The Federal Housing Administration (FHA) will suspend it's anti-flipping rule for another year to help continue to speed the sales of some foreclosed homes.
In 2003, the Department of Housing and Urban Development (HUD) issued a rule that prohibited the FHA from insuring a mortgage on homes that were owned by the seller for less than 90 days.
The rule was designed to avoid "flipping" properties -- buying and quickly reselling them at inflated prices to unsuspecting borrowers.
That was several years before the housing market crashed and foreclosures flooded the market.
Last February HUD lifted the ban for one year to accelerate investors' sales of foreclosure properties. Last week, HUD extended the rule wavier for another year, until January 2012.
The housing market needs whatever it can get to speed up foreclosure transactions which can get bogged down by a host of conditions including delays, clean up issues, fix-up problems and fraud.
Without FHA mortgage insurance for a resale within 90 days, sellers balk at FHA buyers because the sellers will have to endure carrying costs along with the risk of vandalism associated with allowing a property to sit vacant for long periods of time.
Today, low-down payment FHA loans account for 30 to 50 percent or more of home purchases, depending on the location.
"With 65 percent of home buyers using FHA loans in the Inland Empire (California), this will continue to encourage investors to purchase, renovate, and re-sell these homes, get them in better condition, and make them eligible for traditional FHA financing," said Brad Yzermans, a mortgage broker with First Priority Financial.
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