In an effort to continue stabilizing home values and improve
conditions in communities experiencing high foreclosure activity, Acting Federal Housing Administration
(FHA) Commissioner Carol J. Galante will extend FHA’s temporary waiver of the
anti-flipping regulations.
With certain exceptions, FHA regulations prohibit insuring a
mortgage on a home owned by the seller for less than 90 days. In 2010,
FHA temporarily waived this regulation through January 31, 2011, and later
extended that waiver through the remainder of 2011. The new extension will permit buyers to continue
to use FHA-insured financing to purchase HUD-owned properties, bank-owned
properties, or properties resold through private sales. It will allow homes to
resell as quickly as possible, helping to stabilize real estate prices and to
revitalize neighborhoods and communities.
The extension is effective
through December 31, 2012, unless otherwise extended or withdrawn by
FHA. All other terms of the existing Waiver will remain the same.
The Waiver contains strict conditions and guidelines to prevent the
predatory practice of property flipping, in which properties are quickly resold
at inflated prices to unsuspecting borrowers. The Waiver continues to be
limited to 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.
·
In cases in which the sales price of the property is 20 percent or
more above the seller’s acquisition cost, the Waiver will only apply if the
lender meets specific conditions and documents the justification for the
increase in value.
·
The Waiver is limited to forward mortgages, and does not apply to
the Home Equity Conversion Mortgage (HECM) for purchase program.
-- This information was originally shared with us by our friend Diane Rifai, Residential Mortgage Loan Originator. Visit her on the web at: http://www.DianeRifai.com
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