FHA Announces It Will Continue To Insure Wholesale Houses

Once again the Federal Housing Administration (FHA) has announced that it will be extending its anti-flipping waiver, allowing buyers to continue to use FHA-insured loans to purchase homes that are being resold within 90 days of their purchase[1]. The law was originally enacted in 2003 to “ease fraudulent transactions” in which investors bought houses for low prices and then sold them for higher ones, relying on the fast pace of appreciation and the buying mania at that time to make the house salable at a higher value (FHA believes that these values were inflated) rather than taking time to make improvements to the property. The FHA found that buyers in these transactions were more likely to default on their loans and that incidences of straw buyers and unethical appraisal methods were much higher on flips. As a result, the administration opted to stop insuring home loans on these properties.

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