2-3-11 Why suspend the FHA 90-day Rule :: The Construction Management Pro

2-3-11 Why suspend the FHA 90-day Rule

The FHA 90-day rule regulation (24 CFR 203.37a(b)(2)) typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days. Last year, FHA  waived the regulation through January 31, 2011. This rule, fashioned to work in raising housing markets is now inappropriate given existing market conditions. It is counter to the goals of stabilizing home values, creating employment and relieving financial institutions of troubled assets.

Most single family distressed properties are purchased by small businesses. The more projects a company can do, the more jobs and economic activity can be created. Waiving this rule frees up an investor’s capital as well as credit by reducing the holding period.  This will now allow for continued economic activity. These jobs are created in the private sector without subsidy, government intervention and created by small businesses. To the extent that there is a desire to support small businesses, put local people to work in there community, the suspension of 24 CFR 203.37a(b)(2) accomplishes these goals.

This waiver also makes it possible for the banks to dispose of their assets in an expeditious manner as investors can turn over their money quicker. Taking these distressed assets off the bank’s books strengthens the bank’s financial position and allows for the expansion of available credit.

Typically these properties are rehabilitated. This improves the housing stock and raises the mean sale price of homes in the community. This in turn stabilizes existing home values and provides both sellers and buyers with comparables for properties in the existing home market.

Did you like this? Share it:
Be Sociable, Share!

Comments

Got something to say?