In an effort to continue stabilizing home values, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante has today extended FHA’s temporary waiver of the anti-flipping regulations through December 31, 2012 for California and rest of the country.
With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA loans to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. This is a great news for Investors as well who can draw from a much bigger pool of FHA qualified buyers who can buy the properties in less than 90 days after being acquired by them.
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.
I have done several of these loans in last few months and would be glad to guide you whether you are a seller selling a property acquired within last 90 days or a buyer buying such a property.
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