Where are we on Saving DPA

Last year when HR-3221 the Housing Bail Out Bill was passed on July 26th of 2008, it was clear to me that we would see builders go under quickly from this legislation removing the Down Payment Assistance programs. The wording stated that DPA programs ended as of October 1st, 2008. There was fuzzy wording that stated that closings could happen after then as long as written by Sept. 30. However, it stated that any of these carry over loans if the file was opened at any time after Oct. 1st to update credit, change prices, anything, the file would no longer qualify for DPA. Anyone who has ever been around a mortgage for a home under construction knows that there are never files that would go for months and not be opened for something. This effectively ended the program in Sept.

When this came about, I called MIBOR the Metropolitan Indianapolis Board of Realtors, and was told that they were not actively doing anything to get DPAs back or to support Congressman Green's HR-6694 to bring back DPAs. I then called Steve Lains of the Builder's Association of Greater Indianapolis and asked him what they were doing about it, all he wanted to remind me was that my builder that I was working for had quit paying their dues to BAGI so I was no longer a member. My comment to him was, let's talk as two people who both have the best interest of the building industry at heart for a moment. He too told me that BAGI wasn't doing anything, considered it a done deal and was waiting on the national organization to give him the direction to go, but that he personally didn't think it was that big of a deal. My answer to him, after I picked my jaw up off the floor, was two things. One that his builders would sure care, and I told him that he would see several go out of business because of it, and that the city's largest volume builder, C.P. Morgan, would be gone within 6 months due to it. Chuck Morgan had built his entire business model around it, then switched over to sub-prime. Sub-prime had gone away, and left the DPA/FHA option. The good news for the marketplace is that FHA had long ago quit allowing the first year of a buy down to qualify for the loan. This had already taken the high risk part of this loan combination away, leaving a very safe loan and a viable market. With the DPAs gone, there was going to be no way a company the size of Morgan's to reinvent themselves quickly enough to compensate for government taking away the programs that 85% of Morgan's buyer's used to buy their homes. This wasn't rocket science, and I didn't need a crystal ball for that prediction.

From there I started contacting Congressman Burton and Congressman Pence's offices to try to explain our industries time bomb ticking. When they met with us, I pulled together a team of leaders in the Indy area building business, Mike Hunt President of C.P. Morgan, Brent Mosby, their Chief Counsel, David Brenton with Re/Max, Randy Nail President of Residential Mortgage, Mark Etchison the head of Wells Fargo for IN, and IL, and others who came to put in input. This was an outstanding opportunity to educate our representatives as to the impact this legislation would have. Congressman Burton demanded a response from Stephen Preston, the Secretary of HUD, to allow at least an extension to this program until legislation could be corrected. He demanded an answer by Sept. 10th, on that day Preston agreed to terms with Congressman Barney Franks to back HR-6694 if he got to conditions, stiff penalties for manipulating pricing, and a credit scored tier to the mortgage insurance premiums. Both were added in committee.

This bill was added to a big budget bill in December and was expected to pass. However, at the last second, from the podium, Nancy Pelosi removed all rider bills including ours. We are now back to the drawing board, stuck in committee now as HR-600. It is still a good program, and this is a good bill, but is collecting dust at the moment.

At least now you are more or less up to speed.