PARAMOUNT MORTGAGE - LENDER'S BLOG

The Federal Housing Administration's (FHA) acting commissioner, Carol Galante, announced on Wed., Dec. 28, it is extending the waiver for the agency’s anti-flipping regulation.

The waiver was set to expire Jan. 31, but will now be in effect through Dec. 31, 2012.

The law was originally created to maintain stability in the housing market by prohibiting the agency from insuring homes sold within 90 days of their acquisition.

FHA temporarily waived the rule back in 2010, saying a reprieve would allow buyers to acquire HUD-owned properties, bank-owned properties and private homes for the purpose of improving and selling them to revitalize neighborhoods.

Galante wants to help neighborhoods “struggling to overcome the possible effects of abandonment and blight," by accelerating the resale of foreclosed properties.

The waiver is subject to certain restrictions.

When the sale price of the property is 20 percent or more above the seller’s acquisition cost, the lender must provide documents that justify the increase in value and must meet other specific conditions.

All qualified transactions must be at arms-length, meaning parties to the deal cannot be striving to achieve some type of kick-back or special interest separate from buying and selling of the real estate.

The waiver applies only to forward mortgages and is not eligible for home equity conversion mortgages.

The FHA said it extended the waiver after finding it takes less than 90 days to acquire, rehabilitate and sell a distressed property.

Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion specifically on properties resold within 90 days of acquisition.

Link: Waiver