The Eugene/Springfield, Lane County Oregon real estate market could see a huge benefit from the HUD announcement Friday that the rules on flipping homes will be changing Feb. 1. . This is being done in an effort to stabilize home values and improve conditions in communities where foreclosure activity is high according to HUD Secretary Shaun Donovan. I see this as being a boon to our are in getting rid of more of the foreclosures that have been plaguing our market. Under current rules, foreclosures that were still owned by the banks that purchased them could be bought with an FHA loan but any that were purchased from the bank had to be owned for 90 days before an offer could be made on them for an FHA loan.
“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.” So, as a result of the recent change, the prohibition of FHA insuring a mortgage on a home owed by the seller for less than 90 days will be temporarily lifted on Feb. 1. “This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.
Since it often takes less than 90 days for someone to purchase a foreclosure and ready it for resale, FHA buyers were taken out of the buying pool for these properties because the sellers wanted to recoup their capital as soon as possible. Therefore, in many cases were not willing to wait until the 90 day period was expired. Under the new policy, there may be requirements of a second appraisal or proof of improvements, but overall, it will, at least, put FHA buyers on an even footing for some excellent deals out there. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.” said FHA Commissioner David H. Stevens.
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is 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.
As always, I am available to help with the transaction. I would assume that offers should not be made on any of these properties until Feb. 1. If I can help with any FHA purchase transaction, contact me at Alpine Mortgage Planning, 541-342-7576/541-221-3455 cell or e-mail me. We are located at 1200 Executive Pkwy., Ste. 100 in Eugene.
