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AmeriDream Under Attack September 13, 2007

Posted by bobgauger in AmeriDream, General, Real Estate Agents, Resources.
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I was recently introduced to AmeriDream, a non-profit organization that helps people purchase homes by way of an innovative down payment program called “down payment gifts”. This is a program helping people since 1999, and as of today, has helped 224,897 individuals and families reach the American Dream of homeownership. To put this in perspective, on average, every 22 minutes there is a new homeowner because of AmeriDream. Basically, a seller “gifts” part of the purchase price back to the buyer to help with down payment assistance.

However, recently, AmeriDream and other non-profits in the down payment gift industry, have come under attack by HUD. See here (from blog entry: http://blog.ahaanow.org/ahaa/2007/08/affordable-hous.html):

Affordable Housing Program in Jeopardy

An effective, affordable housing down payment assistance program, administered by nonprofit organizations that have helped nearly one million low-and-moderate-income families become homeowners, would be eliminated under a federal proposal submitted by the Department of Housing and Urban Development (HUD).

Nonprofits such as AmeriDream, Inc. of Gaithersburg, MD and Nehemiah Corp. of America, of Sacramento, CA would be banned from providing down payment help to homebuyers who qualify for a FHA-insured mortgage, but lack the money they need for down payment and closing costs.

HUD has proposed the new rule in response to its concerns that the contract sale price is “often increased to ensure that the seller’s net proceeds are not diminished” in transactions involving nonprofits that provide downpayment assistance.

Currently, nonprofit organizations that provide down payment assistance account for nearly 40% of all FHA-insured loans.

The National Association of Homebuilders has already publicly voiced it support for nonprofit organizations like AmeriDream. In addition, the Mortgage Bankers’ Association (MBA) has gone to bat for seller-funded down-payment assistance.

“Down payment assistance is a key to expanding homeownership,” David Ledford, a vice president of the National Association of Homebuilders, said in a recent interview with Bloomberg News. “We think guidelines can be developed to keep prices down.”

If you are concerned about the negative impact that this rule will have on mortgage lending or if you are a home buyer that could now be locked out of an opportunity for homeownership, your local representative needs to hear from you. Please go to the Take Action page of AHAA to take action.

My thoughts are … a home won’t be financed if the sale price isn’t substantiated by the lender’s appraisal. Therefore, if a buyer and seller come to an agreement for the sale price (which is confirmed by the lender’s appraisal), it’s between the seller and the buyer if the seller would like to “gift” some of the purchase price back to the buyer in the form of a down payment. Whether using a service such as AmeriDream, this practice occurs regularly, especially in today’s buyer’s market. Many sellers assist the buyer with closing costs, credits and down payment assistance. Why should HUD interfere between a seller and buyer’s contract when both parties agree and benefit in the transaction?

What do you think?  Share you thoughts here.