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New HUD program can benefit new homebuyers in Maryland and speed resale on foreclosed properties
HUD secretary Shaun Donovan announced a temporary policy which will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties, according to a press release.
“This is good news because it lifts those barriers that have often hindered potential homebuyers from purchasing their first home,” said Ian Johnson, Pillar Property Group.
Currently, Maryland has 43,674 properties that are in active inventory. The Montgomery and Prince George’s counties have the highest active inventory within the state. FHA had prohibited insuring a mortgage on a home owned by the seller for less than 90 days.
Now, this lift will give the buyer more options on recently foreclosed homes with this $2 billion neighborhood revitalization initiative.
“Many people turn to FHA when comes to financing their first home. There are so many restrictions within traditional financial institutions due to fluctuating market that many people turn to FHA,” said TJ Noye, Precision 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 Maryland 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 There is a possibility of this program to be extended or withdrawn at the discretion of the FHA Commissioner.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”
1. All transactions must be arms-length, with no identity interest between the buyer and seller or other parties participating in the sales transaction.
2. 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.
3. The waiver is limited to forward mortgages, and doe not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
“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 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.