FHA Loans Are "Rediscovered"

The “Rediscovered” FHA Loan
I spoke to our lender the other day. She said the majority of the loans she is writing are FHA.
What is FHA? What does this translate into?
To begin, FHA is an acronym for Federal Housing Administration. FHA is part of HUD, which is an acronym for Department of Housing And Urban Development. An FHA loan simply means the loan carries a guarantee. FHA provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA has been insuring properties since 1934.

FHA mortgage insurance protects lenders against loss if the homeowner defaults on their mortgage loan. The lenders bear less risk because FHA will pay the lender if a homeowner defaults on their loan. Loans must meet certain requirements established by FHA to qualify for insurance. You do not need a perfect credit score to qualify. FHA does not have a minimum score requirement. However, many FHA lenders have set their own minimum standards at 580.

The FHA Advantage
Conventional lenders are requiring higher down payments and higher credit scores, as was the norm (a proper norm in my opinion) a few years ago. FHA loans have the lowest down payment options available in today’s mortgage market. FHA allows down payments as low as 2.55% for borrowers using their own funds, or a 3% down payment if the down payment is a “gift” from family, employer, or charity organization.

FHA Has Increased Loan Limits
Loan limits have been increased. The limit varies nationally. Go to https://entp.hud.gov/idapp/html/hicostlook.cfm to obtain your local loan limit numbers.
This is a realistic increase. For example, the limit in my geographic area of Sarasota, FL, USA, is now $442,000. This value is right in the middle of the majority of home sales.
There is additional information at http://www.hud.gov/fha/.

Working With Short Sales

I’ll wrap up this short sale topic with this posting, as all I’m trying to accomplish is let people know what’s happening in today’s market.

After many days of phone calls to two lenders and the property owner, I came to these conclusions…
The property was originally priced by 33% over current market prices. (That’s unacceptable).
The company managing the first mortgage loan (the first lean holder) was easy to communicate with. This loan has been slated for foreclosure, with the foreclosure date unknown. They were unaware that a second lean encumbered this property.
The second lean holder, a nationally known bank that had provided a home equity loan was extremely difficult to contact. The representative of this lender who I finally was able to speak to was unaware of the first mortgage lean (That’s unacceptable). This bank representative stated that unless they received 70% of the debt from sale, they would not approve the HUD1, making it impossible to close on this property. This lender will never realize a 70% recovery. They will be fortunate if they realize a 5% recovery of debt.

Having devoted several hours of work on this property, I informed the property owner that I would not list a property that will not close.

I suggested, for a second time, The property owner visit the US Department of Housing and Urban Development (HUD) website http://www.hud.gov/foreclosure/ and refer to their on-line assistance. I also suggested speaking to an attorney, and perhaps discussing filing bankruptcy.

The unfortunate part is, most of this could have been avoided.
Even if the property owner could not afford an attorney at this time, had the property owner of this rental property not turned his back on these debts, had the property owner contacted HUD and sought their assistance, and had the property owner used prudence in retaining a real estate professional, this house may have already been sold, and the owner released from the debts tied to this property.

Lenders are currently overwhelmed with faltering mortgage loans. Banks do not want to own properties. You can’t wait 6 months and then expect to easily avoid a pending foreclosure. It’s an involved process. Once your loan reaches the lender’s loss mitigation attorneys, things get even more complicated for the property owner, and anyone else involved.

If you are in a financial real estate bind, there are avenues you can pursue to resolve the debt. Doing nothing until the last minute isn’t one of them.

Questions? (I can't guarantee an immediate reply)

Short Sale Marketing

Now I must view the property to see if I want to consider taking the listing. After receiving the property location, I call the current listing agent to setup a preview of the property. I have to set up my viewing with the listing agent. After several phone calls, I reach the listing agent who states the home is on an electric lock box. This is good because most of us have an electric key. In fact, you can only have an electric key if you are an active real estate agent. I drive out to the property. The house has a combination lock box on it. I don’t have the combination, because the agent said the house was on an electric lock box. This is a vacant house. All the doors are locked. I call the agent to get the combination (the agent’s real estate office has absolutely no information on this). I wait a reasonable amount of time and finally leave. The agent calls me back about 90 minutes latter. Seems the agent in California (I’m in Florida) and has no idea of why there is a combo box on the home. She thinks perhaps the bank put the new lock box on the door, and the agent is now wondering where her electric lock box (they aren’t cheep) is.
Still fairly simple, yes?

The Short Sale

Here's how it starts from my end...
I received a phone call form the other side of Florida. A property owner wanting to list his house with me. He did not make a mortgage payment for the past 6 months, he has been in contact with a lean holder, the property was listed with another company, and he now wanted me to list the property for him when the current listing agreement expired.
Sounds simple so far, doesn't it?

The Tampa, Florida Market

I finally have a chance to briefly summarize the Tampa, Florida residential market…
Tampa’s real estate as viewed from the Multiple Listing Service:
Today, Tampa has 5049 single family homes listed as Active listings in the MLS. The MLS also indicates 2731 condo/townhouse active listings.
Of these: 865 single family homes are flagged as being in financial distress (foreclosure, short sale, etc), including a 5121 sq ft lake front, new construction, priced at $1,675,000. There are 295 condos/townhouses, including a 3116 sq ft waterfront penthouse also flagged as financially distressed.
Keep in mind, this geographic area is large and encompasses all types of properties excluding commercial.

Federal Tax Credit For Home Buyers

I must pass this on as I'm sure many are unaware:
First time home buyers, or those who haven't owned a home for the past 3 years could be elegable for a federal tax credit.
http://www.federalhousingtaxcredit.com/

A little more about the Sarasota area...
On the upper end of the property spectrum, There are 11 homes available priced between $10,000,000 and $18,500,000. These are gorgeous homes. None of these estates are flagged as financially distressed properties.
There are 1,038 properties priced between 1,000,000 and $9,999,999. Ten of these are flagged as short sales or foreclosure.
I'll try to touch upon the Tampa area next posting.

Gulf Coast MLS Property Listings

I just checked today’s MLS listings in Sarasota County, Florida.
There are 10,569 properties listed in Sarasota County. These are various types of properties other than commercial.
Of these, 517 listings are flagged with the phrases “Bank Owned, Pre-Foreclosure, In Foreclosure”.
443 are single-family homes.
53 are condos.
This is positive news for buyers.