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FHA
Flipping Waiver for 2010
As of Friday, January 15, 2010
the FHA has suspended its 90-day
anti-flipping rule. For 1 year, this will allow FHA buyers to obtain
loans
on properties that have been recently purchased by investors. The
suspension expires Feb 1, 2011. Specifically this requirement is 24 CFR
203.37a(b)(2).
Combined with the extension of
the $8000 tax credit for first time home
buyers and this promises to move a long list of distressed properties
to new home ownership and avoid the growing number of vacant and
therefore at-risk properties. The effect of this waiver will be to
bring distressed property
rehabbers back into market. It will benefit Real-Estate-Owned
(REO), or bank-owned
properties the most.
If the resale price is 20%
higher than the investor’s purchase price,
the investor will have to demonstrate proof to an
independent appraiser that renovations and repairs justify the higher
price. This will assuredly trigger two appraisals. New property
appraisal rules make this possible.
Basically Freddie Mac financing
will benefit. Fannie Mae will hold off
and check the progress of this development. When they see the
anticipated significant benefit, they'll be along directly.
FHA buyers pay retail price
usually because of
their less-than-prime credit. The refusal of mortgage financing by
conventional lenders is well-known. This should move a lot of
property to occupancy and performing asset status, as well as allow
rehabbers to comfortably return distressed properties to excellent
condition.
The new seller/owner/investor
must hold title to the property. This
will
prevent the same-day double close so prized by the real estate
flipping investor. It's estimated that it will take two weeks or
more for the investor to enable title work to be filed and
recorded. Still, two weeks is much better than the 90 days that
investors have had to endure for decades.
Buyers and sellers in what is
referred to as an A-B, B-C transaction (B
representing the investor) must be at 'arms-length, or no relation.
There can be no financial advantage to the original seller. On the
other hand, the investor is not required to reveal their profit to the
original lender.
The property cannot
show a history of 'flipping'.
Assignments of Contract for Sale
will trigger a red flag.
The seller must be Owner of
Record.
Entities such as LLCs,
corporations, and trusts must be properly established and operating in
accordance with applicable state and federal law.
There are minimum inspection
requirements for the property. Investors
will be encouraged to include as many closing costs as possible in the
A-B transaction.
As someone who has watched the
lenders do everything they can to avoid
mortgage modification, short sale and REO sales for the last year; take
that, Bank of America. Your turn is coming.
Current FHA qualifications are a
minimum FICO score of 580 for a 3.5% interest rate. 3% down payment.
Below 580 needs minimum of 10% down. Seller contributions will be
limited to 3% summer of 2010, down from 6%.
Foreclosure?
Hell, I'm gonna shoot something!
Foreclosure Timer
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