FHA Seller Funded Downpayment Assistance May not be Dead

The House Financial Services Committee adopted H.R. 6694, legislation designed to reauthorize and reform down payment assistance programs that the Bush Administration banned in July.

A last-ditch effort to head off the Oct. 1 ban on the use of seller-funded down-payment assistance with FHA-backed loans is picking up steam as a compromise bill that would mend rather than end the practice of down payment assistance.

HR 6694 would allow qualified borrowers with credit scores of 680 or above to use seller-funded down-payment assistance on FHA-backed loans. Borrowers with scores between 620-680 will be subject to risk-based pricing and higher insurance premium fees.

But the bill still needs to be approved by Congress and the President.

Today's committee vote was a positive step toward preserving down payment assistance, but it's far from over. Now more than ever, members of Congress need to know that Americans are watching their vote on H.R. 6694.

I encourage everybody who wants to see seller assisted down payment assistance preserved to tell their representatives in the House and the U.S. Senate that a vote for H.R. 6694 is a vote for the next generation of homeowners.

What does it take to raise a borrower's credit score so that they can qualify for these loans? (see tomorrow)

Fed Issues New Lending Rules

Daily Real Estate News | July 15, 2008
Fed Issues New Lending Rules

The Federal Reserve on Monday adopted rules designed to protect homebuyers from the kind of loans that drove many into foreclosure.

The new rules apply to all lenders and not just to banks supervised by the Fed. Most are expected to take effect Oct.1, 2009. Escrow requirements won’t go into effect until April 1, 2010.

Here are the new requirements:

1.Prevent loans made without documenting borrower’s income.
2. Require lenders to escrow money to pay taxes and insurance for risky borrowers.
3. Limit and in some cases ban prepayment penalties.
4. Prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value.
5. Require mortgage advertising to contain information about rates, monthly payments and other features of the loan.
6. Insist lenders credit a mortgage payment to a home owner’s account on the day it is received.
7. Brokers and others are forbidden from "coercing or encouraging" an appraiser to misrepresent the value of a home.

Source: The Associated Press, Jeannine Aversa (07/14/08)