Posts Tagged ‘FHA’

HUD nixes dual agency on FHA short sales

hudFHA short sales are slow. Very slow.

The thing about short sales is that they are slow going. For most people, when you want something, you want it now. And when you write an offer on a home and have to wait four, six, twelve, or even eighteen months to close, your interest begins to wane.

FHA (Federal Housing Administration) short sales have long been exceedingly slow going and frustrating for home-buyers and sellers alike. You may recall that the Department of Housing and Urban Development (HUD) sets the guidelines for processing short sales for sellers with FHA loans. In my experience, the main reason that these short sales have been slower than others is because HUD requires sellers, buyers, and agents to jump through more hoops (complete more milestones) before receiving short sale approval. For some sellers, this may mean applying for and getting declined for a loan modification prior to beginning the short sale process.

Benefits of the FHA Short Sale

On July 9, 2013, HUD released Mortgagee Letter 2013-23, a letter that appeared to contain good news for short sale sellers and their agents. Effective on October 1, 2013, the FHA short sale will be “streamlined” for many distressed borrowers.

The highlights of the Mortgagee Letter include the following positive changes to the FHA short sale process:

  1. Imminent Default – Certain borrowers do not need to be 30 days behind on mortgage payments to begin the FHA short sale process, just as long as they can demonstrate hardship.
  2. Reduced Documentation – There is now something called streamlined PFS (pre-foreclosure sale) for borrowers that meet certain guidelines.
  3. Up to $3,000 Financial Incentive – Owner-occupant borrowers who successfully sell their properties are entitled to a consideration of up to $3,000 (terms and conditions apply).

Read Between the Lines

Mortgagee Letter 2013-23 is 8 pages long. While the above three positive changes appeared to be the highlights, there is one big lowlight (if there is such a thing).  Buried at the top of page 8 is the following sentence:

“No party that is a signatory on the sales contract, including addenda, can serve in more than one capacity. To meet PFS Addendum requirements, brokers and their agents may only represent the buyer or the seller, but not both parties”

This particular phrase has agents in an uproar. Everyone knows that sometimes a single agent representing both sides of a real estate transaction may not be a good thing. But, what about two agents in the same brokerage? HUD is now going to prohibit that form of dual agency.

In addition to agent dissatisfaction, this sentence also dissatisfied the National Association of Realtors® President Gary Thomas.  In a letter to the Assistant Secretary for Housing, Thomas writes that this policy may minimize the opportunity for sale of many homes in certain parts of the United States. That’s because single brokerages with hundreds of agents under one license dominate in certain areas. And, if none of those agents (all under the same broker) are permitted to bring a ready, willing, and able buyer to the property, how will the property get sold?

Thomas also states that he understands that this HUD policy may have been enacted in order to avoid fraud, particularly problems where pocket listings may net HUD a little bit less money. He points out that Fannie Mae has enacted a more reasonable policy that requires that all Fannie Mae short sales be placed on the MLS for a minimum of five days, thus assuring that all properties are on an open market. Thomas urged HUD to reconsider their policy and adopt the Fannie Mae policy instead.

Depending upon where you live and where you sell real estate, the new HUD short sale policy and all of its associated drama may not impact you at all. But, if you are an agent listing and selling short sales, you’ll want to know what your in for—the improvements to the FHA short sale policy on October 1, and the bad news associated with it.

WASHINGTON, DC – June 1, 2011 – (RealEstateRama) — U.S. Housing and Urban Development Secretary Shaun Donovan today announced Green Refinance Plus, a program between HUD’s Federal Housing Administration (FHA) and Fannie Mae to allow owners of existing affordable rental housing properties to refinance into new mortgages that include funding for energy- and water-saving upgrades, along with other needed property renovations.

Under the program, FHA and Fannie Mae will share the risk on loans to refinance existing rent-restricted projects while permitting owners to borrow additional funds to make energy-saving improvements to their properties.

Donovan and Fannie Mae’s Executive Vice President for Multifamily Business Ken Bacon unveiled the program at a senior housing development in the San Francisco Bay Area where HUD is investing in energy-saving green retrofits.

“All across the country, owners of affordable housing properties are looking for a way to refinance their mortgages and to make energy improvements and other needed renovations at the same time,” said Donovan. “This program kills two birds with one stone — it preserves our affordable rental stock and it helps finance upgrades that will save energy and money over the long haul. We must make the smart investments in a more energy independent economy. These investments will strengthen our economy, create the new industries and new jobs of the future and reduce our dependence on an ever fluctuating oil market. ”

Bacon added, “Green Refinance Plus supports Fannie Mae’s ongoing commitment to creating a more sustainable rental housing market that is affordable to low- and moderate-income families. This program will provide more renters with renovated apartments in which to live, allow building owners to better manage their energy costs, and help communities by reducing the environmental footprint of our rental properties. Leveraging existing technology and expertise to bring proven energy and cost savings to rental housing is a win for everyone.”

California Congressman Pete Stark said, “Today’s event highlights an exciting new refinancing opportunity for owners of affordable housing to make energy- and water-saving upgrades.  It’s appropriate that the Green Refinance Plus program is being unveiled by Secretary Donovan at the Eden Issei Terrace in Hayward, in the heart of a community poised to help propel our country’s clean, green energy economy.”

Approximately every 10-to-15 years, owners of existing multifamily affordable properties typically refinance their mortgages. In older apartment buildings, however, owners are hard-pressed to find additional financing to maintain or improve the physical condition of their properties, including making energy-efficient upgrades. Beginning next month, Fannie Mae and its participating lenders will begin accepting applications to refinance owners’ debt as well as improve the energy efficiency of their properties.

Green Refinance Plus is intended to refinance the expiring mortgages of Low Income Housing Tax Credit and other affordable projects and to lower annual operating costs by reducing energy consumption. Fannie Mae and HUD anticipate approximately $100 million in initial refinance volume with an average loan amount of $3.5 to $5 million. FHA will insure up to an additional four-to-five percent of the loan amount, or an average of approximately $150,000 to $250,000 per loan, to provide additional loan funds to pay for i) property improvements that save energy and water costs for owners and tenants, such as energy efficient windows and ENERGY STAR appliances, as well as ii) other needed property renovations.

Property owners will be able to select the energy- efficiency upgrades that make the most economic sense for their properties. Borrowers will obtain a “Green Physical Needs Assessment” completed by a qualified provider. This assessment identifies property improvements that both reduce energy and operating costs and will help borrowers make rehabilitation choices that will give them the greatest energy savings for their investment.

Green Refinance Plus is an enhancement of the Fannie Mae/FHA Risk-Share program, begun in the 1990s. It will provide funding for the refinance, preservation and energy-efficient retrofits of older affordable multifamily housing properties, including those that are currently in Fannie Mae’s or FHA’s portfolios. This program allows for lower debt service coverage and higher loan-to-value ratios, to generate extra loan proceeds for property rehab and energy-efficient retrofits.

HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.

Fannie Mae Resource Center Telephone 1-800-7FANNIE
(1-800-732-6643)

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