Do you think the mortgage and real industry as a whole has been bad in the last 2 years? What about the last 6 months? Yes, people are still buying and I am busier this year than last year. Part of the reason is because some lenders are dropping the ball at the end and I am picking up the pieces. But this post is not about that. If you were shaking before, wait until a few months from now.
Down Payment Assistance Programs are now dead in the water....but maybe not. Read more....
The Senate’s decision to ban privately-funded downpayment assistance programs through the passage of its Housing Bill just happened a few days ago.
Why am I extremely disappointed? Again, government officials that don't know what is behind a mortgage, makes a decision that will affect thousands of families just this year alone.
Over the past 6 months, I have heard arguments from both sides of the fence. Even though I am in favor for the down payment assistance programs, and my thought process is very clear, I am outraged at those that badger this program with countless, misleading information, because they don't have a clear understanding on what this all means. Or have a clear understanding of what they are talking about or arguing about.
Here are some of the arguments from the nay sayers......
Here is my rebuteal to the statements made above......
With that said, okay... 3%. Whoopie do dah. 3%? You are complaining that if they put this much money down, that they wouldn't walk away from their home? How about this hard cold fact. Do you realize that in the last 2 years, home values have come down in most major areas. A home that was $300,000 two years ago might be worth $250,000? And I am being polite here, because every area is different. Some homes lost even more equity. So, the claim to fame is that no money into the transaction, people have an easier time to leave. Okay, do you know that there are thousands of homeowners that also left their home after even putting 10% or 20% down, yet their property dropped below what they still owed. And it wasn't because they just decided one night to do this. It's called the ECONOMY. With a bad economy, people losing jobs or lesser income, deaths in the family, divorcees, etc, etc. Think about this and dissect it.
Let me put my opinion and understanding out there. It's illegal to appraise a home more than it's worth. In many cases, the money that is tacked onto the mortgage to cover the sellers gift portion, is because that home is truly worth what the end price is. In most cases, when you sell your home, you get anywhere from 94% to 96% respectively, depending on your house and your market area. And this is after you probably have reduced your home. To many people complaining on this issue, whom haven't walked through this process in their heads or on paper.
Overall, this is going to hurt the economy more than it will help it. In my 16 year career, I have done a few thousand home buyers. I have know of 3 people in that time, that have gone into foreclosure. Things happen. In one case, the woman lost her son that was living with her and was on the mortgage. In another case, one of the family members lost their job.
My whole point to this.... If you are a very good loan officer working with an ethical lender, you still need to qualify these individuals just like the next one. If no fraud is involved, you approve them just like the rest, there is more than that meets the eye then.
One last thought.... HUD and the media has put out there that now 1/3 of all down payments assistance programs go into default or foreclosure. Not one person has been able to provide these numbers to me in writing. And these numbers in my opinion are construed. Some of this based on the bad lending practices of other lenders and loan officer. And don't forget, our current Economy.
For those that want to help and stop this, please click onto the link below. From what I know, this won't go into affect until August. But it still needs to go through one more vote. UPDATE : The proposed rule comment period ends on August 15, 2008.
To support the DPA programs, please go to www.supporthomeownership.com
and make your voice heard.
Please read for more information.... Nehemiah/AmeriDream Down Payment Assistance Programs (DPA's) - Are they that bad?
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Copyright © 2008 by Jeff Belonger
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Over 16 yrs in the mortgage industry & real estate market, I bring expert knowledge and creativity to financing options & loan programs. Being honest and serving your individual needs is my desire!
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FHA loan changes in the near future..... Part 1 of 3 - Down Payment Assistance Programs
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hmmmmmm....did not hear about that one. Will vote to support. I got couple of my clients qualified due to the program. Its a big help! Thanks for sharing.
Thanks, Jeff. That would be a tragedy. I tout these programs all the time, especially for young folk who may not have a lot of dough to put down. I hope we can stop this.
Paul
DPA's are not dead yet! It's gone back to House so they can work out a compromise. Hang in there.
Melissa Breeland
Jeff, when exactly does this measure go into effect? I'm saddened to see the prospect of employer down-payment assistance programs go down in flames, too. Those are win-win programs for employers and employees.
Jeff, I've never been a huge fan of these programs, but only because they were administered by organizations who did not understand real estate and who made the experience the transaction from hell. Still, it was certainly worth the hassle to see a first time buyer client get a great house with the help of one of these programs. And I think they certainly have a place in the real estate financing market place.
I bought my first place in about 1981, and mortgage rates were at 18%. But federal taxes were much higher - I was in a 50% federal tax bracket plus whatever I was paying the District, and with the tax savings, I didn't feel the pinch. And the price was so affordable that it made sense to buy.
And I agree, the HUD numbers sound pretty sketchy!
Jeff,
It is always interesting to me how statistics can be made up on the spot and no one will doubt them. This sounds like another that has no basis in fact. Just remember that over half of the drivers out there think they are above average. I think our congress critters (with their 9% approval rating) must all believe they know more than 80% of the people who work in the industry.
RITU..... it just came up in talks in the last month and went to vote very quickly. Hey, nothing is perfect out there. Bash this program.... but it helps the average homebuyer. The gov't is sticking their noses in this without full facts.
PAUL..... I didn't do as many in the last several years. But these have been about 40% of my business just in 2008. People just don't fully understand how these work and how they can fail. There is so much to this, that it's sad, based on some misleading figures.
MELISSA..... I know that... and I said that in here. But if anyone has paid attention, certain people have made a big push for this to take place. We are talking about politics... who was promised what to help with this cause? Who was paid off in other favors? It happenes on Capital Hill... this is not a false statement. Sacrifices are made for poor decisions at times. It's the web the we weave sometimes.
KENT..... I just added that in there.... into the post. Thanks I have been so busy, I really didn't have time to write tis, so I forced it out throughout the day.
PATRACIA...... hey you.... we'll be talking soon. But one reason why you didn't see many of these was because the loan amounts were lower. Secondly, not all lenders do these nor the loan officers know much about them.
In regards to any transactions that were from hell, that you might have been through? It's very simple... I have never, never had any problem with these programs. When I use Nehemiah, they are on top of their game. It comes down the loan officer or the lender that can botch these up, but it's very easy to put the blame on someone else. Hell... lenders blame ficos that drop, for their reason of denying a client the day before settlement. 99% of the time, that is BS>...
Overall, hopefully soon, that I will be able to show you first hand, with any of your clients.
FRED..... I agree 110%.... it kills me... angers me. So many numbers are misleading and so many people have been running around screaming, 1/3, 1/3, 1/3 of all DPA's go into foreclosure... Okay, so me the numbers... so me... Z Z z Z ZZ Z ZZ Z Still waiting.....
Jeff,
There is still time to tell Congress to save these programs. The House and Senate are in conference reviewing the bill. The House version of the bill regulates, but does not eliminate these programs. However, the Senate version of the bill does eliminate downpayment assistance funded in part by home sellers.
I am working with AmeriDream - one of the nation's largest charitable downpayment assistance providers to raise awareness of the Senate's plan to eliminate DPAs.
Senators need to hear from the people they value the most -- their constituents -- to not eliminate these programs. More information on this important issue is at www.supporthomeownership.com.
Best,
Amanda
PS. You can also send a letter to HUD telling them to save DPAs. As you note in the update - the comment period for HUD closes August 15th.
AMANDA..... who do you work for? Yes, I know all of this and even mention half of what you did in this post. Nehemiah is the Largest and AmeriDream is the 2nd largest.... but that is irrelevant. I also mentioned who to write to and when the next date is..... thanks for your input....
What I wanted out of this is a diccussion to what I mentioned. Why so many fight the issue... and that one of the biggest complaints are the appraisals that are so-called inflated. Also... that these buyers aren't putting any money into the transaction. Do you have a comment on anything that I debated on here? thanks
Jeff,
The elimination of these programs almost happened last year and Nehemiah won a court hearing granting an injunction. If Congress passes these laws (which they have much work to do), do you think Nehemiah will be able to be successful in court again?
Jeff,
Thank you for posting my FHA stuff to localism. I really appreciate it and it has been nice getting to know you a bit.
I am a strong advocate of down payment assistance programs.
-If it's okay for the money to come as a gift from a family member...why not the seller?
I also think that if FHA is going to require just 3% down and accept the use of DAPS, why don't they just offer 100% financing as well?
-In regards to "bumping rates"...this is not very possible in todays market so this really should be a non-issue.
I bought my first property when I was 20 with FHA financing and the use of down payment assistance. I showed my ability to repay the loan and they lent me the money. I am just one of millions that FHA has asssited in achieving the American Dream.
Jeff, you make some great points here and I have to say, I fully agreed with them all. DPA is great if you do not abuse it. With that said, if the government does away with this program, that will be the biggest mistake they can make.
Hi Jeff,
Great Points, I use the Nehemiah program and have used it for the last 2 years. Not one of my clients has defaulted on a loan. How do I know, I do an annual review. I think this program is very valueable and taking it away is only going to make the housing crisis worse.
Jeff--- here is all the data... not very light reading but nowhere even close to one in three DPAs. I am sure you can dissect this into a series of great posts!!
http://edocket.access.gpo.gov/2008/08-1356.htm
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Jeff,
DPA does work and I agree with you. Keep up the good work and postings. My company provides DPA as well, not so much in the residential department, but more so in the commercial area where demand is unprecendented. I advocate DPA and it will be with us indefinitely.
Richard David
FEDERAL FUNDING
richard@fedfund.us
Jeff,
I am sorry to hear that this bill will get signed into law. Your blog spells out the truth.
We are throwing the wrong homeowners under a bus. I am wondering what the backlash will be from the real estate and lending community once this loan is in full force.
AMEN BROTHER JEFF!!!
I totally 100% agree with you. As one coming from an overall mortgage planning background, the reason people lose their homes is one reason....LACK OF CAPITAL!!
So to drain someones savings, or their relatives is simply asnine to say the least. These politicans are idiots of the first degree, and the bankers go along with them because they're helping reduce their stake in the over all situation.
But the reality is just what you said, 3%, 5% or 10%...simply wouldn't matter in a number of markets today. People are losing 20-40% right now on their homes values, and losing 3% from their down payment is not even a factor at this point.
As usual, well done Jeff....