So a colleague of mine passed along an interesting read from RISmedia this past week about how the FHA should reinstate 203K Loans. A 203K Loan is commonly referred to as a rehabilitation loan and the article discussed how it could greatly help with the REO problem we are still in the middle of across the nation.

Basically a 203K Loans lets the borrower get funds that exceed the purchase price of a property provided they make improvements that will increase the overall value of the property. You can’t take the rest of the loan money and buy a boat, a vacation to Florida, or pay down credit cards. Sorry. According to Ken Trepeta of www.rismedia.com HUD has been “reluctant to reinstate the program for investors.” Trepeta goes on to say that a scandal in New York City over a decade ago but has yet to bring it back.

The 203K Loans were a great tool to bring along and improve areas with distressed properties. Time for Uncle Sam to wake up and stop putting band aids on the sawed off leg of the housing market. Bring back 203K Loans for investors. The fed’s latest scheme in the works is to sell REO’s in bulk so that they can be used for rental housing. Never going to work in my eyes. Too much variations block by block, street to street, on what the rental income potential of a property is for most investors to want to pick up a package deal unless it was an utter steal. Too many variables.

In fact when the it comes down to it the Federal Government should be getting out of the way and giving the tools and power to the state, which can pass on the power to local government to make the determining decisions for guiding individual neighborhoods out of troubled situations. It’s impossible to think the federal government can come up with a blanket program that will work successfully in Boston, Tulsa, Fargo, and San Antonio all at the same time.

Filed under: Boston Developments, Boston Real Estate Blogging, Boston Real Estate Editorial