No Money Down Mortgages Continue With the Help Of the Government and Charities

MSNBC reports:

You probably thought nothing-down mortgage loans disappeared in the wake of the American subprime lending crisis, which has ensnarled much of the world in a credit crunch.

They didn't. Even more surprising, many Americans can still buy homes with nothing down thanks in large part to the federal government and a legal loophole that lets builders and bankers ensure a steady stream of asset-challenged borrowers for taxpayer-insured loans.

With quietly expanded powers, the Federal Housing Administration is already offering the next-best thing to nothing down on a house: a payment of just 3.0 percent will get practically any American with a pulse and a job a mortgage of up to $729,000, at least until the end of this year.


But for those who lack the wherewithal to put even a little skin in the game, there's a workaround: a not-for-profit organization can give prospective buyers the teensy downpayment. The spigot is wide open. Of the 180,881 loans that the FHA insured in the first half of fiscal 2008, 36.7 percent, or 66,337, were seller-funded. With home builders and sellers desperate to make sales in a slowing real estate market, this percentage is likely to grow.

The FHA has traditionally allowed family and friends to gift a downpayment to homebuyers. In the last 10 years, homebuilders and sellers have gotten into the act by funneling their upfront consideration through down-payment assistance not-for-profits. Technically wiping out a conflict of interest, the charitable outfit collects the cash and hands it over to the mortgage lender taking a bit off the top for all its trouble.

Don't expect Barney Frank(Democrat-Fannie Mae) to hold hearings on this one.Just look who's the mortgage pusher.