FHA Relaxes Anti-Flipping Rule Starting February 1, 2010

HUD steps it up

Earlier this month, the Housing and Urban Development Department which oversees the Federal Housing Administration stepped up their effort to curb the foreclosure crisis by vowing to speed up the resale of foreclosures. This week comes the announcement making it official that from February 1, 2010 through February 1, 2011, the FHA is lifting the rule that prohibits insuring a mortgage on a home owned by the seller for under 90 days. This rule has been informally called the “anti-flipping rule.”

The change was made to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, said FHA Commissioner David H. Stevens.

3 birds, 1 stone

“Call it three birds with one stone: The federal government hopes to help low-down-payment home buyers, investors who fix up foreclosures, and communities burdened with too many bank-owned and foreclosed homes — all with one potentially far-reaching policy change,” noted Kenneth R. Harney of the Washington Post.

Harney continued, “The end game usually went like this: Find a hapless purchaser for the flipped house who would apply for a low-down-payment FHA loan. Typically, that buyer defaulted quickly — leaving the FHA with a foreclosed house on its books and a loss to its insurance funds.”