HUD plans to waive the Federal Housing Administration's (FHA) anti-property-flipping rule through December 31, 2014. The agency is extending the temporary waiver that was put into place in January 2010 for another two years to encourage investors to acquire and renovate foreclosed and vacant homes.
FHA rules typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days, but HUD notes that the housing market's downturn led to an outsized rise in defaults, and consequently a rapid increase in vacant foreclosed homes. Though efforts to keep families in their homes have averted millions of foreclosures and helped to mitigate some of the damage from the crisis, HUD says foreclosures remain "unacceptably high" and affect not only the families that lost their homes, but entire neighborhoods and communities.
While the agency's primary goal is to help homeowners remain in their homes, HUD says in cases where that's not possible, waiving the FHA regulation on property flipping will help stabilize neighborhoods and communities where foreclosure activity has been high. The waiver is applicable to all single-family properties being resold within 90 days of the seller acquiring the property and is not limited to foreclosed homes. The waiver is subject to certain conditions and is not applicable to mortgages insured under HUD's Home Equity Conversion Mortgage (HECM) Program.