"Brian Demer, who used the FHA down-payment assistance program to buy a new condominium in Aldie, Va., says he wouldn't have been able to buy it without the program.
"Bottom line, I didn't have to put 3 percent down, which was a big deal," he says.
Demer got his down payment from the nonprofit organization Genesis on a recommendation from Holly Davis, a loan officer at SunTrust Bank in Reston, Va. Davis calls the FHA down-payment assistance program the "hot program," especially because private lenders are pulling their no down payment, 100 percent financing deals.
. . .
Data show that buyers who receive down payments through nonprofits are two to three times more likely to default than FHA homebuyers who provide their own down payment.
The FHA projects the high defaults will require it to ask for a $1.4 billion subsidy from Congress next year — the first one in its 74-year history.
Because of high default rates and conflict of interest issues, the FHA is trying to shut down the nonprofit down-payment program, even though it now accounts for more than a third of all FHA loans. That's up from 5 percent in 2001".