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The ONLY reason they got in trouble was because of fraudelent applications that lead to foreclosure.
They were overstating the income not the property value.
Remember that a builder can determine the value of their homes. An appraiser is sent out to back up the value of the home. Beazer didnt get into trouble because of the DPA.
The main problem the NC attorney general was looking into was the "stated incomes" as you mentioned.
But Beazer also came out and admitted that it ws in violation of HUD rules on DPA programs. Read their website, they have a news release in October 2007 where they admit they broke the rules all the way back to 2000 in relation to DPA programs.
There was also some recent news on the fines of a few million they were going to have to pay to HUD.
From an article: "The contrast was sharpest with the prices of 28 homes bought with loans insured by the Veterans Administration. The price of homes bought with Beazer FHA loans averaged 6 percent higher per square foot than the VA homes, adjusting for the year of sale."
This was attributed to the fact that with FHA loans, Beazer had more flexibility with the appraiser they hired. There were a lot of "mis-statements" and errors found on the appraisals. So while yes, the appraiser is sent to back up the value of the home... when the appriaser is hired by Beazer Mortgage to back up the value that Beazer Homes wrote in a contract....
The conflict of interest is clear. The both inflated incomes AND appraisals to get loans to close....
I'm curious, how is the amount of gift funds determined?
I have an interesting situation. I've had my eye on a condo that was originally listed at $85000. I had my buyer's agent do comps and found this to be far below the market value- which seems to be between $105k and $110K. But then, after being on the market for over 90 days, the condo was relisted at $95K! The listing agent would only say that this is a bank owned property and that the bank will not accept any offers for less than $95K. This made no sense to me, until I found the property newly listed on the Nehemiah Gift Funds website. So, from what I've been reading here about DPA's, what seems to have happened is some kind of agreement was made between the bank and Nehemiah, the home's price was then marked up in order to work in the amount of funds the bank agreed to contribute to Nehemiah. However, a $10K markup in asking price seems to be way more padding than needed to cover a gift funds percentage! What am I missing here?
(I guess in the end it may not really matter where the money comes from, a house for sale below market price with the seller offering all closing costs plus down payment gift funds seems like a pretty good deal.)
I'm curious, how is the amount of gift funds determined?
So, from what I've been reading here about DPA's, what seems to have happened is some kind of agreement was made between the bank and Nehemiah, the home's price was then marked up in order to work in the amount of funds the bank agreed to contribute to Nehemiah. However, a $10K markup in asking price seems to be way more padding than needed to cover a gift funds percentage! What am I missing here?
(I guess in the end it may not really matter where the money comes from, a house for sale below market price with the seller offering all closing costs plus down payment gift funds seems like a pretty good deal.)
What I've read in Nehemiah's brochure is that, in order for the BUYER to be eligible for the gift from Nehemiah, the SELLER must make a contibution equal to the gift amoutn, PLUS a "small administrative fee."
I'm curious, how is the amount of gift funds determined?
I have an interesting situation. I've had my eye on a condo that was originally listed at $85000. I had my buyer's agent do comps and found this to be far below the market value- which seems to be between $105k and $110K. But then, after being on the market for over 90 days, the condo was relisted at $95K! The listing agent would only say that this is a bank owned property and that the bank will not accept any offers for less than $95K. This made no sense to me, until I found the property newly listed on the Nehemiah Gift Funds website. So, from what I've been reading here about DPA's, what seems to have happened is some kind of agreement was made between the bank and Nehemiah, the home's price was then marked up in order to work in the amount of funds the bank agreed to contribute to Nehemiah. However, a $10K markup in asking price seems to be way more padding than needed to cover a gift funds percentage! What am I missing here?
(I guess in the end it may not really matter where the money comes from, a house for sale below market price with the seller offering all closing costs plus down payment gift funds seems like a pretty good deal.)
This sounds like a short sale that got forclosed on and now the bank is offering down payment assistance. Not necessarily anything shady.
What I've read in Nehemiah's brochure is that, in order for the BUYER to be eligible for the gift from Nehemiah, the SELLER must make a contibution equal to the gift amoutn, PLUS a "small administrative fee."
Correct... theirs is the highest, at $500. I think they do it lower for builders and REOs, some sort of volume discount.
I usually work with Genesis, same thing but $300 fee. Really all the programs work the same. I guess there may be a small difference in the service/paperwork but from the 2-3 providers I have used in ~10 transactions over the years there was no difference.
I'm curious, how is the amount of gift funds determined?
I have an interesting situation. I've had my eye on a condo that was originally listed at $85000. I had my buyer's agent do comps and found this to be far below the market value- which seems to be between $105k and $110K. But then, after being on the market for over 90 days, the condo was relisted at $95K! The listing agent would only say that this is a bank owned property and that the bank will not accept any offers for less than $95K. This made no sense to me, until I found the property newly listed on the Nehemiah Gift Funds website. So, from what I've been reading here about DPA's, what seems to have happened is some kind of agreement was made between the bank and Nehemiah, the home's price was then marked up in order to work in the amount of funds the bank agreed to contribute to Nehemiah. However, a $10K markup in asking price seems to be way more padding than needed to cover a gift funds percentage! What am I missing here?
(I guess in the end it may not really matter where the money comes from, a house for sale below market price with the seller offering all closing costs plus down payment gift funds seems like a pretty good deal.)
The down payment requirement for FHA is 3%, but some other programs have 5-10%. So they might have made it higher to cover for those options.
Also, DPA funds can go to closing costs + down payment. Maybe they are offering enough to cover both of those costs, or maybe they just want to make extra profit by offering DPA as an "added value"
That is what many sellers do and how the DPA program can work for everyone. Just have to make sure the appraisals work and the buyer isnt going in over their head.
The down payment requirement for FHA is 3%, but some other programs have 5-10%. So they might have made it higher to cover for those options.
Also, DPA funds can go to closing costs + down payment. Maybe they are offering enough to cover both of those costs, or maybe they just want to make extra profit by offering DPA as an "added value"
That is what many sellers do and how the DPA program can work for everyone. Just have to make sure the appraisals work and the buyer isnt going in over their head.
Thank you.
Would you also happen to know....if a buyer is interested in purchasing one of these DPA homes, could they still qualify for a 401K "hardship" withdrawal for use towards a down payment? Or can there only be one or the other used as down payment funds?
Would you also happen to know....if a buyer is interested in purchasing one of these DPA homes, could they still qualify for a 401K "hardship" withdrawal for use towards a down payment? Or can there only be one or the other used as down payment funds?
Well, you can only take a 401k loan for the amount you need to close usually. Most of the companies will ask for a letter or GFE of the cash to close.
So if the DPA was covering 3% of the money down buy you wanted to put 10%, you might be able to take out the difference + closing costs. You can not take money out as a "down payment" withdrawal unless it is to be used for that.
The DPA money can be put towards down payment and/or closing costs. If not, you can ask for a reduction in the sales price as well. But you can not take it as cash at closing.
Also, if you can afford the payment without the 401k money inbvolved it might be better for you to just leave it in there?! Mortgage money is pretty cheap right now (even with the recent slight increases) especially given the tax right off. You might come out ahead by leaving your money IN the 401K and borrowing a little more at a low rate w/tax deduction.
Consult a financial advisor of course!
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