Roll Me Over In The Clover

Roll Me Over In The Clover...  words to an old ditty I was reminded of when I read the latest FHA rules waiver.

On January 15, the Federal Housing Commissioner signed a waiver of Section 203-37a(b)(2) of FHA regulations which essentially state that you cannot get an FHA loan for a property which has been purchased by the seller within the past 90 days.  The waiver takes effect on February 1, and will be in effect for one year from that date.

What does this mean? 

The FHA decided that waiving the 90-day sale rule will offer a multitude of advantages to both the agency and the US housing market:

• It will help address the foreclosure crisis;
• Give FHA a "greater opportunity to dispose of its single family REO properties in a way that maximizes return to the FHA;
• Permit buyers to use FHA loans to purchase other bank-owned property;
• Create market conditions allowing homes to resell as quickly as possible;
• Help stabilize resale prices; and
  
• Help stabilize neighborhoods and communities where foreclosures have been high.

So, let the "flipping" begin!

There's Always A Catch...

Naturally, there are a few restrictions to applying the waiver.  But they're not so bad for transactions on the up-and-up.

• All transactions must be "arms-length" between the buyer and seller;
• Seller must hold title to the property;
• No pattern of previous flipping associated with the property;
• Property must be marketed "openly and fairly" via MLS, FSBO, auction, etc.

And in cases where the sales price of the property is 20 percent or more over the seller's purchase cost, the lender must justify and document the reason for the increase in value with the seller or through an appraiser, and must have an inspection done and provide a copy to the purchaser.

Will It Help?...

In part of the waiver order, the  FHA says, "As a result of the currently tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers.  FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to the stabilization or neighborhoods and communities."

This could actually be as good or better an effort as the homebuyer tax credits which expire this April.  We'll have to wait ans see.  But, let's hope so!

Roll me over...
In the clover...
Roll me over in the clover,
And do it again!