Part II of a Multi-Part Series on HUD Regulations: Addressing “Flipping.” FHA targets fraudulent multiple transfers.
Here are the new rules you need to know:
1. If the seller has acquired the property within the past ninety days, it is not eligible for an FHA-insured mortgage.
2. If the current owner has acquired the property within ninety-one to 180 days, the mortgage company must be notified because FHA requires an additional appraisal. The cost of the second appraisal may not be charged to the homebuyer. If the current owner has purchased the property between 180 days and one year, FHA may require a second appraisal of the sales price.
3. New FHA rules state that if a property is to be financed by an FHA-insured mortgage, only owners of record can sell the property. The regulations prohibit FHA financing on transactions that involve sales or assignments of the sales contract.
FHA provides for limited exceptions to the new regulations. Properties acquired by an employer or relocation agency for the purpose of relocating an employee are exempt from the ninety-day rule. In addition, HUD resales under the Real Estate Owned (REO) program are not subject to the time restrictions. Although these initial sales are exempt, subsequent resales must comply with the ninety-day threshold. Finally, the newly-passed restrictions are not meant to apply to builders selling newly-built homes or building for buyers obtaining FHA mortgages.
So what does this mean for you as an agent? The new regulations will require additional documentation. Such documentation could include a property sales history report, a copy of the recorded deed from the seller, a copy of property tax bill, a title commitment or a binder. All of these new requirements could mean more work for you.