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SUBJECT: FHA ANTI FLIPPING POLICY – TEMPORARY WAIVER
On January 15, 2010, HUD issued a temporary waiver to their anti property flipping regulation that prohibits issuance of FHA insurance on properties owned by the seller for 90 days or less. This is a temporary waiver and will expire January 31, 2011 unless extended. Details of the waiver are below:
The waiver is effective for properties which have been owned less than 90 days and meet the following criteria:
- Must be an arms-length transaction with no identity of interest between Buyer and Seller or other parties participating in the sales transaction. To make this determination: Verify that Seller is in title as indicated on the Appraisal and no apparent family or business relationship exists between the parties to the loan or sales agreement.
- LLCs, corporations or trusts as Sellers must have been established and operated in accordance with applicable State and Federal law.
- No pattern of previous flipping exists such as multiple transfers of title within a 12 month timeframe as indicated on the chain of title on the Appraisal.
- Document that property was marketed openly and fairly through an MLS, an auction, For Sale by Owner or developer. Note: Sales contracts which have been assigned to the current Buyer are not allowed.
2. For property sales prices that are 20% or more above the Seller’s acquisition cost the following must be performed: Keep in mind that if the value increases by 100% or more, a second appraisal is required:
- Appraiser must indicate the Seller completed legitimate renovation, repair and rehabilitation work on the subject property to substantiate the increase in value.
- If the work was not performed, Appraiser must provide appropriate explanation of the increase in value since prior title transfer;
AND
3. The Lender processing the loan must order a property inspection report and provide a copy to the purchaser prior to closing. Cost of this inspection may be charged to the Borrower.
Property inspections will encompass all aspects of the home's structure, interior, exterior, plumbing, electrical, insulation, HVAC and fireplaces
Waiver is limited to forward mortgages only and does not apply to Home Equity Conversion Mortgage (HECM) for purchase program.
If you have any questions, please contact Jon A. Achilles at (480) 688-0656
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