A bill to bring back seller-funded down-payment assistance (DPA) has been introduced in the House of Representatives.

H.R. 600, sponsored by Rep. Al Green (D-Texas) and co-sponsored by Rep. Maxine Waters (D-Calif.) and Rep. Gary Miller (R-Calif.), was filed late Friday, Jan. 16. With Monday's federal holiday and Tuesday's inaugural activities, text of the bill is not yet available. The short description of the bill says that it is to "revise the requirements for seller-financed down payments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act."

Seller-funded DPA was an extremely popular tool for first-time home buyers who lacked the necessary down payment to purchase a home with a Federal Housing Administration-insured loan.

Seller-funded DPA came under fire because federal studies found that borrowers did not receive necessary home buyer counseling and defaulted more often than borrowers who obtained their down payments through other means. Also, many sellers simply inflated the price of the house to cover the cost of the down-payment assistance, which was channeled through non-profit organizations. Several attempts to eliminate seller-funded DPA were thwarted--two successful federal lawsuits were filed in 2008--but with the housing crisis, Congress did away with the program. It ended on Oct. 1, 2008.

Builders immediately felt the impact of the ban, which forced borrowers to find other sources of cash for the minimum 3.5% down payment required for an FHA loan.

In a statement released Monday, Scott Syphax, president and CEO of Sacramento, Calif.-based Nehemiah Corporation of America, commended Rep. Green for "recognizing the important role down-payment assistance can play in the market's recovery." Prior to the ban on seller-funded down-payment assistance, Nehemiah was the oldest and largest provider of the funds.

Pat Curry is senior editor, sales, at BUILDER magazine.