In late 1996 Don Harris, a Sacramento, Calif., minister and housing advocate, got a call from a frustrated real estate investor whose problems gave Mr. Harris an idea.

The man had bought 120 units of a foreclosed townhouse complex on the south side of the city, but a soft real estate market and the housing’s site in a working-class community — where potential mortgage borrowers had good jobs but little savings — meant he could not sell the homes. In desperation he told Mr. Harris he would be willing to give buyers the down payment to cinch a sale.

The conversation got Mr. Harris, who is also a real estate lawyer, wondering: What if he could help get people into homes through down payment donations, or gifts, from private industry? After researching federal law, he found a mechanism that lets charitable organizations make such gifts.

Not long after, through his nonprofit Nehemiah Corp. of California, which was founded in 1994 to spur city revitalization efforts, Mr. Harris began giving a chance at homeownership to people who held jobs and had good credit but could not save enough to make a down payment.

In four years Nehemiah has given away more than $232 million for down payments on FHA loans; more than 70,000 families in 3,500 cities and 49 states have benefited.

The company’s name comes from an Old Testament figure who was asked by God to rebuild Jerusalem after it was destroyed. “He is a servant and a rebuilder of communities, and we think the name was appropriate for what we’re trying to do,” said Scott C. Syphax, 37, president and chief executive of Nehemiah. “We’re trying not only to rebuild communities but to reinforce communities,” he added.

Nehemiah is entirely private-sector-funded, by builders and lenders, and it does not rely on any government funds, Mr. Syphax said. “The motivation is that in helping us to help consumers they’re really helping themselves because we’re expanding the pot of potential homebuyers,” he said.

Typically, a mortgage shopper finds Nehemiah after looking at a house in a development and going through a credit check. The builder, a real estate agent, or a prospective lender contacts Nehemiah about the borrower. If he or she fits the nonprofit’s credit criteria and is willing to take an online homeownership education course, Nehemiah gives from a 1% to 6% down payment to the homebuyer. The party working with the homebuyer agrees to send Nehemiah the same amount, plus a fee for the upkeep of its pool of funds and other assistance projects.

Nehemiah’s fee is 1% of the contract sales price for paper transactions. For Internet transactions, the fee is $800 on a new home and $950 on existing homes, or 1% of the contract sales price, whichever is less.

In September 1999 the Department of Housing and Urban Development expressed concern over such down payment assistance and proposed a rule to prohibit FHA borrowers from accepting cash gifts directly or indirectly from the seller of a property. HUD officials said these borrowers posed a risk to the FHA insurance fund and that sale prices could be inflated to cover the seller’s contribution.

HUD withdrew the proposed rule in January after getting few public comments in favor of it.

The Clinton administration’s HUD officials were drafting a different version of the rule when the Bush team took over. Further HUD action in the new administration is undetermined, a source said.

Mr. Harris said Nehemiah had gotten no complaints from borrowers. He said the HUD concerns are “absolutely ridiculous.” Real estate agents get a 6% commission on home sales, he noted, and most sellers factor that in when they set their sales price.

“Everybody knows there’s an appraiser in the middle of a sale to make sure the appraisal is accurate,” he said. “This was the Inspector General trying to do real estate. They ought to stick to investigations.”

Mr. Syphax acknowledged that the down payment assistance program sounds too good to be true to many observers. “Whenever I talk to people, they are usually quite cynical,” he said. “I’m used to the quizzical look.” Yet HUD has vetted it, and the program got specific approval from both the agency and the Internal Revenue Service, Mr. Syphax said.

Archie Milligan, president of San Francisco Habitat for Humanity, who describes himself as a “recovering banker,” said he is grateful for a $1 million fund Mr. Harris created for Habitat in 1999. “He is always looking for ways to utilize revenue in ways that benefit the community,” Mr. Milligan said.

And Brian Hall, manager of the Arizona division of Beazer Mortgage Corp., the in-house mortgage lending unit for Atlanta-based builder Beazer Homes USA Inc., estimated that in the past six months Nehemiah has helped his company sell 30 homes a month. “We’re offering it to all of our affordable communities, to first-time homebuyers. Not everybody uses it, but more and more are using it all the time,” he said.

The company’s fee-based plan more than just finances the down payment program, however: It lets the company move into other arenas that further its original mission of rebuilding urban communities.

Mr. Syphax said the company has expanded into new markets, such as conventional lending and urban revitalization projects. Two weeks ago it announced that it had created a 102% conventional loan product aimed at helping higher-wage earners meet the challenge of soaring home prices in cities such as San Francisco. Nehemiah is not making the loans itself but is marketing them among lenders and has arranged for First Nationwide Mortgage Corp. of Frederick, Md., to be the master servicer and Radian Group of Philadelphia to provide mortgage insurance.

Nehemiah’s fee income also pays for its “faith-based” mission of improving communities through redevelopment of blighted areas. “We don’t have a shareholder imperative, so we can turn any dollar that we get in excess of what it takes for us to administer the program back into communities,” Mr. Syphax said.

Through a community reinvestment fund, Nehemiah invests in local construction projects for social and economic vitality. In Sacramento, under a pilot program it wants to expand nationwide, Nehemiah built a church in a distressed area. It is building a house for Jesuit volunteers in another community where the priests will establish an urban ministry.

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