Doesn't SF-DPA inherently lead to inflated house appraisals?

One of the principal criticisms of seller-financed downpayment assistance (SF-DPA) has been that it leads to inflated appraisals. Such criticism misses the mark as inflated appraisals are a problem for all FHA-insured mortgages and as the recent housing crisis has made apparent, for all mortgage lending. This problem needs to be addressed on a systemic basis, not just for SF-DPA financed mortgages.

Fannie Mae and Freddie Mac have recently published guidelines to protect appraisers from improper pressures to "hit the mark." HUD could readily adopt similar guidelines, either for SFDPA-financed or all FHA mortgage loans. Further, Congress or HUD could impose additional appraisal requirements for SF-DPA financed mortgages if that were deemed necessary. H.R. 600, a bill introduced by Reps. Al Green, Maxine Waters, and Gary Miller, would do just that by providing for civil money penalties for improperly influencing appraisals of properties financed by DPA mortgages.

# # #

For additional information, please contact Shelley Mitchell, smitchell@nehemiahcorp.org, 916-231-1999.

# # #