90 Day Anti-Flipping policy is waived for one year by HUD!

Have you gotten an accepted offer on a house only to find out that this is a flipped property and FHA will not insure your loan until the 91st day?

If this has happened to you worry no longer. For one year HUD is waiving this requirement with a few restrictions.  Here is the update from National Association of Mortgage Brokers:

On January 15, 2010, the U.S. Department of Housing and Urban Development (HUD) issued a Waiver of Requirements of 24 CFR Sec.203.37a(b)(2).  This regulation provides that a mortgage for a property will not be eligible for FHA insurance if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller, and the seller does not come under any of the specific exemptions that apply to the 90-day rule.

The waiver takes effect on February 1, 2010 for a one-year period, and is limited to those sales meeting the following conditions:

1.    All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction;
2.    In cases in which the sales price of the property is 20% or more over and above the seller’s acquisition cost, the lender must:
a.    provide supporting documentation and/or a second appraisal;
b.    order an inspection of the property and provide it to the buyer
3.    Limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for Purchase program.

You can also go directly to HUD site for information on the Flipping Waiverin Greater detail.

Please consult your mortgage professional on how and if this will affect any transaction that you are seeking or currently in. The waiver starts on the 1st of February.

HUD Postpones Implementation of HVCC for FHA

Breaking news is that HUD has Postponed the implementation of HVCC for FHA loans until February 15th, 2010. This delay is too allow time for Lenders to adjust to the changes. It is a two part action plan:

1) Prohibition of Mortgage Brokers and commission based lender staff for the appraisal process

2) Appraiser selection for FHA Connection

This will be effective for all case numbers after the 15th of February.

HUD making Changes to FHA lending?

I am certain that by now you have heard that there are some changes that are beginning to take place with FHA financing. I am certain that you have heard that they are Bankrupt or that their reserves are diminishing at a rapid pace. I am also certain that you have heard that FHA will be adopting the HVCC as of January 1st.

How much of it is True? What affect will it have on the housing market? Does any of it affect the loan that I have with them?

I am sure that there are a dozen other questions that are going to arise from the headlines and the many blogs that are posted pre-maturely from professionals wanting to be the first to give you the information. Please be aware that all changes that will go into effect will come in the form of a Mortgagee letter. If you do not read it from a m0rtgagee letter do not give it a ton of thought. Even if you read it here it should contain a link to the mortgagee letter directly on HUD’s site. Click here to go to the HUD Site. They have published several mortgagee letters.

Changes include but may not be limited to:

• Appraiser Independence
• Appraiser Portability
• Appraisal Validity Periods
• Strengthening Counterparty Risk Management
• Revised Streamline Refinance Transactions
• Annual Base City High Cost Percentage Revisions

Tax Credit for Your Down-Payment!

HUD has released information on the ability for First Time Home-buyers to monetize the tax credit. I encourage all buyers that this is a good thing but also encourage you to read further. Below is a link to the information posted on HUD’s Site.  The News Release published on the Hud site gives insight on how this will be done.

“Housing Finance Agencies and certain non-profits will be able to use the tax credit for their down-payments via secondary financing provided by the HFA or non-profit.”

The way that I read this is that corporations like Nehemiah was in the past for seller funded down payment assistance will provide Bridge Financing via a second lien for the down-payment. Upon the filing of the tax return with the IRS your debt will be paid in full with your Credit. If it is not a Non-profit like Nehemiah it may be the Housing Finance Agencies.

I am left with the following questions:

1. How much will the fee be to set up the secondary financing through the non-profits?
2. Who will pay the fee?
3. How will wholesalers factor this into the underwriting decision?
4. What is the actual process from A-Z to make this as seamless for the borrower as we can?
5. “HFA and certain non-profits” lead me to the question, Which ones?

I have several other questions that I hope will be answered in the coming days. If I have questions I am most certain that you do as well. I will work diligently to get the answers for you so that I may make this very simple and easy to understand. Have a great weekend.

Don’t Go Assuming Nothing. Or Maybe you Should? Mortgage Definitions: Assumption

As the series on Mortgage Definitions continues we are going to take a look at Assumption. In most cases the root word assume can bring a negative connotation. For Example: “Honey, I assumed you were going to pick up our son from practice.” Another could be “I was under the assumption Michael was going to block the defensive end.” Either case the word is most commonly used in a way that we do not perceive to be a benefit. 

Assumption - The act of taking to or upon oneself – One of many of the definitions in Merriam-Webster pertains to the assumption of a new obligation. 

In the world of Mortgage Government loans are in many cases assumable. Hud defines an Assumable Mortgage in their Mortgage Glossary well. In short a mortgage that may be assumed simply means that the buyer can take over the mortgage of the seller under the same terms and the same balances. The buyer will have to credit qualify for the mortgage and there may be a small fee but this can be very attractive. 

Example: The seller of a property has an FHA loan which can be assumed at the rate of 4.875%. Rates at the time of the sale of the property are around 7.5%. The seller may advertise that they have an assumable first note at 4.875% making the home more affordable for any potential buyers. The buyer will still have to get a second mortgage for the remainder of what he does not have as a down payment. 

Example: Seller is selling the property for 200K and has a first mortgage for 140K at 4.875%. The buyer will either have to put 60K down or get a second mortgage . Since 100% financing is no longer a viable source and seconds are hard to come by the best case is the buyer has the money down. 

The Assumption Clause  is the provision written in the note that allows the assumption to take place. 

If you are wondering whether or not your loan is assumable check for the assumption clause in the note or contact your Mortgage Professional and they can help you. 

Assumption is another reason amongst many that I think that FHA in most cases is better than a conventional loan. It provides a unique selling proposition that the Conventional Mortgage cannot provide.