HUD Suspending 90 Day Rule

HUD’s 90 day rule was a condition put upon home sales stating that if the property was owned for less than 90 days, the owner could not sell it and offer FHA financing.  The reason for this was to keep unscrupulous investors from buying low, and re-selling immediately for substantial profit.  Investors, rehabbers, and the like, needed to wait a full 90 days before the resale could go through with an FHA loan.

Starting February 1st, 2010 home may now be financed via FHA financing even if they don’t meet this 90 day requirement.  This policy change will allow foreclosures to get back on the market in a quicker time frame, and hopefully, move inventory quicker.

Here is the memo that was just released:

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.  The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes…

…The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.  To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, 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.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website at: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf