Sections Explained: (Sec. 113)

 SECTION: 113

SELLER-FUNDED 
DOWNPAYMENT ASSISTANCE

SEC. 113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED  DOWNPAYMENT ASSISTANCE.

Paragraph 9 of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended to read as follows:

(9) CASH INVESTMENT REQUIREMENT-

(A) IN GENERAL- A mortgage insured under this section shall be executed by a mortgagor who shall have paid, in cash, on account of the
property an amount equal to not less than 3.5 percent of the appraised value of the property or  such larger amount as the Secretary may
determine.

(B) FAMILY MEMBERS- For purposes of this paragraph, the Secretary shall consider as cash or its equivalent any amounts borrowed from a family member (as such term is defined in section 201), subject only to the requirements that, in any case in which the repayment of such borrowed amounts is secured by a lien against the property, that-- such lien shall be subordinate to the mortgage; and the sum of the principal obligation of the mortgage and the obligation secured by such lien may not exceed 100 percent of the appraised value of the property.

(C) PROHIBITED SOURCES- In no case shall the funds required by subparagraph (A) consist, in whole or in part, of funds provided by any of the following parties before, during, or after closing of  the property sale: The seller or any other person or entity that financially benefits from the transaction. Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause (i).'.