The Federal Housing Administration’s (FHA) Office of Single Family Housing has announced that the temporary waiver of FHA’s regulation that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of the previous acquisition, expires on December 31, 2014.
FHA deems a sales contract to be executed when all parties to the contract have signed the contract, and the contract is enforceable under the law of the state the property is located. Mortgages that are made on properties in which sales contracts have been executed after 11:59 PM, December 31, 2014, are not eligible for a waiver of the regulation prohibiting property flipping. FHA will not extend the waiver beyond December 31, 2014
Resales Occurring 90 Days or Less Following Acquisition
If the owner sells a property within 90 days after the date of acquisition, that property is not an eligible security for a mortgage insured by FHA unless it falls within one of the exceptions to the time restrictions on resales set forth in §203.37a(c) of the regulations. FHA defines the seller’s date of acquisition as the date of settlement on the seller’s purchase of that property. The resale date is the date of execution of the sales contract by the buyer that will result in a mortgage to be insured by FHA.
If the resale date is between 91 and 180 days following acquisition by the seller, the lender is required to obtain a second appraisal made by another appraiser if the resale price is 100 percent or more over the price paid by the seller when the property was acquired. The second appraisal cannot be charged to the borrower.
Resales Occurring Between 91 Days and 12 Months Following Acquisition
If the resale date is more than 90 days after the date of acquisition by the seller but before the end of the twelfth month following the date of acquisition, FHA reserves the right to require additional documentation from the lender to support the resale value if the resale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months. At FHA’s discretion, such documentation may include, but is not limited to, an appraisal from another appraiser.
Exceptions to 90-day Restriction
The following sales are exempt from the time restrictions provided by §203.37a:
- Sales by HUD of its Real Estate Owned
- Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies
- Sales of properties by nonprofits approved to purchase HUD-owned single-family
- Properties at a discount with resale restrictions
- Sales of properties that are acquired by the sellers by inheritance
- Sales of properties purchased by employers or relocation agencies in connection with relocations of employees
- Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises
- Sales of properties by local and state government agencies.