A signature Sacramento program that has helped almost 300,000 lower-income people nationally buy homes in the past decade – while stirring controversy for years – is likely to be shut down this week, Nehemiah Corp. of America officials acknowledged Monday.
The nonprofit giant believes Congress and President Bush will ban its decade-old down-payment assistance "gift" program within days as part of a larger housing bill, Nehemiah President and Chief Executive Officer Scott Syphax said Monday.
Syphax said he met Monday with the Nehemiah board and about 30 down-payment assistance employees in Sacramento to say it's likely the "doors are closing" on the program.
But Syphax said it's not the end of the nonprofit started a decade ago at Antioch Progressive Baptist Church in south Sacramento to help its lower-income members buy houses.
"Nehemiah is very solid in terms of everything else, and we have prepared for this day over the past two years," he said.
The firm has steadily remade itself into an urban developer, with an eye on building nearly 3,000 residential units just north of downtown Sacramento. Recently, it received $19 million in state housing bond funds for its 65-acre development, called Township 9.
Syphax said the House of Representatives seems all but certain to follow the July 11 action by the Senate that included a ban on the program, in which Nehemiah gives a buyer the down payment to a home. Bush is expected to sign it if passed by the House this week, Syphax said.
The program is part of a larger housing bill to strengthen government-backed mortgage giants Freddie Mac and Fannie Mae and modernize the mortgage lending of the Federal Housing Administration.
Here's how the program works: A lender contacts Nehemiah or a similar group and asks for a down payment "gift" for a buyer who can afford monthly payments but not a down payment. Nehemiah sends a check to cover the down payment. The seller sends Nehemiah a check for the same amount plus a $499 fee.
If down-payment assistance is banned, it will decisively conclude a decade-old war between the federal government and supporters of the "gift" program, which included mayors, mortgage bankers and home builders. Twice, the U.S. Department of Housing and Urban Development has proposed banning the practice only to lose, recently in federal court.
The latest potential ban comes as down-payment gifts are being cited more frequently than ever as the ticket to homeownership. Federal Housing Administration loans require only a 3 percent down payment, and Nehemiah's gift program, and its many imitators nationally, easily take care of that requirement.
"Without programs such as this, it will put the American dream of homeownership in jeopardy for a lot of first-time lower-income homebuyers," said John Frith, spokesman for the California Building Industry Association, a home builder trade group that supports the program.
Others say ending the program will harm prospects for a recovery in the housing market.
"It takes a major player out of our market," said Jon Kaempfer, senior loan consultant at Sacramento-based Vitek Mortgage. Syphax said Monday that Nehemiah and others who offer the program are helping 30,000 people into homes every month.
While Nehemiah says the program helps buyers with the most difficult part of the home-buying process – a hefty down payment – critics say it unfairly inflates the values of homes for those who can least afford it. Though Nehemiah says it discourages the practice, many sellers inflate the price of the house to compensate for the cost.
"Originally, they (gifts) went to builders, and builders would jack up their sales prices," Kaempfer said. "That's what really ticked the FHA off."
Last month HUD officials said the FHA, with one-third of its loans obtained using down payment assistance, was strained by "substantial losses." The agency has asserted that borrowers of Nehemiah-style loans have defaulted at a higher rate than others, endangering government loan guarantees.
Nehemiah says its studies show just the opposite.
Call The Bee's Jim Wasserman, (916) 321-1102. Read his Home Front blog at www.sacbee.com/blogs.
