HUD Temporarily Suspends FHA Anti-Flip Rule

Starting February 1, the Department of Housing and Urban Development will temporarily suspend a rule in FHA lending that prohibited lending on a home that had been previously owned for less than 90 days.

The rule had been in place to reduce the practice of speculators flipping properties for quick profit, but large inventories of foreclosures prompted the administration to suspend the rule in hopes of accelerating the sale of vacant properties.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

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 ruling will be in effect for one year. I don’t know if the ruling will have a significant effect on the Portland market in particular. Full text of the HUD announcement here.

[Photo courtesy of Lazurite, published under Creative Commons license.]

January 20, 2010 · Filed Under Mortgages, National News

Comments

One Response to “HUD Temporarily Suspends FHA Anti-Flip Rule”

  1. David Meek on February 14th, 2010 3:13 pm

    Great blog post. I am an agent in Indy and found you while researching the FHA flipping rule on Google. Here in Indianapolis the rule applies, but only some of the banks are adopting it. The waiver is voluntary I have discovered. For example, Fifth Third Bank announced in January that despite the relaxation of the ruling, local Indianapolis underwriting will still observe the 90 day window….another example of the work that remains to reverse the pendulum in the real estate industry. I will keep an eye on your posts. Thanks, David

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