July 25, 2025
Dear Lending, Real Estate and Non-Profit Partners,
Please read carefully: The Washington State Housing Finance Commission is pleased to announce changes to the Covenant Homeownership Downpayment Assistance Program with the passage of HB1696:
• The Covenant program income limits posted on our website will apply to reservations made on and after July 28, 2025.
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• Covenant Downpayment Assistance Loan Forgiveness:
Please note: The Covenant Downpayment Assistance Note and Deed of Trust is not changing.
Covenant Downpayment Assistance loan forgiveness will apply to loans closed after July 1, 2024. Within 12 months of loan purchase, the Commission and our loan servicer will notify the borrower their loan may be potentially forgiven if they meet the criteria after 5 years. Lenders should not and will not be able to provide the borrowers with a prediction if their Covenant DPA loan will be forgiven.
The new Covenant Downpayment Assistance Loan Forgiveness Disclosure will be required on reservations made on and after July 28, 2025. This form needs to be signed & dated by the borrower and uploaded with the pre-closing file. Annual notifications will be sent out to the borrower if the Commission still owns the borrower’s loan. At the five year plus one month point after the loan closing date, the loan will be automatically forgiven if all criteria are met. The borrower will be notified by the loan servicer if eligible for loan forgiveness.
Below are the criteria for the Covenant DPA loan to be forgiven:
• The Borrower(s) income needs to be at or below the loan forgiveness income threshold at the time of loan purchase per the signed underwriter’s loan approval as submitted to the loan servicer for loan pooling. Each year’s loan forgiveness income thresholds will be posted on the Commission’s website.
• The Commission and its loan servicer must retain the loan for a minimum of 5 years and one month after loan closing. If the loan is not in the Commission’s portfolio for any reason when the loan is ready to be forgiven, then loan forgiveness is null and void.
• The Borrower who met Covenant program eligibility requirements (for race and family history in Washington prior to 1968) must owner occupy the property as their principal residence at the time of loan forgiveness.
• The first mortgage loan needs to be in good standing at the time of forgiveness. If the first mortgage is delinquent, the Commission will not forgive the subordinate Covenant DPA mortgage until a future time when the first mortgage is current as applicable.
• The homeowner needs to be a Borrower on the original loan or have inherited the home through the original Borrower’s passing and be a descendant or immediate family member (including spouse). Documents will need to be submitted to the Commission verifying death and proof of inheritance as applicable.
Our Covenant Homeownership webpage will be updated. Further details may be found in the updated Covenant DPA manual and the Covenant DPA Loan Forgiveness Disclosure will be posted on our website.
To learn more about the Covenant Homeownership Program, please visit our information page.
If you have any questions please call 1-800-767-4663.
Corinna Obar, Homeownership Manager