Industry NewsMortgage

Downpayment assistance should be ended, not mended

Perspective: Circular 'donations' and 'gifts' don't benefit real estate
Published on Apr 7, 2008

When all else fails, why not sue the federal government? That's the card Nehemiah Corp. and AmeriDream have played, perhaps to defend their very existence as two of the largest downpayment assistance organizations in the United States. Yet while these organizations and their 180-plus brethren have helped many people buy a home, their business model has been suspect since the start and today's weakened housing markets would be better off without their inflationary intervention. Downpayment assistance programs funnel "donations" from builders and home sellers to buyers, who use the "gifts" as all or part of their downpayment. The amount of money at stake isn't nominal: AmeriDream alone has given more than $726 million, in chunks of $3,600 on average, to more than 200,000 home buyers since 1999, according to the lawsuit. The issue is important because these programs have become a staple of home loans backed by the Federal Housing Administration. The ...

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