The FHA has announced that it will extend its “anti-flipping waiver” through December 31, 2011 in order to “accelerate the resale of foreclosed homes in neighborhoods overrun with abandoned properties and blight.” David Stevens, FHA commissioner, hopes that the continued waiver will help stabilize market conditions in areas that are currently teetering on the edge of another downward slide due to a plethora of distressed, foreclosed and REO homes[1]. Under normal conditions, the FHA will not make loans on homes that are purchased and then resold in a span of less than 90 days. Officially, the FHA has taken this stance in order to “discourage people from buying properties, performing minimal or shoddy repairs, and reselling them at inflated prices”[2].

The anti-flipping waiver, which has been in place for a year already, has resulted in more than 21,000 sales on homes that would have otherwise been ineligible for FHA loans according to FHA reports.  While the FHA does not actually lend money to home buyers, it does insure lenders against default on loans. With the waiver in place, more lenders are likely to make loans on properties that have been purchased in the last 90 days and are now being resold. Stevens believes that this will help FHA borrowers avoid “being shut out from buying affordable properties” and to take advantages of homes that have recently been renovated.

Of course, there are a few restrictions in the waiver. All transactions must be “arms length,” meaning that there can be no shared interest between the buyer and the seller. Also, if the property has been marked up more than 20 percent from the seller’s paid price, then lenders must qualify the transaction more extensively. All in all, though, the extension of this waiver, originally set to expire today, is good news for real estate investors and retail buyers and sellers in today’s market.

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[1] http://www.dsnews.com/articles/fha-extends-anti-flipping-waiver-to-speed-sales-of-reo-homes-2011-01-28

[2] http://online.wsj.com/article/BT-CO-20110128-714325.html