On June 7, 2006, HUD published a final rule in the Federal register amending regulations at 24 CFR 203.37a prohibiting property flipping in HUD's single family mortgage insurance programs by providing additional exceptions to the time restrictions on sales. The rule and this mortgagee letter become effective for mortgages endorsed for insurance on or after July 7, 2006. this Mortgagee Letter also rescinds, in their entirety, Mortgagee Letters 2003-07 and 2005-05.

The additional categories of properties exempted from the time restrictions include sales of properties by:

• State and Federally chartered financial Institutions and government-sponsored enterprises (GSEs) (e.g., Fannie Mae and Freddie Mac)
• Local and State goverment agencies
• Nonprfits approved to purchase HUD REO properties at a discount (hud.gov/offices/hsg/sfh/np/_hoc.cfm)
• Sales of properties within Presidentially-Declared Disaster Areas (upon FHA's announcement of eligibility in a mortgagee letter specific to said disaster )

Overview of FHA's Property Flipping Policy

FHA requires that :

a) only owners of record may sell properties that will be financed using FHA-insured mortgages

b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing

c) that for resales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property's value. FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.

For more information or whole sale properties, please call Wesley Williams 915-239-1970.