Monday, 30th of June 2008 at 04:00:40 AMRecently, I received word that the Down-Payment Assistance (DPA) programs would be going away. DPA exists to help buyers enter the home-ownership market. The programs exist by having the seller provide a donation to another group to be used as a down payment for the buyer. They help many people to get into the home-ownership status. Now, the government feels that they should be blamed for many of our woes that we are experiencing today and therefore are going to ban them in the future. Boy, this might cause more trouble than it saves.
I have limited exposure to DPAs, most of my clients are buying their next home, not their first home, but I know quite a few people that have used them and none of them have abused the assistance nor are wanting to “walk away” from their home due to financial difficulties. They know it was a gift and that they should respect it. These are the ones that will be hurt, they will have to wait longer to buy a home, saving up around $8,000 in the Phoenix market to buy into a entry level home, at which point, their tastes may now be at the level of a higher-level home, requiring additional savings to cover closing and down-payments.
The idea is that the Feds feel that by preventing DPAs, we can prevent people from getting up-side down in their homes and have a higher investment to prevent them from walking away from them. Okay, so we think this will work, but in reality, I doubt it will. The problem comes in that people are being sold into mortgages that they don’t understand in a market that they don’t understand by professionals that aren’t doing their job to help them, but to sell to them.
Okay, warning, I’m going to be getting on my soapbox now. If someone gets into a home at the height of the market that they can barely afford and oh, by the way, it’s an ARM, there are several risks that they need to be made aware of. One, their payment will be going up, probably faster than their pay, two the value of their home may be going down (since we are seeing prices going up faster than normal). It is the responsibility of the Mortgage broker and their Agent to explain to them these risks in real world detail, not get excited about getting paid. This industry has become too much about money and not enough about solving problems and creating relationships.
Okay, now getting off of the soap-box. What does all of these mean to the everyday seller? Well, if you are in the entry level area for your property, you will find less buyers than normal so you will have more competition to sell your home, higher supply, lower demand. Translation, price decreases.
If you are a first-time buyer? Well, it will be harder to buy a home with little to nothing down, maybe impossible. You will have to rent longer to save the money needed to make the down payment and possibly closing costs. You may have to settle for less home than what you would like to, just to enter the market.
What will this mean for the economy, darn I say, it will push it down again. Let’s hold on for another bumpy ride.
Reference Spencer and other blog entries on the going away of the DPA programs.
Many thanks to Spencer Anglin at Velocity Finacial, LLC for giving me a heads up to this change.
UPDATE: I received word today that they are soliciting comments on the DPA program and HUD’s actions, you can post your position and comments here.
No related posts.
Craig,
I just read your blog, and I hope you have not been given incorrect information on Down Payment Assistance (DPA’s). I have been financing borrowers using DPA’s for over 3 years now using FHA as the loan program and Ameridream as the DPA. I just visited Ameridreams website and it has NO mention what so ever about DPA’s being shut down. I am not sure how familiar you are with DPA’s but Ameridream and Nehemiah have been in numerous court battles with HUD and have won all cases. There is talk that they MIGHT do away with them but it is not a for SURE THING. I will re-check with my source directly with Ameridream tomorrow. Please visit Ameridreams information or Nehemiahs information for the facts.
I 100% agree with you on the position that these programs are extremely beneficial.
Gary,
Thanks for pointing out that this isn’t a reality only a possibility. You are correct and I failed to give additional background in my rant on the topic. Yes, HUD has been trying to do away with the DPA’s, the latest court ruling was in favor of the DPA’s only on the basis of procedure, the judge in his ruling said the HUD was good to cancel the programs, but failed to follow their own procedure in doing away with them.
Now HUD is following their procedures (asking for public feedback) and that period is scheduled to end around 8/16/2008, at which time, HUD can cancel the program.
Here is the link to the HUD document: http://edocket.access.gpo.gov/2008/pdf/08-1356.pdf
Craig,
After reading your reply, all I have to say is that I hope you are wrong on this. Its looks to be accurate. I did forward your post to Barry Antle with Ameridream. Barry is the local account executive for Ameridream here in Arizona. If any can gives us a straight answer it would be him. I did ask for him to comment on your post and fill us in further.
PS. Just subscribed to your blog. Good Stuff.
Gary,
I would love to be wrong on this matter and I would love to post a correction. I feel that as it stands, this will have a negative effect that will ripple through the market making it harder for the economy as a whole to restore. I also hope that there is some brainstorming by those in the know on how we can continue to help first time buyers get into homes. I hate to see a good program go away because of the few that are abusive. I look forward to hearing from Barry and others on the topic.
Thanks for the subscription.
Craig,
Just emailed Barry again myself. It is not like him not to return a call or email me back. When I emailed him I got an auto responder that he was out of town. He just got back a day ago, so I will give him some time to catch his breath. about 70% of all my FHA loans are used in conjunction with Ameridream. This is huge. 1st time homebuyers are the biggest group out there buying. This would stink if HUD got their way. I have a feeling that congress will get involved on this.
[...] ago I reported on the move by HUD to do away with the Down-Payment Assistant program (DPA). Today, Arizona Republic has finally written a story on the matter. I in no way [...]