Posts Tagged with "HUD"

90 Day FHA Rule is Waived

Wednesday, January 20, 2010 - By Gate Arty

HUD has taken a major step to stabilize the real estate market by waiving the “90 day flip rule” effective February 1st, 2010. Currently, FHA prohibits insuring a mortgage on a home owned by the seller for less than 90 days. Originally the 90 day rule was put in place to protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at INFLATED prices to unsuspecting borrowers. This act will give FHA borrowers access to a broader array of recently foreclosed properties. The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. To qualify these conditions must be met:

• 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.

This waiver will be a major coup for real estate investors because the pool of available buyers is substantially increased. Before, investors had to wait 90 days before listing a property in MLS or hold a property for 90 days before selling to a FHA buyer – something most are unwilling to do because of holding costs & risks associated with delayed closings. This should be a major shot in the arm & should drastically reduce the “days on market” for home inventory.

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