In the Metro Atlanta area we have a ton of foreclosures. Because of the market, our lenders are pushing FHA financing. However, I am seeing more and more banks refuse FHA loans. Why is this? What difference does it make as long as the home is up to FHA guidelines in the condition.
Can someone explain? Also, fewer banks are accepting down payment assistance such as Nehemiah which is our bread and butter with the lower end properties.

I couldn't tell you without seeing the circumstances.

Neighborhood Gold was a big downpayment assistance program here. I even used it when we purchased another home & they don't even exist anymore. I haven't take the time to look into it, but not sure why.

One discovery for me, made the hard way, is that FHA underwriting guidelines require the seller to have held title for 90 days. You can close on day 91 or something like that. It's one of their little anti-flipping clauses.

My seller was able to document via the acquisition deed that they had owned the property WAY longer, however the deed had not been recorded (intentionally...long story). Even that was not adequate documentation for the underwriter and the house did not qualify for FHA financing.

The buyer in this case is choosing to wait it out.

But maybe they aren't accepting FHA financing because they know, for whatever reason, that this particular property won't qualify. Just a guess.

As far as the downpayment assistance programs like Nehemiah and Neighborhood Gold, a lender told me about a year ago that the IRS was cracking down on them. I think it was something to do with the DPA programs trying to say that they were charities and the IRS disagreeing about that. At any rate, the lender told me that were going to go away because of the IRS disapproving of them.

My last 3 REO listings were sold with FHA loans with Nehemiah assistance. My AM mentioned to me something to the effect "isn't this how we got into this mess in the first place?".

Nehemiah is here to stay from what I have heard lately.They tried to get rid of it and it was overturned. My lender says it will be avalible. Maybe they have tightened up on qualifing for this type of program.

I have also heard that they are looking into changing it from a 97%ltv to posssibly 98.5% or 100% financing. May have something to do with all the 100% conventional loans going away.

Bottom line the government is bailing out the mortgage industry and trying to give them a product to sell and keep the economy going and WE will be paying for it.

Without knowing all the details I can say that if your prospects are buying a forclosed property then I understand why the seller is going to shy away from FHA. Simply put it's property condition. They want to sell the property as is. Many banks have a large portfolio of REO's and want to get them off the books as quickly as possible as sell them strictly "as is"

As I am sure you have seen many REO's want the prospect to get qualified with them in order to except the contract. Countrywide has this condition on many of their properties. The prospect just has to get pre qualified, not actually get the loan from them. They are just protecting themselves and if they happen to be able to flip the loan into their portfolio it also helps the bottom line.

As far as banks trying to get away from down payment assistance programs the reason in many area's is that the market is still declining. They still have to sell the loan on the secondary market and there are not many investors on wall street that want to purchase loans where the buyer has little investment in the property. It makes little difference that the loan is FHA insured.

Many lenders and banks are now having minuim score requirements on FHA loans. This is a first , even though FHA does not have a score requirement the lenders are still wary of the secondary market.

Now that the subprime market is no longer there many loan brokers are trying to get these borrowers approved via FHA. The lenders are swamped with junk files by in experienced shops and it's clogging the system badly.

The bottom line is it does not matter if the borrower is qualified for FHA or any other program, the loans still have to be sold on the secondary market and everyone is afraid of their own shawdow right now. I am seeing even the most quilified borrowers have to jump though hoops to get approved.

I have an Ocwen REO that has a FHA pre-approved buyer's offer on it. What's the story with the seller owning the property for 90 days? I have read the past threads on the forum and found some info. but I'm still confused. My listing has only been on the market for a few days.

Anyone know what I'll be dealing with or how I should approach this offer?

As I understand it, you can't go FHA until the home has been on the market for 90 days. Tell them you'll get back to them in 3 months with an answer to their offer.

Maybe a lender has a policy stating that but it is not an FHA requirement for a house to be listed at all let alone 90 days.

I just closed an REO end of April that was owned by the bank for approximately 60 days...it went 203K. So it must be a myth.

Regarding the 90 day rule, how does that work with new homes?

Also if a buyer is using an FHA loan, by nature he/she won't have 20% equity at close. So in the case of a 3% down payment using an FHA loan will the buyer need PMI? What are the fees for that?

And are there any ways to avoid PMI while using a FHA loan (besides putting 20% down). It would be interesting to hear if anyone has been able to get a first mortgage with FHA financed at 80% of the sale price minus 3% DP and a 2nd loan with 10% down for the difference.

The 90 day Anti-Flipping Rule is real.

There are exceptions to the rule, of course - but they are difficult to decipher. In terms of REO properties, some financial institutions are exempt. Many REO assets are held by mortgage backed securities and are not exempt. HUD actually requires the purchase agreement to be dated after the 91st day of the recording of the last deed in those cases.

I had an REO sale that HUD would not approve for FHA financing due to the timing. The purchase agreement was written too early and violated their rule - even though the time had since lapsed. A rewritten contract with a later date solved that problem.

Yes, 90 day rule is accurate from my experience, my wife ran into that problem not long ago. I believe it is that the current owner needs to be on title for at least 90 days. I don't know if this is specifically aimed at flipping, however, does anyone know why this rule is in effect?

It's called "seasoning," and you will hear mortgage lenders talking about having programs that don't require seasoning. (Most do.)

From HUD: http://www.hud.gov/news/release.cfm?content=pr03-055.cfm

This appears to be old news, but I think in a lot of areas (like mine) FHA loans weren’t in use for years because the loan limits weren’t high enough. We’re all getting reacquainted with the product now...

Wonderful news!


News Release
HUD No. 08-082
Lemar Wooley
(202) 708-0685
www.hud.gov/news/ For Release
Friday
June 13, 2008


FHA EXTENDS FINANCING FOR IMMEDIATE PURCHASE OF FORECLOSED HOMES
Measure seen to bring stability to home values and accelerate sale of vacant properties
WASHINGTON - In an effort to stabilize declining home values in certain neighborhoods, the Bush Administration today announced a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties.

For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period.

"A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community's recovery," said Brian D. Montgomery, Assistant Secretary of Housing-Federal Housing Commissioner. "The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country."

FHA's new temporary policy will help stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties. Many foreclosed properties remain vacant for months, inviting vandalism and reducing values of surrounding homes. To address that sizeable inventory, lenders have hired companies that specialize in the marketing and disposition of foreclosed homes. It's reasonable and appropriate that these firms have the ability to sell the properties to borrowers using FHA financing.

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This prohibition is intended to prevent property "flipping," a predatory practice that strips a home of its equity before being quickly resold at an inflated price to an unsuspecting buyer. FHA's new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing.

To read the full text of this new temporary policy, visit FHA's website.

Greetings! Here is, from what I understand, the latest on FHA anti-flipping and the circumstances which have temporarily suspended the 90 day rule as of June 9, 2008. Check out the link below for more info. Hope it helps! Be well.


FHA anti-flipping rule waived!

Hi all, Tyler here from sunny Seattle. Just thought I'd chime in on this discussion. This should open up alot of opportunity for buyers, sellers, and agents yes! We have already put together a program to take advantage of this. If interested feel free to take a look. Hope all is well and I look forward to being a part of your community!

Tyler Musson
www.TurboHomesaleMethod.com

I am trying to close on a FHA loan and the docs need to be submitted by noon tomorrow. The loan is for a condo. However, after requesting several additional pieces of information, the underwriter now wants to know how many condos within the association are currently financed by FHA. The loan officer stated that they only want 10% of the condos financed by FHA. Any comments? Has anyone heard this one? If so, any suggestions on where to get this info in a hurry?

So the complex doesn't turn into a ghost town? Just a thought.

Condo Association.