By supporting recent rule change by HUD, state agency aligns itself with an unfair effort to restrict down payment assistance for those in need
In mid-April, the U.S. Department of Housing and Urban Development (HUD) adopted new rules severely limiting access to down payment assistance (DPA) opportunities. With more than 2,500 programs affected by the onerous new rules, thousands of families in need stand to lose the help they need to realize their dream of homeownership.
Logic would dictate that agencies with a mission to increase access to homeownership would oppose this draconian HUD rule. But the Washington State Housing Finance Commission appears to be in support of the new restrictions, and their perplexing position means consumers will lose.
First, some background.
On April 18, HUD released a Mortgagee Letter restricting the ability of national DPA providers to do business. HUD’s action created chaos for thousands of borrowers, who had loans in or nearing the pipeline and suddenly faced the loss of the down payment help they needed to close on their home loan.
Many of those borrowers are receiving help from the CBC Mortgage Agency (CBCMA), a Native American-owned housing agency based in Utah. Through its Chenoa Fund, CBCMA has helped 15,000 creditworthy borrowers achieve the dream of homeownership, including 651 in the state of Washington.
HUD offered no justifications for its sudden change in position, and provided no data to show that its new rules would reduce risk to FHA’s Mutual Mortgage Insurance Fund. HUD also failed to follow the mandatory process outlined in the Administrative Procedures Act, a federal law prescribing the steps that must be taken to implement new policy.
In addition, HUD failed to comply with Executive Order 13175 and HUD’s own policy, which require that federal agencies engage in tribal consultation before they make a policy change that would affect a Native American tribe. And HUD did not notify Congress before issuing its new rules.
HUD’s new rules are an example of discriminatory policies that continue to lock minorities in a permanent, renting underclass. Minorities are most affected by these new rules because statistics show that they often lack the intergenerational wealth white homebuyers enjoy, making it harder for them to meet the down payment threshold.
Following HUD’s rule adoption, CBCMA immediately filed a lawsuit in federal court, which prompted HUD to put a 90-day hold on the new policy. But the core issue remains unresolved and will be adjudicated in federal court in the coming months.
Now for the truly disturbing part of this story. Rather than oppose a federal action that will reduce the availability of help for needy homebuyers, the Washington State Housing Finance Commission (WSHFC) and its allies in several other states filed a brief in federal court supporting HUD’s discriminatory and onerous new rules.
Why would WSHFC and other state housing agencies support these new rules, when the National Council of State Housing Agencies, a nonpartisan association of state housing finance providers, has publicly expressed “deep” concerns over HUD’s new rules? Is it that WSHFC doesn’t like free-market competition and wishes to maintain a monopoly over who can provide DPA in Washington state? Or that WSHFC wants would-be home purchasers to have fewer, rather than more, options—even if that means fewer Americans get the assistance they need?
It should be noted that WSHFC unsuccessfully sued another provider of DPA who was having great success by providing a more competitive program of DPA options to Washington state homebuyers. So the pattern continues. WSHFC, which claims in its mission statement to be dedicated to “increasing housing access,” has chosen instead to restrict housing access by aligning itself with HUD’s unfair and unlawful effort to limit other providers of DPA in order to protect its own programs from competition.
How does the Chenoa Fund program compare to the WSHFC?
- Chenoa Fund’s 1st mortgage loan was compared to the WSHFC five times since September 2018 with the following results:
- September 2018 – Chenoa Fund’s rate was .625% better.
- October 2018 – rates were equal
- March 2019 – Chenoa Fund’s rate was .875% better
- April 2019 – Chenoa Fund’s rate was .375% better
- May 2019 – Chenoa Fund’s rate was .375% better
- Both programs require DPA to be repaid over time at 0%; however, only Chenoa Fund has a forgiveness feature after 36 months if on-time payments have been made on the 1st mortgage.
- Chenoa Fund helps more buyers. Of the 651 borrowers helped in the state of Washington, over half would not have qualified for the WSHFC program. One buyer from Washington, by the name of Taylor Mott opted for the forgivable down payment option and stated: “We were referred to an incredible lender … who explained multiple down payment assistance programs to us, but we knew Chenoa was our perfect fit. As long as you pay your bills on time, the money is essentially free. It is a truly incredible program!”
- John B, a loan officer comments on the advantages of using the Chenoa Fund program: “This program provides lenders a down payment assistance program that we can use in most states instead of having to learn and use 50 unique state specific lending programs. Chenoa’s forgivable second is a abundant lending feature that makes the program more attractive than many state specific options.”
In its brief to the federal court, WSHFC incorrectly attempts to link the causes of the Great Recession to Chenoa Fund, describing people and events unaffiliated with CBCMA. In addition, WSHFC seeks to use misleading arguments and personal attacks to distract from the fact that its programs, service, and pricing are sub-par, causing it to lose market share. Rather than offering a better product to consumers and making its program more competitive in the process, WSHFC wishes to use the courts to suppress much-needed competition.
The Chenoa Fund provides aspiring homeowners with a real alternative to state monopolies. It’s disturbing that Washington and other states are seeking to deprive borrowers of meaningful choice.