Seller participation laundering by CHAPA

[Ted Martin]

I just got a copy of the sales contract for an appraisal which has an addendum which reads.

"The Seller agrees to pay a fee of $2981 to Community Housing Assistance Program (CHAPA). The fee will be paid by and through the closing agent.

The Seller is only obliged to pay the fee if the Buyer recieves assistance of $2061 from CHAPA and this transaction closes.

The seller and buyer understand that CHAPA's fee will not be used to provide downpayment assistance to the buyer of this property, but will make it possible for CHAPA to provide assistance to other homebuyers in the future.

The assistance provided to the buyer will be from CHAPA's own funds that pre-exist this transaction."

The list price on the MLS for this property was $65,500 and the contract price is $68,704.

Needless to say the listing agent called in a panic before the order even came over because she was afraid it wouldn't appraise. Gee I wonder why she was worried?

The order shows up and on top of everything else it's an FHA so I call the lender and talk to the loan officer who transfers me to the underwriter to explain who and what CHAPA is. The underwriter goes on to tell me that she wished she could use one of her local appraiser's because they do these all the time, and it's such a great deal for people with really good credit but no down payment money. Looks like a great program to me also, if I was CHAPA and got to pocket the $900 in transaction fee, and the buyer who gets the house with 100%+ financing, and the seller who gets to pocket a full price sale, and the lender who gets to make the loan, and the agents who get a higerh commission.

The only wrench in the works is ME. The underwriter also tells me that HUD doesn't have a problem with these deals and that I don't really have to bother calling them for clarification since it's not thier program.

I guess if I was without morals, ethics, was blind and STUPID I'ld just make everyone happy and rubber stamp this deal.

But, I'm not, so I'm going to go look at it and find the best comparable sales I can and let the numbers fall where they will.

I wonder if I'm suppose to overlook the leaking toilet that's mentioned in the contract too?

 

[BigBlueGA]

Closing assistance for those of us with credit but no cash...

leaky toilets for those of us without a pot to **** in.


Sorry couldn't resist. :lol:

Sounds a lot like the Nemiah program...

 

[Mountain Man]

There are several other similar programs. The big one in my area is Nehemiah, where the seller pays a "gift" into the pot. In return, the buyer gets a "gift" from the pot. All at the closing table. Believe it or not, it IS a legitimate HUD approved program :!: The "gift" is coming from a "private" corp. (Yeah right) over seen by the gubment. HUD is okay with it, as long as "the market" will support the value :roll: with the "concessions" considered. 8O :lol:

 

[Caterina Platt]

Good one Brandon!


Ksappraiser,

Funny term, 'gift program' isn't it? Seller's not giving a gift is he/she? Full pop offer plus the 'gift' amount on top. Hmmm. Chapa/Ameridream/Nehimiah are not gifting something they are not receiving in return. Even trade plus the transaction fee.

Guess who's the real gift giver? Yup. It's really the appraiser the way these Realtors write up the deal. That's if you cave in and decide to push and shove the value up there. The way the programs were written, it appears it is to be a seller concession from the true market value. The programs are not written to state 'add the figure in on top of your list price'. I'm sure HUD is not intending on providing 100% financing either. I see how these programs were meant to be at conception of the idea, however they've evolved into a creative financing monster. This reminds me of Barbara's term 'real estate cop'. Here's where we have to step in and say, 'Uh, no. You're not playing by the rules here folks.'

You're doing it right. Let the numbers fall as they will, and if the deal requires a second look at the negotiation table, so be it.

 

[Pamela Crowley (Florida)]

The underwriter goes on to tell me that she wished she could use one of her local appraiser's because they do these all the time, ...

Oh great! The underwriter is in on it too! So.... did even the underwriter get the instructions from the boss to make all the deal work? Just how high up does this go? Likely all the way to the top. The sheep are just following along. Who do you think taught the Realtors how to write up those contracts?

 

[larryhaskell]

Ted:

I was only slightly concerned with the underwriter until she/he said HUD is OK with this program so you don't need to call them. Thats when I got real concerned. I would call HUD immediately and get something from them in writing or from their website. I've always held out hope that at least the underwriters were on our side. Now I'm going to start questioning Santa Claus, the Easter Bunny, tooth fairy, etc.

 

[Ted Martin]

Yea, the hair on my neck stood up when the underwriter said I didn't need to call HUD. So made a call to HUD and am waiting for tech support to get back to me before I finish this deal.

Programs like CHAPA probably have a place, but not the way this one was written. I have the feeling that the original intent was for the sale price to stay the same and for the buyer to reimburse the seller for the transaction fee. The seller would still be getting full price, the lender would be making a less than 100% loan and the buyer would be into the property for it's real market value so they could get out if they needed to without taking a bath. I would guess that CHAPA has nonprofit status and that the seller fee to CHAPA is a tax deductible donnation. That way the seller would get a little extra incentive to do the deal. I don't think that adding the downpayment onto the top of the sale price was the original idea. My guess is that the agent, loan officer and in this instance the underwriter don't under stand the way the program is suppose to work. I'm an optimist and believe that these people are just stupid and not really crooks. The exception may be the underwriter who is getting paid to know better.

My personal observations are that the bigger lenders (Countrywide, Wells Fargo, etc..) are the worst offenders. They make so many loans they just bury the these loans in their portfolio and pedal the packages.

 

[Anonymous]

I would disclose all information about any type of sales concessions and let the underwriter take it from there. The question now is have any of the comparables been sold with similar terms and if so how is the appraiser to know?

 

[Jim Bartley]

If you want a good laugh, check #8 on this page.....
This was the ONLY reference I could find for "appraisal". I have done a few of these on new construction. In every case the builder added his contribution back into the price. Just shows how institutionalized the
fraud is getting.

http://www.getdownpayment.com/Program/Pros/FAQ.htm