**Good News** FHA 90-day FLIP Rule has been extended by another year!!

What is the 90 day Flip Rule?  

 

The federal government prohibited the use of FHA mortgage financing by buyers purchasing homes from sellers who had owned the property for less than 90 days.  This was to prevent speculators, through the use of corrupt appraisers, straw buyers, complicient title companies, etc., from defrauding the government through quick flips of houses at over inflated prices.

 

But the policy repressed purchase-and-renovate projects by legitimate investors who buy houses after foreclosure or at the trustee sale and then resell them in substantially improved condition.  

 

Across the country, buyers sought to buy these rehabbed houses using FHA-insured mortgages with 3.5% down payments, but were prevented from doing so by the “anti-flipping” rule.

 

In January of 2010, FHA Commissioner David H. Stevens announced a one-year suspension of that rule, permitting qualified buyers to obtain FHA mortgages on properties purchased by the seller less than 90 days before. The plan, set to expire at the end of this month, came with additional requirements of home inspections and multiple appraisals if the increase in price was more than 20%.

 

Vicki Bott, Deputy Assistant Secretary for single-family housing at the FHA, confirmed in an interview that the agency expects to continue the policy for another year.  "Not only have first-time buyers responded overwhelmingly to the opportunity to buy “turnkey” renovated homes with low down payments, she said, but they have performed well on their mortgage obligations."

 

“Obviously we have concerns about flipping in general,” Bott said, but the FHA has seen none of the fraud problems, defaults and re-foreclosures that cost the agency millions in insurance payouts in earlier years.

 

This is a much needed step in the continued efforts to rebuild our housing market.  The trustee sale investors take great risks in purchasing these homes often without title insurance, with unknown physical damage to the interior of the home, and unpaid HOA fees and / or property taxes, etc... They improve the properties, rectify the HOA, restore neighborhood property values and provide a move-in ready home for a family.