In an effort to stabilize home values, HUD Secretary Donovan announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.
HUD will allow FHA financing for buyers of REO property. This is a temporary waiver of policy, good for one year. The hope is that it will help soak up supply and stabilize the markets. The waiver takes effect February 1, 2010 for one year.
To avoid speculation or flipping of property, HUD has set down some stringent rules. They are certainly not looking to reignite the kind of speculation that was partly responsible for the collapse.
1. The transactions must be at arms-length.
2. No entity of interest between the buyer and seller
3. If the sales price of the property is 20% or more above the sellers acquisition cost, the waiver will only apply if the lender meets certain requirements.
4. The waiver only applies to forward mortgages but not to the Home Equity Conversion Mortgages.
5. FHA currently does not insure a seller owned mortgage, owned less than 90 days. The waiver may give offer borrowers access to FHA temporarily.
The policy allows buyers buyers access to FHA-insured financing to buy HUD-owned properties, bank-owned properties, or properties resold through private sales.
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