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Given low interest rates and home values, we’d like to fix up and quickly resell investment houses. But, do most lenders prohibit financing for fast resales to stop flipping?
In 2003 HUD established an anti-flipping rule because FHA loans were used to finance numerous cases of illegal flipping. Under the rule, HUD refused to finance any home sold within the past 90 days.
The problem with the HUD rule is that while it inhibited “illegal flipping,” the rule also hurt lawful flippers, people who simply want to quickly buy and fix up homes – such as legitimate rehabbers. Lawful flippers need FHA and other loan programs to be available so that prospective buyers can easily finance home purchases.
HUD amended the 2003 rule several times to exclude a variety of property owners, including those who acquired a home by inheritance, lenders with foreclosed properties and state and local governments. Finally – in early 2010 – HUD suspended its anti-flipping rule.
“In today’s market,” said HUD, “FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.”
The HUD findings resulted in the anti-flipping rule being put on the shelf until at least Feb. 1, 2011. HUD will shortly make a new decision regarding whether to continue the suspension, reinstate the rule or change the rule once again.
In addition to HUD, many private-sector lenders also have adopted anti-flipping guidelines – which remain in place. The result is that before buying property with the intent of quickly re-selling, first check with lenders to make sure financing is available to prospective buyers. In addition to HUD, many private-sector lenders also have adopted anti-flipping guidelines – and those guidelines remain in place. The result is that before buying property with the intent of quickly re-selling, first check with lenders to make sure financing is available to prospective buyers.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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