Beginning Feb. 1, the Federal Housing Administration will provide mortgage insurance for some purchases in which the seller bought the property and held it for fewer than 90 days.
The agency is changing what is known as the “anti-flipping rule” to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, says FHA Commissioner David H. Stevens.
Waiving the 90-day rule will encourage private investors to buy vacant properties, fix them up, and quickly sell them to buyers who will be eligible to buy them using FHA financing.
Evidence of what direction the real estate market is
headed will never get any more definitive
It appears that after 3 years of an REO dominated market, real estate agents will now be able to compete on an even playing field for the oncoming wave of short sale listings.
The reason for this significant shift from REO to Short Sale is simple…. because Short Sales mitigate loss is MUCH more effectively than REO disposition models and lenders have finally caught on.
A brief analysis of REO versus Short Sale costs provided by a large Wall Street hedge fund heavily vested in mortgage back securities tells the story:
REO: The average loss per foreclosure (REO) is a whopping 65%. That means the investor nets a dismal $35,000 on a $100,000 note.
Short Sale: The average loss on a short sale is 40%. Using the same $100,000 example, the investor ends up with $60,000.
That is a savings of Short Sale versus REO of a whopping 25% and so the tide change in lender loss mitigation models from “foreclose and dispose” to short sales is well underway. So beyond the obvious evidence cited, lenders have been gearing up for short sales on a multitude of fronts.
on Jul 6th, 2010 at 1:08 pm
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