What was the conclusion of the Alex Brill report in 2008?

A report by Alex Brill, CEO of Matrix Global Advisors and a Research Fellow at the American Enterprise Institute, evaluates the prior economic evidence used by the Federal Housing Administration (FHA) to eliminate seller funded downpayment assistance (SF DPA) and provides an new analysis using recent FHA data. Results of the report can be summarized as follow:

• Analyses of downpayment assistance performed by the Government Accountability Office (GAO) and by the Department of Housing and Urban Development (HUD OIG) are flawed and exaggerate the effects of SF DPA on mortgage default and claims.
• New data on FHA-insured loans allows for a new analysis of the question of impact of SF DPA is on the probability of default. Results indicate that the impact is half that claimed by GAO and one-sixth the claims by FHA.
• According to data from HUD, two-fifths of all African Americans who get FHA-insured loans also receive SF DPA. Over one-fourth of all Hispanics with FHA-insured loans receive SF DPA. SF DPA provides more assistance to African-Americans than FHA in general as over 17 percent of SF DPA loans are provided to African Americans while less than 12 percent of loans without SF DPA are provide to African Americans.
• A limitation of this analysis is that it is limited to only the default related costs associated with SF DPA and does not estimate the benefits from increased levels of homeownership among the populations served by SF DPA.

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

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