As a follow up to my previous post - most folks know that FHA requires 91 days to pass before a contract can be written on a property that has changed ownership in order for the buyer to qualify for an FHA loan. This is called the "90 Day Rule" and is designed to "protect FHA borrowers against predatory practices of ‘flipping' where properties are quickly resold at inflated prices to unsuspecting borrowers" for a quick profit.
On Friday, January 15th, HUD announced a one year "waiver" taking effect on Monday, February 1st lifting the 90 Day Rule http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf to which I blogged about giving kudos to HUD and Secretary Donovan for listening and fixing the problem, however, not so fast.....
THE REALITY & WHAT THIS MEANS TO YOU!
Unfortunately the majority of lenders have chosen to retain their existing "overlays" and NOT adopt the "waiver" as of yet. Others are allowing it IF the transaction meets certain criteria, the first of which says the new sales price cannot be greater than 20% of the acquisition price (regardless of improvements). Netting this out, I've had two transactions here in March that have to be reworked so that the sales contract is post dated to the 91st day. If you're writing an offer and notice the seller is an LLC, take a minute, call your title company and ask them to pull the last 90 days for you. This can save you and your clients some short term challenges while still being workable for all the parties involved. Both BANK OF AMERICA and WELLS FARGO HOME MORTGAGE evoke this 20% increase in sales price as opposed to purchase price. Don't let this bite you! Please visit my website at www.utahloanplan.com for more info or call me directly at 801.983.8211 to discuss.
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