October 18, 2007 | Read Time: 1 minute
A decision this month by the U.S. Department of Housing and Urban Development to ban nonprofit housing programs from giving down-payment assistance to home buyers has sparked a federal lawsuit from two nonprofit groups that are looking to preserve the practice.
Ameridream, of Gaithersburg, Md., and Nehemiah Corporation of America, in Sacramento, filed lawsuits at the U.S. district court in Washington to block the HUD rule, which is scheduled to take effect November 1. The housing agency’s rule applies to mortgages that are insured by the Federal Housing Administration.
In its lawsuit, Ameridream says such programs have helped more than a million people buy homes and that roughly 80 percent of those sales were to first-time home buyers.
The ban, Ameridream contends, would hinder the low-income, first-time, and minority home buyers that the federal government is seeking to protect.
The housing agency has said that many transactions that take place through down-payment-assistance programs are nothing more than pass-throughs from the seller to the buyer.
Often, a nonprofit group that provides down-payment assistance to a home buyer receives money from the seller in the form of a charitable contribution. The price of that gift is then built into the sale price of the home.
“In these cases, there is a clear quid pro quo between the home buyer’s purchase of the property and the seller’s ‘contribution’ or payment to the charitable organization,” the federal housing agency said.
