There is a large segment of the population that does not have a gazillion dollars of “extra” income each month, making it easy for them to quickly save the thousands of dollars needed for a DP. Yes, I could have waited 5 years to save the additional funds above my emergency fund balance, but I would have missed out on over $10k in income tax savings. I would have also missed my the opportunity to realize a modest capital gain as I am now looking to move into a larger home and use the equity to pay off all of my current debt.

Anything done without moderation can turn into a 'bad thing'. I don't think that DPA is the sole culprit. Even with DPA, if I cannot afford to pay the monthly mortgage I should not be given the loan. If my credit history shows a failure to pay anyone ontime – I should not be given the loan. If I can barely pay the loan today at $1000, why would anyone ever think I will be able to handle $1500 in 2 or 3 yrs?

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I can't address them all.

The Lender DOES know about the DPA when it is used, it is IN the purchase contract….so if it is, how is this fraud? How does the seller carrying a 2nd the same even come up as a comparison in this case?
“Skin” in the game is nonsense by the way, the embarrasment of losing one's home is way more of a deterant than a few thousand down. The reason for most foreclosures is loss of job. Whether you put down 5% or 20% or 50%, if you lose your job and can't pay the payment and don't have the luxury of borrowing from mom and dad, what do you do?

Go read my blog on this topic….I am actually in favor of getting rid of DPA, with a huge caveat though….HUD could get rid of DPA and have it nver come back by doing one simple thing: 100% financing like VA.

http://blog.fhainfocenter.com/2008/07/fha-why-r...

Put it another way – if the seller was giving the buyer a second mortgage for the remainder of the sales price, a lender would want to know about that (and would factor that into their assessment of the loan). Why should seller-funded downpayment assistance be any different?

Me, on other hand is a Joe Taxpayer who is going to be stuck with the bill, so please spare me YOUR ANECDOTAL evidence and go directly to HUD site pull up national cumulative default statistic and claim rates and see for yourself. Obviously since you don't like direct evidence you are going to claim that the statistic is bogus and your ANECDOTAL EVIDENCE and ANONYMOUS NON-SUBSTANTIATED HEARSAY is substantially better reflects reality. Reminds me about flat earth society. Some friend of mine doing astrophysics research at Cal Tech told me that all of those pictures and earth being a ball are bogus and because there would be huge upheaval they perpetuate lie. Sounds familiar about “your friend in FHA” ? I thought so.

I can't believe I'm reading a blog from someone with actual intelligence. Here, here to you and your wife. I've been in the Mortgage and R.E. Industry for coming up on 20 years and they're just now outlawing DPA….”our heroes.” HUD has fought DPA for years with the unjust figures that you speak about, but to no avail because their figures aren't accurate. I hope all the previous bloggers will read you closely and realize how wrong their negative statements really are.

To the Mtg. Planner above: I truly resent your statement that I wasn't looking out for the best interest of my client and that I was only in it for the buck. I don't know of one of my clients that I helped with their puchase or a refinance that is in foreclosure to date. Oh…..and I was working in California the whole time of my career. People like you are hopeless.

After gathering the needed data, here is what I have found. HUD uses 400 variables to report their findings, but will only make 12 of those points public. I checked with all my triued and true resources, they can get the whole thing either. Hmm, are they hiding something? Duh! Without the rest of their data, I can't check their work. My friend at FHA told me, “that's the idea”. When I asked him if the data is bad, he said, “#1 remember this is a huge political issue and things aren't always what they seem. #2, they are starting out with the end game in mind and manipulating the data to justify it.” He said he is so disgusted by the stuff they do behind the scenes that he is looking for work elswhere.

Two points to consider; 1) HUD frequently quotes default rates instead of foreclosure. Default rate just means they are over 45 days late on their payment. A small percentage of defaults end in foreclosure. 2) the skin in the game arguement is philosophical, not statistically signficant. The data show about a 1% difference between foreclosure of seller-assisted DPA and Gov't DPA and about another 1% difference in Family Assisted DPA. Does this mean that all downpayment gifting should be banned? If you think there should be skin in the game, you answer has to be yes. If HUD believed DPA's 8.7% foreclosure rate (if accurate?) was a danger to the FHA MIIF Fund, they would also think Gov't and Family gifts were a danger. You mean 8.7% of DPA will cripple the insurance, fund but Gov't 7.5% won't? My buddy is right; POLITICS!!!!