Friday, July 4, 2008

NPR Report on Debate on Downpayment Assistance Charities

Happy Birthday America!

NPR Radio recently ran a story (audio version) (print version) in yesterday's Morning Edition on the effort in Congress to shut down downpayment assistance charities.  The story recounts the FHA assertion that donwpayment assistance charities contribute to the growing foreclosure rate.  On the other hand, the story quotes a Republican Congressman's and an downpayment assistance industry representative's assertions that the FHA is engaging in hypocritical turf protection (not to mention "beside-the-pointism"):

There are too many questions that are not answered here," says Rep. Gary Miller (R-Calif.).  Miller, a former homebuilder, argues that the FHA's data on defaults is suspect and says the agency has refused to provide adequate documentation. He also argues the FHA is trying to imitate nonprofit assistance through its own program called The American Dream Downpayment Initiative.  "What they've said to us is, 'Let's continue the American Dream Downpayment Assistance program and that's using taxpayer dollars to give to somebody, but let's exclude the private sector, which doesn't cost the taxpayer anything from participating in the same program,'" Miller says. "That's a problem I'm having."  Scott Syphax, CEO of Nehemiah Corporation of America, the originator of the non-profit down-payment model, sees the conflict as bureaucrats flexing their muscles. "HUD has never forgiven the fact that we have been more successful at bringing people to FHA and creating new homeowners through their programs than they've been themselves," Syphax says. "And that's the reason that they want to take over the program and do it themselves … they feel essentially we're operating their franchise."

As some readers may be aware, I have been involved in a running debate with an anonymous reader regarding the issue. (see comments to the linked post).  One question raised by the NPR report is that if it is the downpayment assistance that is causing the housing mess, why does the FHA maintain its own such program (with taxpayer dollars, no less), while simultaneously seeking to prohibit privately funded programs?  Granted, the law is clear that "contributions," the benefits of which are earmarked for the donor (any any other specifically identified individual, for that matter), generally do not and should not generate a charitable contribution; but the question of tax exemption for the downpayment assistnce charity is slightly to the left (or right) of that assertion.  That is, denying the charitable contribution deduction for a seller who makes a "donation" to a downpayment assistance charity does not necessarily imply that the charity is not entitled to tax exempt status. And singling out the beneficiaries of downpayment assistance grants as the special causes of the housing mess is ridiculous.


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