In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Federal Housing Administration (FHA) Commissioner David H. Stevens extended FHA’s temporary waiver of the agency’s ‘anti-flipping rule.’ The extension is intended to accelerate the resale of foreclosed homes in neighborhoods struggling to overcome possible property abandonment and blight.
With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. Early last year, FHA temporarily waived this regulation through January 31, 2011. On Friday January 28th FHA posted a notice extending this waiver through the remainder of 2011.
This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
The extension is effective through December 31, 2011, unless otherwise extended or withdrawn by FHA.
To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver continues to be 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.
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