Dennis Norman
In an effort to “stabilize home values and improve conditions in communities where foreclosure activity is high” FHA just announced a temporary waiver of requirements of 24 CFR 203.37a(b)(2). For those of you that don’t have your copy of the Code of Federal Regulations handy, this is referring to what is generally known as the “anti-flipping” rule which (with a few exceptions) prohibited a lender from making an FHA-insured loan on a home owned by the seller for less than 90 days.
The HUD secretary, Shaun Donovan, made it clear that HUD will be watching these deals closely in his statement, “this change in policy is temporary and will have very strict guidelines to asure that predatory practices are not allowed”.
This temporary policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties or properties resold through private sales.
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. The 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.
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