Breaking News. Can you still do a short-term house flip using federally insured, low-down payment home finance money? Thats an important question for buyers, sellers, investors and realty agents whove taken part in a nationwide wave of renovations and quick resales using Federal Housing Administration-backed loans during the last four years. The answer is yes -- you can still flip and finance short term. But get your rehabs done soon. The federal agency whose policy change in 2010 made tens of thousands of quick flips possible — and helped large numbers of first-time and minority buyers with moderate incomes acquire a home — is about to shut down the program, FHA officials have confirmed to. In an effort to stimulate repairs and sales in neighborhoods hard hit by the housing crisis and recession, the FHA waived its standard prohibition against financing short-term house flips. Before the policy change, if you were an investor or property rehab specialist, you had to own a house for at least 90 days before reselling — flipping it — to a new buyer at a higher price using FHA financing. Under the waiver of the rule, you could buy a house, fix it up and resell it as quickly as possible to a buyer using an FHA residential loan — provided that you followed guidelines designed to protect consumers. Since then, according to FHA estimates, about 102,000 homes have been renovated and resold using the waiver. The reason for the upcoming termination? The program has done its job, stimulated billions of dollars of investments, stabilized prices and provided homes for families who were often newcomers to ownership. However, even though the waiver program has functioned well, officials say, inherent dangers exist when there are no minimum ownership periods for flippers. In the 1990s, the FHA witnessed this firsthand when teams of con artists began buying run-down houses, slapped a little paint on the exterior and resold them within days — using fraudulent appraisals. Their buyers, who obtained FHA-backed loans, often couldnt afford the payments and defaulted. For these reasons, officials say, its time to revert to the more restrictive anti-quick-flip rules that prevailed before the waiver: The 90-day standard will come back into effect after Dec. 31. Paul Wylie, a member of an investor group in the Los Angeles area, says he sees more harm than good by not extending the waiver. There are protections built into the program that have served [the FHA] well, he said in an email, Entry-level consumers will be harmed unnecessarily. The bottom line? Whether fix-up investors like it or not, the FHA seems dead set on reverting to its pre-bust flipping restrictions. Financing will still be available, but selling prices of the end product — rehabbed houses for moderate-income buyers — are almost certain to be more expensive. Source: Ken Harney, The Nations Housing The Department of Veterans Affairs home loan guarantee program is likely to continue its growth trajectory in years ahead as military personnel return stateside and/or leave the service and buy homes. That will make VA lending one of the few bright spots in an industry struggling with rising compliance costs, shrinking origination volumes and tightening profit margins. Over the past seven years, the VA guarantee program has grown exponentially, even during the finance bust years of 2007 and 2008 as well as the boom years since then, noted Grant Moon, the founder and president of VA Loan Captain, a Union City, N.J.-based lead generation company specializing in VA loans. You have the U.S. winding down after years of fighting wars in Iraq and Afghanistan, so you have more veterans, younger veterans coming home, integrating back into society, getting jobs, Moon said. That is creating the impetus to have some sort of shelter. The VA home loan program allows these veterans to get into their own home with minimal barriers to getting approved, pointed out Moon, a military veteran himself. Between 2008 and 2013, the programs annual volume has increased each federal fiscal year (which runs from Oct. 1 to Sept. 30) over the previous one, according to VAs data. And between 2005 and 2011, there were more purchase loans done through the program than refinancings. In 2012 and 2013, which was the peak of the latest refi boom, the VA guaranteed more refi loans than purchase loans. In fact, 2013 was the busiest fiscal year ever for the program, with 629,293 loans guaranteed by VA. But only 38% or 241,194 were for home purchases. But through Aug. 10, 62% of the 358,629 loans guaranteed by VA in fiscal year 2014 were used to buy a home. The main selling point for the VA product is that it is practically the only program in the market that provides 100% financing, plus VA loans do not require monthly insurance. Source: National Mortgage News RealtyTrac’s U.S. home equity and underwater report for the third quarter of 2014 revealed that the amount of seriously underwater properties plunged to the lowest level in two years, with 8.1 million U.S. residential properties seriously underwater as defined by the fact that the combined loan amount secured by the property is at least 25% higher than the property’s estimated market value. This represents 15% of all financed properties and an estimated $1.4 trillion in negative equity. Last quarter, 9.1 million residential properties representing 17% of all financed properties were seriously underwater, and in the third quarter of 2013, 10.7 million residential properties representing 23% of all financed properties were seriously underwater. The decrease in underwater properties is promising but the estimated $1.4 trillion in negative equity means that the flood waters are not receding as quickly as they were before, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac. “Slower price appreciation means the 8 million homeowners seriously underwater could still have a long road back to positive equity,” he continued. Additionally, the universe of equity-rich properties — those with at least 50% equity — grew to 10.8 million representing 20% of all financed properties in the third quarter, up from 9.9 million representing 19% of all financed properties in the second quarter of 2014. Collectively these equity rich homeowners have an estimated $2.9 trillion in positive equity. Source: HousingWire
Posted on: Tue, 04 Nov 2014 22:57:11 +0000
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