by Kristine Flook  DREIA Member flook.kristine@gmail.com

Much has been in the press lately about Acting Federal Housing Administration Commissioner Carol Galante’s extension of the temporary waiver of FHA’s anti-flipping regulations through 2012.

Seems they’ve figured out that making an investor wait 90 days or more to re-sell (flip) a house increases costs and risk of vandalism if a property sits vacant too long.  They now recognize what we’ve known for a while: RECOVERY in struggling neighborhoods occurs when properties are occupied! Here’s what Ms. Galante said:

“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight.  FHA remains a critical source of mortgage financing nd stability and we must make every effort to promote recovery in every responsible way we can.”

It’s not carte blanche because there are the “certain exceptions.”  But here’s the crux of it:  FHA justified the extension by recognizing that professional flipping often takes less than 90 days.  In other words, investors who flip properties are  a vital part of our housing market.  So don’t let lore and naysayers keep you from buying a property that you can resell quickly.

Here are some of the conditions (find the complete waiver published in The Federal Register.)

  • Transactions must be arms-length with no identity interest between buyer and seller or any other parties in the transaction.
  • If sales price is 20% or more above seller’s acquisition cost, the waiver applies only if the lender meets specific conditions and documents the justification of the value increase (Ed. note. Work with a competent mortgage broker who knows about this when you sell.  ASK them about the 90 day rule.  If they mumble, find someone else!  You can make this work well if you understand and anticipate the rules.  Ask us for a referral if you need one.)
  • Waiver applies to new mortgages for purchase, not equity conversion mortgages.