HUD Plans to Roll Back Mortgage Assistance Programs

Realtor.com reports that the U.S. Department of Housing and Urban Development has recently called for an end to down payment loans for homebuyers seeking Federal Housing Administration loans.

In response to the changes, the Chenoa Fund sued HUD last month. The Native American financial group, one of the largest programs targeted, provides down-payment assistance on more than 70,000 FHA loans across the country each year. Borrowers, who do not have to be Native American, typically have lower credit scores and live in poorer states. They do have to repay the down payment loan, often at interest rates that are about half a percentage point higher than market rate.

Down-payment assistance is key for many would-be home buyers who can handle a monthly mortgage payment, but have difficulty scraping up a lump sum for the down payment. Escalating home prices make that even more challenging. In April, home list prices reached a record median $310,000 nationally, according to realtor.com® data. That's led about 30% of buyers today to tap into some sort of down-payment assistance program, according to the Urban Institute policy research group.

Most home buyers seeking mortgages don't put the traditionally standard 20% down on a property. In fact, the median down payment was just 13%, according to a 2018 National Association of Realtors report. Many more opt for lower down-payment programs, such as 3.5% with an FHA loan.

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