Real Estate Investors Beware

As a fellow real estate investor, I was ecstatic to see the announcement from HUD Asst. Secretary David Stearns on January 15, 2010 that Section 203.37a(b)(2) was waived for a period of one year - through January 31, 2011. 

The reason behind this decision was simple.  The department of Housing and Urban Development  realized the significant negative economic impact many uninhabitable foreclosed homes have had on the real estate market.  By allowing the waiver of the 90-day seasoning rule, the inventory of these properties would surely decrease as investors are able to rehab and turn these homes in a reasonable amount of time.

Unfortunately the secondary mortgage market is not required to adhere to HUD and FHA "recommendations", and they aren't buying.  At the onset, I found very few lenders who would adhere or accept, either or both stipulations for FHA loans.  I experienced denials from Well Fargo, Bank of America, and SunTrust.  I figured there was a learning curve and they would come around, but now three months into this, the "bigs" still aren’t buying. 

Home buyers looking for a nice rehab property while utilizing an FHA loan are finding more success using local lenders and mortgage brokers.  These people have less bureaucracy and are more apt make the right common sense decisions.

If you are an investor it is critical to educate yourself, and use an educated real estate agent to guide prospects to successful financing.  There is nothing worse than going under contract (taking your listing off the market) for weeks only to find a finance contingency implemented.