Good News for Buyers of Foreclosed Properties and FHA Loans

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With the increase popularity of the FHA loan in today’s mortgage market, the FHA has been slighted with all the vacant foreclosed homes. Due to previous abuses of house flipping problems, the government adopted the idea that they wouldn’t allow funding on a property that was recently purchased. Purchaser had to wait 90 days before FHA would approve the loan. That has since changed with this press release from HUD. This is good news for those that qualify and have found the right home.

FHA EXTENDS FINANCING FOR IMMEDIATE PURCHASE OF FORECLOSED HOMES
Measure seen to bring stability to home values and accelerate sale of vacant properties

WASHINGTON - In an effort to stabilize declining home values in certain neighborhoods, the Bush Administration today announced a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties.

For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period.

“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” said Brian D. Montgomery, Assistant Secretary of Housing-Federal Housing Commissioner. “The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country.”

FHA’s new temporary policy will help stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties. Many foreclosed properties remain vacant for months, inviting vandalism and reducing values of surrounding homes. To address that sizeable inventory, lenders have hired companies that specialize in the marketing and disposition of foreclosed homes. It’s reasonable and appropriate that these firms have the ability to sell the properties to borrowers using FHA financing.

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This prohibition is intended to prevent property “flipping,” a predatory practice that strips a home of its equity before being quickly resold at an inflated price to an unsuspecting buyer. FHA’s new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing.

To read the full text of this new temporary policy, visit FHA’s website.

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You can find out more information on the HUD website.

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June 17, 2008 · Filed Under Frederick MD Real Estate

Comments

4 Responses to “Good News for Buyers of Foreclosed Properties and FHA Loans”

FHA Waives 90 Day Financing Rule For Foreclosures and Other Properties : The Real Estate Bloggers on June 17th, 2008 8:09 am

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Boomer Jack Boardman on June 17th, 2008 3:13 pm

With so many foreclosures in rough condition, or worse, how might this affect the ability to qualify the property for FHA-insured financing?

Boomer Jack Boardmans last blog post..Looking for a Flower in a Pile of Manure!
gotbob on June 18th, 2008 6:49 am

Jack, great point, but oddly enough, I have been in some foreclosed properties that look better than some homes with people in them.

“I’m sorry you didn’t know we were coming today or you would of cleaned up?!?! Did you need a weeks notice next time?”
Boomer Jack Boardman on June 18th, 2008 9:21 pm

“I’m sorry you didn’t know we were coming today or you would of cleaned up?!?! Did you need a weeks notice next time?”
Okay, so help me, I can’t help it! What needed cleaning? The house, or the people?
Boomer Jack Boardmans last blog post..Almost every Neighborhood has One—or Two!