Dave Michaels with the Dallas Morning News called me out of the blue the other day. He was working on a story about FHA Loans in Texas. It seems that I show up pretty high in the Search Engines for the keywords that he was interested in that day(Thanks ActiveRain).
The interview lasted over 1/2 hour and we really got into the depths of these Seller Funded Down Payment Assistance Programs. Not to be confused with true charitable donations... These Faux Charities have been around for a along time. And do put some very deserving borrowers into a good 30yr fixed home loan. However, it also puts some people that might not belong into the same pool of borrowers that provided their own 3%. And since FHA doesn't have a cash reserve requirement to close, many people have been able to circumvent the 3% down payment requirement and get into a home for a measly $500 Earnest Money Check. This is where I have a problem. HUD needs to address this. I would be fine with a 100% FHA product.... with a small rate hit for the additional risk or tighter guidelines even! The Seller Funded DPA programs simply get around the true spirit of the FHA loan guidelines and puts a whole different borrower into the same pool. Which, in theory, will raise rates for all if the foreclosure rate is higher for the Seller Funder DPA loans.... (Hint: The foreclosure rate is almost 3X that of other FHA loans).
So, is it money laundering? Well, yes it is. You have a seller contributing the buyer's down payment(specifically NOT allowed by FHA Guidelines) and all made legal just because a faux charity was the middleman.
Ok, so there. I admit it.... I really did say that to Michael. Among a hundred other things worthy of print as well. But this was his angle and he took my words and used them. And while I will be as sad as the next loan officer to see these programs go.... I just hope that HUD steps up and does the right thing by expanding FHA to 100% financing.
Tom Burris
DallasLoanGuy.com
Dallas, TX
"Your Dallas Mortgage Consultant"
http://www.dallasloanguy.com/
Texas Home Loans Dallas Mortgage Loans
I write about Texas Home Loans , live in the Dallas, TX area and lend across the entire Great State of Texas!! Subscribe to My Blog and stay informed about current lending changes!!
While I personally focus on Texas Home Loans and First Time Home Buyers.... I do lend in other areas. We are in about 46 States and adding programs to bring full service to an area near you.
