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Judge throws out ban on down-payment assistance

HUD must reopen rule-making process

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Federal regulators have not adequately explained their decision to reverse a policy allowing seller-funded down-payment assistance on FHA-backed loans -- or provided sufficient responses to suggestions on ways to mend, rather than end, the practice -- a federal judge has ruled. The ruling means the U.S. Department of Housing and Urban Development will have to reopen an administrative proceeding that culminated in a rule change last October banning seller-funded down-payment assistance on loans guaranteed by the Federal Housing Administration (see Inman News story). Claiming seller-funded down-payment assistance artificially inflates home prices and more than doubles the odds that a loan will end up in default, HUD put forward the proposed rule change last spring. A final rule banning the practice was published in the Federal Register on Oct. 1, after HUD received more than 15,000 comments on the proposal. Three nonprofits that provide seller-funded down-payment assistance...