FHA Temporarily Lifted The 90 Day Seasoning Requirement
January 15th, FHA temporarily changed its policy and lifted the 90 day seasoning requirement for a period of one year starting February 1, 2010. This is exceptional news for our industry. There are still some restrictions and requirements, but the policy change recognizes the needs of the marketplace. In their press release the FHA stated,
“In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.”
The FHA still has concerns over predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
- In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions. (These conditions can be met rather easily with supporting documentation. – AZREIA)
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
The complete text of the Waiver is at http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf. It is suggested that you read it in its entirty to understand how it affects your business directly. Also, the complete press release is at http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011 .