Indianapolis Area Real Estate Blog

The End of the Road for Nehemiah

End of the RoadMany first time homebuyers throughout the years have used programs like AmeriDream and Nehemiah to assist in buying a home. With the tightening of lending practices throughout the country, it was just a matter of time before such programs would be unavailable.

The Nehemiah program and other DPA (down payment assistance) programs have been scrutinized throughout the years and now, they are about to become extinct. Most DPA s have until October 31, 2007 to close any loans they currently have in the works.

The end of the road for Nehemiah is March 30, 2008.

DPA programs allow the seller to participate in the buyer s downpayment. The standard 3% downpayment on an FHA program was gifted by the seller to Nehemiah, who in turn gifted it back to the buyer. Nehemiah, a privately funded company, then receives a fee for their services.

FHA allows gifts for the downpayment and Nehemiah provides such assistance.When utilizing a DPA the buyer is generally asking the seller to contribute 6% of the sales price in concessions. 3% for downpayment assistance and 3% in closing costs.

The argument is the price of the home is increased to account for the 6% contribution, therefore, loans are actually funded for more than the value of the home, increasing the liklihood of default.

I actually have a client who plans to use such a program. Now, they are hoping they can. I personally believe in the program when used as intended, with the seller actually providing the 6% and the value of the home is not inflated to cover the cost.

In Indianapolis, we have many homes sitting on the market, which are underpriced for the recent comps. These are perfect examples of homes which would qualify for the Nehemiah program without inflating the price beyond the comparable value of the neighborhood. On October 1, 2007, Nehemiah has filed a lawsuit seeking an injunction to block implementation of the rule.


#1 By Robin Willis at 10/3/2007 0:24 PM


I was reading about this on the Nehemiah website this morning. I hope that their lawsuit is successful in allowing the program to continue. When I was a first time homebuyer we used Ameridream and we did not have to inflate the price of the home to do so. I think these programs are instrumental in helping out first time buyers. As long as the MONTHLY PAYMENT is affordable, buyers will not be as likely to default.

P.S. I clicked on a link through my Blogosphere widget to look at this post and found out it was yours!! How cool.

#2 By Lynda Eisenmann at 10/6/2007 6:14 PM

Thanks for the update and reminder on this program. It's almost like a "flash fron the past" for me, I had completely forgotten about this one.

#3 By Mana Tulberg at 10/3/2007 6:22 AM

Paula, This is a very informative and important post. Just like Cyndee I have not had a client who has used this program, but those who have need to be informed right away.

#4 By Gena Reide at 10/6/2007 4:41 PM

Good info on a loan program that is finding its way out...others will find their way in and hopefully not add to the issues that we have been seeing. So, many of these programs are really quite good if they had just been implemented correctly.

- Gena Riede

#5 By Joanne Hanson at 10/6/2007 5:10 PM

Paula, with homes as expensive as they are, first time buyers really need help to get their first home. It will be too bad if the program goes away. Hopefully local government or banks can step in and help out. I know you will keep in touch with everyone and let us all know.

#6 By Rita Taylor at 10/17/2007 3:38 PM

I have always thought this was a strange program. I would prefer the FHA just allow the money to go directly to the buyer without the need for an intermediary. As with many things in the last few years, abuse may be the downfall of these types of programs.

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