As you know HUD made an announcement on May 12 that they were going to allow homeowners to use the $8000 tax credit as down payment monies by empowering state agencies, non profits and HUD approved Mortgagees to lend the monies to home buyers.
HUD drafted HUD Mortgage Letter (2009-15), however, the letter was never officially released. HUD has since reversed their position on allowing the monetization of the tax credit over concerns that the proposal too closely resembles the now illegal practice of seller funded down payment assistance programs. IRS officials were also concerned that the proposal could create income tax issues.
The government may continue to seek other alternatives associated with boosting affordability and circumventing the 3.5% down payment requirement, but until further notice they have apparently killed this initiative.