Gaithersburg-based AmeriDream, Inc. is prominently mentioned in a Huffington Post story looking at seller-funded down payment assistance (DPA) programs for new home buyers. The programs allow home builders to give a three percent down payment to possibly unqualified buyers by laundering it through a nonprofit corporation, which takes a fee for the service. As the HuffPo concludes:
Congress ended these programs last year, and the IRS has investigated the nonprofits since 2006. The ground has been plowed before—see
, for example—but HuffPo puts some meat on the bones.
Some basic truisms:
Of course, the "charitable gift" was nothing of the sort. Home builders merely raised their prices to cover the down payment and the vigorish paid to the nonprofit middlemen, thus helping to inflate the housing bubble:
The story is surprisingly light on a key fact: the amount of losses. The story says current losses are $1 billion, though last spring HUD claimed $4.8 billion in "long term" losses. HuffPo's piece clarifies (not really):
There are a couple of useful graphs though, including a breakout comparing the amount of mortgages done through AmeriDream vs. Nehemiah. One of the scariest things is the "
," which shows that Texas is third largest, with about $150 million in losses. This is remarkable because Texas did not see much of a housing bubble, and prices there have remained mainly stable. That would suggest that DPA deals will more often turn out to be bad even in a relatively good housing market.
The HuffPo story focuses on California-based Nehemiah Corporation of America, the concept's originator and Hertz to AmeriDream's Avis.
AmeriDream has launched as part of its lobbying campaign to restore DPA. AmeriDream had revenues of about $144 million in 2007, according to its latest available tax return. CEO Ann Ashburn cleared about $350,000 that year. To put it in perspective, that's about what your average go-getter mortgage broker made that year to facilitate dicey loans.
One thing to realize: even though these home-builder-funded DPA loans are federally banned, low and no-down payment deals are still getting done on existing houses-and some of them are pretty crazy,
A 20-year-old woman with three jobs pays $183,000 for a "box" with no kitchen in Oakland, Calif., and claims it's now worth $250k 'cause she put in a kitchen. She's spending 54 percent of her income to service the mortgage and taxes. It's all backed by FHA.
I feel like it's 2006 all over again.