Today, acting FHA Comissioner Carol J. Galante announced an extension of the waiver of the Anti-Flipping Regulations through 2012. The announcement stated that the reason for the extension was to continue helping the efforts to stabilize the housing market nationwide. The original regulation prohibited FHA mortgage insurance issuance on homes bought within less than 90 days from the last sales date. Obviously, you can see how this could restrict and slow the turn around of the real estate market, because it would reduce how fast a wholesaler could rehab a wholesale proeprty and get it into the hand of a retail buyer. They realize that it does not take 90 days for a wholesaler to rehab a proeprty and get it ready to be sold on the retail market to a retail buyer. They see that this could cost the wholesaler additional time and money to hold onto a wholesale property for this long.
The fact is that most retail buyers can only qualify for the purchase of a home with FHA financing. If FHA did not allow their insurance to be issued, the retail buyer would have to qualify for a conventional loan. A conventional loan as of the day that this wa written requires 20% down payment. Most retail buyers do not have this kind money sitting around.
One additional factor, most people are not familiar with is the fact that FHA will not insure a loan on a property with certain condition issues. Therefore, the wholesaler is a crucial cog in this wheel of getting distressed properties back on the market and habital for retail buyers. If wholesalers do not fix up these properties, they would just sit on the market vacant and deteriorating in condition. Wholesale real estate buyers that fix up properties and put them back into a condition that qualifies for FHA insurance are crucial to any recovery effort in any struggling real estate market. You will not find banks dropping a ton of money into major repairs to put their deteriating properties back on the market for retail buyers. If wholesalers don’t do it, no one else will.
Today’s extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA. All other terms of the existing Waiver will remain the same. In the waiver, you will find the following conditions:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction;
- In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value; and
- The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition. It is obvious that this extension is crucial to the success of real estate wholesalers every where turning many wholesale properties into retail properties each month.