FHA and the “Flipper”

As foreclosures increase across the United States and that includes Indiana, banks are looking for ways to sell their overloaded REO inventory.

FHA has devised a plan that should be able to help many of those that buy homes, do some fixing up of the home and put it back on the market.  In the hopes of turning a profit.  FHA has waived the 90 day seasoning rule for sellers.  Here are the guidelines broke down.

1. The waiver takes effect February 1st, 2010 for a period of at least 1 year unless extended. (we will see if it gets abused)
2. Investors are now exempt from the 90-day seasoning rule.
3. All transactions must me arms-length. (no relation amongst the seller & buyer)
4. No identity of interest can exist between buyer and seller. (ie. land contract)
5. If sale price is 20% or greater than the seller’s acquisition cost, the lender must:

a. provide supporting documentation and/or a second appraisal and
b. order an inspection of the property and provide it to the buyer.

6. The waiver is limited to forward mortgages only. (you cannot use a reverse mortgage)

I have uploaded for your convenience the Indiana FHA mortgagee letter that further explains the “90 day waiver”

any questions feel fee to give me a call

Dave