HUD recently proposed again regulations that would prohibit seller-funded downpayment assistance.
Generally, under current FHA regulations and guidelines, in order for a mortgage to be eligible for FHA insurance, a borrower is required to put down at least 3% of his own money in the transaction. However, that 3% downpayment could also be gifted from relatives, from his or her employer, or from a non-profit organization.
On June 16, 2008, the HUD re-published its proposed rule concerning seller-funded downpayment assistance gifts in connection with FHA mortgages. The re-published regulation, if enacted, would prohibit a borrower from receiving certain seller-funded downpayment assistance in order to meet the 3% requirement. Notably, the regulation would prohibit downpayment assistance that "consists, in whole or in part, of funds provided by any of the following parties before, during, or after closing of the property sale: the seller, or any other person or entity that financially benefits from the transactions; or any third party or entity that is reimbursed directly or indirectly by the seller, or any other person or entity that financially benefits from the transaction."
Comments regarding the re-published rule must be submitted to HUD on or before August 15, 2008. The Notice also states that if, after reviewing the comments, HUD issues a final regulation, it will be made effective 180 days from the date of publication with regard to all mortgages involving properties for which contracts of sale are dated on or after the effective date.
the Notice of Proposed Rulemaking (NPRM) can be seen at edocket.access.gpo.gov/2008/pdf/08-1356.pdf
Hmmm. One wonders why they're trying to end the program through seller-assist when they themselves promote it. See http://www.hud.gov/offices/hsg/sfh/np/sfhdap01.cfm
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB