A Favorable Opinion in Support of HFA Downpayment Assistance Programs

Filed in Codes and Standards, Housing Finance by on August 31, 2015 0 Comments

460635259A recent memorandum from HUD’s general counsel regarding permissible sources of funds for downpayment assistance  (DPA) programs run by governmental entities, such as state housing finance agencies (HFAs), should help strengthen the case that HFA downpayment assistance programs do not violate FHA rules.

While this does not represent a decision by, or formal guidance from HUD, NAHB believes the general counsel’s opinion is a positive step for HFA downpayment assistance programs as HUD’s Office of Housing continues its efforts to resolve a dispute with its Inspector General regarding a HUD audit that found irregularities by a financial institution that used FHA-insured loans with HFA downpayment assistance gifts.

At issue is whether a governmental entity’s use of FHA mortgages with higher than market interest rates in its DPA program represents “premium pricing” under FHA requirements and whether raising funds in this manner by governmental entities is permissible under FHA rules. The general counsel’s memo clarifies that FHA rules have no restrictions on how a governmental entity may fund DPA programs. Further, it states that the use of funds from the sale of mortgages with higher than market interest rates does not constitute premium pricing as defined by FHA.

Last month, Edward Golding, HUD’s principal deputy assistant secretary for housing, said that HFA downpayment assistance programs “help creditworthy families buy their first homes in communities across the country – responsibly expanding access to credit. The intent of our rules regarding downpayment assistance is clear and allows HFAs the discretion necessary to fund these programs appropriately. HUD is taking active steps to completely resolve the issues raised in the audit and to provide proper clarity and guidance to the market.”

NAHB will continue to closely monitor the situation until this issue is finally resolved.

For more information, email Steve Linville at NAHB or call him at 800-368-5242 x8597.

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