UPDATE: FHA Waives 90-Day Seasoning Rule
On January 10, 2010, I posted, FHA Should Rescind the 90-Day Seasoning Rule. Perhaps those in charge at FHA were reading my blog, because on January 15, 2010 (just 5 days after posting my original article), FHA issued a statement, Waiver of Requirements of 24 CFR 203.37a(b)(2).
In short, FHA has apparently come to realize they are now the primary mortgage source for the majority of current home buyers. They have also seemingly come to recognize the fact, that to continue their 90-day seasoning requirement is only exacerbating the depressed housing market, since that rule prevents buyers from absorbing the homes being bought and renovated for resale by small investors.
However, there are a number of conditions that must be met; none of which seem particularly unreasonable.
For homes bought within 90 days of resale (whether or not bought at foreclosure auction) and being resold for more than 20% of that purchase price, there is a burden on the seller to justify the price / value increase. This can be done by 1) having the buyer’s lender obtain at least 2 appraisals (from 2 different appraisers) that might justify the higher price through market value evidence, or 2) by having the seller provide documented evidence (receipts, etc.) showing that the seller made various renovations or repairs, or 3) a combination of both of these processes.
Another important requirement related to homes being bought within 90-days of their last purchase, is that THE LENDER IS REQUIRED to obtain a home inspection to determine the quality of the home. The home inspection must address all major mechanical systems (plumbing, HVAC, etc.), electrical system, roof, structure, as well as all interior and exterior building components, etc.
It’s important to understand that 1) the home inspection to be ordered by the lender is NOT AN OPTION, and 2) the lender is allowed to recover the expense of the home inspection from the buyer.
Now, while there are various other criteria that must be met (e.g. 1) All transactions must be arm’s length, 2) The house has to have been publicly marketed thru an MLS, or various advertising, and 3) Title must actually be held in the name of the seller, etc.), this Waiver does not seem to contain any requirements that are either unreasonable or difficult to meet.
As Mr. Spock would say, “Go forth and prosper.”
