FHA Buy and Bail Rule

By
Real Estate Mortgage Broker NMLS 291249

FHA Buy and Bail Rule

Because of the recent increase in homeowners purchasing another home and claiming they will rent their existing home then allowing the existing home to go into foreclosure; a new term has emerged "Buy and Bail"

To halt Buy and Bail fraud FHA and Fannie Mae have enacted new rules.

CONVERTING AN EXISTING HOME TO A RENTAL
FHA now requires buyers who are legitimately purchasing a home and converting their existing home to a rental either qualify for both loans or have 25% equity in their present home.  Fannie Mae previously instituted their own Buy and Bail rule.

EXCEPTION:
Relocations: The home-buyer is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance.  A properly executed lease agreement (i.e., a lease signed by the homebuyer and the lessee) of at least one year's duration after the loan is closed is required.  FHA recommends that underwriters also obtain evidence of the security deposit and/or evidence the first month's rent was paid to the homeowner.

Complete FHA Buy and Bail Mortgagee Letter

Click Market and Lending Updates for current rates and lending information.

Your FHA GuruBill Ladewig

800.664,SAVE (7283)

Bill@yourFhaGuru.com

 

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Comments 17 New Comment

Anonymous
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Rainmaker
570,934
Bill Ladewig
Your FHA Guru - FHA and VA Loans Since 1970

Renee, there is no fraud anyone can conjure that has not been tried.. but they keep on trying so it leaves it up to us to just say NO.

August 08, 2009 04:08 PM
Rainmaker
122,037
Jim Valentine
RE/MAX Realty Affiliates

The temptation was great even for decent folks.  This makes it more difficult to buy an investment property, but does keep things on the up and up.  Nice post.

August 09, 2009 09:10 AM
Rainer
4,887
Tom Caulfield
First Financial Lending Corp.

Bill - Great info, if you have a few hours call me.  Come to Detroit, we live in this.

August 11, 2009 02:13 PM
Anonymous #16
Anonymous
Hugh Wolf

In a enviroment such that we find ourselves. The banks have rules that are only for their interest. They created this enviorment. They have recieved a bailout that they are now profiting from. As they hold the american public hostage at there will. There are ligitimate people wanting to capitalize on this market share right now and this just keeps the banks competition out! Wake up people! Thsi rule is for the banks protection. Not your financial security. You have a country in a defictit larger than ever before, trying to tell you how to manage your assets. Why dont read up on Mr.Andrew Cuomo and Mr Angelo Mozilo. All this talk about ethics! I sure you all think HVCC is a good rule too?

 

Hugh

August 31, 2009 08:08 AM
Rainmaker
570,934
Bill Ladewig
Your FHA Guru - FHA and VA Loans Since 1970

Hugh, I totally agree that Cuomo and Mozilo are severely ethics challenged and HVCC is poor rule that should be overturned however the Buy and Bail rule is a good one.  Buy and Bail is fraud and fraud must never be condoned.

August 31, 2009 08:17 AM
Anonymous
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Rainmaker
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Bill Ladewig

Your FHA Guru - FHA and VA Loans Since 1970
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