FHA will not extend anti-flipping waiver

The Federal Housing Administration (FHA) announced that it will not extend what is commonly referred to as the “FHA anti-flipping waiver.” This temporary waiver, put into place January 2010, provides a waiver for the FHA rule that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of purchase. Prior to the waiver, a mortgage was not eligible for FHA financing if the purchase contract was executed within 90 days of the seller purchasing the property.

At the urging of the National Association of REALTORS®, the FHA previously extended the temporary waiver of this provision through Dec. 31, 2014. With the waiver, investors were able to acquire and renovate foreclosed and abandoned properties to increase the availability of safe and affordable homes across the nation. NAR sent a letter to the FHA commissioner in October, urging him to re-extend the waiver for these same reasons.

Why is the FHA doing this?
An audit released by the Housing and Urban Development Department (HUD) regarding property flipping says that HUD was lacking when it came to ensuring lenders' compliance with underwriting conditions for the waiver. This means that HUD did not ensure that the lenders were meeting standards for the loans, nor was HUD able to accurately track loan data on the properties resulting in a risk to the FHA Mutual Mortgage Insurance Fund of nearly $274 million. HUD recommended discontinuing the anti-flipping waiver as a result, and the FHA complied.

What does this mean for you and your clients?
If you are an investor or a property-rehabilitation specialist or represent one, beginning Jan. 1, 2015, you will have to return to pre-2010 operations in which properties may not be sold to a buyer using FHA financing until after 90 days have elapsed after the seller purchased the property.