HUD Temporarily Suspends Anti-Flip Rule
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. While this has served to protect borrowers from “predatory” practices of flipping, it has also eliminated FHA-borrowers from the pool of eligible buyers.
In an effort to speed up the re-sale of foreclosed properties HUD recently announced to temporarily suspend this rule arguing that…
In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
The policy change, which will take effect on February 1, 2010,will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. To protect FHA borrowers against predatory practices of “flipping” the waiver is limited to those sales meeting the following general 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.
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
Fin out more here.
