Avoiding HUD Home Headaches:

Tips On Buying HUD Foreclosures!

Bidding & Buying HUD homes-it seems to be the hot ticket in town.

However - Remember these key points to avoid problems and advise buyers:

• Only primary residence buyers allowed in the first round of bidding.
• Advise buyer that if home is being offered as eligible for FHA financing it:
• Has an existing FHA appraisal that must be used (unless expired) AND
• The sales price has usually been based on the existing appraised value. Bidding above the sales price may result in them paying the difference out-of-pocket between their bid and appraised value.
• HUD does not automatically provide title insurance. Explain this to your buyer and make sure that the lender has disclosed this additional expense to them if they want to purchase it to avoid surprises at closing. Only if HUD has agreed to pay closing costs, could the insurance be provided at HUD's expense.
• If HUD is offering a repair escrow, explain to buyers that this amount can be ADDED to their FHA loan, but HUD doesn't pay for it.
• Lender documents must be to the title company up to 10 days prior to closing date in some states. Make sure the buyer's lender understands and can accommodate the requirement.
• HUD signs closing packages first. Then once the loan proceeds and the title company receives buyer down payment and closing costs, the buyer is allowed to sign. Make sure that the lender is aware and has the ability to fund the loan BEFORE they have a completed loan package.
• Closing delays are common due to "title clearing" issues. Foreclosed homes can have several liens due to utilities, taxes; etc that must be dealt with before closing can take place. Prepare the buyer in the beginning and discuss potential challenges, such as rescheduling of moving trucks, and possible rate lock extension fees.

Buyers will appreciate your proactive approach to making their dream come true!

Advertising Rules (Reg Z) for Real Estate Agents & Builders

The updated Truth-In-Lending Rules apply if you quote down payments, payments, interest rates or points. But wait, there's more! These rules apply to all forms of advertising, including email blasts, flyers that you pass out at apartment buildings, TV & radio, and direct mail! They apply to all dwelling-secured loans: single-family, condos, town homes, mobile homes, etc.

Existing Advertising Disclosure Rules

If your ad contains any financing info...

•§ Dollar amount or % of down payment

•§ Number of payments or number of years to repay the loan

•§ Dollar amount of any payment

•§ An interest rate or a finance charge

...then you must disclose the following:

•§ The terms of repayment over the entire life of the loan, including ARMs, Balloon payments or temporary buy downs

•§ Dollar amount or % of down payment

•§ The Annual Percentage Rate

Updated Rate & Payment Rules In Addition to Existing Rules

Effective 10-1-09, more disclosure must be included in addition to the existing rules above:

•§ If fixed interest rate over the life of the loan, the rate and APR must be printed in the same size letters

•§ If advertising a payment, you must include

•o Fact that the payment does not include taxes, mortgage or homeowners insurance

•§ If rate or payment is NOT fixed, (Buydown, ARM or Balloon)

•o Each rate or payment & time period changes for entire term of the loan

•o If ARM, future rate must be disclosed by adding index plus margin

Size of Lettering & Placement of Disclosure - Printed Ads

•§ APR Rate and loan term details must be printed in the same size letters (or larger) than the rate or payment being advertised

•§ Must be printed in "close proximity to info being advertised (not buried way down at the bottom or the ad)

•§ Cannot be obscured in any way (i.e., shading, coloration, etc)

TV, Radio, Video & All Oral Disclosures

Must include all the information above PLUS:

•§ Must be clearly stated (no talking fast or low tone of voice); or

•§ Must provide a toll free number that may be used to call for additional info

For information only - it's not comprehensive or intended as legal advice. Final Rule published in Federal Register Vol. 73, No. 147 and 12 CFR, Part 226

Sell An REO by December 31, 2009-Get Home Steps ^TM Promo For Your Buyers!

November 2009

So what is it?

• Freddie Mac HomeSteps will pay up to 3.5% of home sales price toward Buyer's Closing Cost
• 2 year HomeProtect Home Warranty
• Up to 30% discount on new Appliances

RULES

•· Owner-occupied, primary residence homes, sales price greater than $25,000

•· Valid with offers on or before December 31, 2009

•· Must close on or before February 26, 2010

•· Closing cost offer good for financed homes, cash sales are offered a 1% Buyer's Closing Cost credit

What does it all mean to you?

•· Register as a Selling Agent Select member and be listed on the website in the agent directory and receive the latest promotional material from Freddie as well as weekly e-mail lists of HomeSteps homes for sale. Register here -- http://www.homesteps.com/rl01_sell_agentselect.htm

•· Great opportunity for your clients - Save $$$ and Peace-of-Mind

•· Remember! The coupon must be presented with the initial offer. Home Buyer can fill out coupon here -- http://www.homesteps.com/smart_buy.htm#form

FHA financing on Condo Projects is about to go from flood to trickle on December 7, 2009.

These new guidelines announced in Mortgagee Letter 2009-19 will apply at that time:

•· The spot approval process for condominium projects is eliminated.

•· All current condominium project approvals will be invalid (with the exception of projects approved on or after October 1, 2008) and projects must be re-certified under the new options available. Going forward, all projects will require recertification every two years.

•· There will be 2 approval process options:

•1. HUD Review and Approval Process (HRAP)

•2. Direct Endorsement Lender Review and Approval Process (DELRAP)

(This option is available only to lenders who have unconditional Direct Endorsement authority and staff experienced in reviewing and approving projects.)

•· HUD will only accept approval packages for review from

•o Lenders or

•o Builders/Developers.

Getting projects back on the approved list will be a long and slow process. And until a project is approved, FHA financing is not an option. Early submission to beat the December rush is not allowed.

Now is the time to get those condo listings sold and your condo buyers off the fence!

Wondering what the new Project Eligibility Requirements are?

Contact me with any questions. I would love to be of service!

Project Eligibility Requirements

•o Projects consist of two units or more.

•o Projects must be covered by hazard and liability insurance, and flood insurance if applicable.

•o Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act.

•o No more than 25% of property's total floor area can be used for commercial purposes. Commercial portion must be free of adverse conditions to occupants.

•o One investor may own no more than 10% of units. This applies to developers/builders that rent vacant and unsold units. For two and three unit projects, no single entity may own more than one unit; all units and common areas must be 100% complete; and only one unit can be conveyed to non-owner occupants.

•o No more than 15 % of total units can be in arrears (more than 30 days past due) of their condominium association fee payment.

•o At least 50% of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence lender is willing to make the loan.

•o At least 50% of the units must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50% of the number of presold units (the minimum presales requirement of 50% still applies).

•o Legal Phasing is permitted for condominium processing. It is recommended that developers submit all known phases for initial project approval. For purposes of calculating the owner-occupancy percentage:

•§ On multi-phased projects the owner-occupancy percentage is calculated on the first declared phase and cumulatively on subsequent phases if the ownership of the project remains the same;

•§ If multi-phasing includes separate ownership per phase, each phase is calculated individually; or

•§ Single-phase condominium project approval requests must meet the owner-occupancy percentage requirement.

•o FHA Concentration

•§ Projects of three or less units will have no more than one FHA insured unit.

•§ Projects of four or more units will have no more than 30% of total units insured by FHA.

•o A current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. A current study must be no more than 12 months old - if recent events or market conditions have affected the finished condition of the property that information must be included. When reviewing the study, consideration must be given to items that have been replaced after the time that the reserve study was completed.

"The information provided has been based on rules and regulations issued by Federal Agencies and interpreted for you by MortgageCurrentcy.com. Interpretations are not guaranteed but we attempt to make them both easy to understand and help you sell more real estate. Check with your local and state authorities to ensure that you meet all requirements and disclosures

FHA requires that: a) only owners of record may sell properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and c) that for resales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property's value, meaning another property appraisal will be required.

Below is the applicable rule, which defines the dates to be used. (Handbook 4155.2 4.7.e) This page from the 4155.2 handbook is attached also.

If a property is re-sold 90 days or fewer following the date of acquisition by the seller, the property is not eligible for a mortgage insured by FHA.

FHA defines the:

• Seller's date of acquisition as the date of settlement on the seller's purchase of that property, and
• Re-sale date as the date of execution of the sales contract by a buyer intending to finance the property with an FHA-insured loan.

"DATE OF SETTLEMENT" is the important date, not "date of recording".

Prohibition on Property Flipping - HUD 4155.2 Chapter 4-26