Third-party down payment assistance (DPA) programs for homebuyers died Wednesday Oct. 1, but supporters still hope they can get a replacement program bolted onto the newest economic rescue bill.
"I wanted to say to all of you that the fight is not over yet," Scott Syphax, CEO of Nehemiah Corp., the largest conduit of DPA funds, told supporters during a "town hall" teleconference Wednesday.
It's still possible that H.B. 6694, which would reinstate the program with some changes, could get attached to the rescue package currently being negotiated, according to Syphax. He urged the tens of thousands of people who wrote or called their congressional representatives asking to bring back DPA to continue to lobby their representatives.
"What happens next? We continue to reach out to U.S. Senators; we continue to reach out to our congressmen," said Syphax. "Right now, they are trying to decide what to put in the final bailout bill. Make sure that the people in Washington know they are leaving us out here on Main Street."
Whatever happens, Nehemiah will continue the fight, said Syphax. "Somebody needs to be the voice for Main Street USA in this country, and apparently none of the organizations that we tend to rely on to do so seem to be standing up for us."
If the program isn't replaced, Syphax predicted the housing market will become even worse. Nehemiah says nearly 40% of FHA loans are financed using DPA. Plus, FHA has raised minimum down payment requirements from 3.0% to 3.5%.
"Without it, as of today, housing markets are going to start to seize up and clog up," he said. "Home sales will not be able to take place across the country. The problem that has vexed them on Wall Street is really going to affect them on Main Street."
HUD and the Bush Administration have been opposed to reinstating DPA, saying loans that use such programs have a higher foreclosure rate and that they are inflationary because sellers tend to raise the house price to make up for the assistance they funnel to buyers through non-profit groups such as Nehemiah.
The bill now in the House of Representatives has some compromises baked in designed to make it more palatable to opponents. For instance, it requires borrowers to have a FICO score of 620 or higher. Those with lower FICO scores would need to buy risk-based mortgage insurance to cover possible defaults. The premium would initially be 3.0% of the principal balance and roughly 1.2% of the balance later as an annual premium.
Syphax said that on Tuesday the Congressional Office of Budget issued a report saying the replacement bill would have no cost to the government and would actually generate cash.
"I believe that one of the things we need to do is challenge the FHA to take a position on down payment assistance now that it has been proven that down payment assistance is not going to cost...a single dollar," he said.