Plea to Save Gifting Programs
Nehemiah Corp. of America went to novel lengths Thursday to rally opposition to a provision in the housing bill that would put it and other providers of seller-funded down payment assistance out of business.
The Sacramento nonprofit enlisted the music mogul Russell Simmons and Rep. Al Green, D-Tex., to argue against the provision in a conference call with reporters. Nehemiah's chief executive officer, Scott Syphax, attacked the Department of Housing and Urban Development for its effort to eliminate seller-funded down payment gifts, accusing the agency of overstating the percentage of loans from such programs that default.
The bill would outlaw these programs, something HUD tried to do last year by issuing a rule before Nehemiah successfully sued to block it.
The Federal Housing Administration, which is part of HUD, has said that loans from these programs go into foreclosure at three times the rate of loans made to borrowers who make their own down payments.
Mr. Syphax called HUD's database "corrupt and unreliable" and said the agency has refused to give Nehemiah current data for such loans.
"They are underestimating the total number of loans made … but they know the precise number of claims they have to pay out," he said.
Lemar Wooley, an FHA spokesman, said HUD's data is "extremely reliable" and the agency has made it available through a public database so that nonprofits "can perform their own analysis of it."
When asked why he thought HUD wanted to outlaw seller-funded down payments, Mr. Syphax mentioned "professional jealousy" and said the FHA had unsuccessfully tried to start its own zero-down-payment program.
"We are far more effective at bringing people into homeownership than they are," Mr. Syphax said.
Mr. Simmons said little about the issue on the call, and at one point he digressed into a discussion of New York state's Rockefeller anti-drug laws. But he said he hoped to "create awareness" about the threat to seller-funded programs.
"There are too many Americans who do not know the impact of this bill," he said. "When people understand the ramifications of what's going on, they will be outraged."
Rep. Green acknowledged problems with seller-funded down payments and what he called "collusion between the buyer and seller" to inflate the price of a home.
But he said HUD "did not respond positively" to suggestions for improving such programs, such as requiring a blind appraisal or raising credit score requirements for low-income borrowers.
Rep. Green said he would try to revive the program under the next administration. "The program really can be amended rather than ended," he said.