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FHA down payment program violates federal law – report

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Mortgage Professional America | 10 Aug 2016, 09:42 AM Agree 0
A government watchdog says a down payment assistance program from the FHA forces borrowers to accept higher interest rates and poses a risk to the agency’s insurance fund
  • | | 10 Aug 2016, 11:36 AM Agree 0
    Once again our government shows their ignorance. People writing rules and commenting that have no idea about this industry. There are so many ridiculous disclosures that a borrower signs pointing out the options. A borrower wants to know how much do I have to put down and how much are my payments. If someone shows me how to either be an owner or not by paying a little more, then it should be my decision and not the government. We desperately need Dodd Frank to be rolled back and the CFPB to be reigned in. Then the economy could soar once again.
  • Lee Guess | | 10 Aug 2016, 12:07 PM Agree 0
    And once again the executives at FHA make bonuses off of risky mortgages. There's the real crime.
  • GS | | 10 Aug 2016, 12:35 PM Agree 0
    I would personally gain from down payment assistance programs coming back since the market will get hot.

    But we will end up sticking the taxpayers with another huge bill when all of the mortgages default (again).

    If you cannot put the 3.5% down you are a borderline buyer at best. If you have no equity at all in the process you don't care.
  • Realtor in Wisconsin | | 10 Aug 2016, 12:47 PM Agree 0
    It is sad that the government who makes the rules don't follow the rules. Just like Dodd/Frank who were in charge of the Financial Services Committee and Senate Banking Committee were well aware of Freddie and Fannie being in deep trouble and did NOTHING. Then they get to write the new reforms. There is something so wrong with this system.
  • Julie | | 10 Aug 2016, 12:58 PM Agree 0
    Some down-payment assistance programs are an "Equity Share". Many Buyers don't care in the beginning. However, I've seen home owners in a better position since purchasing that want to refinance and the "equity Share" second will NOT ALLOW them to PAY them off, only when the house sells. Now, this is BS.
  • JB | | 10 Aug 2016, 01:00 PM Agree 0
    Hypocrisy is the name of the game. FHA is supposed to be the gateway mortgage for first time homebuyers but ends up being the most expensive option. DPA programs represent the highest percentage of defaulted mortgages...if you do not have the credit or the funds to purchase then you need to wait. Realtors should not be engaging in back room ABA deals which offer no benefit to buyer/seller. If the agencies are acquiring paper at a discount that privately held companies cannot obtain, then they should be providing that discount in rate and costs to the borrowers and footing some of the ridiculous regulatory costs taken on by bankers and brokers.
  • Bob the Lender | | 10 Aug 2016, 01:09 PM Agree 0
    Down payment assistance is completely unnecessary. As a Loan officer for over 20-years. No one has ever "needed" it. But because it is available, they take it (and pay extra for it just like the article explains). If you eliminated it, people would still buy houses. They would just be forced to be responsible and work towards home ownership. Just about everyone I give these mortgage to, when I explain their other options, all tell me they could figure out how to come up with the money "IF" they had too.

    By far, our companies WORST PERFORMING LOANS, are FHA mortgages with down payment assistance. Gee, what does that tell you?
  • Renea G. | | 10 Aug 2016, 03:15 PM Agree 0
    I agree as a borrower you should be able to put down 3.5%. Without any risk going into the home some buyers are not responsible enough to not have skin in the game. The buyer should not have to pay double PMI which only ties the their hands and makes it harder to pay the mortgage off.
  • Jeff fro So Cal | | 10 Aug 2016, 10:21 PM Agree 0
    Your ignorance is showing. The rate was not significantly higher. The premium for the higher rate was used to help with the down payment. This did not provide higher income to the lender. Lenders have to pay back income in excess of what they disclose to borrowers, regardless of the source of the income to the lender.
  • Larry W | | 13 Aug 2016, 10:41 AM Agree 0
    Work with the the dti ratios so the folks with DPA are not stretching to own the home and make the payments. Leaving them as renters isn't a favor.
  • Bruce at CHM | | 17 Aug 2016, 01:15 PM Agree 0
    Those mortgages have tighter lending restrictions, I do a few of them. I don't think I have made a bad mortgage in the bunch. There is not a lot of difference between 3.5% down and nothing down. What is important is that we look at the credit and income to determine if they qualify. We have to do that now. Not like all those stupid "no doc" mortgages, that's what caused the housing crash.
  • SAL-Mtg | | 18 Aug 2016, 02:09 PM Agree 0
    Borrowers always have the option for any type of mortgage however most do not have DPA. DPA is the difference between the purchase price and mortgage amount. DPA is normally calculated on the total/mortgage note amount never on the purchase price. DPA in form of a gift, they can refinance at any time without penalty. Our FHA mortgages preform better than our conventional mortgages without dpa. The OIG issue is so called "premium priced", well if that is the case. Every lender in the nation has a premium price market rate. If this continues then all lenders will be forced to make zero money. Selling mortgages is exactly what every lender in the nation is currently doing and with a premium price with out dpa....called revenue for doing business.

    The seller based dpa program of the past were based on inflated purchase price to obtain the dpa. Customers/borrowers were put in a mortgage that was upside down from the beginning. Gift funds dpa is not inflated value of said home for dpa. Most HFA's that are providing DPA are doing so with their own HFA's funds. Once mortgage is closed then the decision is to sell in the market or keep in portfolio
  • KAS | | 19 Aug 2016, 02:44 PM Agree 0
    always something....! When I bought my first house, I had no idea I would every be in the business of mortgage lending or real estate....

    I went to a bank in the area, told them we wanted to buy a home. If my memory serves me right, he ran our monthly payments, told us how much the interest rate would be and how much money we would put down and that the mortgage was assumable and did not have a prepayment clause! It was a conventional mortgage. My husband had been on Social Security Disability due to having a kidney transplant (I am talking about 1972 and he 27). He had decided despite his doctors advise to go back to work. I worked part time and we had a 4 year old.

    Back to the issue, we had the required amount, I (not the bank) knew what I could afford and likewise we qualified for the housing ratio which was qualified. Ratios were much lower then (guess that was when everyone was smarter and understood that we did not life on 45-50% of our Gross Income! If my memory serves right - they night have used net income....not sure. We found our home, worked with the realtor and bought our first home - 990 sq ft,, 3 bed 1 bath, with a carport, flat top - great little home for our little family!!! It was a beginning for us!

    I understand the FHA concept of assistance program being problem why now the scrutiny!. Personally I did not care for the program - that was my opinion - I but I did see that it could be beneficial to buyers and sellers. Buyers still had to qualify for the payment.

    I also do not go along with the idea of no money down that the buyers do not care because they have nothing to lose. That is the same as if to say every renter destroys the home because they have no money into it or do not pay their rent because they do not care!!!

    Start treating the consumer like they are smart and not dumb...Dear Lord!!! Full disclosure yes!!! Has anyone been watching 'Brain Dead' series on TV. You can not help but like it!!! We the consumer are not 'BRAIN DEAD! However I do believe that Dodd Frank needs to be rolled back and the CFPB to be reigned in. CFPB needs to get off the 'green juice'!!! CFPB is the blah, blah and a lot of government is 'brain dead'!!!

    Most Consumers can read! Most can do basic math! The bank was reputable. We were young! We made our payments!
    (oh my husband had just gotten off Social Security Disability after a kidney transplant, went back to work after 2 years,
    and I had a part time job....literally newbies....and we could think at even that young age!!
  • Raquel Mullins | | 20 Aug 2016, 12:21 AM Agree 0
    This is a matter of concern for all borrowers and one should get all the necessary information before applying for a FHA mortgage from a lender that charges comparatively low interest rates on military home mortgages.
  • Scott W | | 22 Aug 2016, 07:57 AM Agree 0
    Reality is we are writing the best performing mortgages of all time and limiting what HFA's can offer just keeps more people as renters and away from building household wealth. Who wins with this?
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