In the face of tightening credit, increased loan restrictions, rising costs of gas and food, and of course the biggest bailout for the wealthy ever, Americans were dealt another blow yesterday when Down Payment Assistance (DPA) programs were officially killed by the Housing and Economic Recovery Act Bush signed into law in July of this year. The bill, ostensibly to “rescue” the housing industry, eliminates DPA programs that have helped strapped borrowers come up with the necessary 3 percent down for FHA loans. It also does away with the Nehemiah Program, which basically allows the seller to contribute up to 6 percent of the selling price to the buyer’s down payment and closing costs.

What does this mean for potential home buyers and the economy? According to its many critics, the wiping out of the programs, a drought in credit, and an overall increase in down-payment requirements mean that millions of potential homeowners nationwide will find it more difficult to get into home, despite the glut of homes on the market.

It’s estimated that as much as 40 percent of the monthly FHA loan origination volume utilizes DPA to assist low-income buyers. Low-income families and single women are hurt most by the bill, as single women account for nearly 40 percent of home sales nationwide and are the fastest-growing group of home buyers, according to the National Association of Realtors.

“Community officials across America are bracing for the backlash that will come from the elimination of downpayment assistance,” said Tom Cochran, CEO and Executive Director of The U.S. Conference of Mayors, in a press release yeterday. “These programs inarguably support our local housing markets and have been the differentiating factor between homeownership and renting for low-to-middle income Americans. It is a shame to see them disappear and we will do what we can to support the reinstatement of these programs under a new Administration.”

In the Twin Cities there is currently a 9.9-month supply of homes on the market, and the elimination of DPA programs and lack of access for first-time home buyers ensure the glut will grow, critics say. As Twin Cities Realtor John Mazzra noted on Twin Cities Real Estate News in June: “Let me make this clear: If this bill passes fewer houses will be sold.  More qualified homeowners will remain as renters.  More homes will stay on the market and the real estate and mortgage crisis will get worse…. The consequences of making the wrong decision about the fate of DPAs will affect our entire economy.”