Maria, your situation is interesting, so I asked a lender (someone I have worked with a lot and trust) about it, and here is his reply and suggestions:
"The rule is in place and is real, it has been around for a few years. Several years ago, there was a lot of â€œhome flippingâ€ between family to get around the rules of lending... The rule is so generic it defeats the purpose in many cases such as what her family is doing.
Does the home need enough work that it would go into a rehab or construction loan?
I would have to check with the real estate law on this, but they could all buy the home, have the sister be the only one on the mortgage and the rest on title. After she gets the loan just remove everyone."
That last suggestion sounds like a good one, if all of your siblings are on good terms. If you want to pursue this, give him a call:
Vice President, Mortgage Network
Hope this helps,