HUD steps it up
Earlier this month, the Housing and Urban Development Department which oversees the Federal Housing Administration stepped up their effort to curb the foreclosure crisis by vowing to speed up the resale of foreclosures. This week comes the announcement making it official that from February 1, 2010 through February 1, 2011, the FHA is lifting the rule that prohibits insuring a mortgage on a home owned by the seller for under 90 days. This rule has been informally called the “anti-flipping rule.”
The change was made to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, said FHA Commissioner David H. Stevens.
3 birds, 1 stone
“Call it three birds with one stone: The federal government hopes to help low-down-payment home buyers, investors who fix up foreclosures, and communities burdened with too many bank-owned and foreclosed homes — all with one potentially far-reaching policy change,” noted Kenneth R. Harney of the Washington Post.
Harney continued, “The end game usually went like this: Find a hapless purchaser for the flipped house who would apply for a low-down-payment FHA loan. Typically, that buyer defaulted quickly — leaving the FHA with a foreclosed house on its books and a loss to its insurance funds.”
Stephanie Crawford
February 4, 2010 at 1:41 am
From what I hear this new option may not be much help. Apparently it will be a HUGE issue for many banks to change/remove their existing overlaying under-writing guidelines in order to comply. Similarly, the new FHA rule that allows purchasers with lower credit scores to to obtain loans is a waste of time. I can’t find a single local lender who will accept a buyer under 600, most say 620…
Joe Loomer
February 4, 2010 at 10:51 am
Completely agree with Stephanie. Same situation in our neck of the woods. Lenders don’t care what FHA approves or mandates, they have their own guidlines for minimum scores.
Another huge factor is they can remove the 90-day requirement all they want, but if the “fine print” mandates a “seasoning” period if the home is being sold in the same calendar year (longer in some areas) for more than 20% more than the original purchase price, there’s additional hurdles anyway.
Screams as to why HAMP is largely a failure, too.
Navy Chief, Navy Pride
Patrick Flynn
February 4, 2010 at 1:38 pm
Hey lani~I just wrote a similar post the other day pugetsoundrealestateundressed.neighborhoodsundressed.com/2010/02/02/seattle-real-estate-fha-anti-flipping-rule-waived-for-1-year/ and I have to agree with Stephanie and Joe this is all smoke and mirrors.