In response to my commentary on H.R. 600, several comments were made in support of seller-funded down payment assistance (SFDPA) programs and Nehemiah. Why these comments are special is because they originated from I.P. addresses belonging to Nehemiah Corporation of America. Yes, you heard that right. They all came from Nehemiah Corp of America.

Ed. note: Seller-funded downpayment companies like Nehemiah and Global Direct Sales (Grant America) are firing up the propaganda machine in hopes to get H.R. 600 passed (formerly H.R. 6694), a bill that would re-open loopholes to allow sellers to finance the downpayments of their own buyers using FHA government loans (that is, taxpayer-insured). Read more about it here. We have nicknamed this practice "FHA subprime", and the companies that arrange these loans "foreclosure mills". By their own best numbers, 20% of these loans have historically headed to delinquency. We argue that is going to get much worse now that we are in a housing bear market and a severe recession.


BIGTXLENDER at 18:58 2009-02-10 said:
If they do bring it back, which i hope they do not... but if they do. DO NOT LET BE USED FOR NEW CONSTRUCTION.....that is truly inflated value and all fluff.....keep it for RESALE ONLY.......

20% default is terrible,, but I guess all those Realtors and LO's who are on the LDP-GSA.. are more than likely working at Wal Mart now.... Permalink

CJKatl at 20:01 2009-02-10 said:
Or, if it's brought back, which I really, really hope is not the case, require recipients to complete training in financial planning, budgeting, and home ownership. Live classes. Taught by outsiders to the organization.

And require that the "charities" be run by unpaid volunteers. Do not allow anyone to become rich running these "charities" ever again.

Finally, require these organizaitons to guaranty the gift. In other words, if the loan forecloses in the first, let's say, five years, the fake charity will have to repay the entire gift to the investor holding the loan.

Didn't Chris Shays lose re-election over this issue? Why would anyone in Washington support this evil measure. Oh, yeah, that's right ... they're getting money out of this. Nobody who objectively looks at these programs thinks they actually are consumer friendly.

If 103% loans are what Congress wants, why not just lift the cap on FHA? Why does there have to be a middleman skimming money? Why do we have to pretend there's a gift? Why do we have to get the appraiser to jack up the value? The obvious answer is that much of that money winds up in Washington! Permalink

dirk2290 at 09:45 2009-02-11 said:
The disappointing thing here is that the owners of the Implode o meter are obviously against the SFDA's. There have been a ton of threads about this topic and many many people supported SFDA's and brought incredible stories, numbers, and statistics to the thread. I too wrote many posts on the thread to be complimented by many. Does there need to be serious reform, YES. Should it be wiped from the Lending platform completely NO. IF, level heads can prevail and understand there can be a happy medium, where there is much reform implemented, this can be a product that is respected by the "nay-sayers". Sometimes I wonder if some of the radicalists want to see an utter collapse of the Banking System, Mortgage Industry, just so they can picket a sign saying "I told you so". Are we not supposed to be on the same side, espcially in the crisis we are in right now......so for the love of God, when you post this of the left hand side of the page with a MAJOR link in bold print, it is very evident of the one side apprach and stance that this site has on this topic.......and MAJOR PLAYERS and politicians and econmists would disagree with your view points. Can you guys be some what more Bi-Partisan on this topic? Permalink
Winston Smith at 13:09 2009-02-11 said:
Bravo DTM, Bravo.

The truth is coming. Those once exalted will wear stripes. :idea: Permalink

CJKatl at 21:07 2009-02-11 said:
dirk, why not just go ahead and do a 103% loan? Explain to me why this charade has to run through the fake charity? Why not just let FHA do the 103% loan? It would be cheaper, easier, and net the same impact. Why does a fake charity have to launder the money? Can you explain to me what makes it running through the fake charity better? Other than to make the people who "own" the fake charity rich? Permalink
Do_the_math at 23:51 2009-02-11 said:
The disappointing thing here is that the owners of the Implode o meter are obviously against the SFDA's. There have been a ton of threads about this topic and many many people supported SFDA's and brought incredible stories, numbers, and statistics to the thread. I too wrote many posts on the thread to be complimented by many. Does there need to be serious reform, YES. Should it be wiped from the Lending platform completely NO. IF, level heads can prevail and understand there can be a happy medium, where there is much reform implemented, this can be a product that is respected by the "nay-sayers". Sometimes I wonder if some of the radicalists want to see an utter collapse of the Banking System, Mortgage Industry, just so they can picket a sign saying "I told you so". Are we not supposed to be on the same side, espcially in the crisis we are in right now......so for the love of God, when you post this of the left hand side of the page with a MAJOR link in bold print, it is very evident of the one side apprach and stance that this site has on this topic.......and MAJOR PLAYERS and politicians and econmists would disagree with your view points. Can you guys be some what more Bi-Partisan on this topic?
Dirk, nobody has taken issue with bona fide down payment assistance. The issue is entirely with SFDPA which is not legitimate down payment assistance, but moreover, a scam. The SFDPA organizations are extremely deceptive in this regard and often give the impression that down payment assistance in general has been terminated.

SFDPA threatens to impact FHA underwriting and credit score qualifications for all FHA borrowers, including those not involving SFDPA. Ultimately, the eventual losses from SFDPA would negatively impact underwriting and eligibility for ALL borrowers.

Consider that credit scores have been shown to favor non-minorities while negatively impacting minorities. H.R. 600 would increase premiums for minorities and low income borrowers while reducing premiums for non-minority and socioeconomically advantaged borrowers. Not only would it exempt higher score borrowers utilizing SFDPA from having to pay risk-based premiums, it would displace lower score borrowers, the bulk of which are minorities.

I will ask you the same question that I keep asking SFDPA proponents: Why not simply support a 100% program? Why involve an intermediary? Why increase the sales price to include the down payment concession?

The reality is that the SFDPA organizations do not play fair in the media or with their "grassroots" campaigns. This isn't the first time that a Nehemiah shill infiltrated my blog. With so many bloggers and journalists parroting SFDPA propaganda, both ML and myself are forced to counter-act media deceptive media campaigns and point out the truth behind SFDPA.

I am tired of sitting back while private interests raid the economy via government programs. They dress up SFDPA up with fancy words, platitudes and commissioned reports, but at the end of the day, the Emperor is bald, fat, and naked.

If you want to pretend that a seller rebating the buyer the down payment through a "non-profit" intermediary is really a grant, feel free. I, however, refuse to co-sign to BS.

Disclaimer: ML Auto features replace the letters a - s - s in certain words with "donkey". Permalink

dirk2290 at 10:11 2009-02-12 said:
WOW! TO start out I can only wonder where you were a few months back when there was a very educational and thorough thread for this topic that did bring out the good in this product, by many people other than me.

First thing that I have to mention is that all this jargon about why don't we just do a 100% loan or a 103% loan, and the jargon about increasing the Sales price to cover the SFDPA. WHERE HAVE YOU GUYS BEEN FOR THE LAST YEAR? Are you doing loans? Because all I hear is how badly Appraisals are getting cut. I have been in this industry for 10 years now, and I have never seen such stringent paramteres on Appraisals. You can not just simply increase Sales Price as you guys want the public to beleive. Now if you came out with theory 18 months or so ago, I would agree. But now? Are you kiddin me? Are you saying that there are Lenders that are pushing value on Appraisals and getting away with it? Because it is not happening with our Company or with any of my colleagues that work for other companies. In fact, there is a very conservative approach to the value......and rightfully so. But, please, stop pushin that theory out there like it is the old subprime days where an Appraiser would bring your value in where you needed and you funded the deal end of story.......that just isn't happening. So for someone to say just do a 103% loan is absolutely smack talk and has no relevance to the issue at hand. There is no inflation of value any longer, so stop using that as part of your foundation to beat your chest on your stance against SFDPA's.

You say why increase the sales price to include seller DPA? Come one dude, you can't do the math??? A Seller can contribute up to 6% of the Sales Price for Buyers CC"s. Most often, all that is acheived is 3% or sometimes 4% for lower loan amounts, thus allowing 2-3% on the table, potentialy, to be contributed. What is the difference if we only got 3% for CC's and the other 3% for SFDPA. It is still within the 6% range.

You say that SFDPA don't paly fair in the media: Interesting.....Who does? The Media isn't fair. It is often leftist liberal based, feeding the public that gets the best ratings, whether or not is 100% truthful or not. Topic for another discussion. Look at the War(s). You watch CNN, all you hear is negativity, you watch other statins it seems to be more bi-partisan. CNN nevershows the schools being built, hospitals being built, infrstructure being built, stories from local families that their lives were saved, their businesses were saved. You never hear anyhting good, and I have many friends over there, and there is good being done. Just a fine example....no one plays fair in the media, let alonme the media itself.

You say Credit scores arn't fair to minorities? WOW! Gee, why is that? Lack of responsibility, lack of eduation, always blaming soemone else or some government for their short comings. And BTW, I am Native American, and I have a 772 mid score. Credit Scores are certainlybetter than a hand shake or an IOU wrote on a napkin. If minorities want access to the best of the program, then they need to prepare themeselves prior to buying a home and retain GOOD credit. This is no ones fault bt the person that has bad credit. I don't care if they went through a divorce and it was somethign that couldn't be avoided. Our bad decisions we make today, may take years to pay the consequences. Life is all about learning as you go.....some learn from their mistakes and want to better themeseves, and others will look for someone to blame and never progress, whether Black, Native American, White, Asian, etc, etc......Don't play the race card.....I certainly don't and I could all day long.

Do I think the fake charities should get rich while performing this tactic, NO. But I am also not stupid and I realize that we live in America, where people capitalize off one another. Do I think that an Insurance Company who insures my Autos should pay their CEO 22 Mil bonus for the year, NO. How about the CEO where I send in my Mort payment? How about the board members of my local electric company? Look, I am Republican, but I can't stand the Corprate fleecing and excessive payouts that help bleed this country into oblivion. Shold their be reform, YES. But as long you live in this Country you are going to see millionaires and billionaires. We are not a socilaist country....YET....but we are on our way. Look these guys had an idea, and have capitalized on it to make them wealthy. How many other companies have started like this in this country? All of them? Don't hate the player, hate the game. I don't like Obama Mama, but with him limiting the bonuses af the Bank CEO's is the first part of reform that is needed in the Corp America! I agree with that.

And No SFDPA does not impact the U/W as much as you think. I was told by many of the previous threads that there is a way that when you review a previous sale as a COMP you can tell if DPA was invloved? I don't know this for sure, but the thread from months ago had plenty of U/W' on there as well as Ops managers disproving your vey theory.

And BTW, DPA in genral all but has been eliminated. All those bonds and grants, have dried up as many local and state governments are in huge budget cuts on the verge of filing Chapter 9. Yes, there are some pockets in this country where there are till a few left, but that is a FEW! And you do know that their are income restirctions as well as prepayment restictions with such awesome DPA's, right? Soem of you guys make it sound like it is this wonderful alternative. When in reality, you have to meet certain guidlelines and sometimes certain census tract areas to revitlaize ghetto's, and then the pre-payment clauses. Are we not against pre-payment penalties? Why corner the Buyer like that?

Yes I would support a 100% Porgram, but Congress does not, who is controlled by Dems and witch Pelosi. So, please start a petition, I will sign it. HUD can't even get their SH!! together to come up with a propsal for a 100% program, and if they did there would be the complainers say it is not fair that our Mortgage Insurance is 50% higher and our rate is .750% higher than the normal FHA Loan. But then we could have them wait 120 days and do an FHA Streamline to a normal FHA Loan. See, easier said than done my friend with the 100% loan. It would change the entire FHA set up. It is easier to allow an entity that already has infrasturcture to come back to life and help mve the economy, housing Market. Look into this before spewing "why don't we do this or that".

SHould there be an outlet---YES. Should their be incredible reform----Yes. You need to stop being so myopic just becasue your boss leaves work in a new Mercedes SL520. Yep, when I made 18K a year back in the early 90's, my vision was very myopic as well. I was a player hater.....Until I learned the game....welcome to the USA. Capitlaism! Permalink

Do_the_math at 14:27 2009-02-12 said:
Dirk, I invite you to provide the link to the discussion thread you referenced. But, be advised that I’ve seen enough pro-SFDPA threads to know most of the arguments and propaganda regarding SFDPA.

Your assertion that SFDPAs cannot inflate sales prices due to tighter appraisal standards is erroneous. Unless the “gift” is deducted dollar for dollar from the sales price for public and MLS records, there is no way to keep prices from be inflated in areas where grants are prevalent. This is because the comparable sales that are used for appraisal comps can be inflated due to other grant users. Although appraisers are required to verify sales concessions on comparable sales, the information is not always available or verifiable. The lack of mandatory public records reporting of all concessions makes verification problematic and essentially impossible. The lack of transparency opens the door to fraud and abuse.

Consider that the grant concession does not always result in a sales price that is higher than the list price or other obvious inflation. Sometimes, the sales price is simply not reduced when it could or should be. Also, because grant providers market real estate agents, mortgage lenders and builders. sales prices are adjusted for grants when the list price is established. Since 100% financing buyers quickly dominate markets, the impact to area prices cannot be avoided. Hence, it is not an appraisal issue as much as a market consequence.

As to concessions, its interesting that you brought it up because excessive seller concessions impact prices the same as SFDPA. This is why I was disturbed when FHA disallowed the borrower to finance a portion of their closing costs. A 6% concession is excessive and has an unconscionable impact on the sales price and promotes abuse. If a concession is not typical for the area or concessions were not present in the comps used, the appraiser should adjust the comps accordingly even if it is below 6%.

However, reasonable closing cost concessions do not impact market dynamics in the same way as SFDPA because the borrower still has skin in the game via their down payment. Borrowers with skin in the game (i.e. something to lose) are not getting something for nothing like SFDPA buyers.

In regard to credit scores, I get tired of people saying that minorities and low income borrowers don’t pay their bills. Credit history is only a portion of the score, and types of accounts and other behaviors comprise the bulk of the score. Not all cultures embrace the concept of financing lifestyle through debt. Some cultures rely on minimal use and alternative forms of credit. The FTC has established that credit scores do not favor minority and low income borrowers. The FTC has also reported that they were not able to correct the proxy effect. Hence, there is no way to prevent minority and low income borrowers from paying higher premiums while non-minorities receive the benefit of lower premiums. Realize that according to information contained in the infamous “Brill Report” a large percentage of minority and low income borrowers would be displaced or burdened by H.R. 600. Thus, another risk marker should be used that does not result inadvertent discrimination. As long as the SFDPA providers throw out the race/low income card to garner support for SFDPA, you better believe I will throw out the fact that their proposals create a burden for minorities and low income borrower.

We underwrote credit and risk for years without the benefit of AUS and credit scores. And guess what? The loans performed better. We didn’t get to double digit delinquency rates on FHA until after the advent of AUS, credit scores, and SFDPA.

In an article written by Yuliya Demyank, economist at the Federal Reserve Bank of St. Louis, Demyank questions whether credit scores predict default risk:


Given the nature of FICO scores, one might expect to find a relationship between borrowers’ scores and the incidence of default and foreclosure during the ongoing subprime mortgage crisis. Analysis suggests, however, that FICO scores have not indicated that relationship: Default rates have risen for all categories of FICO scores and, moreover, higher FICO scores have been associated with bigger increases in default rates over time.
This is troubling considering that H.R. 600 exempts borrowers with credit scores of 680 or better from paying risk-based premiums when SFDPA is used. There is no regard for overall risk or other mitigating factors which might counter-balance a lower score. A borrower with a 680 can be a greater risk than a borrower with a 600 score due to an excessive debt to income ratio, payment shock, lack of reserves, inability to save, minimal credit experience, heavy debt use, loan type, and amortization, etc.

When I was underwriting, I didn’t stop at the credit report. Even on suspenses or declines, I had to completely underwrite the file and determine risk as a whole. It is possible to determine a risk-based score that is based on a variety of loan factors rather than credit industry secret formulas that cannot be tested or verified. The credit bureaus can’t provide an assurance of accuracy. They can’t even make subscribers follow the FCRA or the FDCPA. Adopting the same failed practices of the mortgage industry to support another failed practice is a recipe for disaster.

As to your argument that is easier to re-approve SFDPA, I couldn’t disagree more. The very essence of SFDPA involves deception. Furthermore, the third party provider fees adds to the costs. Why incur the SFDPA fee? Wouldn’t this fee be better spent on mortgage insurance than given to an intermediary? I argue that it would in fact be easier for FHA to implement a pilot program for 1st time homebuyers than to expect Congress to accept down payment scams. BTW, your assertion that “HUD can't even get their SH!! together to come up with a propsal for a 100% program” shows how uninformed you are. HUD did support H.R. 3043 that would have authorized HUD to create a 100% pilot program. Educate yourself:


How did the SFDPA respond to this well-crafted piece of legislation? They sought “refinements” that would essentially butcher the bill in order to protect their interests. Ameridream even recommended that a minimum 700 credit score be required (which would have drastically limited availability and competition):


The SFDPAs stopped the experimental program. Had they put the best interests of the American public first, they would have supported the bill instead of working against it. The reality is that the SFDPA’s do not support 100% financing. They support getting paid to facilitate 100% financing. You should at least know your facts before you start spewing misinformation.

As far as the SFDPA organizations and capitalism go, remember that these are “non-profits” we are talking about. I am not arguing the fact that we live in a capitalistic society and that businesses that take risk should be rewarded, but I dispute that non-profits should be able to take advantage of tax laws and public perception of philanthropy in order to enrich themselves. When they manipulate agencies and public opinion to influence laws that are beneficial to their own interests and not the publics, they need to be called out for it instead of being glorified by the media.

There is still down payment assistance available, and even 100% loans. However, most are need-based programs that are limited to first time home buyers and have income limitations. There are also community 2nd programs which the “Non-Profits” are capable of providing, but chose to spend money on lobbying and enterprises of for-profit affiliates.

The SFDPA organizations and the amount of political and trade support they receive is a sad reflection on our industry, political system, and society in general. Permalink

dirk2290 at 16:09 2009-02-12 said:
Do the Math: You say that 6% seller concessions has no place in the indsutry. Appartently you have never done a purchase for someone in rural South Carolina. 52K Purchase in a High Closing Cost State where Attorneys will still charge 2-2.25%% in fees to the Buyer on a 52K purhcase. There are times that it is needed. Please don't forget about smallville or cornville. Just because you and I may live in a urban or suburban area, there is a lifestyle out there where a 52K Purchase is the largest thing they will ever do in their life.

How can you say that not being able to boost the Sales Pirce has no relevance for this topic. That's a bunch of bologna. Of course someone like you would want to discount such a fact that disproves all that abuse you talk about. A home can only appraise for whatever it is worth, bottom line.

HERE IS A GOOD ONE: What about the properties that are in very rural areas, that it is customary for Real Estate Agents to charge 5% and 5%, equaling 10% in Commission. I have done certain deals in the "sticks" where I have seen 11% in total commission paid out. So, putting this money/equity into a Realtors hand is better than a Buyers equation? ......AND.....what about when you want to sell your home and instead of doing the normal listing of 3 and 3, you say to your listing agent, I want to offer a 4% or 5% co-broke fee to the Buyer's agent. After all I am the Seller and I can dictate where my money or equity is going to go in essence to move my property quicker. Not rocket science. So it's ok to deepen the pockets of Realtors, but not to help out a Buyer. It's my money that I lose out on as a Seller, not yours. I am just showing you that their is a different way of looking at this instead of being myopic.

Back to credit scores. I am sure you are ired of people saying that minorities don't pay their bills. I am tired of it too, and I am tired of people blaming others when they don't pay their bills. Yes, credit score is not all about recent timely payments. You make it sound like rocket science, and yes, 90% of LO's have no clue what is entailed in scoring, but once you do understand the game and YOU educate people on how to play the game, with a little restraint you can beat the game. 40% of the score is based on your revolvong debt balances versus limit. Tier 1 is 50%, tier 2 is 25% and tier 3 is 10%. The higher the tier the higher the score. If you are maxing out your card, your scores will drop. So you think this is injustice because you have a low score because you are clearly living beyond your means. PLEASE! Live on plastic, and score will drop. DUH! When you get a medical bill in the mail that is threatening collection.....uh......pay it, maybe that helps too.....come on dude, this is not that hard to understand. Sure you don't have t agree wit hthe system at all, but don't bite your nose off to spite your face and follow the system to get what you need. It's like the dead head friends I had back in the early 90's that were adamnat about wearing tye dye t-shirts and pot leaf hats into an inteerview because they had a point to prove.....they know they were not going to get hired.....duh......but I guessed they proved their point...to who? Who cares? Play the game right and you win, be stubborn and unwilling to learn the rules, and you lose. DO I agree with it, hell no.....but I;m not an idiot to leanr real quick how the system works.

But I am starting to understand you now because you are an U/W and not an Originator. You get a check every Friday regardless if a loan closes or not. You are not in the trenches with these Borrowers and hearing their stories and helping them for months before they are in a position to buy. You have no idea what they have been thorugh or are going through, you simply observe the file with blinders on follwoing a script of guidelines. You see stats and memos from Lenders and think you know what is going on out there. Take your 2 smoke breaks and lunch break and get your check on Friday......nice and cozy feeling. There are some stories that have become proud homeowners paying their bills that came from SFDPA's.

A friggin Underwriter....no wonder I am not getting anywhere.......you have no clue......I'm done wasting my breath on your opinions......good night irene.......can't beleive I wasted this much time already.......you are on a different planet from the very people that orgiiante and give cause to you having a job. Permalink

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