Released: October 02, 2007

HUD sued over down-payment rule

Source: Nancy Trejos, Washington Post (Free Registration)

Two nonprofit organizations have sued the Department of Housing and Urban Development in an attempt to overturn an agency decision that bans seller-financed down-payment assistance to some low- and moderate-income home buyers.

Gaithersburg’s AmeriDream and Sacramento’s Nehemiah Corp. of America, two of the largest providers of such assistance, are seeking injunctions to block the rule, which applies to borrowers whose loans are insured by the Federal Housing Administration. The rule was published in the Federal Register yesterday and is to go into effect Oct. 31.

Under the programs, home sellers give cash to the charities, which then help borrowers with their down payments. The sellers pay the charities a service fee but often recoup the money by adding 2 or 3 percent or an amount equal to the down payment, according to a 2005 study by the Government Accountability Office. FHA rules would otherwise require borrowers to make a down payment with their own cash or with gifts, as from relatives.

Read Full Article: HUD sued over down-payment rule