FHA waiver of 90day seasoning, what it means to investors

This update from FHA was released on Friday January 15th, 2010, as an excerpt from the CFR (Code of Federal Regulations) without a corresponding Mortgagee Letter and contains information about FHA’s policies regarding the waiver of the 90-day seasoning required for sellers.

 6 Points to Know:

 1.    Waiver takes effect February 1st, 2010 for a period of one year unless extended.

 2.    Investors are now exempt from the 90-day seasoning rule.

 3.    All transactions must be arms-length.

 4.    No identity of interest can exist between buyer and seller.

5.    If sale price is 20% or more of 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.

 To read the text of this waiver and specific details: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

What it means to investors?

Definitely a step in the right direction.  Many investors do not want to hold property for 90+ days and incur holding cost, risk of vandalism, etc.  This could increase investor demand and primary residence buyers.  Many of the properties flipped especially rehabbed will sell for 20% more than acquisition cost so the inspection and 2nd appraisal or documentation will be necessary.  Starting Feb 1st for at least a year this will go into effect.  Hopefully more loosening will occur in lending as financing seems to be investors and primary residence buyers biggest challenge.

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