FHA Down Payment Change WILL Hurt Home Sales-Contact Congress NOW

There will be a vote on the housing bill this week-FHA mortgage loan financing might be forever impacted.  If you want to continue to use DPA-down payment assistance funding in it's current format, you NEED-MUST contact your congressman/woman today!

As Realtors, we know how the housing market works.  The progression of home sales within the housing market is dependent on first time home buyers starting the domino affect.  Their home purchases are the catalysts that allow people to sell their existing home and then move into a new property such as a larger home, condo or townhouse. In order to keep the housing market moving forward, we need to encourage homeownership at the beginning of the cycle.  Mortgage programs that are underwritten with greater flexibility regarding credit, income and down payment will create more homeowners. We need mortgage loan programs that allow you to buy a home with as little money down as possible.   

As recently as March of 2008, there were conventional loans that allowed for 100% financing such as the Home Possible, My Community, and 80/20 combination first and second mortgage programs. Declining property values coupled with high mortgage delinquencies in all real estate markets have all but eliminated investors for these types of high LTV loans.  In addition, due to large losses by private mortgage insurance companies (PMI) there is an unwillingness of mortgage insurers to insure these loans.  Hence these loan programs have either been eliminated or now require a down payment.  With Fannie Mae and Freddie Mac's current financial problems and the overall state of the mortgage markets, don't expect that they will be creating any new high loan to value zero down mortgage products anytime soon.

Herein lies the problem.  Most first time home buyers lack sufficient resources for the down payment and closing costs. They often have good credit and the ability to make a payment. Until they save enough money, they are left out the housing market.  FHA loans currently allow buyers to obtain down payment assistance (DPA) from a relative or from a qualified down payment assistance provider.  This means that buyers without enough current resources may be able to obtain enough funds to buy a home today. There are a number of approved down payment assistance providers-some of the largest names are Nehemiah, Genesis, and Ameridream.  In a nutshell, these non-profit organizations issue down payment assistance to a prospective home buyer and then collect funds from the seller of a home who has agreed to participate in this program at the time of closing.  The non-profit charities charge an administrative fee of between $300 and $500 to facilitate with the assistance of this funding. FHA sometimes refers to this arrangement as seller funded down payment-which they don't allow.  Although the funding is coming from a non-profit, the FHA perception is that it is actually from the seller, albeit indirectly.  The problem stems from losses.  According to FHA, they have experienced larger losses on portfolios of loans that were funded with DPA funds. 

In fact, FHA hopes to eliminate these programs altogether through the fast tracked housing bill going through congress now. Time is of the essence!  The senate version-which is the supported version-will eliminate DPA.  What would this mean?  Let me make this clear-if this bill passes fewer houses will be sold.  More qualified homeowners will remain as renters.  More homes will stay on the market and the real estate and mortgage crisis will get worse.  DPA funding offers a solution to our crisis by making homeownership possible.  If there are problems with the way things are being done within the current DPA program then let's work on modifying them.  Let's identify solutions-such as raising the minimum required credit score on DPA funded loans.  This would probably lower the defaults and match the underwriting to the risk.  Elimination or outright banning of DPA programs that are currently helping our ailing housing market is foolish.  As a Minnesota FHA mortgage broker who works in the market on a daily basis, I can tell you about clients who are good people who want to become homeowners.  Their shot at owning a home depends on these programs.  Get involved and learn more.  The consequences of making the wrong decision about the fate of DPA’s will affect our entire economy.

Keeping It Relevant & Local |Linden Hills Minneapolis Minnesota

We are always searching for new ways to get involved in our communities and the people and businesses within.  People do business with people they know and trust.  How would you like to be the local expert and have fun at the same time?  Why not visit your local businesses and profile them on your blog.  You will give the local business some free advertising and you might become recognized as providing some value within the community.  You will get to know your area better and meet more people, which should translate into more business.  You will also be the first hand area expert. 

You will be found with local key words in the area of town in which you work.  At the same time, after you've reviewed or discussed the local business, you can feature your listings or market information about the local real estate market.  Have you seen what the Minneapolis board of Realtors has available? Go to http://www.mplsrealtor.com/the100.aspx  Type in any city you want.  This is the kind of relavent information you need to share about your marketplace. These are the statistics people need to know when deciding to buy and sell homes.  Share this information along side some of the area attributes and businesses.

Here is an example of what I mean.  I live in Edina Minnesota-which is suburb of Minneapolis, MN.   Being that it is a beautiful 4th of July, we went to one of our city lakes today for a walk.  We have a local city lake called Lake Harriet which has a local community called Linden Hills.  The lakes area is very popular and by default-so is Linden Hills.  If you are interested, click  to learn more about the Minneapolis Lakes.

Today, my wife and I visited a local coffee shop in Linden Hills called Coffee & Tea LTD.  Their website can be found at http://www.coffeeandtealtd.com  We tried their coffee a few weeks ago and absolutely fell in love with it.  In fact, I encourage all of you to visit his website and see how he has incorporated video into his site.  Video profiling your business might be something you want to do on your personal website.  Besides traditional beans, Coffee & Tea Ltd has some very rare and exotic blends.  In fact, he has a very rare and unusual bean.  I don't want to spoil your surprise.  Go visit his site and learn about it.  He does sell coffee online and by mail order

This was our first video as we walked up to the store:

http://www.youtube.com/watch?v=vMhD1gISXFU

This was our second video after we went into the store:

http://www.youtube.com/watch?v=y8ouq-Ma2fc

These videos are unedited and our first attempt at local video.  Yet, we had a blast doing it.  We are going to be doing more of this in the future.  It's easy and fun.  We used the Flip Video camera-which is small handheld camera and costs about $100.  The camera couldn't be easier to use-point and click.  It even has a built in USB connector. 

During our visit with the owner, we discovered that he brings his dog with him to his shop.  The dog was a beautiful Rhodesian Ridgeback.  We discovered that he works on the rescue effort of placing these dogs in new homes.  So, if any of you are interested, he mentioned he needs to place 18 of them in the coming months-so if you know of a good home-give him a call-612-920-6344.  I went to Wikipedia and learned more about the breed.  These dogs are actually used as lion dogs in Africa. 

Here's my advice.  Focus on local-provide value-be different.  Many local realtors feature local listings-anyone of us can do that via an IDX feed.   Very few Realtors feature short video of the areas, the people, and the amenities.