Waiver on 90-day flipping rule will help FHA buyers find a home.

It is not uncommon over the last two years to find a statement on the multiple listing service that reads “no FHA loans 90 day rule applies”. Which basically meant that an investor had purchased a home, most likely and REO (foreclosed home), completed repairs, new carpet, paint and then placed in back on the market for sale in less than 90 days.  But buyer’s that were utilizing an FHA loan could not purchase this home.

The FHA has an anti-flipping rule that attempts to prevent FHA loans to be used in speculative home purchases where buyers are lured into over paying for flipped homes. However, this same policy is defeating the purpose of clearing out vacant distressed properties and preventing first time buyers (most likely to use FHA loans) from opportunities in the market place.

This waiver is temporary (one year) and will go into effect on February 1st, 2010. There are some limitations. According to the article at DSNews the following rules apply:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.

• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

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