Usually, buyers can’t receive FHA insured loans on properties owned by a seller for less than 90 days. This new waiver will be beneficial to both financial institutions selling foreclosures as well as investors that rehab and flip properties. Why? Because a lot of buyers currently don’t have the 20% down for conventional loans but can qualify for FHA loans. These buyers can now make offers that are appealing to the sellers because the seller won’t have to sit on the property waiting for the 90 day period to pass.
Please note, the waiver goes in to effect on February 1, 2010 and is only effective for one year!
Some conditions of the waiver include:
- 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 only apply if the lender meets specific conditions.
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
Although the government’s main goal is to help move the inventory of foreclosed homes, one has to wonder, with the right protections in place, would it be best if the 90 day period was removed for good?
For more info, refer to the HUD news release and Waiver document.