Fannie Mae is a major player in the REO market.  It holds just under 100,000 repossessed homes and REOs according to the last reported quarterly statistics.

What is happening is that Fannie Mae is now accepting offers from Buyers without giving the loan servicers notice. In the past Fannie Mae would give Lenders 15 days to review the files and find a better offer if Fannie Mae got an offer after putting an REO on the market.  Now they are accepting first offers out of the shoot.

This will do a couple of things for the REO market.  It will heat up the competitiveness on an already hot REO market because more REO deals will be settled faster.  It will also mean that low offers will have a greater chance of acceptance.  More deals at lower cost for REO Investors!

You heard me right – FHA has ELIMINATED their 90-day seasoning requirement.

This is HUGE for investors, especially those of us who are smart enough to be doing short sale flips.

Here is a link to the release on the official HUD site: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

Check back soon for a full description of the new rules and their impact on the market!

HUD has just published some new guidelines that will nix some sales effective immediately if there is any suspicion that the buyer is participating in a Short Sale deal and is simultaneously renting out their previous house. If they sold their old house at Short Sale simply to take advantage of purchasing a similar or superior house for less, this is also an activity that the FHA will not condone by approving a loan.

The FHA will try to monitor this situation by looking closely at the sources of rental income. The FHA may consider rental income only when the LTV of the vacated property is 75% or less. This means that generally rental income will not become a part of the qualifying income used to qualify for the FHA loan.

It is ok for an FHA applicant to be renting out their previous home if they are current on the mortgage or if they have had to rent out their previous home in another city that is not commuting distance from their new location and are trying to Short Sale that distant property.

This new rule means Investors and their Agents will need to look more closely at the buyer’s sources of income before accepting an offer from someone expecting to get an FHA loan. You will find that deals fall through more frequently with FHA buyers, and there are seasoning issues that will delay closing in many cases. This new rule is just another reason to be wary of FHA buyers for your Short Sale flips.

Cuyahoga County, Ohio may be starting a trend by putting a six month suspension on foreclosures for delinquent property taxes. It is believed to be the first county in the country to be doing this. The County hopes that this suspension will give homeowners time to catch up on delinquent taxes. Many believe, however, that this will only make the delinquencies worse and only delay the inevitable.

The County’s treasurer, Jim Rokakis, acknowledges that things are not getting better and that Cleveland is seeing a huge increase in vacant and abandoned properties that are harming the value of neighborhoods and causing untold human misery. By suspending foreclosures for now for tax liens the County hopes to forestall even more abandoned homes and homeless families.

Homeowners who are behind in taxes are also typically behind in their mortgages. A tip for finding homeowners in pre-foreclosure is to contact the people who are on the delinquent tax rolls. With the tax foreclosure hold-off, now is the time to get in and help these people before the pressure from the late taxes catches up. Often tax liens can be negotiated down, paid by Lenders or, if the deal is good enough, something that the Investor is willing to cover to get the deal done.

Our crystal ball has predicted a continuing decline in home values in the majority of markets. When will we begin to see some improvement?

According to First American CoreLogic prices will decline through the winter and then, spurred by lower unemployment rates and lower housing resales inventory, the prices will begin to bounce off the bottom in March. First American CoreLogic expects 45 of the largest housing markets to decline 4.2%, a little less drastic a prediction than that of Deutsche Bank, which we reported a week or two ago expected a decline of 10 to 12%. First American CoreLogic projects a 1% year-over-year appreciation by October 2010.

Which projection should you follow? It depends on the details for your specific market. Make sure that if a decline is expected in your market you figure those projections into your Short Sale offers. On average the Short Sale will take three or four months to complete, and may take longer.

With every indication pointing to continuing fall in home values in a majority of metropolitan areas, the problem of strategic defaults is likely to increase. A “strategic default” is a situation where the owner decides that it is more in their financial interest to walk away from a property than to continue to pay on a mortgage that is more than the value of the property. These owners have the means to continue to pay, but not the will.

In areas where home values have fallen dramatically it is estimated that as many as one in four foreclosures are triggered by a strategic default where the homeowner feels that the loss of 160 points or more in credit score, and possible financial ramifications imposed by the courts is somehow less onerous than continuing to pay an over valued mortgage.

First American CoreLogic estimates that 5.3 million U.S. households have mortgage balances at least 20% higher than their homes’ value, and 2.2 million of those households are at least 50% under water. The worst problems are in California, Arizona, Nevada, Florida and Michigan.

There are a couple of issues for the Short Sale Investor to consider in determining whether to help people who have weak cases when it comes to hardship. For one, it is less likely that a lender will accept a Short Sale when the homeowner is still able to pay. Secondly, if it is accepted, the lender is likely to refuse to waive a deficiency judgment, although it may be possible to negotiate a no- or low-interest unsecured loan for the remaining debt, and that may be vastly less punitive and less damaging for the homeowner’s credit than if the home goes into foreclosure.

There are ethical concerns, however, that should be considered. With so many homeowners in genuine hardship, consider whether you want to spend your time helping someone who is making a strategic decision rather than one made out of necessity. There are so many others who really need our help that, frankly, the better move, and the one most likely to resonate with loss mitigators, will be to help those in greatest need first.

The policies that guide different lenders are constantly changing. This is one reason why it is always best to use experts who specialize in Short Sale negotiations with the lenders. Those who do not work at these negotiations day in and day out cannot possibly know where the hang-ups will come until a lot of time has been wasted and it is too late to repair. You can get 90% of a deal right and then find that it fails on something that you didn’t know about. This is a strong argument that you can use with Agents for farming Short Sale negotiations to our specialists.

We received word this past week that Wells Fargo has issued a new credit policy for house flipping, and it is good news for those who are using our transactional funding, or funding from another short term lender.

The rules are still tight and must be followed precisely:

1. Down payment and cash needed to close must be fully documented, but transactional funding is allowed if it meets this rule.

2. Second mortgages are allowed to help fund a deal.

3. No gifts are allowed; no funds from the seller.

4. If the increase in the Investor seller (the B in A to B and B to C transactions) sale price over their purchase price is more than 15% then two full appraisals are required. An exterior appraisal will be ordered if the difference is less than 15%.

5. A LoanSafe report will be reviewed with full information about sales, property history, buyers and sellers of nearby property, etc.

6. Traditional means of marketing must be used, including the MLS or a traditional auction, or marketing by a developer if it is a new home.

7. No assignment clause will be allowed. There must be no change of hands of the property from the party who signs as the B party in A to B and the B party in B to C with a 12 month period unless it is a lender or asset management service such as ones that banks use for REOs. All contracts will be reviewed to make sure names are the same and the documents meet standards.

8. The seller must hold title with clear chain of title.

9. No bogus owners. An LLC, corporation or trust that takes title must be fully documented.

10. All transactions must be arms-length. So, for example, the Investor cannot sell the property back to the original homeowner or one of their kin.

The Wells Fargo instruction document to their processors states that “Due to current market conditions having a large volume of distressed properties, the existing policy of not allowing financing for flipped properties has been revised. Legitimate property flipping transactions are now eligible to be financed by Wells Fargo Home Mortgage…”

Wells is such a large and influential Lender that chances are strong that other Lenders who have been reluctant to accept flips will begin doing so in order to get this housing crisis behind us faster. It is a clear recognition by a major player that Investors who serve as middle-players in the these transactions play a legitimate role in cleaning up liens and helping with Short Sale negotiations, then finding buyers quickly for these properties. Our work clearly saves Lenders money and gets Homeowners out of a nightmare situation with less permanent credit damage. Flipping is now being recognized as a win-win-win combination.

Talk about a nice surprise for the holidays!

I’m very sorry to everyone who was on our call with Lee Arnold last night, unfortunately there were some issues with our internet connection and the audio cut out for a little while near the end.

This is a really important call that I think every investor needs to hear. Think about it – he’s explaining how you can fund every deal, every time. AND how you can make your money, and other people’s, work FOR you as a hard money lender yourself.

Take it from this “recovering rehabber,” there’s a lot of money to be made by safely leveraging resources to make your money make more money with ZERO work.

We want to make sure everyone gets a chance to hear it, so we’re going to be running it again this Saturday, Dec. 19 at 12 pm (noon) Eastern/ 9 am Pacific.

Make sure you register your spot so you don’t miss out on this second chance call.

Go here to register: https://www2.gotomeeting.com/register/117545826

This is a big one, folks. I hope to see you on the call!

Last month, President Obama signed into law H.R. 3548, an expansion and extension of the homebuyer tax credit that otherwise would have expired at the end of November. Both the House and Senate passed the new legislation by wide margins.

In fact, instead of just extending the current $8000 for a few more months, there is a credit for current homeowners who purchase a new main residence between November 7 and April 30, 2010. The credit will be up to $6500 for married joint income tax filers and $3250 for single filers and married people, filing separately. One restriction is current homeowners must have resided in the home being sold consecutively for 5 of the last 8 years. A contract to purchase must be in effect on April 30 or before, and the purchaser will have until July 1, 2010 to close.

There are also income limits attached to the new home seller credit: $125,000 for single tax filers and $225,000 for married filers. The home may not cost more than $800,000, and the home may not be purchased by a dependent. They must live in the new residence for at least three years or they will need to pay the credit back.

The government estimates that 70 percent of homeowners will now be eligible for a credit should they choose to sell their home and purchase a new one within the designated timeframe.

What we do not see in the law is any restriction that would apply to homeowners who are selling their home by Short Sale. Normally, a Seller who sells a home at a loss that the Lender absorbs is not allowed to benefit from the sale of the home. However, in an effort to provide incentives for everyone to make property productive again, the federal government has been showing more interest in helping troubled homeowners more directly. The fact that the rules for this tax credit do not seem to exclude Short Sale homeowners is an indication of the government’s recognition that people in this situation are hurting and could use the tax break in order to get a clean start.

This is not the only incentive available to homeowners who complete a Short Sale. The Make Home Affordable guidelines from the Treasury Department for Home Price Decline Protection Incentives and Foreclosure Alternatives were updated in May and the directive that implemented new incentives for Lenders and junior lien holders also allow up to $1500 at a Short Sale closing for the Sellers to use toward moving expenses.

For the First Time Buyers the rules remain in place until April 30: To qualify for a tax credit the first time buyers may not have had an interest in a principal residence for 3 years prior to the purchase. Single filers and those who are married but filing individually is limited to $4000 in credit. The credit may not exceed 10 percent of the purchase price and will be prorated if the home was purchased for less. The extension period is from December 1 through April 30 for First Time Homebuyers.

Once again, Short Sale Investors continue to have an unprecedented opportunity not only to make money in this down economy, but to help families who are in trouble to make a new start by selling their homes at Short Sale.

A friend of mine has put together what I think is going to be an awesome, 11-part training series that focuses on Short Sales. It’s called Cash with Short Sales and it’s 100% content with zero sales. Just 11 of the nation’s leading Short Sale experts giving you some of their secrets to being successful in this market.

I’m taking part in it as one of the Expert instructors and wanted to invite you to check it out. And the best part is, it’s totally free. Just great content. Check it out, I think you’ll really be glad you did. It got started on Wednesday, but there are still a few days left!

Here’s the link: http://www.theagentmagnet.com/cwss