HUD has long recognized the important role that downpayment assistance through secondary financing plays in providing affordable housing opportunities. There are three categories of DAP assistance providers:

1) Nonprofit and Nonprofit Instrumentality of Government DAPs: Nonprofits and Nonprofit Instrumentalities of Government that provide DAPs in the form of a lien in conjunction with an FHA first mortgage lien, must be approved by HUD. HUD maintains a Roster of those Nonprofits and Nonprofit Instrumentalities of Government that have been approved. See Mortgagee Letter 02-01 for more information on the approval process. Also, see: Non Profit Approval Information for Participation in Single Family Programs.

2) Government Entity DAPs: No approval is required for Government Entities that provide secondary financing in the form of a lien in conjunction with an FHA first mortgage lien. HUD does not maintain a list of Government Entity DAP providers. Mortgage lenders are responsible for assuring that a Government Entity DAP meets all appropriate FHA requirements, including those contained in Mortgagee Letters 94-2, 02-22, and HUD Handbook 4155.1 Rev-5, Paragraph 1-13A.

3) Gift Programs: FHA does not "approve" down payment assistance programs in the form of gifts administered by charitable organizations (i.e., nonprofits). Mortgage lenders are responsible for assuring that the gift to the homebuyer from the charitable organization meets the appropriate FHA requirements and the transfer of funds is properly documented. See HUD Handbook 4155.1 REV-5, CHG-1 Paragraph 2-10 (C) and Mortgagee Letter 00-08, for further information. Those charitable organizations that comply with existing regulations and policy guidelines are permitted to give cash gifts to eligible homebuyers and do not need prior FHA approval to do so. Please see: Status of IRS charitable organizations for more information.

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