FHA Will Keep Funding Flips

For the second year in a row, the Federal Housing Administration is extending a temporary waiver of its "anti-flipping" rule, meaning home buyers relying on FHA-insured financing will continue to be able to buy homes that have changed hands in the last 90 days. The waiver is a boon for investors seeking to rehab and flip properties, because it expands the pool of eligible borrowers to include those relying on FHA-backed loans, popular with first-time home buyers and others who lack the cash to make large down payments. In extending the waiver through 2012, FHA said all transactions must continue to be arms-length. In cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will apply only if the lender can document the justification for the increase in value, FHA said. FHA instituted the anti-flipping rule in 2003 to protect its mutual mortgage insurance program from losses on homes that were merely flipped, rather than rehabbed. Homes repossessed by Fannie Mae, Freddie Mac, and state- and federally chartered financial institutions were exempt from the rule.

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