FNMA, FHMLC, and the banks such as Wells, Chase, etc. continue to warn lenders to apply extra scrutiny on transactions where the seller has owned the home less than 90 days. It is possible that they may soon adopt a 90 day rule similar to FHA's rules, but in the mean time, Bell Mortgage in Phoenix Arizona is continuing to process these transactions on a case by case basis. They still have two investors who will accept these loans, and there are currently two mortgage insurance companies who will insure them up to 90% LTV, provided the borrowers have strong files with solid home appraisals.
Here are some areas of concern:
1) The seller must have clear title to the property when they sign the purchase contract. All liens must be paid off. Short sale middlemen do not have clear title.
2) The title company must supply the lender with a 24 month chain of title. We may need to obtain copies of the Trustee Deed in order to determine who is actually on title.
3) Multiple ownership changes in a short period of time (other than between financial institutions and their agents) can be a cause of concern.
4) Large changes in value with little or no improvement to the property may trigger additional scrutiny of the loan file.
5) Sales that are not arms length (sale to a relative) may cause the transaction to be denied.
Courtesy of Jay Starks, Bell Mortgage, Phoenix, Arizona
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