Mortgage Grapevine

Down Payment Assistance Programs

Ok everyone don't shoot the analyzer, researcher geek here, but I am trying to figure out the legitimacy of some of these Down Payment Assistance Programs and how the Wholesale Lenders review and accept them.

The Lenders I speak to basically tell me that they don't do any business with these non-profit agencies that try to fund the money at the closing table.

I do come from the old school, and can realize why they are skeptical about some of these agreements.

I have several programs claiming to have been used for transactions through many of the big time wholesale lenders.

Any input, cautions issues that arise from it in your experiences?

How does the underwriter condition for these type of loans, even with a certificate or agreement with seller on sales contract where do these funds come from the rising of the appraisal? It seems a bit far fetched to me especially when the gifts could be as much as $40,000 with only a 1 percent fee to the seller plus contract sales arangements?

Please share your experiences good or bad in regards to these programs so that I can better understand where the benefits and detriments are.
by investordude August 2, 2003 12:00 AM

Cookie Monster is right. Non-profits like my company do probably 98% of our grants on FHA. We are the second largest DAP in the country and we only have about 5 conventional investors and maybe 4 or 5 subprime that will accept our grant funds. Of couse, we think we are the best and easiest but I won´t advertise why here. (LOL)Anyway, I would be happy to list the conventional and subprime investors but I am not sure if I am allowed to. I tell my lenders, builders & Realtors that if you want to make the most of these programs, then FHA is the way to go. One more thing for example, ANY FHA approved buyer can use down payment assistance. Only conventional buyers with a FICO of around 680 can use DPA and SubPrime is even harder, probably down to a 580 but thats about it. Alot of LO´s want to use DPA on their deals with a 450 score but it just isn´t going to happen. If you want more info, please ask.
by Neighborhood_Gold August 2, 2003 12:00 AM

Neighborhood Gold is correct. Ninety percent is FHA, however, several subprime lenders and Freddie´s Flex 97 both use the program. Different lenders use and approve different companies that provide the service, the main difference being the amount they will "gift" and the fee the seller has to pay. I am now an AE with a lender, but prior to that was with a DAP program called The Franklin Foundation. They were less expensive than many (ha a flat fee of $500), had less hoops to jump through and would allow larger gifts.

Recently, due to an article that appeared in a trade paper stating that these types of loans had higher delinquency ratios, some lenders have become more cautious about accepting such loans. However all of the following lenders approved The Franklin Foundation´s program:

ABN Amro
AccuBanc
American Mortgage Network
Argent (formerly Ameriquest)
Chase
Commonwealth United
CUNA Mutual
DecisionOne Mortgage
Downey Savings
FT National
Flagstar Bank
GMAC
GN Mortgage
Greenpoint
Homecomings
HomeStreet Bank
Interfirst
Ivanhoe Financial
M&T Financial National City
New Century
Option One Mortgage
Provident Funding
RBMG
Sierra Pacific
Wells Fargo



by LoanGoddess August 2, 2003 12:00 AM

We have been using Ameridream for our FHA loans that we have been sending to National City. Ameridream has a knowledgeable rep on the road, he came in and taught us the program and has helped with last minute snags if they occurred. National City hasn´t caused us any hassles because we use the program. I´d be interested in any info on subprime lenders that accept these programs for the 1st 5% down, all of the material I saw on subprime required the borrower to come up with the first 5% and then the grant could be used for further funds.
by Alan B August 2, 2003 12:00 AM

No, I would say it´s not a grant in the way most people would think of a grant. As an example of how it works, on a 97LTV FHA loan, the "grant company" puts up the 3% required for the down payment. At closing the closing attorney takes 3.00% off the top of the sale price, and an additional processing type fee of .75%, so the grant company wires over 3%, and the next day or so gets 3.75% wired back-quite a good program for the grant company. You can think of this as having the same effect as a seller closing cost credit. The seller knows that they have agreed to give up 3.75% of their proceeds and this buyer will qualify if they do. Of course, the seller can also give a further credit for closing costs. Now there´s been articles in the Wall Street Journal about these grants, and of course there´s concern that the sales prices are "inflated" to cover the grant money. Our market continued to appreciate rapidly, and our appraisers have found that the prices agreed to by the buyer and seller are in fact at market value-that´s the biggest risk of the program-the lender´s underwriter could disagree with the value-it just hasn´t happened to us yet.
by Alan B August 2, 2003 12:00 AM

Nehemiah is the grandaddy of the programs but this is just a short list of SOME of the companies providing this service with their websites. The word "grant" is used but it is really a legal seller concession and the companies are similar to accomodators for Starker 1031 exchanges.


1. The Ameridream Charity – the fee is ¾ % of the sales price www.ameridreamcharity.org Has a desk in the Beaverton Office of Agape Business Solutions in BVTN (Kim Blanquie) (Offer MPPI)
2. The Nehemiah Program – the fee is 1% ($750 on line) of the sales price www.getdownpayment.com
3. The Buyer’s Fund Neighborhood Gold – fee is 1% of the sales price www.thebuyersfund.com
4. The Genesis Program – fee is 1% or $750 of the sales price whichever is less. www.thegenesisprogram.org (up to $22,500 Offer MPPI)
5. Realty America – fee is ¾% of the sales price and the grant is limited to 5% www.realtyamerica.org (Requires 1% in reserve)
6. New Song - $540 flat fee www.buyersassistance.com (gone?)
7. Housing Assistance Corporation - $650 flat fee but requires buyer to attend a seminar Local in Florida only http://www.haconcapecod.org/
8. Partner’s In Charity – fee of ¾% and Homebuyer Education required www.partnersincharity.org Down payment 2-10% Builders charged $500
9. Home Quest – only allowed up to 6% fee $650 www.homequestdownpayment.org
10. Cornerstone Grant –fee of .7% of the sale price can gift up to 3% www.cornerstonegrant.org
11. Hart – $500 new $650 resale www.hartprogram.com Buyer needs to have 1% of sales price
12. Gift America Program – limited to 3% ¾% www.downpaymentprograms.com AKA GAP
13. American Family Funds – ½% www.americanfamilyfunds.com Tout local representation but have none in OR
14. A New Horizon - $595 www.anewhorizon.com (debt management company)
15. Dream Maker Program - $600 Established through a broker
16. Alliance Housing Assistance Program - $285 www.allianceassistance.org Gift cannot exceed 5% or $10,000 whichever is lower. Funds wired 3 days in advance.
17. Jeremiah – only up to 6% $500 fee www.jeremiahfoundation.org
18. Own Program – not over 5% $300 fee Requires ownership education and 1% in reserves www.ownprogram.org
19. Home Ownership Providers – only 3% $675 fee www.hop-downpayments.org in Atlanta. No local representation
20. C-Cap Inc. – $750 flat only up to 5% www.c-cap.com Requires home buyer education
21. Futures - $650 limited to 6% www.fhap.org “Local” rep is in Georgia little info on website
22. Apollo Housing – ¾ % No 501c3 Capped at 6% www.apollohousingllc.com but has a “relationship” with Ken-Ray a public charity. Odd they do not require signatures from parties to transaction
23. Equity Grants - $750 ? www.equitygrants.com division of World Mission Charity
24. Home Gift USA $325 www.homegiftusa.org Up to 6% on FHA and 10% on conventional. Seller contributes an amount equal to the gift to HGUSA! And an additional service fee of $325.
25. Dreamhouse Charity - www.dreamhousecharity.com fee is $650

by LoanGoddess August 2, 2003 12:00 AM

Loan Goddess..Please do me a favor from now on. Remove the 1% fee from The Buyers Fund DBA Neighborhood Gold. Also you can remove #18, they are gone for at least a year. The local Neighborhood Gold AE´s are now allowed to set the fee´s in their area according to market conditions. In Virginia for example, Our fee is .75% with a cap of $1,000. On new construction it is .75% with a cap of $600. Plus I can do better if necessary. As far as our list of investors, We have an 8 page list with about 25 investors on each page. Plus we give free a years worth of Mortgage Payment Protection to the buyer. We were the first of the down payment companies that did this for the buyer. We have no forms to fill out and do not require the lenders or Realtors to get signatures. Plus, we guarantee 1 hour funding during working hours. I had a LO from Chase (retail) that forgot to order the grant funds, called me at 9AM when the closing started in a panic and we had the money there in 21 minutes, You know I have a testimonial from her for that one. :o)


ALLEN B..Tell me how to locate you and I´ll send a NG rep by to see you and let you compare apples to apples between us and Ameridream. You will be pleasantly surprised. I promise.



by Neighborhood_Gold August 3, 2003 12:00 AM

We’re thinking of trying Genesis since they have gone to flat fee of $300. Appears they are largely internet and so don’t need the fat fees to pay the sales force. Anyone had problems with Genesis?

Our reason for the shift from AmeriDream to Genesis is basically the misuse of the DPA program by real estate agents – the old just-add-cost-to-the-sales-price syndrome. Many times house doesn’t appraise and, of course, it’s OUR fault. We’ve had to shift some deals to the only true grant program we have by lowering sales price. Borrowers get a better deal with a true grant but we have access to only a limited supply of grant money and hate to use it to “save” a realtor who intentionally screwed up the deal to begin with.



by c-f-s August 3, 2003 12:00 AM

Excellent thread, which I will add to the Newbie Resource Guide.

by quickerino August 3, 2003 12:00 AM

A very NEGATIVE viewpoint on DAP programs. Anyone wonder why they are basically done only with FHA loans? Does it have anything to do with the fact that most conventional lenders, and definitely with end investors, are very sophisticated in their risk analytics? I´m sure there will be a lot of screaming about what I´m going to say, but I feel very confident I´m right. DAP programs are basically legalized fraud. What is the purpose of the program? Allegedly, the DAP folks will tell you they are providing a very valuable service in that they are allowing the "american dream" to be realized. After all, what is better than putting people in homes, especially minorities? I totally agree that we should do everything possible to help everyone achieve the dream which I think is the secret success of this country.

HOWEVER, artifically boosting the price of the house in order to provide a "legal" kickback is doing nothing to promote home ownership in this country. I would submit that it´s basically a good way for most of these DAP programs to make some money and support themselves.

In every transaction there are consequences. Most of the time in our industry, the consequences are good. However, think of what happens on the downside in a DAP deal. (Recognize that this is already happening all across the country) A well intentioned couple, family, single indivdual wants a house. They have no down payment, viola!!, enter a DAP program. The purchaser buys a home FHA, at about 5%-6% more than it´s actually worth. For a variety of reasons, they can´t make their payments, they fall behind and eventually go to foreclosure. The "forced" value of the house already way exceeds the market. Now we have a foreclosure (unfortunately it´s probably in a lower class neighborhood) which will not be able to be sold anywhere near the original purchase price. Because of the foreclosure activity, the house will probably not be maintained properly, thus further downsizing the eventual sales price. Ultimately the property is sold. What is the impact? Home prices in the neighborhood are depressed because of this sales price. Also, EACH AND EVERYONE OF US, have lost money because HUD´s mortgage insurance fund will make payment of the loss to the investor.

Now I can´t wait for you DAP guys to jump all over me and tell me how wrong I am. Before doing so, I would just ask you to first explain one thing to all of us before you begin your "preaching." Why are the delinquency rates and foreclosure rates on DAP programs almost 2.3 times higher than already out of control FHA numbers?
by hdbear August 3, 2003 12:00 AM

Although I have never had the opportunity to use a DPA, something that really concerns me is if the DPA typically brings what, a 3-5% of the purchase price on average to the table? And then, in return receives as much as 33% over their initial wire, at 20-33% return, people are worried about Brokers being predatory?

Large or small, percentages are percentages.

Not slamming anyone, and good lord knows I wouldn´t want to deprive anyone from their dream home, I´m just calling it as I see it.

*I am really confused about most of the DPAs claiming "non-profit" status too*


by Mac August 3, 2003 12:00 AM

Mac,

Request their IRS 990s. They have to provide this but can charge. Forms will show very little income FOR THE NONPROFIT. Catch is they contract with a separate marketing firm -- this is where the big bucks are.


by c-f-s August 3, 2003 12:00 AM

Thanks, c-f-s. I figured there had to be a catch to the non-profit thing. There usually is.

By the way, I wanted to tell you that I learn a lot from your posts here.

Thanks again.

by Mac August 3, 2003 12:00 AM

hdbear....do you happen to have info on where those delinquency rates might be posted?Are the numbers you were using relative to one particular state or are they national figures?

I think your scenario was a little "heavy" on the doom and gloom side but that is usually the most effective way to get the point across. Like everything else...these DPA programs started off as a great "tool" ....but when used without some discretion can end up as a weapon.
by mortgagewitch August 3, 2003 12:00 AM

I helped my sister sell her home to a buyer who used the Nehemiah program.

The buyer never made a payment, and everything else went just as hdbear describes...

by mountainhigh August 3, 2003 12:00 AM

Mortgagewitch,

For stats see MBA’s magazine, Mortgage Banking, August, 2003, pages 59-65.

I think hdbear is referring to HUD IG report on DPA loan originated between 1997 and 1999. DPA default rate is 19.39% versus 9.7% for nonDPA – just about 2 times as greater. Sleeping dragon is the loss we taxpayers are doing to take when (allegedly) over-priced home work their way through foreclosure.


by c-f-s August 3, 2003 12:00 AM

mortgagewitch, hdbear is right about the delinquency figures. Check HUD´s Inspector General´s report, I believe it came out in October of 2002. I´ve read the entire report and he called for an end to the DPA programs. But they comprise such a large percentage of the overall FHA volume that it was thought that ending them would bring the housing market to a screeching halt.
by Old Hand August 3, 2003 12:00 AM

I agree with MortgageWitch. Anyone can find bad things about any program. I am not a mortgage person but a 103% or 107% refi seems like a similar bad idea. And the remarks I keep hearing that the default rate being 2, 3, 4 times higher than non-DPA deals are just not true. I know what some of the studies say (PRO and CON). That debate will not end until HUD comes out with their "official" study probably next year. I wasn´t around when FHA was created but I feel that alot of mortgage professionals were scared that now their industry had a loan where the buyer only had to put down 3% as opposed to 20%. AS far as raising the price to cover the grant repayment, most Realtors will do that because that has been the norm when the seller has to pay the closing cost. They just add it to the loan so it makes sense to them. But I try to teach them not to do that but I know they still do. But we try to get the realtors to look at it a different way but in a sellers market, its about the only way to make it work.

I can say this, our company is also concerned with some of the tactics used by some companies. We helped to create H.A.N.D. (Homeownership Alliance of Non-profit Downpayment assistance providers) http://www.downpaymentalliance.org/

This site will give you a list of DPA´s that have agreed to adhere to a strict set of guidelines on how they behave in our industry. And these guidelines must be followed. HAND just kicked out one of its members just in the last couple of weeks.
by Neighborhood_Gold August 3, 2003 12:00 AM

<< DAP programs are basically legalized fraud. >>

A DAP is just a money-laundering mechanism but if the default rates w/DAP vs. w/o DAP are approximately the same, what´s the difference? Let HUD continue to put its head in the sand, as it always has.

FHA, on the other hand, has NEVER operated in the red. It´s one of only two governmental agencies (the Post Office being the other) that doesn´t rely on taxpayer revenue to fund its operations. Its operating revenue comes solely from MIP premiums. Some may say that USPS and FHA are in other ways subsidized by the good ol´ US of A but, in the main, the sale of postage stamps and the monthly premium on FHA insurance does the job for these agencies.

The "non-profit" orientation of these various DAPs is a joke, but that´s another issue.

Curious how Neighborhood_Gold just "showed up" here on the heels of investordude´s "question." Neighborhood_Gold...just another do-gooder out to make a buck.


by quickerino August 3, 2003 12:00 AM

quickerino...being called a do-gooder is a heck of a lot better than what some folks get called on here. I´ve been around about 6 or 7 months but choose to read more than post but I do feel the need to post when my industry comes under fire because I do see the good that we can do. Sometimes people just become file numbers and get lost in the hectic days of the busy LO. I have had many people hug and thank me at home buyer seminars because they have decent credit, decent jobs but have trouble saving the extra money needed for the DP&CC and now realize with DPA they can finally buy a home. Geez, now I might be accused of trying to be saintly. The point is, whether you like the design that we use a seller concession, or whether it is a state or city grant that uses tax payer concessions (known as taxes) we do help families and the overwhelming majority will pay their payments and never default.

PS. This is the only screen name I have so don´t worry that I would ever post questions so I can answer them. I am not quite that bored with my life.
by Neighborhood_Gold August 3, 2003 12:00 AM

Neighborhood_Gold, I am not picking nits here. I just wanted to clarify something for you.

The difference in a 103% or a 107% or even the 115% and 125% LTV loans and a DPA with or without an inflated purchase price is they are priced accordingly to offset the risk involved. Not due to an inflated appraisal but a risk that has been accounted for by the investor who has specific parameters for that individual product.

Just FYI
by Mac August 3, 2003 12:00 AM

I´m sorry, Neighborhood_Gold, but I know TWO "non-profit" individuals who are now in the process of creating a DAP and have no intention of not making profits--big ones, in fact. Mac´s point is well-taken: under DAPs, the investor is NOT being compensated for the perceived additional risk of loaning on a property that, from the get-go, is under water through the utilization of a DAP.

DAPs are money-laundering, pure and simple.

by quickerino August 3, 2003 12:00 AM

quick is right.....its just an exploitation of the loophole. if you ask if i use this.... your damn right i do :)
by jason411 August 3, 2003 12:00 AM

My only point is that I don´t like the giant paintbrush that we get painted with just like I am sure you mortgage professionals don´t like your industry getting a bad rap because of some bad seeds. But I do realize its more entertaining this way. BTW, I do learn some good things reading this board and I can admire anyone that does loans all day and can keep their sanity.
by Neighborhood_Gold August 3, 2003 12:00 AM

gold.... you guys provide a good service, as do others. moreover, without services such as yours, many people qould not be able to purchase a home, which also means less closings for me
by jason411 August 3, 2003 12:00 AM

I hope no one misinterpreted my post.I was NOT implying that hdbear was pumping up those numbers.I just hadn´t recalled anyone separating out the DPA figures from the rest of the foreclosures and was curious about where I might be able to find those figures.
by mortgagewitch August 3, 2003 12:00 AM

Here are the facts, taken from the HUD Inspector General´s report dated September 25, 2002.

An analysis of 2,261 loans utilizing DPA´s showed a default rate of 19.39%. Non-DPA loans had a default rate of 9.7%.

The default rate for DPA loans quadrupled over a 28 month period.

The Inspector General recommended elimination of DPA´s which derive their funds from the seller´s contribution.

by Old Hand August 3, 2003 12:00 AM

mortgagewitch, if you want a copy of the report, just drop me an e-mail.

kcheek@nwfmortgage.com
by Old Hand August 3, 2003 12:00 AM

Old Hand, well that´s a shame, then, isn´t it?--that a borrower, given an opportunity of a lifetime, will many times mismanage the transaction and possibly lose an opportunity to ever buy a home.

I submit that if the seller would accept the benefit of a DAP WITHOUT allowing the sales price to exceed the appraised value, then and only then do DAPs make sense. But to put a borrower underwater in the property from Day One is simply irresponsible by everyone involved, not just the borrower who doesn´t make the payments.
by quickerino August 3, 2003 12:00 AM

Quick, lenders don´t allow the sales price to exceed the appraised value. The point is that many times the appraisals are pushed to reflect the number that needs to be hit in order for the seller to be able to afford to "gift" the down payment.
by Old Hand August 3, 2003 12:00 AM

Thanks for the update Neighborhood Gold. No harm meant; as I said I am now a wholesale AE for an Alt A lender, but I ran into the fact that Genesis was buying up the market with a flat fee of $300 and that is hard to beat.

I also ran into reluctant lenders who did not want to continue the program due to the HUD report detailed above by Old Hand. Thanks for the support, Kevin!
by LoanGoddess August 3, 2003 12:00 AM

<< Quick, lenders don´t allow the sales price to exceed the appraised value. >>

Oh. I thought exceeding the value by the amount of the concession was allowed. Then "inflated" appraisals are even WORSE! Down with DAPs! LOL

by quickerino August 3, 2003 12:00 AM

These deals happen all the time and HUD seems to know the details yet their OFFICIAL take (from the guidelines) is still that HUD mtgees (the broker or originator, as well as the wholesaler) must ensure that the borrower´s funds for closing "don´t come, directly or indirectly, from an interested party to the transaction".
by Jimbo36 August 4, 2003 12:00 AM

Jimbo: That´s why Nehemiah is set up to ensure just that, at least with builder business.

I work for a large builder. We participate in the Nehemiah program. We are required to ensure that we do not simply raise the price to cover the cost. Lenders require our Sales Activity Report for that purpose.

For anyone interested, Nehemiah sends a <gift> to closing for the buyer - in my world, we participate up to 3%. Nehemiah only does this because we - as the seller - will make a <contribution> to Nehemiah of that same 3%, plus a fee which is currently $385.

Now, I´m not sure how Hud can consider that this is not <directly or indirectly> a contribution from an interested party. But our inhouse lender does them all the time - the loans get insured - and we also pay up to a 6% contribution on top of Nehemiah.
by Emmeline Pankhurst August 4, 2003 12:00 AM

Almost everybody does them, that´s my point. Since none of these "gift" programs would give the money if the seller didn´t pay the "service" fee to them then how can we ensure that it isn´t "directly or indirectly" coming from the seller?

BTW, some of the "gift" programs realize there is not a 3% or 6% limitation since a gift is not a financing concession. Technically, (and some of them know and acknowledge this) the seller could give 20%-25% plus the "fee" so that the program gives the borrower 20% down (plus CC & PP). Since it´s 80% ltv you could do that as a Fannie/Freddie deal.
by Jimbo36 August 4, 2003 12:00 AM

Many good Posts regarding the subject, and even ´civil´ to boot? Great debate on either side of the topic, I think.

INVESTORDUDE - Underwriters treat DAP Gift funds the same as they treat "Gifts´ from Relatives. No down, is no down and the ´risk´ is the same.

FHA says that Borrower ´Gift´ funds can ONLY come from a Relative, or a Non-Profit Organization. Due to that Guideline, many non-profits were set up for this purpose. The ´flaw´ in FHA Underwriting Guidelines is the culprit. "Find a Need and Fill It" IS the way of Business I believe?

No doubt, when there is no personal ´investment´ into something, it is easier to walk away from it. Yet, it is Good News that DAP Loans are only twice as likely to Default as Standard FHA Loans. I would have thought it would be more considering the Billions Funded through the Program...so 80 per cent of the Home Buyers ARE keeping their Agreement?

I´ve done several DAP Loans in my Region. NONE of them have Defaulted. I think ´serious´ Borrower Counseling is needed for all FHA LOANS (or any 100 per cent financing Loans).

Many Brokers merely fill out the "budget" forms and have the Buyer sign them...many Realtors and Brokers ´push up´ the Buyers to BUY HOMES at their MAXIMUM qualifying RATIOS without considering their ´lifestyles´ etc. I wonder why that is?

Often the Purchase Price of a Property is ´pushed up´ to pay for Closing Costs when a Buyer ONLY HAS 3 per cent down, and then, the Seller pays those (and some CC´S are really quite HIGH PRICED too) for the Buyer...

Money ´Laundering´ means illegally ´gained or unreported´ money is placed into a legal channel (like Real Estate and even some Lending Companies), so that when it comes back to the DONOR on the other end it is... ´clean´. Somehow, describing DAP´s this way seems about as fair as requiring all Brokers to wear Hats that say LOAN SHARK on them? ´Legalized Fraud´ is an oxymoron too. Fraud means ´lying´, and these Loans are fully Documented for the Lender...so if the term is accurate...the Investor is the Conspirator working in conjunction with the Broker?

At the ROOT of FORECLOSURE problems a Realtor or Mortgage Broker or Lender was more interested in the SALE, than the best interests of the Client....(when FORECLOSURES are not as a result of ´Life on Life´s Terms)´. How many POSTS brag about 50 or even 60 per cent RATIOS being found ´acceptable´ by DU or LP...but ISN´T placing folks in Homes WE KNOW they cannot afford the real crime?
(I know, if we don´t do it, someone else will.)

DAP is merely a ´tool´ Brokers use to GET EM IN...they are not the CAUSE of the problem. Heck, before DAP...many Brokers had to lend the money (behind the scenes), have a family member sign the ´gift letter´, and have the Buyer sign a ´secret note´ to pay back the money with interest rather than ´decline´ the deal or disappoint the Realtor.
(On this Vine a few weeks ago, when one LO´s Buyer was´short to close´, about six or seven Posters suggested this exact solution!)

DAP is saving many from that illegal practice, and as a result, the Buyers do not have to pay that little extra something every month back...with interest.

Blaming DAP for inflated Appraisals is a little OT too for only one entity can order an Appraisal and request a value...and we all know who that is.

What was that about the Pot calling the Kettle...?:>)

by moneyone August 5, 2003 12:00 AM

<< Blaming DAP for inflated Appraisals is a little OT too for only one entity can order an Appraisal and request a value...and we all know who that is. >>

I have never in my career intimated to an appraiser that he needed to "hit" a value for the deal´s sake. And I will immediately set the realtors straight when they ask me if I can find a "friendly" appraiser for his/her deal. I say, "I don´t know any ´friendly´ appraisers, but I know plenty who do their jobs correctly and ethically."
by quickerino August 5, 2003 12:00 AM

QUICK - I absolutely agree one hundred per cent that YOU are ethical, above board, and do not do ANY OF THE ABOVE.

If all Loan Originators were as knowledgable, honest, and customer oriented as YOU ARE and many of the Professionals contributing here,(and we know by their Posts WHO THEY ARE)...our Industry would not be constantly maligned and facing ever increasing Legislative and Regulatory Restrictions.

If these ´lapses in integrity´ were truly rare and uncommon, Default Rates would decrease ´instantly´.
Unfortunately, there are more than a FEW bad apples based on the number of of Defaults, the rage of Consumer Groups, the audit findings, and the suspensions and revocation of Licenses in California for ´cause´.

Yet, it is difficult to blame the DAP Programs...when it is the Broker or LO who really knows the Borrower better than anyone else (financially), and places them in a Loan likely to FAIL. That is GREED, plain and simple...and there is no ´customer service´ to it.

Affinity is gaining more and more Lender Participants, and Loans are being ´rated´ for potential Fraud, and other things of interest to Lenders, and Brokers are receiving ´ratings´. Too many ´bad marks´ and the Broker will find themselves FROZEN OUT from Brokering to all the Major Players.

When all is said and done, the THOUSANDS OF BAD APPLES will be GONE...and the honest folks can build huge empires if they want to. I will celebrate my own small part in helping this to become a ´reality´ in the not too distant future....and you know what part I play.

Whether or not DAP is good for the Consumer, and the Lender, is up to individual Brokers and Lenders to decide.
When more ´accountability´ is required of Brokers and Loan Originators....better decisions will be made.

I would rather see the self-policing within the Industry, than from without. That´s my point and other than Disagreeing with your terminology describing DAP...we are on the ´same page´ in the ´Practice´ of our Profession.

OKIE DOKIE...?





by moneyone August 5, 2003 12:00 AM

moneyone, I thought I was the only one that cringes when I read "I got a 63.7% DTI approved through _______"<------put name of favorite underwriting engine here*



Before eveyone climbs my case, and claims all of the undisclosed income and assets the borrower´s have, I know that not all of these borrowers have that additional income/assets.
by Mac August 5, 2003 12:00 AM

I´ll leave the finger pointing to the politicians. The real issue is the 20% default rate. That has the potential of dealing a knockout punch to the economy. I´m no economics expert, but it stands to reason that if a flood of HUD repos hits the housing market there would be the potential for a dramatic decrease in values.
by Old Hand August 5, 2003 12:00 AM

Hi moneyone ~ I didn´t think you were talking about me, but thanks for clarifying.

As to high DTI, it makes me cringe also to see new homebuyers trying to buy a home that will consume HALF (?!) their discretionary income. That´s why, when I interview a borrower, I say, "what´s the monthly payment you have in mind that won´t make you sit bolt upright in bed at night in a cold sweat?" We work backwards from there (if it´s reasonable), regardless of what they "qualify" for, and that´s what I tell the realtor.

On a refi, as long as the payment is being lowered, I don´t think the DTI has much to do with anything.
by quickerino August 5, 2003 12:00 AM

Before I became the funding director for a(nother) national DAP program I scraped, begged and borrowed the $15K it took to buy a beachfront condo on the Gulf. After 3 months I got laid of and had no savings.

Needless to say, my first tendency was to throw in the towel and default... but I didn´t. However the whole ordeal put a rift between me and my ex and eventually wedged us apart. Now I´m in Dallas.

So, regardless of the perceived risk it puts on investors the reality is that DPA programs will continue to flourish and help families when they neeed it the most by putting more cash at their disposal. Unfortunately it´s also true that most people in the industry have no idea of how to apply for the funding. Go figure...

NM - Dallas
by Funding Agency July 8, 2004 12:00 AM

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