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Nonprofits sue to keep seller-funded assistance on FHA loans alive

HUD aims to tighten down-payment-assistance rules on Oct. 31

Two nonprofits that are among the largest facilitators of seller-funded down-payment assistance on FHA loans have filed suit to block a rule change that would bring an end to the practice. The companies -- AmeriDream and Nehemiah Corp. of America -- say the rule change will have a disproportionate impact on minorities, low-income and single-parent families who rely on the down-payment-assistance programs they provide. The Department of Housing and Urban Development, which proposed the rule change in May, maintains that seller-funded down-payment assistance artificially inflates home prices and more than doubles the odds that a loan will end up in default. "We want to stop this practice that often causes the most vulnerable of home buyers to go into default, and, in many cases, lose their home," said Federal Housing Commissioner Brian Montgomery. HUD doesn't want any more of the poorly performing loans in its portfolio, Montgomery said, because of their potential impact on the soundnes...