Effective Feb 1, 2010, HUD/FHA suspended its normal 90 day flip rule. The suspension/waiver allowed FHA buyers to purchase a home that had been purchased within 90 days by the current seller. While that waiver is still in effect as of today there have been a few changes that I want to share with you. Before I do, it’s important to understand that HUD/FHA has NOT changed their ruling. The change is at the investor level meaning that the companies that buy loans from mortgage banks such as PrimeLending have changed the rules on what kind of loans they will purchase.

So while FHA is still perfectly okay with the 90 day rule waiver issued a year ago the investment banks buying mortgages have layered their own rules over HUD’s/FHA’s. Here is what is happening relative to FHA flips.

Previously:

An FHA buyer could purchase a home that was bought less than 90 days ago even if that home was being resold for more than 20% of what the seller bought it for. The catch was that we had to do 2 appraisals on the property if the price exceeded the 20% limit. For example, if a seller has just purchased a home 60 days ago for $100,000 and was now selling it for $140,000 (40% more than what they bought it for) an FHA buyer that was purchasing that home could do so. They would just need 2 appraisals.

Now (As of December 10th, 2010):
The one and final investor that was purchasing these loans where purchase price exceeded 20% of previous sales price is no longer doing so.

What this means going forward:

1. If you have a buyer that is looking at purchasing a home using an FHA loan less than 90 days from the date the seller bought it AND that home is being sold for more than 20% of what the seller paid you are stuck. Your buyer would need to wait until 90 days after the settlement date of the seller purchase before they can ink a new contract.

2. If you have a buyer that is looking to buy a home using an FHA loan less than 90 days from the date the seller bought it AND that home is being sold for than 20% or less of what the seller paid for it you can still move forward. No 2nd appraisal is required on these transactions.



***Important Dates***
1. The 90 days is measured from the date of settlement (not recording) of the previous sale and the date the new purchase contract (for your buyer) is executed.

2. This change is effective 12/10/2010 – loan must be locked by this date in order to not be impacted by this change.