On January 15, 2010 HUD announced that it was implementing a temporary waiver of their 90 Day Seasoning Rule to help accelerate the resale of foreclosed and distressed properties.

In the past when investors bought a property to renovate and resell there was a 90 day waiting period before that property could qualify to be sold using an FHA loan.  This waiting period was also called 'Seasoning'.   In the current real estate market, especially markets such as Phoenix and Tucson,  many investors are purchasing foreclosures and other distressed properties, renovating them and then placing them on the market for re-sale.   In today's marketplace we are seeing a large number of FHA loans being made, thus many homes are sitting vacant for several months.  This waiver will allow homes to be resold more quickly having a positive effect on neighborhoods and communities.

The waiver is good until February 1, 2011 unless otherwise extended.  However, due to the possibility of predatory practices there are some conditions that lenders must do in order to operate with this waiver.  A brief summary of the requirements are as follows.

All Transactions must be at arm's length and the lender must assess and determine the following:

1.  Seller holds title to the property

2.  Sellers that are LLC's, Corporations, and Trusts are established and operating accordingly to state and federal laws.

3.  No previous flips exist on the subject property in the last 12 months.

 4. The property was marketed openly and fairly via MLS, auction, FSBO or developer.

In cased in which the sales price is 20% or more over the sellers acquisition cost some additional requirements are required:

1.  The sales price must be justify the increase with supporting documentation of repairs or renovations.  When no such work is preformed, the appraiser must provide appropriate explanation of the increase of property value since the prior transfer.

AND

2.  The lender orders a property inspection and provides the inspection report to the purchaser prior to closing.  The lender may charge the borrower for this inspection. The inspector does not have to be an FHA approved inspector, but may not have any interest in the property or relationship with the seller.  In addition,  the inspector cannot receive any referral fees from work needed to repair the home and FHA does outline some areas that must be covered in the inspection.

3.  The waiver is limited to forward mortgages and does not apply to the Home Equity Conversion Mortgages.

Overall this is a positive step in the housing market recovery by getting more properties eligible quicker for FHA financing.