Foundation Expresses Concerns About Future of Down Payment Assistance Programs

Congratulations on your appointment as U.S. Secretary of the Treasury. We at Esther Foundation are encouraged by President Bush's appointment of a man acquainted with both business and the non-profit sector. The information and concerns in the paragraphs below, regarding IRS Revenue Ruling 2006-27, were sent to former Secretary Snow. We are sharing them with you in hopes that we can work together to provide down payment assistance to low-income and minority homebuyers.

We understand that with Ruling 2006-27, the IRS wishes to clarify the definition of a 501(c)(3) charity and enforce a structure that would ensure down payment providers operate exclusively for charitable purposes. As you construct new guidelines for down payment assistance, we at Esther Foundation respectfully ask to be a part of the process.

Esther Foundation was created in 1994 as a private charitable foundation whose mission was to benefit individuals and families through homeownership, health, education, and culture. In 2002, Esther Foundation created a Down Payment Grant pilot program. This new program allowed us to help 200 times as many families achieve home ownership as we had in our previous five years of housing efforts which consisted mainly of donations to Habitat for Humanity, low-income housing projects, and homeless shelter services. We set high standards for this program that would ensure its charitable mission.

• We presented our down payment and closing cost grants as a charitable contribution from a past seller who had contributed to our organization, never as an addition to the price of the contract.

• We set a low flat fee nationwide so as not to penalize the seller for making a charitable donation.

• We set a high standard of giving for that fee, giving back over 50% to the community.

• We made a conscious effort not to approach down payment assistance as a for-profit company in disguise.

• We set a compensation level for all staff that was competitive in the non-profit arena but not excessive in any way.

As with the creation of any industry, the development of seller-participation down payment assistance programs (DPAs for short) has had its fits and starts. In the last three years, the DPA industry has improved considerably. But we believe there is still work to be done.

A week before the IRS issued Ruling 2006-27, Esther Foundation sent a letter similar to this one to Susan Brown, Attorney Advisor at the IRS, with the following suggestions which would ensure that DP As function as wholly charitable endeavors.

Esther Foundation has always striven to do down payment assistance the right way. Esther Foundation is a charity. We have never engaged in self-serving tactics or business arrangements. Esther's President makes no salary at all, and all Esther Board members serve on a voluntary basis. We want to do what is necessary to bring Esther Foundation and the DPA industry into compliance with the standards the IRS feels are necessary.

Please allow us to continue helping the government help low-income and minority families. We want to work in harmony with you to achieve President Bush's goal of seeing at least 5.5 million minority families achieve homeownership.