HUD flipping rules

In an earlier decision to limit the number of home flippers, HUD stated that you couldn’t sell your FHA-insured home in under 90 days.  They were doing this to obviously discourage people from flipping.  They’re just reneged on this ban in a hope to stabilize the market a little bit.

I’m trying to understand why they would want to discourage flippers at all.  Won’t this help eliminate a lot of the foreclosures out there by having them be remodeled and updated and drive up values for homes? 

They say they have lifted this ban just temporarily. They’re leaving it in effect for one year.  So now buyers can use FHA-insured financing to purchase HUD-owned homes, bank-owned homes, or through private sales.  They will let them be resold as soon as the buyer want it to.

HUD is imposing a few conditions.  They include:

1. The buyer and the seller cannot be related in any way.  This prevents a dishonest deal from occurring.

2. If the buyer will obtain a big profit by selling the house quickly (20% or more than what they bought it for in the past 90 days), an appraisal must be done to determine if improvements are enough to justify a higher sales price. 

More information can be found on HUD’s Web site here.

As I said earlier, I think lifting this ban will mean good things for the economy in terms of raising house values, letting fewer foreclosures linger for too long on the market, and getting people buying houses again.  What are your thoughts?  Do you agree or disagree?  Please leave me a comment or visit me online.

Are the banks involved in more short sale fraud?

I came across a very interesting article on CNBC’s Web site.  Writer Diana Olick was alerted that some big banks were taking bribes to get short sales closed.  The lenders were asking for cash “under the table” from buyers of short sales and/or their Realtors.

How it’s working is if there’s two loans on the property, the second lienholder has to drop the lien for the short sale to go through.  If they don’t, the house goes into foreclosure and it’s owned by the first lienholder.  If that happens, the second lienholder doesn’t get any money from the deal.  Some banks/lenders are negotiating with the second lienholders to drop the lien by offering them some partial payment.  This whole process is completely legal.

What’s not legal is that they are now requesting money under the table to drop that lien since they are generally getting nothing or very little from the first lienholder.  If you’ve bought a house before, you’re familiar with the HUD-1 statement or RESPA that you get at the end of closing that details what the buyer is paying in fees, what the seller is paying in fees, and who ends up with what.  Everything needs to be reported on the RESPA.  So the second lienholders are asking for money that doesn’t show up on the RESPA to allow the short sale to go through. 

Olick’s source said he’s heard from over 200 agents that have requested this illegal deal from representatives at Bank of America, JP Morgan Chase, and Citi Mortgage.  When confronted with these accusations, JP Morgan Chase had no comment.

 Bank of America said, “Bank of America enforces a policy that all disbursements are documented on the settlement statement for short sales. When we are servicing a first mortgage with a second lien held by another investor, if the second lien holder asks for off-HUD payments, we will not approve the transaction (if we have knowledge of it). It is also against Bank of America’s policy to accept off-HUD payments on its second liens.

Citi Mortgage said, “We work very hard to help distressed homeowners find solutions for their financial challenges. In our attempt to amicably resolve the debt, we will generally negotiate a reduced settlement with the homeowner in order to release a second lien. Unlike some lenders who refuse to reduce the payoffs on second liens, we choose to reduce the payoff amounts in some situations to assist the borrower. We do not provide instructions to settlement agents on how to fill out the settlement statement or any other closing documents, and we certainly do not require settlement agents or any other parties to violate applicable laws.”

Olick writes, “I contacted the Treasury Department, HUD, FINCEN (Financial Crimes Enforcement Network) and the Federal Trade Commission, and none of their representatives could tell me of any active investigation into this. The folks at HUD said they’d be very interested to see my story.

So now the lenders want bribes to get rid of homes?  They haven’t gotten in enough trouble by approving loans for borrowers that didn’t have the money to pay them in the past?  That’s how we got into this mess in the first place.  We’re stuck with all these short sales because the lenders got greedy.  This is going to create a whole slew of problems.  Realtors could lose their licenses over it.  Buyers could end up having to bring even more money to the table to close. 

What is the solution?  How can we prevent this from happening?  Is it something we should consider making legal?  Let me know your thoughts.  Leave me a comment or visit me online.

Energy conscious homeowners get rewarded

You may all remember the famous Cash for Clunkers program offered by the government last year.  Well, Obama wants to do for homeowners what he did for car owners and that is offer a similar program called Cash for Caulkers.  He’s proposing a bill where homeowners can earn tax credits and receive money back for purchasing energy-efficient appliances.  Up to $12,000 per home!

Congress is currently working on drafting a bill that would be twofold.  First, homeowners would receive reimbursement for energy-efficient equipment and insulation.  Second, the government would reward small businesses and companies.

Included would be appliances such as refrigerators, washing machines, dryers, and even air conditioning, heaters, windows, and insulation.  They’re currently looking at reimbursing homeowners 50% of the purchase price PLUS installation.  So without an income cap, you could spend up to $24,000 to get $12,000 back.  Congress is still working out the kinks as to how the money would get returned.  It’s possible that it would come in the form of a tax credit (there is a current tax credit for energy-efficient appliances already, but not this much) or they might set it up where you can fill out information for a rebate and receive a check.  The government is looking at a cost of about $10 billion to fund this.

They’re trying to model it similar to New York State’s energy efficiency program.  How that program works is homeowner’s contact a contractor who is licensed to perform an energy audit from the State’s Web site of a toll free number.  The contractor arrives to determine how much energy is wasted in that specific home.  It costs the homeowner several hundred dollars.  When the contractor generates a list of what could be replaced, the cost, and how much energy could be saved, the homeowner chooses what he wants done and negotiates a price.  The contractor gets paid directly, submits paperwork to the state, and the homeowner receives about 10% back in the form of a check.

So do you think it is another program that could invite fraud?  Will homeowners take advantage of it?  Is the government wasting $10 billion that could be spent elsewhere?  I’d love to hear your thoughts.  Please leave me a comment or visit me online.

More information on the program can be found here, here, and here.

Up and coming design trends

Happy New Year, everyone!!  Can’t believe the first decade of the 21st Century is already behind us.  How time flies.  Since I wrote last week on some 2010 predictions for the year in real estate, I thought it would be interesting to write about some new trends in home design.  What do experts expect to see going forward?

For those of you who bought your home insisting on stainless steel appliances, you might be shocked to find out that big name appliances companies like Amana and Viking are introducing color.  And no, this is not your avocado green oven anymore, folks.  They’re looking at bold, bright colors like royal blue, deep purple, even orange.  Expect to see a lot of bright colors in kitchens moving forward.  Think about what a statement these would make with white walls, dark granite counters and wood floors.  Can we expect to see patterns next?  Can you imagine zebra print or leopard print refrigerators??  Experts also say that more comfortable seating in the kitchen like benches and sofas could be the next trend for sitting around a table.

Home builders will definitely be building more “green.”  What’s interesting is that now in our local MLS, there are options to include what design features, fixtures, and appliances are considered “green.”  Appliance companies will start to phase out those that used up a ton of electricity and water.  Imagine shower heads with less water flow.  Maybe we’ll see appliances that auto shut off when not in use to conserve energy.  And think of the tax savings!

Also this year, the stats show that 1 in 4 homeowners will be aged 55 and older.  Easy-to-use products will be more readily available to make life easier.  Designers have created touchless faucets, pullout drawers, and even non-slip bathroom floors.  And those ugly grab bars will get a makeover, too, to match the rest of the decor. 

What new design features would you like to see?  I’d love to hear your comments.  For other expert opinions, read this article.  Please be sure to visit my Web site.