Orange, CA (PRWEB) January 27, 2013
The California Housing Finance Agency (CalHFA) abruptly suspended their down payment assistance program on January 25th, 2013 in a letter released to the public. The suspension was due to a clash with a recently released Housing and Urban Development (HUD) interpretation of the Housing and Economic Recovery Act of 2008 (HERA).
HERA was passed in 2008 in response to the collapse of the housing market which was driven primarily by negative amortization or "neg-am" loans, sub-prime loans, and predatory lending practices. Down payment assistance programs have played a vital part of the housing market's recovery since the passage of HERA.
The CalHFA has stated that the suspension is temporary and it will continue to process those applications for assistance that have already been submitted but "will require lenders to execute two separate liability waivers." Loans that are not FHA insured are still eligible for the program.
"This is an attempt to reduce liability and fraudulent lending. I can't say I agree with it, but I see the logic behind it," says Scott Schang, Branch Manager at Broadview Mortgage and Editor of findmywayhome.com. Schang, a veteran in the mortgage industry states that it will make it more difficult for his bank to close loans using assistance programs on time.
"Right now we see about a 7 to 10 day turn around time to have the state approve an applicant. We let the applicant borrow the funds and the state pays us back after the fact. Who knows how long it's going to take to actually get the state to wire in funds for a timely closing," said Schang.
Current applicants and homebuyers using down payment assistance are encourage to speak with their lenders to see how their situation has been affected. For many, it will mean the difference between owning a home this year or not.