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lukeallison
1402 Posts |
 Posted - 07/22/2008 : 08:17:57 AM
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I'm on a product conference call and this was the first thing discussed. It is an "Almost Certainty" that DPA will be removed and it could be retroactive to when Bush signed the current housing bill.
More to Follow....... |
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mganovsky
2045 Posts |
Posted - 07/22/2008 : 09:01:30 AM
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Nehamiah or Ameridream will go back to court and file an injunction to stop it just like they have in years past. And they will win agian. Hud's statistical stand point on more loans defaulting than loan with out the DPA will not stand up in court; just like last year.
A smarter move by HUD would be to require at least 4 months reserves if a DPA is used. |
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nutesch
481 Posts |
Posted - 07/22/2008 : 09:04:37 AM
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| I just heard this also.....Someone was telling me it may be out by the end of the week....Uh ohhh |
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MortgageBoarder
3972 Posts |
Posted - 07/22/2008 : 09:31:11 AM
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The way I look at it, there is no uh oh. FHA requires a 3% inestment from your buyer, so they generally end up paying the closing costs when receiving DPA.
Nehemiah takes the down payment, in CA 2.85%, from the seller plus the additional fee. Why not just have your buyer pay the 3% down and have the seller contribute up to 6% concessions instead? And in this market, that is a better bet for your buyer if they would like to discount their rate!
That is how I swing it... |
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lukeallison
1402 Posts |
Posted - 07/22/2008 : 09:38:08 AM
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| You can't have a seller concession for down payment only closing costs. The funds for the 2.85% would have to be sourced and seasoned in Underwriting. There is going to be no way around it. |
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HonestNJBroker
314 Posts |
Posted - 07/22/2008 : 09:40:25 AM
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| GOOD DPA should be banished. if you can't come up with 3% DP-you should be a renter. I mean come on 3%. Spend less eating out-buy less coffee-stop going out every weekend. If you WANT a home you will find a way to save 3%. rant over |
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jvanpetten
2502 Posts |
Posted - 07/22/2008 : 09:43:15 AM
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They can get a gift for the 3% down and still have seller paid closing costs up to 6%. If they can't save 3% or get a gift for the 3%, they don't need to buy a home.
I don't want to see DPA go away, it is nice to have, but most of the purchases I have closed did not need it or the seller would not particiate. I showed my borrowers that you just pay more for the house if you do DPA, just find the 3% and ask the seller to pay closing costs (or at least some) instead. |
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MortgageBoarder
3972 Posts |
Posted - 07/22/2008 : 10:09:20 AM
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Luke.. I know that concessions only go toward closing costs, not down. If you read my rsponse, I said have the buyer put their own 3% down and have the seller pay up to 6% for concessions (everyone should know that means CLOSING COSTS, not down payment).
And OF COURSE the funds have to be sourced and seasoned. That can be a gift letter source as well. It's not a lot to ask and if they can't come up with that, they need to continue renting until they are prepared to meet the minimum standards! |
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sbuckman
515 Posts |
Posted - 07/22/2008 : 10:17:28 AM
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| Is this something that would go effective immediately? |
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currency
31 Posts |
Posted - 07/22/2008 : 10:23:24 AM
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| You all sound like a bunch of idiots that know nothing about FHA, or DPA or anything about how DPA works. You dont pay 3% more for a house because of DPA. No wonder our business is so screwed up. |
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americanheartlan
2236 Posts |
Posted - 07/22/2008 : 10:33:19 AM
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essentially, yes...you are inflating the value by 3% with DPA.
If you add-on the 6% for the realtor and 6% seller concession...then it's really inflated 15%. |
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KipW
217 Posts |
Posted - 07/22/2008 : 10:39:20 AM
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quote:
Originally posted by currency
You all sound like a bunch of idiots that know nothing about FHA, or DPA or anything about how DPA works. You dont pay 3% more for a house because of DPA. No wonder our business is so screwed up.
Please give your take on it as I am new to FHA loans. |
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MortgageBoarder
3972 Posts |
Posted - 07/22/2008 : 10:41:05 AM
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NO!!!!! There is no inflating of purchase price and THAT is where people screw things up!
Any contributions from the seller are deducted from the proceeds which NEEDS to be based off of the true OLP. I have no tolerance with inflating to compensate and I call any Realtor out on it if they even remotely hint of that sort of strategy!! |
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TheBigGuy
392 Posts |
Posted - 07/22/2008 : 10:42:57 AM
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quote:
Originally posted by currency
You all sound like a bunch of idiots that know nothing about FHA, or DPA or anything about how DPA works. You dont pay 3% more for a house because of DPA. No wonder our business is so screwed up.
So if a seller accepts a 100k offer with them paying 3% DPA netting them 97k, you would argue they wouldnt take an offer of 97k with them paying nothing?
Of course they would take the 97k, they net the same either way, which means the DPA inflated the price.
Im all for DPA, but lets not pretend its something it is not |
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jvanpetten
2502 Posts |
Posted - 07/22/2008 : 10:44:09 AM
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| I wish I could honestly say that the value is NOT inflated due to DPA. I have seen it happen, the offer is not accepted because of the DPA and an increase in the offer suddenly we have a PA. You are not in the real world if you are saying you walk away when you see this happen. |
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assassin17
4154 Posts |
Posted - 07/22/2008 : 10:46:28 AM
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quote:
Originally posted by currency
You all sound like a bunch of idiots that know nothing about FHA, or DPA or anything about how DPA works. You dont pay 3% more for a house because of DPA. No wonder our business is so screwed up.
I suppose you've never seen a price raised for Seller Concessions either? |
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jvanpetten
2502 Posts |
Posted - 07/22/2008 : 10:47:07 AM
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Exactly, they net the same, so tell me the value is not inflated.
quote:
Originally posted by TheBigGuy
quote:
Originally posted by currency
You all sound like a bunch of idiots that know nothing about FHA, or DPA or anything about how DPA works. You dont pay 3% more for a house because of DPA. No wonder our business is so screwed up.
So if a seller accepts a 100k offer with them paying 3% DPA netting them 97k, you would argue they wouldnt take an offer of 97k with them paying nothing?
Of course they would take the 97k, they net the same either way, which means the DPA inflated the price.
Im all for DPA, but lets not pretend its something it is not
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kalee3415
193 Posts |
Posted - 07/22/2008 : 10:49:14 AM
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We sound like idiots? What is not to understand? Most sellers have a bottom line in mind (or payoff for that matter) and of course they are usually going to ask for a higher sales price when they have to cover the DPA through programs such as Nehemiah. Why would the seller not take this into consideration? It may not always raise it by exactly 3%, but if you don't think that the seller is going to expect a higher purchase price from someone asking for seller funded DPA (and a $600 admin fee to boot) vs. someone who is not asking for DPA than you are the idiot.
quote:
Originally posted by currency
You all sound like a bunch of idiots that know nothing about FHA, or DPA or anything about how DPA works. You dont pay 3% more for a house because of DPA. No wonder our business is so screwed up.
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jvanpetten
2502 Posts |
Posted - 07/22/2008 : 10:50:56 AM
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| The lender trigger is when the PA is more than the listing price, that is when the red flags pop up. |
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MortgageBoarder
3972 Posts |
Posted - 07/22/2008 : 10:59:01 AM
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It is no different than traditional concessions and though the perceived notion is to inflate the purchase price to net the same, this abused practice is wrong and need needs to come to a halt!!
The point of the seller doing contributions should be to net less in order to get a buyer into escrow quicker, time is money in all transactions and this is a tool to get their home off the market! We as professionals should be conveying this to all agents and sellers out there.
If they don't want to net less then they should simply reject the offer and wait for someone who does not need contributions to come to the table, period! |
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jvanpetten
2502 Posts |
Posted - 07/22/2008 : 11:02:24 AM
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Tell that to the realtors, you are correct, they are the ones that negotiate the PA.
quote:
Originally posted by MortgageBoarder
It is no different than traditional concessions and though the notion is to inflate the purchase price to net the sae needs to come to a hault!!
The point of the seller doing contributions should be to net less in order to get a buyer into escrow quicker, time is money in all transactions and this is a tool to get their home off the market! We as professionals should be conveying this to all agents and sellers out there.
If they don't want to net less then they should simply reject the offer and wait for someone who does not need contributions to come to the table, period!
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JoefromPhilly
653 Posts |
Posted - 07/22/2008 : 11:03:29 AM
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Yeah, but the property still needs to appraise at the "higher" price with DPA, so the lender is still not at risk.
- Joe |
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lucky1s
3614 Posts |
Posted - 07/22/2008 : 11:05:55 AM
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DPA is not that they have a problem with.
It's SELLER FUNDED Dpa that is the issue.
I agree it should be illegal.
It encourages artifical inflation of the purchase price to cover the DPA.
Real DPA is just fine in my book. If you can find it. |
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MortgageBoarder
3972 Posts |
Posted - 07/22/2008 : 11:10:36 AM
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I do, every time, and so should everyone else!! If you convey it like I do it makes sense and they actually fear the practice, and they have no rebuttal.
If you all don't do the same, it will never go away.
quote:
Originally posted by jvanpetten
Tell that to the realtors, you are correct, they are the ones that negotiate the PA.
quote:
Originally posted by MortgageBoarder
It is no different than traditional concessions and though the notion is to inflate the purchase price to net the sae needs to come to a hault!!
The point of the seller doing contributions should be to net less in order to get a buyer into escrow quicker, time is money in all transactions and this is a tool to get their home off the market! We as professionals should be conveying this to all agents and sellers out there.
If they don't want to net less then they should simply reject the offer and wait for someone who does not need contributions to come to the table, period!
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STIFFLER
106 Posts |
Posted - 07/22/2008 : 11:14:03 AM
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| So any seller concessions, even on Fannie/Freddie products are nothing more than Inflated Values.....hmm |
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KipW
217 Posts |
Posted - 07/22/2008 : 11:16:59 AM
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| From what I'm gathering, a savvy realtor and seller should always come up with a sales price from the start that INCLUDES seller paid closing costs and 3% DPA, right? |
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financeone
1634 Posts |
Posted - 07/22/2008 : 11:17:27 AM
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| check out today's sacramento bee, page d1. nehemiah could be gone this week. |
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SoCalRay
2698 Posts |
Posted - 07/22/2008 : 11:18:00 AM
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Somethings I have heard more then once sitting thru meetings about DPA
The default ratio is 40% higher using a DPA
In regards to the comments about down payment needing to be seasoned for FHA.
Check your guidelines
FHA does not have seasoning for down payment
We are selling to Countrywide, Suntrust, Chase, Taylor Bean and none are requiring seasoning for down payment fund.
And I work for a very conservative bank
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STIFFLER
106 Posts |
Posted - 07/22/2008 : 11:18:30 AM
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| Fannie My Community Program allows 6% Seller Concessions at 97%LTV. Imagine what you have to inflate the proeprty value to on one of those Purchases.....using the above logic of course |
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lucky1s
3614 Posts |
Posted - 07/22/2008 : 11:18:32 AM
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I am in-house at a real estate office and our forclosure rate for the 5 years of my placement here is 100% zero.
Is it because I am super sqeaky clean and do vanilla loans only?
No.
I am a firm believer in the no harm-no foul rule.
But if the transaction didnt feel right, I simply wouldnt do it.
I look back now and realize that was my gut telling me something wasnt right.
Today my gut tells me to stay from seller funded DPA.
These days I trust my gut. |
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neg_am630
108 Posts |
Posted - 07/22/2008 : 11:44:03 AM
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I agree, if you need DPA and no reserves i don't think that person is ready to buy. They will just be living pay check to pay check.
quote:
Originally posted by HonestNJBroker
GOOD DPA should be banished. if you can't come up with 3% DP-you should be a renter. I mean come on 3%. Spend less eating out-buy less coffee-stop going out every weekend. If you WANT a home you will find a way to save 3%. rant over
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Joepa
167 Posts |
Posted - 07/22/2008 : 12:55:29 PM
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So, are you against having grandma/mom/dad/company, etc all not allowed to contribute or is the default issue in your mind only when the seller gets involved?
As far as inflating the value, the other choice is to go ahead and premium price the closing costs, etc and charge the buyer .75% more than market. I dont know about you but I would prefer not killing the buyer when you can get it done other ways.
Leave the DAP's or you will really hurt demand on houses and there will be another 1-2% decrease in housing prices. It's up to you. I prefer the DAP option. |
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slants
4274 Posts |
Posted - 07/22/2008 : 1:03:20 PM
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quote:
Originally posted by MortgageBoarder
The way I look at it, there is no uh oh. FHA requires a 3% inestment from your buyer, so they generally end up paying the closing costs when receiving DPA.
Nehemiah takes the down payment, in CA 2.85%, from the seller plus the additional fee. Why not just have your buyer pay the 3% down and have the seller contribute up to 6% concessions instead? And in this market, that is a better bet for your buyer if they would like to discount their rate!
That is how I swing it...
Are you sure about that. I thought seller can fund the DPA to Nehemiah and credit 6% for closing costs = $0 contribution from buyer. |
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BanditJimmy
26 Posts |
Posted - 07/22/2008 : 1:40:22 PM
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| As I said on another thread, DPAs are fine if you use them for the right borrowers. Borderline borrowers with bad job history and bad credit, those are the customers we need to enforce to put "Blood in the Water" (3%). Customers with good job history, good DTI, reasonable housing payment shock, and OK credit .... yes, roll the dice on them and get them the best deal on the block which is ZERO down DPA option. |
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lemeuss
456 Posts |
Posted - 07/22/2008 : 2:00:25 PM
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quote:
Originally posted by neg_am630
I agree, if you need DPA and no reserves i don't think that person is ready to buy. They will just be living pay check to pay check.
quote:
Originally posted by HonestNJBroker
GOOD DPA should be banished. if you can't come up with 3% DP-you should be a renter. I mean come on 3%. Spend less eating out-buy less coffee-stop going out every weekend. If you WANT a home you will find a way to save 3%. rant over
I think these are thoughtless remarks...how is this true if a person has no reserves yet STILL has a low DTI? Recent college grads, recent job promotions etc. can be reasons DPA is alright...especially in this market if a buyer qualifies they should do what it takes to get into a home asap because who knows if their program/rate will be around in a month.
Also, if you take away DPA, I believe it discriminates against those who come from unwealthy families....if you take away DPA, you need to take away large gifts from family as well...why should someone qualify for a mortgage solely because their parents have money, when someone w/the same qualifications and no gift funds cannot qualify?
As with everything else in this business, DPA is a good thing for the right borrower, its the brokers/agents that manipulate the program and try to use it when they shouldnt that is the problem.
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the_mortgage_guy
1178 Posts |
Posted - 07/22/2008 : 2:47:56 PM
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quote:
Originally posted by HonestNJBroker
GOOD DPA should be banished. if you can't come up with 3% DP-you should be a renter. I mean come on 3%. Spend less eating out-buy less coffee-stop going out every weekend. If you WANT a home you will find a way to save 3%. rant over
Especially for those who can't offer FHA, although I dont know if that includes you. |
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lucky1s
3614 Posts |
Posted - 07/22/2008 : 3:56:30 PM
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| http://www.sacbee.com/103/story/1099122.html |
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MortgageBoarder
3972 Posts |
Posted - 07/22/2008 : 4:09:12 PM
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There are DAPs that also allow for 6% concessions but it is not Nehemiah. Those $0 programs are limited and have income restrictions, while anyone can apply for Nehemia.
That is how we have it in our guides at least...
quote:
Originally posted by slants
quote:
Originally posted by MortgageBoarder
The way I look at it, there is no uh oh. FHA requires a 3% inestment from your buyer, so they generally end up paying the closing costs when receiving DPA.
Nehemiah takes the down payment, in CA 2.85%, from the seller plus the additional fee. Why not just have your buyer pay the 3% down and have the seller contribute up to 6% concessions instead? And in this market, that is a better bet for your buyer if they would like to discount their rate!
That is how I swing it...
Are you sure about that. I thought seller can fund the DPA to Nehemiah and credit 6% for closing costs = $0 contribution from buyer.
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neg_am630
108 Posts |
Posted - 07/22/2008 : 4:44:46 PM
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All valid points. I use this tool myself. But there is a reason why alot of these loans are in default. I just see to many people trying to live above thier means. Some people don't think about the future, and get way to much in dept and befor you know it they can't make thier mortgage payment.
quote:
Originally posted by lemeuss
quote:
Originally posted by neg_am630
I agree, if you need DPA and no reserves i don't think that person is ready to buy. They will just be living pay check to pay check.
quote:
Originally posted by HonestNJBroker
GOOD DPA should be banished. if you can't come up with 3% DP-you should be a renter. I mean come on 3%. Spend less eating out-buy less coffee-stop going out every weekend. If you WANT a home you will find a way to save 3%. rant over
I think these are thoughtless remarks...how is this true if a person has no reserves yet STILL has a low DTI? Recent college grads, recent job promotions etc. can be reasons DPA is alright...especially in this market if a buyer qualifies they should do what it takes to get into a home asap because who knows if their program/rate will be around in a month.
Also, if you take away DPA, I believe it discriminates against those who come from unwealthy families....if you take away DPA, you need to take away large gifts from family as well...why should someone qualify for a mortgage solely because their parents have money, when someone w/the same qualifications and no gift funds cannot qualify?
As with everything else in this business, DPA is a good thing for the right borrower, its the brokers/agents that manipulate the program and try to use it when they shouldnt that is the problem.
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clos25
419 Posts |
Posted - 07/22/2008 : 4:49:28 PM
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quote:
Originally posted by neg_am630
All valid points. I use this tool myself. But there is a reason why alot of these loans are in default. I just see to many people trying to live above thier means. Some people don't think about the future, and get way to much in dept and befor you know it they can't make thier mortgage payment.
Don't hate! they are just living the dream :D |
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Joepa
167 Posts |
Posted - 07/22/2008 : 4:51:23 PM
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One other thing that cracks me up is that I see everyone pointing to default ratios for FHA and all the negativity around it. However, if you look at default rates over the last 5-7 years, they are typically the same as they have been. FHA has always been a moderate to high risk.
FHA has been FHA. It has never been a clean sheet type of loan and never will be. That's not why it was created. |
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slants
4274 Posts |
Posted - 07/22/2008 : 4:53:13 PM
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quote:
Originally posted by MortgageBoarder
There are DAPs that also allow for 6% concessions but it is not Nehemiah. Those $0 programs are limited and have income restrictions, while anyone can apply for Nehemia.
That is how we have it in our guides at least...
That must be program specific to your guidelines. I don't think either Nehemiah nor FHA restricts the 6% seller contribution when DPA is used. |
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TheBigGuy
392 Posts |
Posted - 07/22/2008 : 4:53:47 PM
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quote:
Originally posted by lucky1s
http://www.sacbee.com/103/story/1099122.html
Judging by this article they plan on closing up shop at any time. By that I would say even deals with casenumbers already issued will not be honored |
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KHufford
5912 Posts |
Posted - 07/22/2008 : 4:56:47 PM
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quote:
Originally posted by currency
You all sound like a bunch of idiots that know nothing about FHA, or DPA or anything about how DPA works. You dont pay 3% more for a house because of DPA. No wonder our business is so screwed up.
Well sorry buddy, you would be wrong. Otherwise if people had the money down they would have negotiated the price to be lowered by 3%. NEXT!
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tammym
60 Posts |
Posted - 07/22/2008 : 9:28:55 PM
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DPA is gone. But borrowers can borrow funds from family members.
p. 480
http://www.rules.house.gov/110/text/110_atostohto3221.pdf |
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liverichly
3927 Posts |
Posted - 07/22/2008 : 9:35:46 PM
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Thanks for that Tammy, says it goes into effect 10/1/08.
Still needs to go through the final two stages of becoming a bill though.
http://www.govtrack.us/congress/bill.xpd?bill=h110-3221 |
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mgraham224
1008 Posts |
Posted - 07/22/2008 : 9:59:07 PM
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Wow... is there REALLY this much confusion about simple math?
(in my best rapper voice) "break it down!"
- forget about seller paids for the moment and take a look at DPA
- seller willing to sell for 100k cash
- buyer wants house, but ain't got no 100k cash no how
- Seller must now agree to "donate" 3% to down payment for buyer
- Seller ain't got no urge to give away free three grand yo
- seller needs to net 100k at the end of the day
- forget the Nehemiah processing fee for a moment so we can work with rounder numbers
- seller "donates" 3g's to buyer, just like grandma would do if she had it, poor old lady
- but wait a minute! seller ain't got no 3g's down jus' layin 'round
- if it's to be "no cash out of pocket" for buyer, then they'd need to finance 100k with no DPA.
- Since there is DPA, we divide 100k by .97. = 103092
- NOW the seller can afford to "give" the buyer 3% to put down and STILL net 100k (103092*3% = 3092).
- so on this 103092 purchase price theoretically the seller is getting 3% down. But since the seller has already "gifted" that 3092 to the buyer, the seller is still net 100k.
- The buyer, having agreed to buy said domicile for 103092 and having received said "gift" from seller via Nehemiah, now puts the 3092 down as their 3% down payment leaving them with....
- 100k!
- and the seller?
- 100k net!
- hmmmm.... let me see... the purchase price had to go up to 103092 to leave seller room to donate 3092 and still net their precious 100k. I'm still crunching numbers on this one guys, so bear with me, but I THINK that maybe, JUST MAYBE, 103092 MIGHT be higher than 100k. (someone please check my math.... Here's my calculation so far: 103092>100000=true
- SO ipso facto ergo therefore hence and consequently, DPA DOES, in fact, inflate the PURCHASE PRICE. I'm sure that anyone who argued contrarily merely meant that the LOAN AMOUNT is not inflated because my math says 100k=100k=true, however the purchase price and appraised value must be inflated.
This is why those smart originators who try to help you when you are stumbling through FHA originations ask you "will it appraise high enough to allow the DPA?"
In conclusion, owing to the above referenced assumption that some respondents may have semantically confused LOAN AMOUNT with PURCHASE PRICE, I'm willing to accept that those respondents are not necessarily fvcktards. But anyone else who still maintains that DPA does not cause--nay, REQUIRE--a higher purchase price are surely fvcktards of the highest order. Anyone disagree? just make sure you've washed off your forehead with a mild soap, rinsed it well, and have about 20 minutes blocked out this afternoon. I have my "fvcktard" stencil and tattoo gun ready. This will only sting a little, and don't worry, I don't think there's a risk of hitting any brain... |
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socalusa
267 Posts |
Posted - 07/22/2008 : 10:08:47 PM
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I call DPA sort of "FHA Buyer's Stimulus Program". It provides incentives to buyers to buy properties from sellers who are having difficult time finding full price offers.
Real Estate market is down, it's a buyer's market out there. The DPA provides opportunities to have more transactions, and prevent prices from further decline.
Just my $.02
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marketsvcs
34 Posts |
Posted - 07/22/2008 : 10:37:51 PM
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| who doesnt think houses cannot appraise for an additional 3 - 5%? |
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kellamtom
632 Posts |
Posted - 07/22/2008 : 10:45:17 PM
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| the value is not inflated if dpa is used isn't the value of the property based on an appraisal not the sales price, so if the value isn't there then the dpa isn't even an option. |
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kellamtom
632 Posts |
Posted - 07/22/2008 : 10:47:55 PM
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quote:
Originally posted by tammym
DPA is gone. But borrowers can borrow funds from family members.
p. 480
http://www.rules.house.gov/110/text/110_atostohto3221.pdf
so can a nonprofit could provide gift to a family member, then the buyer can borrow from the family member, is this the new nehemiah |
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