BluefoxToday blog : FHA Temporary Lift of Anti-Flipping Rules: More Government Regulation Helping Big Corps?

FHA Temporary Lift of Anti-Flipping Rules: More Government Regulation Helping Big Corps?

FHA just relaxed the anti-flip underwriting guidelines for purchasing a home.  You can read about it here (Nevin Williams) and here (Esko Kiuru). 

This is not an "informational piece" on how FHA has relaxed the guidelines.  This is in depth real estate chat for:  "Why did they do this and why did they do it for only 1 year?"

Basically true REO were exempt from the rule before (when a house went "back to the bank") but third party or private party investors who purchased property at the trustee's sales were not exempt.  Read about the flipper and trustee sales if you aren't following me here.. 

For the Trustee Sale Flipper:  this kept a solid 30% of their buyers out of the game.  I have also been watching the sales types (trustee sale flips) gain steam through my BPOs. 

What's going on here?  Are the banks getting ready to dump some of that infamous "shadow inventory?" 

Clearly this strategy of opening up 30% of the market to "The Flippers" will create furious bidding wars at the trustee sales thus driving up auction sale prices for the bank.  

The banks would be able to completely dispose of their inventory and be done with it.  This would, in turn, leave investors holding the bag this time around for declining market scenarios (falling prices.)

Banks will take their cake and eat it too.  Screw the little guy.  What a perfect set up, if shadow inventory does exist.

What say you? (fyi, this is not a "Republican" or a "Democrat" scenario, both love to enable big corps)


Thanks,  Renée Burrows 702-580-1783 Broker/Owner, REALTOR®
 

 

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Comment balloon 12 commentsRenée Donohue • January 24 2010 11:20AM

Comments

You wrote:  "Basically true REO were exempt from the rule before (when a house went "back to the bank") but third party or private party investors who purchased property at the trustee's sales were not exempt."

I am now and will always be suspicious of the motives or intent of any government rule, regulation, law, etc. that pits one group against another both of which have the same goal. 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 8 years ago

Hi Renee...Great Story, you could be very well Correct with your observation :O)) Great Reporting !

Posted by Fred Carver Personal Real Estate Corporation, Accredited Real Estate Consultant (RE/MAX Camosun Victoria BC Real Estate) over 8 years ago

Lenn:  At least they will not be stuck holding the bag completely as they can do "creative financing options" BUT their resources will be tied up with that type of options!

Fred:  Thanks ;)

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) over 8 years ago

Renee,

That's an interesting take on the situation, and totally plausible. Thanks for the mention and link.

Posted by Esko Kiuru over 8 years ago

Renee - It doesn't surprise me that the banks have been able to change the rules. Barney Franks and Chris Dodd are probably trying to find ways to line their pockets before their last term ends.

Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) over 8 years ago

Renee, I can get on board with your thought train.  I am noticing that things that the gov't does seem or sound pretty good UNTIL we start living with it. Aside from the banks getting increased prices at auction the flippers will be able to sell FHA.  That can be a good thing for moving inventory.  As for shadow inventory.....I have shadows all around me down here just waiting in the wings to hit the spot light. 

Plus, at least the flipper floks will rejuvenate the property to sell.  The banks just let them sit.  It is like showing Miss. Havasham's house.

Posted by Michael J. Gallo, Florida Luxury Realty - Gulf Home Sales Team (Florida Luxury Realty) over 8 years ago

Interesting perspective. All I know is that all my investor/flipper friends are begging me to get back into the business with them but my brain and body are keep telling me that I've done my time there.

Posted by Not a real person over 8 years ago

Larry:  I think everyone wants in our pockets!!

Esko:  You are welcome!

Michael:  True, so let's make trustee flips permanent ;)

Russell:  It's a rough game and I respect the flippers!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) over 8 years ago

Renee, I have watched some very interesting transactions going on behind the scenes on foreclosed properties over the past 18 months in this area.  This encompasses both the politicians and the banking industry and will cause to harm the industry further.

Posted by Tim and Pam Cash, Real Estate Professionals - Clarksville TN (Crye-Leike (Sango)) over 8 years ago

Renee - Today we get the sappy news that sales are down 16.7%. Down from December. Let the flippers Flip. That is a free market solution. What if someone told you  (in a free market system) that you could buy but you could not sell. ????? Who the heck is going to buy? Great post

Posted by Claude Cross, Charlotte NC Homes For Sale (Homes By Cross, Inc. ) over 8 years ago

Tim & Pam:  Not Surprised.

Claude:  I have no problem with free market, just keep it free :)  Our sales are way down from December too BUT BUT BUT, December was a stellar month that beat November and October.  Go figure.  Doncha love the media?

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) over 8 years ago

Renee:

I'm personally very excited about the change in the rules, as my husband and I getting ready to buy several properties at the foreclosure auction and rehab them, then put them up for sale.   It will make it much easier for them to sell if we can offer FHA financing on them.

Posted by Kathy Torline, Colorado Springs Real Estate Blog 719-287-1049 (ERA Herman Group Real Estate) over 8 years ago

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