An appeals court has rejected claims by a state housing finance agency that the National Homebuyers Fund is barred from offering down payment assistance in Washington state.

The decision by the Washington State Court of Appeals reversed an earlier trial court's ruling that NHF cannot operate outside its home state of California. The appeals court said the Washington State Housing Finance Commission did not have standing to bring the case, noting that WSHFC is among at least 25 other organizations providing down payment assistance in the state.

“Therefore, WSHFC is only one of the participants in housing finance assistance and does not have a monopoly interest to protect,” the court wrote in its opinion.

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When the National Homebuyers Fund entered the Washington market in 2014, the Washington State Housing Finance Commission “looked for ways to curtail NHF’s entry into and activities within Washington,” according to the court’s opinion. Bloomberg News

NHF provides down payment assistance to low- and moderate-income homebuyers in the form of a grant of up to 5% of the mortgage loan. Lenders create individual mortgages with NHF and supply the down payment assistance to the homebuyer; individual mortgages are then combined into mortgage-backed securities. The fund sells the MBS on the secondary market to investors.

When NHF entered the Washington market in 2014, the WSHFC “looked for ways to curtail NHF’s entry into and activities within Washington,” fearing competition, according to the court’s opinion.

In May 2015, the state commission filed suit against NHF and its partner organizations, and sought an injunction to prohibit the organization from providing services in Washington.

The WSHFC was created by state legislation to increase the supply of affordable housing within the state, and is authorized to participate in the Federal Housing Administration's mortgage insurance program. One of the commission’s programs provides secondary loans for down payment assistance with low or zero interest and deferred payments. The trial court had agreed with the state commission that NHF was legally prohibited from offering services outside California.

"Because WSHFC lacks standing to bring this lawsuit, we conclude that the trial court erred in granting summary judgment for WSHFC," the appeals court said in its decision.

Following the appeals court’s decision, NHF is now able to resume operations in Washington, said Craig Ferguson, vice president of NHF.

“It was a frivolous lawsuit and the appellate court showed us that, and we’re back in business in Washington,” he said in an interview.

Kim Herman, executive director of the Washington State Housing Finance Commission, said the group is weighing its legal options.

“We are conferring with our legal team about the possibility of an appeal,” Herman said.

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