HUD Secretary Shaun Donovan announced on January 15, 2010 a temporary policy that will expand access to FHA mortgage insurance. Investors will now be allowed to quickly resell foreclosed properties.
Previously FHA would not insure a mortgage on a home owned by a seller for less than 90 days. This ruling has been temporarily lifted and will give investors access to a wider range of foreclosed properties. The waiver will take effect on February 1, 2010 and will be effective for one year. HUD has reserved the right to stop or extend the program at any time.
The FHA found that buying and preparing foreclosed properties for resale usually took less than 90 days. By not allowing the use of FHA mortgage insurance for a quick resale within 90 days of purchase they found it stopped sales to investors. Investors do not want the extra expense of holding costs or the threat of vandalism that could happen during the 90 day holding period.
This change in policy will allow investors to use FHA Insured Financing to purchase HUD Properties, bank owned properties, or private sale properties. As a result homes should sell quickly, aiding in stabilizing prices in real estate and rejuvenating neighborhoods and communities.
To protect buyers against predatory practices of "flipping" these homes at inflated prices, certain conditions have been set:
All transactions must be arms-length. There can be no relationship between the buyer and seller or anyone participating in the sales transaction.
If the sales price is more than 20 percent of the seller's purchase cost, the waiver will only apply if specific conditions are met.
The waiver is limited to new mortgages.
To find out more about this program go to HUD's website or contact your local Certified Distressed Property Expert.
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