In an effort to revive the sale of foreclosed properties, HUD has announced a temporary waiver of the 90 day flipping rule. The waiver took effect February 1, 2010, and we have just learned that this waiver has now been extended through the end of 2011, unless otherwise extended or withdrawn by HUD. The announcement is part of the Obama administration commitment to addressing foreclosure.
"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," HUD Secretary Shaun Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.
FHA Flipping Rule Limitations
The waiver to the FHA flipping rule 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.
