The U.S. Department of Housing and Urban Development announced that it was extending a 2010 waiver of its anti-flipping regulation through December 31, 2012. The waiver was scheduled to expire Saturday, December 31, 2011.
The anti-flipping rule instituted in 2003 forbade Federal Housing Administration-backed loans from being used to buy homes that have been owned by the seller for less than 90 days.
It was put in place in 2003 to thwart the kind of unscrupulous home flipping that drove up real estate prices during the boom years of 2003-2006 and which is partly blamed for the housing market crash. In 2010, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011.
But with mounting foreclosures and a shadow inventory of 1.6 million not-yet-listed homes nationwide, federal officials said blocking the sale of flipped homes would hurt the housing market. This is part of FHA’s effort to help stabilize home values and improve conditions in communities experiencing high foreclosure activity.
All other terms of the existing Waiver will remain the same, including conditions to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.
Compliance with the FHA anti-flipping waiver requires that:
- 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% or more above the seller’s acquisition cost, the lender must meet specific conditions and document the justification for the increase in value;
- The waiver does not apply to the Home Equity Conversion Mortgages (HECMs).
Read more about anti-flipping rule: http://usgovinfo.about.com/cs/consumer/a/antiflipping.htm
The FHA anti-flipping rule does NOT apply to the conventional loans. Fannie Mae and Freddie Mac have never imposed a 90-day waiting period to avoid flipping. However, many buyers are surprised to find out that some lenders and, more importantly, many mortgage insurance companies have often set their own rules.
SOURCE: National Association of REALTORS