FHA Anti Flipping Rule Changes January 1, 2015

Since 2003 there have been regulations set forth by HUD which prohibited using FHA-insured financing for properties that had been owned by the seller for less than 90 days. The goal of these regulations was to curb illegal home flipping, or selling homes with inflated values through mortgage or appraisal fraud. 

The FHA anti-property flipping rule restricts the use of FHA financing to purchase single family properties that are resold within 90 days from the seller's acquisition date. The flipping rule does provide for exceptions to certain types of sellers such as HUD and GSEs. The temporary waiver expanded the types of sellers covered by the exception to sellers such as private investors and non-bank financial institutions.

As of January 1, 2015, FHA's restrictions on property flipping will revert back to the original guideline that prohibits FHA financing for the purchase of a property that was acquired by the seller within 90 days from the date of the executed date of Sales Contract for resale. FHA deems a sales contract to be executed when all parties to the contract have signed the contract, and the contract is enforceable under the law of the state the property is located.

The effective date for transactions eligible for the flipping waiver will be based on the date on which the sales contracts have been executed. Only transactions that are based executed sales contracts executed on or before December 31, 2014 will be eligible for the flipping waiver. All parties must have signed the sales contract to be eligible for the waiver.

Any transaction based on a sales contract executed on or after January 1, 2015 will not be eligible for the flipping waiver and will be subject to standard 90 day resale restriction as described above.

The following exceptions to the 90 day resale restriction will remain as follows if sales transactions are:

• For properties acquired by an employer or relocation agency in connection with the relocation of an employee;
• resales by HUD under its REO program;
• sales by other U.S. Government agencies of Single Family properties pursuant to programs operated by these agencies; 
• sales of properties by nonprofits approved to purchase HUD owned Single Family properties at a discount with resale restrictions; 
• sales of properties that are acquired by the seller by inheritance; 
• sales of properties by state and federally-chartered financial institutions and Government Sponsored Enterprises; 
• sales of properties by local and state government agencies; 
• sales of properties within Presidentially Declared Major Disaster Areas, only upon issuance of a notice of an exception from HUD

Until next time,

Craig Turley

NMLS 80917

FHA Mortgage Payoff Change Effective January 21, 2015

Have you paid off a FHA mortgage and noticed you were charged additional interest through the end of the month, even if your mortgage was paid off earlier than the last day of the month?  This post payment interest charge is going away in 2015 and it will allow FHA mortgage holders to only be charged interest through the date of prepayment, not the interest as of the next installment date.  This is a small win for the consumer looking to payoff or refinance their existing FHA mortgage.  For information on the benefits of paying off your existing FHA mortgage, feel free to contact me for a courtesy analysis of your mortgage.  



from HUD
The Handling Prepayments: Eliminating Post-Payment Interest Charges final rule revises FHA regulations that currently allow an FHA-approved mortgagee to charge the borrower interest through the end of the month when the mortgage is paid in full before month end. The revisions to our regulations will allow mortgagees to charge interest only through the date the mortgage is paid in full, prohibiting the charging of interest beyond that date. The changes are responsive to the CFPB’s January 30, 2013 final rule, Ability-to-Repay and Qualified Mortgage Standards under the Truth in Lending Act (Regulation Z), which limits the use of prepayment penalties and broadly defines “prepayment penalty” to include FHA’s previously allowed post-payment interest charges.

FHA’s final rule adopts the policies published in our March 13, 2014 proposed rule on this topic without change, including: Notwithstanding the terms of the mortgage, mortgagees shall accept a prepayment at any time and in any amount, and shall not charge a post-payment charge; and monthly interest on the debt must be calculated on the actual unpaid principal balance of the mortgage as of
the date the prepayment is received and not as of the next installment due date.

With the publication of this final rule, FHA is prohibiting prepayment penalties for all FHA-insured single family mortgage products and programs, regardless of whether the product or program could fit into one of the circumstances where the CFPB’s final rule allows a limited prepayment penalty. This maximizes consistency among FHA-insured single family mortgage products and provides the same protections for all FHA borrowers.

The revised policies in this final rule become effective for FHA-insured mortgages closed on or after January 21, 2015.

Until next time,

Craig Turley
NMLS 80917