HUD Properties, FHA & Title Seasoning
by William Bronchick
With HUD properties, title seasoning, FHA loans, and short
sales, investors have had some confusion regarding the
rules. This article will clarify all of these issues for you.
HUD is the United States Department of Housing and Urban
Development, a government agency whose goal is to
increase homeownership, support community development .
The Federal Housing Administration (FHA), which is part of
HUD, provides mortgage insurance on loans made by
FHA-approved lenders throughout the United States.
HUD and FHA come into play in three different scenarios in
the investor/foreclosure arena.
HUD Foreclosed Properties
When a person gets an FHA loan, it is funded through a
private lender and the loan is insured or backed by the
Federal Housing Administration. When the loan is in default,
FHA pays out the lender and take an assignment of the
loan. When the property is foreclosed, it is owned by HUD.
HUD then offers these properties for sale to both
owner-occupants and investors. The properties are offered
on the local MLS computer database, but you have to
submit an offer through a HUD-approved real estate broker.
The offer is made under a bid process, under which the
HUD will either accept or reject your offer depending on
what other offers are submitted. An investor can buy, hold,
or flip these properties if their offer is accepted.
FHA Loans and Title Seasoning
Then second place HUD comes into play is the FHA loan.
If a buyer of your property gets an FHA loan, there is a
title seasoning requirement of 90 days. In other words, if
you are selling the property to an FHA buyer, you must
have title recorded in your name for 90 days before the
closing and funding of the FHA loan. This precludes you
from doing a double-closing or a short term (less then 90
days) flip.
Keep in mind that the 90 day seasoning rule has nothing to
do with HUD-owned properties as described above. In other
words, you can buy a HUD property and flip it 3 minutes
later so long as your end-buyer is not using FHA financing.
FHA Loans in Short Sale
The third place HUD comes into play is if you are working
on a foreclosure short sale on a property that has an FHA
loan. In this case the Federal Housing Administration is
insuring the loan and must approve the short sale. You
can buy a property with an FHA loan on it, then flip it
without a title seasoning issue, unless your end-buyer is
getting an new FHA loan.
In summary, don't confuse the FHA new loan 90-day title
seasoning requirement with the two other scenarios,
HUD-owned properties and existing FHA-insured properties.
For more information on HUD properties and FHA loans,
visit www.hud.gov.
by William Bronchick
With HUD properties, title seasoning, FHA loans, and short
sales, investors have had some confusion regarding the
rules. This article will clarify all of these issues for you.
HUD is the United States Department of Housing and Urban
Development, a government agency whose goal is to
increase homeownership, support community development .
The Federal Housing Administration (FHA), which is part of
HUD, provides mortgage insurance on loans made by
FHA-approved lenders throughout the United States.
HUD and FHA come into play in three different scenarios in
the investor/foreclosure arena.
HUD Foreclosed Properties
When a person gets an FHA loan, it is funded through a
private lender and the loan is insured or backed by the
Federal Housing Administration. When the loan is in default,
FHA pays out the lender and take an assignment of the
loan. When the property is foreclosed, it is owned by HUD.
HUD then offers these properties for sale to both
owner-occupants and investors. The properties are offered
on the local MLS computer database, but you have to
submit an offer through a HUD-approved real estate broker.
The offer is made under a bid process, under which the
HUD will either accept or reject your offer depending on
what other offers are submitted. An investor can buy, hold,
or flip these properties if their offer is accepted.
FHA Loans and Title Seasoning
Then second place HUD comes into play is the FHA loan.
If a buyer of your property gets an FHA loan, there is a
title seasoning requirement of 90 days. In other words, if
you are selling the property to an FHA buyer, you must
have title recorded in your name for 90 days before the
closing and funding of the FHA loan. This precludes you
from doing a double-closing or a short term (less then 90
days) flip.
Keep in mind that the 90 day seasoning rule has nothing to
do with HUD-owned properties as described above. In other
words, you can buy a HUD property and flip it 3 minutes
later so long as your end-buyer is not using FHA financing.
FHA Loans in Short Sale
The third place HUD comes into play is if you are working
on a foreclosure short sale on a property that has an FHA
loan. In this case the Federal Housing Administration is
insuring the loan and must approve the short sale. You
can buy a property with an FHA loan on it, then flip it
without a title seasoning issue, unless your end-buyer is
getting an new FHA loan.
In summary, don't confuse the FHA new loan 90-day title
seasoning requirement with the two other scenarios,
HUD-owned properties and existing FHA-insured properties.
For more information on HUD properties and FHA loans,
visit www.hud.gov.
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