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AmeriDream Supports Reformed DPA in HR 600

Fact vs. Fiction about downpayment assistance

Downpayment assistance funded in part by sellers (DPA) could help stabilize the housing market if Congress adopts H.R. 600. Learn the facts and discredit the fiction about DPA.

Download Fact vs. Fiction About Downpayment Assistance

FICTION: “DPA programs won’t help the housing market or the economy recover.”

FACT: DPA in H.R. 600 will help stop the downward spiral of home values, reduce foreclosures, create home equity and jobs, fund state budgets and won’t cost the government or taxpayers a dime. H.R. 600 will enable 300,000 additional families and individuals – all qualified and approved for Federal Housing Administration loans – to become homeowners each year. Eighty percent of them will be first time homebuyers. DPA will create 235,000 jobs, generate over $4 billion annually in local and state revenues, and provide $2 billion annually in private capital for sustainable homeownership. DPA’s absence prompts fewer home sales, lower home values, more foreclosures, job losses, and lower revenues for cash-strapped local governments. H.R. 600 is a vital mechanism to stabilizing the U.S. housing market.

FICTION: “The government should fund downpayment assistance for homebuyers.”

FACT: H.R. 600 creates a public-private partnership using the government’s standards and requirements for homeownership. It uses $2 billion of private capital for the downpayment funds to help 300,000 government-approved homebuyers become homeowners at no cost to the government or taxpayers.

FICTION: “DPA is subprime and is part of today’s problem.”

FACT: DPA is not subprime and has no subprime characteristics. Homebuyers using DPA must qualify for an FHA loan, use an FHA-approved lender, and use FHA loan underwriting criteria. All loans are fully-documented and incomes fully verified. Homebuyers will receive a safe, long-term fixed interest rate. FHA coupled with DPA is the safe alternative to subprime.

FICTION: “Economic recovery plans need to reduce foreclosures and create jobs.”

FACT: DPA helps reduce foreclosures and create jobs. A good way to avoid foreclosure is to sell your home. DPA in H.R. 600 will increase the pool of qualified homebuyers, estimated at 300,000 annually with 80% being first time homebuyers. Second, DPA is estimated to create over 200,000 jobs.

FICTION: “DPA programs lead to high default rates among homeowners with FHA loans.”

FACT: DPA programs encourage sustainable homeownership.Ninety-four percent of charitable DPA-assisted homebuyers pay their mortgage without difficulty when measured over 3 years, according to a 2005 General Accounting Office study. FHA homeowners using seller-based and other DPA assistance with 3-year old loans have a 6% and 5% claim rate, respectively, while FHA owners using no DPA assistance have a 3-4% claim rate.

FICTION: “We shouldn’t be putting people in homes they can’t afford.”

FACT: H.R. 600 implements credit requirements for DPA recipients and makes homebuyer education available to encourage responsible homeownership. DPA participants must use FHA-approved lenders, be a qualified borrower, and meet strict FHA underwriting guidelines. The average DPA gift will be $3,600 toward the purchase of modestly priced homes averaging $108,000 compared to an average $116,000 for other FHA-insured loans.

FICTION: “People should not be getting into homes with no money down.”

FACT: DPA in H.R. 600 establishes and verifies that there is a minimum of 3.5% money down creating instant equity in the home for the new homeowner. This begins the cycle of wealth creation through home equity.

FICTION: “DPA programs encourage appraisers to inflate home appraisals.”

FACT: DPA providers are not involved in the appraisal process. To ensure an accurate appraisal and prevent any party from manipulating the appraisal, H.R. 600 implements stiff penalties against improper appraisals. H.R. 600 also requires that lenders use multiple appraisers.

FICTION: “DPA will drain taxpayer money at a time when government can’t afford it.”

FACT: DPA will not cost the taxpayer a dime, according to a 2008 Congressional Budget Office report.