In the days of the flaming real estate market, FHA’s motive was to slow down the rate of home price increases and profit taking by homeowners who wanted to take advantage of the current market conditions.

With the number of foreclosed properties on the market, many of which are in such bad condition that they would not qualify for any type of loan, the FHA is now looking for real estate speculators and investors to help bail out the market. With the 90 day holding period waived for the next year, investors can now snap up some of the great deals that are available, renovate them as quickly as they can so that they will qualify for a loan, and get them back on the market so buyers can take advantage of the available federal homebuyer tax credits.

This should significantly increase the number of turn-key livable homes on the market in the Paradise &  Lake Oroville real estate market,  something that is sorely needed right now.  Going forward I would like to see FHA permanently rescind the regulation as it interferes with the free market. Only when the government gets out of the way will the market repair itself.

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The  result of these changes, which are anticipated to be put in place sometime between the spring and summer months, will be that buyers are going to need more upfront cash than they are required to have today.

The change that will have the greatest impact on the current conditions of the Lake Oroville real estate housing market is the reduction in the maximum amount of closing costs that a seller may pay on behalf of the buyers. The new regulations will cut the buyers allowable credit from 6% of the purchase price down to 3%. Meaning that on a $150,000 purchase a seller will only be allowed to contribute  $4,500 towards a buyer’s closing costs as opposed to the $9,000 that they are now allowed to contribute.

Another change will require that upfront charges for mortgage insurance premiums be increase fron 1.75% to 2.25% of the loan value. This charge is normally financed as part of the loan, so in most cases the effect of this new regulation will be a small increase in the amount of a buyer’s loan payment. And although small it may be, it may be enough to keep some buyer’s from qualifiying for a loan.

And the party is over for those of you with marginal credit scores. If your credit score is less than 580 you will no longer be eligible for the 3.5% down payment program. The new guidelines call for these borrowers to put 10% on their purchase. For that same $150,000 purchase in the above example you will be required to have a down payment of $15,000 vs. $5,250 that you currently are required to have.

OK, all you buyer’s who are still sitting on the fence. Let’s look at what happens if you wait so long to buy a house that you end up buying a home under these new guidelines (sometime this summer) instead of buying now.  Assuming the price of your new home is $150,000 and your credit score is less that 580.

I think you will agree that no matter how you look at it, waiting is going to be very costly.

 Oroville real estate, chico homes, Paradise listings, Gridley properties, butte county california market

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• See the HUD Site

A lot of what most of us would call “bad changes” for this market centers around the over zealous tightening of lending guidelines, and the knee jerk reaction of lawmakers and regulators that, so far, have inhibited the free market from working it’s “magic.”

Well, my friends, I can’t believe I am about to say this, but recently it seems that the government may have gotten something right with regards to assisting the market.

Today we invited Renee’ Jones from the local Mission Hills Mortgage office of the Lake Oroville real estate market to come to our office and give us an update on the new disclosure requirements that lenders must now make to borrowers during the loan process. Renee’ is a top notch loan officer who strives to stay on top of all the latest lending rules so I knew she would be up to speed on these new regulations.

The Department of Housing and Urban Development  recently mandated that as of January 1, 2010 all lenders must use the same prescribed format for disclosing the terms of a borrowers loan. Not only that, but the timing with which these Good Faith Estimates are to be  delivered to borrowers is also going to be more strictly enforced in order that terms and fees to a loan cannot be changed at the last minute. In fact some of the terms and fees, once disclosed, cannot change at all, safegaurding borrowers from the incompetent and/or dishonest acts that some lenders have used to increase their commissions on the loans they are selling. The new disclosure format will allow you, the borrower to more easily shop for the loan package that provides the most value for your money.

The other change that HUD is making, beginning Feb 1, 2010, is the lifing of the 90 FHA ban on flipping properties. The ban currently states that an FHA loanis unavailable on a propety that is changed hands within 90 days of the last sale.  This rule was put into place when the market began going nuclear in the early part of the decade. The effect of this rule was to tell an investor that if he or she bought a house in order to rehab it and resell it that there had to be a 90 day waiting period before that could be done.  Although this rule, in my opinion, should have never been implemented, HUD is now making progress in the common sence department by waiving this rule for the next 12 months.  A permanent recission would be better, but we will take what we can get right now.

 In this age of bank owned properties that have been trashed by homeowners who somehow think it was the banks fault that they lost thier homes, this waive allows investor money to buy some of these distressed properties, rehab them, sell them for a profit ( I think this is still allowed), and move on to the next project. The long term effect will be higher home values and increased property tax revenue to our municipalities.

Both of these actions by HUD are going to help give us what this economy really needs: Long term stabiltiy in the housing market.

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On November 14, 2009 I blogged about the financial state of The Federal Housing Administration (FHA) and the possibility of an increase in the minimum downpayment requirement from 3.5 percent to 5% in order to obtain an FHA loan to purchase a home in the Lake Oroville real estate market and beyond.

Seems that I am not the only one thinking this way. RealtyTimes.com has an article about this very thing.

CLICK HERE to read the article.