Quote:

According to documents sent to the buyer and obtained by the Weekly, the asking price on the home was $85,000. But the proposed buyer had bad credit, and the lender wanted a hefty down payment. So the Genesis Foundation, based in Indiana, was brought in to “give” the buyer the $7,200 down payment in return for a $595 fee that was rolled into the loan. In return, the company selling the house gave Genesis a tax-deductible “gift” of equal value and paid Genesis a $750 transaction fee.

It’s illegal for a home seller to give down payment money to a buyer, under federal lending rules. But in this case, the down payment technically came from a charity. In reality, it was just a way to move the money from one pocket to another. The new purchase price for the house was $93,000. So, in the end, the FHA (which requires at least a 3 percent down payment) was backing a higher loan with no real down payment. And instead of an $85,000 loan, the buyer now had a $93,000 loan.

“When these loans don’t get paid, the taxpayers are going to have to cover them,” said Dauphinot, who has been in the business for 30 years. “Everyone likes to portray these foundations as groups that are helping out the poor and getting them into home ownership. But it is all about getting around laws and inflating prices in the market. That house went from $85,000 to $93,000. The borrower now has a bigger loan to cover. That’s not helping the poor.”

The Genesis Foundation gave out nearly $23 million in down payment loans in 2003 (the latest year available on their 501(c)3 charitable foundation tax forms), a geometric increase from just $52,000 in 2000. Illinois-based Partners in Charity gave out $29 million in down payments in 2003. The GAO estimates there are about 50 DAs now operating, and sellers contribute almost all the money — but they get their money back on higher selling prices.

A HUD study of DAs done this year concluded that “allowing these new organizations to flourish has increased the percentage of FHA-insured households with relatively high probabilities of default and foreclosure.” In the process, the report said, credit risks are increased and the transactions contribute to price inflation.

No one at the Genesis Foundation would comment on whether their business contributes to higher home prices or default rates. But Deborah Kroupa, executive director of the Texas United Housing Program, a nonprofit corporation that advocates for moderate- and low-income housing, said she’s appalled that the practice is growing so fast and without government regulation.

“To say these are charity organizations helping the poor is insulting,” Kroupa said. “There needs to be a stop on all this. The FHA is insane for allowing this, because they are allowing 110 percent to be paid for a house by people who cannot afford that. These nonprofits are nothing more than clearinghouses for the lending industry.

“Laws were passed so that buyers couldn’t donate the down payment to a buyer, and then increase the purchase price,” Kroupa continued. “So [the lending industry] came up with a plan to launder the money through nonprofits. They are making megabucks using these nonprofits. HUD needs to see what is happening.

http://www.fwweekly.com/content.asp?arti....

Last modified: 2008-08-25 18:24:34 by etz3l

Last modified: 2008-08-26 06:18:29 by yaldor

Quote:

The new purchase price for the house was $93,000. So, in the end, the FHA (which requires at least a 3 percent down payment) was backing a higher loan with no real down payment. And instead of an $85,000 loan, the buyer now had a $93,000 loan.

Quote:

I think there is some trouble with the economy. :>

Quote:

This is simply fraud and the institutions and people involved - all of them - need to be indicted.

Last modified: 2008-08-26 11:43:52 by do_the_math

Quote:

All realtors are in on this scam.

Quote:

What DPA company was involved with your sale?