This is continuation of my FHA blogs.  Please visit the first installation on flipping: 

https://ameglegal.wordpress.com/2008/03/28/tgif-legal-tip-fha-loan-anti-flipping-rules/

Please visit the following on fees:

https://ameglegal.wordpress.com/2008/04/04/tgif-legal-tip-what-to-know-about-fha-fees/

As you know from my previous blogs, FHA has unique requirements that prohibit the seller from having owned the home less than 90 days.  Remember “flipping” is when property is resold in a short period of time after it is purchased.  Key point to remember: know what the sale date is.  It is not close of escrow, rather the date of execution of the sales contract.  You cannot “clean up the title” at close of escrow.  The seller must be on title at time of contract.  Finally these rules do not apply to new construction.

HUD has Announced an Exemption to its Anti-Flipping Rule. 

On June 9, 2008, HUD expanded the categories of properties exempt from this anti-flipping rule.  This new exemption is for property acquired through foreclosure by mortgagees that are not state or federally chartered to become eligible for FHA-insured financing during the 90-day period and is effective for a period of one (1) year. 

What does it mean?

SHORT VERSION:

It makes it easier for your clients to use FHA loans when buying most any  REO property.  So don’t stress if it’s confusing.  This will occur behind the scenes and prevent the few hiccups that have been occurring recently. 

LONG VERSION:   

The new exemption is explained here: 

For the curious, the long version is as such: when a home is foreclosed upon, it is sold within the REO arena right?  Well what was happening was the Lender foreclosed and then often transferred the property to a third party and THAT third party sold it to your client and your client was running into trouble getting an FHA loan due to the 90 day rule.  Also lenders were not federally chartered (think hard money lender).  HUD found that the current exemptions from the 90-day restriction in the law failed to accommodate sales of properties acquired as the result of foreclosure by mortgage lenders other than those currently exempted, and do not accommodate exempt institutions that use subsidiaries and vendors to sell their inventory of foreclosed properties.  So, both un-chartered lenders can break the 90 day rule AND this exemption flows to properties foreclosed on by the lenders, their subsidiaries, as well as vendors hired by exempt entities to sell their real estate owned.  I highlight “exempt” because if the lender is hard money, for example, or a non state/federal-chartered lender and forecloses and transfers the property to another entity this exemption does not appear to apply.

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