FHA Underwriting Guideline Loophole Closed
BY JENNA V. LOCEFF
STAFF REPORTER
The Federal Housing Administration closed a loophole in its lending rules that it said may have allowed some homeowners to dump and default on a more expensive home in order to get a cheaper one.
The FHA, along with mortgage lenders, said that as fuel prices rose, some homeowners were relocating nearer to their employment. The homeowners in turn planned to rent out their former residences.
However, the FHA said it has become concerned some borrowers were providing misleading financial information about those sales with the intention to “buy and bail.”
In response, the FHA stopped allowing prospective buyers to use the proposed rental income from the soon-to-be-vacated house unless: The buyer is being transferred by a current employer or is relocating with a new employer, or if the buyer has a loan-to-value ratio of 75 percent or less.
“Buy and bail” is when a homeowner purchases a more affordable home than the one they live in with the intention of defaulting on the first home.
“They should have closed this loophole two quarters ago,” Realtor Timothy Brown of Creative Property Services in Santa Rosa said.
“With all of the other lending issues, the market tightened up before the government stepped in. This is the one place where they could have prevented additional foreclosures, but they are just getting around to it now,” Mr. Brown said.
Mr. Brown said the rule change is likely to put upward pressure on rents and could prevent an investor from being able to turn their first home into a rental.
Jenna V. Loceff at 707-521-4259, jloceff@busjrnl.com or fax 707-521-5292.
Source: North Bay Business Journal
- Related Posts Around the Web
- Car Rental Coupons – Your Most Economical Route
You use coupons at the supermarket to get the most value for your dollar. But when attempting to plan that next big trip for as little...
- Sunshine Kids Monterey Booster Car Seat - Monterey Pink Baby...
Product Specification : Brand : Sunshine Kids powered by Yahoo shopping...
- Laptop Skype Usb Internet Web Voip Phone Telephone Cd
Hey, check out these auctions: HEADSET MICROPHONE MIC SKYPE MSN YAHOO VOIP LAPTOP PCUS $4.71 (0 Bid) End Date: Tuesday Sep-22-2009...