Nonprofits that funnel money from sellers to buyers are under attack by the Bush administration, but supporters say that these companies help thousands of middle-income people who would otherwise never save up enough to buy a home.

The Federal Housing Administration requires a down payment of 3 percent, but no-money down loans using charitable down-payment assistance grew to about 35 percent of the agency’s new loans last year, up from about 5 percent in 2001.

Defaults are higher than the FHA’s other loans. As of February, about 10 percent of borrowers receiving seller-financed down-payment assistance were either 90 or more days delinquent or in foreclosure, government statistics show.

That’s greater than the rate of about 6 percent for ordinary FHA loans, but less than the rate of about 24 percent for subprime loans made to borrowers with poor credit.

Supporters say that the programs would significantly reduce access to homeownership and some tightening of the regulations would solve problems with the program.

Source: The Associated Press, Alan Zibel