FHA to Allow Flip Sales?

Rumor has it....FHA will now allow flip sales. Is this true?

Here is the response from prominent closing attorneys, Weissman, Nowack, Curry and Wilco:

As a matter of fact, yes, subject to some restrictions. Up until now, FHA would not insure a loan if the sales contract was dated within 90 days of the seller's purchase of the property. In other words, to qualify for FHA financing, the seller had to have owned the property for longer than 90 days. However, by memorandum dated January 15, 2010, David H. Stevens, Assistant Secretary for Housing - Federal Housing Commissioner, issued a one year wavier (effective February 1, 2010 through January 31, 2011) from this. Starting February 1, 2010, FHA will insure a loan even though the seller owned the property for less than 90 days.


The following conditions apply: (1) the transactions must all be arms-length with no identify of interest between buyer and seller or other parties to the transaction; (2) if the price is increasing 20% or more (i.e., seller buys at $100,000 and, within 90 days contracts to sell at $120,000 or more) then the lender must justify the increased value by maintaining a 2nd appraisal or other evidence of renovations, repairs, etc. and order a property inspection. The inspection does not need to be FHA approved, but can have no interest in the property or relationship with the seller. The inspector must be hired, and paid, by the lender, although the lender can pass this expense along to the buyer. This wavier does not apply to reverse mortgages.

Investors are going to love this.....