Expiration of the Federal Housing Administration’s Property Flipping Waiver

[Sean Brooks]

The Federal Housing Administration's (FHA) Office of Single Family Housing announced that the temporary waiver of FHA’s regulation that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of the previous acquisition, expires on December 31, 2014.

The waiver applies to all sales contracts executed on or after February 1, 2010, until 11:59 PM, December 31, 2014.FHA deems a sales contract to be executed when all parties to the contract have signed the contract, and the contract is enforceable under the law of the state the property is located. Mortgages that are made on properties in which sales contracts have been executed after11:59 PM, December 31, 2014, are not eligible for a waiver of the regulation prohibiting property flipping. FHA will not extend the waiver beyond December 31, 2014.

Section 203.37a(c) lists the sales transactions exempt from this rule.The exempt transactions include sales by HUD of real estate-owned (REO) properties under HUD's regulations in 24 CFR part 291, sales by other federal agencies of REO properties, sales of properties by nonprofit organizations that have been approved to purchase and resell HUD REO properties, sales by state- and federally-chartered financial institutions and government sponsored enterprises (GSEs), and, upon announcement by HUD through issuance of a notice, sales of properties in areas designated by the President as federal disaster areas. The regulation, including its exemptions, is still in effect.

So if you're going to flip a property, you can cannot sell it until you've owned it for 90 days and on day 91 you can sell it.

[Greg H.]

in my experience mortgage companies have been all over the board on their interpretation of the 90 day rule :

- Some calculate the 90 days from the date of closing and some the date of recording of the deed. In Texas, this usually is no more than a couple of days but my understanding in other states the difference may be greater

-Some will allow the closing to take place on day 91 while others will not allow the property to be under contract until day 91.  The difference here could be 30-45 days

-Some require 2 appraisals after 90 days and less than 180 days

When I receive an FHA offer, I always insist on speaking directly to the loan officer and if possible the underwriter and get their investors guidelines in writing so we are all on the same page