FHA agrees to temporarily extend short sale flip waiver for second year

The Federal Housing Administration will be prolonging a temporary waiver of its “anti flipping” rule for the second year in a row. This means homeowners are relying on the FHA that insured financing will continue to be able to allow homeowners to buy homes that have changed hands in the last 90 days.
For investors looking to rehab and flip properties, the waiver is relief because it stretches the eligible borrowers to include those depending on FHA backed loans. FHA said that even with extending the waiver through 2012, all transactions must remain arms length. If a sales price of property is 20% or more above the sellers acquisition cost, the waiver will be made possible if the lender can document the justification for the jump in value.

In 2003, the anti flipping rule was established by the FHA to save mortgage insurance program from losses on homes that were practically flipped, rather than rehabbed, Houses that were repossessed by Freddie Mac, Fannie Mae, and state and federally chartered financial institutions were exempt. The Obama Administration waited the waiting period for resale’s in February 2010 which included homes bought and rehabbed by private investors with intentions of leveling home prices and opening communities struck by foreclosure.

The Department of Housing and Urban Development said that it usually takes less than 30 days to gather, rehabilitate and sell properties. However, a select amount of sellers with rehabbed properties were hesitant to get into contracts with FHA buyers due to the costly amount of holding a property for 90 days.