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HUD secretary Shaun Donovan announced a policy that will dramatically accelerate the process of re-selling foreclosures.  The announcement is part of the Obama adminstrations commitment to stabilizing the foreclosure market.  The announcement came along with a commitment of $2 billion in NEIGHBORHOOD STABILIZATION GRANTS.

Historically FHA from insuring a home mortgage owned for less than 90 days (90 days title seasoning).  This requirement represented a 90 day delay in processing all foreclosures, homes being flipped by investors, etc.  In todays market foreclosed homes can be acquired and fixed up nicely in well under 90 days which would then create delays for investors looking to re-sell the homes once they are fixed up.

The change in policy will take place on February 1, 2010 and last for one year.  It will permit buyers to use FHA financing to purchase foreclosures, hud homes, REO properties, bank owned real estate or general private sales without a 90 day delay.  This change in policy is expected to help stabilize real estate markets and further revitalize neighborhoods with high foreclosure activities.

This change in policy will allow investors to accelerate their turn cycle of purchasing, repairing and then re-selling affordable homes to the general public.  It will also help provide clean, renovated and affordable housing to the general public.  To prevent predatory practices from investors, the following guidelines will be ensured on each FHA loan:

1.  All transactions must be at arms-length, with no identify of interest between buyer and seller

2.  In cases where the sales prices of the property is 20% or more above the seller’s acquisition costs, the lender will need to meet certain guidelines

3.  Waiver is limited to forward originated mortgages and not applicable to home equity conversion mortgages

What impact will these changes have on the real estate market?  Let me know what you think.

Jim Ingersoll

www.investingnow.wordpress.com

jimingersoll@verizon.net

Jim Ingersoll

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