October 03, 2007
Charities Sue to Block Ban on Down-Payment Gifts
By Peter Panepento
A decision this week by the U.S. Department of Housing and Urban Development to ban nonprofit housing programs from giving down-payment assistance to home buyers has sparked a federal lawsuit from two nonprofit groups that are looking to preserve the practice.
Ameridream, of Gaithersburg, Md., and Nehemiah Corporation of America, in Sacramento, this week filed lawsuits at the U.S. District Court in Washington to block the HUD rule, which is scheduled to take effect Nov. 1. The HUD law applies to mortgages that are insured by the Federal Housing Administration.
In its suit, Ameridream claims such programs have helped more than 1 million people buy homes and that roughly 80 percent of those sales were to first-time home buyers.
The ban would place obstacles in front of the low-income, first-time, and minority home buyers HUD is seeking to protect, Ameridream contends.
“By limiting the financing choices that these borrowers have, many will choose other options, such as subprime loans,” Ameridream said in its lawsuit. “Since delinquency and foreclosure rates for subprime loans do not compare favorably to those of [the Federal Housing Administration], these choices are not optimal.”
HUD, in its rule, said many transactions that take place through down-payment-assistance programs are nothing more than pass-throughs from the seller to the buyer.
Often, a nonprofit group that provides down-payment assistance to a home buyer receives money from the seller in the form of a charitable contribution. The price of that gift is then built into the sale price of the home.
“In these cases, there is a clear quid pro quo between the home buyer’s purchase of the property and the seller’s ‘contribution’ or payment to the charitable organization,” HUD said.
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This is another in a long line of wrong headed decisions made by HUD in regards to the people they purport to serve. Over the past few years it is obvious that HUD has backed away from its original purpose of providing options and opportunities for quality homes for low and moderate income families. In an era where the cost of living and acquisition of housing has become more and more an impossibility for most Americans, HUD appears to be more of an adversary than an the overarching protector of these families. HUD no longer provides the option of first right to those families residing in properties under the Mitchell Lama system and other subsidized housing programs. This has made them prey to outside private developers, foreign and domestic, who have no qualms about increasing rents and purchase prices to unconscionable levels. Additionally, HUD foreclosures which were once an opportunity to obtain a home at a reasonable or below market rate, are now being auctioned off at Market Rate instead, leaving only well heeled private developers and investors the opportunity to obtain these homes. Witness the HOPE VI program whereby people were pushed out of “projects” with many not being relocated into quality homes. The Nehemiah Program and Ameridream have been the conduit to opportunities that home buyers who have not the wherewithal to amass savings in the amounts of $20,000 to $80,000 for down payments and closing costs. HUD should recognize this as a boon for these individuals rather than setting up blockages to these worthwhile programs. Sadly, under the current administration, HUD has become little more than an acronym for Hurting the Under Dog. Hopefully, under the new administration they will return to the policies and principles so many have come to rely upon in leveling the playing field. Like FEMA, HUD’s credibility is becoming more and more questionable. Under the guise of fairness they are blocking opportunities for so many worthwhile families. In addition to a lawsuit, this should be brought to the attention of Congress, as it directly impacts all the constituents to whom they are responsible.
— G. WILSON Oct 3, 11:54 PM #