Dream On: Shut Down Imminent For Nehemiah Program

Oakdale, CA — September 3, 2008
By: Kim Van Meter, Oakdale (CA) Leader

Although industry analysts have said that first-time homebuyers will be the ones to stabilize the faltering home market, President Bush has just made it even more difficult for those people to own their first home by shutting down the Nehemiah program.

Effective in October, those looking to use the down payment assistance program will have to find other means to make their dreams of home ownership come true if they don't have the 3.5 percent of the purchase price to offer as down payment.

A statement released July 30, by Scott Syphax, president and CEO of The Nehemiah Corporation of America in response to the president's actions stated, "As he signed the housing bill into law this morning, President Bush conceded with Congress that hard working Americans who have not been able to save a down payment are not worthy of homeownership. We hope that Congress and President Bush wake up with a clear conscious tomorrow, knowing that millions of Americans will awake to a law that leaves them with zero alternatives for attaining homeownership. Nehemiah has fought to keep seller-funded down payment assistance (SF-DPA) programs alive, recognizing that along with the rest of the industry, we have helped put more than one million deserving American families in homes."

Syphax goes on to quote research gleaned by Zelman & Associates that reports 10 to 25 percent of potential homebuyers will have no way of securing homeownership without SF-DPA. He continued, saying, "Which will also undoubtedly have far-reaching implications for the real estate industry at large. In the wake of the Housing Bill, we at Nehemiah want to send a clear message: Nehemiah will continue to serve as a catalyst for economic empowerment and wealth creation through homeownership. We will continue to fight for the rights of potential homeowners across this country. We are willing to use every resource at our disposal to reinstate seller-funded down payment assistance by taking the fight back to the current Administration, or taking it to the next Administration if need be."

This take charge attitude and fighting spirit has resulted in a new website geared toward saving the doomed program by creating a letter and email writing campaign in the hopes of inspiring local political officials to do something about this situation.

The website, www.DPAGroundSwell.org, is a web-based community established to mobilize the growing industry opposition to the Oct. 1 ban on seller-funded down payment assistance.

According to the website, nearly 40 percent of all FHA loans are originated with DPA.

These Federal Housing Administration loans are not sub-prime. Without DPA programs, an estimated 50,000 families per month will be locked out of homeownership.

Casey Knowles, a PMZ senior loan officer who's been in the business for eight years, said even though the program is scheduled to end in October, most banks have already stopped offering the program.

"It's definitely going away quickly," Knowles said. "I don't think it's going to come back. I'd be happy if it came back but I doubt it."

For those in the housing industry, particularly loan officers and real estate agents, the Nehemiah program was one of many tools utilized to put people in homes but the government is contending that some of those people who achieved home ownership never should've qualified in the first place.

"The program has done a lot of good for a lot of people. I love it. It helps me get a lot of people into houses but it's pretty easy to walk away when you have no money put into it. If you put three percent into your house you're more likely to make the mortgage payment," Knowles said.

But even as the Nehemiah program is likely going down the tubes, Knowles was quick to point out that there are other programs out there, although some have restrictions on who can qualify.

One program that's been around for a long time but people have forgotten about is the Guaranteed Rural Housing program offered by the U.S. Department of Agriculture.

"Although it has population restrictions, the city you buy in can't have a population over 20,000, this is a program Oakdale actually qualifies for. You just need reasonably good credit, similar to the guidelines set forth for CalHFA," Knowles said.

Another option is the VA loan for those who have served in the armed forces, Knowles added.

But even as it is likely new programs will crop up for niche qualifiers, the impact on the housing market will likely spell bad news for sellers as less buyers mean less competition, which in turn, drives market prices down.

"It's definitely going to affect home prices," Knowles said. "The market needs to stabilize. I think we're very close to the bottom. The entry-level homes can be rented out for the same amount as the mortgage. We haven't been in the market where the cash flows for a very long time. I think we're going to see more investor purchases in the near future."

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

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