Federal District Court Blocks Implementation of HUD Rule on Downpayment Assistance

In the ongoing battle between nonprofit downpayment assistance organizations and the department of Housing and Urban Development, a federal district court has ordered a temporary injunction preventing the implementation of a proposed HUD rule that prohibits homebuyers who obtain a seller funded downpayment from obtaining an FHA insured loan. The proposed rule would have been enacted on October 31st had U.S. district court judge Paul Friedman not ruled that HUD "failed to supply a reasoned analysis for its departure from its long-standing policy of approval". Recent studies by both the IRS and Government Accountability Office have shown that homes sold using seller funds for a downpayment are much more likely to result in foreclosure and often sell at an inflated value. NAR generally supported the proposed HUD rule as a way to combat rising foreclosure rates in many areas of the country. The court order prevents HUD from implementing the rule until further review. A future court date has not yet been announced.