Mobile, Alabama (PRWEB) September 30, 2013
“September 30, 2008 will live in infamy as the day that the US Congress ended down payment assistance on loans insured by the Federal Housing Administration. That decision eliminated over 25,000 homebuyers per month directly out of the market at the worst time. Add to that the ripple effect of the sellers not being able to sell, significantly accelerated the housing market collapse,” according to Joel S. Pate CEO of Mobile, Alabama-based American Family Funds Down Payment Gift Program.
Pate noted that “the only segment of the real estate market to benefit from the end of down payment assistance: The American Apartment Owners Association.”
Pate and other industry leaders had suggested that FHA alter the programs instead of eliminating them. Instead the politicians chose to eliminate the seller funded assistance programs only to temporarily replace them with a $7,500 tax credit.
“Borrowing money from China to fund a down payment did in fact soften the initial blow to the housing market. However, it proved insufficient, transferring more risk and cost to the taxpayers by using Federal tax credits to fund the borrower down payments further worsened it. As a result, the housing market collapsed across America because of the lack of buyers willing and able to qualify for a home loan. As prices plummeted, as job growth ended, unemployment exploded it because impossible to sell a home. The aftermath: We are still struggling with to this day,” according to Chris Russell founder of AmeriDream the leader in the down payment assistance industry.
Conflicting studies from both FHA and the down payment assistance industry abound regarding the default rate on FHA loans with down payment assistance. But according to research conducted by the industries trade association, HAND, “while loans with down payment assistance did result in a slight increase in default rates as compared to FHA loans with buyer paid down payments, the primary driver of defaults in the past five years has been the substantial decline in jobs and the drop in home prices that resulted in the typical FHA market consumer to lose mobility generally available in past market shifts,” according to Jon Cottin, attorney and former Executive Director for HAND.
“The historic run up in sub-prime loans and the associated increase in housing prices between 2003 and 2007 had a greater negative impact on the FHA insurance pool than down payment assistance. You just can’t let a loan applicant lie about income, assets, and the ability to re-pay and expect a positive outcome. W-2 borrowers should always be required to document the loan file,” according to Pate.
It appears that policy makers are getting into sync with the realities of the marketplace. Evidence of this include the September 4, 2013 Bulletin from the Consumer Financial Protection Bureau that placed data furnishers and the credit reporting agencies on notice of their current failure to follow through on their “duty to investigate consumer credit disputes” appropriately.
The Federal Trade Commissions December 2012 “Report to Congress under Section 319 of the Fair and Accurate Credit Transactions Act of 2003” found “the number of errors on credit reports (sic) are eye opening,” according to Howard Shelanski, Director of the FTC’s Bureau of Economics. He went on to say, “The results of this first of its kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.” http://www.ftc.gov/os/2013/02/130211factareport.pdf
And, FHA’s release of Mortgagee Letter 2013-24 and separately 2013-26 change the landscape of the availability of FHA loans to consumers with small collections, accounts currently in dispute, and the waiting period after a short sale or foreclosure when the event was the result a of job loss or 20% drop in income.
All of these reports, according to Pate, “draw one to conclude that these three agencies realize that they must act to remove road blocks that prohibit the consumer from entering or successfully re-entering the housing market in order for it to continue to recover. Perhaps they will also embrace a return of down payment assistance as well.”
Scoreinc.com maintains a list of credit repair advisors that you can refer your home-buying customers to in every market throughout the United States. To have Scoreinc.com refer a Score Way Credit Repair Business associate, just call (877) 876-5921 or visit http://www.scoreinc.com for more information.