FHA 90-day Flip Rule Waiver
HUD has announced a temporary waiver of the 90 Day Flipping Requirements Rule. The waiver is effective for FHA purchase transaction loans with purchase contracts signed on or after February 1, 2010. Loans with purchase contracts prior to February 1, 2010 are not eligible for the waiver. The waiver is limited to those sales meeting the following general conditions which are designed to protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting buyers:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or any other parties participating in the sales transaction, including:
- Seller must hold title
- LLCs, corporations and trusts must be established in accordance with state and federal law
- No evidence of previous flipping within 12 months
- Evidence that property was marketed openly; via MLS, auction, FSBO
- If the sales price of the property is 20% or more above the seller's acquisition cost, the waiver will only apply if the lender meets the following conditions:
- Significant work has been done to the home (documented by a second appraisal verifying that legitimate repair and rehabilitation has been done to substantiate an increase more the 20%); or,
- In cases where no work has been done, the appraiser must provide explanation to support the increase since the prior transfer; and,
- A property inspection must be provided to the buyer prior to closing. (The lender may charge the borrower for the inspection.) The inspector does not need to be FHA approved, but must have NO interest in property, must no receive compensation other than from the lender and may not be involved with the repairs recommended from inspection. At a minimum, the inspection MUST include:
- Property structure, foundation, floor, ceiling, walls and roof;
- Exterior, siding, doors, windows, any decks, balconies, walkways and driveways;
- Roofing, plumbing, all electrical, heating and A/C systems;
- All interiors;
- All insulation/ventilation systems as well as fire places and fuel burning appliances
- The waiver does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
The waiver is scheduled to be effective for one year. The complete text of the Waiver is available on the HUD website.
For more information contact me at 800-405-0676, or by email.