Lender group asks HUD to reinstate popular investor loanJune 11, 2012 @ 8:19 am
The Mortgage Bankers Association (MBA) is urging HUD to end its moratorium on allowing investors to take part in the agency's Section 203(k) rehabilitation loan program.
The association concedes that the moratorium was the right course of action when it was implemented in the mid-1990s, but notes that today's housing market is vastly different.
"Communities would benefit from investors buying bank-owned properties, renovating them through the 203(k) program and selling or renting them," says Steve O'Connor, MBA's senior vice president of public policy and industry relations.
Owner-occupants continue to use popular 203(k) loans, which allow the borrower to finance both the purchase of the property and upgrades into one mortgage guaranteed by the government. However, for the past 15 years, FHA has maintained a moratorium on allowing investors to use the 203(k) program because of past abuses in how the refurbished properties were appraised.
The FHA 203K program was designed to roll all financing into one package. The borrower can take out one mortgage loan, at a long-term fixed or adjustable rate, to finance both the acquisition and the rehabilitation of the property. The mortgage amount is based on the "as will be" (projected) value of the property and takes into account the cost of the work.
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