A reader asks, “I purchased a manufactured home 10 months ago. I tried to sell it to a buyer whose lender told her that I as a seller have to won the home for at least a year before a buyer to use FHA for their loan. Is this a fact?”
FHA loan rules do place a partial restriction on how the buyer can sell his or her property that has been purchased with an FHA mortgage loan. This restriction, known as the FHA’s “anti-flipping rule” requires borrowers to wait a minimum of 90 days before selling the property.
FHA mortgagee letter 2014-06 spells out these rules, which were amended for a time with a waiver to the anti-flipping rule, but since those days are over a review of the mortgagee letter that rescinded the waiver is in order. It says:
“Property flipping is a practice whereby a property is resold a short period of time after it is purchased by the seller for a considerable profit with an artificially inflated value, often abetted by a lenders collusion with the appraiser. FHAs policy prohibiting property flipping eliminates the most egregious examples of predatory flips of properties within the FHA mortgage insurance programs.”
Additionally, FHA Mortgagee Letter 2014-06 says, “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; and 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 propertys value.”
There’s an additional line in the mortgagee letter which states, “FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.” That may be where the reader’s one year question comes into play–a misinterpretation of this rule or a misunderstanding of it could lead one to believe that all borrowers must wait a full year to sell.
And with that in mind, Mortgagee Letter 2014-06 adds the following for sales of homes purchased with an FHA loan that fall between 90 days and 12 months:
“If the resale date is more than 90 days after the date of acquisition by the seller but before the end of the twelfth month following the date of acquisition, FHA reserves the right to require additional documentation from the lender to support the resale value if the resale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months. At FHAs discretion, such documentation may include, but is not limited to, an appraisal from another appraiser.”
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