Down Payment Programs Not a Scam, FHA to Tell Watchdog

The Federal Housing Administration is expected to rebuff a government watchdog report that criticized down payment assistance programs, questioning why low-income borrowers are charged nominally higher mortgage rates for such programs.

The Department of Housing and Urban Development’s Office of Inspector General took issue in a report earlier this month with the so-called “premium pricing” of two down payment assistance programs in Arizona.

The watchdog alleged that NOVA Financial & Investment, a Tucson, Ariz.-based mortgage lender, violated HUD rules by charging borrowers nominally higher mortgage rates in return for assistance. It also alleged the lender failed to conduct due diligence on the non-profit government housing finance agencies that administer the down payment assistance programs and wants the lender to repay $48.5 million for 709 loans.

“The gifts were not true gifts as defined by HUD,” the report said. “To be considered a gift…there must be no expected or implied repayment of the funds to the donor by the borrower.”

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Rachel Dollar

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