“FHA EXTENDS 'ANTI-FLIPPING WAIVER' TO HELP STABLIZE HOUSING MARKET:

Measure continues effort to boost home values and accelerate resale of vacant properties:

In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Federal Housing Administration (FHA) Commissioner David H. Stevens today extended FHA's temporary waiver of the agency's 'anti-flipping rule.'  The extension announced today is intended to accelerate the resale of foreclosed upon homes in neighborhoods struggling to overcome possible property abandonment and blight.

With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days.  Early last year, FHA temporarily waived this regulation through January 31, 2011.  FHA today posted a notice extending this waiver through the remainder of 2011.  This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"As I noted when we first announced this policy change early last year, because of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Stevens.  "Today I can report that this policy change has been effective.  Since the original waiver went into effect on last February, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition."

FHA research finds that in today's market, acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days.  Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

Stevens added, "Because of past restrictions, FHA borrowers have often been shut out from buying affordable properties. This action enables our borrowers, especially first-time buyers, to take advantage of this opportunity and buy a home that has recently been rehabilitated.  It will also help to move more foreclosed properties off the market and reduce the number of vacant homes in neighborhoods throughout this country."

The extension announced today is effective through December 31, 2011, unless otherwise extended or withdrawn by FHA.  All other terms of the waiver will remain the same, and HUD continues to invite public comment on it. The waiver contains strict conditions and guidelines to assure that predatory practices are not allowed.

To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver continues to be limited to those sales meeting the following general conditions:

•                  All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

•                  In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Read the waiver: http://www.hud.gov/offices/hsg/sfh/currentwaiver.pdf”

Protecting your home from moisture intrusion.

 For people, water is necessary for survival. However, for a house, water can be a destructive force that can lead to wood rot, peeling paint, insect infestation, shorter lifespan of roofing and siding and higher maintenance costs.

Investigate, Identify and Repair All Leaks and Cracks
The best way to prevent water damage from rainwater and snowmelt is to ensure the exterior materials of the building are properly constructed and maintained. The following are tips for identifying and eliminating sources of water intrusion in your home.
Common places where water intrusion occurs:
Windows and Doors: Check for leaks around your windows and doors, especially near the corners. Check for peeling paint, it can be a sign of water getting into the wood. Inspect for discolorations in paint or caulking, swelling of the window or doorframe or surrounding materials.
Roof: Repair or replace shingles around any area that allows water to penetrate the roof sheathing. Leaks are particularly common around chimneys, plumbing vents and attic vents. To trace the source of a ceiling leak, measure its location from the nearest outside wall and then locate this point in the attic using a measuring tape. Keep in mind that the water may run along the attic floor, rafters, or truss for quite a distance before coming through the ceiling.
Foundation and Exterior Walls: Seal any cracks and holes in external walls, joints, and foundations, in particular, examine locations where piping or wiring extends through the outside walls. Fill all cracks in these locations with sealant.
Plumbing: Check for leaking faucets, dripping or "sweating" pipes, clogged drains, and faulty water drainage systems Inspect washing machine hoses for bulges, cracks or wetness. Replace them every few years or sooner if problems are found. Inspect the water heater for signs of rust or water on the floor.
Prevent Water Damage Through Good Home Maintenance
You can help prevent future leaks and water intrusion by regularly inspecting the following elements in your home and making sure they remain in good condition.
Flashing: Flashing, which is typically a thin metal strip found around doors, windows, thresholds, chimneys, and roofs, is designed to prevent water intrusion in spaces where two different building surfaces meet.
Vents: All vents, including clothes dryer, gable vents, attic vents, and exhaust vents, should have hoods, exhaust to the exterior, be in good working order, and have boots.
Attics: Check for holes, air leaks, or bypasses from the house and make sure there is enough insulation to keep house heat from escaping. Among other things, air leaks and inadequate insulation results in ice damming. If ice dams collect around the lower edge of a roof, rain or melted snow can back up under the shingles and into the attic or the house. Check the bottom side of the roof sheathing and roof rafters or truss for water stains.
Basements: Make sure that basement windows and doors have built-up barriers or flood shields. Inspect sump pumps to ensure they work properly. A battery backup system is recommended. The sump pump should discharge as far away from the house as possible.
Humidity: The relative humidity in your home should be between 30% and 50%. Condensation on windows, wet stains on walls and ceilings, and musty smells are signs that you may have too much humidity in your home. Check areas where air does not easily circulate, such as behind curtains, under beds, and in closets for dampness and mildew. Be sure to use bathroom exhaust fans following warm showers or baths. When going on trips, turn the temperature up on the air conditioning, not off. The air conditioning system helps remove moisture from your home. If you are concerned about the humidity level in your home, consult with a mechanical contractor or air conditioning repair company to determine if your HVAC system is properly sized and in good working order.
Air Conditioners: Check drain pans to insure they drain freely, are adequately sloped toward the outlets and that no standing water is present. Make sure drain lines are clean and clear of obstructions. Drain pan overflows usually occur the first time the unit is turned on in the spring. Clean prior to first use with compressed air or by pouring a water-bleach solution down the drain line until it flows freely.
Expansion Joints: Expansion joints are materials between bricks, pipes, and other building materials that absorb movement. If expansion joints are not in good condition, water intrusion can occur. If there are cracks in the joint sealant, remove the old sealant, install a backer rod and fill with a new sealant.
Exterior Wood Sheathing and Siding: Replace any wood siding and sheathing that appears to have water damage. Inspect any wood sided walls to ensure there is at least 8" between any wood and the earth.
Drywall: Since drywall is an extremely porous material and is difficult to dry out completely, damaged areas should be replaced if any signs of moisture are present. One way to protect drywall from moisture intrusion in the event of a flood is to install it slightly above the floor and cover the gap with molding.
Exterior Walls: Exterior walls should be kept well painted and sealed. Don't place compost or leaf piles against the outside walls. Landscape features should not include soil or other bedding material mounded up against walls.
Landscaping: Keep trees trimmed so that branches are at least 7 feet away from any exterior house surface. This will help prolong the life of your siding and roof and prevent insects from entering your home from the tree. Vines should be kept off all exterior walls, because they can help open cracks in the siding, which allows moisture or insects to enter the house.
Irrigation: Inspect and adjust the spray pattern of the irrigation heads to minimize the water sprayed directly onto the house to avoid excessive water near the foundation.
Source: Institute for Business and Home Safety. IBHS is a national nonprofit initiative of the insurance industry to reduce deaths, injuries, property damage, economic losses and human suffering caused by natural disasters.
Now is the time to correct any issues that may lead to moisture intrusion. Long before the cold air moves into town and makes some repairs difficult or impossible.

The 203 K Rehab loan

Loan Process:
        
1.       Borrower finds a property that is in need of repair.
2.       Borrower schedules a meeting with a contractor at the house.
3.       Contractor creates a list of improvements, completes a work write
up and prepares a contractor bid package to obtain cost estimates.
4.       Appraiser uses work write up to determine improved value.
5.       File goes to underwriter for approval.

Basics:

1.      Only 1 bid is required
2.      Home must be livable within 30 days of closing.
3.      Borrower must occupy within 60 days of closing.
4.      All work must be completed within 60 days of closing.
5.      General Contractor is not required, but preferred.

Property Requirements:

1.      Owner Occupied homes only.
2.      Condos and newly constructed homes are not eligible.
3.      1-2 units allowed.

Borrower Qualifications:

1.      31/40 Ratios apply
2.      Higher ratios may be allowed with credit score of 720 or higher.
3.      Minimum FICO score of 620.
4.      3.5% Down Payment
Loan Qualifications:

1.      30 Year Fixed Rate Loan
2.      Can borrow up to 110% of the appraised value.
3.      Minimum of $5,000 in repairs - Maximum of $30,000 in repairs.
4.      10% contingency reserve is added for cost overruns.

Eligible Improvements (Not inclusive):

1.      Repair/Replace roofs, gutters & downspouts.
2.      Repair/Replace plumbing & electrical systems.
3.      New furnace or A/C
4.      Weatherization – storm windows & doors
5.      Exterior siding
6.      Appliances
7.      Basement finishing and waterproofing.
8.      Repair/Replace flooring
9.      Minor remodeling – kitchens, baths, etc.
10.  Lead base paint stabilization and abatement.
11.  Repair/Replace/Add decks, patios & porches.

Ineligible Improvements:

1.      Septic system and/or well repair or replacement.
2.      Swimming pools or luxury items.
3.      Structural Repairs.
4.      Free standing garage or barn.
5.      Landscaping, sidewalks, driveways.
6.      Additions.
7.      Major Rehabilitation/Remodeling
8.      Relocation of load bearing walls.

Bids:

1.      Must be on contractors letterhead signed by all parties.
2.      Bids must be detailed and complete (Name Brand, model #’s, etc).
3.      All bids must be reviewed by lender.
4.      Once approved, cannot be changed.


Contractor Requirements:

1.      Must use licensed contractors.
2.      Need copy of contractor’s license & insurance policy.
3.      Must fill out a W-9.
4.      Must sign Homeowner/Contractor Agreement before closing.
5.      Contractor must submit credentials, work experience & references.

Draw Process:

1.      Draws at closing are not permitted.
2.      The investor must purchase the loan before draws can begin.  This
can take 7 to 30 days.  This means the contractor must be okay starting the work knowing he may not get his first draw for about 30 days.  Contractor should be okay with this knowing the money for the project has been escrowed at the closing.
           3.   Only 2 draws are permitted.