An anti-flipping requirement on mortgages insured by the Federal Housing Administration that was waived during the depths of the housing market meltdown and subsequently extended has been extended again. This time around, the term of the extension was doubled.
On home purchase transactions, properties securing FHA loans cannot have been acquired during the prior 90 days.
However, the Department of Housing and Urban Development waived the requirement in May 2010. The waiver impacted sales contracts executed between Feb. 1, 2010, and Feb. 1, 2011.
“During this period of high foreclosures, FHA seeks to encourage investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes,” HUD explained at the time.
In a January 2011 statement proclaiming the waiver a success with more than 21,000 mortgages insured for over $3.6 billion as a result of the exemption, then-federal housing commissioner David H. Stevens said that the exemption would be extended until Dec. 31, 2011.
A few days before the extension was set to expire, another extension was announced until the end of this year.
HUD has, yet again, decided to extend the anti-flipping waiver, according to a Federal Register notice.
This time around, however, HUD is taking a longer-term approach — extending the waiver two years until Dec. 31, 2014.
Qualified transactions must be arms-length with no identity of interest between the buyer and seller or other parties.
Price increases in excess of 20 percent must be justified by a second FHA appraisal or supported by documented renovation costs.
If there aren’t sufficient renovation expenditures, then the appraiser needs to provide an appropriate explanation for the increase in value.
In addition, property inspections are needed, and any needed repairs for “health and safety” issues that are identified need to be completed prior to closing.
“Through the regulatory waiver, FHA encourages investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes, with the objective of increasing the availability of affordable homes for first-time and other purchasers, helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high,” Thursday’s filing stated.
