The Housing and Economic Recovery Act of 2008 (HERA) amended the National Housing Act to add a prohibited sources clause, at section 203(b)(9)(C).  This requirement prohibits any portion of a borrower’s minimum cash investment, as required by section 203(b)(9)(A) from being provided by: (i) the seller or any other person or entity that financially benefits from the transaction, or (ii) any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause (i). While section 203(b)(9)(C) prohibits assistance from a seller involved in the transaction, FHA continues to receive questions regarding the prohibition on persons or entities that may financially benefit from the transaction. In particular, FHA has received questions regarding whether down payment assistance programs operated by governmental entities are being operated in a fashion that would render such assistance prohibited. Over the past several years, FHA has engaged with the public about down payment assistance and held a 2022 tribal consultation to provide HUD with a broader understanding regarding down payment assistance proposed rulemaking and the potential implications for tribal government. This rule would establish through rulemaking the circumstances in which governmental entities are deriving a prohibited financial benefit.