On January 23, 2012 FHA published a memo recommending a reduction in the amount that a seller can assist home buyers with their costing costs from 3% to 6%.
Foreclosures Lower with FHA but FHA is in Denial
It was brought up in 2010 and commentary from the public was an overwhelming NO. So the Proposal was shelved. However with the new year this proposal has gained new life with the Federal Housing Administration and HUD. As the refinement in home mortgage lending has occurred over the past 5 years. Delinquencies are down sharply as noted in this article by Housingwire.
So who will this impact the most? First time Home Buyers who use down payment assistance on more affordable homes. As it stands now using down payment assistance programs such as Bond 77 and it’s higher costs would prevent thousands of First Time Home buyers in Texas from using popular programs like Bond 77, Homes for Heroes and other programs that provide assistance for the down payment but not for closing costs.
Devastating Results of Reducing Seller Concessions to First Time Home Buyers
Lets use the example of a $100,000 house. Total closing Costs of Tax and Insurance Escrows, 1-year of Insurance, Title and Lender fees are fairly fixed and exceed $3,000. Currently the seller may pay up to 6% or $6,000 and this is adequate for homes even that are in higher cost county such as Harris County that has higher Taxes and towards the the coast would have windstorm and flood insurance requirements. Under this proposal anything in excess of the $3,000 would have to be paid for with either cash or a gift to the buyer. This very fact would knock thousands of first time home buyers, educators, firemen and law enforcement from using down payment assistance in Texas.
As a result the housing market which is so important to our national economic recovery would suffer. FHAs Motto to Serve the Undeserved looks like it needs to be changed. I’m interested on your thoughts on the subject. Feel free to comment below.
As soon as this proposal is released to the Federal Register I will post a Link to the Comment Section so you can voice your opinion to FHA and HUD