Industry News

Tighter down-payment-assistance rules proposed

Sellers, builders won't be allowed to assist on FHA-backed loans

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The Federal Housing Administration would no longer allow down-payment assistance from charities or groups that accept payments from builders and sellers under a proposed rule change published in Friday's Federal Register. The Department of Housing and Urban Development says it plans to tighten rules governing down-payment assistance to stop sellers and others who profit from a home's sale from participating in circular financing arrangements that inflate home prices. The rule change would still allow down-payment assistance from family members, governmental and public agencies, employers and labor unions, and IRS approved tax-exempt charitable and educational groups. The IRS last year said it would no longer consider groups that accept money from sellers to provide down-payment assistance tax-exempt. The rule change is aimed at down-payment-assistance programs that accept money from home sellers or others who profit from the sale of a particular home. Under such circula...