This is HUGE!!!

In an effort to speed sales of distressed properties and homes
that have been rehabbed by investors buying and selling for a profit,
FHA will no longer require that the property be owned by the seller for 90 days!

This rule waiver is scheduled for one year and designed to “stabilize
home values and improve conditions in communities where
foreclosure activity is high”, according to the announcement.

This is going to reduce hold times for investors and increase investor activity. It also
means FHA will insure REO’s for buyers!! Did I mention how BIG this is? This will definitely
stimulate some sales!!

Here’s why this is so great….

For investor resales, FHA is the only way to go right now because they
require only 3.5% down and the seller can contribute up to 6% to
the buyers closing costs, getting them in very, very light when
necessary. Problem was, FHA wouldn’t underwrite any home being
sold within 90 days of the purchase. This rule has squelched many
investors activities and kept them from buying, because they were
being forced to hold the properties longer, increasing their expenses.

Also, FHA couldn’t insure loans to owner/occupants (O/O) who wanted to buy bank REO’s
because they were also not owned by the seller for 90 days in most cases.

On one hand, this is going to increase competition from O/O’s a bit for
investors who buy from the banks, but the deals we buy typically need repairs
that, number one, sellers aren’t willing to accept, and two, sellers
would have to fund those repairs in cash after the sale,
something most of them can’t and won’t do.

Since the kinds of deals we buy don’t qualify for FHA
financing until substantial repairs are made, this will keep most of
our investor deals safe and untouched by the non-investor public.

So, no matter how you slice it, this is great for investors, great for
the public and great for home values. This can literally end
price declines in weaker areas hit hardest by the foreclosure debacle.

There are a few details to the rule waiver and it’s only scheduled
to last a year at this point, but I’m betting HUD bans the lift
permanently OR amends the rule to 45 days seasoning, which, in my
opinion, fully satisfies the purpose for which it was originally intended.