Realty Times reports today that President Charles McMillon of the National Association of Realtors has written a letter to HUD Secretary Steve Preston asking that FHA’s 203(k) rehabilitation loan be made available to investors.
The 203(k) loan program is one in which the FHA issues a mortgage and rehabilitation loan at the same time, in an amount for up to 110 percent of the properties rehabilitated value.
McMillon contends that allowing rehabbers access to the program would help absorb and restore the backlog of dilapidated or vandalized foreclosure properties currently flooding the market.
HUD may be a little reluctant to do so, given they placed a moratorium on investor participation in the program in the 1990s due to several fraudulent incidents involving the program became public. To assuage Preston’s concerns, McMillan proposed investor access to the program be temporary.
Of course, with less than a month until the Obama administration takes office, it’s unlikely we’ll see any HUD action during the remainder of President Bush’s tenure. However, as Shaun Donovan, Obama’s nominee for HUD secretary, has extensive experience with housing restoration.
The proposal warrants consideration. Much of the housing stock on the market, while priced at first-time home buyer prices, is beyond the rehabilitation skills of all but professionals.