In an effort to stabilize home values, HUD Secretary Donovan announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.
HUD will allow FHA financing for buyers of REO property. This is a temporary waiver of policy, good for one year. The hope is that it will help soak up supply and stabilize the markets. The waiver takes effect February 1, 2010 for one year.
To avoid speculation or flipping of property, HUD has set down some stringent rules. They are certainly not looking to reignite the kind of speculation that was partly responsible for the collapse.
No Speculators Allowed
1. The transactions must be at arms-length.
2. No entity of interest between the buyer and seller
3. If the sales price of the property is 20% or more above the sellers acquisition cost, the waiver will only apply if the lender meets certain requirements.
4. The waiver only applies to forward mortgages but not to the Home Equity Conversion Mortgages.
5. FHA currently does not insure a seller owned mortgage, owned less than 90 days. The waiver may give offer borrowers access to FHA temporarily.
The policy allows buyers buyers access to FHA-insured financing to buy HUD-owned properties, bank-owned properties, or properties resold through private sales.
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I wish I could predict – The program is available for one year only. Moodys says that 3 million more homes will foreclose this year and that 3 million more are 30-60 days late.
The answer is linked to at least four things
1. Supply – probably rising
2. Credit – Possibly better, but not by much – the banks are looking at commercial property and Alt A problems as big as what we have already seen
3. Qualified borrowers – A function of jobs – here we are looking better with job loss in the 80,000 range down from 750,000 at the peak of the recession
4. Ability to Push Paper – According to Pro Rebulica 76 percent of the trial mods started three or more months ago are still in limbo. Even if the Govt pulls out all the stops it created a bottle neck down stream.
JJ – You run a great blog…..thanks for the effort for the rest of us to share ideas
Howard