Carol Galante, Acting Commissioner of the Federal Housing Administration (FHA), has announced that the FHA will extend its temporary waiver of the anti-flipping regulations in 2012 through Dec. 31, 2012. The extension was granted in an effort to continue stabilizing home values and improve conditions in communities with high foreclosure activity.
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 Jan. 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA-insured financing to purchase U.S. Department of Housing & Urban Development (HUD)-owned properties, real estate-owned (REO) 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 extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Galante. “FHA remains a critical source of mortgage financing and stability and we must make every effort that to promote recovery in every responsible way we can.”
The extension is effective through Dec. 31, unless otherwise extended or withdrawn by the FHA. 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.
