HUD Secretary Shaun Donovan announced, on January 15, 2010, a temporary waiver policy that is intended to expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The policy is a temporary waiver of the "property flipping" regulation that makes a property ineligible for FHA insurance if the contract of sale is executed within 90 days of the prior acquisition by the seller (and the seller does not come under any of the specific exemptions that apply to the 90-day rule).
The temporary waiver, signed by Commissioner David H. Stevens, is meant to 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.
Effective Date: February 1, 2010
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.
This waiver is limited to those sales meeting the following general conditions:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
- In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.