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Down-payment-assistance programs deserve better regulation

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A preliminary round of applause is in order for a federal government report that has identified new risks associated with down-payment-assistance programs. Yet much more is needed in the way of government investigation and regulation of these programs, which help otherwise unqualified home buyers purchase a home with the aid of a charitable "gift" that funds a portion of their down payment or closing costs. The General Accounting Office report found that homes purchased with a "gift" from a down-payment-assistance program were appraised at and sold for prices that were 2-3 percent higher than the prices of comparable homes sold to buyers who did not receive such assistance. The report also found a 76 percent increase in foreclosures on Federal Housing Administration-insured mortgages obtained with charitable down-payment assistance and said the FHA has ignored $1.8 billion in potential losses by not accounting for the heightened risk of foreclosure on those mortgages. Those findings ...