WASHINGTON, Sept 29: The largest homebuyer assistance programme run by the US government will ban a popular form of downpayment under new rules, the head of the programme said on Friday.

Under the new rules downpayments “cannot be derived from sellers directly or indirectly or any other party that benefits financially,” Brian Montgomery, the FHA chief, told reporters in a conference call.

Under current rules, the Federal Housing Administration permits homebuyers to accept some downpayment help from the seller or private firms that specialise in such assistance, including AmeriDream, Inc. of Maryland and Nehemiah Corporation of Sacramento, California.

Some groups that are ostensibly non-profits give downpayment help to borrowers and then accept donations from the seller in a quid pro quo exchange, he said.

The donation generally comes from the proceeds of the sale and homeowners who benefit from the exchange are much more likely to default than other borrowers, Montgomery said.

Spokespersons for AmeriDream and Nehemiah were not immediately available for comment.—Reuters