BiggerPockets

Thanks for the post Ted, that is a big plus for investors and FHA borrowers who are the needy ones blocked by the idiotic anti flip rules. Amen!
-- Dawn

Have to give Josh credit ... his post on the bulletin side is where I first saw the news. I thought this great & positive policy change worthy of forum discussion.

With that said, I recommend that everyone should read the bulletin for themselves. My first concerns is that lenders might not adhere to the FHA ruling and stick to their in house seasoning requirement. FHA has recently subpoenaed 15 lenders with high default rate. That could scare banks and non-bank lenders to tighten up their underwriting and turn down flip transactions.

Second, I would be careful (now more than ever) how a transaction is structured (even for transactions that close 90+ days). Section 1(c) states "No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame". Rehabbers that buy from wholesaler (that do A-B B-C transactions) might have a tougher time unloading a property to a retail buyer who uses a FHA mortgage. Entity flipping now seems like a better idea.

Third, I see a higher level of scrutiny for all flip transactions. Flips with more than a 20% (need at least that to make money) increase over acquisition cost will need documentation to justify the higher sale price. This is not a big deal if you have your house in order (proper paperwork from contractors, invoices, etc...).

In the end, this is a net positive. I wouldn't be surprised to seem a decrease in the absorption rate and days on market around the country. Well thats my take on it, what's yours?

James, good points and logical! It's also mentioned in the wavier to justify improvements. I guess they are geeting logical, what a change! Hopefully this will filter through in the secondary and make life easier. Bill

These are the "cliff notes" i pulled out of it:

1. Effective 2/1/2010
2. Transactions must be arms length - no inappropriate collusion and no identity of interest between the buyer and seller or other parties. This can be determined using the following:
1. Seller holds title to the property
2. LLC's, Corporations, or Trusts which are sellers are operating within the law
3. No pattern of previous flipping exists for the same property within a 12-month time frame
4. Property was marketed openly and fairly via MLS, auction, FSBO (for sale by owner) or developer marketing
3. In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender:
1. Justifies the increase in value by retaining loan file supporting documentation and / or a second appraisal that verifies the seller has completed sufficient renovation / repair / renhabilitation work
2. Orders a property inspection and provides inspection to the purchaser prior to closing. FHA approved inspectors are not required. Inspection must include, at a minimum:
1. Structural inspection, including roof, foundation, floors, ceiling, walls, and roof
2. Exterior, including siding, doors, windows, decks, balconies, walkways, an driveways
3. Plumbing, electrical, heating, and air conditioning systems
4. Insulation and ventilation systems, including fireplaces and fuel burning appliances
4. Waiver is limited to forward mortgages, and does not apply to Home Equity Conversion Mortgage (HECM) for Purchase program

oh and another thing. if you cant sell a home for more than 20% (unless renovations.) of what you paid. is it talking you cant PROFIT more than 20% or you cant SELL for more than 20%? im reading SELL but im hoping im missing something.

I am still having problems with lenders who are following the old 90 day rule. Although I show them a copy of the signed waiver, they are waiting for the FHA mortgagee letter to come out. No one knows when that will happen. Does anyone know of a lender who does business in Wisconsin that will not require the 90 seasoning?