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FHA News

What to Expect now That the FHA's 90-Day Waiver has Ended

by Eric Allee 21. January 2015 09:45

FHA 90 Day RuleFor the past 4 years, investors and home buyers benefited from the Federal Housing Administration’s (FHA’s) waiver of its 90-day flip rule that addressed a housing market which was flooded with foreclosures.  This waiver ended at midnight, December 31, 2014.  This means that, effective January 1, 2015, FHA has reverted to its former policy of not insuring a property loan where title was transferred within 90 day or less.  There are some exceptions to the FHA’s suspension of the 90-day rule.  They are as follows:

1. HUD properties under REO 

2. Sales by other federal agencies of REO properties

3. Sales of properties by non-profit organizations approved for resale by HUD 

4. Sales by state or federal financial institutions such as Fannie, Freddie or GSE

5. Sales of HUD properties where the President declares it a federal disaster area

What are not exempted from the rule are properties that were bought by investors and/or developers looking to do quick fixes and then flip the property.  Financing will still be available, but selling prices of the end product — rehabbed houses for moderate-income buyers — are almost certain to be more expensive and may have a detrimental impact on entry-level homebuyers.  The 90-day flipping restriction by FHA might also have some negative impact on some investors. However, it might be very minimal as many property flips are either cash purchases or financed with hard money loans, which enable investors to fast-track their property re-sales and maximize their profits.

 

Here are five points to consider with respect to the suspension of the 90-day waiver:

1.  An Inconvenience for Investors: The 90-day rule reduces the pool of homebuyers to those who are not using FHA financing.  Investors who are flipping at price ranges prime for FHA financing will definitely feel the negative impact of this rule.

2.  Missed Homeownership Opportunities for New Buyers: Some would-be FHA buyers will miss the opportunity for homeownership because investors will be more likely to work with conventional buyers who can be processed more quickly than the FHA rule allows.

3.  Less Available Housing Inventory: We are no longer experiencing the glut of home foreclosures that existed in 2010 when the FHA waiver was initially implemented.  With fewer available foreclosures, the suspension of the 90-day rule is not too significant. When FHA first implemented the waiver in 2010, bank-owned sales represented 44% of the entire California housing market (Source:  RealtyTrac), and by the last quarter of 2014, they comprise only 5.7% of all sales in the state (Source:  DQNews).

4.  Longer Selling Timeframes: Realistically, many investors easily take 30 to 60 days to flip a property regardless of the 90-day ruling status.  Once rehabbed, the property is commonly on the market for 30+ days.  Consequently, many homes will meet the time guidelines to qualify for FHA financing.  For example, in large metropolitan areas in 2014, housing flips in the third quarter of 2014 took an average of  185 days, slightly less than the 187 of the previous quarter (Source:  Yahoo! Finance and RealtyTrac 2014). 

5.  A Boost to Conventional Loan Products: The FHA’s suspension of the 90-day waiver will steer some buyers to use conventional financing.  More creative financing options are likely to emerge as buyers seek new ways to accomplish quick flips without FHA financing.

Vanguard Hard Money and its affiliates have provided this overview.  For a detailed explanation of the FHA’s ruling please consult the Federal regulations and/or legal counsel.

FHA Anti-Flipping Waiver Extended

by Carla Palmer 2. February 2011 19:40

The FHA announced on January 28, 2011, that it would extend its “Anti-Flipping Waiver” through December 31, 2011.

Under normal conditions, FHA regulations prohibit insuring mortgages on homes owned by the seller for less than 90 days. But in today’s foreclosure-ridden environment, with so many distressed properties on the market, the agency has found that many rehabs take less than 90 days, and the tightened credit market often leaves FHA-insured mortgage financing as the only means available for potential homebuyers to purchase these recently-renovated properties.

The extension of the waiver will also help move more foreclosed properties off the market and reduce the number of vacant homes in neighborhoods throughout the country.

In fact, the agency reports that, since the waiver first took effect in February of last year, they have insured over 21,000 mortgages, at a value of $3.6 billion, on properties resold within 90 days.

Read more from the article
FHA Extends ‘Anti-Flipping Waiver’ to Speed Sales of REO Homes 

- Carla Palmer

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