FHA Anti-Flipping Rule….Uh Why Exactly?
I guess in my limited mental capacity, for the life of me I can’t really wrap my mind around this FHA Anti-Flipping Rule. I mean it is ok for the same buyer to buy this flipped property at market value using a conventional loan, heck back when prices were stupid, that buyer could finance over 100% of the purchase price and then a few months later after watching late night TV and seeing that dude from that company ask “Homeowners, do you need to consolidate your bills and buy a nice big jet ski or boat or are you in humiliating need of a Humvee?”
So those predators (Flippers) can sell that home in conjunction with our capitalist society and then amazingly enough put their winfall back into the economy and kind of keep things going round and round? And for some reason some bleeding heart thought that the buyers needed protecting from these same flippers only while trying to use a goverment insured loan? Are we really protecting the buyer or are we just protecting the insurers?
I am feebily still trying to understand this. I keep reading and I just can’t follow the logic. If you followed the link above please check this link out and then try esplanen’ this rule to me so I can be in the show.
FHA Waives 90 Day for foreclosures and other properties.
So, let me say this….We currently are in escrow with first time home buyers that have saved and saved and are finally able to take advantage of the reasonable interest rates and home values in our market. We look and look for a suitable piece of property for them and after several weeks and a few offers written and not accepted, find a property that is not only in their price range but also already fixed up and clean. Yeah, fresh paint, new carpet, yards are clean, no broken windows, a clear pest report! Wow! The clients are approved for an FHA loan and they are extremely excited about the possiblities of finally owning a home.
Sounds nice? Yet the clients have to wait for the home to be owned by the investor for 90 days before they can attempt to buy it. These clients can’t qualify for a conventional loan due to the increased down payment. Meaning they have the amount of money for down and closing for an FHA loan. With a conventional loan they need to come up with 5-6% more to cover their down payment and closing costs.
Now, what we see happening is the investor simply states in the marketing material that they will not consider any offers from buyers who are pre-approved for an FHA Loan. Great…. We have this wonderful program available that is limited in it’s use. Meaning most foreclosed properties are beat to death and won’t qualify for FHA and the ones that are the investor/owner won’t look at offers from buyers using FHA. Now that leaves a very small percentage of homes in any price range that are owner occupied due to the climate of this market.
Tell me oh please tell me who have we protected? It looks as though we have just shoved a pretty large group of buyers out of the market. And, in a time where the economy could really use those same buyers participating in the market.
Help Me please Help Me understand this! Oh, and if you say to me you are protecting the consumer, I will just have to say…TTTTTHHHHHPPPPPBBBBBPPPP!!!!!
Kelly…
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7 Responses to “FHA Anti-Flipping Rule….Uh Why Exactly?”
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[...] Original post by Wallace & Kelly Modesto Real Estate Blog [...]
[...] Original post by Wallace & Kelly Modesto Real Estate Blog [...]
[...] Original post by Wallace & Kelly Modesto Real Estate Blog [...]
Well, as a professional lender, I have to agree…
TTTTTHHHHHPPPPPBBBBBPPPP!!!!!
I’m sure when HUD put this rule into play, they were attempting to solve some great corruption problem within the industry. But at this point in the game, LET’S JUST PUT SOME PEOPLE INTO HOMES! It helps everyone.
Fannie doesn’t care, Freddie doesn’t care, why does HUD?
Just to clarify, here’s the english translation of the waiver of the flip rule:
If you are not the foreclosing entity, it’s representative or subsidiary (called the mortgagee in the actual verbiage), you still have to wait 90 days from the acquired date.
So they’ve allowed the company that took the foreclosure hit to attempt to unload the property faster, but they are penalizing the folks who are buying on the courthouse steps, taking care of the property, and attempting to make a profit.
I, for one, would much rather have a conscientous seller with some skin in the game make a profit, and give my buyers what they are looking for, rather than see another torn up bank owned property sitting empty for a longer period of time.
In the scenario you mentioned Mike, our borrowers are getting the property for a good price. It’s in great shape. The sellers want a fast close. They are using a local title company who is responsive. This is a great opportunity for everyone involved. How waiting the 90 days prevents some kind of potential problem is beyond me.
The other issue involved here is that it is difficult to put borrowers into a conventional loan right now. The minimum required down payment is 5% ONLY if you have a 700 or better credit score. If you are 699 or below, you are required to have a 10% down payment. So with a higher down payment requirement who do you think is likely to buy this property? INVESTORS!
We all know the housing industry has been a mess. We know that we had to learn some lessons as a country, as consumers, and especially as professionals. We get it, new rules had to be implemented. But this rule doesn’t help anyone. It actually defeats it’s own purpose.
So very well put! Thank you for your input however as usual very few people are listening.
Kelly…
Carla, I read your comment again and I have to ask this question. Predatory flippers? How can there be a predatory flipper if this investor buys a property below market value, fixes it up and sells it to a buyer that is using an FHA loan who has an FHA appraisal for market value? I don’t see where anyone was taken advantage of…. I just don’t… When you purchase a piece of property in a climbing market and then we move into a declining market those are the breaks…Keep making your mortgage payments and wait for the market to climb again. And, those unfortunate few that have lost their jobs because of the economy are just that….Unfortunate! I feel for them and who knows, maybe I will be one of them someday but the goverment can’t be expected to write rules to protect against market conditions.
Kelly…
Sorry it took me so long to respond, I’ve been in proerty flippin hell on a CONVENTIONAL LOAN!! Be careful out there! Although Fannie and Freddie don’t worry about the 90 days, the mortgage insurance companies do.
The MI rep’s take on it is that someone could buy a house below market value, produce straw buyers, and sell at an overpriced amount. This would then inappropriately inflate property values and create more problems in the market. I guess they are assuming that the appraiser would have to be willing to inflate the value as well. She also indicated that this just opens the door to more potential loan fraud, etc…
Myself, I have grown weary of this whole issue and pray that I do not run into anymore “flips”. or anything that looks like one. They’re stressin me out man!