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”.