The Official Online Weekly Newspaper of NAHB
The Federal Housing Administration on Dec. 28 announced that it was 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 in 2010 and originally extended it through Jan. 31, 2011, in an effort to accelerate the resale of foreclosed-upon homes to help stabilize home values and improve conditions in housing markets with high foreclosure rates.
The new extension is effective through Dec. 31, 2012 — unless the FHA decides to extend it again or withdraw it.
The extension will enable buyers to continue to use FHA-insured financing to purchase properties owned by the Department of Housing and Urban Development or banks or resold through private sales.
Since the original waiver went into effect in February 2010, the FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.
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.
“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Acting Federal Housing Administration Commissioner Carol J. Galante.
“FHA remains a critical source of mortgage financing and stability and we must make every effort to promote recovery in every responsible way we can,” she said.
Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition makes sellers less willing to accept 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.
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).
For more information, email Steve Linville at NAHB, or call him at 800-368-5242 x8597.