FHA 90 Day Flip Rule is Waived To December 31, 2011

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Mortgage and Lending NMLS 291249

FHA 90 Day Flip Rule is Waived To December 31, 2011

The long standing FHA 90 day flip rule has been officially extended by FHA for another year

January 29, 2011, FHA formally announced the suspension of their 90 Day Flip Rule to December 31, 2011.  Official Notice

While FHA may waive the rule for one year not all lenders will also waive their flip rules which is often applied to all mortgages.  As of today, I have a lender that will accept loans on flips within 90 Days.

Originally the 90 day flip rule was temporarly waived for all sellers effective February 1, 2010 and the waiver  expires one year from February 1, 2010

The text of HUDs press release is reproduced below:

Pursuant to §7(q) of the Department of Housing and Urban Development Act (42 USC 3535 (q)) and 24 CFR 5.110, I hereby waive §203.37a(b)(2) of the regulations. The regulations at 24 CFR §203.37a(b)(2) provide that a mortgage for a property will not be eligible for FHA insurance if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller, and the seller does not come under any of the specific exemptions that apply to the 90-day rule.

This waiver, which takes effect on February 1, 2010, is limited to those 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. Some ways that the lender can ensure that there is no inappropriate collusion or agreements between parties is to assess and determine the following:

The seller holds title to the property;
LLCs, corporations, or trusts that are serving as sellers were established and are operated in accordance with applicable state and Federal law;
No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame (chain of title information for the subject property can be found in the appraisal report);
The property was marketed openly and fairly, via MLS, auction, For Sale by Owner offering, or developer marketing (any sales contracts that refer to an "assignment of contract of sale," which represents a special arrangement between seller and buyer may be a red flag).

In cases in which the sales price of the property is 20 percent or more over and above the seller's acquisition cost, the waiver will only apply if the lender:

Justifies the increase in value by retaining in the loan file supporting documentation and/or a second appraisal which verities that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer: and

Orders a property inspection and provides the inspection report to the purchaser before closing. The lender may charge borrower for this inspection. The use of FHA-approved inspectors or 203(k) consultants is not required. The inspector must have no interest in the property or relationship or with the seller, and must not receive compensation for the inspection from any other party than the lender. Also, the inspector may not compensate anyone for the referral of the inspection. Additionally, the inspector may not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection, and may not be involved with performing any repairs recommended by the inspection.
At a minimum, the inspection must include:

The property structure, including the foundation, floor, ceiling, walls and roof;

The exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways;

The roofing, plumbing systems, electrical systems, heating and air conditioning systems;

All interiors; and All insulation and ventilation systems, as well as fireplaces and solid-fuel-burning appliances.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HELM) for Purchase program.

 In support of the waiver, I make the following Determinations.

: In a program reversal that could help move some bank-owned inventory, in June 2008 the federal government temporarily lifted its 90-day moratorium for any bank owned resale properties that use new FHA-guaranteed mortgages. 

The moritorium does not apply to anyone except banks.  All the rest of us must wait 90 days before reselling a property with FHA financing

The 90 day flip rule moratorium was extended to May 10, 2010.

Although this rule change is not exclusively for first time buyers, FHA has temporarily lifted (for one year) the 90-day waiting period for REO resales financed by new FHA-guaranteed loans In an attempt to help lenders speed the process of getting real estate-owned properties off their books.

This flip rule only applies to FHA loans and not to VA or conventional loans but some lenders are applying the FHA Flip Rule to their VA and conventional loans so it is a good idea to check with your lender before placing any purchase loan where the property has been owned for less then 90 days.

Please contact me with any questions you may have.

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  1. Leslie Leis and Dee Bundy 01/19/2010 01:08 PM
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Rainmaker
481,084
Harrison K. Long
Coldwell Banker Previews, Irvine, South OC - Irvine, CA
business, REALTOR , GRI, Broker

I never liked the HUD anti-flipping rule for the first 90 days.  It didn't satisfy the need ... lack of solvency question ... as set forth in original government policy.

Jan 18, 2010 12:57 PM #21
Rainmaker
88,872
Leslie Leis and Dee Bundy
ERA Herman Group Real Estate - Fort Collins, CO
Sell Smart, Buy Wise & Live Well in Nrthn Colorado

This is a great help. I am still confuesd though. If I have an investor that wants to buy a home from a bank (REO) or a Seller (Short Sale) and fix it up and re-sell it to a 1st time home buyer who is going to get an FHA loan does he have to wait 90 days still?

Thank you for putting this together.

 

Leslie Leis

www.leslieleis.com

Jan 19, 2010 01:06 PM #22
Anonymous
Anonymous
Evelyn G. Bumanlag

Hi Bill, 

Please correct me if I'm wrong, my interpretation for the 90 days FHA Flip is that it only applies to REO (Bank Owned) properties.  Waiver for the 90 days Flip applies.

Meaning if it is a regular investor doing the Flip sales contracts still needs to be dated after 90 days of acquisition.

I really need clarification on this, I have a transaction today with this kind of situation.

Thank you very much and I do appreciate your quick response.

Evelyn

Mar 24, 2010 12:06 PM #23
Anonymous
Anonymous
Evelyn G. Bumanlag

Hi Bill, 

Please correct me if I'm wrong, my interpretation for the 90 days FHA Flip is that it only applies to REO (Bank Owned) properties.  Waiver for the 90 days Flip applies.

Meaning if it is a regular investor doing the Flip sales contracts still needs to be dated after 90 days of acquisition.

I really need clarification on this, I have a transaction today with this kind of situation.

Thank you very much and I do appreciate your quick response.

Evelyn

Mar 24, 2010 12:07 PM #24
Rainmaker
617,993
Bill Ladewig
Escondido, CA
Experience Is Your Advantage

Hi Evelyn, the 90 day rule has been waived for all properties; bank and privately owned. 

Mar 24, 2010 12:26 PM #25
Anonymous
Anonymous
Mark Del Santo

Hi Bill,

Nice blog.

Not sure if this was addressed earlier in the thread, but how about this little gem from hud.gov:

"In cases where the sale price exceeds the previous purchase price by more than 20%, the lender will be required to take extra steps to ensure the sale is legitimate. This includes a second appraisal and a full FHA inspection."

That quote only paraphrases the actual waiver language and the lender requirement is in fact much more complex.

Just ran into this on a rehab property. Essentially, as far as I can tell, no lenders will touch this.

Mar 24, 2010 06:57 PM #26
Anonymous
Anonymous
Kathy

Hi Bill, Question, we are buying an fha approved condo from a investor, he bought it June 25th 2010.  It was a foreclosure when he bought it. We are buying it from him, is there a charge to us because of the 90 day flip rule? It is very confusing, the bank we are going through says there is a charge of 995.00. HELP!!!!  Thank you Kathy

Aug 17, 2010 07:59 PM #27
Rainer
405,885
Randy Ostrander
Lake and Lodge Realty LLC - Big Rapids, MI
Real Estate Broker, Serving Big Rapids and West Central MI

Late last year a local 5/3 Bank would not recognize the Flip Waiver. I sent them over the docs about it and they said as a company they were not going to follow the waiver and we would have to wait. My buyer ended up waiting 30 some more days to close. Worse part was they followed the Flip Rule just not the Waiver. Nice.

Jan 28, 2011 03:11 PM #28
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Judi K Barrett
Judi Barrett~Integrity Real Estate Services~Idabel, Oklahoma - Idabel, OK
Broker/Owner, Integrity Real Estate Services -IDAB

Bill,

Thanks for posting this.   Haven't had a situation where this fit so haven't followed the sequence of rules and their changes.

Jan 28, 2011 08:48 PM #29
Rainmaker
617,993
Bill Ladewig
Escondido, CA
Experience Is Your Advantage

Randy, to the best of my knowledge, none of the the "too big to fail banks" recognize the waiver; as a matter of fact, I know of only a few wholesale lenders who will.

Hi Judi, nice to hear from you, hope everything is good in OK.

Jan 29, 2011 02:03 PM #30
Rainer
224,000
Gerard Gilbers
Stingray Performance Marketing - Waldorf, MD
Your Marketing Master

This is great news that they extended the waiver. The 90 day time frame can still create some issues, but it is much better than one year! It opens up more buyers for the investors who fix up the foreclosures and help move more inventory.

 

Jerry

Jan 29, 2011 02:29 PM #31
Anonymous
Anonymous
Hal

Hi Bill, it seems you have uncovered new information about the ability for private investors to sell properties within 90 days. I am looking at your posts 12 and 15 vs. 25. I work for a nonprofit that purchases REO homes from banks pre  MLS and then via a developer agreement sells them to realtors and developers to rehab and resell to owner occupants. If this rule also exempted them they would be very happy

 

Hal

Feb 01, 2011 10:30 AM #32
Anonymous
Anonymous
Hal

Hi Bill, it seems you have uncovered new information about the ability for private investors to sell properties within 90 days. I am looking at your posts 12 and 15 vs. 25. I work for a nonprofit that purchases REO homes from banks pre  MLS and then via a developer agreement sells them to realtors and developers to rehab and resell to owner occupants. If this rule also exempted them they would be very happy

 

Hal

Feb 01, 2011 10:31 AM #33
Rainmaker
617,993
Bill Ladewig
Escondido, CA
Experience Is Your Advantage

Jerry, I have a couple of lender who allow FHA financing for flips owned less than 90 days.

Hal, be happy... don't worry; your developers and realtors are exempt and can sell their homes inside 90 days with FHA financing.  Be sure to call me for the loan for California homes.

Feb 01, 2011 11:32 AM #34
Anonymous
Anonymous
DON GREIF

hi i just bought a house in palm desert that was bank owned and i am hiring contractors to rehab the house..it needs alot of work, but it will be done in about 6 weeks, and then we would like to list and sell...since i am not living in it can i sell it or do i still have to wait...if not can you email me what i need to get it financed? or tell me who to contact?  another question was..what if i rent it to my prospective buyer for 90 days ,then go to escrow..can i do the contract now with a 3 month close? or is there another way?

Jul 05, 2011 01:55 AM #35
Rainmaker
617,993
Bill Ladewig
Escondido, CA
Experience Is Your Advantage

Hi Don,

I have a couple of lenders that will fund loans with the contract written less than 90 Days and would be glad to help with the financing of your home.

The rule says the contract cannot be accepted within 90 days so if you rent to a PRE-APPROVED buyer until the 90 days is up and then write the purchase contract that also works.  There should not be any mention of a purchase in your rental contract.

Bill Ladewig, 866.2049733, email: Bill@YourFhaGuru.com

 

 

 

Jul 05, 2011 01:42 PM #36
Anonymous
Anonymous
Elizabeth McNamara

Hi Bill,

I see the wording includes "single-family homes" does this waiver aslo apply to condominium units?

Elizabeth

Jul 30, 2011 09:14 PM #37
Rainmaker
617,993
Bill Ladewig
Escondido, CA
Experience Is Your Advantage

Hi Elizabeth,

I believe it applies to SFRs and FHA approved condos.  But, it is the individual lenders who are making the final determination.  Which state do you live? 

Bill

Jul 31, 2011 01:19 PM #38
Anonymous
Anonymous
Milo

Hi Bill,

I am an investor living in Utah with a home in Missouri that I have owned for a month.  I have a buyer who can close in just over 45 days from the date I purchased the property.  The mortgage company in Missouri is unfamiliar with waiver of the 90 day rule.  What can you tell me about it?

Milo

Nov 14, 2011 06:58 PM #39
Rainmaker
617,993
Bill Ladewig
Escondido, CA
Experience Is Your Advantage

Hi Milo,

The waiver is a lender option.  Some lenders allow a FHA loan on properties owned less than 90 days and most will not.  Your Missouri buyer must find a local lender that allows the 90 day waiver.  Their best bet is to find a knowlegable local Mortgage Broker who understands FHA and knows who does and does not allow the waiver.  Wish I could provide more information.

Best regards,

Bill Ladewig

Nov 14, 2011 07:24 PM #40
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