Bush administration officials on Friday said they had made a major change to existing U.S. Department of Housing and Urban Development regulations for mortgages endorsed by the Federal Housing Administration, lifting a key anti-flipping provision that lenders and disposition firms have long said limits their ability to resell distressed real estate.
HUD officials said a newly-introduced temporary policy will now extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties. FHA regulations currently prohibit insuring a mortgage on a home owned by the seller for less than 90 days, a limitation designed to prevent property flipping activity.
FHA's new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing, HUD said in a press statement
For one year, the FHA will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders; properties must purchased by owner-occupants, however, HUD said.
"A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community's recovery," said Brian D. Montgomery, the FHA's commissioner. "The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country."
Montgomery said that FHA's new temporary policy will help stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties.
The FHA action comes ahead of a major announcement from HOPE NOW, the industry coalition organization by Treasury Secretary Henry Paulson late last year, that will see the industry group adopt new measures for loss mitigation.
The group has scheduled a press conference for tomorrow afternoon to detail the changes.
For more information, visit http://www.fha.gov