Rick Neale’s Oct 6 Florida Today article entitled “Melbourne to close housing loophole: Needy families pocketed profits” made the following statement: “Those recipients sold their houses a few years later and pocketed a combined $1.1 million in net proceeds, a FLORIDA TODAY analysis shows. Unlike regulations on the books in Palm Bay and Titusville, these homeowners were not required to return any of this money to the city.”

If you check with the City of Melbourne, I believe you will find their down payment assistance program is not a loan at all, but a gift. There is no lien filed against the property. I tried many years ago at the County to have liens filed against the property for the amount of the down payment assistance, normally 20%, to ensure if the property ever sold that the original ‘loan’ would be returned. I suppose the reason some entities are looking at a share of the profits is that they are not a lender at all, but should be a part-owner. Programs like this are ripe for abuse, especially at 20%. Back in the early 1990’s people in $40,000 1960’s houses were paying taxes so those buying brand new $100,000 houses could get $20,000 free down payment ‘assistance’.

This money was supposed to help people buy their first house. The concept was to make people long term homeowners, but like many programs, it went awry here. Either first time homeowners simply got the cash and laughed all the way to the bank (many sold very quickly) or else they could never afford a house in the first place. If you look at the houses bought and mentally adjust for the year bought, these were not small 3/1/carport houses. While the newspaper may characterize the buyers as Melbourne’s poorest households, this is most likely not the case. Many families run at the margins of reported income, but hang in there with unreported income.

The government entities ‘interest’ is really not ownership rights. Had Melbourne (or the other cities and the County) which administer this federal/state program liened the property for the money ‘loaned’ (a euphemism for given), then upon the sale of each house the ‘loan’ would be repaid and the money put back in the pool for assistance for other first time homebuyers.

People are losing sight of the program’s intent. It was designed to subsidize people to buy (own) their first house, not subsidize a real estate ‘investment’, in the hopes they stay in their house. Yes, of mice and men…

Another issue I had argued was the 20% (or more) assistance, as a 5% assistance could help more people. The knock on my idea was the County did not want these buyers to have to pay for PMI (Private Mortgage Insurance). Again, how many homeowners were paying PMI, putting their own money down, and then having their taxes handed off for someone else to get the ride?

Government drives up the costs of housing, then offers money to a lucky few to buy what government regulation has made harder to buy.