Monday, November 14, 2005

Downpayment Help Leads To Foreclosures

The Columbus Dispatch reports on the unintended consequences of downpayment assistance. "Federal officials are sounding new alarms to home buyers: Beware of down-payment help from charities working with sellers. You’re likely going to pay more for your house, and you’re doubling the odds of falling behind on your government-backed mortgage, according to a soon-to-be-released report by the investigative arm of Congress."

"GAO investigators found that programs such as AmeriDream and the Nehemiah Corp. of America continue to gain in popularity, artificially inflate home prices and operate with little HUD oversight."

"The down-payment providers largely work alike: The charity gives cash-strapped buyers money for a down payment at closing and later gets reimbursed by the homebuilder or other seller, who also pays a service fee."

"'Some of these programs are clearly abusive,' said consumer advocate Bill Faith. 'I don’t care if there’s a nonprofit involved or not. We’re not doing people any favors by putting them in houses they can’t afford.'"

"Investigators found that: Home buyers who used down payments supplied by sellers paid 2 percent to 3 percent more for their houses, essentially the amount of the 'gift,' than those without financial help...Nearly a third of FHA mortgages involved seller-funded down payments last year...Builders use the charities for new houses twice as often as those selling older homes..Foreclosure claims to the FHA insurance fund have increased by 76 percent on mortgages with financial help involving charities."

"Realtor and consumer advocate Mildred Wilkins thinks they all play the same game, with home buyers as the only financial losers. New subdivisions in her hometown of Indianapolis have been ravaged by foreclosures. 'HUD can’t go on indefinitely acting like they don’t know what’s going on,' she said. 'There have been a huge number of losses.'"

1 Comments:

At 8:19 PM, Blogger Mort Fin said...

GAO report is available on line at
www.gao.gov
in the upper right box, where it says search by report #, type in 06-24

 

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