By Mark Rafeh-Century 21 Hilltop / Loan Centers of America
On Friday FHA released an update to their policy waiving the 90 day seasoning period that was in place for properties that were foreclosed on by their lenders.
My first take on it was, “wow, investors finally have something to rejoice about”. Since 2003 investors, including myself have had to deal with the 90 day ownership holding period prior to reselling the property to a buyer using FHA financing.
Unfortunately this is still going to be an issue. Although I personally don’t agree with the policy, it was designed to protect HUD (FHA) from inflated values created in an area by property flipping schemes. This new waiver doesn’t eliminate that clause.
The fine print on the waiver taken from HUD’s website states Section 203.37 a(b)(2) of FHA regulations, 25 CFR 203.37a(b)(2) is hereby waived for a one year period from today’s date with regard to sales of properties acquired by mortgagees, whether sold directly by the mortgagees or by their subsidiaries or by vendors to whom they have transferred titles to propertied for the purpose of effectuating sales of those properties.
So what is the bottom line for investors……
- Borrowers can now use FHA financing for buying properties owned less than 90 days that were acquired by foreclosure by mortgagees (i.e. lenders)
- In addition to mortgagees, it includes any subsidiary of the lender or vendors used to market and sell property.
- The new waiver rule will apply whether or not the mortgagee is state-or federally-chartered. The original policy restricted it to state and federally charted entities.
Those of us were don’t fall in the category of a mortgagee ( the entity that actually foreclosed on the property) or a vendor ( an entity that has a agreement or contract with the lender) are still bound to the 90 day holding period before selling a home to a buyer who is using FHA financing.
There is nothing in the waiver guideline that mentions or implies that any other party will qualify other than Mortgagees or Vendors.
In areas like mine ( Simi Valley) this is a small step forward for those home buyers struggling to get a property in this low inventory environment, it will help open up some of the REO’s to them that were once not eligible for FHA financing. As for investors looking to capitalize on auctions and trust deed sales, this is of absolutely no help…
Interest rates have been starting to improve due to the weakness in securities ( Stock Markets). The security markets have been dropping due to uncertainty in the proposed Chinese stimulus plan; yesterday the market rallied in anticipation that the Chinese government was going to increase the amount stimulus; many investors forecast that China will be leading us out of the global recession. Bank stock prices are also weighing heavy on the overall market; thus far the government’s approach to saving them is not giving investors any confidence that a solution is in sight. The problem is that that the more support the bank gets from the government, the more investors fear it will be nationalized ( government controlled) which means that the government has first position over the common share holders; this drives down the stock price, which then makes the bank weaker, which means more government support. It is like watching a dog chase his own tail.
