The Federal Housing Administration is considering barring a growing type of home financing aimed at low- and moderate-income buyers in which the seller of a property finances the buyer's down payment.

The proposal would stop several nonprofit groups that act as down-payment assistance programs from obtaining FHA loans for buyers if the down payment comes "directly or indirectly" from the seller.

FHA officials say they've received complaints about the financing but are proceeding with caution.

Officials are concerned that the arrangement can lead to overpricing of properties by sellers looking to cover costs. They say such programs could also lead to increased default rates. A decision will be made after the comment period on the proposal ends Nov. 15.

The largest program of this kind in the country is run by Sacramento-based Nehemiah Progressive Housing Development Corp., which has given more than $95 million in down-payment assistance to nearly 26,000 families, using funds collected from home sellers and builders since late 1995. Forty-seven percent of those buyers were minorities, and 50 percent were households headed by single mothers.

In the Washington-Baltimore area, the Nehemiah program, named after the biblical figure who rebuilt the walls of Jerusalem, has helped about 2,000 low- and moderate-income people buy homes.

Under the Nehemiah program, the seller pays a service fee to Nehemiah amounting to 4 percent of the sales price. The fee pays for Nehemiah's costs in finding and preparing prospective buyers for purchase. It also covers Nehemiah's marketing of the property.

"These are no longer arm's-length transactions," said FHA Commissioner William Apgar, referring to the close relationship between all parties involved. "We've had problems with abuse--properties that sold for $100,000, for example, that were then marked up to $110,000 to cover the down-payment assistance program."

The other concern is default. "We know for a fact," Apgar said, "that as down-payment obligations reduce down, the risk of default grows."

Nehemiah President Don Harris counters that no data show increased default rates. FHA's proposal to ban the programs, he added, came "completely out of the blue."

Nehemiah started with a pilot program in California in 1996. With HUD's backing it went national in April 1998. Since then, similar programs have sprouted up around the country.

"This will have a chilling effect on the industry," Harris predicted.

Tom Hallerbach, a senior vice president at Columbia-based Columbia National Mortgage Corp., says early results from the Nehemiah program show those loans perform just as well as, if not better than, other FHA loans.

Columbia National Mortgage has completed about 1,400 Nehemiah-backed loans since last fall. Hallerbach cautioned, however, that it takes a few years to see true trends in default rates.

"The fact is we've seen an opening up of the pool of home buyers with this type of program," Hallerbach said. "For us, it's been a huge opportunity to grow low- and moderate-income lending."