Posted by David Kral on 10/8/06 1:59pm
Msg #151036

FHA New Anti Flipping Rules go in effect


I searched and did not see a post on this. This comes from a local title company newsletter sent monthly. It does not quote a source, but I have been getting it for a long time. I believe it is accurate.

FHA's anti-flipping rules have gone into effect wit the government hoping to curve mortgage fraud and predatory lending.

FR-4615 makes recently sold property ineligible for FHA mortgage insurance and allows FHA to demand more documentation to support any dramatic increase in value.




Under the rules:

A home sale in 90 days after acquisition will not be eligible for FHA insurance.

Re-sales between 91 to 180 will be allowed provided the lender obtains an additional appraisal from an independent appraiser based on the re-sale percentage threshold established by the FHA.

Re-sales occuring between 90 days to a year will be subject to a requirement that the lender obtain additional documentation to support any dramatic increse in value.

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Well better late than never. Still it is likely a good thing over the long term.
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Reply by PL on 10/8/06 4:12pm
Msg #151047

I dabble in the Flipper market

As of today, I have never had anyone question the added value of any place I've done. To call some of the places I have rehabbed dumps, would be disparging the word dump, all have turned out to be quite nice and if anything they brighten up the neighborhoods there in. None have ever been an FHA deal, mostly because no one wants to jump the hoops, or pay MI. Most were 3/27 or 2/28 adjustables, because most of the buyers did not have stellar credit, but these loans let them escape the apartment Hell they were in and allowed them to start their version of the American dream.
If the FHA rule change shakes out some of those who are not playing squarely, right on, but for the rest of us who play by the rules, no big deal. There will always be those willing to risk capital, for a decent gain. Ain't this country great?

Reply by Paul_IL on 10/9/06 1:03am
Msg #151083

Not reallly an issue as most convention financing is now better than FHA presently so it only eliminates a small percentage of potential buyers for your flip. Also if it is a true rehab there will be adequate documentation to justify the increased value.

There is also a definition difference in what most people and numerous TV shows show as flipping and what the FHA considers flipping.

Reply by PAW on 10/9/06 7:46am
Msg #151096

Read the ruling ...

http://www.hud.gov/news/focus.cfm?content=2003-05-02.cfm

Property "flipping" occurs when a recently acquired property is resold for a considerable profit with an artificially inflated value. Predatory lending results when home purchasers become unwitting victims of lenders, sellers and appraisers, often working together. The unsuspecting home buyers either purchase homes with sales prices far in excess of the fair market value, or are substantially overcharged for costs associated with obtaining a mortgage.

Many states, including Florida, are adopting (or have already) similar laws and statutes to prevent flipping. Florida is expanding on this rule to make it mandatory that every sale of a residential, owner occupied, property to have an affidavit that clearly states the intent of the buyer. This affidavit should have wording to the effect, that when a new home is purchased or an existing home is refinanced, as a residential property (including vacation and second homes, excluding all investment properties) that property will be currently occupied (or occupied within then next 60 days for a purchase transaction), that the occupants **intended** to occupy the property for the next full year, and that the property will not be leased or rented during the next year. We'll have to wait and see if this actually becomes law. But some lenders are already including an affidavit in their closing packages which states the same thing.