HUD Affirms HFAs’ Ability to Provide Down Payment Assistance with FHA Loans

Yesterday afternoon, Principal Deputy Assistant Secretary for Housing and Head of the Federal Housing Administration (FHA) Ed Golding issued a statement reaffirming that loans that include HFA down payment assistance (DPA) are eligible for FHA insurance. The statement also says that HFA DPA programs are legal and consistent with federal housing law.

The statement is the result of internal deliberations between FHA, OIG, and senior HUD officials. These deliberations began after the HUD Office of Inspector General (OIG) released an Audit Report last summer that found that NOVA Financial Investment Corporation, an Arizona-based mortgage lender, violated FHA policy by originating FHA-insured loans that included DPA grants from two local HFAs that the OIG says utilized “premium pricing” to pay for the grants.

While the OIG report did not specifically target any HFA programs, the precedent it could have set if its findings were accepted would have jeopardized HFAs’ ability to administer self-sustaining DPA programs. NCSHA immediately contacted FHA to express these concerns. After the report was released, Golding released a statement reiterating FHA’s support for HFA DPA programs, and a legal opinion from HUD General Counsel Helen Kanovsky disputed the OIG’s findings and argued that FHA policy “does not restrict the source of the funds used for DPA provided by government entities.”

In the statement, Golding credits HFA DPA programs with helping to support affordable homeownership and neighborhood stabilization. Golding also pledges to work with HFAs and lenders to make DPA programs work even better for borrowers in the future.