HUD Anti-Flipping Laws

Wednesday the U.S. Department of Housing and Urban Development ruled that homes sold within 90 days of purchase will not be eligible for FHA financing.

The rule will go into effect July 9 and homes sold between 91 and 180 days after purchase will require additional documentation if the sales price is 100% or more of the previous purchase price.

This is another example of a government entity attempting to regulate an industry without understanding the core issues, much like the recent lease option law in Texas.  Preventing a home owner from easily selling their house within 6 months of purchase does nothing to protect the potential buyer, and certainly won't stop fraud.

Flipping refers to selling a house quickly after purchase for any reason and is in no way illegal.

If HUD wants to stop mortgage fraud (which is their stated intent), they should crack down on mortgage brokers and appraisers that act in collusion to provide an appraised value of a property that is more then it is actually worth.  As long as an appraisal is legitimate and reasonable, there should be no problem providing FHA financing on a property.

The most ridiculous part of this ruling is that HUD itself is exempt, along with Fannie Mae, Freddie Mac, and housing agencies.  "Do as I say, Not as I do".

Comments

[Cheryl Ferrante]

No, the most ridiculous part of this ruling is that the very people the government is trying to protect are also becoming the victims. A young person stumbles upon a house that is being renovated, but not as yet for sale. Since her preapproval amount is not high (so her housing choices are limited) she asks the owner if he plans to sell. He is - so she makes an offer, which is accepted. They get a contract, she applies for a loan, he finishes his work - making little if any profit because of unforeseen issues coming up during the renovation - then - after the buyer has spent $400 on an appraisal - 3 days before closing - and 5 days before the buyer has to move from her present rental - the bank informs her that FHA won't approve the loan because of the anti-flipping law and the closing will have to be put on hold for a month. HUH? No, as I said, the ridiculous part of this law is that the very people the law is supposed to protect are actually being victimized by it.

[daniel cherry]

i live in batavia ny i can not understand how our government gives breaks to people like my landlord to buy a hme never do any work to fix serious problems structural problems.Then flip it and make alot of money at the expense of tenants who are made to live in substandard housing.And the if a tenant complains you lose hud..Must be the ones complaining did somthing wrong to tenants??My landlord mike ognibene buys hud homes and flips em for profit.In the dead of winter we were forced to pay heat.When i complain the hud acts we did somthing wrong.We were good tenants until we complain about payin heat.Daniel cherry cherrypicss@hotmail.com..i know if i were a landlord id treat people who pay rent well fix things and a happy tenant would be a good one...