The announcement is part of the Obama administration commitment to addressing foreclosure. This comes in the wake of  Donovan’s announcement on Thursday that HUD is allocating $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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“I think it is a positive thing for our market currently here in Denver,” Peer said. “We have such low inventories and prices are still very low as well. So being where we are in the market, this is a good incentive,” he said about the legislation signed by Obama.

But Peer is not a Realtor.

As the Housing Counseling Manager for Edgewater-based Brothers Redevelopment, which has helped thousands of homeowners in Colorado avoid or deal with foreclosure, he has another take on the tax credits.

“My concern is that the credits might cause some people to rush into homeownership,” Peer said. “We have been trying to promote education along with the incentives. We have some fears, that especially first-home buyers that are buying only for the tax credits, who might not buy otherwise, might run into problems down the line.”

Indeed, he said if someone can only afford to buy a home with the help of the tax credits, they might not be a good candidate to buy a home at this time.

I asked Peer if the tax credits could actually result in more people eventually losing their homes to foreclosure.

“That’s hard to say if that is true or not,” Peer said.  “Over the past couple of years, with prices have dropped, and so many people have been on the fence. A number of people have worried that they might be buying too early and prices could fall more.”

The tax credits, however, could help bring stability to the market with more buyers, and especially in the Denver area, could help reinforce that the housing market is coming off the bottom, Peer and Realtors say.

“My feeling now is that we’re getting out 0ur promotion of homeownership, which is good, but we do not want people to jump in who are not ready to be homeowners, just because of the tax credits,” he said.

“I wonder if we missed an opportunity to require some kind of counseling before people can take advantage of the tax credits,” Peer said, much like the Colorado Housing and Finance Authority does, when buyers take advantage of its programs. Also, Fannie Mae and Freddie Mac have an educational component with some of its programs, he said.

“Of course, I was not involved in that decision,” Peer said. “Maybe the experts consulted thought that would uave made the program too cumbersome and unwieldy.”

Still, he encouraged people to contact Brothers at this link or call 303-202-6340. You don’t need to be in danger of losing your home to contact the non-profit Brothers, which will put you in touch the the appropriate HUD-approve counselor for no charge.

“We have counselors who can give advice to first-time home buyers and existing home owners,” Peer said. “I’m sure there are people out there who have owned a home for 10 years, but since they haven’t purchased a home in 10 years, buying a home is really new again to them. We have a wide-array of counselors available.”

He said they have even discussed setting up a number similar to Colorado Foreclosure Hotline, for people seeking advice on how to avoid financial problems when buying a home.

I asked him if what they are doing is similar to preventive medicine, as opposed to treating the sickness.

“Definitely,” he said.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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CHFA’s statewide Mortgage Credit Certificate program gives qualifying first time home buyers even greater tax benefits from home ownership than traditionally available.

“CHFA’s Mortgage Credit Certificates will supercharge a first time homebuyer’s federal tax savings by allowing the certificate holder to claim 20 percent of the mortgage interest paid annually, dollar-for-dollar, against their federal tax obligation,” said Karen Harkin, CHFA’s director of home finance.

“The remaining 80 percent of the mortgage interest paid can continue to be used as an itemized deduction, which is typically how all mortgage interest is treated. Because they aren’t paying as much towards taxes, first time home buyers have more money left in their paychecks to put towards their mortgage payment.”

To be eligible for a CHFA Mortgage Credit Certificate you must be a first time home buyer in Colorado and meet the income and purchase price guidelines for the census tract and county where you live. CHFA has a tool on their website, www.chfainfo.com, to help homeowners identify the income and purchase price limits for their area. For example, in targeted Denver Metro Areas, homebuyers with three or more people in their household can earn up to $106,400 annually with a maximum purchase price of $417,000.

Homeowners who refinance out of an adjustable rate mortgage originated after Dec. 31, 2001 and before Jan. 1, 2008, and obtain a long-term fixed rate mortgage are also eligible to apply for a CHFA Mortgage Credit Certificate.

Harkin commented on the program saying, “While select counties have chosen to make Mortgage Credit Certificates available, this is the first time the program has been offered statewide. The combination of low prices, favorable interest rates, the $8,000 federal tax credit, and a Mortgage Credit Certificate make a compelling case for home ownership today.”

To apply for a CHFA Mortgage Credit Certificate, contact one of CHFA’s participating lenders, or inquire about Mortgage Credit Certificates with your local lending institution. To view a complete list of lenders currently authorized to issue CHFA Mortgage Credit Certificates visit www.chfainfo.com. Lenders interested in applying to participate in CHFA’s Mortgage Credit Certificate program should contact CHFA’s Home Finance team at 1.800.877.2432.

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