Nonprofit-Brokered Mortgages Led to Billions in Defaults

Mortgages arranged by nonprofit groups using funds from home builders have defaulted at triple the rate of other Federal Housing Administration-backed loans and helped trigger the housing crisis, according to a Huffington Post investigation.

Nonprofit housing organizations arranged more than a million such loans in the past decade, working with the mortgage divisions of housing firms. Those companies made donations to the nonprofit groups to cover down payments for families that did not have sufficient funds of their own.

Nearly 40 percent of such loans went through two groups, Nehemiah Corporation of America — which pioneered the idea of builder-funded down payments in the 1990s – and AmeriDream Inc. Defaults on mortgages brokered by the two groups, which collected tens of millions of dollars in fees on the deals, exceed $3-billion, costing the Federal Housing Administration’s insurance fund $1-billion.

Last year Congress ordered the federal agency to stop backing such loans.