The Federal Housing Administration on Jan. 28 announced that it is extending a temporary waiver of its “anti-flipping rule,” which, with certain exceptions, prohibits a mortgage from being insured on a home owned by the seller for less than 90 days.

The FHA initiated the waiver early last year through Jan. 31, 2011, in an effort to help stabilize home values and improve conditions in housing markets with high foreclosure rates by accelerating the resale of foreclosed-upon homes. The extension is effective through the end of this year — unless the FHA decides to withdraw it or extend it again.

The extension will enable buyers to continue to use FHA-insured financing to purchase properties owned by HUD or banks or resold through private sales.

Since the original waiver took effect last February, the FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of the time they were acquired, said FHA Commissioner David Stevens.

The FHA said that its research has found that in today’s market acquiring, rehabilitating and reselling  foreclosed properties can often take less than 90 days.

“Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time,” the agency said.

Stevens added that the waiver is enabling FHA borrowers, especially first-timers, to take advantage of the opportunity to buy a rehabilitated home at an affordable price.

To protect FHA borrowers against the predatory practice of quickly reselling a property at an inflated price to an unsuspecting borrower, the waiver is limited to sales meeting the following conditions:

• The transactions must be at arms-length, with no interest between the buyer and the seller or other parties participating in the sales transaction.
  
  
• In cases where the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
  
  
• The waiver does not apply to the reverse Home Equity Conversion Mortgage (HECM).

To read FHA’s anti-flipping waiver, click here.

For more information, e-mail Steve Linville at NAHB, or call him at 800-368-5242 x8597.

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