Court tells Bush administration to rethink down payment aid ban
Posted by: admin in Real Estate and Housing
Filed under: Law, Politics, Housing
Federal Judge Lawrence Karlton has ruled that the Bush Administration must reassess its plan to outlaw a down payment assistance program that is used by more than 100 thousand low and middle-income borrowers. He ruled that the Department of Housing and Urban Development failed to complete a “reasoned analysis” and that agency head Alphonso R. Jackson may not take part in that analysis.
The New York Times reports that “The administration sought to ban the aid, contending the program leads to higher housing prices and a disproportionate number of foreclosures.”
What makes this unique is that the Bush Administration was not seeking to eliminate federal assistance but rather seeking to eliminate private assistance with down payments.
The argument goes something like this: Non-profits giving money to people to finance down payments artificially allows people to get into homes they couldn’t otherwise afford — The ability of a buyer to come up with a down payment one measure that lenders look to for evidence that a borrower is worthy of credit. Home owners allowed to buy homes without having to come up with their own down payment money may be more likely to get into trouble on the mortgage payments. And, as we learned from the subprime mess, allowing people to buy homes they can’t really afford does drive up home prices.
Here’s what makes the Bush Administrations stance hypocritical. If you’re going to ban gifts by non-profits to help people come up with down payment money, shouldn’t you also ban gifts from family members to help with down payments? The principle is exactly the same. Banning loans like those made by Nehemiah Corporation of America, the largest and oldest private down payment assistance provider, but not gifts from relatives gives a leg up to people with wealthy/generous relatives — and penalizes those who weren’t smart enough to make the decision to have rich parents.
In a statement celebrating the Judge’s decision, Nehemiah said that “We are thrilled with the Court’s decision to support low-to-moderate income families across the country by ruling against HUD’s attempt to ban private down payment assistance … This is a major and conclusive judgment, leaving no uncertainty that down payment assistance is a life line to the families that Nehemiah serves …”
I don’t necessarily have a stance on the worthiness of these programs — but it should be consistent. Either people should be able to get help from other people with their down payments … or they shouldn’t.
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