The temporary property anti-flipping rule waiver has been extended through the end of 2012, by the Federal Housing Administration (FHA). The FHA rules prohibited insuring a mortgage on a home that the seller owned for less than ninety days. However, in 2010, the FHA waived this regulation and has extended it through the end of this year.
Buyers will be able to continue to use FHA-insured financing to purchase bank-owned properties and HUD-owned with this extension. This waiver will help stabilize prices a revitalize communities with high foreclosure activity.
According to the FHA’s Acting Commissioner, the waiver has strict guidelines and conditions which are implemented in order to prevent “predatory property flipping” in which properties are sold quickly at inflated prices.
Additionally, all transactions must be arms-length, where there is no link between the selling and buying parties. And when the sales price of the property is twenty percent or more than what the seller bought it for, the waiver will only apply if the lender meets specific conditions and justifies the increase in value.
The property flipping waiver does not apply to the Home Equity Conversion Mortgage program.
Research done by the agency found that in today’s market, it often takes less than ninety days to acquire, rehabilitate and resell foreclosed properties. As a result, FHA says prohibiting the use of its mortgage insurance for a subsequent resale within 90 days would adversely impact the willingness of sellers to consider offers from potential FHA buyers, mostly because they would be required to cover holding costs and the risk of vandalism that comes with allowing a property to sit vacant over a ninety day period of time.
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