This is going to keep the SHort Sale Listings Coming...

From WSJ.com:

Seller-Funded Down Payments Still Plague FHA

Seller-funded down payment “gifts” appear to be of the sort that keep on giving.

It was a little over a year ago that FHA finally prevailed in a years-long effort to rid itself of gift programs that allowed home sellers to fund 3% down payments for borrowers who took out FHA-backed home loans. But the recently released independent audit for the FHA, which shows that the agency’s reserves for unexpected losses have fallen to razor thin levels, shows that seller-funded down payments continue to account for an outsized share of losses.

From 2002-2008, these gift programs essentially allowed folks to buy homes with no money down. Nonprofit agencies provided the required down payments to home buyers, and the sellers typically made a donation to the nonprofits. (See any one of three Page One stories that the Journal did over the years: U.S. Backed Mortgage Program Fuels Risks, Scrutiny of Down-Payment Gifts Threatens Charitable Movement, and Home Buyers’ Down Payments Are Now Paid by Some Builders.)

The problem with the loans, of course, is that buyers who have no skin-in-the-game are more likely to default on their mortgage. “Those facilities created too many homeowners in the FHA portfolio that were not equipped for the financial responsibilities of homeownership,” the agency said in its report to Congress.

The FHA said on Thursday that it’s now badly depleted reserves would be more than $10 billion higher without them—enough to put the agency’s capital reserve ratio at the minimum 2% required by law…