TopMortgage Compliance Update (1)
  July 12, 2010
                                               HUD Homes at 10% Discount

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Overview
On July 12, 2010, the U.S. Department of Housing and Urban Development (HUD) announced a new initiative, the First Look Sales Method,  that gives state and local governments, and nonprofit organizations participating in HUD's Neighborhood Stabilization Program (NSP) preference to acquire homes from the Department's inventory of foreclosed properties, commonly known as "HUD homes."

A Notice outlining this temporary initiative will be published in the Federal Register. As signed by FHA Commissioner David H. Stevens on July 9, 2010, the Notice details how the sale of HUD Homes under the Federal Housing Administration's (FHA) First Look Sales Method will align NSP and FHA requirements to provide NSP grantees an exclusive option to purchase HUD homes before they are marketed to other purchasers.

Through the First Look Sales Method, HUD will offer NSP grantees a preference ("First Look") to acquire available HUD homes within the defined boundaries of NSP-designated areas. 

First Look will also provide NSP purchasers with the opportunity to purchase FHA properties at a discount of 10 percent (10%) below their appraised value, less the cost of any applicable listing and sales commissions.

  • The First Look period will last approximately 14 days from the conveyance of a property to FHA. 
  • Properties that remain unpurchased at the expiration of the First Look period will be listed and sold according to standard FHA procedures. 
  • Eligible NSP grantees may acquire these properties with the assistance of NSP funds for any eligible use under NSP, including rental or homeownership.
  • First Look is effective from July 12, 2010 through May 31, 2013.
If you have any questions about this matter or would like assistance with mortgage compliance, please contact Jonathan Foxx, Managing Director or call 516-442-3456 x 100.
Highlights
Discounted Sales Price
  • FHA will the First Look property to the eligible NSP purchaser at a discounted purchase price of 10% below the appraised property value, less any applicable costs, including commissions.
  • Minimum discounted purchase price of each FHA REO First Look property purchased by an eligible NSP purchaser (in whole or in part with NSP funds) shall be one percent off of the appraised property value.
  • In no case shall the discounted purchase price exceed 99% of the appraised property value. 
  • The sales price of each FHA REO property is based upon the appraised value of the property.
Settlement Dates
  • Each eligible NSP purchaser must close on the purchase of each FHA REO property within the same time frames that apply to non-NSP purchasers under FHA requirements.
  • When scheduling the settlement date, the HUD's Management and Marketing contractor provides the maximum time allowable under applicable FHA requirements to ensure that the eligible NSP purchaser is provided with the time necessary to document compliance with all applicable NSP requirements.
  • Settlement date deadlines may also be extended, per the procedures and guidelines provided under Property Disposition Handbook One to Four Family Properties (Handbook 4310.5 REV-2).
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First Look Sales Method for Grantees, Nonprofit Organizations, and Subrecipients under the Neighborhood Stabilization Programs  

Federal Housing Administration

July 9, 2010

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