The HUD Office of Inspector General (OIG) released an audit on July 9, 2015, in which it opined that loans that included down payment assistance programs from state housing agencies ran afoul of HUD regulations. (OIG Report 2015-LA-1005). Less than two weeks later, Ed Golding, Principal Deputy Assistant Secretary for Housing, issued a press release reaffirming "FHA's support of certain down payment assistance programs, like those run by state housing finance agencies." Since then, HUD and the OIG have traded blows on the issue with the OIG conducting additional audits releasing similar findings and HUD responding by assuring lenders that the programs were compliant with HUD rules.  Most recently, on May 25, 2016, Mr. Golding issued a release on behalf of HUD in which he said:

"I am writing to let you know that loans that include down payment assistance provided by state and local housing finance agencies continue to be eligible for FHA insurance. After conducting a thorough and deliberative process, HUD has determined that housing finance agency down payment assistance programs are legal and consistent with the National Housing Act. Government entities may provide funds to borrowers to help make down payments on FHA loans."

OIG Inspector General David Montoya responded almost immediately and expressed the OIG's disagreement with HUD's decision. The OIG noted that another audit of a lender is currently underway related to a similar down payment assistance program. Accordingly, HUD's press release provides little comfort to those lenders that may be subjected to an OIG audit (and the resulting costs incurred in working through and responding to such an audit). As a result, until HUD takes official action to approve of the down payment assistance programs, lenders need to closely consider their participation in the programs.