Congress Ready to Nix Seller-Financed Loans

Congress is expected to pass a housing package this week that eliminates seller-financed mortgage programs.

Under these programs, nonprofit organizations finance the down payment for buyers, then home sellers repay the organizations. Millions of people have bought homes this way, but the Federal Housing Administration says the foreclosure rate on these transactions is four times higher than it is on its other transactions.

The Senate version of the housing bill banned seller financing; the House version did not. Negotiators crafting a compromise bill have agreed to follow the Senate’s position, which is also supported by the Bush administration.

"No insurance company can sustain that amount of additional costs year after year and still survive," Brian D. Montgomery, the FHA commissioner, said in a recent speech.

But supporters of this kind of assistance say the system may have its problems, but because it is vital to low- and middle-income buyers, it should be fixed, not abandoned.

Source: Washington Post, Dina ElBoghdady (07/22/2008)