All Forum Posts by: Catherine Coy

Fannie Mae announced on June 25, 2008 that seasoning for a short sale is now two years versus five years for foreclosure. Here's the announcement:

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pd

Here's the pertinent section:

Why has Fannie done this? Because short sales are currently net 80-82% of Fair Market Value to Fannie--which is more than Fannie gets from an REO sale, not to mention that by the time the property goes to foreclosure, it's worth far less in most areas of the country and has sometimes been vandalized.

http://www.rebuild.org/news-article/foreclosure-and-stripping-homes/

To ensure that the former homeowner is ready to purchase again in two years, s/he should pay all their other debts on time and use no more than 50% credit capacity on credit cards.

According to the Mortgage Debt Forgiveness Act of 2007, the amount of mortgage deficiency (known as "phantom income") will be forgiven if the house is owner occupied. (No break to investors.)

http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html

The derog will be reported to the bureaus as Score Factor Code #22--"serious delinquency, derogatory public record or collection." There is no other "reason code" that lenders can use to characterize the activity of a defaulted mortgage. “Default” occurs when the borrower does not pay as agreed.

http://www.bayhouse.com/FairIsaac-NextGen-risk-factors.shtml

Depending on the consumer's utilization of other debt, the hit to his FICO could be less than 100 points. Here's a post from this forum where the borrower orchestrated his own short sale at OCWEN and Washington Mutual.

http://forums.biggerpockets.com/about17168.html

The definer of this program is (from your excerpt):

When the term 1-4 units is used, it means 1-4 units IN THE SAME PROPERTY, not up to four separate properties. See the distinction?

If an investor tried to get more than one 203(k) loan and declared that he was going to live in each property covered by a 203(k) loan, he would be committing loan fraud; specifically, occupancy fraud.

The 203(k) program is currently closed to investors, but can be used for owner occupants purchasing ONE property consisting of up to four units, also known as a four-plex.

An investor, if he doesn't already own a home, can declare that he's going to occupy the property but multi-unit properties are very susceptible to post-closing audits to make sure the mortgagor (borrower) really lives there.

I know for a fact that the 203(k) program is closed to investors. I'd try to find the Mortgagee Letter that addresses this, but that would take time I really don't have right now. You may be able to find it yourself here...

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/

The figures above re how many Americans own their homes free and clear are distressingly pessimistic. Thankfully, they're also incorrect.

So many Americans own their homes free and clear that reverse mortgages are realizing a boom in popularity.

Reverse Mortgages Boom While the Rest of the Industry Swoons
http://realtytimes.com/rtpages/20070430_reversemort.htm

Well, they can't...and they don't. They live in one unit and rent the other three out. This is allowed by all lenders.

Gheeee.....

I'll look it up, but I don't think the 203(k) has re-opened for investors. Yes, you can borrow up to 110% with a 203(k) but that's for owner occupant only.

I'll post back with what I find.

Unfortunately, at this time, they're available to OO only. When I was originating (literally) hundreds of these loans for investors--I used to wheel them around the office on a dolly!--they were cumbersome for the investor because they're full doc only, but they were cheap compared to hard money loans. The borrower must front the cost of repairs and then be reimbursed from the rehab escrow account at each of the five draws allowed.

I think, with the current mess, they'll bring back the 203(k) loan for investors, but with more oversight features to (attempt to) avoid the fraud associated with investor loans.

By the way, the news is that 50 new FBI agents have been added to a task force in Southern CA alone to address mortgage fraud.

Loan limits on all FHA loans have increased to $729,750 in high cost areas.

It's not a new program; it's the same ol' FHA 203(k) rehab loan that's been around for a long time. I used to originate them when they were available to investors. Investors brought a lot of fraud into the program; now they're available only to owner occupants.

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

** tee hee hee **

You can't afford NOT to go. Put the tab on a zero interest for 12 months credit card and go--sooner rather than later. :lol: