By Inman News, Monday, January 18, 2010.
Starting Feb. 1, housing regulators will suspend for one year a 90-day waiting period on property resales that it says has put FHA borrowers at a disadvantage in bidding on foreclosed properties.
The waiting period on FHA financing of resales was implemented in 2003 to protect the Federal Housing Administration's mortgage insurance program from the impacts of home flipping.
The policy did not apply to properties repossessed by Fannie Mae, Freddie Mac, or state- and federally chartered financial institutions. In 2008, FHA lifted the 90-day waiting period on resales of all bank-owned (REO) properties (see story).
Now, although many other conditions still apply, the waiting period is being lifted on all resales -- including properties purchased and rehabbed by private investors.
Research shows that acquiring, rehabilitating and reselling properties to prospective homeowners often takes less than 90 days, the Department of Housing and Urban Development (HUD) said in announcing the change.
Some sellers of foreclosed properties have been reluctant to enter into contracts from potential FHA buyers because of the cost of holding a property for 90 days, and the risks that a vacant property would be vandalized, HUD said.
Lifting the waiting period "will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities," HUD said.
Lenders must have supporting documentation or a second appraisal if the sales price of a property increases by more than 20 percent from the seller's acquisition cost, HUD said in publishing the waiver requirements. The waiver does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
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