Dover Mortgage Company - Wholesale - Wholesale - Agency, FHA/VA

Acting FHA Commissioner Carole J. Galante announced that FHA will extend its waiver of anti-flipping regulations throughout 2012. This move is intended to stimulate slack housing markets while offering a solution to long-standing vacant properties and resulting neighborhood blight. Real estate investors no longer inhibited by FHA rules against flipping, a practice where investors buy homes, repair them and quickly resell them, can take advantage of incentives offered by banks and other institutional lenders attempting to sell off foreclosed homes.



Buyers of homes offered for sale by so-called “flippers” may then apply for FHA mortgage loans. The FHA decision to extend the anti-flipping waiver may instill confidence in investor sellers who don’t want to deal with arbitrary delays in selling homes they’ve renovated to buyers using FHA mortgage loans.
By waiving its anti-flipping rules for another year, FHA can insure  for first time buyers with little cash to put down. FHA insures mortgages for up to 97.5 percent of a home’s current appraised value. The combination of FHA mortgage loans and availability of renovated homes in moderately priced neighborhoods can potentially increase home ownership and stabilize crime and home devaluation frequently associated with vacant foreclosed and abandoned homes.
Prior to issuing the initial waiver in February 2010, FHA required property owners to hold their properties for a minimum of 90 days before selling them. The key to successful flipping relies on buying homes, quickly renovating them and turning them over. Artificial time constraints can reduce profits when investors are forced to “sit on” renovated properties while awaiting the 90 day waiting period to expire. FHA outlined specific conditions associated with its 2012 waiver of anti-flipping regulations:

• Arm’s length transactions: Buyers, sellers and others involved in a flipping transaction cannot have “an identity of interest” between themselves.
• Limited seller profit: In cases where the sales price of a flipped property is 20 percent or more than the seller’s acquisition price, the seller is required to provide documentation justifying the selling price.
• No HECM loans: FHA does not allow buyers to purchase flipped homes through its Home Equity Conversion Mortgage program. Also known as reverse mortgages, HECM loans provide borrowers with cash drawn from home equity.

Since the inception of its waiver of anti-flipping rules, FHA cites the approximate value of 42,000 FHA mortgages arising from sales by sellers holding properties less than 90 days at $7 billion. These figures suggest that FHA may be on to something, and depending on how the extension of the anti-flipping waiver works in 2012, it could be time to scrap the anti-flipping rules altogether.