Lender Owned Homes not accepting FHA financing

Good post.

I guess this is what you get when you take the emotion and financial tie out of it. Folks working for the banks are told to sell the units quick. Dones not make sense

Tony

I had heard something about FHA loans that include a secondary loan that covers the repairs as long as the property is purchased under the appraised value?  I'm not sure what program it was, but I've seen things like it advertised by different REO agents on the MLS.

Paul - I feel your frustration.  I specialize in low-medium income borrowers and around here (SoCA) my clients have the same problems that yours do.  It's not fair and I want to strangle some of the REO listing agents around here for their blantant discrimination against FHA borrowers.  To make matters worse (and rubs salt in the wounds of my clients) is when these properties are BOM after a few weeks because the conventional offer they accepted fell through.

On one of these particular BOM properties, my FHA clients made yet another offer on the listing and they were refused again for another conventional offer.

Paul.... I can see how a bank would take a cash offer... With some lenders and loan officers screwing up a mortgage when their client applies, that closing could be delayed or not happen at all.... and what if values dropped even further. But here is my opinion... you say "many" REO properties go conventional or cash, not FHA... I have helped 7 clients buy REO properties in the last 6 months, all went FHA... and these banks didn't have a problem with it. FYI... FHA loans don't take forever, that happens when an experienced lender or loan officer gets involved.

Secondly, you say that most REO homes are in good shape to pass the FHA appraisal. I know many areas to where this is not true. Real estate in my opinion is local.

Lastly.... I will agree though that there are realtors and banks that don't want to except offers with FHA financing involved.  But how does one put a number on this, unless they did a survey. Just food for thought.  thanks

@ Julie...  a secondary loan?  There was what was called title 1 loans, a 2nd loan, but I don't know who does these anymore. It's still on HUD's web site, but I know of nobody out there doing these.  They stopped around 1998? 1999? 

On another note, FHA will allow 2nd liens out there, but specific ones. State grant liens... a second held by the seller... or a previous 2nd to be subordinated... not sure what you did hear about. If you find out, please let me know.  thanks

The lenders are idiots for not doing the minimum to get the home FHA ready. They are taking 60+% of the potential buyers out of the loop.

Reason #4,632 why they don't deserve a bailout.... 

Paul,

I guess I'm lucky to be Florida where the lenders aren't getting enough offers to be that picky about government loans. I have had buyers come across a few properties that weren't up to FHA snuff but most properties have no problems passing. If it's ridiculously cheap, then you better be ready for repairs, and the best program for that is the FHA 203k anyway.

Gerry Suarez, Jr.

Your FHA Loan Pro!

I lost a few contracts because of the FHA financing, but eventually got in contract on a bank owned home.

Hi Paul, thank you for the post, we have the same problem around here in N. California, it is understandable sometimes when we are having problems with appraisals, an all cash offer will be a safer bet than having to wait for FHA approval, even if it takes less money.

Antonio

Hi Paul,

It's a crazy time to be in the RE market.  I have a house in escrow, I asked for a 40 day escrow because of all the end of the year holidays, so we went into contact around Thanksgiving.  We are supposed to go to docs tomorrow, what is that 80 days.  The loan changed 2 times.   It's nuts.

Conventional loans in our area are taking at least 6o days to close. 

FHA is better, but appraisers are calling crazy things, like caulking the shower.  Our values are coming in so low on appraisals.  Our market is still declining, my feeling is that they are giving us value on what they think it will be when  it closes, not when we go into contract.

Also 1/3 of our properities come back on the market. 

So it may seem short sighted to take the cash and run and it's really frustrating when you have the pre-qual client rather than the cash one, but I can understand it.

Thank God this market won't last forever, heres to better days.

Karen @ Hamilton Landon in Apple Valley, CA