I learned about the AmeriDream and Nehemiah programs while reporting a story about lenders tightening housing standards. Lenders have defined some of the Washington, DC area as a “declining market;” which in some cases means buyers have to put down 20% or more to get a loan. I asked a realtor if these tighter lending standards were pushing buyers out of the market. I was surprised when she told me that FHA qualified buyers could still get 100% financing through AmeriDream and Nehemiah. She told me a lot of sellers were eager to have an offer from an FHA qualified buyer because they didn’t have to worry about the lender changing the standards or the buyer having the down payment.
The FHA says the default rate on these seller funded down payment assistance loans is three times higher than the other loans in their portfolio. FHA Commissioner Brian Montgomery says if his agency has to continue making these loans, it will need money from Congress to keep operating.
Congress is now working on reforming the FHA. The Senate's proposal eliminates these types of loans, but there is a lot of support for them in the House. Mortgage consultant and former HUD official Howard Glaser expects Congress will ultimately eliminate these programs because lawmakers will not want to start pouring money into the FHA.
Comments
PLEASE MY HUSBAND AND I HAVE GONE THROUGH A LOT NO DOUGHT. WE ARE HAVING OUR 10TH YEAR ANNIVERSARY ON THE TENTH OF SEPT. WE'VE NEVER BEEN ABLE TO PURCHASE A HOME BECAUSE OF HIS PAST ADDICTION. NOW WE ARE BUILDING A STABLE FAMILY. WE STILL GO TO CHURCH AND WE DESIRE A FAMILY HOME FOR OUR CHILDREN AND 24 GRAND CHILDREN TO VISIT. I DON'T ASK FOR A LOT JUST WHAT I NEED. I LOVE THEE OUT DOORS AND I LOVE TO FISH. THANK YOU FOR YOUR HELP. PS MY HUSBAND IS A PAINTER SO WE DON'T MIND A FIXER UPPER AS LONG AS IT HAS 5 BED ROOMS AND 3BATHS AND A LARGE GARAGE. I ALSO WOR FOR IRS SEASONAL AND SELF EMPLOYED DOING IRONING CLOTHES.
In my experience as a seller, the mortgage company and Ameridream were the primary benefactors. The mortgage company sent me a package containing a revised sales contract adding Ameridream language PLUS another Ameridream document requiring me to agree to the buyers financing terms. This language would have essentially made me a co-signer on the loan. In the contract, I had already agreed to the selling price and agreed to pay the closing costs. In the new contract,I was also expected to pay an additional amount equal to the down payment which ameridream would receive to continue to fund its program. Ameridream would reap the tax benefits and I could not claim it as a tax deduction or charitable donation!!! When I did not agree, the mortgage company slowed the process down, required the loan to go back to underwriting and exceeded the timeframe for the locked in mortgage rate for the buyers. Is this how they help the first time buyer?
Steve,
Thank you so much for the feedback about how to improve our site. We hope to add more video clips of our nightly broadcast to our website in the future, but we have some server space issues to deal with first.
In the mean time, here is the direct link to the transcript of the original report that inspired Stephanie's blog entry: FHA's No Money Down Program
Could we get a link to the video for this story, not just the transcripts? In fact, it would be a great enhancement to the site if the feature stories were available as "stand-alone" videos. These stories have a longer shelf life then the market updates/news that are included each night. If we could have the investigative reporting and feature stories separated, we could find them more easily and it would entice us to use the site more often. Also, it would prevent us from having to search through a whole episode to find the topic of interest.
Despite all the overstated, false information and negative statements being distributed by Brian Montgomery et al, the fact remains that Meg Burns testified before Congress that HUD could better manage the DPA programs but have choosen not to. So, HUD has had the power to better manage FHA but choose not, seems to be quite in character with this administration.
The story and the comments below seem to be missing the point. One of the founding principles the United States was built on is equal opportunity and providing programs that help give people of this country equal opportunity. Without these programs and governmental programs there would be great social unrest. Therefore, we as a country focus on issues impacting women, minorities, the handicapped and the lower income wage earners. Many men and women have died for this country protecting this American value. Generally, controversial programs end up with refinements made to the program. Perhaps refinements to the program is what HUD, AmeriDream and PBS should be working toward. Let’s protect our American values of freedom, equal opportunity, and empowerment of all social and economic classes so that people continue to believe in America and are willing to fight to defend it.
HUD makes a billion dollars a year off these programs and will continue to past the year 2014???? I think you got the sign wrong. The link to the Independent Review of HUD's Mutual Mortgage Insurance Fund, which the poster failed to provide, is http://www.hud.gov/offices/hsg/comp/rpts/actr/2007actr.cfm
The previous poster might note that in the section on Fund sensitivities, they note that the Fund will LOSE about $5 Billion if the downpayment assistance programs are not stopped in 2009, but allowed to continue until 2014. In other words, these programs COST about $1 Billion per year.
http://www.hud.gov/offices/hsg/comp/rpts/actr/2007sec5.doc
The relevant section is copied below:
D. Continued High Concentration of Loans with Downpayment Assistance
Loans with downpayment assistance from non-profit organizations produced claim rates significantly higher than traditional FHA business. The IRS issued a ruling in May 2006 prohibiting non-profit organizations from receiving financial contributions by home sellers and subsequently providing downpayment assistance to homebuyers. HUD also issued a ruling in October 2007 that prohibits the endorsement of loans that receive contributions from any party that is financially related to the seller of the collateral housing. In the base-case scenario, we assume that these rulings will be effectively enforced; making loans that receive gift letters from seller-funded non-profit organizations phase out quickly. Our alternative scenario shows the situation of the Fund if, for any reason, the recent high concentration in these loans continues into the future. Under this alternative scenario, there is no impact on the FY 2007 economic value and capital ratio. However, due to the higher projected claim rates of future books of business, the FY 2014 economic value will decrease by $5.198 billion and the FY 2014 capital ratio will decrease by 0.97 percentage points from their base case scenario levels.
WOW! Someone has fallen hook, line, and sinker for HUD's hype. Get the facts read the reports. HUD makes a billion dollars a year off these programs and will continue to past the year 2014-- it's in the independent review done on HUD's fund so there is no hype just facts. Further any comment submitted "anonymously" has no credibility!
JP said:
"I don't understand why this program and HUD are specifically singleing out AmeriDream especially since the tax-payer dollars are NOT used to fund their programs. If programs like AmeriDream are eliminated I question how HUD will step in to fill the void. Will they resort to using tax-payer dollars?"
WOW!
They are already using taxpayer dollars. These illegal programs have already compromised the FHA insurance fund to the point where they REQUIRE an appropriation for the 08-09 fiscal year.
The cost of running false down payment gift programs has already infected the FHA insurance fund to the point of insolvency. That's the point! And the cancer will only get worse. That's why HUD is in a panic.
Personally, I am very much for the continuation of programs like AmeriDream. Understand I am biased as my husband and I received AmeriDream funds to assist us with our FHA 3% downpayment. We were able to provide half, but without assistance from a family member (which was not even a possibility for us), we would not have been able to come up with the additional 1.5% without AmeriDream.
My understanding is that people who get any downpayment assistance are equally successful no matter where the downpayment gift comes from. Considering many loan options allow for downpayment assistance, I don't think AmeriDream and those who benefit from the program should be penalized for not having other resources such as help from parents, government offers, or other programs.
I don't understand why this program and HUD are specifically singleing out AmeriDream especially since the tax-payer dollars are NOT used to fund their programs. If programs like AmeriDream are eliminated I question how HUD will step in to fill the void. Will they resort to using tax-payer dollars?
Personally, I am thankful to AmeriDream for assisting us and over 1 million other people in getting into a safe loan product like FHA loans. I can't even imagine where all of those people would be if they had to go into a subprime loan instead.
I realize this program is not perfect, but I think HUD should work with AmeriDream to address specific concerns rather then completely do away with a program that has done so much good.With the economy the way it is and the housing crisis - how are people like my husband and I (who don't have wealthy parents to provide a gift) going to be able to own a home??
This issue is going to be getting much bigger and much more problematic.
I'd like to make a couple of points:
1. You interviewed someone who had used the Ameridream program 8 YEARS AGO! Of course they still have equity. Try interviewing one of the tens of thousands who have lost their home to foreclosure after having been victimized by these false gift programs. Check the Charlotte Observer archives on "Nehemiah."
2. Howard Glaser, Howard Glaser, Howard Glaser. Will you please ring Howard Glaser and ask him EXACTLY what he had to do with the release of these programs as "Acting" General Counsel at HUD. He doesn't seem to ever want to acknowledge his history with the release of the Nehemiah Program in 1998 when he comments as a "mortgage industry consultant." What is Howard hiding?
It would not be an apples to apples comparison, but I think you're right and it would have been a good point to have in the story. The GAO sample is from 2000 - 2002. Ashburn puts her numbers in the context of over the last 10 years. There are also more players than AmeriDream. My piece did say the loans have a higher default rate and the FHA Commissioner said it was three times as high as that of non-seller funded down payment loans, but perhaps it didn't come across as clearly as it should have.
When Anne Ashburn makes easily verifiable claimes, like "only 6% of down payment assisted borrowers have trouble making their mortgage payments" why can't reporters be bothered to actually go ahead and check? In the GAO report that you almost link to (you link to the highlights page, not the whole report) Figure 2 shows that about 25% of assisted borrowers have had at least one episode of being 90 days or more delinquent in their first 5 years. That's a lot higher than "6%" and it would have taken almost no effort to find that figure
http://www.gao.gov/new.items/d071033t.pdf
see Fig. 2 on page 10. It would also help if you got the name of the agency right - "GENERAL Accountability Office?" Where did you come up with that name?