FHA Amends Anti-Flipping Rule


On January 15, 2010, FHA made some changes to the June 7, 2006 anti-flipping policy on property flipping.

For the past 3 1/2 years HUD has not allowed the resale of a property within 90 days due to flipping concerns. While the initial intent was to prevent the rapid escalation of the price of homes through questionable flipping of properties, it is now hindering the sale of homes since prices have fallen and more properties are the subject of foreclosure.

While there were several exemptions to the rule, almost all applied to Banks and Financial companies. This change will directly impact the small investor who buys properties cheaply and repairs them for resale.

Currently many HUD or Lender Repo's are sold "As Is" without warranties or repairs. Many of the foreclosed homes are purchased by investors who have the means to repair the homes but may not purchase the homes due to the 90 day holding requirement to sell to a new FHA Buyer and the cost and risks associated. These buyers have to account for the longer holding time and potential risk of vandalism. Thus the homes tend to sit vacant longer and hinders community stabilization and revitalization.

Beginning February 1, 2010, sellers that meet the new requirements may be able to sell the property prior the old 90 day rule. The sales must be an arms length transaction. The seller must hold title to the property (i.e. no double closing). There must not be prior evidence of flipping on the property and special rules apply if the increase from the sellers purchase price the buyers purchase price is greater than 20%.

This is a positive change from HUD. Homes may stay vacant less and buyers have more options. These transactions will be under more scrutiny but they can now get completed.

The full guidelines of the new FHA Anti-Flipping Rule is available though the link.

The Wall Street Journal had a recent article titled, “Default, then Rent”.   What is going on with people values?






One of the people highlighted is a School Teacher. Yes she is teaching your children. So what lesson is she teaching? She bought her big house on a “No Money Down” loan. Then she and her husband proceeded to spend thousands on upgrades.

Ms. Richey, the teacher, arrived in Palmdale in 1999. In 2004, she and her husband, Timothy, bought a two-story home on Caspian Drive, near Avenue O-8, with a no-down-payment loan. They took pride in the amenities they installed: a powder room with granite countertops, a backyard pool and play area, and the purple-and-turquoise fantasy playroom upstairs for their three daughters.

They had a $430,000 mortgage and their lender cut them a deal to offer them a payment of $3,300 per month. They felt this was too high. Maybe they should have thought about his before they bought the house? So they decided to walk away and stick the Lender with a foreclosure and the tax payers will pick up the bill.

However, before the foreclosure they found themselves a nice new house to rent.:

On one trip, they drove by the house at 3152 Club Rancho Drive. It was bigger than their house on Caspian, had a pool with three waterfalls, and boasted a cascading staircase that Ms. Richey says she could picture her daughters descending on prom night. The rent was $2,195 a month.


Showing a visitor the personal touches in her new home, including a $1,800 dining set she bought with some of her newly available income, she notes the advantages of being a renter rather than an owner.


"You take a risk for the American dream," she says. "I don't have to worry about paying property tax, homeowners' insurance, the landscaping, cleaning the pool or any repairs."

Remember this is a person that probably spends more time with you children that you do. What kinda values is she teaching?  She sticks the lender and taxpayers with hundreds of thousands in losses and goes out and buys a $1,800 dining set?

One of the other people they discuss is walking away from his $430,000 mortgage, $4,800 a month payment. His new rental payment will be $2,200 per month. The good news, he is keeping his BMW 6 series car with its $700 payment. At least I guess both stories have a happy ending.  One got a dining set the other got to keep his BMW.

While I understand that unforseen things happen, these types of people with little moral obligation is what is wrong with society today.   Oh, the school teacher, she thinking about walking away from her two rental properties as well.

First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify
WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers.
The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.
The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.
But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.

A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.
Income Limits Rise

The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
New Requirements

Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law:

• Dependents are not eligible to claim the credit.
• No credit is available if the purchase price of a home is more than $800,000.
• A purchaser must be at least 18 years of age on the date of purchase.

For Members of the Military

Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.

For more details on the credit, visit the First-Time Homebuyer Credit page on IRS.gov. or watch the IRS video below.

The first time home buyer tax credit has been extended and expanded. The $8,000 credit has been extended by six months.  There has also been an expansion to include current home owners who want to buy.  Sorry, nothing for Investors.  Current home owners can get a $6,500 tax credit when they purchase a new home. This is pretty similar to the article we posted earlier on the $8,000 Tax Credit.

• The credit is available for homes that go under contract by April 30, 2010 and CLOSE by June 30th, 2010.
• If you are a current homeowners, you can claim a $6,500 credit as long as the property you are vacating has been your primary residence for at least five consecutive years.  
• For the Rich there are Income limits: $125,000 a year for individuals, $225,000 a year for married couples.  
• Homes that cost more than $800,000 aren’t eligible for the credit. Again, sorry to the rich folks. 
• $6500 tax credit is not retroactive. What that means is that you only get the credit if you purchase a home after the Bills is effective.

Author: Peter Gomes

If you are planning to take out a reverse mortgage, you can free up some of the equity that is trapped in your house. Reverse mortgage plays an important role for older Canadians. It offers financial security to seniors. The proceeds of reverse mortgage in Canada can be used for meeting various financial obligations. It may include meeting unforeseen expenses or you can use the cash for home improvement, renovation, repairing work etc.

Reverse mortgage in Canada is different from the traditional mortgages that are taken out. There are many differences between reverse mortgage and traditional mortgage, the main one being mode of repayment. In case of traditional mortgage you should have a sound income that can support your monthly mortgage payments. In Canadian reverse mortgage, you don’t have to make monthly mortgage payments. And you can repay the mortgage if you change your residence or the mortgagee dies.


There are few requirements that are to be fulfilled if you are planning to opt for reverse mortgage. You need to be 60 years and above and the house in which you are residing should be your primary residence. The proceeds of reverse mortgage can be availed as –

Lump sum
Supplement to retirement funds
As supplement to Social Security
In form of “Stream of payments”.

While a traditional mortgage is “Decreasing debt and increasing equity”, a reverse mortgage on the other hand is “Increasing debt and decreasing equity”.

When you take out a reverse mortgage in Canada, you have to continue paying your real estate taxes and also make payments for utilities etc. If you have opted for Ontario reverse mortgage, you cannot face foreclosure for missing your mortgage payments.

Reverse mortgage fees in Canada
The reverse mortgage fees in Canada usually vary from one lender to another. The initial set-up fee ranges between USD$1275 and USD$1485. A lender may also offer Equity Protection Option in some cases. This ensures that at any point of time at least a certain amount of equity remains in the property.