U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

37–562 PDF 2007

HOMEOWNER DOWNPAYMENT ASSISTANCE

PROGRAMS AND RELATED ISSUES

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND COMMUNITY OPPORTUNITY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JUNE 22, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–45

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

ALBIO SIRES, New Jersey 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

THADDEUS G. McCOTTER, Michigan

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY

MAXINE WATERS, California, Chairwoman

NYDIA M. VELA ́ ZQUEZ, New York 

JULIA CARSON, Indiana 

STEPHEN F. LYNCH, Massachusetts 

EMANUEL CLEAVER, Missouri 

AL GREEN, Texas 

WM. LACY CLAY, Missouri 

CAROLYN B. MALONEY, New York 

GWEN MOORE, Wisconsin, 

ALBIO SIRES, New Jersey 

KEITH ELLISON, Minnesota 

CHARLES A. WILSON, Ohio 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

BARNEY FRANK, Massachusetts 

JUDY BIGGERT, Illinois 

STEVAN PEARCE, New Mexico 

PETER T. KING, New York 

PAUL E. GILLMOR, Ohio 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

GEOFF DAVIS, Kentucky 

JOHN CAMPBELL, California 

THADDEUS G. McCOTTER, Michigan 

(V)

C O N T E N T S 

Page 

Hearing held on: 

June 22, 2007 .................................................................................................... 1

Appendix: 

June 22, 2007 .................................................................................................... 39

WITNESSES 

FRIDAY, JUNE 22, 2007

Ashburn, Ann, President and CEO, Ameridream, Inc. ........................................ 28

Burns, Margaret, Director, Office of Single Family Housing Program Development, Federal Housing Administration .............................................................. 8

Fuller, Dr. Steven S., Center for Regional Analysis, George Mason University 

School of Public Policy ......................................................................................... 33

Heist, James A., Assistant Inspector General for Audits, Office of the Inspector General, U.S. Department of Housing and Urban Development ............... 9

Osta, John F., Vice President, Gallinger Realty USA .......................................... 32

Queen, Beverly, Homeowner ................................................................................... 34

Richardson, Todd, Vice President of Legal Affairs, C.P. Morgan ........................ 32

Shear, William B., Director, Financial Markets and Community Investment, 

U.S. Government Accountability Office .............................................................. 11

Syphax, Scott C., President and CEO, Nehemiah Corporation of America ........ 30

APPENDIX 

Prepared statements: 

Carson, Hon. Julia ............................................................................................ 40

Maloney, Hon. Carolyn B. ................................................................................ 41

Ashburn, Ann .................................................................................................... 43

Burns, Margaret ............................................................................................... 54

Fuller, Dr. Steven S. ........................................................................................ 57

Heist, James A. ................................................................................................. 62

Osta, John F. .................................................................................................... 70

Queen, Beverly .................................................................................................. 73

Richardson, Todd .............................................................................................. 76

Shear, William B. ............................................................................................. 82

Syphax, Scott C. ............................................................................................... 100

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Waters, Hon. Maxine: 

Statement of the American Enterprise Institute ........................................... 114

Statement of the National Association of Realtors ........................................ 120

Miller, Hon. Gary: 

Bloomberg News article dated June 5, 2007 .................................................. 124

(1)

HOMEOWNER DOWNPAYMENT ASSISTANCE 

PROGRAMS AND RELATED ISSUES 

Friday, June 22, 2007

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HOUSING AND

COMMUNITY OPPORTUNITY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:10 a.m., in room 

2128, Rayburn House Office Building, Hon. Maxine Waters [chairwoman of the subcommittee] presiding. 

Present: Representatives Waters, Velazquez, Cleaver, Green, 

Maloney, Sires, Ellison, Wilson; Biggert, Miller, and Neugebauer. 

Also present: Representative Scott of Georgia. 

Chairwoman WATERS. This hearing of the Subcommittee on 

Housing and Community Opportunity will come to order. 

The Chair asks unanimous consent that Mr. David Scott, the 

gentleman from Georgia, and a member of the Committee on Financial Services, but not of this subcommittee, be allowed to participate in today’s hearing by delivering an opening statement and 

asking questions of the witnesses. 

Without objection, it is so ordered. 

Ladies and gentlemen, I would like to thank the ranking member, Mrs. Judy Biggert, and members of the Subcommittee on 

Housing and Community Opportunity for joining me today in this 

hearing entitled, ‘‘Homeowner Downpayment Assistance Programs 

and Related Issues.’’ Without objection, all members’ opening statements will be made a part of the record. 

The downpayment assistance programs have been the basis for 

audit reports by the HUD Inspector General as well as by the Government Accountability Office study issued in 2005. On May 11, 

2007, HUD issued a proposed rule related to downpayment assistance programs that mimics a rule issued in September 1999 that 

was not finalized. Further, the Internal Revenue Service issued a 

ruling last year related to downpayment assistance programs and 

charitable organizations. 

I have not taken a position on downpayment assistance programs. The purpose of today’s hearing is to address public interest 

on this issue and to answer questions surrounding downpayment 

assistance programs that are offered in communities all over the 

country. While the proposed HUD rule published on May 11, 2007, 

changes the tenor and level of interest on the issue of downpayment assistance, I and other members of the subcommittee have 

questions about downpayment assistance programs. 

2

Many of us have heard about the existence of downpayment assistance programs. Many of us have heard not only about the programs, but about the existence of downpayment assistance programs and our low/moderate income constituents’ reliance on some 

form of downpayment assistance to purchase a home. Others claim 

that this type of assistance has led to defaults because of inflated 

sales prices tied to homes. 

The Nehemiah Corporation of America, represented here today, 

happens to have been the first major, nationally recognized provider of downpayment assistance programs. As far back as 1997, 

Nehemiah Corporation began providing downpayment assistance to 

homeowners. In fact, according to some estimates, downpayment 

assistance is so prevalent in real estate transactions that between 

2000 and 2005, 680,000 home buyers were supported by a gift from 

downpayment assistance providers. Interestingly, the Federal 

Housing Administration has routinely allowed downpayment assistance programs in support of its R203(b) program, and estimates 

indicate that from 30 percent to 40 percent of FHA mortgages have 

been supported by downpayment assistance. 

In 2003, legislative proposals were introduced in Congress to provide downpayment assistance grants to as many as 40,000 homeowners under the American Dream Downpayment Act. In addition, 

there is a provision in H.R. 1852, the Expanding American Homeownership Act of 2007—which I sponsored and the Committee on 

Financial Services passed—that provides for zero downpayments 

for first-time home buyers. 

While downpayment assistance programs are not new, they have 

not escaped some controversy. Under the typical downpayment assistance program, a low- to moderate-income person or family is 

provided downpayment assistance as a gift toward the purchase of 

a home. The gift must not be a quid pro quo. The seller cannot provide funds to an organization. In providing downpayment assistance in exchange for downpayment assistance to the buyer, in essence, the nonprofit organization cannot be reimbursed for the 

downpayment assistance. 

Sellers, buyers, builders, and other parties with an interest in 

the transaction are also prohibited from providing downpayment 

assistance to the home buyer. The homeowner does not repay the 

gift. Downpayment assistance programs that meet these requirements appear to be legal. Downpayment assistance programs that 

circumvent these programs appear not to be legal. 

In an effort to further develop the public record on this issue, I 

have asked today’s witnesses to answer several questions. As such, 

I look forward to hearing the witnesses’ testimony on the issue of 

homeowner downpayment assistance programs. 

Now I would like to recognize our ranking member, Mrs. Biggert, 

for 5 minutes for her opening statement. 

Mrs. BIGGERT. Thank you, Madam Chairwoman, and thank you 

for holding this hearing today on the use of downpayment assistance in FHA-backed mortgages. I will keep my remarks brief, as 

I know we have three panels of witnesses to hear from this morning. But before I begin, I would like to say, ‘‘Happy Homeownership 

Month,’’ to everyone; June is National Homeownership Month. 

3

I must disclose that in my former life I was a real estate attorney, and I learned, I think firsthand, about the difficulty that firsttime home buyers have had with presenting that downpayment 

check. However, I also saw firsthand the joy that homeowners had 

once they were handed the keys to their new homes; it was their 

piece of the American dream. 

This month, I have heard from a dozen of my constituents about 

the benefits of downpayment assistance, and quoting one of their 

letters, ‘‘Helping people become homeowners adds to the tax base, 

improves communities, helps children to do better in school, and 

helps people gain wealth through the equity in their homes. Home 

equity is a family’s biggest asset and is often used to fund school 

tuition and retirement. Homeownership should be encouraged for 

all.’’ I could not agree more. 

To overcome a barrier to homeownership for many low- and middle-income Americans, privately funded downpayment assistance 

programs began surfacing in the 1990’s. In 2003, this committee 

worked on legislation that resulted in a law which created the 

American Dream Downpayment Initiative, ADDI. I would also like 

to note that both my FHA modernization bill and the chairwoman’s 

FHA modernization bill contain a provision that authorizes FHA to 

offer zero downpayment insured loans. 

As a result of downpayment assistance, more Americans are becoming homeowners. Today, over 70 percent of Americans own a 

home. Administered as part of HUD’s Home Investment Partnerships Program, ADDI has helped thousands of Americans overcome 

the downpayment hurdle and has helped them to secure a home. 

I hope that we can discuss the downpayment assistance, ADDI, 

as part of the dialogue. The program has been administered in my 

district to a small extent, but particularly in my neighbor to the 

east, the City of Chicago, and its surrounding counties. 

We are here today to discuss the private sector’s role in helping 

Americans achieve the dream of homeownership, and I would first 

like to thank our witnesses today whose organizations have provided hundreds of my constituents with downpayment assistance, 

have helped them secure a mortgage, and have enabled them to 

own and stay in a home. 

I understand there is some concern about the downpayment assistance industry, or perhaps some bad actors in this industry, and 

downpayment assistance entities have been highly scrutinized by 

HUD, by the IRS, and by GAO in recent years. I understand that 

FHA data indicates that over one-third of homeowners receiving 

downpayment assistance have low FICO scores and high delinquency rates. 

In addition, my office has learned from a variety of sources in 

Washington and in Illinois that downpayment assistance may contribute to an inflated house price, resulting in a seller’s seeing 

more benefits than a buyer. I hope that we can address some of 

these issues during today’s hearing. 

Again, I thank the chairwoman for holding this important hearing, and I yield back the balance of my time. 

We must also be thinking about the environment because I see 

that there is an awful lot of green up here. 

Chairwoman WATERS. Thank you very much. 

4

I would like to recognize Mr. Cleaver for 5 minutes. 

Mr. CLEAVER. Thank you, Madam Chairwoman. I will hold my 

opening comments in the interest of time. Thank you. 

Chairwoman WATERS. Excuse me, Mr. Cleaver. Before you get 

started, I have been advised that a vote has been called, and we 

only have 7 minutes left on the vote. Let me beg your indulgence. 

Please do not start your opening statement. 

I would like to ask our witnesses to, if you can, remain here until 

we return. We have votes on the Floor. It should not be too long. 

How many votes do we have on the Floor? We have two votes on 

the Floor, so we should return in about 15 to 20 minutes. Thank 

you very much. 

[Recess] 

Chairwoman WATERS. Thank you very much, ladies and gentlemen. 

Mr. Cleaver had started on his opening statement, but he has 

not returned yet, and so I am going to recognize the gentleman 

from California, Mr. Gary Miller, for a 5-minute opening statement. 

Mr. MILLER. Thank you, Madam Chairwoman. 

This hearing, I think, is absolutely appropriate. Since I have 

been in Congress, one of the important endeavors I have taken on 

is the creation of homeownership; and one of the keys to personal 

wealth in this country is individuals being able to own a home, and 

the prices as they inflate over the years create equity for individuals who otherwise do not have that opportunity. It is one of the 

main drivers of the economy in this country. 

One of the main barriers in achieving the dream of homeownership, in any case, is the lack of accumulated wealth and disposable 

income. Rents are skyrocketing in this country. By the time people 

pay their rent and they pay for their food and they pay for their 

health care, there is really no money left for a downpayment, and 

that is one of the problems we have seen in this country. Over the 

years, some nonprofit organizations have developed programs to 

provide downpayments to qualifying families. Such programs target 

individuals and families who lack the necessary funds for a downpayment and other related costs, but who can afford the monthly 

payment, and they become homeowners. These downpayment assistance programs have proven successful in providing homeowner 

opportunities to low- and moderate-income families. These programs will allow families to enter homeownership years earlier 

than if they had to save the money the traditional way and acquire 

the downpayment on their own. 

HUD has permitted the use of these programs in conjunction 

with the FHA-insured loan programs. In fact, in 1998, HUD’s Office of General Counsel found that funds paid to homeowners from 

a seller-funded nonprofit were not in conflict with FHA’s guidelines 

that profit from further downpayment for assistance to sellers. Regulatory changes have been proposed by HUD that would basically 

eliminate the programs that we have here today, and I guess one 

of the problems I am having with this is—I have read a lot of information. In fact, I have read a lot of correspondence from HUD to 

some of these nonprofits back to 1999 that when some of the nonprofits were asking to be regulated in certain fashions, HUD was 

5

saying, no, they did not think that was appropriate or necessary at 

the time. 

For a lot of the time we spend on this committee, we talk about 

homeownership. That is our focus, and we deal a lot with PHAs 

and government housing, and we get people out of government 

housing, people who are in Section 8. And we have come up with 

new programs to move people out of government housing, out of 

Section 8, so that we can bring more people in who need assistance. 

In fact, in 2003, we came up with the American Dream Downpayment Assistance Act where government comes in and provides 

downpayment assistance. 

Now, the problem I am having with this is that if it is okay for 

government, why is it not okay for the private sector? If underwriting is a problem, let us fix the problem. If we are concerned 

about appraisals, let us fix the appraisals. 

We have programs here that basically, from the information I 

have read, 85 percent of these loans are made to individuals who 

do not have any money for a downpayment. So these are not people 

who have a lot of disposable income. These are people who can afford to pay their rent, who are working hard in life, and they have 

an income, but they just do not have money to pay the closing costs 

and the downpayment. 

If 85 percent are performing, the last time I was in school, 85 

percent was pretty good. If I look at the subprime market today 

and the problems we are having in the subprime, they are far 

worse than what we are facing in this program, and we have 

worked really hard to come up with a new proposal for FHA for 

zero downpayment. 

Now, that comes with oversight, with guidelines, with requirements, and restrictions, that have to be put in place to do that. 

Why can’t we do it here? Instead of throwing the baby out with the 

bath water, like we seem to be doing here, we are just closing our 

eyes and turning our head and saying, ‘‘Well, we are just going to 

eliminate the program,’’ and it is a program that when you figure 

the percentage of FHA loans that are made to a buyer Downpayment Assistance Program there are a whole lot of people in this 

country in homes who would not be in a home today; they would 

still be out renting some home that maybe somebody who came off 

of Section 8 might need to rent, thereby creating a situation where 

there are no available rental homes. People are moving into homes, 

and if they are moving into homes, 85 percent of these people have 

acquired wealth who did not have wealth before. 

I remember touring one of these nonprofits in 2000, and there 

were probably 40 to 45 women working in this nonprofit, and as 

I went through this place and talked to people—can I have an additional 1 minute, being as there is nobody on our side to speak? 

Chairwoman WATERS. You may have an additional 25 seconds. 

Mr. MILLER. 25 seconds. 

Every one of these women had been on welfare, and every one 

of these women owned a home. The majority of the loans made 

from this Downpayment Assistance Program were to minorities. 

These people had a dream of owning a home, but no opportunity. 

It seems like we can do better than just saying ‘‘no.’’ If there are 

problems, let us address the problems. If there are requirements, 

6

let us impose the requirements, but let us not just throw a program 

out that obviously is benefiting hundreds of thousands of low-income people who otherwise would never have an opportunity to 

own a home. 

And I will have to talk later when I have a chance for questions. 

Thank you. I yield back. 

Chairwoman WATERS. Thank you very much. 

Mr. Cleaver for 5 minutes. 

Mr. CLEAVER. Madam Chairwoman, I think I will forgo a statement in the interest of time. 

Chairwoman WATERS. Thank you very much. 

Mr. Green for 5 minutes. 

Mr. GREEN. Thank you, Madam Chairwoman, and I thank the 

ranking member as well. Madam Chairwoman, I thank you for 

framing this issue for us. I also would like to thank Mr. Miller because I think that he has stated quite well some of the concerns 

that I desire to express. 

I do want to say, however, that we know that there are many 

persons who will inherit a legacy of poverty. They will not have the 

same opportunities that many others will have, but they do have 

the same hopes, the same dreams, and the same aspirations. I commend the organizations and institutions that have worked to assist 

them in fulfilling the American dream of homeownership. 

Homeownership does more than provide shelter. It causes persons to be in neighborhoods where they develop special relationships, where they have a greater degree of safety. The asset, itself, 

can be utilized for education. Many people start their first business 

with the equity in their home. It just means so much to give people 

the leg up out of poverty. 

So, as Mr. Miller has said, Congressman Miller, we should not 

end this program. We should amend it and make it work. We 

should not eliminate it. We can regulate it appropriately and make 

it work. We should show some degree of patience and understanding when it comes to the least, the last, and the lost, the persons who do not find themselves in the same station of life that 

most of the people in this room happen to enjoy. 

So I am honored that the Chair has assembled these spokespersons this morning to give us the intelligence that we need to 

preserve this program. There may be some who will differ with me, 

but I think, in the final analysis, most people in this country would 

like to see persons have the opportunity to own a home, notwithstanding the station in life that they are born into. 

I yield back the balance of my time. 

Chairwoman WATERS. Thank you very much. 

Mr. Sires, would you like to have an opening statement for 5 

minutes? 

Mr. SIRES. Yes. 

Thank you, Madam Chairwoman, for having such, what I consider to be, very important hearings. 

I have been a mayor of a municipality where, of 73 percent of the 

student body, their families fell below the poverty level. It is very 

hard for those people, without any kind of assistance, to own a 

home. 

7

I have seen this program where it has helped boost those families whom we were able to help, and I cannot think that such programs will be eliminated for these people. When we are spending 

money abroad on all sorts of things, I think this is one of the things 

that we have to focus on at home—giving people the opportunity 

to own, to feel good. It just changes the whole family structure 

when people have a place that they can be proud of. 

I am surely a strong supporter. I know the chairwoman is, and 

the members here, and I am looking forward to seeing how we can 

make this program work better. This is taking these people who 

are really in need and bringing them to another level, and if I can 

assist a little bit, that is something that I will be very proud of 

doing for the rest of my life. 

So thank you very much, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. 

The gentleman from Georgia, Mr. Scott. 

Mr. SCOTT. Thank you, Madam Chairwoman, and I really appreciate your kindness and generosity in allowing me to participate in 

this subcommittee meeting on such an important issue and timely 

issue as downpayment assistance. 

Owning a home is so central to the American way of life. It is 

so essential to a person or to a family in having a sense of selfworth. It is that instrument that helps start the cinder blocks for 

building wealth, for having dignity, and we need to keep it. We 

need to find ways to keep this, not of trying to find reasons or rationales for dismantling it. 

We need to keep this. We need to do more to make sure that we 

are reaching out to the people who need it and who need it the 

most. Downpayment assistance has helped those who may not have 

originally qualified for a home loan. It is so important, and it creates that instant equity for the homeowner. 

I am particularly interested in hearing from the witnesses on 

findings from the 2005 study conducted by the GAO in which outcomes of FHA loans with downpayment assistance programs were 

compared with those loans that were originated without this assistance. I understand that the GAO and certain nonprofit housing organizations have differing views on the outcome of this report. That 

is so essential, and I think it is important for this committee to 

hear from both sides on this issue. 

In addition, we are all concerned about our constituents and the 

rising foreclosure rates throughout the country, especially in Georgia and especially in the Atlanta metro area, which leads the Nation. So I will be pleased to hear your thoughts on the relationship 

and role, if any, between downpayment assistance and the 

subprime market. 

These programs have worked. They have been popular. They 

have been successful. I think that when we look at situations, there 

is no way we can look at perfection, because none of us is perfect. 

The world is not perfect. What we can look at and continually 

strive for is the goodness and decency in man. Nowhere is that 

more applicable than in making sure that this Downpayment Assistance Program continues and is strengthened. 

Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. 

8

Having exhausted all of the opening statements, we will move to 

our first panel. I would like to welcome you to this committee hearing, and thank you for your patience. 

On Panel one, we have: 

Ms. Margaret Burns, Director of the Office of Single Family 

Housing Program Development, Federal Housing Administration; 

Mr. James Heist, Assistant Inspector General for Audits, Office 

of the Inspector General, U.S. Department of Housing and Urban 

Development; and 

Mr. Bill Shear, Director of the Financial Markets and Community Investment team, U.S. Government Accountability Office. 

I want to welcome each of you, and thank you for appearing before the subcommittee today. Without objection, your written statements will be made part of the record. Each of you will now be recognized for a 5-minute summary of your testimony, and we will 

begin with Ms. Burns. 

STATEMENT OF MARGARET BURNS, DIRECTOR, OFFICE OF 

SINGLE FAMILY HOUSING PROGRAM DEVELOPMENT, FEDERAL HOUSING ADMINISTRATION 

Ms. BURNS. Chairwoman Waters, Ranking Member Biggert, and 

members of the subcommittee, thank you for inviting HUD to participate in this hearing. My name is Meg Burns, and I am the Director of Single Family Program Development for the Federal 

Housing Administration. 

I appear today representing FHA Commissioner Brian Montgomery, who sends his regrets that he is unable to attend. I have 

been asked to testify on the recently published proposed rule which 

continues HUD’s longstanding policy of permitting FHA borrowers 

to rely on downpayment assistance from family members, employers, governmental entities, or charitable nonprofits, but clarifies 

that the funds cannot be derived from sellers or from any other 

party that stands to benefit financially from the purchase transaction. 

As you may know from previous public statements, and from testimony offered by the FHA Commissioner, our Agency has been 

concerned with seller-funded downpayment assistance for some 

time now. While well-intended, the programs have had a significant negative impact on FHA’s business for the last several years. 

Loans made to borrowers who rely on these types of seller-funded 

gifts perform very poorly. The foreclosure rates on these loans are 

more than twice that of all other home purchase loans insured by 

FHA. 

Moreover, FHA experiences higher loss rates from the sale of the 

properties associated with these particular foreclosures, a reflection 

of the overvaluation that occurs with these programs. The higher 

foreclosure rates represent a financial burden for FHA, but of 

greater concern, they hurt the families who lose their homes and 

the neighborhoods in which those homes are located. 

The core problem with these programs is that they disrupt the 

natural negotiations between buyers and sellers in a way that results in inflated sales prices and, thus, higher mortgage amounts. 

Seller-funded downpayment assistance programs flourish in weak 

real estate markets where sellers are less likely to get full asking 

9

prices for their homes. These programs help them sell at a higher 

price than they would otherwise get. As such, the property overvaluation associated with these programs occurs in markets that 

are least able to accommodate pricing variations. The harmful effects of seller-funded downpayment assistance were highlighted in 

2004 and in 2005 studies prepared by Concentric Consulting on behalf of FHA and GAO. 

In 2006, the IRS issued guidelines, stating that seller-funded 

downpayment assistance from sellers to buyers through self-serving circular financing arrangements is not charitable. So why is 

FHA proposing this rule, and why now? 

Prior to November 2006, the FHA publicly acknowledged the 

problematic nature of the seller-funded gift programs, stating on 

several occasions that these programs pose a higher cost and risk 

to borrowers and to the soundness of FHA’s insurance fund. However, the agency resisted the development of an outright prohibition of seller-funded gifts, pursuing instead an alternative FHA financing arrangement for borrowers lacking the funds for a downpayment. 

FHA sought legislative authority to eliminate the 3 percent cash 

investment requirement to offer cash-poor but creditworthy borrowers a safer, more affordable alternative to the seller-funded gift 

programs. It was our view that a 100-percent financing option 

would reduce borrowers’ reliance on seller-funded gift programs, an 

outcome that would be good for borrowers and for FHA. 

That said, we will continue to work closely with this committee 

to enact needed reforms for FHA, such as 100 percent or zero-down 

financing, as well as the reauthorization of the American Dream 

Downpayment Initiative. 

I want to conclude my testimony by thanking this committee for 

the bipartisan support and leadership it has shown on FHA modernization. I also want to point out that if enacted, both the legislation introduced by Chairwoman Waters and the legislation introduced by Ranking Member Biggert, would go a long way toward resolving the issue before us today by authorizing FHA to ensure a 

zero-down mortgage. 

Thank you for having me here, and I will be happy to answer 

any questions you may have. 

Chairwoman WATERS. Thank you very much. 

[The prepared statement of Ms. Burns can be found on page 54 

of the appendix.] 

Chairwoman WATERS. Next, we will have Mr. James Heist. 

STATEMENT OF JAMES A. HEIST, ASSISTANT INSPECTOR GENERAL FOR AUDITS, OFFICE OF THE INSPECTOR GENERAL, 

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Mr. HEIST. Chairwoman Waters, and members of the subcommittee, thank you for inviting me to testify today. 

In 1998, less than 1 percent of all FHA borrowers received sellerfunded downpayment assistance from nonprofits. By 2006, loans 

with nonprofit downpayment assistance approached 25 percent of 

all FHA new business. The default and claim rates for these loans 

are twice as high as are loans without gifts, and this adverse performance has become a serious financial concern to HUD. HUD has 

10

recently proposed regulatory changes that would establish specific 

standards for an FHA borrower’s investment in the mortgaged 

property. 

The Office of the Inspector General strongly supports the Department. My office has recently audited FHA lenders. For example, 

the Broad Street Mortgage audit found documents showing that 

sellers increased sales prices to cover the cost of donations to downpayment assistance providers. Correspondence between lender staff 

cited specific amounts needed from sellers to close the loan and the 

price markups required to fund the seller’s gifts. 

In 2002, at the request of FHA, we reviewed a statistical sample 

of over 1,000 FHA files to determine the percentage of borrowers 

who were receiving downpayment assistance from nonprofits and to 

find out if the downpayment assisted loans were more likely to default than loans without such assistance. The audit found that such 

loans have a greater tendency to default. We have not been the 

only voice of concern. 

The Government Accountability Office cautioned in a November 

2005 report that the FHA needed to better manage the risk of 

FHA-insured loans with downpayment assistance. FHA’s actuaries 

have also commented on the impact of downpayment assisted loans 

for fiscal year 2005. Their conclusion: an almost $2 billion decrease 

in the estimated economic value of FHA’s insurance fund. 

HUD’s contractors conducted an independent analysis in 2004. 

Their conclusion: median house prices and seller contributions 

tended to be higher when gifts from nonprofits were present. 

In May 2006, the IRS issued a revenue ruling that nonprofit organizations that fund downpayment assistance programs with contributions from the property’s sellers do not meet legal requirements for tax-exempt status. The IRS is currently conducting a 

large number of investigations of organizations involved in such activities. 

Nonprofit downpayment assisted loans will continue to have a 

negative impact on the economic value of the FHA insurance fund 

and on FHA borrowers. FHA’s fiscal year 2008 budget states, ‘‘Because of adverse loan performance, the baseline credit subsidy rate 

for FHA’s single family program is positive, meaning that the total 

costs exceed receipts on a present value basis and, therefore, would 

require appropriations of credit subsidy budget authority to continue operation.’’ This is primarily attributable to the poor performance of seller-funded, nonprofit downpayment assisted loans. 

When the HUD Inspector General testified in March before the 

Senate Committee on Appropriations, the committee was very concerned about having to fund a new appropriation to cover the 

shortfall. Since HUD has indicated that it would not seek appropriations, this burden will fall on all new FHA borrowers through 

increased premiums. The subcommittee will hear other testimony 

highlighting the growth of homeownership opportunities through 

nonprofit downpayment programs. 

This growth comes at a price. It is often the borrower who suffers 

the most when financed into a home at an inflated value because 

the sales price was raised to pay for the nonprofit gift. Borrowers 

are sometimes unable to keep current on their inflated mortgage 

loans and eventually lose their homes to foreclosure. To prevent 

11

this, and to help address the looming budget shortfall, FHA should 

implement the proposed rule to end seller-funded nonprofit gifts. 

That concludes my testimony. I thank the subcommittee for holding this hearing, and I look forward to answering any questions the 

members may have. 

Chairwoman WATERS. Thank you very much. 

[The prepared statement of Mr. Heist can be found on page 62 

of the appendix.] 

Chairwoman WATERS. Mr. Shear. 

STATEMENT OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. SHEAR. Madam Chairwoman, and members of the subcommittee, it is a pleasure to be here this morning to discuss issues 

concerning downpayment assistance for home buyers. 

Making a downpayment on a mortgage can benefit both the 

home buyer and the mortgage provider. However, many families 

have difficulty saving sufficient funds for a downpayment and loan 

closing costs. In many instances, obtaining downpayment assistance from third parties, such as relatives and government agencies, 

can create instant equity and make homeownership affordable to 

more families. 

Largely in contrast to other key mortgage industry participants, 

the FHA allows borrowers to obtain downpayment assistance from 

nonprofit organizations that operate programs supported partly by 

property sellers, which I will refer to as ‘‘seller-funded downpayment assistance.’’ 

My testimony today is based on a report we issued in November 

2005 on downpayment assistance used with FHA-insured mortgages. My discussion will focus on, first, trends in the use of downpayment assistance with FHA-insured loans; second, the impact 

that the presence of such assistance has on purchase transactions 

and house prices and; third, the influence of such assistance on 

loan performance. 

In summary, we found, first, the proportion of FHA-insured purchase loans with loan-to-value ratios above 95 percent; those that 

were financed, in part, by seller-funded downpayment assistance 

grew from about 6 percent in 2000 to about 30 percent in 2004 

while the overall number of loans that FHA insured fell sharply. 

Second, seller-funded downpayment assistance can alter the 

structure of the purchase transaction in important ways. When 

home buyers receive such assistance, many of the nonprofits require property sellers to make a payment to the nonprofit that 

equals the amount of assistance the home buyer receives plus a 

service fee. This requirement creates an indirect funding stream 

from property sellers to home buyers that does not exist in other 

transactions, including those involving more traditional forms of 

downpayment assistance. According to mortgage industry participants, a HUD contractor study and our analysis, property sellers 

who have provided such assistance then often raise the sales price 

of the homes involved in order to recover the required payments to 

the organizations. 

12

Finally, turning to loan performance, our evaluation included, 

among other things, an analysis of the national sample of FHA-insured loans while we controlled for other variables affecting FHA 

insurance claims. Here, we found that the probability of claims was 

76 percent higher for loans with seller-funded downpayment assistance than it was for comparable loans without assistance. The 

weaker performance of loans with seller-funded downpayment assistance may be explained, in part, by the higher sales prices of 

homes bought with this assistance and the home buyers’ having 

less equity in the transactions. 

In fact, the higher sales price that often results can have the perverse effect of denying buyers any equity in their properties and 

creating higher effective loan-to-value ratios. Due partly to the adverse performance of loans with seller-funded downpayment assistance, FHA has estimated that, in the absence of program changes, 

its single family mortgage insurance program would require a subsidy in 2008. 

Our 2005 report made recommendations, including a recommendation that FHA treat seller-funded downpayment assistance as a seller inducement and, therefore, subject to the prohibition against using seller contributions to meet the 3 percent borrower contribution requirement. 

Madam Chairwoman, this concludes my oral statement. It is 

really a pleasure to be here. 

Chairwoman WATERS. Thank you very much. 

[The prepared statement of Mr. Shear can be found on page 82 

of the appendix.] 

Chairwoman WATERS. I will now recognize myself for 5 minutes 

for questions. 

First, let me just try and clear up something with you, Ms. 

Burns, and you, Mr. Heist. 

The FHA did come to us regarding the formulation of our legislation and asked us to include in the legislation zero downpayments. 

That means that they would like to outreach and to service the 

same kind of people who are being serviced by the programs that 

we are here to discuss today, who may not be able to afford a 

downpayment. If the FHA is going after the same clientele, what 

is going to be the difference in the so-called ‘‘foreclosure rate?’’ 

I also want you to be more specific and give me some hard numbers on the foreclosure rate. 

I will start with you, Ms. Burns. 

Ms. BURNS. Thank you. It is an excellent question. 

We felt very, very strongly when we came to Congress with that 

proposal because we want to reach these exact borrowers, just as 

you said. We believe that these are the borrowers FHA was always 

intended to serve. However, we are putting them in a program 

today that gets them in trouble. We are putting them in harm’s 

way today. 

A 100-percent financing program is a way to reach them safely 

and affordably. That is what FHA is here for. What we know about 

these programs today is that the foreclosure rate is twice as high 

as it is for— 

Chairwoman WATERS. Excuse me. I only have 5 minutes. 

Ms. BURNS. Okay. 

13

Chairwoman WATERS. I want you to tell me— 

Ms. BURNS. Yes. 

Chairwoman WATERS. —how the FHA is going to have a program 

with no downpayments and not have the foreclosure exposure that 

you have described here in some detail. 

Ms. BURNS. That is right. 

The reason that these particular borrowers get into trouble is because these programs only work in weak markets. Sellers do not 

want to participate in this kind of a program in a market where 

they can get the full asking prices for their homes. What that 

means is, when borrowers receive one of these gifts and pay a higher sales price as a result and essentially finance their own gifts and 

get an inflated mortgage amount, they are already upside down. 

They do not have instant equity. They have no equity. 

Chairwoman WATERS. In essence, what you are telling me is, 

with the FHA program, there is going to be some assurance that 

they are going to know that the selling price of the home that is 

being purchased is of fair market value, that it is not going to be 

inflated, that it is going to be a price where, if the same person 

were to get a downpayment from these programs, he would be able 

to perform better with the FHA? Is that what you are telling me? 

Ms. BURNS. Yes. Absolutely. 

Chairwoman WATERS. How will they guarantee a fair market 

price on the purchase or on the sale of homes? 

Ms. BURNS. For every financing transaction, there is an appraisal 

performed, and the appraisal determines the appropriate value of 

the home, and that is exactly what would happen. 

Chairwoman WATERS. So am I to understand that they do not 

have appraisals in Nehemiah and in the other programs? 

Ms. BURNS. There are appraisals that are performed today. 

Chairwoman WATERS. Is something wrong with those appraisals? 

Ms. BURNS. I think we all— 

Chairwoman WATERS. Are they illegal? 

Ms. BURNS. No, absolutely not. They are not illegal. The appraisers are doing the best that they can. 

Chairwoman WATERS. What is going to be the difference between 

the appraisals that the FHA will have and the appraisals that are 

now working with these programs? How do you know that the price 

of the house will not be inflated? 

Ms. BURNS. There will not be any reason for price inflation. 

There will not be a nonprofit involved in the middle of the transaction providing the seller— 

Chairwoman WATERS. So the only time that you have inflated 

prices in the market is when you have a program like this, but 

they are probably never inflated? When you are dealing with the 

market and with the FHA or with other financial institutions, you 

never have inflated home prices? 

Ms. BURNS. I cannot speak to other types of transactions, but I 

can speak to this particular type of transaction. 

Chairwoman WATERS. So you cannot guarantee me that FHA 

contracts will not have inflated prices? 

Ms. BURNS. Yes, there will be no reason for an inflated sales 

price. That is correct. 

14

Chairwoman WATERS. But you do not know that there will not 

be. I am just trying to understand. 

Ms. BURNS. Right. I mean, we do not know that there will not 

be, no, but we know that there will not be a reason for it. We will 

be eliminating the cause that exists today. 

Chairwoman WATERS. So the reason for inflated prices, wherever 

it occurs, is that people want to make more money. 

Ms. BURNS. Oh, absolutely. 

Chairwoman WATERS. Wherever it occurs, that is the reason for 

inflated prices. You simply cannot tell us that the only place for inflated prices is in a program like this where you have the nonprofit 

who is, in some way, inflating the price of the sale of the house just 

to make the downpayment. I suspect that may be true, and I am 

not arguing that point. 

The point that I am arguing is that the prices of homes do get 

inflated. The appraisals, we hope, would always be good appraisals, 

but they are not. Those of us who are real estate people here on 

the panel know something about that. 

Okay. Do you have anything you would like to say about this, 

Mr. Heist? 

Mr. HEIST. Only that in conjunction with some of our audit work, 

we have seen examples of where there is pressure put on the home 

seller to raise the price of the property to cover the downpayment 

gift that the seller has to provide to the nonprofit. In fact, we have 

seen examples of where there is a list price put out by the builder 

of the home, and actually, the borrower is going into the closing, 

expecting that is going to be the price of the property, and yet, 

when they come to the closing, they find that the price of the home 

has increased to cover the cost of the downpayment gift that they 

are expected to provide to the nonprofits. 

So that is— 

Chairwoman WATERS. So what you are basically describing to 

me—as for the appraisers, as I understand it, when they go into 

an area, they get comparables, and what you are saying is, if Nehemiah or if one of these programs is involved with the sale of a property, that they may increase it beyond the comparable value of the 

other houses in the community; and the person who is selling does 

not know, and the buyer does not know, that they are all being 

duped. 

Mr. HEIST. I am only saying that the buyer may not be aware 

of the increase in the sales price. Oftentimes, these are first-time 

home buyers who have not gone through the transaction they are 

confronted with. 

Chairwoman WATERS. I see. All right. Thank you very much. I 

will recognize our ranking member, Mrs. Biggert. 

Mrs. BIGGERT. Thank you, Chairwoman Waters. 

Mr. Heist, on pages 7 and 8 of your testimony, you present two 

cases there which, I think, are similar to what you were referring 

to with Ms. Waters where there has been the gift. But after you 

have gone through these two cases, you say that neither borrower 

was able to keep current on their inflated mortgage loans, and they 

eventually lost their homes to foreclosure. 

In the FHA modernization bills we have put in, as for the zero 

downpayment, there was one where, if you have the zero downpayVerDate 0ct 09 2002 10:53 Oct 04, 2007 Jkt 037562 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\37562.TXT HFIN PsN: TERRIE
15

ment, then you have to pay more annually; at least in the bill that 

I have, we raised the premium without the downpayment. 

Would that same thing occur if the annual premium were raised 

by FHA? I mean, the property value in that case would not be inflated, would it? 

Mr. HEIST. I do not know if that would have an effect on the 

price, but it would certainly affect the amount that would be financed under the mortgage because you have additional mortgage 

insurance premiums which may or may not be financed as part of 

the mortgage, so it may not affect the price, but it could affect the 

amount of the mortgage, certainly. 

Mrs. BIGGERT. Well, there seem to be people who do not have the 

money for the downpayment, but—they have the money to meet 

the monthly payments just based on salary, but they do not have 

a savings to make the downpayment. I am trying to distinguish 

what the difference is between that and having somebody give a 

gift of the downpayment. 

Mr. HEIST. Well, one thing that would not be present would be 

the processing fee that the nonprofit charges to make the transaction. 

Mrs. BIGGERT. Okay. Can you give us an idea of what those 

charges are? 

Mr. HEIST. I believe they run around 1 percent, but I am not certain. 

Mrs. BIGGERT. Okay. Ms. Burns, do you know, or Mr. Shear? 

Ms. BURNS. The most recent figure I had heard was that the av- erage is $500. 

Mrs. BIGGERT. So it is like another closing cost. Okay. 

Then, Ms. Burns, I understand that FHA data indicates that 

over one-third of homeowners receiving downpayment assistance 

have low FICO scores and high delinquency rates; is that true? 

Ms. BURNS. I am not familiar with those statistics. Sorry. 

Mrs. BIGGERT. Okay. Well then, you would not know, on the flip 

side, if two-thirds of homeowners receiving downpayment assistance have average or above average FICO scores and lower delinquency rates? 

Ms. BURNS. No. I am not familiar with those figures. 

Mrs. BIGGERT. Okay. Thanks. 

I yield back. 

Chairwoman WATERS. Thank you very much. 

Let us just go right down and start with Ms. Velazquez. 

Ms. Velazquez, do you have questions? 

Ms. VELAZQUEZ. Ms. Burns, either you or Mr. Heist, can you tell 

me, in terms of the audit that found that 19.39 percent of the loans 

were in default for at least 90 days, how many of those at the end 

became foreclosed? 

Mr. HEIST. I believe, overall, there are statistics that suggest 

that roughly a third of 90-day defaults end up in foreclosure. One 

has to wait for a particular year’s portfolio to mature before you 

realize what the exact percentage is. 

Ms. VELAZQUEZ. How does that compare with a subprime foreclosure? 

Mr. HEIST. I do not have that information. 

Ms. VELAZQUEZ. Do you? 

16

Ms. BURNS. No, I do not know the subprime foreclosure rate. 

However, the average foreclosure rate for these particular loans is 

approximately 16 percent. 

Ms. VELAZQUEZ. Ms. Burns, what is your response to those supporters of downpayment programs such as Nehemiah who argue 

that even if HUD’s audit conclusion is correct, this Downpayment 

Assistance Program serves low-income home buyers better than 

subprime mortgages, which have even higher default rates? 

Ms. BURNS. I would say that the FHA could serve them even better, which is why we would hope to have 100 financing— 

Ms. VELAZQUEZ. Traditionally, you have not. 

Ms. BURNS. Traditionally, the FHA, previous to the last 5 years, 

did serve low- and moderate-income families. It is true that over 

the last 5 years the trend has gone to subprime loans. That is very 

true, and that is of great concern to us. 

Ms. VELAZQUEZ. Well, let me just say this. I will recommend very 

strongly to both the chairwoman and to the ranking member that 

we study this further. The fact of the matter is that transformation 

and renaissance have been taking place in neglected areas like in 

New York. In New York, there were areas that were low-income 

communities, totally neglected. The Federal Government never 

really put any type of program to assist low-income earners to become homeowners. 

Today, there is a renaissance happening in those places, and it 

is because of Nehemiah’s presence in that community. So we need 

to study this further. I am not convinced, and I will strongly advocate to oppose this regulation. 

Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. 

Mr. Miller. 

Mr. MILLER. Thank you. 

I am usually the guy on HUD’s side, and I am really confused. 

I mean, I have been going through this paperwork for weeks. 

Mr. Heist, do you know who the bad guys are? You said you reviewed paperwork, and there were letters saying that the prices 

were inflated. 

Who is doing this? Do you know? 

Mr. HEIST. Only to the extent that we— 

Mr. MILLER. Well, no. If you read the stuff, then you know who 

the bad guys are; is that not fair? 

Mr. HEIST. Well, the focus of our lender audits is on the origination of the— 

Mr. MILLER. No. I only have 5 minutes. 

You told me in testimony that you read letters saying they inflated the appraisals, and they did this and that. So you have to 

know who they were. What did you do? 

Mr. HEIST. Our focus was on the— 

Mr. MILLER. No. What did you do? I do not have time. Did you 

do anything, ‘‘yes’’ or ‘‘no?’’ 

Mr. HEIST. To look at the— 

Mr. MILLER. Did you do anything to correct the problem, ‘‘yes’’ 

or ‘‘no?’’ 

Mr. HEIST. Not to— 

Mr. MILLER. Okay. Thank you. 

17

GAO, you came out with a study in 2005, and you made some 

legitimate—I am on your side. I am not chewing you out. You made 

some good recommendations. 

Did you guys do anything, ‘‘yes’’ or ‘‘no?’’ 

Ms. BURNS. No. 

Mr. MILLER. No, you did not do anything? 

I read a letter from Nehemiah back in 1999 to HUD, and it says, 

‘‘You need to regulate our industry. You need to do these things.’’ 

HUD’s response was, ‘‘At the very least, we believe that several of 

your proposals may require the rather protracted and rigorous 

process of rulemaking rather than the simple issue of a mortgage 

letter, as you suggested. In any event, we will keep your letter and 

accompanying brochures as reference material should we elect to 

seek changes in the future.’’ 

So you have probably the largest downpayment assistance program saying, ‘‘Please regulate our industry so we do not have bad 

guys,’’ and under Cuomo’s charge—and Carter wrote this letter—

he said, ‘‘No, we do not want to do anything.’’ 

Now, the problem I am having is, you have guys trying to put 

them out of business—and I love you guys, we are buddies. So you 

are trying to put them out of business. The IRS is trying to tax 

them to death when they did not make any money. I have a real 

problem with this. 

Ms. Burns, you said it is better with the zero downpayment. You 

set standards, and you guys require certain underwriting standards from an FHA loan, do you not, ‘‘yes’’ or ‘‘no?’’ 

Ms. BURNS. Yes. 

Mr. MILLER. You do. Good. Okay. 

Now, if you require standards for underwriting and standards for 

appraisal, you are telling me that they are better off with a zero 

downpayment on a $200,000 home than they are getting $6,000 

from a nonprofit as a downpayment, only owing $194,000 rather 

than $200,000. That does not make sense to me. 

I was a developer for over 35 years. Sorry, it does not make 

sense. I know nonprofits who require the seller to certify in writing 

under penalty of perjury that they are not inflating this price at 

all, that this is the normal market price, so some of them are trying to do it. If some are not, let us fix them. 

You said this only works in a downward market; is that correct? 

Ms. BURNS. Yes. 

Mr. MILLER. What happened between 1998 and 2005? Were there 

any downpayment assistance programs processed through you, 

‘‘yes’’ or ‘‘no?’’ 

Ms. BURNS. FHA— 

Mr. MILLER. Yes, there were. 

What was happening during 1998 to 2005? Was it a bad real estate market or was it probably the best real estate market we have 

ever seen in history? Was it better or worse? 

Ms. BURNS. The real estate market— 

Mr. MILLER. The real estate market was the healthiest market 

we have ever experienced in my lifetime. I am 58 years old; that 

is not young. So, if they are making all of these downpayment assistance programs in a marketplace where buyers are standing in 

18

line to buy homes, I love you, but the argument does not hold 

water. 

Now, if you are saying that in the last year things have been 

tough in the marketplace, and buyers are sitting out there wondering who is going to buy their homes, well, okay. 

Let us talk about the last 12 months. Nehemiah received a letter 

on September 15, 1999 from HUD that said, ‘‘Please, let’s regulate 

our industry,’’ because they believed that there could be problems 

in the industry, that things could go wrong. 

If you guys are doubting an appraisal, you need to hold people 

accountable and fix it. If you are doubting underwriters’ standards, 

hold them accountable and fix it. 

But why not establish the same criteria for downpayment assistance as you do for zero down? Monitor it. Have oversight. Make 

sure the guarantees are established in law. But you cannot convince me that if I borrow $200,000 from you on a zero downpayment, and owe $200,000, that I am better off than if I owe 

$194,000, when somebody gives me $6,000 as a downpayment, and 

there are, maybe, some closing costs. 

So, somehow we have to fix this thing. If we can have the government’s help, we can sure allow the private sector to help if it 

does not hurt us at all. And if we have to introduce legislation, I 

am sure I can find a bunch of people on this to join me in drafting 

legislation to say, let us tighten the restrictions and let us tighten 

the requirements, but let us not throw the baby out with the bath 

water, and let these people do their jobs as you are doing your job, 

but let us work together. 

If they want guidelines and oversight, give it to them. If they are 

saying, hold the bad guys accountable, hold them accountable, but 

let us not, please, adopt a rule where you get in a fist fight with 

all of us over a program that we think has some viability. 

And if there is something wrong, Lord, believe us, we want to fix 

it. I think we are making a mistake. 

I yield back. 

Chairwoman WATERS. Thank you very much. 

Mr. Cleaver. 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Let me, first of all, associate with the liberal comments of Mr. 

Miller. 

Mr. MILLER. I am buying you lunch today. We have to talk. 

Mr. CLEAVER. When the DPAs are granted, are they tax exempt? 

Ms. BURNS. Yes. The providers of downpayment assistance today 

are nonprofit 501(c)(3)— 

Mr. CLEAVER. No. No. No. No. 

When someone receives a gift of downpayment assistance, is it 

nontaxable? 

Ms. BURNS. I am sorry. I cannot speak to the tax side of it. 

Mr. CLEAVER. Mr. Heist? 

Mr. HEIST. I cannot either. 

Chairwoman WATERS. If the gentleman would yield, it is my understanding that if you receive a gift of $10,000 or more, it is reportable. I do not think it is necessarily reportable under $10,000. 

Is that your understanding, Mr. Tax Attorney Green? 

19

Mr. GREEN. I do not claim to be a tax attorney, but I believe that 

is correct. 

Mr. MILLER. Would the gentleman yield for 1 second? I can directly respond to that. 

They are trying to not only tax the people who gave the money, 

where the nonprofits charge them a tax, but they can also go to the 

person who received it and tax him for a gift. 

Mr. CLEAVER. Yes, that is where I was going. Thank you. We are 

kindred spirits, Mr. Miller. 

I know the IG is an independent agency, or it is supposed to be. 

Did the IG’s office have any impact on this new rule? Was there 

any influence from the Inspector General’s office in HUD or on 

HUD that resulted in this new proposed rule? 

Mr. HEIST. Well, we have certainly expressed our concerns and 

have made that recommendation in the past, and as other studies 

have confirmed the results of our initial concerns, we have continued to make that recommendation, yes. 

Mr. CLEAVER. So then, you would know the number of non-FHA 

loans using downpayment assistance, and you would probably also 

know the ratio of foreclosures with non-FHA to those with FHA? 

Mr. HEIST. No, sir, I would not. Our jurisdiction is basically auditing FHA’s program. 

Mr. CLEAVER. Well, how do we know whether or not this is something that is horrible or how do we know that this is, you know, 

the way the market is moving? 

Mr. HEIST. Because one can measure the performance of these 

loans versus the rest of the portfolio. 

Mr. CLEAVER. But that is comparing apples and pineapples. 

I mean, the only accurate comparison, I think, and maybe you 

would agree, are the non-FHA loans using downpayment assistance 

that go into foreclosure and the FHA loans; isn’t that right? 

Mr. HEIST. That might be a legitimate comparison if one could 

make one. That is not something that we have done now. 

Mr. CLEAVER. That is the point I am making. That is precisely 

the point I am making, so— 

Mr. HEIST. What our initial work did back in 2002 was to compare downpayment assisted loans with loans that did not receive 

gift assistance. 

Mr. CLEAVER. Just stop right there. Let’s hang out right there. 

You can’t make a comparison like that. I mean, they don’t go together, don’t you agree? 

Mr. HEIST. Respectfully, I don’t agree with that. 

Mr. CLEAVER. Explain to me why those comparisons are legitimate. 

Mr. HEIST. The point is, the loans represented increased risk to 

the insurance fund above and beyond what you could expect with 

loans that either to the extent they are funded through gifts from 

relatives or don’t require a gift and actually meet the 3 percent investment requirement and are able to make a downpayment. Those 

homes have a greater degree of equity going into the transaction. 

Mr. CLEAVER. Okay, thank you. 

My last question, can you give me an idea of the cost to the 

Treasury of this benefit? I mean, how much revenue is lost because 

of the DPA? 

20

Ms. BURNS. I don’t know. 

Mr. CLEAVER. Would you say negligible? 

Ms. BURNS. No. I would say from an FHA perspective that the 

concern is with the budget, and that if we continue to permit these 

kinds of programs, we would grow positive next year; we would 

need appropriations to operate next year. 

Mr. CLEAVER. But we don’t know how much they are losing. We 

just know that they need to go next year with appropriations, but— 

Ms. BURNS. I am sure someone in FHA’s budget office could provide you with those figures if you would like us to provide that 

after the hearing. 

Mr. CLEAVER. I would. It would seem to me that a major issue 

here is, I was expecting someone to say that we are losing $25 billion a year. 

Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. 

Mr. Neugebauer. 

Mr. NEUGEBAUER. Well, thank you, Madam Chairwoman. I have 

been in a markup. I understand that my good friend from California, Mr. Miller, had some interesting dialogue going on prior to 

my getting here, and so I will yield him my time to let him have 

some follow-up time. 

Chairwoman WATERS. Very good. 

Mr. MILLER. Thank you very much. Oh, welcome back. 

How do you propose preventing risk in the future associated with 

the new zero downpayment program? 

Ms. BURNS. There are several measures we will take. One is 

clearly on the underwriting side; with underwriting the core components that you look at are the credit history of the borrower— 

Mr. MILLER. Standards, that is good. And what else? 

Ms. BURNS. It would be primarily on the underwriting standards. 

That is really where we will— 

Mr. MILLER. Could you not apply this same standard to downpayment assistance? 

Ms. BURNS. Yes. 

Mr. MILLER. Could you enforce that standard? 

Ms. BURNS. Absolutely. 

Mr. MILLER. So you are telling me that it is possible to be certain 

on appraisals, it is possible to be certain on underwriting standards 

where the program would be safe and sound. That is possible? Because I am very concerned about whether we are making loans 

that put the program at risk. I don’t want do that. 

Based on your testimony, it is possible to do that? 

Ms. BURNS. It is possible to put— 

Mr. MILLER. Then why don’t we? 

Ms. BURNS. —more stringent underwriting standards. 

Mr. MILLER. Why don’t we? 

Ms. BURNS. Well, we are in the middle of a rulemaking process. 

Mr. MILLER. No, we are in the middle of saying, we don’t want 

these babies thrown out— 

Ms. BURNS. That is an indication of FHA’s position but— 

Mr. MILLER. I would like to propose that you listen to your testimony, and if it is possible—I think we should do it. So I am just 

21

adding to the debate at this point in time; you haven’t released the 

rule. 

I am strongly suggesting, and I think many will echo this, that 

maybe that is the approach we should take, because that is not the 

approach I am reading of this coming down. 

Ms. BURNS. Right. And just so you know, we certainly hear you 

and that is what the rulemaking process is all about. 

Mr. MILLER. I love you, and I am glad. 

Do you know how many people in the last 8 years, who are lower 

creditworthy borrowers, who would not be in a home today if it 

weren’t for downpayment assistance programs? Do you have any 

idea? 

Ms. BURNS. I believe the figure is approximately 50,000. 

Mr. MILLER. I think it would be more than that. I know they 

made more than a million loans. 

Let’s say a million people out there wouldn’t be in a home today. 

There are 850,000 families in homes that are making the payments, they are not a risk, they would probably be renting an 

apartment somewhere. 

Let’s say some of those people could have put together the money 

for a downpayment, let’s say—is 15 percent a fair number? Is 20 

percent a fair number? Throw me a number. Give me a number. 

I will go with it. 

Let’s say 20 percent. 

So let’s take 180,000, out of 850,000, might have gotten into a 

home, and then the other 15 percent that maybe you might come 

back and foreclose the other 5 or 6 percent; the others might work 

it out somehow. 

Some of the 15 percent may sell that house and even pay you off 

and make a profit. If they bought their home back in 2000, something happened that they can’t make the payment today, the numbers are there they are probably going to be able to sell that home 

and make a profit. Even if that market had inflated that sales 

price by 6 percent or 4 percent or 3 percent to come up with the 

downpayment, because when I read the charts on how much housing was inflating from 2000 to 2006, it doubled in most areas. 

So if they inflated to 3 percent, they will probably still make a 

profit. And that is where I am having problems: If it was possible 

to establish standards, and we didn’t establish standards, and GAO 

said, you should have established standards in 2005. And Nehemiah said in 1998–1999, do we need some standards? In all the paperwork I have back here everybody says, ‘‘no.’’ 

Why didn’t you implement some standards? 

Ms. BURNS. We decided internally that a better way to deal with 

this was to request additional authority to offer 100 percent financing programs. We have been pursuing that. 

Mr. MILLER. You have asked us to implement—I have been 

working for 3 years on the zero downpayment. I think it is a good 

idea. Because that was a concept that we couldn’t guarantee would 

happen, we did nothing with what was assumed to be a problem. 

I love Alphonso. 

Shame on us. If we had known there was a problem and we do 

nothing about it—and the problem is not everybody, I don’t believe 

that at all. There are some bad apples, and some doing a great job. 

22

So if we did nothing about the bad apples, and now based on language I am seeing in the proposed ruling, we are going to throw 

them all out, maybe we need to rethink it. 

Thank you. I yield back. 

Chairwoman WATERS. Thank you very much. 

Let me say, Mr. Miller, before I call on Mr. Green, that none of 

us were told that is the reason why FHA wanted zero downpayment in the bill that we had put together. I feel a little bit duped. 

Mrs. Biggert was not told; I just consulted with her. You may 

want to look at the FHA bill and may want to save the trouble 

with pursuing the regs by just overlapping with legislation. 

I call on Mr. Green at this point. 

Mr. GREEN. Thank you, Madam Chairwoman. I want to thank 

Congressman Miller for showing some love this morning. You indicated that you love Secretary Jackson. I want you to know that I 

love you. Just to make sure that I spread the love around, I want 

all of the panelists to know that I love you too. 

What Mr. Miller has made clear, I shall now make transparently 

clear. You agree—I have to say this, sometimes when people finish, 

I don’t know whether they have said, ‘‘yes,’’ or ‘‘no,’’ so I am going 

to ask that you say, ‘‘yes,’’ or ‘‘no,’’ and then perhaps we will hear 

an explanation. 

But do you agree that price inflation was one of your primary 

concerns in instituting this new policy? Do you agree? Do you agree 

that a seller can cover the cost of downpayment and you can have 

a legitimate transaction, one that is not invidious, that is not onerous, do you agree that that can take place, ma’am? Or are you saying that every time a seller covers a downpayment, it is inherently 

evil? No. 

Ms. BURNS. No. 

Mr. GREEN. So do you agree that you can have a legitimate 

transaction where the seller covers part of the downpayment, assuming that the price is right, meaning the price has not been inflated? Do you agree? 

Ms. BURNS. Yes, that can happen. 

Mr. GREEN. Do you agree, sir? 

Mr. HEIST. I would say it is possible. 

Mr. GREEN. It is possible. If the price is not inflated, and the seller wants to give his money away, the law does not prevent people 

from giving their money to whomever they choose. 

Do you agree that a seller can give his money to whomever he 

chooses and pay a downpayment and that can be legitimate? 

Mr. HEIST. Well, the law addresses that— 

Mr. GREEN. Can you have a legitimate transaction with the seller paying a part of the downpayment? 

Mr. HEIST. I think that depends on how you evaluate legitimacy. 

Mr. GREEN. Assuming that the price has been properly staged, 

that there is no inflated price. 

Now, sir, if there is no inflated price, and the seller wants to give 

his money to someone, do you agree that he can? 

Mr. HEIST. Under current guidelines and interpretations, yes. 

Mr. GREEN. Sir? 

Mr. SHEAR. I would say the answer is ‘‘yes.’’ It is a question of 

facts and circumstances. 

23

Mr. GREEN. All the facts and circumstances are legitimate; the 

seller has a legitimate appraisal and the seller decides, I want to 

give some of my money to this buyer. 

Mr. SHEAR. Yes. Then it is a gift. It is a gift and, yes, that can 

happen. 

Mr. GREEN. That can be a legitimate transaction? 

Mr. SHEAR. Yes. 

Mr. GREEN. Listen, now, you have to realize people are listening 

to you and this makes sense to the other people here and to the 

people who may not be in this room who are listening. People with 

common sense can tell you that a seller can have an appraisal that 

is legitimate and give his money to whomever he chooses. That 

makes sense. 

Now, if this is the case, if you can have these legitimate transactions, the question becomes, why would we end a process as opposed to amend the process to make the process legitimate such 

that we can continue the process? 

Why would we want to eliminate as oppose to regulate? That is 

the question we are trying to get to, because truthfully, it appears 

to me that what you have done is overreact. It was not necessary 

to go to the extreme that you have gone to when you could have 

done some things in between and protected people who truly want 

to buy homes and don’t have downpayments. 

Now, given that we can have this legitimate transaction, the 

question becomes this as to your statistical information. In your 

statistical information, do you agree that it includes those loans 

where the persons were foreclosed on—the 16 percent that we are 

talking about, it includes those loans where you had persons who 

could not pay the inflated price, as well as persons who probably 

could not have paid a price that was not inflated? 

You see, you commingled inflated, and you don’t know whether 

the persons—let me give you an example since you are shaking 

your head, ma’am. 

Suppose some of these persons actually went into foreclosure and 

they had to file for bankruptcy. It may have been totally unrelated 

to the home, they could have had some other circumstance in life 

that they had to cope with. So you have those persons who could 

not have paid even a lower loan included those with the inflated 

prices. 

So you commingled them, have you not—if you do statistical 

analysis appropriately, you have to dissect and take out those that 

would have paid less and would have still lost their homes. 

Madam Chairwoman, you have been very generous with the 

time, and I want you to know that I truly do love you; you will get 

Christmas cards from me. Thank you. 

Chairwoman WATERS. Thank you very much. 

Mr. Sires. 

Mr. SIRES. There is a lot of love going on here, but I just want 

to thank Mr. Miller for clarifying a couple of things in your questioning that I had some doubts about. 

What is the average mortgage payment for people who get downpayment assistance? 

Ms. BURNS. Monthly mortgage payment? 

Mr. SIRES. Yes. 

24

Ms. BURNS. I don’t know. It would depend on the loan amount. 

The average loan amount for FHA borrowers is approximately 

$130,000, an average payment for that would be—actually, I am 

not sure. I don’t know. 

Mr. SIRES. Somebody mentioned that 16 percent of these people 

are foreclosed, the people that you give loans to, something around 

that area. 

Ms. BURNS. The borrowers who rely on downpayment assistance 

from seller-funded nonprofit, correct. 

Mr. SIRES. Are there any programs for the people who fall in this 

16 percent to assist them so they don’t lose their homes? Do these 

people maybe qualify for Section 8 so they don’t lose their homes? 

Do people on Section 8 qualify for first-time payment assistance? 

Ms. BURNS. These people would certainly receive loss mitigation 

services, but part of the problem is that once someone is in a position where the loan balance is substantially higher than the property value, there are fewer options available to them, which is why 

we are so concerned that these problems operate—or thrive, I 

should say—in weak markets. 

Foreclosure rates are higher when that event occurs. When they 

can’t get out from under that loan balance, they can’t sell, they 

can’t get out from under. 

Mr. SIRES. There are no assistance programs? 

Ms. BURNS. There are loss mitigation services and counseling 

services that try to help— 

Mr. SIRES. Monetarily, there is nothing? 

Ms. BURNS. Offered by the Department of Housing and Urban 

Development? 

Mr. SIRES. Yes. 

Ms. BURNS. There are HOME funds that go to State organizations, CDBG money to go to State organizations that run rescue 

funds, but there is not a specific pot of money that is intended specifically for foreclosure prevention, no. 

Mr. SIRES. I was involved with tax credits, building affordable 

homes. When you build with tax credits, these people qualify for 

the downpayment assistance program after you are building affordable housing. Do you know that? 

Ms. BURNS. I am sorry, I don’t know. 

Mr. SIRES. If I build 50 homes for low income and these people 

qualify, are they entitled to get the money for the downpayment of 

those homes? Do you know that? 

Ms. BURNS. If they qualify for FHA financing? 

Mr. SIRES. Yes. 

Ms. BURNS. Could they rely on downpayment— 

Mr. SIRES. Even though it is a tax credit project? 

Ms. BURNS. I am not sure. I am sorry. 

Mr. SIRES. I think the public-private partnership is the way to 

go, in my eyes, in the future. If these people would need a home, 

have an assistance on the downpayment, even though it is a tax 

credit project, I think that is something that may be worthwhile exploring, to help these people get their homes. 

I don’t know why you wouldn’t qualify, if you qualify for an FHA 

loan for the downpayment assistance. 

You are not following me? 

25

Ms. BURNS. No, I am sorry, I am not. 

But people who qualify for FHA financing can rely on— 

Mr. SIRES. They automatically qualify for the downpayment assistance. 

Ms. BURNS. Right. I am just not familiar with tax credits in 

owner occupancy scenarios, only in rental development. So I am 

sorry, I am not really sure. 

Mr. SIRES. There is a problem out there, at least in the State 

that I come from, and I know some of the other States also have 

it, where you build affordable housing. But many times the problem is, you are trying to find people who need homes, but again 

they can’t afford the downpayment. And it is not so much the 

monthly payment, because I think the average mortgage for those 

is something like $800, $875. 

So I think that is something we might want to work on to qualify 

people under these programs. 

Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. 

Mr. Wilson. 

Mr. WILSON. Thank you, Madam Chairwoman. 

Ladies and gentlemen who are testifying here today, I am one of 

the Representatives from the State of Ohio where we have the absolutely terrible reputation of leading the Nation in foreclosures. 

Somehow, some way, we are going to find solutions to these problems and I believe that not necessarily your group that is here 

today, but other Federal regulators that we have talked with—and 

that is the OCC, the FDIC and the Fed—it just seems to be sort 

of a disconnect. 

I think the reason there is a disconnect, it is not the banking 

community that are these predators. It is really the secondary 

mortgage people that are causing it, and I am not sure how, 

Madam Chairwoman, and what we can do, but it is certainly going 

to change. 

Last year, when I was in the Ohio senate, we did senate bill 185, 

which was a beginning, and we identified one of the problems with 

some of the appraisals that were going on. And I recently introduced a bill that says that we won’t have favoritism, but rather the 

appraisers will be distinguished by a draw, where we had copies 

of e-mails, ladies and gentlemen, where the loan generator had emailed to the appraiser the number he had to hit to get the loan. 

So that is the kind of thing that we can’t have. 

And one of the things my colleague from New Jersey was saying 

was about the homeowner downpayment assistance program. 

Couldn’t that be a connecter, that if a person would be able to qualify, Madam Chairwoman, for the downpayment assistance, 

wouldn’t that help validate the value of that home and the fact 

that it wouldn’t be overappraised. That would be a question I have 

to you. 

In other words, if someone applies for downpayment assistance, 

I would assume that would be scrutinized so that they were not 

buying something that was overly inflated; is that correct? 

Ms. BURNS. Yes. 

Mr. SIRES. Is there anything that we can do that will make sure 

that those—in other words, I just get the feeling, as a relatively 

26

new legislator here, with 6 months, that we are just not connecting 

the dots. I think that everybody’s interested in the oversight that 

needs to be done so that we in Ohio, and certainly in the Nation, 

don’t continue to have these predatory lendings and have people 

who are just victims of certainly the educational process, but I believe the initiative in this committee is to try to connect the dots 

so that we make sure that we are protecting people who in many 

cases just don’t understand what they are going through, how we 

can get more people into homeownership. And I think that is 

where—it comes back to the opportunity for the downpayment program. 

So those are the kinds of things, at least that I am hearing, and 

I look forward to learning more about. 

Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. 

Mr. Scott. 

Mr. SCOTT. Thank you, Madam Chairwoman. 

Ms. Burns, would you explain the proposed HUD rule that you 

are proposing to eliminate regarding downpayment? 

Ms. BURNS. Yes. The proposed rule frankly clarifies that FHA 

does permit downpayment assistance from a variety of sources. 

However, the funds cannot be in any way derived from the seller 

or another party to the transaction who will financially benefit 

from that transaction. 

Mr. SCOTT. Does this rule eliminate the downpayment assistance 

program? 

Ms. BURNS. This rule would prohibit downpayment assistance 

that comes from a source that is related to the seller or from any 

other party to the transaction. 

Mr. SCOTT. But does it eliminate the downpayment program? 

Ms. BURNS. No. 

Mr. SCOTT. Okay. So what are the exact stipulations behind the 

program? 

Ms. BURNS. Well, downpayment assistance providers can not continue to provide assistance to other borrowers, those who receive 

funds from the sellers. 

For FHA borrowers, they can only receive downpayment assistance from parties where there is not seller money involved or 

money from any other party to the transaction. 

Mr. SCOTT. I want to try to get it sort of plain where I can understand it. 

So, first of all, the proposed HUD rule does not or has no plans 

to eliminate the downpayment assistance program? 

Ms. BURNS. No. 

Mr. SCOTT. How are individuals chosen to participate in the 

downpayment program? 

Ms. BURNS. Are you referring to the seller-funded downpayment 

programs that exist today? 

Mr. SCOTT. The program that the rule does not eliminate. 

Ms. BURNS. For FHA borrowers, FHA makes it possible for them 

to rely on downpayment assistance from any source, but there is 

not a particular program for which they are eligible. We don’t deem 

them eligible to receive downpayment assistance. It is a personal 

27

choice on the part of the borrower to go out and seek some form 

of downpayment assistance. 

Mr. SCOTT. So there are no requirements, no requirements that 

are there to make a person eligible? I am looking for reasons why 

this person is chosen to participate in the program. 

Ms. BURNS. Right. No, no, FHA does not have criteria for eligibility. 

Mr. SCOTT. What role is the downpayment program playing in 

the subprime market? 

Ms. BURNS. I don’t believe any role today. I believe on the 

subprime side, when people need 100 percent financing, they get a 

first and a second mortgage or they get a full 100 percent financing 

product. 

Mr. SCOTT. Now, should your rule go through, how will this affect those individuals in the process now of receiving downpayment 

assistance? 

Ms. BURNS. It would not. We would obviously recognize all borrowers who had signed a sales contract prior to an effective date 

for the rule to take effect so that anyone who was in the process 

of purchasing a home and financing that home, they would not be 

affected. 

Mr. SCOTT. So your proposal rule changes are retroactive? 

Ms. BURNS. Proactive. It would only be for those transactions 

that occur in the future. 

Mr. SCOTT. Okay. Are there any plans in place—I know you said 

this will not eliminate the program, but are there any other plans 

in place that could very well take the place of this program? 

Ms. BURNS. I don’t know if you call it a ‘‘plan,’’ but there is a 

hope that FHA will offer a 100 percent financing product of its 

own. 

Mr. SCOTT. Why are my constituents calling me very concerned? 

Why are they saying to me that you are proposing in this rule to 

eliminate the program? And when I ask you the question, you say 

you are not eliminating the program. 

Where is this misunderstanding? 

Ms. BURNS. I understand that there is a campaign of some misinformation out there to try to stop FHA from moving forward with 

this rulemaking process. And I would also say that the rulemaking 

process is actually beneficial for parties who feel that the rulemaking is inappropriate. 

This is an opportunity for parties to comment to FHA, to the Department of Housing and Urban Development, to make substantive 

constructed proposals for alternative regulatory fixes. This is an opportunity for that to take place. 

The campaign of misinformation won’t necessarily do that. It is 

really through the rulemaking process, through those protocols that 

a change could occur. 

Chairwoman WATERS. Thank you very much. 

I would like to thank the panel for your testimony here this 

afternoon and a question has been asked of me about the possibility of extending the rulemaking process. As I understand it, you 

have until July 10th to give comments; is that right? 

Ms. BURNS. That is right. 

28

Chairwoman WATERS. What is the possibility of extending that 

another 30 days? 

Ms. BURNS. I am not an attorney, but we can certainly look into 

that and let you know. 

Chairwoman WATERS. Would you please get back to me early 

next week about extending that while we talk more. 

We thank you for being here. The Chair notes that some members may have additional questions for the panel which they may 

wish to submit in writing. Without objection, the hearing record 

will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record. 

Chairwoman WATERS. Panel One is now dismissed, and I would 

like to welcome our second panel. 

I am going to combine the second panel and the third panel. I 

am pleased to welcome our distinguished second and third panels 

of witnesses. Our first witness will be Ms. Ann Ashburn, president 

and chief executive officer, AmeriDream, Incorporated. Our second 

witness will be Mr. Scott Syphax, president and chief executive officer, Nehemiah Corporation of America. Our third witness will be 

Mr. John Osta, vice president, Gallinger Realty USA. Our fourth 

witness will be Mr. Todd Richardson, vice president of legal affairs, 

C.P. Morgan. Next, we will have Dr. Steven Fuller from The Center 

for Regional Analysis, George Mason University School of Public 

Policy. And, finally, we will have Ms. Beverly Queen. Would you 

please join us at this end of the table? 

I wanted to make sure that we got everyone in. With that, Ms. 

Ashburn, would you please begin with your testimony for 5 minutes. 

STATEMENT OF ANN ASHBURN, PRESIDENT AND CEO, 

AMERIDREAM, INC. 

Good morning, Chairwoman Waters, and Ranking Member 

Biggert. Thank you for your work in increasing and supporting affordable housing policy and the opportunity to testify today. 

My name is Ann Ashburn, and I am president of AmeriDream, 

a 501(c)(3) organization that increases homeownership possibilities 

for the underserved. AmeriDream was established in 1999 and is 

now one of the largest affordable housing nonprofits in the country. 

I ask this committee to bear in mind one proposition: Downpayment assistance works. I appreciate the comments you made earlier and I hope the added comments will support and affirm your 

earlier comments. 

We have educated 61,000 home buyers, counseled 1,200 people in foreclosure prevention, built and committed over $30 million to affordable housing projects, and have provided downpayment assistance to over 200,000 lower-income home buyers in every congressional district in the United States. 

Our gift recipients are lower-income individuals including minorities, legal immigrants, women-headed households, and firsttime home buyers. We are not subprime lenders and we are not a 

lender. 

No one disputes that DPA programs have assisted hundreds of 

thousands of lower-income families. No one questions whether the 

beneficiaries of these programs have received every penny promVerDate 0ct 09 2002 10:53 Oct 04, 2007 Jkt 037562 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\37562.TXT HFIN PsN: TERRIE
29

ised, and no one doubts that these programs have lifted homeownership rates to record levels, particularly among minority 

groups. 

HUD itself has used our downpayment assistance program when 

selling its properties. This is a new charitable sector, barely a decade old, and it has experienced significant growing pains. 

AmeriDream and Nehemiah here today have recognized that the 

program is not perfect, and we have aggressively sought guidance 

from HUD and the IRS. 

Unfortunately, that outreach has been rebuffed, and policies 

drafted without our input which seek to shut the program down. 

I respectfully suggest to this committee that such a result would 

be disastrous for the housing market, for the families we serve, and 

for the major work that this committee does to promote homeownership for all Americans. 

I would like to take a moment to address a few points that came 

up and clarify and reaffirm your understanding. Appraisals: claims 

have been made that, using DPA, lead to overvalued property. The 

fact of the matter is, all FHA homes have HUD-certified appraisals. We have long recognized that the appraisals were an issue 

with DPA as well as the entire lending industry. We proposed a 

system of a line draw similar to the Veterans Administration. Unfortunately, HUD ignored our suggestions. However, we commend 

Congressmen Wilson and Clay for their bill on appraisal reform 

and for taking the steps to restore the integrity in the appraisal 

process. 

The claim rates: The DPA claim rate has been consistently overstated. Page 10 of the GAO study today shows a true national 

claim rate in figure 2. Loans seasoned 3 and 5 years have a 94 percent and 91 percent success rate. 

DPA-assisted loans should be compared to other assisted loans, 

particularly family-assisted loans. These are both groups that need 

help with the downpayment. When you compare these groups, 

there is only a 1 percent difference in the claim rate. This 1 percent 

allows home buyers who do not have family wealth to become 

homeowners. 

Fund insolvency: The assertion that the downpayment assistance 

program is primarily responsible for potentially making the FHA 

fund insolvent is inaccurate. GAO studies in 1990, 1998, and 2002, 

to name a few, have cautioned that if the market slowed down, and 

the private sector became more active, for instance, the insurance 

fund would be in danger. We have seen subprime loans reduce 

FHA’s market share. In times of low house appreciation, such as 

today, foreclosures are more likely to occur and would impact the 

fund. 

GAO also determined that HUD did not have the ability to reliably estimate or evaluate the full impact of policy changes on the 

fund, and HUD relaxed its underwriting standards to increase 

homeownership—all actions that will impact the fund. All of these 

issues have contributed to the proposed HUD rule which, if implemented as drafted, will eliminate DPA. 

We oppose the rule because the program works and the related 

issues can be addressed through specific policy adjustments, beVerDate 0ct 09 2002 10:53 Oct 04, 2007 Jkt 037562 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\37562.TXT HFIN PsN: TERRIE
30

cause requests to HUD have gone without action for the past 10 

years. 

Finally, one of the most alarming statements about DPA came 

from comments from HUD officials in which they suggested that 

despite public comment, they were determined to implement the 

final rule. This is alarming because over here we have 7,000 comments that have been received in support of DPA and requesting 

HUD to withdraw the rule. Only 16 comments are in favor of the 

rule. 

[The prepared statement of Ms. Ashburn can be found on page 

43 of the appendix.] 

Chairwoman WATERS. Thank you very much. 

Our next witness is Mr. Scott Syphax. 

STATEMENT OF SCOTT C. SYPHAX, PRESIDENT AND CEO, 

NEHEMIAH CORPORATION OF AMERICA 

Mr. SYPHAX. Madam Chairwoman, Ranking Member Biggert, 

and members of the subcommittee, thank you for inviting me to 

testify today. I am Scott Syphax, president and CEO of Nehemiah 

Corporation of America, the oldest of the downpayment assistance 

providers under discussion today. Since our inception, Nehemiah 

has made $909 million in downpayment assistance grants to over 

228,000 families across the United States. 

When I joined Nehemiah 7 years ago, it was because I believed 

in the mission of homeownership among the traditionally underserved, and helping those folks who had been locked out, whether 

it was because of their recent immigration to this country, the fact 

that their families never received their 40 acres and a mule, or just 

that they were locked out of opportunity because of family circumstance, that this model brought promise, hope and success to 

the ability of people to reach the American dream. 

The Nehemiah program was birthed in a way that I think is important for all of you to hear. It was birthed by a grassroots movement. A small black Baptist church in Sacramento, California, Antioch Progressive Baptist Church, put up a pool of $5,000 because 

a local city councilman had found someone who wanted to help 160 

low-income renters become homeowners and couldn’t figure out a 

legal way to do it. 

When he moved forward and was able to come up with the program to fix that problem, a young man by the name of Don Harris 

sought out HUD’s assistance in establishing a pilot project. That 

pilot project has now grown into the movement that this committee 

is discussing today. 

However, along the way, groups like AmeriDream, Nehemiah, 

and others have sought out HUD’s partnership and assistance in 

taking care of the issues that we ourselves brought forward to the 

government and tried to address in a way before they became a 

large outstanding issue, but as Congressman Miller pointed out, to 

no avail. 

We stand before you here today because of the fact that we are 

threatened once again, the second time in a decade, with an extinction. Whose interest does it really serve? Well, it is certainly not 

the almost 1 million families that we have served collectively in the 

time this program has been around. It certainly does not serve the 

31

communities where those homeowners pay taxes and strengthen 

the very civic fabric of the cities and towns that they live in. In 

fact, it is ironic that today, in the middle of National Homeownership Month, we would be in a place where HUD would be proposing the extinction of this program. 

I have said to many, mend it, don’t end it, and the reason is, 

whatever outstanding issues there are, there is a willing community that wants to fix the problems, only our arms are not long 

enough to box with HUD’s god. 

So, therefore, we come before you today humble and thankful for 

your interest in this issue and ask once again, please assist us in 

assisting the dreams of the millions of families yet unserved, not 

only by this program, but by the programs that this committee has 

authored through the reformat. 

We look forward to that competition. We look forward to HUD 

having additional tools, but we too can play a role. It is ironic that 

at this very moment HUD would immediately eliminate 40 percent 

of its business today. No, it does not stand to rational reason. 

I will close by asking all of you to consider a question that, frankly, I borrowed from one that Ronald Reagan asked in the 1980 election, but I have rephrased it in my own way. And that is, would 

America and the million or so families that downpayment assistance has served because of organizations like AmeriDream, and 

Nehemiah, and others, would America and those families be better 

off today if we had never come into existence and all those people 

were renters? 

If you believe the answer is ‘‘yes,’’ then kill us, allow HUD to do 

their deed and take us out. But if you agree with us, that in fact 

America and those families and the communities they reside in are 

better off today because of their existence and the help provided, 

then please help us to continue to help others. 

Thank you very much. 

[The prepared statement of Mr. Syphax can be found on page 100 

of the appendix.] 

Chairwoman WATERS. Thank you very much. 

Witnesses, I am going to ask you to keep your testimony very 

tight and reduce it to 3 minutes, because we are going to have to 

go and vote. If we leave, we will be gone for almost an hour because we have 50 minutes’ worth of votes, and I know you don’t 

want to sit here and wait another hour for us to come back. So I 

will get Mr. Osta started right now. 

Mr. MILLER. Madam Chairwoman, based on HUD’s testimony, I 

think this should be introduced into the record: 

‘‘June 5th, Bloomberg, U.S. Department of Housing and Urban 

Development will ban a downpayment assistance program for home 

buyers over the objection of nonprofit groups. HUD Secretary 

Alphonso Jackson said, ‘I am very much against it.’ Jackson said 

in the interview, ‘I think it is wrong and I don’t want this to continue to be a partner.’ Jackson said in the interview that HUD intends to approve the new rule by the end of the year, even if the 

agency receives critical comments.’’ 

That is germane to our discussion earlier. 

Chairwoman WATERS. Without objection it shall be submitted 

into the report. 

32

Mr. Osta. 

STATEMENT OF JOHN F. OSTA, VICE PRESIDENT, GALLINGER 

REALTY USA 

Mr. OSTA. Thank you for allowing me to be here. I have submitted my remarks, but after listening to representatives of HUD, 

I did want to reiterate that I am affiliated with a real estate company. I have no affiliation with any of the downpayment assistance 

programs. 

In my whole career, I have had the same dream as many of you 

have had, and that is trying to provide affordable housing for all 

Americans. This program, when first introduced to our company 

and to me, certainly met those criteria. 

The only comments that I would like to make to stay within your 

timeframe is that I was sort of almost breathless in listening to 

some of the comments that came from HUD about the facts and 

figures of what buyers and sellers do in this program. Some of it 

was inaccurate, in some cases very inaccurate. 

The fact of the matter remains that a seller has a right to sell 

a property and a buyer has a right to buy a property. It is a negotiated item. All of the statements made from some of the HUD representatives really are not factual in the real world, and I just 

wanted you to be aware of that, and also state that you and your 

committee have said a lot of things that are in my testimony, so 

I really am pleased to hear what is happening. 

My concluding remark would have been to you, please do try to 

bring these parties together. 

Congressman, you said it, I had it in my mind: Don’t throw the 

baby out with the bath water; let’s keep this going. 

[The prepared statement of Mr. Osta can be found on page 70 of 

the appendix.] 

Chairwoman WATERS. Thank you very much. 

Mr. Richardson. 

STATEMENT OF TODD RICHARDSON, VICE PRESIDENT OF 

LEGAL AFFAIRS, C.P. MORGAN 

Mr. RICHARDSON. Thank you, Chairwoman Waters, and members 

of the subcommittee, for the invitation to speak today regarding 

downpayment assistance. Also, thank you for the robust discussion 

that occurred with Panel One; most of those points were also in my 

document, and I can truncate my discussion. 

There are many different opinions on downpayment assistance 

that I will allow others to more eloquently state. However, as a 

home builder that serves the first-time home buyer market, I hope 

to provide a unique perspective on the topic of the downpayment 

assistance program, the impact it has had on our homeowners, and 

the implications the proposed HUD rule would have, effectively 

eliminating downpayment assistance. 

Over the last 24 years, C.P. Morgan has had the pleasure of 

building over 23,000 homes for first-time home buyers. Nearly half 

of our home buyers are minorities. Nearly one-third of our home 

buyers utilize downpayment assistance, namely the Nehemiah program, and have done so with great ease. Downpayment assistance 

33

clearly has enabled otherwise underserved groups the opportunity 

to take part in the American dream. 

C.P. Morgan’s mission and statement is to provide more people 

with more home than they have ever dreamed possible. Downpayment assistance has served as a useful tool to help C.P. Morgan 

achieve its vision. 

With that said, it is important to understand what will happen 

if and when the proposed rule goes into effect and downpayment 

assistance is eliminated. 

Thousands of our customers, specifically minorities and first-time 

home buyers, will be precluded from experiencing the dream of 

homeownership. With the appropriate dissolution of the subprime 

market, these home buyers will be left with few funding options 

and will be forced to continue renting. 

Furthermore, with one-third of C.P. Morgan, there will be an adverse impact on our employees, subcontractors, and suppliers. This 

impact will occur throughout the Nation and is not C.P. Morganspecific. Remember that over 100,000 homeowners utilized downpayment assistance in 2006; imagine the national impact caused by 

eliminating 100,000-plus home sales annually. 

All of this discussion raises questions that I trust HUD will respond to, and it is quite evident you all have your eyes on: Number 

one, is a reformed downpayment assistance program possible using 

the experience we have gained over the last 10 years? 

If it is determined that downpayment assistance should be eliminated, is it appropriate to put the rule into effect without first having an alternative mechanism? 

Would it be prudent also to note the fate of the FHA Modernization Act? 

And an issue that hasn’t been necessarily been spoken about 

here, but with downpayment assistance representing 40 percent of 

FHA loans, what will happen to the FHA reserve fund if downpayment assistance is eliminated? 

Chairwoman WATERS. I am sorry to do this to you, but if we 

want to finish this before we take those votes, I have to move to 

Dr. Fuller. 

Mr. RICHARDSON. I understand. Thank you. 

[The prepared statement of Mr. Richardson can be found on page 

76 of the appendix.] 

STATEMENT OF DR. STEVEN S. FULLER, CENTER FOR REGIONAL ANALYSIS, GEORGE MASON UNIVERSITY SCHOOL 

OF PUBLIC POLICY 

Dr. FULLER. Thank you very much. Thank you, Madam Chairwoman, and distinguished members of the subcommittee. 

You have my comments. There are a couple of points I would like 

to make in the few minutes I have. 

We have just completed a study called, ‘‘A Comprehensive Analysis of Nonprofit Downpayment Assistance.’’ It hasn’t been released 

yet, but we will make sure you get a copy. 

One of the issues that we undertook in this analysis was to look 

at the criticism of the nonprofit downpayment assistance programs. 

The opponents of the NDPA industry based their arguments primarily on three studies; we heard from those today. There are two 

34

important issues that I think are important to bring to your attention because I have heard statistics used here this morning that 

just aren’t correct. 

It is useful to recognize that the Department of Housing and 

Urban Development Office of Inspector General’s report only looked 

at four cities. It is not a national study; its results cannot be applied nationwide. 

The results of the GAO study provide more rigorous analysis, but 

they also have some problems in them. And all of the comparisons 

today, the comparisons were made between the total industry nationwide and the recipients of the downpayment assistance—two 

different groups. 

They also have another group. There are other kinds of downpayment assistance—from family, friends, parents, and that kind of 

thing. We look at these differences. Nationwide it is a 1 percentage 

difference in the default rate between the two groups. 

One last point that I think is very important: The claim rates 

quoted here, the 15 percent, are from three cities. That isn’t a national statistic; it is only 8 percent, 1 percent more than similar recipients. 

[The prepared statement of Dr. Fuller can be found on page 57 

of the appendix.] 

Chairwoman WATERS. Thank you very much. We’ll have your 

written testimony to review. 

I would like to get to Ms. Beverly Queen, the homeowner, before 

we go to vote. 

STATEMENT OF BEVERLY QUEEN, HOMEOWNER 

Ms. QUEEN. Yes, Madam Chairwoman, and distinguished committee members. Thank you for taking the time to hold this hearing on such an important issue. 

I grew up in a housing project in Washington, D.C., with my 

eight brothers and sisters. My mother was a high school graduate 

who supported our family on roughly $1,500 a year, as a sole 

breadwinner. 

When I heard about the downpayment assistance program, I was 

living in a basement in Section 8 housing with my four children. 

I knew it was time to get out when my eldest son, then 17, was 

robbed by a group of kids in our neighborhood for his tennis shoes. 

He also started falling in with the wrong crowd and getting into 

fights. 

I was worried for the welfare of my youngest son, then 12, because I didn’t want him to follow the same path. I prayed to God 

to take us away from that place. At that time my husband, who 

was still my boyfriend back then, and I worked full-time jobs to afford our $795 a month rent and tried to make ends meet, but we 

were not able to save any money for a downpayment on a house. 

Nevertheless, we knew that owning our own home was the answer, so we went looking for property. When we found our dream 

home, the real estate agent introduced us to a lender who was familiar with the Homeowners Assistance Program. They walked us 

through the process, and we were comfortable when we decided to 

go with the Downpayment Assistance Program through 

AmeriDream. 

35

One of the best parts of the process was learning how to budget 

our income and save. AmeriDream provided us with so much information and told us about things that we never knew before. 

Our home has four bedrooms with a full dining room, kitchen, 

sitting room, and a family room, on a half acre of land in Fort 

Washington, Maryland. It borders government land, so there are 

often cows grazing, much different than our basement view, which 

was a brick wall. 

When we bought our home in 2000, it cost $173,000. This was 

a lot of money actually for many people in our country, but for 

Washington, D.C., it was cheap. I am happy to say that the value 

of my house has doubled in the 3 years that I have lived there. And 

I am so also proud to say that we have never been late on our 

mortgage payment. 

Without a downpayment assistance program like AmeriDream, I 

know in my heart that I would have lost my dream home, and in 

the time it would have taken for me to save up for my own house, 

it would have been sold, plus I would have needed to stay in a desperate living situation until I was able to scrape together the 

money. 

The most important part of my story is how downpayment assistance enabled me to give my children a better life. My youngest son 

is now a 4.0 student, studying criminal justice and is working as 

an intern for the State’s Attorney— 

Chairwoman WATERS. I am sorry, I am going have to ask you to 

discontinue. I think we get the point. Your written statement will 

be part of the record for all of us to review. 

[The prepared statement of Ms. Queen can be found on page 73 

of the appendix.] 

Chairwoman WATERS. Members, we have 10 minutes left. I will 

not ask any questions. I will yield to my ranking member, Mrs. 

Biggert. 

Mrs. BIGGERT. I will yield to the gentleman from California. 

Mr. MILLER. Thank you for yielding. My question is for Nehemiah. I read this letter that you gave me yesterday, and when you 

asked HUD to impose additional regulations on nonprofits, what 

were you asking them to do? 

Mr. SYPHAX. Well, we were asking them to do a number of 

things. We were asking them, one, to oversee and create a more robust appraisal process. 

As Ms. Ashburn recently testified, we did ask for two things. One 

was some sort of appraisal process where people had to sign, upon 

penalty of perjury, that there was no manipulation of the appraisal, 

or secondly, the blind pool arrangement where HUD could contract 

with the VA or create their own blind pool. 

Secondly, mandatory homeownership education for everyone who 

received downpayment assistance. 

The third thing, for existing homes, was multiyear home warranties. 

And number four, we were looking to impose a mandatory requirement for post-home-ownership counseling, which is something 

that AmeriDream and Nehemiah do today. So none of the things 

that we asked for are new; we have been consistently asking for 

them for over a decade. 

36

Chairwoman WATERS. Thank you very much. We are going have 

to go. We have about— 

Mr. MILLER. I yield back the balance of my time. 

Chairwoman WATERS. Mr. Green. 

Mr. GREEN. Yes, ma’am; quickly, Madam Chairwoman. 

It seems to me that someone has made the assumption that we 

will trade one program for another, and you have commented on 

this, Madam Chairwoman, so I think it would be appropriate for 

us to somehow send a message to the appropriate authorities that 

we never intended to trade one program for another. 

I can see how both of these programs have a place and can be 

maintained and should be. 

Chairwoman WATERS. Thank you very much. 

Mr. Ellison, I know you have been in and out today; quickly, 

about 6 minutes? 

Mr. ELLISON. Is there room for the rule change and for the sellerfunded downpayment assistance providers? As I listen to both presentations, and I had read the remarks earlier, the question that 

came to mind is, would the rule change wipe out seller-funded assistance or is there room for both the rule and seller-funded assistance? 

I do believe in hearings like this sometimes people draw stark 

and clear lines because they want to be persuasive, but in truth, 

is there room for in the market for both? 

Ms. ASHBURN. I think I will answer that, because Scott and I 

have talked about it. And please amend these remarks, as written. 

As written—if it is passed as written, it does absolutely eliminate 

the work that our programs do. Our request is that the rule be 

withdrawn, so that there is a public debate and discussion about 

the issue. Because it is a significant issue, it is complex, there are 

a lot of nuances to it; and we don’t think it can be satisfied through 

paper dialogue. I think people have to sit down and come together. 

Mr. ELLISON. Have you had a chance for dialogue with HUD? 

And one last question, do you deny that the seller-funded downpayment programs inflate the price of the house? 

Mr. SYPHAX. To answer question one, which is, have we had the 

opportunity for a dialogue, we have been attempting to have that 

dialogue for a decade and the paper record reflects that, that is, on 

both of our parts. 

Number two, with regards to whether or not there is room for 

this rule and whether that can take place, theoretically, sure, but 

the fact of the matter is that for over a decade we have attempted—and one of the reasons that we so much appreciate this 

forum is because, frankly, after 10 years of not taking action, it 

may be that it takes legislation to figure this out. 

Number three, in terms of the denial issue, price appraisal can 

and does take place on an anecdotal basis. We have standards very 

similar to each other where it is that we actually kick out home 

purchases if we can find evidence of manipulation. The problem is 

that without broad standards that everyone has to pay attention to, 

whoever tried to originate that loan can take it down the street to 

somewhere else. And so we need help because of the fact that ultimately we are the ones that are punished by the fact that whatever 

37

lawless activity takes place does take place. It is too honest to benefit from regulation. 

Chairwoman WATERS. Thank you very much, I am sorry, we are 

going to have to leave to go to the Floor. 

The Chair notes that some members may have additional questions for this panel which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

This panel is now dismissed. And before we adjourn, the Chair 

notes that the record of the hearing will remain open for 5 days 

to allow for the submission by members of additional materials. 

The Chair would ask unanimous consent that the letter containing the written statement of Dr. Kevin Haskett of the American Enterprise Institute be included in the record and the written 

letter of the National Association of Realtors also be included in 

the record without objection. It is so ordered. 

This hearing is now adjourned. I thank all of the witnesses for 

being here today. You are now officially on the record in describing 

what it is and what it is not. 

We have other members who will be taking some action as a result of this hearing. We will look closely at the FHA bill and the 

no-downpayment program. We will also be looking at the other bill 

that was referenced here today about appraisals to see if we can’t 

be fair and just in the way that we manage the ability for our constituents to have assistance with downpayments. 

Thank you very much. 

[Whereupon, at 12:38 p.m., the hearing was adjourned.] 

(39)

A P P E N D I X

June 22, 2007

40


37562.001
41


37562.002
42


37562.003
43


37562.004
44


37562.005
45


37562.006
46


37562.007
47


37562.008
48


37562.009
49


37562.010
50


37562.011
51


37562.012
52


37562.013
53


37562.014
54


37562.015
55


37562.016
56


37562.017
57


37562.018
58


37562.019
59


37562.020
60


37562.021
61


37562.022
62


37562.023
63


37562.024
64


37562.025
65


37562.026
66


37562.027
67


37562.028
68


37562.029
69


37562.030
70


37562.031
71


37562.032
72


37562.033
73


37562.034
74


37562.035
75


37562.036
76


37562.037
77


37562.038
78


37562.039
79


37562.040
80


37562.041
81


37562.042
82


37562.043
83


37562.044
84


37562.045
85


37562.046
86


37562.047
87


37562.048
88


37562.049
89


37562.050
90


37562.051
91


37562.052
92


37562.053
93


37562.054
94


37562.055
95


37562.056
96


37562.057
97


37562.058
98


37562.059
99


37562.060
100


37562.061
101


37562.062
102


37562.063
103


37562.064
104


37562.065
105


37562.066
106


37562.067
107


37562.068
108


37562.069
109


37562.070
110


37562.071
111


37562.072
112


37562.073
113


37562.074
114


37562.075
115


37562.076
116


37562.077
117


37562.078
118


37562.079
119


37562.080
120


37562.081
121


37562.082
122


37562.083
123


37562.084
124


37562.085