FHA EXTENDS FINANCING FOR IMMEDIATE PURCHASE OF FORECLOSED HOMES
Measure seen to bring stability to home values and accelerate sale of vacant properties
WASHINGTON - In an effort to stabilize declining home values in
certain neighborhoods, the Bush Administration today announced a
temporary policy that will extend government-backed mortgage insurance
and allow for the immediate sale of vacant foreclosed properties.
For one year, the Federal Housing Administration (FHA) will insure
foreclosed properties marketed and sold by property disposition firms
on behalf of lenders. The properties, which must purchased by
owner-occupants, will no longer be subject to the customary 90-day
waiting period.
"A glut of foreclosed and abandoned homes harms neighborhoods,
frustrates homebuyers and delays a community's recovery," said Brian D.
Montgomery, Assistant Secretary of Housing-Federal Housing
Commissioner. "The action we take today will allow homebuyers to
purchase these homes in much greater numbers and ease the excess supply
of unsold homes in neighborhoods across the country."
FHA's new temporary policy will help stabilize neighborhoods
experiencing high rates of foreclosure by reducing the inventory of
unsold properties. Many foreclosed properties remain vacant for months,
inviting vandalism and reducing values of surrounding homes. To address
that sizeable inventory, lenders have hired companies that specialize
in the marketing and disposition of foreclosed homes. It's reasonable
and appropriate that these firms have the ability to sell the
properties to borrowers using FHA financing.
With certain exceptions, FHA currently prohibits insuring a mortgage
on a home owned by the seller for less than 90 days. This prohibition
is intended to prevent property "flipping," a predatory practice that
strips a home of its equity before being quickly resold at an inflated
price to an unsuspecting buyer. FHA's new policy will permit the
immediate sale of foreclosed properties to legitimate borrowers wishing
to use FHA-insured financing.
To read the full text of this new temporary policy, visit FHA's website.
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