A proposal reinstating seller-funded down-payment assistance (DPA) is expected to move to the floor of the House of Representatives next week, but the likelihood of such programs being resurrected into law appear just as slim as they did last week, when NAHB CEO Jerry Howard told BUILDER the chances of doing so were evaporating. "We would like to get it done," Howard said then. "But the hurdles we thought had been removed are still there."
That remains the case, even as the new DPA bill moves forward in the legislative process and encounters both practical and political obstacles.
"It is uncertain how long this bill will sit with the House floor before a satisfactory proposal can be reached and delivered to Senate and then the President," Wachovia Capital Markets housing analyst Carl Reichardt said this week in a report. "Passage would be positive for home builders in our view. Given HUD's position on and the overall sentiment regarding DPA program loans (HUD contends that default rates are two to three times higher than other FHA loans), enactment is likely to be challenging before Oct. 1, when DPA is set to expire. Nevertheless, the magnitude of the decision for or against will be important to the industry in our view, and we will monitor it closely."
According to the NAHB and others, there remains significant opposition to the bill, even in its revised form, from senators and HUD officials. During the back-and-forth of the housing rescue legislation passed this summer, the Senate specifically eliminated seller-assisted DPA as of Oct. 1 in its version of the housing bill due to concerns about high default rates on such loans.
The updated version of DPA would make such programs available to FHA borrowers who met minimum credit scores, and for those with riskier credit profiles, only with higher mortgage insurance premiums.
But, as JPMorgan housing analyst Michael Rehaut points out, even if such a DPA program did make it into law, it may not provide that much benefit to builders. "We note the bill would reinstate DPA in a more compromised form, and thus does not represent a full return to the unhampered use of the program prior to the passage of the housing bill in late July," he explained in a report released this week. "As a result, while the bill is a partial reversal of the complete ban on DPA, it still represents a net negative when compared to the unhampered use of the program prior to the passage of the housing bill."
Alison Rice is senior editor, online, at BUILDER magazine.