HUD Clarifies Statement on DPA Programs

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HUD’s Deputy Secretary, Nani Coloretti, issued a statement advising lenders that although HUD allows government-sponsored Down Payment Assistance, it must comply with their rules (DPA Issue). DUH!

This was intended to clear up confusion previously created when Principle Deputy Assistant Secretary, Ed Golding, issued his letter back on May 25^th on this same issue (Letter). That letter was intended to alleviate lenders concerns on accepting these DPA programs in view of pending actions being taken by HUD’s OIG (Office of the Inspector General).

Confused? Don’t be. HUD Handbook 4000.1, II, A, 4(d)(iii)(J)(1) clearly outlines the terms under which government-sponsored down payment assistance is allowable. The criterion is quite clear.

HUD and the OIG are concerned with the use of such programs by lenders when a consumer is not fully aware of the terms, the intent, and/or repayment obligations. They also want to ensure such a program is not used to steer a borrower to a certain lender and is then charged higher rates or fees as a result.

Government-sponsored DPA’s are good for consumers and lenders when utilized, and disclosed, properly. Their use should not end up costing the borrower more money to obtain their first mortgage. The rate of the FHA insured first loan should not be increased to cover any costs associated with the DPA. That could violate the HUD rules.

Be informed. It took a lot of effort and time for HUD to develop and issue their new handbook. Use it. If you’re still not sure, I strongly suggest you contact HUD directly for guidance before proceeding with acceptance of any DPA programs.

Down payment assistance should be a benefit, not a burden on consumers.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.