HUD has announced it will limit the seasoning requirment for one year.
In a surprise move, the U.S. Department of Housing and Urban Development (HUD) has announced that beginning on February 1, 2010 it will rescind its three-month moritorium on selling a home for one year.
“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said HUD Secretary Shaun Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
What does this mean?
Basically, it brings investors back into the foreclosure market, because if they find a house that is a great value they can buy it and “flip it” as quickly as they can. Traditionally there has been a 90-day seasoning period between when the home was bought and when it could be resold per FHA guidelines.
Of course there are catches in this program.
To be considered the transaction must:
- 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. (These conditions include showing significant improvements to the house backed up by two appraisals and
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
Brian Brady, America’s No. 1 Mortgage Broker, has stated on Facebook that he believes many banks will not wave the seasoning rule. Which would lead to this being another “public” announcement by the government of what they are willing to do when it really helps no one.
Is Brian right or will this allow some people to invest in property fix it up and help stabalize home values? Only time will tell.
