FHA will keep funding flips - Waiver for 90-day resales extended through 2012

Waiver for 90-day resales extended through 2012
By Inman News, Wednesday, December 28, 2011.

Inman News®


For the second year in a row, the Federal Housing Administration is extending a temporary waiver of its "anti-flipping" rule, meaning homebuyers relying on FHA-insured financing will continue to be able to buy homes that have changed hands in the last 90 days.

The waiver is a boon for investors seeking to rehab and flip properties, because it expands the pool of eligible borrowers to include those relying on FHA-backed loans, popular with first-time homebuyers and others who lack the cash to make large down payments.

In extending the waiver through 2012, FHA said all transactions must continue to be arms-length. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender can document the justification for the increase in value, FHA said.

FHA instituted the anti-flipping rule in 2003 to protect its mutual mortgage insurance program from losses on homes that were merely flipped, rather than rehabbed. Homes repossessed by Fannie Mae, Freddie Mac, and state- and federally chartered financial institutions were exempt from the rule.

In February 2010, the Obama administration waived the waiting period for resales -- including homes purchased and rehabbed by private investors -- in the hopes of stabilizing home prices and revitalizing communities hit by foreclosures.

It often takes less than 90 days to acquire, rehabilitate and sell properties, the Department of Housing and Urban Development said at the time. Some sellers of rehabbed properties had been reluctant to enter into contracts with FHA buyers because of the cost of holding a property for 90 days, HUD said

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HUD Condo Guideline Extension Could Translate to Increased Condo Sales

Buyers interested in purchasing condominiums with an FHA loan may already know that the condo development must be on the FHA approved list. In order for the condo development to be on the list, the development must meet certain HUD guidelines.

Recently, HUD released Mortgagee Letter 2011-03, which extends the temporary guidance for condominium rules through June 30, 2011. These temporary guidance changes increase the chances for a condo development to be approved.

Mortgagee Letter 2011-03 extends and clarifies temporary guidance announced in Mortgagee Letter 2009-46 A. The temporary guidance:

1. Increases Federal Housing Administration (FHA) concentration requirements to 50 percent,


2. Requires 50 percent of units in a project to be owner-occupied but vacant and REO property are not considered in the calculation of the owner-occupancy percentage,


3. Reduces the pre-sale requirement to 30 percent,


4. All projects in Florida are required to be reviewed under the HUD Review and Approval Process (HRAP), and


5. The Spot Loan Approval Process was eliminated on February 1, 2010, for all FHA case number assignments on or after February 1, 2010 and is not extended.

The temporary guidance is effective for all FHA case numbers assigned through June 30, 2011, excluding spot loans.

As the number of REO condo units increases, vacant and REO units may adversly affect condo developments ability to meet the owner- occupied percentage. This change alone, may keep more develpments on the list for FHA financed loans. That could translate to more homes being sold in condo developments as many Buyers utilitze FHA loans which require only 3.5% downpayment for property purchases.

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Senate Passes Home Buyer Tax Credit Extension

Recently the United States Senate approved an amendment to HR 4213, the American Jobs and Closing Tax Loopholes Act of 2010, which would extend the homebuyer tax credit closing date deadline from June 30, 2010 to September 30 2010.

The amendment applies only to purchasers who have satisfied the April 30 binding contract rule for the $8,000 & $6500 tax credits and creates no new eligibility. Before the Senate bill can be sent to the president for final approval, it must be reconciled with the House legislation. (Source NAR/NJAR)

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