FHA Waives 90-day Anti-flipping rule!
Effective February 1, 2010 FHA is eliminating a rule that they FINALLY agree has been negatively affecting the Real Estate market given it’s current condition. Previously, a property was not eligible for FHA financing if it was being sold within 90-days of the last sale UNLESS it was a bona fide foreclosure from an institutional lender or non-profit agency (other limitations applied). The goal was to eliminate predatory “flipping” which did little more than jack up the price of housing.
However, there are MANY investors taking advantage of the current market by buying substandard homes acquired through foreclosure, then performing “floor to roof” remodels and selling to occupant buyers. Such ventures clearly helped homebuyers BUT these investors were prohibited from reselling for at least 91 days.
In the current ruling (click here for full excerpt), the 90-day seasoning requirement is being waived with the following new conditions:
- All transactions must be arms length (no relationship between seller and buyer).
- No “identity of interest” deals allowed (no parents-to-kids)
- If the sales price is 20% or more over the last sales price the lender must either: a) provide supporting documentation and/or a 2nd appraisal, and b) order an independant inspection on the property and include it with the loan file.
We await the official FHA Mortgagee Letter, but this is clearly great news guaranteed to help both Buyers and Investors!
Call Todd Abelson and Tyler Ford at Sunstreet Mortgage in Tucson Arizona for all your Mortgage needs!