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In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan last Friday announced a temporary policy that will expand access to FHA mortgage insurance and allow a quicker resale of foreclosed properties.

FHA currently requires the seller to own (must be on the title) a Sacramento property for a minimum of 90 days before they can sell it to a buyer using FHA financing. Sacramento bank owned property is exempt from this rule….until now!  

HUD will lift this restriction for one year beginning on February 1, 2010!

This lift of the 90 day seasoning rule will permit buyers to use FHA-insured financing to purchase homes they previously could not qualify for. You see… there are a ton of Sacramento investors picking up homes and renovating them, so they can quickly resell the home for a profit. In the past, if an investor wanted to sell their home to a FHA borrower, the investor would have to hold the house for 90 days before they could write a contract with the borrower. This made investors seek out conventional and VA buyers, leaving the FHA buyer out of luck.

To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length
  With no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

This is a good compromise in my opinion! Let’s make sure the FHA buyer is protected and… Lets get these homes rehabed and back on the market!

This is one less thing we have to worry about now when we work on getting a Sacramento mortgage for one of our clients!

Do you think that this will help move inventory in the Sacramento Real Estate Market?