The Federal Housing Administration (FHA) announced today they will extend the temporary waiver of FHA’s anti-flipping regulations through 2012, in hopes the move will stimulate foreclosure sales.
In a press release announcing the extension of the FHA anti-flipping waiver (click to view full press release), acting FHA commissioner Carol Galante said that the “extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight.”
“FHA remains a critical source of mortgage loan financing and stability and we must make every effort to promote recovery in every responsible way we can,” she added.
The waiver was first announced in 2010 and was originally set to expire in December 2011. It allows buyers to use FHA-insured mortgage loan financing to purchase a variety of properties, including HUD-owned, bank-owned and properties resold through private sales.
In order to protect consumers, the waiver also includes strict conditions and guidelines to prevent what FHA calls “the predatory practice of property flipping, in which properties are quickly resold as it inflated prices to unsuspecting borrowers.”
The waiver is limited to sales that meet the following conditions:
- All transactions must be arms-length, with no identity of interest between buyer and seller or other parties participating in the sales transaction. In other words, buyers and sellers must act of their own accord and have no relationship to one another.
- In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply for the mortgage loan only if the lender meets specific conditions, and documents the justification for the increase in value.
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM, also known as a reverse mortgage) for purchase program.
The extension is effective through December 31, 2011, unless otherwise extended or withdrawn by FHA.