CV Escrow | FHA Delays Implementation of Anti-Flipping Rule
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FHA Delays Implementation of Anti-Flipping Rule

FHA Delays Implementation of Anti-Flipping Rule

As part of an ongoing effort to spur growth in real estate, the FHA recently announced they would again delay implementation of an anti-flipping rule.  The rule prohibited buyers from obtaining FHA-insured financing for homes owned by the seller for less than 90 days, leaving “flippers” unable to move properties quickly.  The waiver was placed in 2010 to allow additional financing options on what has become an eyesore of this recession:  a glut of bank- and HUD-owned properties.

“We must make every effort to promote recovery in every responsible way we can,” stated FHA’s acting commissioner, Carol Galante.  Speaking with, she went on to say, ““This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight.”

In order to avoid potential for predatory activity, the waiver contains specific language and conditions to prevent over-inflated transactions.  For one thing, FHA-backed financing must be conducted at arms-length, allows no link between buyers and sellers.  Another aspect of the waiver requires documentation to justify sales prices 20% or more over the seller’s acquisition cost.

Most flipping activity occurs well within 90 days of purchase.  Before allowing the waiver, FHA’s research concluded that by disallowing flipped properties – at least on a temporary basis – it would hamper an important part of the recovery.  Since its implementation in February 2010, the waiver’s reach has been staggering:  42,000 mortgages worth in excess of $7 billion.

That’s over $7 billion of sales and 42,000 homes that might not have been…

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