HUD Waives 90 Day Hold Period required for FHA Loans.
HUD realizes that the 90 day hold period "Seasoning" requirement for an FHA Loan is hurting buyers, especially first time home buyers more than the investors and rehab flippers (that they thought were getting rich by preying on the helpless homeowner (BTW some were))...
David H Stevens the Assistant Secretary for Housing - Federal Housing Commissioner Signed a a 1 year waiver into effect on January 15, 2010
Check out the actual text here...
http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf
My Summary of the Waiver:
For just about anyone with Arms Length Transaction and Fair Marketing Effort.
If More Than 20% Increase from Acquisition to Flip Price - then need Justification and or documented rehab, Second Appraisal and Inspected to meet FHA and HUD Standards.
Does not apply to the Home Equity Conversion Program.
The Brief 90 Day Hold Policy History:
June 7, 2006 - Waiver that let Government Agencies, Revitalization Efforts, Non Profits, Relocation Companies and Disaster Areas have an exemption from the 90 day rule.
Foreclosing have a waiver to dispose of assets.
June 8 2008 - Waiver exempting 90 day Hold for sales of REO properties acquired by Mortgagees
My two cents for what its worth.
May 15, 2009 - Extension of REO Mortgagee Waiver to May 10, 2010 (sounds like an REO liquidation deadline or another extension will come and I believe this Waiver will cover them till at least Feb 1, 2011.
Sep 14, 2009 - Waiver granted exempting sales of properties that had been previously foreclosed or abandoned by for-profit or non-profits in HUD's Neighborhood Stabilization Program (NSP).
January 15, 2010 - This Waiver granted, effective February 1, 2010, exempting just about everyone.
Basically the Department of Housing and Urban Development has realized that with the flood of foreclosure properties on market, their 90 day seasoning or anti-flipping rule is hurting short sale efforts and first time home buyers and other buyers that could otherwise buy affordable housing that has been bought up and rehabbed or at least inspected and certified to be HUD approved and a few other things... that it is OK to flip that house out to a buyer with an FHA HUD Guaranteed Loan.
This should aid re-absorption of these homes to first time home buyers as opposed to landlord/investors or other investors who are planning to ride it back up and sell the homes for a profit after the market rebounds, after renting them for a few years, even if it is at a loss. There is no doubt in my mind that the houses caught in this mess are best made into homes for first time and other home buyers, the people of the United States of America that need the lower down payment required by FHA, than from a conventional mortgage.
If the average home costs $200,000 in an area FHA requires 3.5 percent down which would be $7,000. The 10 or 20% required for some conventional loans would be $20,000 to $40,000. Everyone can see how this prevents or at least dissuades home ownership. Even if someone has the $20,000-$40,000, I contend they are better off going with a smaller down payment and keeping a reserve emergency fund, rather than completely depleting their savings and moving into a new home.
Don't get me wrong, I am not anti-investor, but I think an investor play here is to be or finance/partner with the "rehab guy" swoop in, bail out the troubled home owner, clean the place up a bit, maybe carpet/paint/minor repair and flip it to a new home owner... now they can qualify with an FHA loan 3% down. If your a long or longer term investor, I think the play is to do the above but then to finance the houses for the buyer (that can't even qualify for an FHA loan - like me), with no shorter than a 5 year balloon - give em a chance to perform... and lending should return to more of a normal state by then to where they will hopefully have a little equity to refinance and pay you off.
I know there are pundits out there that think that "risky borrowing" has led us here... I disagree, that was a component of course, but it always exists and has existed. Without risk there is no reward!
I suppose you could even use the Alan Greenspan term of "irrational exuberance". But from where I was sitting in Montrose Colorado, it was the drying up of the money supply that killed the construction and job base of our town. From what I understand this mess was caused "more by" the Banks "irrationally exuberant" bets on derivatives (a highly leveraged and speculative investment - essentially a hedged bet on interest rates and currencies from what I understand (an option on a futures contract)). This coupled with some investment bank's unscrupulous "packaging" of loans to make them look less risky then they were so they could be sold off as A or B paper when they were really C. The market was essentially "manipulated" by banks so they would have bigger profits. Were they risk takers? Yes. Was it "irrationally exuberant"? In my opinion Yes at best irresponsible and criminal.
Were the small contractors and builders of Montrose Colorado risk takers, yes, of course, but they were calculated seemingly smart risks they were taking... We didn't have whole subdivisions of 50 or more spec homes built to sell to no one. In Montrose, we had small family men and women that worked in the construction trades slowly cranking out one house at a time for the next family that wanted to move to a beautiful place in Western Colorado with Great Upstream Water as I like to call it. To some extent they, these people moving to Montrose slowed down, but often they just couldn't get a loan or couldn't sell their house, but they wanted to come. These small builders only need one house not to sell for a year or so and they can go under... They use the profit from one home to obtain the loan for the next home. Risk takers? Yes. Irrationally Exuberant? No.
Regardless of who's fault it is we need to figure out how to re-build America and the USA... Create jobs and put people back in homes, rather than on the street or in apartments. For us Realtors of the world we need to figure out how to increase the number of transactions (currently lacking the buyer component of the equation...)
I realize not everyone can own a home... If I didn't own a home already, I as a Realtor couldn't buy or own a home right now, because I don't have a W-2-ed steady paycheck and job... I live commission to commission and the banks and lenders consider that risky... Can't say I disagree, but I have never defaulted on a single loan in 46 years and don't plan to start... Due to complicated and lengthy tax returns, I have used the "evil liars loan" stated-loan programs of yesteryear for my last three real estate loans. So for those of you that are screaming here we go again, wave two... I think you are wrong.
The banks and AIG should have been left to fail and this mess would of cleared faster than it will with all the bank and insurance company bail outs... (Know why AIG was going down, an otherwise extremely profitable "Insurance Company"... because they were insuring the Bank's Derivative Bets that went bad... and then they couldn't pay up, if they didn't pay, the bank failed.) How they (AIG) were ever convinced to risk their butts for the Banks behalf without making them jump through the hoops and pay the "actuarialized safe house bet" premiums, that we would all have to for any kind of insurance is beyond me, but it happened.
So what do we do... blame and punish the average guy, who might have been framing houses, dry up the money supply and essentially freeze lending and tighten up credit so none of these people can get jobs or loans and then they will lose there houses and the press will blame their loss on their risky borrowing and over-zealous budgeting and income expectations.
I ask you this? Who's job is stable today? I dare you to name more than 10 that are essentially guaranteed (I can't even think of 10 at the moment...) I mean think of it, lawsuits, mergers, bankruptcies, bank failures, government cuts, city job cuts due to reduced tax base, etc. There is little that is safe other than being self employed in something with a relatively stable demand, but even then you are constantly battling off change, the big guy and the government itself...
There are no guarantees, there are just challenges and opportunities.
This "Hud Waiver" is a welcome change and I believe it will provide opportunity and greatly help many people from new families, to old ones starting over or upgrading homes, etc. It will even help investors, and contractors that go into rehabbing properties rather than building homes...
Chris Ormsbee
Century 21 Action Realty
The Montrose Gold Team
www.C21ActionRealty.com/COrmsbee
PS - Share this news with your fellow Realtors, so they can educate their buyers and investors about the change. Plus you might seem "smart" to them... Feel free to reblog as well. Thanks for reading my long worded rant - news blast.
You will save time and money using, my experience & knowledge in your next Real Estate transaction. I sell Homes, Commercial and Land. I am part of the Montrose Gold Team. You get a 2 for 1!
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