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HUD Waives 3-Month FHA Seasoning Rule!

Mortgage and Lending with WJ Bradley Mortgage Capital Corp, S. Burlington, VT

HUD Waives 3-Month FHA Seasoning Rule, to Speed Up Resale of Foreclosed Properties.  What does this mean?  Read on...

On Jan 15, HUD took action to reduce the inventory levels of foreclosed properties by waiving the 90-day FHA seasoning requirement. Currently, with certain exceptions, FHA will not issue mortgage insurance to the buyer of a home if the seller has owned the property for less than 90 days.

This is very good news for both real estate investors and buyers, since more and more buyers in today's market are FHA buyers, who will now have access to a wider array of foreclosed properties.

HUD secretary Shaun Donovan says, "This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed." 

And FHA commissioner David H. Stevens added, "FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties. This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

So buyers will be able to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, and properties resold through private sales.  The waiver will go into effect on Feb 1, 2010, and will be effective for one year... unless extended or withdrawn by the FHA commissioner.  I expect this to continue once they realize the positive impact this will have on the housing market, and the economy as a whole.  This is certainly a positive step.

Here are a few rules - from the HUD website:

  • 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.
  • The waiver is limited to forward mortgages, and does not apply to the (Reverse Mortgage) Home Equity Conversion Mortgage - (HECM). 

Read the details - in this pdf released by HUD.  Get the FHA Flip pdf Here.

Posted by

Ronald Borch is a loan officer with WJ Bradley Mortgage Capital Corp, located in South Burlington, VT. 

Ron is your guide to USDA Rural Development Housing Loans, FHA Purchase & Refinance, FHA 203k Rehab loans, VA Purchase & IRRRL, and conforming purchase and refinances in the state of Vermont. 

Reach Ron at 802-233-0623  or RBorch@gmail.com   

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Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

In the new climate in Washington they seem to think profit is a bad thing.  Glad they understand if we don't sell these properties we are not going to get out of the crunch.

Jan 17, 2010 04:57 AM
Ronald Borch
WJ Bradley Mortgage Capital Corp, S. Burlington, VT - South Burlington, VT

Thanks Tim - I couldn't agree with you more. 

Jan 17, 2010 05:48 AM
Carol Lee
Dilbeck Real Estate - Oak Park, CA
Realtor - Agoura, Oak Park, Westlake CA Homes

this should help a lot of people!  Thanks for the concise information.

Feb 28, 2010 03:20 PM
Nate Cadwell

Thanks for the information.  Being a real estate investor and having previously struggled with this law, I was excited when I learned about this suspension.  However, I was recently told by a reliable source that there are still lenders who are being extra cautious and they are still requiring seasoning.  Have you seen or heard this? 

Thanks in advance!

-Nate Cadwell

Winning Solutions Specialist




Mar 24, 2010 12:13 AM
Ronald Borch
WJ Bradley Mortgage Capital Corp, S. Burlington, VT - South Burlington, VT

Good point Nate. Many lenders have stricter guidelines than those of FHA.  For example, the minimum credit score with most FHA lenders has been 620.  However, until only recently, FHA did not have their own minimum score requirements.  I have also heard some lenders still require the 90 days of seasoning.  Although we go by the new FHA guideline where 90 days are no longer required, as long as the new sales price is no more than 20% higher than the seller's acquisition cost. Otherwise you would need to wait three months. The 90-day period would be calculated from the seller's acquisition date to the purchase contract date of the new transaction. 


Mar 25, 2010 09:03 AM
Nate Cadwell

Thanks for the input Ronald.  We appreciate it.

I have another question for you regarding this topic.  Last year we had multiple properties that had buyers lined up and we faced seasoning issues.  One lender in particular informed us that they would not even recognize a contract or start working on the file until the 91st day after seasoning had past from the date it had been filed (not the actual purchase date).  In our county, it is not uncommon to purchase a property, close on it, and two weeks later it would actually get filed.  Our county is pretty slow in many areas like this.  So this lender counted day one as when it was filed with the county (when we purchased it) instead of the actual close date.  In this case it was two weeks after we had actually closed and funded the deal.  The bottom line is that added another half a months holding costs to our expenses.  In this particular transaction it was a huge pain for us, because during that time the home was broken into.  So we not only had extra holding costs, we had additional repairs.  We were willing to give the buyer a good deal that was a good price for us as well, but we had to keep adding expenses to the purchase price...  The worst part of it all is that it ALL could have been avoided if they would have just started working on the file!  And I know that they are just trying to protect themselves, but still it is frustrating.

So here are the questions:

Are you seeing that type of thing a lot where they won't start counting until it is filed, or are lenders starting to count when the property is purchased?

Is there anything we can do to speed up the process of getting the transaction filed with the county to avoid this problem in the future?

Thanks in advance!

"Winning Solutions Specialist"




Mar 26, 2010 06:59 AM
Ronald Borch
WJ Bradley Mortgage Capital Corp, S. Burlington, VT - South Burlington, VT

Nate - I haven't run accross this issue.  I do know that some lenders have stricter guidelines than those of FHA.  Using the date of recording does not seem right, but absent a HUD-1 Settlement Statement from the seller, the underwriter may have no choice but to use the recording date.

Mar 27, 2010 02:07 PM