November 4, 2015
Ever since the publication of the new FHA single family home loan rule book, HUD 4000.1, have been examining loan rules as published in the new guide. One important area of the FHA single family loan rulebook involves the guidelines for buying property with an FHA mortgage that is being sold after having been recently acquired by the seller.
HUD 4000.1 states that, in order for a home to be eligible for an FHA mortgage, a certain amount of time must elapse between the sale of the home to the new owner and the subsequent sale of the property to another buyer–this time requirement is known as the HUD “anti-flipping” rule. It states:
“Property Flipping is indicative of a practice whereby recently acquired Property is resold for a considerable profit with an artificially inflated value, often abetted by a Mortgagees collusion with an Appraiser.
(a) Definition
Property Flipping refers to the purchase and subsequent resale of a Property in a short period of time.”
How much time? According to HUD 4000.1, “A Property that is being resold 90 Days or fewer following the sellers date of acquisition is not eligible for an FHA-insured Mortgage.”
What about homes that are technically outside this buying-and-selling window? “A Mortgagee must obtain a second appraisal by another Appraiser if:
–the resale date of a Property is between 91 and 180 Days following the acquisition of the Property by the seller; and
–the resale price is 100 percent or more over the price paid by the seller to acquire the Property.
If the second appraisal supports a value of the Property that is more than 5 percent lower than the value of the first appraisal, the lower value must be used as the Property Value in determining the Adjusted Value. The cost of the second appraisal may not be charged to the Borrower.”
All important things to keep in mind. It’s clear that the FHA and HUD take a dim view of flipping, hence the rules preventing FHA loans on property sales that seem to fit the description. However, there are certain exceptions to keep in mind:
“Exceptions to time restrictions on resale are:
–Properties acquired by an employer or relocation agency in connection with the relocation of an employee;
–resales by HUD under its REO program;
–sales by other U.S. government agencies of Single Family Properties pursuant to programs operated by these agencies;
–sales of Properties by nonprofits approved to purchase HUD owned Single Family Properties at a discount with resale restrictions;
–sales of Properties that are acquired by the seller by inheritance;
–sales of Properties by state and federally-chartered financial institutions and Government-Sponsored Enterprises (GSE);
–sales of Properties by local and state government agencies; and
–sales of Properties within PDMDAs, only upon issuance of a notice of an exception from HUD.”
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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