FHA Reopens Comment Period on Proposed Ban of Seller-Assisted Payments

In a speech at the National Press Club on June 9th, FHA Commissioner Brian Montgomery announced that HUD would be re-opening the public comment period on a proposed ban of seller-assisted down payments for FHA loans. As a result of their annual re-estimate, FHA will be reporting an estimated 4.6 billion in unanticipated long-term losses, which Montgomery attributes to the increased number of seller-funded loans accepted by FHA.

"Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments," said Montgomery.

The percentage of FHA loans with seller-assisted down payments is currently at 35%, as compared with 5% seven years ago. The ban was proposed last year, and met with heavy opposition, especially from the nonprofit groups that frequently provide the downpayments for these loans.