HUD Loophole Allows Builder-run "Charities" to Donate Down Payments

16 de may de 2007

<body><div id="article"><tr><td height="28" valign="middle" width="184"></td><td valign="middle" width="185"></td></tr><h1>HUD Loophole Allows Builder-run "Charities" to Donate Down Payments</h1><p>May 15 (EIRNS)--The Department of Housing and Urban Development (HUD) announced a proposal on Friday to do away with the loophole that allows home builders to make the down-payment for low-income buyers, who are using an FHA (Federal Housing Administration) loan to make their purchase.</p><p>The loophole in FHA regulations allowed builders to set up third-party "non-profit" organizations, which then "donated" the cost of a down-payment as a gift to the needy home-buyer. Reports estimate that this practice has allowed 750,000 buyers to obtain loans since its enactment in 1999, but that buyers relying on this "gift" were twice as likely to lose their homes in foreclosure.</p><p>HUD estimates that as much as 60% of FHA loan applicants now rely on this practice for qualification. The problem is that home-sellers simply added the cost of the down payment to the price of the house, and thereby caused the price of the loan to immediately be above the value of the house being purchased.</p><p>Posted on the site of one of the leading "charities" of this type, Nehemiah Corp (conveniently located at getdownpayment.com), is a report by convicted junk bond swindler Michael Milken's Milken Institute. The report praises the public benefits of this corporate cash (could one call it the first public-private-partnership?), which they claim has aided over 200,000 home-buyers over the last five years.</p><p>Testifying before Congress last month, HUD's inspector general Kenneth Donohue compared the scam to a fraudulent card game. "As far as I'm concerned, it's three card monte," he said, adding, "I'd like to see it end as quickly as possible."</p><p>Interestingly, nothing of this can be found on the HUD website. This report was compiled from leads provided by an article in today's Charlotte Observer.</p></div></body>