Anti Flipping Rule Back- How Are You Adjusting?

[Jonathan C.]

How, if at all, are you changing your strategy next year given the FHA anti flipping restriction is coming back next year? Sigh

[Larry Turowski]

For those who don't know, the anti-flipping rule affects you if your buyer needs to qualify for an FHA conforming mortgage, as opposed to a conventional mortgage. Since many flippers sell to buyers who will be getting FHA conforming mortgages, this affects them.

Banks want to issue FHA conforming loans because this allows them to sell those loans to FANNIE MAE and FREDDIE MAC, government enterprises that buy mortgages. These enterprises have rules that say that they can only buy FHA conforming mortgages.

What the FHA anti-flipping rule itself says is that a mortgage cannot be issued on a house if it was previously sold less than 90 days prior and the price is more than 20% higher than the previous sale, without two appraisals and receipts, etc, justifying the higher price. In other words, you can't buy a house and re-sell it within 90 days for more than 20% more than what you bought it for (good luck trying to justify a higher price) to a buyer that is applying for an FHA conforming loan.

Here is an article on the end of a waiver that eliminated this rule:

http://www.latimes.com/business/realestate/la-fi-harney-20141019-story.html

Now, in my experience, banks were not paying attention to this waiver, and required a 90 day wait anyway, just to be safe.  Furthermore, I couldn't even have the purchase and sale contract signed within 90 days.  I've had to wait 90 days before the contract could be signed.  So what this has meant to me is that I had to plan to hold a house about 4.5 months--90 days to sign the contract, then 45 days to close.  So to me, it was as if this rule has been in place all along.