News that the Federal Housing Administration’s capital reserves have dipped to $3.6 billion generated a spate of alarming headlines last week.  But few focused on one aspect of the problem: the role nonprofits played in generating at least $1 billion in losses for the FHA insurance fund.  

Those losses were the subject of a Huffington Post Investigative Fund project published in October, which examined how two large housing nonprofits --Nehemiah Corporation of America and AmeriDream Inc. --  brokered $54 billion in FHA-backed loans for borrowers who couldn’t afford the government’s minimum downpayment.

The nonprofits were two of dozens that would front the downpayment for the buyer, then recoup the money (plus a fee) as a donation from the seller. The Government Accountability Office looked into the practice and found that homebuilders in these programs often factored the cost of the down-payment into their sales prices -- the buyers rarely knew the difference.

An FHA financial briefing (PDF) released last week blamed these seller-financed down-payment assistance programs for many of its bad loans, and estimated that they would generate $10.4 billion in future losses to the agency. Without them, the agency said, the reserve fund would be above the federally mandated 2 percent.  

Read the full story to find out more about how these nonprofits made tens of millions in fees on the no-money-down deals.