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Fannie Mae owned property , flipping rules ?

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Rob Rey

May 12 '09, 11:57 AM


I looked aroung Google for rules about flipping a Fannie Mae owned property .

I know HUD has rules about buying HUD properties as a owner occupied or as an investor .

My question is , can an investor buy a Fannie Mae property , then try to flip it while holding the property for as short a period of time as possibe ?

I couldnt find any holding period requirements or preferences being give to owner occupied Fannie Mae properties ?

I know at one time Fannie Mae would not back a mortgage
on a property that was owned by the same person for less than 3 months. I think they rescinded this rule recently, thou I'm not sure about that .

So, can an investor simply buy a Fannie Mae owned property and then attempt to flip it without any holding period requirements ?

I'm thinking yes , thou not very sure with my answer.
I'm hoping someone can clarify this for me .

Thank you in advance for any info and responses .


Edited Jun 26 2010, 08:12


Kathy Thompson

Real Estate Consultant from California

Jun 19 '09, 11:01 AM


I also tried to look this up on Homepath.com and using Google. Could not find an answer but although not 100% sure I believe the investor must hold the property for 90 days?


Edited Jun 26 2010, 08:39


Scott M.

Real Estate Investor from Rochester Hills, Michigan

Jun 19 '09, 11:03 PM
2 votes


They will put a 90 day deed restriction on the property unless you negotiate it down. I just locked up a FNMA property and got the deed restrictions to 30 days. I have been able to get it to 0 as well. All depends on the people involved.


Edited Jun 26 2010, 08:40


Kel S

Real Estate Investor from Toledo, Ohio

Jun 20 '09, 01:25 AM


The one (Fannie Mae) we are buying says we can't sell it for over a certain amount before 90 days. I wonder why they do that? This is what our addendum states:

Grantee herein shall be prohibited from conveying captioned property to a bonafide purchaser for value for a sales price of greater than $XX,000 for a period of 3 months from the date of this deed. Grantee shall also be prohibited from encumbering subject property with a security interest in the principal amount of greater than $XX,000 for a period of 3 months from the date of this deed. This restriction shall run with the land and are not personal to the grantee. This restriction shall terminate immediately upon conveyance at any foreclosure sale related to a mortgage or deed of trust.


Edited Jun 26 2010, 08:40


Scott M.

Real Estate Investor from Rochester Hills, Michigan

Jun 20 '09, 05:24 AM
1 vote


Hey Kel - you say "the one we are buying" as if it were still in progress.

Even after you do the signed agreements you can have your Realtor / broker / whomever submit an addendum to get that deed restriction lowered. I would do one for 0 days and settle for anything you get :)

Getting it reduced to 0 really isn't a big deal and getting it to 30 happens almost all the time.


Edited Jun 26 2010, 08:40


Daniel Bruckner

Real Estate Investor from San Clemente, California

Jun 22 '09, 01:33 PM


There is legislation soon to be presented to the government "all-knowing" powers on the stupidity of these rulings. Some of them are being looked at by attorneys as well as a class action (I haven't verified this as truth, just heard it from a few investors) as it appears to be a violation of certain rights.

There is a great guy by the name of Bruce Norris (in CA) www.thenorrisgroup.com who is actively attemtpting to get the legislation changed to do away with seasoning issues all together. Sign all those petitions that are out there and/or make your voice heard to his group!

We all know that in a down market, what kick starts the economy is the willingness investors have to purchase properties. When will THEY realize this?


Edited Jun 26 2010, 08:42 by Daniel Bruckner


Will Barnard Video Moderator Donor

Real Estate Investor from Santa Clarita, California

Jun 22 '09, 01:40 PM


Go Bruce! He is great, and an influential man of action.
Hope something is done about these stupid seasoning rules. They do NOTHING to prvent more foreclosures, all they do is hinder investors from helping out the communities these run down homes are in.


Edited Jun 26 2010, 08:42


Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Jim Wineinger

Real Estate Investor from ten mile, Tennessee

Jun 22 '09, 02:19 PM


The "new" agency being established has control over fannie and freddie which makes all their regulations the same as FHA also under their control.

This would mean a 90 day seasoning rule. But there is also talk about that 90 day seasoning being put on a one year "hold" back in 2008. These regulations may not have taken affect since everything I found in the FHA guidelines actually refer back to 2007 even though they are dated 2008.

I do hope these changes are indeed comming, but even if enacted now, the real question is how long before they become implimented?


Edited Jun 26 2010, 08:42


Jim Wineinger

Real Estate Investor from ten mile, Tennessee

Jun 22 '09, 02:47 PM


I may have finally found something on this. But the one year date started june 8, 2008, which means it has just expired.

Anyone know if there are plans to extend it?

I am working on getting permission to reprint the whole article so for now I will copy and paste here only the summary from the FHA Assistant secretary for Housing-Federal Housing Commissioner which should give everyone a name to contact for the REAL STORY and why everyone is still having problems if the seasoning rule was suspended.

WAIVER
Section 203.37a(b)(2) of the FHA regulations, 24 CFR 203.37a(b)(2), is hereby waived for a period of one year from today's date with regard to sales of properties acquired by mortgagees, whether sold directly by the mortgagees or by their subsidiaries or by vendors to whom they have transferred titles to properties for the purpose of effectuating sales of those properties.

Brian D Montgomery
Assistant secretary for Housing-
Federal Housing Commissioner

Issued June 9, 2008


Edited Jun 26 2010, 08:42


Jay Son

Select a State

Jun 26 '09, 07:39 PM


If you're an Investor, page 6 under "Deed Restrictions" to the FNMA Purchase Addem. must be completed with 120% of the purchase amount for 3 months. Property can't be sold for more than that amount for a period of 90 days.


Edited Jun 26 2010, 08:45


Sam Kuria

Real Estate Investor from Atlanta, Georgia

Jul 22 '09, 09:46 PM


If you are wholesaling and never get the title does this deed restriction still apply? Can you use an LLC?


Edited Jun 26 2010, 09:05


Daniel G.

Real Estate Investor from Miami, Florida

Aug 05 '09, 11:49 AM


I just met with my r.e. attorney on saturday and I am meeting with him again tomorrow afternoon and he was telling me that they have now pushed the 3 month restriction to 6 months.

I am meeting with him again to review this scenario a bit more along with other topics. I will keep you all posted if I hear anything different from these posts....

Good thing he is a partner of mine, so I dont have to pay him a dime! =)


Edited Jun 26 2010, 09:15


Account Closed

Real Estate Investor from Newport Beach, California

Aug 20 '09, 08:45 AM


Don't forget to take into consideration the crowd you plan on selling it to. A lot of lenders are pushing back on buyers and sticking to the last sold price for up to a year. For example: FHA will use the last sold price regardless of the appraised value for 6 months...prevention of house flipping.

and so on...

The Agent Center


Edited Jun 26 2010, 09:26


Daniel G.

Real Estate Investor from Miami, Florida

Aug 20 '09, 12:06 PM


Why would you even try to sell to an FHA buyer within your 90 day period. Just flip it to a cash buyer as a double close.

Yes, the deed restriction is 90 days, but you can still sell as long as you are 120% of your purchase price. So why not flip a few to some cash buyers!

My 2 cents! =)


Edited Jun 26 2010, 09:26


Daniel Bruckner

Real Estate Investor from San Clemente, California

Aug 20 '09, 01:21 PM


It is true... 6 month seasoning on FHA/VA now. That precludes that you even need an FHA buyer. You can always insist that it can't be a buyer who needs FHA lending when you find your end buyer. There are many other options to getting an approved short sale/REO double closed.


Edited Jun 26 2010, 09:26


Tim Hennessy

Real Estate Investor from denver, Colorado

Aug 30 '09, 02:37 PM


I have recently purchased 3 REO properties from Fannie Mae that came with a deed restriction. An addendum to purchase contract (tied to property not buyer) limiting the sale of the home within a 90 day period to 120% purchase price. Not that big of deal if you are in the FHA price point & market.


Edited Jun 26 2010, 09:33


Jim Wineinger

Real Estate Investor from ten mile, Tennessee

Aug 30 '09, 04:42 PM


Which one are you speaking of?

Deed restriction?
or
An addendum to purchase contract?

These are two different things.


Edited Jun 26 2010, 09:33


Tim Hennessy

Real Estate Investor from denver, Colorado

Aug 30 '09, 11:07 PM


The deed restriction was included in my addendum to the contract on every property. I was trying to copy in the paragraph from the addendum but seems I cannot.


Edited Jun 26 2010, 09:33


J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Aug 31 '09, 12:35 AM


First, there is another thread about this as well:

http://www.biggerpockets.com/topics/37221-fannie-mae-reo-you-can-flip-them-in-24-hrs-?forum_id=16&page=2#posts-189791

To summarize some answers to various questions:

- Yes, FNMA imposes a deed restriction on every REO they sell that limits the resale of the property to 120% of the purchase price for 90 days from date of purchase.

- Yes, this restriction applies to any wholesale transaction where the deed is placed in the name of the wholesaler for any amount of time.

- Yes, this restriction can be negotiated out of the FNMA addenda if the asset manager agrees. Basically, just submit an amendment to the seller that says:

"Seller agrees to remove all deed restrictions outlined in the Real Estate Purchase Addendum page 5, section 14 [or whatever page applies to you]. All parties agree that buyer will have no seasoning time or price restrictions on resale of the property."

If the asset manager signs it, you're good to go. Most of the time they will, especially if you have some leverage (like a due diligence period).

- The FHA 90-day seasoning period is still in effect, and is still 90 days. There is no plan (as far as I've heard) to increase it to 180 days or to reduce it to 0 days.

- VA has no seasoning rules like FHA does. There is no plan (as far as I've heard) to impose VA seasoning restrictions.

Hope this helps!


Edited Jun 26 2010, 09:33


Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Michael Gillmer

Banker from Orchard Park, New York

Aug 31 '09, 12:44 AM


Good Afternoon,

I am reading your blog and I wanted to let you know what I ran into recently with a bank M&T. I am a mortgage broker and I submitted a file for underwriting...clear all conditions and then it was called into quality control. Quality control said that need 90 seasoning...but they went 90 days from the day the deed was recorded..which was a month after the actual closing. I said I wold resubmit with new contract but they basically told me they flat out just didnt want to do the deal.

Hope this helps

Michael Gillmer
Nickel City Funding
[CONTACT INFO REMOVED]


Edited Jun 26 2010, 09:33 by Moderator


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