The DAP Monster Isn’t Dead

Unlike a vampire, driving a stake through the heart of Downpayment Assistance Programs doesn’t seem to kill them. They’re trying to make a comeback.

Housing Wire has a story that you can peruse. The front men for this are some non-profits but you can bet that they are getting all the help they need from the homebuilders and other groups that stand to profit from bringing back DAP’s.

These couple paragraphs alone sum up the tired arguments for this program and the one compelling reason they shouldn’t reappear:

 Non-profits like Nehemiah and AmeriDream Inc. frequently reiterate the statistic that more than 1 million borrowers have used seller-funded down payment assistance programs to achieve homeownership. The statistic these programs don’t like to repeat is the one that led to their demise: Federal Housing Administration commissioner Brian Montgomery in June said the one-third portion of the FHA’s portfolio that consisted of loans made to borrowers that used these non-profits might soon cripple the “FHA’s ability to serve American citizens who need access to prime-rate home loans.”

“Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own down payments,” he said at the time.

My guess is that DAP’s are back in time for the spring home buying season. The only thing that Washington seems to know how to do well is repeat past mistakes so count on them reappearing.

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