The news is spreading fast...  As reported out from FHA on January 15, 2010 -

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties WASHINGTON -

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.

The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. "FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens.

"This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity." The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.

To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions: * All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

* In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.

* The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.

 

Dave Rosenmarkle

Broker/Owner

Highland Realty

Arlington, VA

(703) 538-2566

davidrose@mris.com

www.HighlandAgents.com

 

 

 

84 Comments on FHA has lifted the 90-day seasoning requirement!

20 Most Recent Comments Displayed Show All

JAN
17
2010
161,382 Points 2 Featured Posts Attended Rain Camp

I do not think 20% is a realistic number. Often the homes will need more than 20% in repair. Even if they let you document you expenses. and up it 20% above purchase and repair work. What if they do the work them-self. They will not get to count there labor as an expence. Then if they sell with a Realtor who charges 6% that just leaves them 14% profit.We you subtract there holding cost from that it will not give them a profit margin that is worth taking the risk.
5:50pm • #67
851,621 Points 183 Featured Posts Attended Rain Camp Called Shot Master

Stopping back again....so glad this was featured, this is something that can make a real difference for my buyers.
6:12pm • #68

When I initially read the news, I too, was worried about the 20% limit on these properties, but there is more to the news as seen in the comments that followed.   I have learned not to panic until I have all the facts.  Obama is trying to help improve the industry with new lawsm but everything is complex.  I want to wait and see how it works before I judge it as a problem.

 
Betsy Hartge
7:58pm • #69

20% limit could be waived with two appraisals.
8:36pm • #70
111,058 Points 1 Featured Post

Thank you for sharing the information.  My favorite phrase is "the devil is in the details"
9:42pm • #71

Good post -- Everyone should have read the HUD release before commenting -- the 20% limit seems very "gray" and as long as you can document improvements the 20% rule will be a non factor -- 
10:09pm • #72

I agree with Mike O' Hara. I also understand the view point of so many of you, but these new guidelines are designed to help bring home values back up, not to keep things as they are. When an investor purchases a property and has docs to support the rehabbed home value the property will be appraised for more and will be allowed to be re-sold for more then just the 20%. And You can still flip homes but if they are over 20% the lender will have to comply with strict guidelines. It is actually going to help flip more homes if you ask me. I plan to buy several and create a small empire!! :D
E.D. Sanchez
11:36pm • #73
JAN
18
2010

I know some rehab investors that this is going to make them very happy.
12:30am • #74

It looks like a big press release about nothing. The 20% limitation will make this an ineffective move.

20% plus cost and improvements would be more realistic.
6:22am • #75
120,636 Points 9 Featured Posts Outside Blog Attended Rain Camp

Thanks for the insight. It will be interesting to see how this actually plays out in the market, escpecially here in Woodbridge, VA
8:00am • #76

The 20% cap looks like it will limint the options. But, there seems to be a workoaround with appraisals & documentation. I think if you can prove your point to the Lender, they will / might make the loan.

It's going to be interesting to see how this works in the real world!
8:22am • #77

Two appraisal is not the panacea still. It's a lot of pain in practice.

I'm right now in escrow for 2,5 month, we are waiting on the 3rd (!!!) appraisal, because the second came ridiculously low, way below ugly comps, All the comps are REO houses, we're selling turn key flip at the same price as trashed REO and couldn't get 2nd appraisal. When some appraisers see "flip" this is like red tag, I had 4 back up offers while we've been in escrow, all above the accepted offer. Isn't that a sign that the house is worth what we're asking for it? 
10:01am • #78

I am glad somebody is doing something to keep things moving.  We lose a lot of buyers because of the time element.  Now that the first-time-homebuyers tax credit is going to expire in April, a lot of folks are hesitant to get tied up for months at a time.
Pam Canova
10:32am • #79

I say, If the seller can show proof of the work done, and the immediate market can justify the value with Two appraisals, then the 20% cay should not be there... If these two factors cannot be proved then I understand the reason for the limit....we certainly do not want to repeat what we just went through with the Real estate market...
11:28am • #80
565,708 Points 6 Featured Posts Outside Blog Attended Rain Camp

This is indeed great news for potential new home buyers and investors.  Thanks for sharing.
12:20pm • #81
1,023,886 Points 15 Featured Posts Localism Sponsor Outside Blog Called Shot Master

I had heard about this but did not catch the details.  The 20% cap sounds like another great socialist program out of Washington.
8:18pm • #82
JAN
20
2010

I think its a good idea, there are guidelines for the waiver designed to prevent fraud.  I see lots of conditions for the loan officer to gather. 
4:47pm • #83
JAN
21
2010
997,092 Points 4 Featured Posts

It is about time abeit for a limited time. Flipping is not what got us into this mess. A buyer should be able to pay what a seller is willing to take and a bank is willing to loan.
8:45pm • #84
JAN
25
2010

What happened to capitalism.

A 20% limit is socialism.

Most properties need 20% improvements.

Expenses are nearly 10%, in and out of a 'flip'

Where's the profit?
Jerry
8:28am • #85
FEB
11
2010
116,208 Points 1 Featured Post Outside Blog

Thank you Dave for the info. However, the more the government gets involved the more problems they create. The same people who are making the decisions now are the same individuals that created the problems in the first place.
12:14am • #86

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