Tri-Valley Mortgage News

I read a blog today on the apparent lack of lending support for FHA's recent waiver of the 90 day flipping rule which has originators and real estate agents understandably frustrated.

It appears that the majority of lenders are gun shy about accepting deals where the current owner has owned the property for less than 90 days and is now attempting to sell at a profit. Of course, there is good reason behind this. The past decade of lax lending guidelines has created problems industry wide. So when HUD came forth with a proverbial dangling carrot, it's not hard to see why some have decided not to play.

Although, HUD has expressed its hope that the waiver will help to move the housing market towards recovery, it still requires that such deals comply with the guidelines they set forth. My previous blog post (here) outlines these requirements. So this is by no means a free-for-all.

That being said, there ARE lenders who will accept FHA loans that comply with the flip waiver. I am aware of two that are currently in the game. However, it's important that the originator knows of any overlays that may tighten even further HUD's guidelines. For instance, one major lender will not accept the deal if the current value is over 19.99% of the value the investor originally purchased the property for. This is due to HUD's requirement of further valuation documentation to justify the jump in value if the current value is 20% or over the original value. Personally, I feel that this is a prudent move because if the value exceeds the threshold, the additional appraisal documentation could very well hinder the transaction closing in a timely manner (if at all!). With all the RESPA and appraisal restrictions we are currently dealing with, do we really want to throw even more potential pitfalls into the mix? If the ultimate goal is to get the housing market moving forward in a positive direction, our focus must be on closing and closing in a timely manner. As we've seen, HUD has good intentions but all too often, putting these intentions into practice can be a whole other matter entirely.

As always, my goal is to not only close as quickly as possible but to leave everyone with the feeling that they've received superior service - it's harder to accomplish these days but certainly not impossible.