30% of FHA Foreclosures Linked to Downpayment Assistance

This blurb came in via National Mortgage News:

Nearly one third of Federal Housing Administration foreclosures completed in 2008 involved FHA loans with seller-funded downpayment assistance, HUD secretary Shaun Donovan told senators. FHA loans where the downpayment assistance was arranged by non-profit housing groups represented only 12% of all FHA loans at the start of 2008. "Much or our recent loss activities have been attributed to the growth of seller-funded downpayment assistance," the Department of Housing and Urban Development secretary testified. Congress banned such down payment assistance on FHA loans. That ban went into effect October 1, 2008. "The termination of this program should substantially reduce FHA losses in new originations in the years ahead," Mr. Donovan testified.

Update: We've located the full testimony. Here is a pretty clear quote from it:

Moreover, much of our recent loss activities have been attributable to the growth in seller-funded down payment assistance. These loans grew from under 2 percent of all FHA home purchase originations in FY 2000 to greater than one-third of purchase originations in FY 2007 and 2008. The seller-funded down payment originations result in completed foreclosure at three times the rate of loans where borrowers provided their own down payments and while they only represented 12 percent of the FHA portfolio at the start of 2008, accounted for 30 percent of all foreclosure completions that year. The termination of this program should substantially reduce FHA loses on new originations in the years ahead.