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Springfield Missouri Real Estate Investment Buyers, FHA Has Suspended the 90 Day Flip Rule!

Springfield Missouri Real Estate Investment Buyers, FHA Has Suspended the 90 Day Flip Rule!

The 90 day flip rule has been temporarly suspended for all sellers effective February 1, 2010 and the waiver will expire one year from February 1, 2010

Here is HUDs press release:

Pursuant to 7(q) of the Department of Housing and Urban Development Act (42 USC 3535 (q)) and 24 CFR 5.110, I hereby waive 203.37a(b)(2) of the regulations. The regulations at 24 CFR 203.37a(b)(2) provide that a mortgage for a property will not be eligible for FHA insurance if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller, and the seller does not come under any of the specific exemptions that apply to the 90-day rule. This waiver, which takes effect on February 1, 2010, is limited to those sales meeting the following conditions:

1   All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. Some ways that the lender can ensure that there is no inappropriate collusion or agreements between parties is to assess and determine the following: 

a. The seller holds title to the property;

b. LLCs, corporations, or trusts that are serving as sellers were established and are operated in accordance with applicable state and Federal law;

c. No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame (chain of title information for the subject property can be found in the appraisal report);

d. The property was marketed openly and fairly, via MLS, auction, For Sale by Owner offering, or developer marketing (any sales contracts that refer to an "assignment of contract of sale," which represents a special arrangement between seller and buyer may be a red flag).

In cases in which the sales price of the property is 20 percent or more over and above the seller's acquisition cost, the waiver will only apply if the lender:

a.   Justifies the increase in value by retaining in the loan file supporting documentation and/or a second appraisal which verities that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer: and

b,   Orders a property inspection and provides the inspection report to the purchaser before closing. The lender may charge borrower for this inspection. The use of FHA-approved inspectors or 203(k) consultants is not required. The inspector must have no interest in the property or relationship or with the seller, and must not receive compensation for the inspection from any other party than the lender. Also, the inspector may not compensate anyone for the referral of the inspection. Additionally, the inspector may not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection, and may not be involved with performing any repairs recommended by the inspection. At a minimum, the inspection must include:

 I.   The property structure, including the foundation, floor, ceiling, walls and roof;

ii.    The exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways;

iii.  The roofing, plumbing systems, electrical systems, heating and air conditioning systems;

iv.  All interiors; and

v.   All insulation and ventilation systems, as well as fireplaces and solid-fuel-burning appliances.

3.   The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HELM) for Purchase program.

 In support of the waiver, I make the following Determinations.

DETERMINATIONS

I    To help facilitate the return of repaired and habitable properties to the market in a timely fashion, additional exemptions to the 90-day resale restriction period must be granted for the purchase of properties by investors. This policy change will help to sell properties that may otherwise remain vacant for up to 90 days, while offering affordable housing options to buyers wishing to use FHA-insured financing. 

2.   All other guidance concerning property flipping prohibition remains unchanged.

3.   The most expeditious means of effectuating such additional exemptions is by waiving 203.37a(b)(2).

4.   The above findings constitute good cause for the waiver, as required by 24 CFR §5.110.

5.   A waiver of 203.37a(b)(2) will not violate any statutory requirements.

6.   The waiver shall expire one year from February 1, 2010, unless otherwise extended or withdrawn by the Commissioner. If FHA discovers that there is a significant increase in mortgage defaults and mortgage insurance claims attributable to insured mortgages obtained through this waiver, the Commissioner may, at his discretion, withdraw this waiver immediately.

About The Authors:  Betty Knowles is a full-time REALTOR® with Coldwell Banker Vanguard REALTORS® in Springfield, MO and proudly serves on the board of the Greater Springfield Board of REALTORS®.  She also served as President of Women’s Council Of REALTORS® in Southwest Missouri.  Betty’s genuine passion is helping people buy and sell homes in Springfield, Ozark, Nixa, and surrounding communities.  

John Knowles is likewise a full-time REALTOR® with Coldwell Banker Vanguard and a member of the Greater Springfield Board of REALTORS®. A self-proclaimed computer geek, John is talented at developing real estate websites, videos, photography, blogs, search engine optimization and other technical skills essential to marketing and selling real estate in Springfield MO.

Together this dynamic team makes up TeamKnowles REALTORS®, Spouses Selling Houses!  They are dedicated to doing what it takes to sell your home in the greater Springfield real estate market, or help you purchase a home that fits your particular needs. Give TeamKnowles a call today; you’ll be glad you did!

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Comment balloon 1 commentBetty Knowles • January 29 2010 06:14PM

Comments

Betty - Do you think those guys have any idea what they are doing? So far it's been a show to rival the keystone cops, and I don't think it's going to change for 3 more years. This is good for investors, but it never should have been changed to start with.

Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) over 8 years ago

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