I recently wrote an article about HUD closing the loophole for the Down Payment Circumvention companies that operate under the guise as a 'charity'. HUD Ends Most Down Payment Assistance Programs.
These 'Faux Charities' helped many thousands of people get into a home when they didn't have the required down payment. Used mostly on the FHA loan programs, this circumvention of the down payment rules allowed many Americans to get into a loan program for which they did not qualify. And although I understand that this hurts those that CAN afford a house payment... but are short on cash.... let's face it: These people did not belong in the same loan pool as those people who COULD afford the down payment. And this is why I took my stance against the Faux Charities. Hey, I like to do loans to... but allowing undeserving people into the same loan pools as the deserving hurts all involved. And it is an undeniable fact that loans with DPA foreclose at an alarmingly higher rate than those loans with buyer money into the deal.
If you look towards the bottom of that post in the comment section you will see that a Spammer was promoting HIS Down Payment Circumvention' program with no regards to blogging etiquette. Purportedly 'legal'and RESPA compliant.... this program is on the Maverick Mortgage's "Prohibited Parties List". Yes, BOTH DPFunder and Buyers Account, LLC are BANNED from doing business with Maverick Mortgage.
Realtors take note: If it sounds too good to be true, it might just be.... er... or should I say that IT PROBABLY IS!!!
Although this spammer claims that his program is legal.... it may not be wise to rely on a spammer on the internet. Yet, rather, you should work closely with your Lending Partner to sort through all of the misinformation floating around the internet.
Tom Burris
DallasLoanGuy.com
Dallas, TX
"A Home Loan For Every Texan"
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!!
Hi Barbara: These loans were dragging down the whole loan pool.
Hello Lania: Gov't bond programs are great. Although difficult to work with, it actually gives the buyer some equity and does not inflate property values. Most people going into deals with DPA were going to be upsid down if they sold in the short term. I see your point about why does it matter where the gift comes from.... and I admit that I haven't studied the numbers on foreclosure data differentiating 'Faux Charity' dpa and Govt DPA.
Lots of emotions on both sides. I try to look at it from the standpoint of this: "What is good for our industry?"
Tom, thanks for your stance! I watched the banter back and forth on that.
You are right in life if it sounds too good to be true it probably is. I have people find this great piece of land on the internet and I look it up and almost ALWAYS the entire thing is in the flood plain.
Thanks Marchel:
This latest deal may very well be on the up & up(for now)..... but I expect HUD and Fannie to squash it.
My main point is this: Tread cautiously.... I network nationwide with lenders and noone knows of one of these actually closing.
Oh, and the fees are pretty high.... below is from one of their sites
Joe Buyer wants to buy a $200k house. Joe can sign up with us to be a dealer. Joe then asks the seller to enroll her property in the Owners Alliance.
Ms. Seller agrees and signs the Membership Agreement form. Ms. Seller has agreed that she will pay $12,000.00 plus $300 processing fee, which will be collected at settlement. Her benefits to the association begin immediately.
A commission of $10,000.00 is paid to Joe Buyer, our dealer. Lenders may request a Verification of Deposit (VOD) from the bank showing the funds in Joe Smith's account.
The buyer has simply earned the income required for their down payment.
Hey Tom:
Thanks for posting comments on my blog. Have a great week.
Tom,
Both of these "charities" are also banned at Supreme Lending...the owner of our company sent down a directive almost a year ago specifically towards DPfunder and any DPA similar to them...
I agree with you 100% on the faux DPA's...
I really enjoy working with the city and state bond programs although some of them have a very restricted lender and broker pool...
I've been working with a charity program for active duty military members that is similar to the bond programs that pays some of their closing costs...
Do you keep getting emails from the faux charities asking you to email your senators? I get them and respond that I feel that is in all of our best interest to not accept them.
I could go on but you understand what I mean...
JP
http://www.gao.gov/new.items/d0624.pd
There was some discussion about the relative foreclosure experience of loans with faux charity "gifts" versus gifts from governments, etc. where there is real equity involved. The GAO report above shows that real gifts have higher rates of foreclosure than comparable mortgages without gifts, but that loans with "gifts" from the faux charities have by far the highest rates of foreclosure.
You can 'spin' the numbers both ways......
Regardless.... the 'faux charities' have been BANNED by some lenders.... and I haven't seen any list of approved lenders for the scammer/spammer dpafunder type scams. Pffft...
Nice anonymous post!!
Thank You Rosemary!!