Down Payment Assistance Programs - Gone But Not Forgotten

A key provision of the Housing legislation just passed by Congress is the elimination of the down payment assistance program. The principal advocate for eliminating the program was the FHA. Their reasoning is that these types of loans have failure rates two to three times the rates of other loans that they insure. That coupled with the fact that down payment assisted loans today account for 1/3 of all loans that FHA insures.

In Congress, members of the Black caucus and Hispanic legislators are already making plans to introduce legislation to once again allow for these seller assisted loans. With the anticipated gains by the Democratic Party in Congressional seats this November, these legislators are confident in reinstating these programs.

Another element of the legislation, effecting primarily lower income buyers, will institute risk based pricing for insurance premiums paid by the borrower. The FHA wanted this pricing action implemented immediately. The version just passed will delay implementation of risk based pricing for one year, until October, 2009.