…and it’s a good thing.

HUD has flipped the Anti-Flipping rule on its head – temporarily — in an effort to make foreclosures more attractive to investors. On Jan. 15, HUD announced that FHA mortgage insurance will now be allowed on foreclosed houses that are quickly resold – “flipped” – which will also free up the supply of foreclosed home for first-time buyers.

The temporary waiver on purchasing a flipped house with an FHA mortgage went into effect on Feb. 1 and runs for one year, unless it’s extended. There are conditions attached to help HUD do what it sought to do by invoking the Anti-Flipping rule in the first place: prevent “predatory practices” by investors:

• The transaction has to be at arms-length;
• If the sale price is +20% more than the acquisition cost, the lender has to meet certain appraisal and property inspection conditions;
• The waiver cannot be applied to Home Equity Conversion Mortgages; it is limited to forward mortgages.

The waiver helps investors sell flipped properties quickly at a fair market price, which helps the home occupancy rate and also helps to stabilize values.

The waiver makes FHA-insured mortgage financing available for a growing percentage of the available homes for sale.

The waiver could potentially diminish FHA mortgage fund losses by increasing what buyers can pay for distressed properties.

More buyers. More sellers. More fair market prices.

Hey, it’s all good.

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