Southern Nevada - with communities like Henderson, North Las Vegas, Mountains Edge, Rhodes Ranch, Summerlin and Anthem - real estate purchases have recently been financed increasingly with FHA products that offer mortgage applicants more considerate underwriting guidelines and lower down payments than the conventional ones. Without FHA it is hard to imagine what a darker place Las Vegas housing market would otherwise be in right now. And things are going to get even better soon.
HUD just announced an adjustment to the FHA home loan program. Presently, with some exceptions, FHA outlaws insuring a mortgage on a property owned by the seller less than 90 days. The change is going to take place on February 1, 2010 and will be in effect for one year, although it can be either extended or mothballed with a magic flip of a switch by the FHA corner office. In other words, it's temporary.
In short, this mortgage initiative's main goal is to help speed the resale of foreclosed homes. FHA has figured out that the current 90-day ban lowers seller interest in seriously looking at FHA buyer contracts and therefore slows down the stabilization of housing markets all across. FHA-insured financing will then under the new setup be available for HUD-owned homes, bank REOs and private resales, in essence a whole spectrum of real estate.
It'll come, however, with some strict guidelines to keep abuse to a minimum. That's always something to keep in mind. There still are flippers and other schemers out there. First of all, all transactions must be arms-length. Secondly, if the sales price is over 20% higher than the original acquisition cost the mortgage lender has to meet certain conditions. And thirdly, the waiver only applies to forward mortgages. More specific guidelines can be found here.
Las Vegas housing market is going to be gladly putting its arms around this initiative from FHA. Who wouldn't? Moreover, it'll help throughout the country firm up prices and give communities a chance to recover from this current mortgage and real estate malaise. It's not a cure-all, but it'll provide a small step forward toward normalcy.