Deadline looms for down payment assistance

Local builders are urging home buyers to purchase a home by Aug. 31 if they want to take advantage of the FHA-backed program that offers down payment assistance by the seller.

The Federal Housing and Economic Recovery Act eliminated seller-assisted down payments effective Oct.1.

Sia Howe, vice president of marketing for Astoria Homes, said the deadline would give new buyers just enough time to get the purchase approved and closed.

H.R. 3221, signed by President Bush July 30, allows lenders to refinance home mortgages to correspond more accurately to their appraised values and extends the deadline on a $7,500 tax credit for first-time buyers, among other things.

The act's elimination of DPA programs has spurred members of Congress to create a new bill, the Federal Housing Administration's Seller-financed Downpayment Reform and Risk-based Pricing Authorization Act (H.R. 6694).

If passed, it will allow such programs to continue indefinitely.

Most industry experts have responded to the Recovery Act by saying its attempts to stabilize the housing market are "too little, too late," and will have little effect on declining markets or the alarmingly escalating number of home foreclosures.

Builders are concerned, however, that eliminating down payment-assistance programs will have a further negative impact on the local market.

"They are very concerned about the impact that's going to have for first-time home buyers," said Monica Caruso, director of public affairs for the Southern Nevada Home Builders Association.

Jerry Howard, chief executive officer of the National Association of Home Builders, said the association supports H.R. 6694.

Howard said the association did its best to keep the down payment elimination out of the recovery act.

"We tried to fight the good fight as long as we could, but we couldn't see sacrificing the greater good for one provision," he said.

The act increased the mortgage requirement on FHA-insured loans from 3 percent to 3.5 percent, and prohibited those funds from coming from the seller.

It will eliminate programs like the Nehemiah Program.

Nehemiah, the country's largest "seller assistance" program, "gifts" mortgage down payments to buyers from sellers.

"There were many factors that contributed to the situation we're in now," Caruso said. "We don't feel that DPAs were such a primary contributing factor in the decline in housing that they should be eliminated."

The elimination of the DPA is critical in a down market, Howe said, and the press has largely ignored its inclusion in the Recovery Act.

"Nobody's talking about how this DPA is going away," Howe said. "We have closed 50 percent of our homes under this program. It's been a big tool for a lot of us to get some of this inventory moved."

Everyone assumes it's the buyers who didn't have an investment -- or "teeth in the game" -- who caused the foreclosure crisis, she said, because "it's so easy to walk away if you never put any money down."

But it's not FHA buyers, many of whom took advantage of Nehemiah, who have been bailing out of their homes, she said. FHA buyers are required to qualify for loans in every other way besides down payments, she pointed out, including income, bank deposits and credit ratings.

Nehemiah's Web site, getdownpayment.com, includes a form for H.R. 6694 supporters to complete if they wish to send -e-mails or letters to their congressional representatives.