WASHINGTON (Reuters) - The U.S. government is taking action to speed the resale of foreclosed properties by temporarily expanding access to Federal Housing Administration mortgage insurance, U.S. housing officials said on Friday.
Effective Feb 1, the Housing and Urban Development Department will waive for one year an FHA rule that prohibits insuring a mortgage on a home owned by the seller for less than 90 days, giving FHA borrowers access to a broader array of recently foreclosed properties.
The move is to allow homes to resell as quickly as possible, helping stabilize real estate prices and revitalize neighborhoods after the U.S. housing market collapse.
“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” HUD Secretary Shaun Donovan said.
FHA research shows acquiring, rehabilitating and reselling foreclosed properties to prospective homeowners often takes less than 90 days, HUD said.
The current rule discourages sellers from signing contracts with FHA buyers because of holding costs and the risks of vandalism from allowing a property to sit vacant more than 90 days, the department said.
“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David Stevens.
The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties or properties resold through private sales.
Reporting by Doug Palmer; Editing by Andrew Hay