Isn't the new minimum downpayment 1.5%?

Stephen: That has been proposed, but FHA has not changed the down payment requirements yet.

JOEY, thanks for sending this out.  You are right it only took a few minutes and that was with adding 6 friends email addresses. 

This is very good information for all housing industry professionals to be concerned and activated about!

Joey,
Wonderful and helpful information for all of us in the business.  Thanks for keeping us on our toes, we need that.

I agree... great post and thanks for giving us the heads up on how we can all do our part!  FHA is the best program out there right now for 1st time homebuyers and with the gift down payments it has definitely helped alot of future homeowners. 

Joey, I have no problem with FHA eliminating DPAs IF and only IF they replace it with a 100% product. DPAs are HUGE in my market. I agree completely with this post and I'm popping over now to wriet my letters. Thanks

Bryant, you make a great point.  Then folks would stop inflating sales prices and would eliminate the arguments on the other side...not that everyone does this, but some do. 

Unfortunately, looks like they are eliminating the DPAs and increasing the minimum monies from 3% to 3.5%.  Not good for any of us.

If this is what Senate is focusing on , they are nuts! On an FHA loan you can get the 3% down from a family member...but not the seller? Craziness!

REBUTTAL: My friend Matt Leebert sent me a link from Calculated Risk sharing a contrarian view. While I agree that the long-term benefits are there, to me it's like having someone with severe bleeding going to the ER and being given a diet and exercise plan. Does DAP mean more buyers and quicker stability in the real estate market? Or does it mean more foreclosures and less stability?

...it could mean BOTH. However, these mortgages that have HART or Nehemiah are full doc loans with fixed rates and reasonable debt ratios. The real risk is that there isn't much equity. Well...by that reasoning, the faster housing prices stabilize and people stop losing their equity, wouldn't that stem the tide of foreclosures? Whereas pulling buyers out of the market seems likely to keep prices plummeting. Hmmm...

REBUTTAL:  <p>

I've never seen the word "gift" placed in quotation marks as often as it is when discussing this subject.<p>

The real estate industry has always had a bad reputation when it comes to honesty and ethics (see historical annual Gallup Poll rankings on honesty and ethics in professions surveys).<p>

A program where buyers are told they are getting a gift and then have to pay for that gift in the form of a higher price and inflated mortgage balance is simply not honest.  <p>

Now I often see how some argue that prices are raised when sellers pay for recurring and non-recurring closing costs and that those are built into the price of the home also; so what's the difference?  The difference is that there is no certification of a gift with those concessions.  There is no representation to the home buyer that he/she will be given the closing cost assistance free and without charge.  That's not the same as the "gift" programs.  They are certified to be free.<p>

Also, you see the "nonprofits" argue that the "appraisal comes in" so that makes it okay.  What they don't tell you is that appraisals are not exact by their very nature.  Appraisals are opinions of market value defined as "estimates" in HUD handbooks.  <p>

Existing anti-flipping regulations and more recently, a 2008 FHA Mortgagee Letter state that under certain circumstances, such as the quick resale of a home at an increased price, the underwriting of an FHA loan requires that a second appraisal be obtained to verify the property value.  As long as the second appraisal is not more than 5% below the first appraisal, the first appraisal is acceptable.  Effectively, HUD has declared that the permissible tolerance between two appraisals is 5%.<p>

The "gift" programs distort sales prices by the 3% down payment requirement plus the "gift" fee charged by the "charity."  Now you can see that the sales price inflation can live like a virus within the acceptable range between two appraisals.  Like a computer virus, just because it can find a place to hide in the system, doesn't make it legal.  <p>

The problem is not with the appraisers.  How can HUD discipline an appraiser for an "error" of less than 5% when HUD itself has committed to 5% as an acceptable tolerance?  So when the "charities" send you after a red herring that "the appraisal comes in" so all is well -  think twice.  The problem is that there are two different prices on the home.  The appraisal issue is a distraction designed to get you off the subject of price inflation.<p>

Let me suggest a mental exercise to see if you think making someone pay for their gift is honorable or ethical.  Let's say it's your birthday party, and some character shows up that you have never met before.  Strangely, this character has brought with him a $4,000 gift (big screen, vacation package, fill in the blank of what $4,000 gift you would like for your birthday) and makes a "big todoo" about it.  Kind of odd since not even your parents or other family members, people who actually know you, gave such a gift.  After all the fanfare, and the OMG thank you so muchs, the stranger leaves ... and leaves you wondering who was that man who gave me so much and why would he give me - a stranger - so much?<p>

A little time goes by and one day, after work, you go home get the mail and are stunned to see that that nice man had charged that "gift" to your credit card.  But it doesn't end there, he also charged you a $750 fee for getting you the gift!  Now what do you think of him?  Now you know why he crashes every birthday party in town with his "gift."  Welcome to Nehemiah.<p>

I have to stop typing now because I ran out of quotation marks.

Thomas...I've always appreciated Common Sense.

Your Friend
Ben Franklin

great post, i actually logged in today to get an update of on what was going on with the DPA. There gonna take the best program we have left away, nothing like kicking us while we're down...LOL gotta love the decision being made.