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Have you ever had a deal fall apart because your offer on a Sacramento REO (bank owned) was written before the Bank reached it's title seasoning requirements for FHA?

If not, here is a little background information.  FHA currently has a guideline that states the current owner needs to be on title for more than 90 days before they can sell the home.  They put this rule into effect to discourage investors from flipping property several years back.  Unfortunately with the huge inventory of foreclosed homes in Sacramento, this rule can tend to get in the way of a Buyer wanting to use FHA financing.

With this rule, both the Buyer and the Seller would need to wait until the 91^st day after the Seller's ownership interests were recorded against the property before they can sell the home to a Buyer who wants to use FHA financing. 

Thank goodness HUD has realized this is an impossible rule in today's market.  With a huge percentage of homes in Sacramento currently owned by the bank because of foreclosure, this rule has become the bottle neck of the REO process.

Banks need to liquidate as soon as possible so they can get this unprofitable asset off their books.  Neighbors want the foreclosure sign down and the vacant home with the tall grass sold even quicker.  The Buyer wants to move in and the Agents want to get their deals closed.

As of July 6, 2008 we will no longer have to deal with this guideline in regard to Sacramento Bank Owned Homes!      Can I get a halleluiah?!!!

On June 7, 2006, HUD published a final rule in the Federal Register amending regulations at 24 CFR 203.37a prohibiting property flipping in HUD's single-family mortgage insurance programs by providing additional exceptions to the time restrictions on sales. The rule and this mortgagee letter become effective for mortgages endorsed for insurance on or after July 7, 2006. 

Here is FHA's Flipping policy

FHA requires that: a) only owners of record may sell properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and c) that for resales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property's value.  FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.

The following sales are exempt from the above mentioned policy

• Sales by HUD of its Real Estate Owned
• Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.
• Sales of properties by nonprofits approved to purchase HUD-owned single-family properties at a discount with resale restrictions.
• Sales of properties that are acquired by the sellers by inheritance.
• Sales of properties purchased by employers or relocation agencies in connection with relocations of employees.
• Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises.
• Sales of properties by local and state government agencies.
• Upon FHA's announcement of eligibility in a notice (i.e., ML), sales of properties located in areas designated by the President as federal disaster areas, will be exempt from the restrictions of the property-flipping rule.  The notice will specify how long the exception will be in effect and the specific disaster area affected.

 We hope you find this information helpful!

This blog written by:
Team Newington
Sacramento Mortgage Planner
(916) 687-66868
www.SuperiorLoanTeam.com