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HUD/OH RIN: 2502-AJ50 Publication ID: Fall 2019 
Title: Mortgage Insurance for Mortgage Transactions Involving Downpayment Assistance Programs (FR-6150) 

The Housing and Economic Recovery Act of 2008 (HERA) amended the National Housing Act to add a prohibited sources clause, under section 203(b)(9)(C).  This requirement prohibits any portion of a borrower’s the 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) 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 downpayment assistance programs operated by government entities are being operated in a fashion that would render such assistance prohibited.  This rule would establish through rulemaking the circumstances in which governmental entities are deriving a prohibited financial benefit.

Agency: Department of Housing and Urban Development(HUD)  Priority: Other Significant 
RIN Status: Previously published in the Unified Agenda Agenda Stage of Rulemaking: Proposed Rule Stage 
Major: No  Unfunded Mandates: No 
EO 13771 Designation: Other 
CFR Citation: 24 CFR 203   
Legal Authority: 12 U.S.C. 1709    42 U.S.C. 3535(d)   
Legal Deadline:  None

Statement of Need:

The rule is needed to ensure that governmental entities are acting consistent with the National Housing Act and are not accruing financial benefits. Obtaining financial benefit other than recouping costs from operating a downpayment assistance program would violate the statute and increase risk to the insurance fund.

Summary of the Legal Basis:

This rule would resolve continuing issues with downpayment assistance (DPA) programs when HUD mortgage insurance is involved, by defining what types of DPA programs comply with statute.



Anticipated Costs and Benefits:

HUD expects that the neither the total economic costs nor the total efficiency gains will exceed $100 million.


There is a risk that entities may be more reluctant to provide downpayment assistance. However, since most the cost of compliance with the rule is low, this is viewed as an extremely small risk.

Action Date FR Cite
NPRM  01/00/2020 
Regulatory Flexibility Analysis Required: No  Government Levels Affected: Local, State 
Small Entities Affected: No  Federalism: No 
Included in the Regulatory Plan: Yes 
RIN Data Printed in the FR: No 
Agency Contact:
Elissa Saunders
Director, Office of Single Family Program Development
Department of Housing and Urban Development
Office of Housing
451 7th Street SW,
Washington, DC 20410
Phone:202 708-1672