ABC's of DPA

Charitable downpayment assistance programs, funded in part by home sellers, (DPA) have operated for the past decade with HUD’s full knowledge and participation. DPA has been a proven success for helping low-to moderate-income individuals and families become homeowners. These working families qualify for FHA insured loans in every respect, but are unable to save the needed downpayment. The facts are:

  1. Over 90 percent of loans with DPA are performing well. DPA has not been proven to be a predictor or cause of claims. Claims are caused by job loss, family medical issues and economics of a particular region. Statements noting that DPA-assisted homebuyers go into default, at a higher rate than homebuyers with NO assistance at all, are misleading in two ways. One, it has not been proven that DPA causes a claim and two the group of homebuyers not needing any downpayment assistance is not similar to groups who need downpayment assistance. Similar groups would be homebuyers who need assistance (DPA-assisted) to another group also in need of assistance (government-assisted) in which case there is only a 1% difference in claim rate between government-assisted homebuyers and DPA-assisted homebuyers.
  2. Today, loans with DPA comprise almost 50% of FHA purchase volume. Homebuyers who received the benefit of DPA were able to obtain a safe FHA insured loan and avoid the risky subprime loans.
  3. The success of DPA was accomplished using absolutely no taxpayer dollars. Charitable organizations providing DPA, funded in part by seller participation, have given out over $3.8 billion in money used to make a downpayment on a home.
  4. Two different federal courts took the rare step of striking down the HUD regulation which would have banned seller-funded DPA. The courts’ decisions were made on fundamental substantive reasons citing among other things that HUD’s explanation of the Final Rule reflects a lack of reasoned decision making.
  5. The economic impact of DPA is significant: Over 1 million low and moderate income families have utilized over $3.8 billion in downpayment assistance from charitable organizations to take out $130 billion in mortgage volume.
  6. DPA has always been a program of HUD’s own guidelines. Starting in 1998, Howard Glaser, HUD’s Acting General Counsel, reviewed DPA and analyzed closely the participation of the home seller and determined that the program operated within HUD’s guidelines. This is the same program and process that is adhered to today. Further, before a homebuyer can receive gift funds from a charitable organization providing DPA, the homebuyer must work with an FHA-approved lender, must meet all HUD/FHA loan underwriting qualification (except for having the downpayment requirement), must have a HUD certified appraiser conduct an appraisal on the home using HUD appraisal criteria.
  7. DPA Works! The program has been proven to be a successful program that gives FHA/HUD qualified homebuyers an opportunity for homeownership.

New Report Questions Accuracy of HUD's Data: Click Here To Read Report

 

H.R.6694 the new homeownership bill would make non-profit downpayment assistance an allowable gift source for FHA borrowers. The bill further seeks to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest. It also includes language to ensure that the Federal Housing Administration maintains its financial stability by permanently authorizing the Secretary of the Department of Housing & Urban Development to assess premiums based on borrowers’ qualifications.

Overview and Analysis of Downpayment Assitance