Industry NewsMortgage

MBA goes to bat for seller-funded down-payment assistance

Industry claims rule change could halve FHA loan volume

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Sellers have probably abused their right to provide down-payment assistance through nonprofit groups, but regulators should establish caps and more stringent eligibility requirements on FHA loans rather than ban the practice outright, an industry group maintains. In a letter to the Department of Housing and Urban Development, The Mortgage Bankers Association said seller-funded down-payment assistance on loans insured by the Federal Housing Administration has "provided an important tool for low-income, minority and first-time home buyers," and should be reformed, rather than scrapped. HUD has proposed tightening the rules governing down-payment assistance on FHA insured loans, in part because of concerns that allowing sellers and others who profit from a home's sale to participate in circular financing arrangements artificially inflates home prices. Of particular concern are charitable organizations that sellers often use to circumvent FHA restrictions on seller-funded down payments....