FHA 90 Day Flip Rule is waived for All Sellers

Reblogger NoCo Home Team
Real Estate Agent with C3 Real Estate Solutions

We can all be appreciative of our coorperative REALTORS. Thank you Bill for the good info!

Original content by Bill Ladewig NMLS 291249

90 Day Flip Rule Waived for All Sellers

Great News!!!  The 90 day flip rule has been temporarly waived for all sellers effective February 1, 2010 and the waiver shall expire one year from February 1, 2010

The text of HUDs press release is reproduced below:

Pursuant to §7(q) of the Department of Housing and Urban Development Act (42 USC 3535 (q)) and 24 CFR 5.110, I hereby waive §203.37a(b)(2) of the regulations. The regulations at 24 CFR §203.37a(b)(2) provide that a mortgage for a property will not be eligible for FHA insurance if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller, and the seller does not come under any of the specific exemptions that apply to the 90-day rule.

This waiver, which takes effect on February 1, 2010, is limited to those 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. Some ways that the lender can ensure that there is no inappropriate collusion or agreements between parties is to assess and determine the following:

The seller holds title to the property;
LLCs, corporations, or trusts that are serving as sellers were established and are operated in accordance with applicable state and Federal law;
No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame (chain of title information for the subject property can be found in the appraisal report);
The property was marketed openly and fairly, via MLS, auction, For Sale by Owner offering, or developer marketing (any sales contracts that refer to an "assignment of contract of sale," which represents a special arrangement between seller and buyer may be a red flag).

In cases in which the sales price of the property is 20 percent or more over and above the seller's acquisition cost, the waiver will only apply if the lender:

Justifies the increase in value by retaining in the loan file supporting documentation and/or a second appraisal which verities that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer: and

Orders a property inspection and provides the inspection report to the purchaser before closing. The lender may charge borrower for this inspection. The use of FHA-approved inspectors or 203(k) consultants is not required. The inspector must have no interest in the property or relationship or with the seller, and must not receive compensation for the inspection from any other party than the lender. Also, the inspector may not compensate anyone for the referral of the inspection. Additionally, the inspector may not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection, and may not be involved with performing any repairs recommended by the inspection.
At a minimum, the inspection must include:

The property structure, including the foundation, floor, ceiling, walls and roof;

The exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways;

The roofing, plumbing systems, electrical systems, heating and air conditioning systems;

All interiors; and All insulation and ventilation systems, as well as fireplaces and solid-fuel-burning appliances.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HELM) for Purchase program.

 In support of the waiver, I make the following Determinations.

: In a program reversal that could help move some bank-owned inventory, in June 2008 the federal government temporarily lifted its 90-day moratorium for any bank owned resale properties that use new FHA-guaranteed mortgages. 

The moritorium does not apply to anyone except banks.  All the rest of us must wait 90 days before reselling a property with FHA financing

The 90 day flip rule moratorium was extended to May 10, 2010.

Although this rule change is not exclusively for first time buyers, FHA has temporarily lifted (for one year) the 90-day waiting period for REO resales financed by new FHA-guaranteed loans In an attempt to help lenders speed the process of getting real estate-owned properties off their books.

This flip rule only applies to FHA loans and not to VA or conventional loans but some lenders are applying the FHA Flip Rule to their VA and conventional loans so it is a good idea to check with your lender before placing any purchase loan where the property has been owned for less then 90 days.

Please contact me with any questions you may have.


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Ryan Case
Pacific Servicing - Temecula, CA

So it doesnt apply to us, we buy at the trustee sales 20-40% below market, and usually do minimal work, then resale. Looks like we still have to deal with Conventional, Cash, or VA since we are not a bank... Am I reading that part correctly?

Jan 19, 2010 05:22 AM #1
NoCo Home Team
C3 Real Estate Solutions - Fort Collins, CO
Sell Smart, Buy Wise & Live Well in Nrthn Colorado


I am in the process of getting some clairfication, but as I have researched it so far you are reading it correctly. I think it is intended to help banks move inventory.

Jan 19, 2010 05:39 AM #2

As recently as 2/10, I was informed by my broker that financial institutions were not extending FHA loans to buyers when purchasing a home that had been flipped.  The home on which I made an offer, then proceeded into to inspection process, may now be lost to me.  Web threads suggest that banks need time to "catch up" regarding this new ruling.  Any ideas/suggestions about how to proceed? 

Feb 11, 2010 02:22 PM #3
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NoCo Home Team

Sell Smart, Buy Wise & Live Well in Nrthn Colorado
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