Wall Street Journal (06/24/08) P. A1; Timiraos, Nick
Critics of seller-funded down-payment programs administered by nonprofit organizations worry that they will burden the FHA and push up foreclosure rates even more, as home builders and highly motivated private sellers promote the programs as a way for buyers to obtain the
3 percent down payment needed to qualify for a federally insured mortgage. Builders are turning to nonprofit down-payment assistance in response to a decline in home sales, the drying up of the subprime mortgage market and the introduction of bigger down-payment requirements by traditional lenders; but the future of such programs is in question, as the Senate version of the FHA modernization bill scraps such down-payment programs altogether. The FHA reports a jump in down payments from nonprofits to 34 percent of FHA loans in 2008 from 18 percent in 2003 and under 2 percent eight years ago, noting that default risks rise about three-fold when nonprofit-funded down payments are involved.
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