4 steps congress can take to improve the real estate market

Several nationally known experts in real estate and the economy shared their perspectives during a recent forum and charity event for the Orange County affiliate of Susan G. Komen for the Cure.

Among them, real estate analyst and investor Bruce Norris of The Norris Group in Riverside, CA, recommended that Congress do several things to boost the real estate market. These include:

1. Increase the number of loans made available to well capitalized investors: Expand Fannie and Freddie loan programs from a maximum of 10 loans per investor to an unlimited number of loans for qualified investors.
2. Make the 203K FHA loan program available to investors: A 203K loan allows a property needing work to be purchased "as is," but included in the loan amount is money for repairs. The loan funds both the purchase and rehab of the property. Investors need this loan now, but this loan is currently only available to owner occupants. FHA previously made this loan available to investors, but stopped the practice in 1996 when HUD ran out of lender owned, fix uppers. Banks could solve the vacant house problem by giving investors back the 203K loan program.
3. Eliminate the 90-day waiting period before a repaired property can be sold to a buyer using an FHA loan: Investors who purchase fixer uppers can often completely repair the property in a matter of weeks. But the current law prohibits investors from reselling the property within 90 days. The assumption is that fraud must be taking place if a property is resold within 90 days. It's ridiculous to assume that every investor who purchases a property, improves and resells it is committing fraud. All this policy does is increase investors' costs of purchasing and rehabbing vacant homes.
4. Allow loans to be taken over by credit-qualified new buyers with no down payment. Through this process, which was successfully used in the 1980s, new buyers simply step in and take over the loan payments. The only stipulation is that the loan has to be made current at the close of escrow. The U.S. currently has about one million owners who will not be capable of keeping their homes without a huge discount on the principle balance. Many of these properties have fixed rates at very favorable rates. Allowing willing and capable buyers to come in and take over these loans would help contain the spread of foreclosures across the country.