HUD Bans Property Flipping

The U.S. Department of Housing and Urban Development (HUD) passed a measure that places time restrictions on the resale of properties that are financed by Federal Housing Authority (FHA) Loans.

This was in response to predatory flipping that HUD defined as “refers to the practice whereby a property recently acquired is resold for a considerable profit with an artificially inflated value, often the result of  a lender’s collusion with the appraiser”

HUD issued a final rule o May 1 2003 that the FHA will not insure a mortgage if the contract of sale for the purchase of the property that is subject to the mortgage is executed within 90 days of the prior acquisition by the seller.

HUD extended the exception to the 90 day restriction to include transactions such as, single family properties by government sponsored enterprises (GSEs), state and federally charted financial institutions, nonprofit organizations approved to purchase HUD Real Estate Owned (REO) single family properties at a discount with resale restrictions, local and state governments as well as federal disaster areas.

Keep in mind that these rules apply ONLY to FHA loans.

However, FHA temporary waiver to certain transactions…

Read the HUD article outlining the temporary waiver until December 31 2011.

To summarize, the FHA has extended the waiver of its regulation that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of the previous acquisition until December 31, 2011. This is in response to the high level of foreclosures that have been taking place across the US. The waiver is available for the purpose of stimulating rehabilitation of foreclosed and abandoned homes and is applicable to all single family properties being resold within the 90 day period after prior acquisition. There are certain conditions, so make sure you read the article above and visit the HUD.gov website for the latest information.

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