In the news ... Tuesday, May 06, 2014

Mid-Atlantic Area

 

Pennsylvania

Three Glenhardie Corporate Center

1265 Drummers Lane, Suite 220

Wayne, PA  19087

(610) 687-8020

(800) 842-2080

(610) 687-6056 - fax

 

Calder Square

P.O. Box 10326

State College, PA  16805-0326

(814) 238-3600

(814) 238-3604 - fax

 

125 Technology Drive, Suite 101

Canonsburg, PA  15317

(866) 364-2777

(724) 746-5434 - fax

 

Delaware

32 The Green

Dover, DE  19901

(302) 734-3570

(800) 722-0784

(302) 734-3254 - fax

 

The 800 King Street Building

800 King Street, Suite 304

Wilmington, DE  19801

(302) 661-1997

(302) 661-1996 - fax

 

Maryland

Columbia Corporate Park

8850 Stanford Blvd., Suite 2900

Columbia, MD  21045

(410) 953-6763

(800) 664-8306

(410) 953-6761 - fax

 

Virginia

9303 Center Street, Suite 101

Manassas, VA  20110-5547

(703) 365-2300

(800) 232-6817

(703) 365-2400 - fax

 

1503 Santa Rosa Road, Suite 233

Richmond, VA  23229

(804) 288-4090

(888) 859-922

(804) 288-4092 - fax

6802 Paragon Place
Suite 410
Richmond, VA 23230

(804) 441-6112
(804) 441-6050 - fax


Modifications to National Housing Act to Eliminate Seller-Assisted Down Payment Programs


On July 24, 2008, the United States Congress passed the Housing and Economic Recovery Act of 2008 (the “Act”). President Bush signed the Act into law on July 30 (Public Law 110-289). One of the provisions contained in the Act is a provision which modifies that portion of the National Housing Act codified at 12 U.S.C. 1709(b)(9) to specifically prohibit the use of funds received from a seller or any other party deriving a financial benefit from a transaction to fund the buyer’s down payment on FHA insured loans. This prohibition becomes effective for any loan for which a mortgagee issues credit approval for a borrower on or after October 1, 2008.

Specifically, 12 USC 1709(b)(9)(C) states as follows:

(C) PROHIBITED SOURCES.-In no case shall the funds required by subparagraph (A) consist, in whole or in part, of funds provided by any of the following parties, before, during, or after closing of the property sale:

(i) The seller or any person or entity that financially benefits from the transaction.

(ii) Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause (i). This subparagraph shall apply only to mortgagees for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.

The prohibitions described above apply only to FHA insured loans. The most significant impact of this legislation will be to disqualify the use of seller-assisted down payment programs, such as the Nehemiah program, from participation on sales involving FHA insured loans. It remains the position of Old Republic that our direct operations and agents should close transactions involving down payment assistance on other types of loans only if:

1. The lender’s closing instructions acknowledge and approve the use of down payment assistance funds; and

2. The credit for the buyer and contribution from the seller are reflected in the appropriate sections of the HUD-1 settlement statement.

 Should you have any questions, please contact our underwriting counsel: Steve Gratman; Sue Swick or Dwight Edwards.

 

 
 
 

 

Please contact Sue Morgan at Old Republic Title with any questions
or give us a call at 610-687-8020 or 800-842-2080. 

 

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Old Republic Title Update is published by the Mid-Atlantic Area Office of Old Republic National Title Insurance Company in an effort to provide information relative to our industry on a timely basis. None of the materials included in this publication should be deemed legal or underwriting advice or should be acted upon without prior consultation with your underwriter or counsel.