I would like to suggest charging a funding fee to help offset the cost or even make the program self sufficient. The argument against this is that this is for very low and low income, but if the fee is financed in above the LTV like with VA, FHA, and Guranteed RH loans, it would not affect the borrower's payment by much…it would raise their payments less than $10 if it was a 1-2% fee for most loans. There is talk of defunding this program, but the two big arguments I make for keeping the 502 direct program and not migrating everything towards 502 guaranteed are: A) Guaranteed banks almost never do new construction if at all, and with the new construction starts numbers being so low and the financing practically drying up for any type of new construction loans, especially draw loans, it would have a significant negative impact on the housing market if the 502 direct program was defunded. B) There are very few banks who will finance a house that is in need of repairs and even fewer who will actually finance in the cost of these repairs, or work with a grant from a leveraging partner to do the work and allow it to be completed after closing. The ones who do are usually very choosy about what loans they will approve, which leaves a large group of people with the most need without many options. So I feel that this program has a definite crucial need that it fills in the housing market, especially in the rural underserved areas. If we could make some changes so that it was not just a negative number in the budget maybe we could save it or even create some revenue from it! I am sure at the rates we have now the cost outweighs whatever revenue comes in from the mortgage payments…maybe back when the rates were at 12% or higher it was not so bad, but at 4.25 or less there is not much room for profit. There is nothing wrong with charging a fair price for providing a service, even to low income borrowers! If we can try to run things more like a business would we can succeed!
Idea No. 6630