FHA Insured Mortgage Loans will have new Outlets for Buying!
Shaun Donovan, secretary to HUD would like to see more FHA insured loans going to foreclosed and vacant homes. Researchers at the FHA headquarters find that acquiring and refurbishing foreclosed property takes less then 90 days. Donovon would like to see these homes being sold instead of sitting vacant, ready pray for vandals.
The ban to acquire a FHA insured loan to purchase a property that has been on the market within the last ninety days has been lifted for approximately 1 year.
It has been frustrating for investors to sell their properties quickly. It doesn't normally take 90 days to revamp a property and increase the value. Investors want to repair, remodel, or rejuvenate a property and sell it fast. Previously investors have not been able to sell to folks using a FHA loan. The law required investors to hold on to the property for 90 days.
Beginning February 1, 2010 you will be able to purchase a home with a FHA insured loan even if the home was just on the market within the last 90 days. The HUD wants vacant houses to sell more quickly then they have been.
So does this provide a free-for-all for Flippers? No. Sales must meet the following conditions:
1. "All transactions must be at arms-length" which means the buyer and the seller can not be in collaborate with one another. It is the lender's responsibility to verify this by insuring the following:
a. The seller must hold the title. If a corporation, trust or LLC is the seller, the lender must make sure they are an established business and operating in accordance with applicable state and federal law.
b. there should not be a pattern of previous flipping activity.
c. Be sure the property was marketed fairly through the MLS system, at auction, by a developer or For Sale By Owner.
2. If the seller stands to profit more then 20% of his acquisition there are more rules that need to be followed:
a.the seller must have documentation showing the rehab, repair or renovation for the home to substantiate the increase.
b. The lender must order a property inspection and provide the report to the purchaser BEFORE closing. However the lender may charge the borrower for this inspection. An FHA-approved inspector is not required.
3. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
The waiver shall expire February 1, 2011, unless otherwise extended or withdrawn by the Commissioner. If the FHA finds a significant increase in mortgage defaults and mortgage insurance claims attributable to insured mortgages obtained through the waiver, the Commissioner may withdraw this waiver at his discretion.
To review the temporary policy please go to the HUD / FHA Waiver website for complete details.
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