Dustan Shepherd

HUD this afternoon released the attached Mortgagee Letter 11-10 notifying lenders that with case numbers assigned on and after April 18, 2011 the annual premium will increase 25 basis points. The one-time upfront fee will stay at 1%. With loans in excess of 95% LTV the annual premium will move from 90 basis points to 115 basis points.

Mortgagee Letter 11-10 February 14, 2011

Over the past few weeks I have been combining my blogs, 203k guidelines, links and housing studies into one website. With the website rebuild (I used wordpress Thesis and built it myself!) and the pick up in business I have not had a lot of time to blog. I hate to post blogs from my other sites but I wanted to get people thinking about buying two-to-four unit properties in todays housing market. Enjoy the read and checkout my upgrade at: 203kkc.com

Last week I closed a 203k loan on a foreclosed duplex in Los Angeles. Sad to say it was the first non-single family unit that I have closed in the last year. The total PITI (principal, interest, taxes and insurance) for the property was $1,292.00 with a projected rent for the second unit established at $1.050.00. That is not a misprint if the borrower rents the extra unit for the average rent for the area (established by the appraiser) he will only pay $242.00 a month for his portion of the mortgage payment. The scheduled renovation to the property will bring the home up to code while also completing numereous deferred maintenance items that had been neglected over the years. By handling the repairs upfront the borrower should be years down the road before needing any major financial investment in the property. Past experience tells us that most landlords get into trouble if they have to make excessive repairs to the rental unit(s) prior to building up a deferred maintenance reserve fund, the 203k funds take care of that issue.

As you can image I receive lots of calls on how to finance income generating properties in today's distressed market. Although an investor can not use the 203k to purchase/refinance a piece of property an owner occupied borrower can purchase a two- to -four unit property and use the 203k owner occupied guidelines to accomplish the transaction. 203k guidelines allow you to take a property that has more than four units and reconfigure the unit to a maximum of four units as well as take a property and redevelop a single unit in to multiple units (maximum of four). Mixed use properties are also allowed.

If you are currently in the market for a new home and interested in testing your skills in property management ask your Realtor to add two- to -four unit properties to your list of showings. Call me when you find a property, I would be happy to talk you through the 203k repair process and assist you in calculating your potential property income.

In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Federal Housing Administration (FHA) Commissioner David H. Stevens today extended FHA's temporary waiver of the agency's 'anti-flipping rule.' The extension announced today is intended to accelerate the resale of foreclosed upon homes in neighborhoods struggling to overcome possible property abandonment and blight.

With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. Early last year, FHA temporarily waived this regulation through January 31, 2011. FHA today posted a notice extending this waiver through the remainder of 2011. This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"As I noted when we first announced this policy change early last year, because of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Stevens. "Today I can report that this policy change has been effective. Since the original waiver went into effect on last February, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition."

FHA research finds that in today's market, acquiring, rehabilitating and 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.

Stevens added, "Because of past restrictions, FHA borrowers have often been shut out from buying affordable properties. This action enables our borrowers, especially first-time buyers, to take advantage of this opportunity and buy a home that has recently been rehabilitated. It will also help to move more foreclosed properties off the market and reduce the number of vacant homes in neighborhoods throughout this country."

The extension announced today is effective through December 31, 2011, unless otherwise extended or withdrawn by FHA. All other terms of the waiver will remain the same, and HUD continues to invite public comment on it. The waiver contains strict conditions and guidelines to assure that predatory practices are not allowed.

To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver continues to be 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.

click here to read and print the waiver

this post was a repost from the HUD National Homeownership Center received by email January 28, 2011. Use the HUD NHC link that I have provided and look for the "Want More Information" tab in the lower right hand column to receive emails directly from the center. It is a free email subscription and is a must read for all housing industry professionals.

Over the years I have followed the Environmental Building News located at buildinggreen.com. This issue marks the 20th year for the publication. Their first article for the year "A Green Building Wish List: Policies, Trends, and Products for 2011 and Beyond" is a must read for all residential real estate professionals. I hope you will hit the link and take time to read this article on green housing, I think you will find this site an excellent source of environmental ideas for today's housing experts.

This issue marks the beginning of our 20th year of publishing Environmental Building News. For two decades we've been reporting on happenings, trends, technologies, and products in green building. With this issue, we're doing something different: reporting on what we'd like to see-not what's here, but what should be here.

Some of these ideas may not be practical, possible, or politically tenable, but our hope is that even the farthest-out ideas will be food for thought. We want to see the green building movement continue its forward trajectory, and doing so requires setting some targets and thinking differently.

clink on the link to read the full story

A Green Building List: Policies, Trends, and Products for 2011 and Beyond

Over the weekend, I received a purchase contract with a sales concession of $3,900 or 9.75%. The purchase price is $40,000, with estimated repairs of $125,000. Sales concessions are calculated on the purchase price. In this case, 6% of $40,000 is a maximum of $2,400; the remainder of the funds would be considered an inducement to purchase, thereby reducing the amount of the mortgage dollar-for-dollar of the excess amount. Don't get confused and calculate a sales concession on a 203(k) off of the acquisition price (purchase price plus the repair escrow) instead of the purchase price.

The sad part of this story is that a loan officer suggested the $3,900 when the loan was at their shop and was being reviewed as a standard FHA mortgage, a 203(b). The realtor never questioned the loan officer's FHA knowledge and thus wrote the contract for the excess amount. I think we can all see the numerous lessons to be learned here without my further commentary.

One last item: The maximum sales concession for FHA is still 6%, not 3%. That day may come, but the change has not yet been implemented. Don't be confused by Fannie/Freddie conventional products, which were lowered to a maximum 3% for loans with an LTV greater than 90%. HUD only asks for comments on changing sales concessions in 2010. Buyers must always have their own 3.5% downpayment. (There are various acceptable means to meet this requirement: own funds; gifts; borrowing against an asset; etc.) When writing contracts, don't forget that sales concessions are a great means to assist borrowers in paying for all or a portion of their closing cost.