DS News

36 FLIPPING STILL NEAR HISTORIC AVERAGES IN SOME AREAS While percentages of homes being flipped na- tionwide are nowhere near their peak reached in 2005 and 2006, in some areas such as California they remain near their historic levels, consistent with home price gains in those areas, according to a report released by Trulia. Trulia found traditional flips—those in which an investor sells soon after buying the house to take advantage of rapidly rising home prices—are high- er in markets experiencing higher price gains, and especially high in markets where prices appreciated by more than 10 percent year-over-year. e recent hot spots for flipping include Cali- fornia and the South, according to Trulia. Six of the top 10 metro areas where flips represented the highest share of home sales were located in California; two were in Tennessee (Nashville and Knoxville); and Florida (Fort Lauderdale) and Massachusetts (Cambridge-Newton-Framing- ham) had one metro each in the top 10. e two metro areas with the largest share of flips as a percentage of home sales in the third quarter of 2014—San Jose (4.0 percent) and San Francisco (3.8 percent)—experienced year-over-year price gains in Q 3 of 11.1 percent and 11.7 percent, respectively. Trulia housing economist Ralph McLaughlin pointed out in the report that all metros with year-over-year home price gains above the high watermark of 10 percent experienced flipping activity between 3 and 4 percent in Q 3 2014, which is on par with the average flipping percentage for that level of price appreciation from the years 2000 to 2014. In an interview with DS News earlier this month, Auction.com EVP Rick Sharga cited price appreciation combined with a lack of inven- tory as the main drivers of flipping activity in areas where the flipping share is highest. "One is the fact that the properties are more expensive now, which makes them harder to rent at a profit because you have fewer potential renters willing to pay higher prices," Sharga said. "e other is that some of these states have a very low inventory of existing homes for sale. So flippers can come in, invest some money in fixing up properties, and sell them pretty quickly at fair market value." With slower home price growth predicted for 2015 and an ever-declining foreclosure rate in some areas, McLaughlin predicts these factors will cause traditional flipping activity to taper off somewhat in the coming year. "Now that home prices are rising more slowly, we've passed the point of peak flipping," McLaughlin said. "Traditional flips will become less common as fewer markets have double-digit price gains. Plus, foreclosure flips have gotten rarer now than in 2009 to 2011 because fewer foreclosed homes are available to buy and flip." NEW FHA POLICY PROVIDES FORECLOSURE ALTERNATIVE ON REVERSE MORTGAGES A new policy issued by the Federal Hous- ing Administration (FHA) in late January under the Home Equity Conversion Mortgage (HECM) Program will allow reverse mort- gage lenders to delay calling HECMs from a surviving non-borrowing spouse following the death of the last surviving borrower. Such a delay on collection of the HECM from the surviving non-borrowing spouse would postpone the foreclosure process normally triggered by the last surviving bor- rower's death. Under the new policy, reverse mortgage lenders have the option of assigning the HECM to the U.S. Department of Hous- ing and Development (HUD), thus allowing that spouse to remain in the home despite his or her non-borrowing status. FHA amended the policies for HECM to allow for deferral of "due and payment status" for eligible non-borrowing spouses, hence deferring the foreclosure process, for FHA case numbers assigned on or after August 4, 2014. e new policy announcement allows for simi- lar treatment of eligible HECMs and surviving non-borrowing spouses for case numbers issued before August 4, 2014. Lenders will be allowed to pursue claim payments under FHA's new policy on HECMs and eligible surviving non-borrowing spouses for case numbers assigned before Au- gust 4, 2014, by: allowing claim payment fol- lowing the heirs' or estate's sale of the property; foreclosing on the property within the terms of the mortgage, then filing an insurance claim under FHA insurance contracts as endorsed; electing the Mortgagee Optional Election (MOE) Assignment; or assigning the HECM to HUD upon the passing of the last surviving borrower. Lenders will be permitted to modify the FHA mortgage insurance contracts when they choose the MOE assignment, thus permitting assignment of eligible HECMs to HUD even though the HECM can be called due to the fact that there is no surviving borrower. According to the mortgagee letter issued by HUD, the new policy is effective immediately and assignments made pursuant to the letter will be accepted starting on June 1, 2015.

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