Off the wire:

The Federal Housing Administration is prohibiting its borrowers from relying on down payments financed through charities that are in effect paid for by the seller.

These programs, which often are run by legitimate charities, have helped thousands of people buy homes.

Home sellers give a donation to the charity equal to the down payment and the charity funnels it to the potential buyer. Then the seller recoups the money by charging a higher price for the home, usually equal to the down payment.

Why did the FHA decide to do this?

The Government Accounting Office found that buyers receiving assistance from the charities are more than twice as likely to default or become delinquent than other FHA borrowers.

Oh. Really?

So, basically, they’re saying borrowers who have little (or no) money to put down at closing are more at risk of not paying their loans, in the future?

Yeah, I’d buy that argument.

That’s because they DON’T HAVE ANY MONEY!

Source: FHA Prohibits Seller-Financed Charitable Down Payments – The Wall Street Journal by way of Realtor.org

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Updated:  1st Q 2018

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