Wednesday, December 28, 2011
In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante announced an extension is now in effect through December 31, 2012. With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, FHA temporarily waived and then extended this regulation through January 31, 2011. The new extension through 2012 will continue to allow buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. FHA's motivation is to allow properties to resell as quickly as possible, helping to stabilize real estate prices and to revitalize communities. The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA. The Waiver still consumer protections to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. Sales must meet the meeting the following conditions to take advantage of the Waiver. • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. • If the sales price of the property is 20 percent or more above the seller’s acquisition cost, the lender is required to document the conditions creating the increase in value. For more details see the December 28th press release from the FHA.