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FHA Calls for an End To Seller-Funded Down-Payment Charities

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moh malekpour

Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/20/AR2008062001242.html

This use to be added to sales price without mentioning in the purchase contract causing an inflated price.
But according to HUD, FHA loans using seller-funded gifts are ending up in foreclosure and causing losses at between "two and three times" the rate of loans in which borrowers made their own down payments. In a proposed rule banning seller-funded gifts, HUD cited a 2005 study by the Government Accountability Office that found gifts funneled from sellers to buyers sometimes "raised the sales price of the homes involved in order to recover the required payments" given to buyers as inducements.

Inflated prices, in turn, contribute to excessive losses when buyers default, leaving FHA to pick up the bill, HUD said. Buyers using gifts default at higher rates in part because "they have no skin in the game" -- no real stake in the house -- according to Montgomery. HUD's proposed regulation includes extensive statistical data comparing performances of seller-assisted buyers with other borrowers from 2000 through 2007
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I lost clients cause I would not play this game (sales price always higher then list price and exactly the same amount as the seller gift).

Finally FHA is realizing people need to have a vested interest in something to fight for it. People need to earn things, not be given them.

I think the funny part is, FHA is finally realizing the mistake and all of us Appraisers knew this was a bad idea from the beginning.
 
They have no other choice or the next big "sub prime" melt down will be FHA.
 
AGAIN!!! Mr Dave Biggars of Alamode has a E-Mail system circulating that is incrediablly easy to use & all you do is fill it out & it goes to your Senators. (Course some of us have our elected officials in our E Mail address books). Can't get any easier than that to send your comments. By the way FHA supposedly is apposed to having this charity funding system or at least some of the employees are. & they would encourage you to voice your opinion on this.
 
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