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.