A week earlier, U.S. Department of Housing and Urban Development Secretary Shaun Donovan had told the National Association of Home Builders that HUD would let banks and local governments offer short-term "bridge loans" to cover the down payment for first-time buyers eligible for the tax credit. The loans would have been available to applicants for federally insured mortgages such as Federal Housing Administration loans.
Lenders, home builders and real estate agents had reacted favorably to the bridge-loan proposal, saying it would open up the housing market to more first-time buyers, however it was determined that the proposal too closely resembled a now-illegal practice known as seller-funded down-payment assistance, which allowed a home's seller to "gift" the down payment to a specific buyer through a non-profit organization.
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Jolenta Averill, Principal
Lake & City Homes Realty