Today we’ll start a series of brief updates that will focus on the Housing Bill that was signed into law on Wednesday July 30th.
The bill is 700 pages and I have read enough of it over the last 5 days to make all of our eyes water. I’ve picked out the items with the biggest and most immediate impact on all of us. The bill includes a few things that produce challenges as well as a few that produce opportunities.
Part 1: Removal of Down Payment Assistance (DPA) loophole
For quite some time, lobbyists in Washington have been trying to get rid of this program that essentially allows an FHA borrower to buy a house with only $500 coming out of their pocket. Through some nifty loophole work, a seller could “donate” the 3% down payment to a company that, as a non-profit, qualified as a source for the buyer’s down payment. This method has been essentially a paper transaction that allowed selling homes with little to no money down and is one of the last ways for a buyer to do so.
The Bad News: Effective October 1st, 2008 DPA is no longer a valid source of funds for use in an FHA loan. To be specific, the approval from the lender must be completed prior to October 1st. The fine print here is that so long as our buyers are approved prior to this date, we can continue to offer the DPA program.
The Good News: In a recent communication from Ameridream (the nations largest DPA organization), they are claiming that a bill is already in the works to get DPA re-instated. The murmurs are that the exclusion of DPA was a political move that was required to get the bill passed and that there is plenty of political support to get it re-instated PRIOR TO the October 1st deadline. I will keep you all posted on this.
Even with the good news, we all have great reasons to stress the urgency to buyers and sellers right now. Buyers who need this program might be left in the cold if they do not move quickly enough. Sellers, especially those in the “entry level housing” market, could see a further reduction in the number of qualified buyers. For anyone selling a house in this market, this news should be motivation for accepting an offer that’s been made.
--Keith
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