In response to high foreclosure rates and a continually sluggish housing market, the Federal Housing Administration (FHA) announced today they will extend the temporary waiver of FHA's anti-flipping regulations through 2012.
The waiver, which was first announced in 2010 and set to expire in December 2011, will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties or properties resold through private sales. The goal is to help stabilize communities that have been devastated by the foreclosure crisis.
In a press release announcing the move, Carol Galante, acting FHA commissioner, said that the "extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight."
"FHA remains a critical source of mortgage financing and stability and we must make every effort to promote recovery in ever responsible way we can," she added.
To protect consumers, the waiver contains strict conditions and guidelines to prevent what FHA calls "the predatory practice of property flipping, in which properties are quickly resold as inflated prices to unsuspecting borrowers."
According to today's release from the Department of Housing and Urban Development (HUD), the waiver is limited to sales that meet the following 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 other words, buyers and sellers are acting of their own accord and have no relationship with one another.
-- In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value.
-- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA.