Investors Want To Know: How Long Till I Can Cash Out On My Foreclosure Purchase?

By
Mortgage and Lending with SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) NMLS 223495

"How long until I can cash out on my foreclosure purchase?"  My borrower got a screaming deal on the courthouse steps.  $80,000 cash bought a 3 bedroom, 2 bath home in relatively good condition.  No roof problems, no structural probems, decent kitchen and modern bathrooms. 

What it needed was a thorough cleaning, fresh paint and new carpet. That done, the home would bring $120,000 and likely sell for that price within 30 days.

He had intended to flip it for a profit, but the final result was so nice that he decided to keep the home and rent it out.  The trouble was, it had eaten up all of his cash, and he wanted to buy another foreclosure. 

That's when my phone rang.  "Mike," he said, "this is that guy who keeps the wolf from your door.  I've got a refinance for you."  "How long until I can cash out on my foreclosure purchase?" It's worth $120,000 easy. 

"You're not going to like Fannie's answer," I replied. 

"Fannie?"  You know, FNMA.  Fannie Mae. 

Let me share with you what I told him:

  1. If the property was purchased by the borrower within the six months preceding the date of the application for new financing, the borrower is ineligible for a cash-out refinance.
  2. After 6 months, we will use the lesser of (1) the sales price or (2) the appraised value.
  3. If significant repairs/remodeling have taken place, you'll have to prove it to me and to the appraiser.

And thems the dirties.

 ___________________

I'm Mike in Tucson, your preferred Tucson, AZ Mortgage lender.
Mike Jones (Tucson Mortgage Company, LLC): Loan Officer in Tucson, Pima County, Arizona
SUNSTREET MORTGAGE
Call me
if I can help you or someone you know with a purchase or refi mortgage.
(520) 349-9090

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Rainmaker
643,145
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Mike, Thanks for sharing!  It is a whole new world out there!!!

Sep 15, 2009 01:39 PM #1
Rainmaker
713,356
Cheryl Johnson
Highland Park, CA

As much as I dislike regulations,  I think Ms. Fannie's got a point there.

Around here, during the bubble, people went crazy wild with flipping and serial refinancing; and all those flips and refis were a contributing factor to the mess we're digging ourselves out of now....

It's a tough, tough call, though.  How much entrepreneurship and creativity do we trade for regulations and stability?....

Sep 15, 2009 01:53 PM #2
Ambassador
1,091,244
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

Good....that's a good thing. Let's keep it going and straighten this up. Great info to give Mike.

Sep 15, 2009 01:54 PM #3
Rainmaker
786,877
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

It is a harsher landscape we inhabit now.  Yet... we still have 100% funding. 

Sep 15, 2009 02:14 PM #4
Rainmaker
575,553
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

I'm sure they don't want to get back into the same problem again so they will have to see some growth in prices in the area for a while before they change the rules.

Sep 15, 2009 03:34 PM #5
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754,103
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Terry,

Perhaps.

Mike,

We do still have 100% financing in two instances:  VA and Rural Housing. Both require full documentation.

Sally,

It is what it is.  I work with what is, and leave what will be to others.

CJ,

In my humble opinion, the HVCC fiasco has driven prices unsustainably low.  The next six months are going to be a roller coaster.

Marchel,

Thanks for stopping by and being the first to comment.  Tell your son to call me for VA financing.  :)

Mike in Tucson

 

Sep 15, 2009 05:19 PM #6
Rainer
212,227
Carol Smith
Casmi Photography - Mebane, NC

Ahhh - the ugly truth.  One would almost think that investors would be aware of the rules prior to tying up all their cash. But then again - that's why they are fortunate enough to have YOU on their side.

Just keep telling them the truth ... and eventually they will learn.

Sep 16, 2009 02:05 AM #7
Rainmaker
339,591
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Hi Mike - Kind of makes sense the investor guidelines have been tightened so dramatically, don't you think? I'd be curious to see the latest statistics on what percentage of the foreclosures in the 4 sun states were on investor owned property...

Sep 16, 2009 03:10 AM #8
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Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Karen,

It does make sense.  What would help the market would be for guidelines to stabilize moving forward and for the Federal Reserve to quit tinkering with rates.  Bloomberg news is on in the background right now, and they're talking about a proposal for the government to buy "nearly every commercial loan in the country to help the banks clean up their balance sheets."  It's just nuts!

Carol,

It is what it is. I think that 30 year rates one year from now will be at 6.5%

Mike in Tucson

Sep 16, 2009 03:17 AM #9
Rainmaker
292,351
Robin Rogers
Robin Rogers, Silverbridge Realty, San Antonio, Texas - San Antonio, TX
CRS, TRC, MRP - Real Estate Investment Adviser

Yep, it's true, Mike. Time to look for a great property manager.

Cheers,

Robin

Sep 17, 2009 01:24 AM #10
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