According to an article in the Star-Telegram, a state program for first-time home buyers was suspended because it was no longer able to offer below-market interest rates. The program has helped 9,600 first-time home buyers since 2005. The Texas Department of Housing and Community Affairs is hoping to restructure the program and launch it in April making it easier for first-time home buyers to make a down-payment on a new home.

The article said:

The changes that state officials are considering include making down-payment assistance available. Details on how the program would incorporate the assistance are not yet available. In general, officials are looking at monetizing the up-to-$8,000 refundable tax credit for first time buyers recently made available by the federal government. The state agency would advance the down payment and closing costs, then borrowers would repay the agency when they receive the tax credit from the federal government.

Basically, the agency wants homeowners to take out a loan against a future (possible) tax return and use it to purchase a new home. This sounds dangerously close to the “no down-payment” schemes that are partly responsible for the foreclosure crisis we’re facing today. It is not clear what type of system this housing agency has put in place to prevent homeowners from creating a situation where they are facing foreclosure ; but we need to proceed cautiously with this type of program.

Many homeowners who are now filing for bankruptcy are doing so because they are weighed down with unaffordable debt–mostly medical debt and mortgage debt. Is it likely that a homeowner who is unable to save money for a down-payment on a home will be able to restrain themselves from spending the tax credit instead of repaying the down-payment loan? As we move forward in our attempts to stave off this foreclosure crisis we need to be diligent about giving mortgages and down-payment loans only to those who are fiscally prepared to handle the new debt.