We have reported on the attempt by the U.S. Department of Housing and Urban Development (HUD) to impose new documentation requirements for down payment assistance provided by government entities to be used in connection with Federal Housing Administration (FHA) insured mortgage loans. For now, those efforts have come to an end.

Initially, HUD announced the requirements in Mortgagee Letter 2019-06. Significantly, the new requirements became effective for case numbers assigned on or after April 18, 2019, which was the date that the Mortgagee Letter was issued.

Next, in Mortgagee Letter 2019-07 HUD extended the effective date of the new requirements to case numbers assigned on or after July 23, 2019. HUD advised it extended the effective date to allow time for governmental entities to prepare the documentation described in Mortgagee Letter 2019-06. What HUD did not mention was that that CBC Mortgage Agency, which is an instrumentality of the Cedar Band of Paiutes Indian American tribe and operates the Chenoa Fund down payment assistance program, had filed a lawsuit in the U.S. District Court for Utah challenging HUD’s action.

Then, in July 2019 Judge David Neffer granted a preliminary injunction preventing HUD from implementing the requirements. Finally, in Mortgagee Letter 2019-10 HUD suspended the effective date of Mortgagee Letter 2019-06 until further notice. HUD also advised that mortgagees may continue to follow the guidance in HUD Handbook 4000.1 II.A.4.d.ii, which sets forth existing requirements regarding government-provided down payment assistance.

Now, HUD has thrown in the towel, at least temporarily, by announcing in Mortgagee Letter 2019-12 the rescission of all three Mortgagee Letters. HUD welcomes feedback from interested parties for a period of 30 days from the date of issuance of the Mortgagee Letter. Time will tell if HUD will make another attempt to impose the same type of requirements or seek to impose other requirements that it believes to be suitable alternatives.