FHA Property Flip Guidelines

Happy Friday!

FHA Property Flip Guidelines

(Please note that agency/conventional loans do not necessarily have these rules, but many lenders have overlays that do have these restrictions…jumbos, some do some don’t…always check with me first-our Fannie/Freddie Direct products/conventional, typically allow flipped properties) 

Once upon a time FHA didn’t have a restriction on the purchasing of a property recently acquired by the seller (AKA a “Flip”) … then along came the “FHA Prohibition on Flipping” provision, circa 2003. A brief waiver to the anti-flipping rules was provided by HUD back in 2014, but the waiver has since expired.

Today, we must abide by FHA’s strict rules surrounding flip situations – so make sure to pay close attention to the chain of title on your FHA purchases!

Here’s a summary of the current FHA guidance:

The term Property Flipping refers to the purchase and subsequent resale of a property in a short period of time.

The eligibility of a property for a Mortgage insured by FHA is determined by the time that has elapsed between the date the seller acquired title to the property and the date of execution of the sales contract that will result in the FHA-insured Mortgage.

FHA defines the seller’s date of acquisition as the date the seller acquired legal ownership of that property.

FHA defines the resale date as the date of execution of the sales contract by all parties intending to finance the Property with an FHA-insured Mortgage.

Resales Occurring within 90 Days or Fewer After Acquisition:
A property that is being resold within 90 days or fewer following the current owner’s date of acquisition is not eligible for an FHA-insured Mortgage.

Resales Occurring Between 91-180 Days After Acquisition:
A Mortgagee must obtain a second appraisal by another appraiser if:

  • the resale date of a property is between 91 and 180 days following the acquisition of the property by the seller’s; and
  • the re-sale price is 100 percent “over the purchase price” paid by the seller to acquire the property.

The required second appraisal from a different appraiser must include documentation to support the increased value.

If the second appraisal supports a value of the property that is more than 5 percent lower than the value of the first appraisal, the lower value must be used as the property value in determining the adjusted value.  The cost of the second appraisal may not be charged to the borrower.  The Mortgagee must obtain a 12-month chain of title documenting compliance with time restrictions on resales.

Exceptions to FHA property flipping restrictions are made for:

  • properties acquired by an employer or relocation agency in connection with the relocation of an employee;
  • resales by HUD under its real estate owned (REO) program;
  • sales by other U.S. government agencies of Single Family Properties pursuant to programs operated by these agencies;
  • sales of properties by nonprofits approved to purchase HUD-owned Single Family properties at a discount with resale restrictions;
  • sales of properties that are acquired by the seller by inheritance;
  • sales of properties by state and federally-chartered financial institutions and Government-Sponsored Enterprises (GSE);
  • sales of properties by local and state government agencies; and
  • sales of properties within Presidentially Declared Major Disaster Areas (PDMDA), only upon issuance of a notice of an exception from HUD.

The restrictions listed above and those in 24 CFR 203.37a do not apply to a builder selling a newly built house or building a house for a borrower planning to use FHA-insured financing.

All the best,

Don

Alert: Reduced FHA Insurance Premiums Repealed

HUD SUSPENDS MIP REDUCTION

The Department of Housing and Urban Development (HUD) announced today that the recent Reduction of Mortgage Insurance Premiums (MIP), outlined in FHA Letter 2017-01 were suspended.

According to posted information from Housing Wire, the letter stated that a subsequent Mortgagee Letter will be issued at a later date should this suspension or policy change.

“FHA is commited to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers,..”
as stated in the letter this afternoon.

Please see this link to read the full article, but know that CHM is committed to you and your borrowers and with this suspension of policy, there will be some loans that will need correcting in respect to compliance.

Please contact us today should you have questions.

Don Parsons
Mortgage Advisor
(949) 428-3099
dparsons@commercemtg.com

Reverse Mortgage Rules Take Effect March 2nd, 2015

In the last 72 hours I sent an e-mail to all my clients, consumers as well as professionals, in order to alert seniors, specifically those 62 or over, about the NEW FINANCIAL ASSESSMENT RULES for REVERSE MORTGAGES.  Everyone has family, friends, neighbors, or associates that may be impacted.

The new rules were to take effect March 2, but have been postponed 30-60 days. [Read more…]

Does HUD Owe You a Refund?

US-Dept-of-HUDIf you had an FHA-insured mortgage, you may be eligible for a refund from HUD/FHA.

Due to increased public interest, the Mortgage Insurance Premium Refund Support Service Center is experiencing a high volume of calls.

http://www.hud.gov/offices/hsg/comp/refunds/index.cfm

FHA Homeowners Fact Sheet

Who may be eligible for an FHA refund or share?

http://www.hud.gov/offices/hsg/comp/refunds/fhafact.cfm

Very Important Information for Anyone Who Has Had a Short Sale

During the weekend of August 16, 2014, Fannie Mae will update Desktop Underwriter® (DU®) Version 9.1 with yet another change:

Short Sales (Deed-in-lieu of Foreclosure and Pre-foreclosure Sale):

warning-sign200The waiting period requirements for borrowers who have had a previous deed-in-lieu of foreclosure or preforeclosure sale (Short Sale) are being updated to now require a four-year waiting period. Only this last year it was updated to allow for only a two-year period. Now, Fannie Mae is changing it back again to a four-year waiting period. Please pass the word…

If you know of anyone with a short sale in the last few years, have them call me or e-mail me immediately to get a purchase or refinance started BEFORE THE AUGUST 16 WEEKEND. Many banks have implemented this pre-maturely. We are allowing two year period until Aug. 16 weekend!

OTHER REASONS TO RESTRUCTURE/REFINANCE YOU EXISTING MORTGAGE:

  • Take Cash-out to make Home Improvements or for Down Payment on a new 2nd Home or Investment
  • Payoff a 2nd OR Heloc, especially those set to adjust soon
  • Refinance out of FHA Loans into Conventional (possibly without MI, or a more favorable PMI policy)
  • Borrower’s that went FHA due to credit seasoning, now eligible for conventional loan
  • VA Loans – We have VA Cash-out Refinance available to 100% LTV!
  • 62 and over, consider a Reverse Mortgage to Live in Home Without Mortgage Payments

**Pre-Approvals (professional courtesy for my clients and those they refer) are positively required before you shop for a new home, a second home or investment property. Higher values are being created by low rates and a shortage of inventory and cash offers are very common now.

**Reverse Mortgage Changes – …and more to come. These products are becoming more and more challenging to tap equity for those 62 and over. But the first week of August there are some positive changes that will roll back the tightest equity restrictions of a year ago to become slightly more tolerable. i.e. access to a little more equity by seniors on this product. Caution: A skilled consultation is a requirement for anyone you love or care about before a person enters into any reverse mortgage transaction, whether purchase or refinance.

**HOME VALUES are definitely higher, many areas as high as 2007 values, and are allowing many folks to refinance who were formerly under water. Even if there is not 20% equity we need to do a careful review of how limited equity and partial mortgage insurance might still make a huge impact by refinancing. Many are consolidating debt with the low interest rate environment.

and remember… with today’s continued volatility and sharp swings in the market, new Federal regulations and guidelines, trusted market knowledge and EXPERIENCE is as important as price in your mortgage decisions. If you have any questions or concerns, please contact me.

Don Parsons
Certified Mortgage Planner & Consultant
CMP, CMPS, RMA, CLA
Commerce | Mortgage

450 Newport Center Drive Suite 350
Newport Beach, CA 92660
Direct: 949.428.3099
eFax: 949.423.6818
don@donparsons.com
dparsons@commercemtg.com
www.donparsons.com

NMLS #287222
Arizona Licensed also #0927145

Government Shutdown and Lending

Before my comments, this is what you may see for a while in the news:

obamayikes

It appears that loan applications will continue on, rates will still be locked, appraisals ordered and loans underwritten.  However, that “4506 transcript” from the IRS will still be required by all lenders I have researched at this point, but instead of at the origin of underwriting, will be required as a funding condition, at least by lenders who are putting their customers first.

I requested several years ago that my personal staff and underwriter NEVER hold up a file over a 4506 transcript. Either the file is a viable file or not at origination and holding it up for a transcript is an insult to your clients, both borrowers and Realtors. So, the only question mark here is how long it will be before that part of the government is operational so loans can actually close. Well, there is one other question….or two, or three…..if we as a people become more and more dependent on the government, e.g. turning over more and more of our independence…..Health Care, retirement, housing, to name only a few, how does this not teach us a lesson about worse things to come?  Does it not make sense to furlough all politicians for about 9 months out of the year, so they only have 3 months a year to wreak havoc on the American public?  Notwithstanding the few who are really looking out for us and our kids and grandkids future, the rest of the lot should get real jobs, paying taxes, and living under everything they have handed down for decades. NO exemptions or special health care or special retirement packages.  Statesmen are what we need, God fearing not ballot box fearing!

Here are a few additional remarks I have pulled from Rob Chrisman’s Leadership Report.

“…..the IRS staff is also staying in bed today, and lenders are telling staff that it is doubtful that Tax Transcripts can be obtained and therefore they can process and underwrite loans without the Tax Transcripts but will not be able to close or fund until the Tax Transcripts have been obtained.”

stress350“Does anyone know whether FNMA is offering relief on validation of tax returns since the IRS is not validating returns during the shutdown?” Fannie just issued a new selling guide announcement. It provides details on a number of underwriting considerations for lenders with regard to the shutdown. It is posted on www.fanniemae.com. The mortgage market, including Fannie Mae and Freddie Mac, should not be affected by the government shutdown, SIFMA Managing Director Chris Killian said. “Fannie and Freddie should be unaffected by the government shutdown (Freddie Mac went so far as to issue a client update stating this), Ginnie Mae informs us that their [mortgage-backed securities] and Multiclass Securities Programs and operations continue uninterrupted, and [the Federal Housing Administration] appears to be able to endorse loans,” Killian said. “However, SIFMA urges Congress to come to a resolution as soon as possible.”

More to come…

Process for June 3, 2013, FHA MIP term changes

FHA-MIP-term-changes

Reverse Mortgage Fixed Rate Product Being Eliminated

alert-redOn April 1st FHA is eliminating the popular Fixed Rate Reverse Mortgage. Only those who obtain a counseling certificate and sign an application in time to pull an FHA Case number before April 1st will have the option of obtaining this Fixed rate product.

While the HECM Line of Credit will still be available, and the Fixed Saver product (fixed rate
with much lower draw capacity, or in conventional terms, much lower loan to value requirement) the most popular Fixed product helping the consumer who has a larger mortgage the most, will disappear like the dinosaur.

The Reverse Mortgage, which has had some bad rap in the past, mostly before FHA began to insure and regulate the program, has in recent years become a serious financial planning vehicle. Many consumers over the years would pay down their home quicker than the amortization schedule called for in order to have their home free and clear at retirement, but not invest adequately in retirement accounts. The unplanned result at retirement was a nice home free and clear but not much more than social security to pay the bills. This did not, and does not turn out well, due to lack of financial planning. So, though in this case the Reverse Mortgage becomes a homeowner’s financial salvation so to speak, it has also often become the financially sound homeowner’s greatest financial planning vehicle.  A homeowner age 62 or older, regardless of income or credit (to some degree) can “eliminate their mortgage payment “for life” while they are occupying their home.  If there is a larger mortgage it can be paid off in many cases and the Fixed rate product is usually advisable.  If there is no mortgage or a smaller one, it is generally wiser to apply for the Line of Credit to draw on monthly via auto deposit much like the monthly distribution of an IRA or 401K, but without the tax consequences.  Since the program is very versatile, a consumer can draw out what they need any time they want for repairs on the home, medical care, in home care, anything virtually without qualification.

For more information or a brochure please e-mail me with Reverse in the subject line and simply ask for it, free of charge.  don@donparsons.com

However, if you are 62 or older or have a family member or friend who might want to consider this financial option, it is IMPERATIVE THAT YOU CALL ME ASAP, if merely to determine if the Fixed Rate Product is the correct program for you.  If it is, you have only 1 or 2 days left by which you will be able to get in the system.  Otherwise the still viable Line of Credit program will be the most likely choice for most.