In an article written by Kenneth R. Harney that ran in the Los Angeles Times on October 19, 2014, it is stated that HUD staff had indicated that they were considering terminating the 90 day anti-flipping rule waiver.
This waiver (which had been extended through 12/31/14) establishes certain criteria under which a property owner can sell their property to an FHA borrower within 90 days of their acquisition of the property. When this anti-flipping rule was initially extended, the Department stated that the extension was “intended to accelerate the resale of foreclosed upon homes in neighborhoods struggling to overcome possible property abandonment and blight”. Furthermore, “it will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.”
If FHA does not extend this waiver, home sellers will have to wait at least 90 days to sell their house to an FHA borrower. There are some exceptions to this rule such as bank foreclosures and, of course, HUD itself is exempt from this rule when selling their REO properties. However, since many experienced investors have the expertise in acquiring, rehabbing and selling their properties well within a 90 day time frame they will be less apt to entertain offers from prospective FHA buyers due to the added holding costs and risk of vandalism that result in holding a vacant property over 90 days.
Unless HUD/FHA officials can document the added risks to the FHA insurance fund that the waiver has caused – it is difficult to understand why they would not extend this waiver. It certainly appears contrary to FHA’s published “Blueprint for Access” policy that was announced in May 2014 which outlines additional steps the agency was taking to expand access to credit for underserved borrowers as many of the recently acquired and rehabbed properties could be subsequently purchased by such borrowers.