Just saw this article in Realty Times, so you know it's gotta be true! It seems that now that the horse is out of the RE barn, it's time to pass some new Anti-Flipper Laws. ain't that always the way it goes?!
Often the end purchaser of the flipped property was not financially qualified, and used fraudulent income, employment and assets information to obtain the FHA loan. Then the buyer quickly defaulted, leaving FHA with insurance losses and a house that was worth nowhere near its appraisal valuation. The flipper, meanwhile, pocketed all the sales proceeds financed with the FHA mortgage.
Hey, why change the rules in the middle of the game? Oh, it's not the middle of the game? It's the end of the game? As a matter of fact the curtain's down, and the FBer has sung his/her last encore and left the building..(to the bank). Of course, now's the time to get serious with these fraudulent loans. Sure thing dude. Mos def.
And speaking of weird and strange financing in our little town. My ex-neighbor, as I've commented before, closed on his over-priced sh**box. So we were invited to join in a little celebration. Champagne and crow. I sort of felt like the murderer who watches the victims funeral from across the street, but then I remembered, we warned him and had nothing to do with this toxic paper. As a matter if fact we'd heard just two days before that there were "problems" with the lender. I'm sure there were. Anyone looking at the overall picture there would surely have some problems, but in the end insanity triumphed and the loan was granted.
There was much glee and toasting by the principals in this enterprise. I asked how soon he'd be moving in and was told that they couldn't move in yet, as it wasn't quite "livable". Only in Sonoma could one go into hock for almost 700k and not be "livable". The Flippers were also driving a brand new car, no wonder there were "problems" with the lender. The evening ended with our neighbor leaning over to my husband in a celebratory glow and moaning, "ooooooh, we're really in debt now!"
To bad those new laws seem to be too little and far too late.