FHA Property Flipping Waiver Expires December 31, 2014
FHA Property Flipping Temporary Waiver on the 90 Day Rule will expire on December 31, 2014 and will not be extended as announced by the Federal Housing Authority on December 11, 2014. This is important news for investors and home buyers to be aware of starting January 1, 2015 as investors will need to wait 91 days before they can executed a sales contract on a flip for a buyer using FHA financing to purchase the property.
If you have questions or would like to apply for a FHA Loan to purchase or refinance a home in Delaware, please call 302-703-0727 or you can APPLY ONLINE
The waiver applies to all sales contracts executed on or after February 1, 2010, until 11:59 PM, December 31, 2014. FHA deems a sales contract to be executed when all parties to the contract have signed the contract, and the contract is enforceable under the law of the state the property is located. Mortgages that are made on properties in which sales contracts have been executed after 11:59 PM, December 31, 2014, are not eligible for a waiver of the regulation prohibiting property flipping. FHA stated they will not extend the waiver beyond December 31, 2014.
On June 7, 2006, HUD published a final rule in the Federal Register prohibiting property flipping on the FHA Mortgage Loan Program. The property flipping rule and became effective for mortgages endorsed for FHA insurance on or after July 7, 2006. A waiver to this rule was issued on February 1, 2010 which allowed individuals to sell homes within 90 days of purchasing in order to help the weak housing market that was being hampered by the glut of foreclosures.
Property Flipping is described by HUD as a practice whereby a property is resold a short period of time after it is purchased by the seller for a considerable profit with an artificially inflated value, often abetted by a lender’s collusion with the appraiser. FHA’s policy prohibiting property flipping eliminates the most egregious examples of predatory flips of properties within the FHA mortgage insurance programs. FHA prohibits properties being sold within the first 90 days of purchase
Overview of FHA’s Property Flipping Policy that becomes Effective Again January 1, 2015
FHA requires that:
a) only owners of record may sell properties that will be financed using FHA-insured mortgages
b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing
c) that for resales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property’s value. FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.
FHA has made Exceptions to the 90 Day Flipping Rule for the following:
- Sales by HUD of its Real Estate Owned
- Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.
- Sales of properties by nonprofits approved to purchase HUD-owned single-family properties at a discount with resale restrictions.
- Sales of properties that are acquired by the sellers by inheritance.
- Sales of properties purchased by employers or relocation agencies in connection with relocations of employees.
- Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises.
- Sales of properties by local and state government agencies.
- Upon FHA’s announcement of eligibility in a notice (i.e., ML), sales of properties located in areas designated by the President as federal disaster areas, will be exempt from the restrictions of the property-flipping rule. The notice will specify how long the exception will be in effect and the specific disaster area affected.
This Rule DOES NOT apply to New Construction Homes being sold by home builders in Delaware.
If you would like to apply for a FHA Loan to purchase or refinance a home in Delaware, please call 302-703-0727 or APPLY ONLINE
John R. Thomas
Certified Mortgage Planner – NMLS 38783
Primary Residential Mortgage, Inc.
302-703-0727 DE Office