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HUD Waives FHA Rule on Flipping
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In an effort to expand access to FHA mortgage insurance and allow for the quick resale
of foreclosed properties, HUD has announced a temporary waiver of the 90-day flipping
rule. The waiver takes effect February 1, 2010, and lasts for one year, unless otherwise
extended or withdrawn by HUD.
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The waiver is limited to those sales that meet the following conditions:
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1.
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All transactions must be arms-length, with no identity of interest between
the buyer and seller or any other parties participating in the sales transaction,
including:
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Seller must hold title
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LLCs, Corporations and trusts must be established in accordance
with state and federal law
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No evidence of previous flipping within 12 months
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Evidence that property was marketed openly, such as via MLS,
auction, FSBO
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The waiver is limited to forward mortgages and does not apply to the Home
Equity Conversion Mortgage (HECM) for purchase program
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2.
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If the sales price of the property is 20% or more above the seller’s acquisition
cost, the waiver will apply only if the lender meets the following conditions:
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Significant work has been done to the home (documented by a second
appraisal verifying that legitimate repairs and rehabilitation have been
done to substantiate an increase of more than 20%); or,
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In cases where no work has been done, the appraiser must provide
explanation to support the increase since the prior transfer; and,
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A property inspection must be provided to the buyer prior to closing.
(The lender may charge the borrower for the inspection.) The inspector
does not need to be FHA approved, but must have no interest in the property,
must not receive compensation other than from the lender and may not be
involved with the repairs recommended from inspection.
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The complete text of the waiver — including what the inspection must include —
is available on the HUD website at: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf
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