Putting a Stop to Nonprofit Housing Supports?

The U.S. Dept. of Housing and Urban Development (HUD) has decided to ban nonprofit programs that give down-payment assistance to home buyers. According to a report on the ban, HUD contends that, “the down-payment assistance creates higher default risk on government-insured mortgage loans -- and has the perverse effect of inflating housing prices for the very people it's supposed to help.”

But nonprofit organizations that have been providing down-payment assistance for houses to low-income people disagree, and are suing HUD to reverse its decision. Nehemiah Corporation of America, and Ameridream have filed separate suits to block the HUD rule. Ameridream's suit states that, “By limiting the financing choices that these borrowers have, many will choose other options, such as subprime loans...Since delinquency and foreclosure rates for subprime loans do not compare favorably to those of [the Federal Housing Administration], these choices are not optimal.” For its part, Nehemiah President and Chief Executive Scott Syphax states that the lawsuit is, “…about the principle of fighting for people that no one wanted to take a chance on…The liquidity is gone for low-income people."

There is no question that the housing market is in a mess, largely owed to the subprime lending debacle. But is the solution to the problem eliminating this option for low-income people who otherwise cannot come up with down payments on their own, and whom traditional lenders shun? While home ownership is not a panacea for improving the lives of low income Americans, it can be an important step on the road to financial success, if entered into with appropriate information and understanding, and within reasonable parameters.

Surely banning organizations that help people achieve this important step is not the answer to the subprime lending problem. We’d love to hear from the housing advocates and experts on this issue—how are your communities and organizations dealing with this problem?

Caroline Heine