FHA 90-Day “Anti-Flipping” Rule Waived - Yes and No

Many of you have gotten excited about the FHA “waiving” their 90-day “Anti-Flipping” rule beginning February 1, 2010. But hold on a second because that’s not what really happened.

In case you don’t know, the FHA “Anti-Flipping”  rule prevents you - the ready, willing, able and honest home buyer - from buying a perfectly good and renovated home that was last bought within the last 90 days (bank-owned properties do not fall into this category). It has also prevented investors who have bought, renovated and flipped a property within the last 90 days  from being able to sell it to home buyers that are using FHA financing.

Sounds a lot like a “lose-lose” situation, doesn’t it? That’s because it is.

Well, the FHA has realized that it’s hurting home buyers and has made some changes to their “Anti-Flipping” rule. No - they have not canceled, repealed, gotten rid of or any such permanent thing when it comes to the rule. They have simply made some temporary small changes to the rule which allow for a small window of breathing room. But it’s ain’t much of a window.

Here are the highlights of the changes to the FHA “Anti-Flipping” rule…

The exception to the FHA 90-day “Anti-Flipping” rule is only for properties that do not have a 12 month history of flipping. The properties must have all the renovation and rehab closely documented. And the increase in sales price must be less than 20 in order for the property to qualify. If the sales price is 20 percent or more, a full home inspection and 2nd appraisal must be conducted.

And here’s the kicker…

Banks and financial institutions must adopt this exception before you, the home buyer or investor, can take advantage of it. So far, I have yet to hear of any bank or financial institution adopting it. And even if they do, they may add their own extra rules to the exception on top of the FHA’s so who knows what the final “exception” to the rule will be - if there’s one at all.

Sorry to burst your bubble folks, but better you know the real truth now rather than finding it out the hard way later.

If you have specific questions or concerns as a home buyer or investor, email or call me - 703.582.6900.

You can also read the HUD announcement and get further details regarding the changes by checking out the document below (click here if you don’t see the HUD press release regarding changes to the FHA 90-day “Anti-Flipping” rule below)…

Changes to FHA 90-day Anti-Flipping Rule 2010 -

Local Government and Banks Discuss Short-Sales, Foreclosures and Loan Modifications

The Dulles Area Association of REALTORS® hosted a symposium yesterday with banks and REALTORS® to foster a greater understanding of the mortgage options for troubled homeowners and challenges arising from complicated real property transactions such as short sales. The event was held at George Washington University’s Ashburn campus and featured Congressman Frank Wolf and “top dogs” from HUD, the FHA, Bank of America and the Virginia Mortgage Lenders Association.

I wasn’t sure what to expect of the event because I was afraid politics and “prepared speeches” would get in the way of actually getting things accomplished (or at least discussed openly and honestly). There was a discussion/Q&A session at the end, but not much commenting came from the “top dogs”. And as far as the “advice” given, none of it was anything many of us didn’t already know.

It seems the people near the top of these organizations/companies are out of touch with what’s really going on in real life. Or maybe they do know, but don’t want to admit it or do anything about it.

For example, one agent commented how bank negotiators never return phone calls nor emails regarding the status of a short-sale in process. The response was, “Be patient. We get 180,000 phone calls per day and we don’t have the manpower to support the volume.”

So you want people to sit around for up to 6 months before you bother to get back to them? That’s your advice?! Gee, thanks. I feel much better now

How about this…You received TARP money (aka millions of tax payer dollars) plus you’re saving thousands of dollars by working out a short-sale rather than going the foreclosure route - so hire more (competent) people!

Another example (which I have been fortunate enough NOT to experience) is that the short-sale and foreclosure departments at the same bank don’t communicate with each other. Banks have been known to foreclose on a property in the middle of a short-sale negotiation (with the same bank). It’s 2009 - there are land lines, cell phones, email, IM, text, Twitter, Skype, etc. There is no excuse for such a lack of communication between two departments within the same company.

They defended the new HVCC appraisal guidelines quite a bit even though every agent and most sellers, buyers and those trying to refinance since May 1 have a horror story (or five) to share thanks to the HVCC.

And not too much new was talked about working out a loan modification. Things such as term length increases were number one on the list of possibilities with lowering the interest rate close behind. Either way, you have to prove to the bank that you can’t afford your current (or soon to be adjusted) monthly payment due to some form of hardship.

The point is…there are lots of issues and new problems arising from foreclosures, short-sales and the new appraisal process and not much is being done about it. As a consumer, make sure you’re properly educated and be prepared for hurdles along the way. And if you’re selling your house “short” or buying a foreclosure or short-sale property, make sure you have an experienced agent who knows what they’re doing when it comes to these types of transactions (I may know of one).

Related Articles

A Seller’s Guide to the Short-Sale Process

10 Questions To Ask Before Writing an Offer on a Short-Sale

10 Things to Look Out For With Bank-Owned Property Contracts

Do You Qualify for a Loan Modification?

Attention Investors and Buyers - FHA Lifts Waiting Period On Flips

Attention all investors and buyers of "flipped"/rehabed properties - the FHA is lifting their 90-day waiting period requirement on resales. The FHA instituted this waiting period 5 years ago in order to deter fradualent/predatory home flipping.

Lenders are probably still going to have to do some rehab on many of the properties they foreclose on before turning them around to an FHA borrower. FHA has eased up a bit on requirements for minor repairs, but before you can sell a home to a borrower relying on an FHA loan guarantee program, it’s got to be "safe, secure and sound."

Here are some links that go over the requirements further:

• Appraisal and property requirements
• Repair conditions

Here’s an excerpt from the guidance the FHA gave lenders in a letter back in December 2005:

"Examples of minor property conditions that no longer require automatic repair for existing properties:

• Missing handrails
• Cracked or damaged exit doors that are otherwise operable
• Cracked window glass
• Defective paint surfaces in homes constructed post 1978
• Minor plumbing leaks (such as leaky faucets)"

Source: Inman