Is there regulation around this issue?

Underwriting is practically non-existent as to the needs of a seller and borrower, RMLOs will be looking at conventional guidelines and the new regulations are designed around conventional underwriting as well.

This makes perfect environment for people and want to fix and flip houses you doing it full-time or a part-time earning income.

I wrote a blog post on the new IRS regulations that you may find of interest. 

@DB BrooksWhile I am fairly well acquainted with older buildings - we have a couple from the latter half of the 19th century and more from the early 1900s - I do not know the particulars of being in that warm of a humid environment (it gets humid along the cost here, but only warm for half the year).You do want to look at the plumbing, though in a depression era house, I would suspect galvanized supply and drain lines to be more prevalent than lead (though they are possible).  

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That all makes sense in an environment where nobody improves their house.

@Sien Long Chong what types of regulations are involved for investors.

Some of the realtors I work with that I most admire, are former lenders that said "this is nonsense, unethical, immoral, and dishonest, I can't compete and be an honest player in this environment" and thus... quit lending and became realtors. 

I took advantage of an FHA 203k Loan for financing the construction portion of my last flip and I will never be restricted to the regulations imposed by lenders again.