Why Seller funded downpayment goes away?

Main points about the Seller-funded Downpayment Assistance Provision

* Seller-funded downpayment assisted FHA loans have a very high default rate. In FY2007, the default rate on seller-funded downpayment loans was more than 28%, roughly three times the default rate on FHA loans without seller-funded downpayment assistance.

* The FHA does not collect enough in premiums to sustain a 28% default rate on its loan portfolio without the need to raise premiums for all FHA borrowers or receive a federal subsidy for the first time in the 71-year history of the FHA program.
FHA is the only mortgage program that has allowed seller-funded downpayment assistance.

* Under the legislation, FHA borrowers can still receive a 100% loan. The only requirement is that they must contribute 3.5% of the total costs in either the downpayment and/or closing costs.

Facts About Seller-funded Downpayment Assistance Provision

Facts About Seller-funded Downpayment Assistance Provision

The Housing bill signed by the President on July 30, 2008, does not eliminate all downpayment assistance programs from eligibility for FHA insurance. Only those programs that are funded directly from the seller or other party to the transaction are prohibited. Downpayment assistance from family members, government programs, or charities that are not seller-funded is still permitted. The prohibition goes into effect October 1, 2008. Read more about the Seller-funded Downpayment Assistance Provision.