fallout.
DOC
Amen, Doc!
Killing these programs gets people with no “skin” in the game, out of the game. Aren’t some of the issues and causes of the run up, suspect buyers, no down payments and walking away with zero risk???? Thought so! Sounds like a good idea to kill these programs.
I just found the following statement from http://www.dpagroundswell.org, “Non-profit downpayment assistance (DPA) is not any riskier than DPA gifts from family members or the government. Default claim rates for homeowners with an FHA loan after three years: no downpayment assistance is 3%, family/government assistance is 5%, DPA is 6%.”
Sounds like these programs bring more low-come families into homeownership than anything else out there. Has anyone considered the 94% remaining mortgages that did not defualt? Should all potential homebuyers in the future pay the price for the 6% that defaulted? Sounds a little unfair to me.
“‘These are still proven, qualified homebuyers. We’re not pushing people who have bad credit,’ Mazzara said.”
It’s not about qualifying people with bad credit. Rather it is about giving people with good credit the incentive to buy homes they cannot afford. The bad credit will come later when they get foreclosed.
Only government affordable housing policy wonks could have come up with such a nightmarish program.
The one problem with your theory that “only government affordable housing policy wonks could come up with such a nightmarish program” is that they didn’t. It was created by some Sacramento pastor as a “faith-based initiative.” Housing policy wonks have been trying to get rid of it ever since, but elected politicians kept supporting it.
OK, let me rephrase this: “Only government affordable housing policy wonks could have concluded such a nightmarish idea would make for effective low-income housing policy.“
If they believed that it would “make for effective low-income housing policy” then why have they been trying to get rid of it for the past 10 years?
I don’t get the “they” here. Why can’t the wonks tell Congress they are full of sh!t if necessary? Are they that cowed that they would rather throw away their reputations than point out the obvious?
They have. But Congress can tell them to do it anyway. If you want to see the wonks telling Congress that, and the Congressional response, just have a look at the questioning in this hearing. I keep trying to post this link, and it keeps failing to appear.
http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht062207.shtml
OK, this will be about the 6th time in the last hour that I’ve tried posting this link. Maybe this time it will actually work.
http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht062207.shtml
At the above link, the policy wonks at HUD DO tell Congress that these things don’t work, politely of course, as Congress controls their budget. But since Congress gets to write the rules …
Your question “why can’t the wonks tell Congress …” not only assumes facts not in evidence, but assumes “truthiness psuedo facts” that are fairly easily disproven. I could post a dozen links for housing policy wonks pointing out the obvious.
mort_fin,
Thanks for all the insight, and many apologies if my rant was unfair. I have such a hard time with these Congressional blowhards who go on and on about their deep concern for low income folks’ housing concerns, while they hypocritically lend support to programs which effectively throw the same low income households under the financial equivalent of a moving bus.
How is that “faith-based initiative” working out around Sac? Isn’t Sac one of the nation’s foreclosure capitals? Does Pastor Nehemiah (or whatever his name is) have a prayer that will help families escape the foreclosure process? Perhaps burying a statue of St. Joseph is the ticket…
“The nonprofit pockets a fee, typically about $400.”
Faith-based fleecing.
“Faith-based fleecing.”
Many churches are very adept at this sort of thing.
There’s BIG money in God! Some of the biggest scam artists on the planet are Evangelists. Some folks give their last dime and eat dog food so they won’t go to hell.
Those of blind-faith have been porking out @ our expense for over 7 years now, and have got used to the idea, but come January 20, they are going to be on the outside, looking in…
The candidates are still treating the evangs with kid gloves, as there’s an election to win, but there’s never been a 3rd Rail the likes of them politicaly, that both parties want nothing to do with, and can’t wait to jettison, once opportunity presents itself.
“Faith-based fleecing.”
Nehemiah was reeeeeally big in Utarr. Along with that other very wide-spread faith-based fleecing program ol’ Horndog Joe Smith the Profit came up with awhile ago. But with that one, it’s 10%, instead of 3%, plus you are ordered to wear unattractive panties. Then again, that 10% plus the panties gets you into the Celestial Kingdom later! Hmmmm…which one has the most merit? Dadgummit, I’m just conflicted all over the place.
Mormonism truly is a “Made in America” product.
Bummer about the unattractive panties, however. Real big bummer.
more than 15,000 Minnesota homebuyers estimated to have gotten their down payments through just one such group, Nehemiah Corp. of America
The biblical-themed name is a nice sleazy touch.
Hucksters know that a certain portion of religious people (not all of them) are easy marks for scams. Dazzle them with some familiar phrases from their dogma to convince them you are ‘in’ with their tribe, and they’ll trust and follow you anywhere.
A belief system that exalts ‘faith’ in the absence of evidence, and obedience to authority, is not a solid basis for intelligent financial decisions. When you see a business that wears its religiosity on its sleeve, run in the other direction.
Who could have known that Halloween would fall on October 1, this year?
Trick of Treat!
Just remember why Friday the 13th became a date to dread and an unlucky number. October is rarely a good month.
“Martinez said, ‘We are advising our sellers to be as aggressive now with pricing to make sure we get the buyers in, because we basically need to have them in Escrow with in the next week to close by September 30. FHA loans take a little bit longer so we need the full month of September to close them.’”
So… come Oct 1st the rules change. To get buyers in before Oct 1st, sellers must be ‘aggressive with pricing.’
I’m betting after Oct 1st they’ll have to be far more aggressive with pricing.
Got Popcorn?
Neil
Drop the cash on the side walk. Buyer: ‘Look what I’ve found?’ ‘A bunch of Ben Franklins. I was going to make my down payment but now I’m going to buy some crack’. hehehehehehe
?? when a foreclosure sells how long does it take to appear on record and where do you look ??
tia
http://icare.fairfaxcounty.gov/Search/GenericSearch.aspx?mode=ADDRESS
I believe I read at CNN Money that there is now a scramble in Congress to pass a law to continue to provide for down payment assistance. So, this discussion may already be a moot point, as I’m sure it will pass. Would you expect anything less from our dutiful, fraudulent Congress?
If you have the time I’d encourage you to have a look at this House hearing from last year, on the sugject of down payment assistance programs. Have a good look at the questioning done by your elected reps, especially those of you from California.
http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht062207.shtml
That pretty much nails it, mort! Thanks for the link.
Also interesting is that they claim DAP mortgages default at two times the normal rate. Now, it is three times. The poor performance is accelerating.
Anything to respike the housing price inflation punchbowl…
If you have time I’d encourage you to watch the questioning by your elected reps, especially those of you from California, in this down payment assistance program House hearing from last year. Skip over the prepared statements (faster to read them then watch them) and just watch the performance during the questioning.
http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht062207.shtml
Would you expect anything less from our dutiful, fraudulent Congress?
Absolutely not!
Editorial: Say goodbye to seller-funded down payments
Mortgage idea that started in Sacramento runs aground on the rocks of foreclosures
Published 12:00 am PDT Wednesday, July 23, 2008
Story appeared in METRO section, Page B6
For people who have a hard time coming up with a down payment to buy a home, U.S. Department of Housing and Urban Development policies allow a relative, employer, public agency or charitable nonprofit to help out.
The policy does not allow home sellers, brokers or builders to help with down payments because they have an interest in the sale of the home. And that’s reasonable. That’s what builder incentives do — provide downpayment assistance in the form of automobiles, vacations, or cash back at closing, financed on the mortgage loan under the pretense that these forms of “downpayment assistance” are part of the physical structure
But more than a decade ago, an idea started small in Sacramento, went national and muddied the waters.
In 1997, Antioch Progress Baptist Church in Sacramento loaned $5,000 to one of its ministers so he could help low-income Sacramentans make down payments. That’s the good part.
Then the Rev. Don Harris created the nonprofit Nehemiah down payment assistance program and took the concept national. The idea by then had morphed into the nonprofit serving as a conduit for sellers to make down payments for buyers. It works like this: A lender contacts Nehemiah and asks for a down payment for a buyer. Nehemiah sends a check for the payment, and the seller sends Nehemiah a check for the same amount plus a $499 fee.
““‘These are still proven, qualified homebuyers. We’re not pushing people who have bad credit,’ Mazzara said.”
“Her clients Aaron and Amanda Swanson are buying a $132,000 split-level in Big Lake with an FHA-insured mortgage and $7,920 from Nehemiah for the 6 percent down payment. Amanda, 27, is a stay-at-home mom while her husband works in a machine shop making steel tubing. They rent a townhome in Coon Rapids and simply couldn’t save enough for a down payment, she said.”
They are just a new roof or a new furnance away from a foreclosure unless what they are paying for renting the townhouse is close to what they are paying on their mortgage. we have to think whether we are putting people into a home or into a foreclosure.
This is the money quote…
“Amanda, 27, is a stay-at-home mom while her husband works in a machine shop making steel tubing. They rent a townhome in Coon Rapids and simply couldn’t save enough for a down payment, she said.”
Amanda won’t work, so they need a hand out. Well boo,hoo,hoo. Get a job Amanda then your family might be able to save for a downpayment.
She does work. She’s a stay-at-home parent. Obviously something about which you are totally clueless.
I always amaze at women who want this and want that…but then say she won’t work? Should have married a doctor or something honey cuz the tubing bender ain’t gonna cut it!
Interesting story in the Napa Register today about “Johnny A”.
He’s a heckuva good guy who started buying homes in Napa for residential recovery facilities. You rent rooms out and hopefully cover the mortgage. He got to about 6 houses at his peak about 2 years ago. At that time, he told me he was “fascinated” by real estate and wanted to expand even further.
Fast forward a year: he told me a year ago that if he had a million bucks, he would buy as many houses as he could, because they were then such relative bargains.
Fast forward to today: he just completed a 25 day hunger strike to raise money to keep two of his houses open and out of foreclosure. He recently had his truck repossessed (briefly). His credit is ruined.
Moral of the story: never, ever jump on RE bandwagons. Even with great intentions. Johnny A was never a mercenary–he never bought jetskis, or Winnebagos, or did anything other than try to serve adults needing a clean, safe and sober home in early recovery. But he proceeded, in my view, without a clear understanding of the RE market. Now he, and his recovery venture, are at least temporarily fooked, and he’s doing hunger strikes to raise money.
In lieu of a hunger-strike, I like the idea of throwing a fondue.
Thats bull$hit. Typically those people are scammers. They rent out the rooms to people that are forced into recovery houses by the court. They share rooms, 4+ to a room, and the tax payer covers the tab. This a$$hole just paid more for the houses than he could cover with this scam. Another ARM reset idiot that more than deserves to be in jail.
I like the hunger strike idea; one less FB we will have to “rescue.” Then again, probably said FB’s family will file a wrongful death lawsuit and it will end up costing taxpayers anyway. Sorry to sound so cold, I’m just really getting annoyed at all the “victims” out there when really the only victims are those seeing their savings ravished by inflation–and there are few alternatives.
You know the real estate motto location, location, location. Let’s replace it with affordability, affordability, affordability.
In case anyone is interested, here is the IRS announcement of the ruling getting rid of tax-exempt status for the private ones run by the builders. The link to the ruling (for real wonks) is at the bottom:
http://www.irs.gov/newsroom/article/0,,id=156675,00.html
From the text of the announcement, and indicating that some parts of the gov have been trying to do something about this stuff for a while:
A March 2005 report entitled, “An Examination of Downpayment Gift Programs Administered By Non-Profit Organizations,” commissioned by the U.S. Department of Housing and Urban Development (HUD), found that seller-funded down-payment assistance has led to underwriting problems and resulted in an increase in the effective cost of homeownership. A report from November 2005 entitled, “Mortgage Financing: Additional Action Needed to Manage Risks of FHA-Insured Loans with Down Payment Assistance,” conducted by the U.S. Government Accountability Office (GAO) found similar results.
My DAD who lives in Thousand Oaks CA tells me he gets contractors everyday knocking on his door wanting to build something at his house, new driveway? how about a new landscape, paint, windows?
must be slow I wonder when they will all be back at Home depot working as sales people just like 1995.
“The chief executive of the largest U.S. home builder, D.R. Horton Inc, said he ‘got suicidal’ over the ban (on seller funded downpayment assistance).”
Hooray! HooRAAAYYYYYYYYY! Wheeeeee! Goodygoodygoody!
Oh, wait. He was just using hyperbole.
Dammit.
Horton hears a Who?
(Suicide note to the Donald: If you are contemplating slashing your wrists, do it length-wise, otherwise the blood will just clot and you’ll have to think of some other method.)
And if you want to be classical, do in in a warm bath, like a good Roman.
“Working People,” “working class Americans,” and “working families” were used in all those articles leading into this thread. I assume the other groups do not work at all? Actually the people who use those terms refer to people who earn a subsistance wage. They don’t mention the people who are work their rear ends off who happen to earn a lot of money. That group is the group Obama wants to tax more.
“People everywhere confuse what they read in newspapers with news.”
A.J. Liebling
My favorite quote of the bunch:
“‘The banks are pulling out six to seven weeks ahead of HUD’s announcements because they are furious that if they go to sell it (a mortgage) to the FHA, the FHA’s not going to buy it and …………….they’re going to get stuck with a loan that is totally unsellable to anybody,’ he said.”
How about that? They’ll be making a loan they can’t dump on some dumb sucker.
If the loan had value, they could hold it for the income stream and make money the old-fashioned way.
Yea - the people running these banks should be INDICTED FOR FRAUD (or attempted fraud), in that they trying to lend money that they KNOW FULL WELL will not be paid back, since, if they cannot DUMP THESE LOANS ON SOMEONE ELSE and have to keep them, they won’t make the loans.
This, ladies and gentlemen, is about as blatant as it gets.
A chain is only as strong as it’s weakest link…
“Even luxury builder Toll Brothers Inc, which does not offer down payment assistance (DPA), will be hurt as owners struggle to trade up, CEO Bob Toll said on a conference call. ‘We would expect that the whole daisy chain of the market will be impacted to some extent,’ he said.”
FIVE kids? Jeesh, put a Glove on that Thing.
“‘The banks are pulling out six to seven weeks ahead of HUD’s announcements because they are furious that if they go to sell it (a mortgage) to the FHA, the FHA’s not going to buy it and they’re going to get stuck with a loan that is totally unsellable to anybody,’ he said.”
Words cannot express my shock and dismay. My blinders have been lifted. All this time I thought banks were philanthropic institutions, chartered to help the financially irresponsible, er, persons with less than stellar credit, achieve the AMERICAN DREAM!!! And the OWNERSHIP SOCIETY!!! Utopia seemed within reach (sob)…Now I find that these unscrupulous shylocks are actually in the business of MAKING MONEY! — though you wouldn’t know it from their lending practices of recent years. I am weeping and bereft amidst the rubble of my shattered idealism. NYCityBoy, can I crash on your couch for the next couple of weeks while I drink my sorrows away?