New FHA Rules Regarding 90 Day Hold on Properties

You may have heard that HUD recently relaxed, under certain circumstances, the requirement that a seller hold a property for 90 days before selling to an FHA buyer. This so-called “Flipper” rule is designed to protect buyers, but HUD has found that in certain circumstances this requirement is inhibiting the revitalization of neighborhoods. The following information is a summary of the rule changes.

The waiver will take effect on February 1, 2010, and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this 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.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

The text of the full waiver, which is 5 pages long, can be found here:

http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

In short, you can take advantage of this waiver under certain, well-defined circumstances. You are urged to consult with your tax and legal advisors to determine if the facts of your particular situation qualify for a waiver of the 90 day “seasoning” period in place for most FHA loans.

For a full discussion of your particular situation, please contact the experienced legal team at Pak & Moring PLC.

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