Temporary Property Flipping Waiver:

The temporary waiver of the property flipping rule will permit lenders to more easily sell properties acquired as a result of foreclosure to homebuyers who use FHA financing. Both lenders and the property disposition firms they hire (or with whom they are affiliated) are now exempt from the 90-day lock-out period that once prevented homebuyers from using FHA financing to purchase properties that were owned by an individual/entity that held the property for less than 90 days. Under the new waiver, homes that were foreclosed on and are being sold by the mortgage holder or on its behalf may be purchased by FHA borrowers without regard for the 90-day seasoning period. To prevent future flipping of any properties purchased through the foreclosure sales, the subsequent sales of the properties will continue to be subject to the standard regulatory requirements - lockout for the first 90 days and two appraisals required to justify any increase in value of 100% or more for sales that occur within 90 to 180 days.

The waiver is effective for all FHA mortgage insurance endorsement requests on or after June 9, 2008 and expires for all loans for which the sales agreements were signed by the seller and buyer prior to June 8, 2009. Again, the exemption applies only to the initial sale of a foreclosed property and does not extend to a subsequent sale of that property.

FHAConnection is being modified to permit lenders to enter specific data about the waiver eligibility on foreclosed properties, on the Appraisal Logging screen. The systems modifications will be completed by early next week. Although lenders will not be required to submit documentation requesting a waiver on the foreclosure transaction to the applicable Homeownership Center prior to entry of appraisal logging data, lenders must include this documentation in the endorsement file. Further instructions are forthcoming about the system modifications and will be posted on the FHAC Message Board and this listserv.

To read the press release please visit: http://www.hud.gov/news/release.cfm?content=pr08-082.cfm

To read the waiver document please visit: http://www.fha.gov and click on the “property flipping waiver” link or link directly to:
http://portal.hud.gov/pls/portal/docs/PAGE/FHA_HOME/PRESS/PROPERTY_FLIPPING_WAIVER/PROPERTY%20FLIPPING%20WAIVER%20REQUEST.PDF

Visit FHAConnection on-line at: https://entp.hud.gov/clas/index.cfm