I knew about most of what they talked about in that article but I didn’t know that they were still allowing the “not for profit organizations” to gift the 3% down payment.
From the article:
“But for those who lack the wherewithal to put even a little skin in the game, there’s a workaround: a not-for-profit organization can give prospective buyers the teensy downpayment. The spigot is wide open. Of the 180,881 loans that the FHA insured in the first half of fiscal 2008, 36.7 percent, or 66,337, were seller-funded. With home builders and sellers desperate to make sales in a slowing real estate market, this percentage is likely to grow.”
This is simply going to cause a repeat of the mess that the housing industry is presently in. It has been demonstrated for many, many years by banks and companies who fund loans for big-ticket items to people who do not put a down payment on the product will quickly see a very large number of the borrowers default within the first one to two years. Anyone who has ever been involved in retail management of big-ticket, retail products learns this when they make the mistake of giving credit to people who can’t afford a down payment.
