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FHA extends flipping waiver through 2012

Posted: December 29, 2011 1:55 a.m.
Updated: December 29, 2011 1:55 a.m.

The Federal Housing Authority is extending the waiver of its anti-flipping regulations through 2012 in an attempt to stabilize home values, the agency announced Wednesday.

The extension is intended to stabilize home values and improve conditions in communities experiencing high foreclosure activity.

“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” Acting FHA Commissioner Carol J. Galante said.  “FHA remains a critical source of mortgage financing and stability, and we must make every effort  to promote recovery in every responsible way we can.”

The latest move is the third extension issued by the FHA.

With certain exceptions, FHA rules prohibit insuring a mortgage on a home owned by the seller for less than 90 days.

In 2010, however, FHA temporarily waived this regulation through Jan. 31, 2011, and later extended that waiver through the remainder of 2011. On Wednesday, the agency extended the waiver for the third time.

The new extension permits buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.

It also allows homes to resell as quickly as possible in hopes of stabilizing real estate prices and revitalizing neighborhoods and communities.

Buyers of Fannie Mae (Homepath) properties will get 3 percent in closing costs if they are going to live in the home, whereas investors will only get 2 percent, said Dwight Hawkins of Realty Executives in Valencia.

That represents a slight penalty for investors getting these homes off the market, and they have to wait up to 10 days before being allowed to make an offer on these homes, he said.

“So, the investors have to wait till no one wants it, and then they get a reduction on closing costs to help clear out the mess,” Hawkins said.

To protect buyers, however, the waiver includes strict conditions and guidelines to prevent predatory practices of quickly flipping properties and reselling them at inflated prices.

The FHA said acquiring, rehabilitating and reselling properties to prospective homeowners in this market often takes less than 90 days.

Not making FHA mortgages available to these properties often means the owners of the rehabilitated homes are reluctant to sell to FHA buyers, limiting the buying market and options for new homeowners. The homes also risk vandalism when a property sits vacant for a longer period waiting for a buyer approved for a convention loan.

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


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