"As a dog returns to its vomit, so a fool repeats his
folly." Prov 26:11
"Mortgagees" in this case would be the banks and their
subsidiaries that have foreclosed on the home. So all you entrepreneurial
flippers need to check the fine print, and perhaps team up for a percentage
from the banks, who are in the driver's seat on this HUD exception to the
anti-flipping rule passed in 2003.
This does provide yet another opportunity for the banks and
their subsidiaries to skin more money from the foreclosure transaction with
the help of public subsidy. So if you are the entrepreneurial sort, you'll
have to grease the palms of the banks to gain access to the FHA for those
quick flips.
The waiver from the HUD Website is here.
HUD No. 10-011
Lemar Wooley
(202) 708-0685 FOR RELEASE
Friday 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.
Jesse
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