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FHA Down Payment Assistance Programs Supported by Primary Residential Mortgage, Inc.


Seattle, Washington – OCTOBER 19, 2007 – The U.S. Department of Housing and Urban Development (HUD) has recently announced that starting October 31, 2007, they will cease down payment assistance programs for loans with down payment funds provided by specialized non-profit organizations. These non-profits groups are set up to aid borrowers unable to provide the minimum down payment required for Federal Housing Authority (FHA) loans.

The U.S. Department of Housing and Urban Development cites statistics that the down payment assistance programs have foreclosure rates that are two-times as much as other programs. Of loans made in 2000 and 2001 with assistance from non-profit down payment programs, the foreclosure rate is around 15%, while the typical FHA rate is 6%. If the high number of foreclosures on these loans continues, the FHA reports the down payment assistance program, as currently constituted, will have to operate in the red.

The decision to discontinue this type of assistance has been met with opposition. Demand for FHA loans has increased significantly in the preceding months, as the subprime mortgage crisis has created a void for certain products. FHA loans have once again became en vogue for borrowers with lower credit scores and who lack sufficient down-payment and closing-cost funds.

While gifts from parents are still permissible, seller arranged down payments through these non-profits will be prohibited. Several of these non-profits are challenging HUD’s decision in federal court, contending their exclusion from the market will hurt lower-income homebuyers.

"We fear that HUD is basing their decision to eliminate the down payment assistance programs off of a black-and-white statistical scenario,” says David Zitting, President and CEO of Primary Residential Mortgage, Inc. “Yes, there may be higher foreclosure rates for loans that were completed by utilizing these programs, but it is highly unlikely that the actual assistance program was the main cause, but more that it was more of a negative layering effect within the overall credit package. When you layer negative issues, like poor payment performance on other consumer debt, outstanding collection accounts (above $1000), short tenure on job or poor job stability—then, in turn, you add a feature that doesn’t require the borrower to invest dollars into the transaction; this is for a recipe for foreclosure.”

“We believe that further study should be made to truly determine what percentage of loans with down payment assistance programs actually went into foreclosure that weren’t married up to these negative layering characteristics,” says Zitting. “I would bet that the loans in that bucket perform very closely to regular FHA loans that did not utilize the assistance program. It is our opinion that HUD should reconsider their decision to eliminate the down payment assistance programs and allow potential new homeowners to utilize these resources if they can demonstrate that the other characteristics of their ability to borrow are stable"

Headquartered in Salt Lake City, Utah, Primary Residential Mortgage, Inc. (PRMI) was founded by Dave Zitting, Jeff Zitting, and Steve Chapman in 1998. Since its inception, PRMI has evolved from a four-person business to a nationwide multi-billion dollar operation with 800 employees working in approximately 200 Branches in 47 states. Branches operate under the PRMI brand or as DBAs as part of the Divisional Joint Venture and Consortium Partner programs. Serving all segments of the market, Primary Residential Mortgage , Inc. is a privately held, debt-free company that focuses primarily on traditional loan products. Licensed in Arizona, Alabama, Arkansas, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,Texas, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.

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