Mortgage Video & Blogging Community

New FHA rules will greatly aid in the home sales market of foreclosed properties in Los Angeles and other areas of California.  HUD has announced a temporary waiver of its regulations providing that a loan will not be eligible for FHA insurance if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller, and the seller does not come under any of the exemptions that apply to the 90-day rule.

THIS WAIVER WILL TAKE EFFECT WITH CASE NUMBERS ASSIGNED ON OR AFTER FEBRUARY1,2010 (PURCHASE CONTRACTS CAN BE DATED PRIOR TO FEB.1^ST)  AND IS LIMITED TO SALES MEETING THE FOLLOWING CONDITIONS: 

1.      All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.  Some ways that the lender can ensure that there is no inappropriate collusion is to assess and determine the following:

a.      The seller holds title to the property;

b.      LLC’s, corporations, or trusts that are serving as sellers were established and operated in accordance with applicable state and Federal law;

c.       No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame;

d.      The property was marketed openly and fairly, via MLS, auction, For Sale by Owner, or developer marketing.  A sales contract that refers to an “assignment of contract of sale” may be a red flag.

2.      When the sales price of the property is 20% or more over and above the seller’s acquisition cost, the waiver will apply only if the lender:

a.      Justifies the increase in value by obtaining documentation which verifies the seller has completed sufficient legitimate renovation, repair, and rehab work to substantiate the increase in value; or, in cases where no such work is performed, the appraiser provides appropriate commentary regarding the increase in value since the prior title transfer; AND

b.      Obtains a property inspection and provides it to the purchaser prior to closing.  The lender may charge the borrower for this inspection.

3.      When the sales price of the property is 50% or more over and above the seller’s acquisition cost, the waiver will apply only if a second appraisal is obtained.

The full text of this temporary waiver is available at:  http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

——————–

Top Articles / Links / Questions:

1. FHA Loan Limits – Upland, CA
2. FHA Seller Paid Closing Costs – Upland, CA
3. California Investment Property With an FHA Loan
4. What Is FHA Gift Money?
5. The Trouble With FHA Loans in California

——————–

Brian Wiesner California FHA Mortgage Expert Monaco Mortgage Corporation Toll Free: 866-343-1579 Direct: 909-581-4075