Received an e-mail from one my lenders yesterday detailing the wind-downs several large lenders are implementing for the end of Ameridream and other seller-assisted down payment (DPA) programs.

Chase, Franklin American, Citibank, Wells Fargo, US Bank and others are following roughly similar timelines:

• No rate locks on DPA loans after August 22.
• Loans in the pipeline must go to underwriting by September 12.
• Funding must take place by September 30 (the Congress’ rule, not theirs.)

At the same time, the effort to save the DPAs continues to roll forward with H.R. 6694. And this video’s now making the rounds detailing HUD’s amazing testimony on the “Housing and Economic Recovery Act?” Gee, why regulate the system when you can eliminate a program and keep thousands of would-be buyers out of the market (even as a $7,500 loan - not credit - is offered in the same legislation.)

Next week I’ll have my third Ameridream closing in the past 10 months. Good folks, all. All able to make their payments. All simply lacking the savings to pay for their own down payment. And none would be able to purchase October 1 thanks to the unique solution of amputating an arm to cure a tumor in the leg.

Brilliance.

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Just received a note from one of the lenders that I work with on a regular basis. It appears there may be life for seller-assisted down payment programs such as Ameridream after all.

A cynical person would ask why the bill was passed with the provision killing off these programs in the first place, but that’s another story for another time.

From Ameridream …

Last night, Congress introduced bipartisan legislation, H.R. 6694 that would reauthorize and reform charitable downpayment assistance. This bill would remedy a harmful provision in the new housing law which limits homeownership opportunities for low and middle-income Americans. The legislation, sponsored by U.S. Reps. Al Green (D-TX), Gary Miller (R-CA), Maxine Waters (D-CA), and Christopher Shays (R-CT) reauthorizes and reforms charitable downpayment assistance funded in part by sellers, which has helped over one million families and individuals become homeowners since 1999. The program was eliminated by legislation signed by President Bush on July 30, 2008.

The Green-Miller-Waters-Shays plan would re-authorize and reform non-profit downpayment assistance and secure it as an allowable source for FHA borrowers. The bill seeks to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest. The bill also includes language to ensure that FHA maintains its financial stability by permanently authorizing the Secretary to assess higher premiums to higher risk borrowers.

It is important that you contact your elected officials in Congress and tell them that you support downpayment assistance and urge them to support H. R. 6694. To reach your elected officials, please call the US Capitol Switchboard at 202.224.3121.

You also can read more at SupportHomeOwnership.com.

Let’s see if House Speaker Nancy Pelosi will leave the lights on for this bill or if Congress really is willing to leave a pool of viable homebuyers in the dark.

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President Bush signed H.R. 3221, otherwise known as the Housing Stimulus Bill, into law. NAR is rather excited about the bill … but I’m not so sure.

One of the more talked-about provisions is the $7,500 tax credit for homebuyers … except it’s not really a pure tax credit. Rather, it’s essentially a 10-year tax-free loan available only on qualifying purchases (foreclosed or “recently built” homes) and available only to qualifying buyers (like anything tax related, there are some income limits built into the process.)

I guess the mere fact that the credit is less robust than first suggested leaves me less sanguin than I was yesterday at the thought of incentives only being offered on the purchase of foreclosed homes. The last thing your average home owner needs is for there to be additional incentive for buyers to ignore their homes for sale in favor of a bank-owned “deal.” (Note to Congress, et al: REOs are selling at a much faster rate than the rest of the real estate market.)

Another provision in the bill does away with down-payment assistance programs such as Ameridream and Nehemiah. Through these programs, sellers could help buyers with their down payments in addition to closing costs by making a contribution to the non-profit (with a nominal processing fee attached.) As of October 1, those go away.

I understand the concern about the percentage of FHA purchases being made through these programs, or at least I try to. For the most part, people qualifying for FHA loans legitimately are qualified to buy. You’re not seeing the shell games played with an FHA loan that you saw with sub-prime loans.

The only thing these buyers lack is sufficient money for a down payment. Having been in that situation myself, I can empathize with their plight … they have the credit, they can afford the payment and all they need is a helping hand to get them into their home.

Now that opportunity is gone (or will be shortly) in favor of tax credits that do next to nothing when all is said and done.

NAR can celebrate the “victory.” Me? I’ll take a pass.

Others opine:

• Livingston Living Online
• Bargaineering.com - the Housing Stimulus Bill Explained
• Steve Hoffacker - Housing Stimulus Package - NOT
• Dr. Housing Bubble - Crony Capitalism for Dummies

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Appraisals on real estate, at least appraisals tied to a purchase or a refinance, are an evaluation of the risk the lender is willing to take and are made to justify (or not justify) the asking price.

Appraisals are not measures of a property’s inherent value. For proof, look no further than the appraisers’ need for the current purchase contract.

If the appraiser was trying to determine the true value of a property, would the price to which the two parties agreed really matter? Of course not. Comparable properties would be reviewed, formulas formulated and the final number would be presented - whether it related to sales price would be irrelevant, at least to the appraiser.

But that’s not how it works. Appraisers always ask for the sales contract when putting together an appraisal. Why? Because that’s the number they’re trying to justify if at all possible. That’s the only number the lender cares about - is the house worth at least that much or is it not?

Remember those geometry proofs we all were tortured with in high school?

Completing an appraisal while holding the purchase contract is like one of those proofs - you’re not looking for an answer, you’re looking for the theorems that prove the answer.

It’s the difference between proving the Pythagorean theorem and being Pythagorus, creating the theorem in the first place.

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One of the more entertaining notes to appear in the Arizonal Regional MLS of late is the requirement on Countrywide-owned REO properties that the buyer be prequalified by Countrywide before an offer will be considered.

The buyer can use any lender they choose for the loan, but Countrywide wants to make sure they can prequalify them before the offer is viewed.

Considering Tobey probably could have been prequalified by Countrywide back in the day and considering Countrywide’s significant role in the mortgage meltdown, how much is that prequalification really worth? Does it tell anyone anything?

Countrywide also is home to one of most comprehensive (to the point of being onerous) REO as-is addendums around. Read it closely enough and you get the sense Countrywide is offended that a buyer might want to inspect the home they’re about to purchase.

Then again, Countrywide’s true colors have been emerging of late … in case you missed last week’s e-mail fiasco involving CEO Angelo Mozilo, check it out here.

Mozilo’s millions of dollars in bonuses, though, for operating a mortgage mill with no conscience? No, that’s not disgusting at all.

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