Non-Profit Guidelines           

HUD has released the rules on dealing with down payment assistance programs.

Per MORTGAGEE LETTER 2006 -13

 Federal Housing Administration (FHA) approved mortgagees that seek FHA mortgage insurance on loans secured by single family houses, on which downpayment assistance has been provided to the borrower in the form of gifts, are required to determine that the gifts are from sources acceptable to FHA.                

            The mortgagee is responsible for ensuring that an entity is a charitable organization as defined above.  One resource available to mortgagees for obtaining this information is the Internal Revenue Service (IRS) Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986, which contains a list of organizations eligible to receive tax-deductible charitable contributions.  The IRS has an online version of this list that can help mortgagees and others conduct a search of these organizations.  The online version can be found at: http://apps.irs.gov/app/pub78, using the following instructions to obtain the latest update.   

• Enter search data and click “Search”
• Click “Search for Charities” under “Charities & Non-Profits Topics”
• Click “Recent Deletions from Cumulative List” under “Additional Information”
• Click name of organization if that name appears on list of names under “Recent Deletions from Cumulative List (Publication 78)”

In addition, FHA has developed a web page that provides a listing of downpayment assistance providers whose nonprofit status has been revoked.  This page can be found at:  http://www.hud.gov/offices/hsg/sfh/np/irstatus.cfm

FHA continues to examine downpayment assistance programs and will provide appropriate notification about any changes that may be made to existing policies.

Please note that Mortgagee Letter 2005-02 provides guidance to mortgagees and appraisers about their responsibilities for reporting sales concessions and verifying sales data, including downpayment assistance provided by the seller or any other party involved in the transaction.