In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Federal Housing Administration (FHA) Commissioner David H. Stevens extended FHA’s temporary waiver of the agency’s ‘anti-flipping rule.’ The extension is intended to accelerate the resale of foreclosed homes in neighborhoods struggling to overcome possible property abandonment and blight.
With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. Early last year, FHA temporarily waived this regulation through January 31, 2011. On Friday January 28th FHA posted a notice extending this waiver through the remainder of 2011.
This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
The extension is effective through December 31, 2011, unless otherwise extended or withdrawn by FHA.
To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver continues to be 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.
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The House Appropriations Committee approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac, and Federal Housing Administration financing in high-cost areas through September 2010.
Without this extension, the loan limits revert at the end of the year to $417,000 in the highest-cost areas.
The spending bill also would extend FHA’s Home Equity Conversion Mortgage reverse mortgage program for seniors. And it provides $70 million to continue pre-purchase counseling for prospective home buyers and counseling for families facing foreclosure.
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Source: Inman News (07/21/2009)
The Federal Housing Administration had previously announced in early May that First Time Home Buyers would be able to use the (up to) $8,000 tax credit towards the down payment or closing costs of their new home purchase for FHA loans. Later the government revised their position and it looked like First Time Home Buyers would not be able to use the funds in advance.
New guidelines have just been released which now allow First Time Home Buyers to use the tax credit in advance, with the following restrictions:
- The monetizing of the tax credit cannot be used for the 3.5% down payment required by FHA. It can only be used for settlement expenses, or additional down payment funds in excess of the 3.5% or to buy down the interest rate.
- The funds to monetize the tax credit cannot come from anyone who may have an interest in the transaction – the seller, the lender, the real estate agent, the builder, etc.
- The funds to monetize the tax credit CAN come from a family member, any other non-interested party or another finance shop. The limit however is that any finance firm cannot exceed a 2.5% fee (which would limit the interest of any consumer finance agency from participating as an organization to monetize the credit).
- A lien cannot be recorded for the monetized finance amount unless the lender is one of the narrowly approved government sponsored non-profits.
- Repayment of the advance must come from the buyer – the IRS will still send the tax credit to the buyer and the buyer will have to repay the advance to whomever loaned it.
Have questions about how you can monetize the tax credit, contact us.
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