Read the Article below and see what the FHA has so graciously done for us. They’re giving us another year to practice capitalism and actually make a profit from our risk, labor and entrepreneurism. The truth is they give us nothing here because the crap you must go through to justify your markup ain’t worth shaving a few days off your holding period. It’s unlikely you will buy, fix, sell and close many houses in less than 90 days anyway, so the rule never affected the business of those in the know. Be sure to watch the video in this issue where I make a case it’s not in your best interest to cash out quickly. I suspect it will get you thinking about your business model.
I got this article from my sister Barbara and would appreciate all contributions from members. Your input determines my output.
FHA Waives Anti-Flipping Rule Through Year-End to Speed REO Sales
By: Carrie Bay 01/03/2012
The Federal Housing Administration (FHA) is extending the temporary waiver of its property anti-flipping rule through the end of 2012.
FHA rules typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, however, the agency waived this regulation, and later extended the waiver through 2011.
The new extension announced late last week will permit buyers to continue to use FHA-insured financing to purchase HUD-owned and bank-owned properties, no matter how long the homeowner has held the title, through December 31, 2012.
FHA says the waiver will allow homes to resell as quickly as possible, helping to stabilize real estate prices and revitalize 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,” said Carol Galante, FHA’s Acting Commissioner. “FHA remains a critical source of mortgage financing and
stability and we must make every effort that to promote recovery in every responsible way we can.”
According to FHA, the waiver contains strict conditions and guidelines to prevent predatory property flipping in which properties are quickly resold at inflated prices to unsuspecting borrowers.
Among these conditions, all transactions must be arms-length, with no link between the buying and selling parties.
In addition, in cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value.
FHA’s property-flipping waiver is limited to forward mortgages, and does not apply to the agency’s Home Equity Conversion Mortgage (HECM) for purchase program.
Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.
The agency says its own research has found that in today’s market, acquiring, rehabilitating, and reselling foreclosed properties to prospective homeowners often takes less than 90 days.
As a result, FHA says prohibiting the use of its mortgage insurance for a subsequent resale within 90 days would adversely impact the willingness of sellers to consider offers from potential FHA buyers, namely because they would be required to cover holding costs and the risk of vandalism that comes with allowing a property to sit vacant over a 90-day period of time.
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