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FHA Extends Waiver of Anti-Flipping Regulations Through 2012

Late yesterday, we got notice from HUD that FHA has extended the waiver of Anti-Flipping Regulations through 2012.

Here’s what the email read:

All-

 

FHA Extends Waiver of Anti-Flipping Regulations Through 2012:

 

In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante will extend FHA’s temporary waiver of the anti-flipping regulations.

 

With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days.  In 2010, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011.  The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

 

The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA.  All other terms of the existing Waiver will remain the same.  The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.  The Waiver continues to be limited to sales meeting the following conditions:

 

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

 

  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value.

 

  • The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Expiration of FHA Flipping Waiver

Flip This House Logo

Be sure to read this UPDATE posted 12/23/2011

In February, FHA extended the FHA property flipping waiver until December 31, 2011. As of now, this waiver has not been extended again and will expire on 12/31/11.

All loans that are utilizing the waiver to get around the 90 day seasoning required by FHA on flip properties (mainly being used now by investors who are fixing/flipping homes) must have a fully-executed purchase contract and must have a case number assigned on or before 12/31/11. No extensions will be given to this deadline. Any loans with case numbers & contracts January 1st or later will require 90 days seasoning prior to the borrower making loan application, with the only exceptions being the following:

4155.2 4.7.h Exceptions to the 90-day Restriction

The only exceptions to the 90-day resale restriction described in HUD 4155.2 4.7.e are for

  • properties acquired by an employer or relocation agency in connection with the relocation of an employee
  • resales by HUD under its Real Estate Owned (REO) program
  • sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies
  • sales of properties by nonprofits approved to purchase HUD-owned single family properties at a discount with resale restrictions
  • sales of properties that are acquired by the seller by inheritance
  • sales of properties by state and federally-chartered financial institutions and government sponsored enterprises
  • sales of properties by local and state government agencies, and
  • sales of properties within Presidentially Declared Disaster Areas.

If HUD decides to extend the waiver, I will notify you here ASAP.  Contact me if you have any questions. Be sure to read this UPDATE posted 12/23/2011