FHA Suspends 90-day Rule for FHA Purchases

The Department of Housing and Urban Development (HUD) recently announced that it is instituting a one-year moratorium on the Federal Housing Administration (FHA) 90-day anti-flipping rule.

On most homes the FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. However, beginning February 1, buyers may use FHA-insured financing to purchase properties resold through private developers and investors, providing access to a broader array of recently foreclosed properties.

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general 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.
•The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

I consider this good news as it will immediately increase the inventory of homes and create more possibilties for the thousands of buyers who are looking to purchase before the April 30th tax credit deadline.