HUD puts on hold the 90 day property seasoning rule for FHA loans!
HUD announced today January 15, 2010 that it is temporarily relaxing its 90 day seasoning rule which currently prohibits FHA loans for properties owned by the seller for less than 90 days. See the HUD press release for more details.
HUD states today in its public notice that “The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.”
The new rule will take effect February 1, 2010 and will be in place for one year. To try to avoid the use of the FHA financing for flipping HUD is putting certain restrictions in place. The new policy will only apply to sales meeting following guidelines
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. These condition include verifying that the property does not have a series of flips in the last year. In additon lender will have to verify that the propertyhas been substantially improved to raise the value of the property.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
There is more detail on the HUD site which contains the specific requirements applicable.
This new change will be great news to investors that our renovationg neighborhoods and improving values. Many investors felt that the 90 day law slowed down their ability to renovate and re-sell plus increase addional risk of vandalism and holding cost. First time buyers will now have a bigger selection of renovated homes to choose from and this will stabilize the market. The retail market was affected dramatically by the 90 day law and in many cities reo’s dominated the selection availability of homes in many neighborhoods. Renovators that fix and flip homes will now be able to buy larger quantities of homes thus speeding up the process of rejuvenating neighborhoods. Those individuals that fix and flip homes would be wise to read the fine print on huds website.
Posted in Uncategorized | Tags: 2010, 90 day fha flip law, 90 day flip, Feb 1, flipping, fx and flip, hud, hud policy, stabilize market
Tags: 90 day fha flip, 90 day flip law, feb 1 2010, fha flip, hud homes
