Lawmaker Forwards to Treasury Constituent's Letter on Down Payment Assistance Guidance

Enclosed is correspondence which I recently received from my constituent, Mr. Graig Taylor, in which he expresses concern about the Internal Revenue Service Ruling 2006-27 regarding seller- participation down payment assistance.

Your review and consideration of Mr. Taylor's correspondence are appreciated. Please fax your response to the attention of Matthew Sandgren of my staff at (202) 224-6331.

We, at Esther Foundation, were shocked by the May 4 IRS Ruling 2006-27 regarding seller-participation down payment assistance because of the tremendous positive impact these programs have had for the past seven years on first-time homebuyers and their families as well as the mortgage industry as a whole.

The following are five vital points Ruling 2006-27 has disregarded.

• It ignores the reason that down payment assistance organizations exist and why they are classified as 501(c)(3) charities: to lessen the burden of government. It is projected that in 2006 the private down payment assistance industry will assist some 100,000 families with as much as $500 million in grants. This is $500 million that the government will not provide as they have no replacement programs at this time.

• Ruling 2006-27 hurts low income families and minorities. It disregards its potential impact on low income buyers and the ripple effect it will have on communities and the economy.

• It attacks the mortgage industry, eliminating 40% of FHA grants and accelerating the jump that has hit the housing market. Thousands of FHA loans will no longer qualify for down payment assistance.

• It eliminates the successful partnership between the government and the non-profit sector of the mortgage industry. It mocks all the mortgage industry has accomplished through charitable means and partnerships and sends the message that charitable intent has no place in this industry.

• Ruling 2006-27 is in direct opposition to the aims of the Bush Administration's "Homeownership Challenge" that the mortgage industry increase homeownership opportunities for minorities.

We were surprised that the IRS chose to make their intentions known through a Ruling rather than a Regulation which would have allowed for debate and discussion. We're asking you to speak with Treasury Secretary John Snow and HUD Secretary Alphonso Jackson on our behalf and urge them to allow sufficient time for public discussion and feedback before revoking the 501(c)(3) status of seller-participation down payment assistance programs. We feel certain that if they sufficiently examined the Esther Foundation, they would find everything from our mission statement to our 990's reflect a wholly charitable organization.

PS. The elimination of the seller-participation down payment assistance industry would leave at least 100 families without work in the state of Utah. It would rob 5,000 families in Utah of their chance of homeownership and would result in the loss of approximately 30,000 loans nationwide.