DAPs simply will not die.
To understand DAPs in nerdy detail, see Tanta's DAP for UberNerds.
From the WSJ: Government Mortgage Program Fuels Risks
The offers -- including "100% financing" -- are made possible due to down-payment assistance programs run by nonprofit organizations. These programs are funded largely by home builders and also by private homeowners desperate to sell. The seller-funded groups provide enough down-payment money to buyers that they can qualify for a mortgage backed by the Federal Housing Administration, which requires at least a 3% down payment.These are not real down-payments from disinterested third parties. These programs are designed to have the seller (including home builders) funnel money to the buyer through a "nonprofit" to get around the FHA down-payment requirements. The buyer still has no skin in the game.
The FHA estimates that down payments provided by nonprofit groups account for 34% of all 200,000 loans backed by the FHA so far this year, up from 18% in all of 2003 and less than 2% in 2000. And the agency says that borrowers are two to three times as likely to default on their payments when they receive a down payment from a nonprofit.Here are some previous posts by Tanta and I about DAPs:
D.R. Horton Inc., the nation's largest home builder by volume, is touting "100% financing" for its two- and three-bedroom condominiums near the beach in Maui, Hawaii, which start at $498,000. In the Seattle area, local builder Quadrant Corp. is advertising townhouses that can be purchased with as little as $500 down. "Use your coffee budget to move into a new home," says an online promotion.
FHA Going After DAP Again? Tanta, June 10, 2008
DAP for UberNerds, Tanta, Oct 19, 2007 **** READ this one for nerdy details! ****
FHA to Ban DAPs, CR, Sept 29, 2007
Housing: IRS Raps DAPs, June 2, 2006
More on Housing, CR, Feb 24, 2005