Currently, there are 3,000 properties that are in forclosure status each year in the DC area. FHA had probibited insuring a mortgage on home owned by the seller for less than 90 days.
Now, this lift will give the buyer the more otions on recently foreclosed home with this $2 billion neighborhood revitalization initiative.
"Many people turn to FHA when it comes to financing their first home. There are so many restrictions withing traditional financial institutions due to the fluctuating market that many people turn to FHA," said TJ Noye, Precison Funding.
The policy change will permit buyers to use FHA--insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sale.
This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and revitalize Washingtong neighborhoods and communities.
"I would recommend potential homebuyers to speak to a mortgage professional to gain a better understanding of how FHA loans are different from most other financing options,"said Noye.
This program will take effect on February 1, 2010 and will last for one year. There is a possibility of this program to be extended or withdrawn at the discretion of the FHA Commissioner.
To protect FHA consumers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
• All transactions must be arm-lenght, with no identity interest betwee the buyer and seller or other parties participating in the sale transaction.
• In cases in which the sale 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 forwared mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase programs.
"For the average person these conditions look like legal jargon, this is why it is good for the buyer to consult a third party such as a home mortgage professional. A true professional will sit down and take the time and explain what each of these conditions mean so the buyer will be able to make an informed decision and can recognize whether they are following those conditions outlined by the FHA," said Noye.