--= Bush Administration stop Flipping / Wholesaling =--
This is bad news for BirdDogs, Investors, and Rehabbers. What now?
http://www.hud.gov/news/release.cfm?content=pr03-055.cfm
Jer
This is bad news for BirdDogs, Investors, and Rehabbers. What now?
http://www.hud.gov/news/release.cfm?content=pr03-055.cfm
Jer
Subject-To of course! And there is also owner financing....Those two come to mind quickly. I am certain there are other ways too....
Get the Deed within a Land Trust...keep it in the name of the former Owner
Resell as the Trustee and take a Fees for Services or Become the Beneficiary of all net proceeds.
Either way there is no tipping off to FHA/HUD or the Lender that the property has 'seasoning' issues.
BTW HUD exempts it's own REOS, Section 204, and some Reloc. properties from this New Law.
The old days of buying and "Quick-Turn'n" properties are fast coming to an end...unless you know how to use the 'backdoor' using Land Trusts!
I hope this helps!
Derrick Ali
Am I missing something?
I put a contract on a property and found a buyer, I simply assigned the contract to my buyer, he's going to close with the seller.
I never had the deed, the only record of me is on the contract from the seller...does this matter in this case?...Is this predatory lending... I got the house at the payoff balance ($155k) and charged only $3500 to my buyer.
The house has an ARV of about $195k...They should be glad I took it...They hadn't made a pymt in 6 months.
Geez louise,
Clif
This is going to be a bit long (sorry everyone)
Here is a synopsis of the ruling, right off the HUD site:
The final rule, "FR-4615 Prohibition of Property Flipping in HUD's Single Family Mortgage Insurance Programs," (view as TEXT or view as PDF file) makes recently flipped properties ineligible for FHA mortgage insurance. It also allows FHA to better manage its insurance risk by requiring additional support for a property's value when a significant increase between sales occurs. Features include:
Sale by Owner of Record: Only the owner of record may sell a home to an individual who will obtain FHA mortgage insurance for the loan; it may not involve any sale or assignment of the sales contract, a procedure often observed when the homebuyer is determined to have been a victim of predatory practices.
Time Restrictions on Re-sales:
Re-sales occurring 90 days or less following acquisition will not be eligible for a mortgage to be insured by FHA. FHA's analysis disclosed that among the most egregious examples of predatory lending was on "flips" that occurred within a very brief time span, often within days. Thus, the "quick flips" will be eliminated.
Re-sales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a re-sale percentage threshold established by FHA; this threshold would be relatively high so as to not adversely affect legitimate rehabilitation efforts but still deter unscrupulous sellers, lenders, and appraisers from attempting to flip properties and defraud homebuyers. Lenders may also prove that the increased value is the result of rehabilitation of the property.
Re-sales occurring between 90 days and one year will be subject to a requirement that the lender obtain additional documentation to support the value to address circumstances or locations where HUD identifies property flipping as a problem. This authority would supersede the higher expected threshold established for the above-mentioned 90 to 180 day period and will be invoked when FHA determines that substantial abuse may be occurring in a particular locality.
Other recent actions by the Bush Administration to protect homeowners from predatory lending and promote homeownership include:
A proposed rule making lenders accountable for appraisals on mortgage insured by FHA.
A recent plan announced by HUD to expand protection of homeowners by proposing performance standards for appraisers of FHA-single family homes under its Appraiser Watch Initiative. Under Appraiser Watch, some 25,000 appraisers will be held accountable for faulty appraisals, which too often lead to default and foreclosure. FHA will monitor appraisers' default and claim rates and will levy sanctions - including removal from its list of approved appraisers - against those whose rates are excessive.
A proposal to reform the regulatory requirements of the Real Estate Settlement Procedures Act (RESPA) that would make the process of buying and refinancing a home significantly simpler, potentially less expensive and would protect consumers from unscrupulous lending practices.
The "Homebuyer Bill of Rights," which requires greater disclosure of costs associated with buying a home, allows consumers more choices in choosing providers of closing services, limits excessive settlement fees and encourages innovation and competition in the marketplace.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet.
i think this might be an issue mostly for rehabbers, as for flippers and whatnot this shoudn't be a big deal, you'll be flipping to other investors most of the time and they won't be using FHA so no worries....
From a Wholesalers point of view this should not be of any worry. A rehabber may need to be concerned, however a rehabber who is doing things the right way should be fine.
The guys who are doing poor rehabs and pushing for fraudulent values are going to have a tough time. My only fear is that those who run their businesses legitimately will be thrown into the same category.
[addsig]
Board Members,
This new ruling effects people who are using FHA to finance a property. So if your investing method falls within these guidelines do not use FHA loans to finance your properties when you are ready to sell.
I think the key word here is 'predatory' lending this is what caused this ruling to take effect. If you look into the background of what is going on, it is where the appraiser, the lender, the 'bogus' property owner all got together to defraud the consumer by inflating prices of the property thereby defrauding the innocent new buyer.
Subject To investing does not fall within these guidelines of the FHA ruling as we have our buyer re-fiance after a two year period.
So bottom line there are Mortgage Brokers who you can find that will understand your investing methods and will not submit paperwork to the FHA if the property falls within the time frame instituted by the FHA.
Just a small road block which can easily be overcome, this is why I advocate having a Mortgage Broker on your team, he will understand what you do and take the appropriate action to make sure you use the proper lender.
John $Cash$ Locke
PS: Steve Cook, welcome on board this board as a Channel Partner and a very knowlegeable investor. Looking forward to reading your posts to help the new person here at TCI,
Ok. I am a rehabber and I want to make sure I understand this FHA/no flipping thing correctly.
I closed on a house last Monday, 4/30, using hard money. I'll be done with the rehab in two weeks. I'm ready to start marketing the house now.
If I find a buyer within 3 months of my 4/30 closing date, does this new rule mean that my buyer cannot get an FHA loan?
If so, then that seems to severely limit my buyer's loan options and therefore it limits my number of potential buyers.
Any ideas on getting around this? I am hoping for a solution that still lets me pay off my hard money loan ASAP and doesn't make me a landlord!
Re-sales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a re-sale percentage threshold established by FHA; this threshold would be relatively high so as to not adversely affect legitimate rehabilitation efforts but still deter unscrupulous sellers, lenders, and appraisers from attempting to flip properties and defraud homebuyers. Lenders may also prove that the increased value is the result of rehabilitation of the property.
This is the part that deals with rehab and it says that lenders must get a seperate appraisal from that which the rehabber provides and prove that the increased value is the result of the rehab. I think we'll be all right as long as we're ethical.
What do the other rehabbers think?
I'm turning these houses fast...I really do not have time or desire to bother with the FHA/VA crap anyway....they are just a very slow roadblock. Too bad for those poor people who will miss out on a great deal on a good house from me. I do have a mortgage broker on my team and have formed an LLC So I got my tail covered. Good luck to you all in your ventures.