ShareOn April 18, 2019, the Department of Housing and Urban Development (HUD) released Mortgagee Letter 19-06 clarifying documentation requirements for government entities that provide down payment assistance to Federal Housing Administration (FHA) borrowers. Government entities include federal, state, or local agencies and governments; federally recognized Native American tribes; and Federal Home Loan Banks. HUD is requiring that all government entities offering down payment assistance to FHA borrowers demonstrate that the property in question is working within the jurisdiction where the government entity has authority to provide assistance. A government entity must also provide a legal opinion attesting to the validity of the government entities authority to provide down payment assistance and a letter from the government entity stating the down payment funds are not contingent upon any future transfer of the insured mortgage to a specific entity.
While the requirements were to go into effect for FHA case numbers assigned on or after April 18, 2019, HUD has agreed to hold off on implementation for 90 days following an injunction filed by the Chenoa Fund which is arguing that HUD needs to go through the rule-making process for this type of action. The Chenoa Fund is run on behalf of the Cedar Band of the Paiutes located in Utah. The Fund has been offering down payment assistance outside of Paiutes tribal borders and is concerned a strict reading of the new guidance could affect their ability to continue to offer such assistance.
On April 25, 2019, HUD released Mortgagee Letter 19-07, announcing a new effective date of July 23, 2019 for the implementation of the new down payment assistance requirements.