The FHA has extended a waiver to its anti-flipping rules into 2012. Under normal circumstances FHA rules forbid taking out an FHA mortgage for the purpose of “flipping”,which is the practice of buying a home, renovating it, and returning it to the market as soon as possible.

A press release from the Department of Housing and Urban Development, HUDNo 11-292, states the waiver will be extended through 2o12 as part of an effort to stabilize home values and improve the housing market.

Acting Federal Housing Administration Commissioner Carol J. Galante was quoted in the release, saying “This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Galante.  “FHA remains a critical source of mortgage financing and stability and we must make every effort that to promote recovery in every responsible way we can.”

According to the release, “With certain exceptions, FHA rules prohibit insuring a mortgage on a home owned by the seller for less than 90 days.  In 2010, however, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011.”

The FHA and HUD’s extended waiver, cited as a temporary measure, allows buyers to use FHA-insured financing to purchase “HUD-owned properties, bank-owned properties, or properties resold through private sales.”

The anti-flipping waiver lets borrowers sell these homes quickly, “helping to stabilize real estate prices and to revitalize neighborhoods and communities” according to the FHA official site.

The extension remains in effect until December 31, 2012, unless otherwise altered, extended, or canceled by the FHA. The press release states the FHA anti-flipping waiver is designed to allow flipping, but not predatory practices that sometimes accompany it.

According to the FHA, “The Waiver continues to be limited to sales meeting the following conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction;
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value; and
• The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.”