A new government ban will terminate virtually all seller-funded down payment assistance programs in the United States. But the clock may be stopped, now that a bill has been introduced in Congress that would reverse the ban.

The clock will tick off its last second Oct. 1, the last day when homebuyers will be able to use seller-funded down payment assistance with any mortgage backed by the Federal Housing Administration, or FHA, a division of the U.S. Department of Housing and Urban Development, known as HUD.

The ban is part of the Housing and Economic Recovery Act of 2008, which President Bush signed into law July 30. The act states that a borrower's down payment for any loan backed by the FHA can't be provided before, during or after the sale by:

• The seller.
• Any other person or entity that financially benefits from the transaction.
• Any third party or entity that is reimbursed, directly or indirectly, by the seller or any other person or entity that financially benefits from the transaction.
• An "entity that is reimbursed ... by the seller" clearly refers to seller-funded down payment assistance programs, which collect "donations" from home sellers and then "gift" those donations to buyers, who use the funds to purchase the seller's home. The seller also pays a fee, typically of several hundred dollars, to the organization.

Act now to tap seller-funded down payment. Homebuyers will have very few, if any, opportunities to buy a home without a down payment after the ban on seller-financed down payments becomes effective.

An FHA-backed loan with a seller-funded down payment was "the last of the 100 percent loans available," says Peter Thompson, a senior loan officer with Professional Mortgage Partners in Downers Grove, Ill. "The conventional homebuyer programs have pretty much all done away with doing this. This is something that has been specific to FHA loans for quite some time."

"The new housing law says that the lender must have provided final credit approval on the loan before Oct. 1 in order to use seller-funded down payment assistance for the down payment. As of Oct. 1, it is prohibited," says HUD spokesman Lemar Wooley.

Buyers who want to use a seller-funded down payment may decide to "move up their time frame to (buy a home) a little quicker," so they can take advantage of such assistance, Thompson says.

If you are a prospective home buyer waiting for the bottom of the housing market, there is another fact you need to take into account: mortgage rates are rising.

Rates on a 30-year fixed-rate loan, which were as low as 5.89 percent in mid-April, have been climbing and now remain near a one-year high of about 6.7 percent, according to the financial publisher HSH Associates.

The financial troubles at Fannie Mae and Freddie Mac, the nation’s two largest mortgage finance companies, are one factor behind the increasing rates. The two companies continue to reduce the number of mortgages they buy from lenders and have also imposed new fees on the loans they do buy and guarantee, a cost that ultimately is passed on to borrowers.

There are three sides to every story, they say: Yours, mine, and the truth. Well, I went browsing for good stories on the Freddie Mac and Fannie Mae disaster. Here are two stories that I think cover it fairly well - but they aren’t news. These are opinion pieces, one pro and one con. They are good reads, nevertheless.

Should the U.S. government bailout Freddie Mac and Fannie Mae? No matter which side you fall on, you can’t deny that this is a crisis of epic proportions. If the government does bail out the companies then they will have to take money from the public coffers. If they don’t bail out the companies then money will flow from private pockets into a gutter and disappear. Which is worse? One has short term implications and one has long-range consequences. No matter which way it goes, someone will lose. Someone else has already one - the upper executives at both companies who will never have to pay for their mismanagement. Too bad this is a sad story with no happy ending in sight.