With the downturn in the housing market, thousands of families who had previously been shut out of the housing market finally had the opportunity to participate in the home-buying process by utilizing a seller-funded down payment assistance program called The Nehemiah Program.
With spiraling costs at the gas pump as well as higher food prices, the average family would be hard pressed to save the 3 to 6 percent required for a down payment and closing costs.
In cold hard cash, for a $250,000 home they would need approximately $15,000. Nehemiah allows sellers to make a donation equivalent to the buyer’s down payment and or closing cost and in turn The Nehemiah Program would fund that amount to the title company for closing.
This technically violates the U.S. Department of Housing and Urban Development’s regulation regarding seller participation in the down payment.
Although there are other non-profits that provide down payment assistance, many have sales price or income restrictions, thus eliminating many middle-income borrowers.
Another issue is availability. Often times, funds are unavailable due to the demand. Some counties choose not to participate, thus leaving seller-funded programs as the only alternative.
With the Department Housing and Urban Development whispering the “F” word, foreclosure, into the ears of Congress, it has effectively slammed the door on the faces of thousands of potential home buyers. 
The Federal Housing Administration used the current climate of fear to get Congress to effectively close this program down Oct. 1, 2008.
The FHA-insured loans have always had a high risk factor and the provability that the increase in foreclosure is due primarily to seller-funded participation is at the very least questionable.
Currently, 4 percent of homeowners are facing foreclosure nationwide. That means that 96 percent are able to keep their commitments.
If the Federal Housing Administration has such a large percentage of foreclosures, perhaps one should look at their underwriting guidelines, rather than where the down payment came from.
FHA loans were not even a large part of the market during the past few years due to their loan limits and the availability of 100 percent financing elsewhere. 
It has only been recently that the Federal Housing Administration has raised its loan limits and changed its requirements to make it a player in the market once again.
The exotic loans that are responsible for the current rise in foreclosures are conventional loans that cannot be used with a seller-funded down payment program.
The Nehemiah Program (www.nehemiahcorp.org) is one of the most respected programs in the industry. The implications that this program was a “shell game” and that it encouraged sellers to increase sales prices to cover the costs is unfounded.
Statistically, there is no significant evidence that an increase in sales price by 3 percent could increase foreclosure rates. 
An appraisal of like properties determines the legitimacy of a sales price and reflects concessions. It’s up to an underwriter to review the terms before issuing an approval. These guidelines were set by the FHA. 
The recovery and stability of the housing market depends on first-time home buyers being able to enter the market.
Closing down a program which reportedly is involved in nearly 40 percent of all current transactions is not a positive move by Congress.
Lynda Armes has been a mortgage loan originator for 18 years and is branch manager for the largest mortgage banker/broker in the country, Maidu Financial in Lincoln. She is the current president of the greater Sacramento chapter of the California Association of Mortgage Brokers. Armes can be reached at (916) 747-6150.