State housing finance agencies' down payment assistance running dry
(October 31, 2008) -- BusinessWeek Magazine reported yesterday that state housing finance agencies are having trouble issuing the bonds they have used in the past to help home buyers with down payment assistance and mortgages. The magazine reported that West Virginia, Ohio, Wisconsin and California have all suspended all or part of their mortgage and down payment assistance programs financed through bond issues -- leaving HUD's $100 down payment program as the easiest way remaining to buy a home without thousands of dollars in down payment money.
The global credit crunch originally began with problems arising from mortgage-backed securities. Institutional investors have been hurt badly by these underperforming instruments and have little or no appetite for new bonds backed by mortgages.
Housing finance agencies' loans are considered by many to be of higher quality than many low down payment loans, since buyers have to take classes in home finance in order to get their loans. This counseling helps them to understand their obligations in a mortgage and how that piece fits in their overall financial picture, and is provided by someone who will not earn a commission if the buyer completes the home purchase.