bait and switchDid you hear about the new FHA waiver suspending the 90-day no-flip rule?

I first caught wind of it Friday through a forum post, then again on Cory’s blog and on CNN.

The CNN article says…

“The Bush administration is temporarily suspending a 5-year-old rule intended to deter property flippers, as part of an effort to help speed the sale of foreclosed properties. For one year, the Federal Housing Administration will no longer impose a 90-day waiting period before foreclosed properties can be sold to receive government-backed loans.”

Break Out the Bubbly! Let the People Rejoice!…Right?

Don’t uncork that bottle just yet, my friend.

Yes, at first glance a lot of investors (including me) saw this as an incredible break for investors who, since 2003, have had to deal with a “90 days of ownership seasoning” requirement before our properties could be sold to buyers using FHA financing.

Sadly this is still the case.

Whether we like it or not (I know I don’t) the 90-day seasoning policy was place in 2003 to deter what the FHA in it’s infinite wisdom determined to be property “flipping” schemes.

Apparently this new “waiver” doesn’t phase this limitation at all.

If you carefully review the PDF of the actual waiver from HUD’s website, you’ll notice this little tidbit…

fha waiver

So What DOES This Mean?

Simply this…

  • FHA financing is NOW available to borrowers purchasing properties owned less than 90 days that were acquired by foreclosure by mortgagees (i.e. lenders)
  • This also includes any subsidiary of the lender or vendors used to market and sell property.
  • This waiver applies whether or not the mortgagee is state-or federally-chartered (which was previously a restriction).

The Bottom Line for Investors…

Sorry, but nothing changes for us, because…

  • You’re not a “mortgagee” unless you’re the one who actually foreclosed on the property.
  • You’re not a “vendor” unless you actually have a contract of some sort in place with one of the lenders.

There is no verbiage in the waiver that states or even suggests it applies unless you’re one of the above.

Business as usual, folks. Move along…

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