SEATTLE MORTGAGE: FHA EXTENDS WAIVER OF ANTI-FLIPPING REGULATIONS
FHA has announced an extension of its temporary waiver of regulations prohibiting insuring a mortgage on a home owned by the seller for less than 90 days. 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.
The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA.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.
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