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FHA makes it easier to ‘flip’ properties

The Federal Housing Administration has extended a program designed to make it easier for investors to “flip” foreclosed and other depressed properties by buying them, rehabbing them, and quickly selling them to homebuyers. Ordinarily, investors who buy a property with an FHA-insured loan are not allowed to sell the property until at least 90 days after the purchase. However, the FHA now says it won’t enforce this rule until at least the end of 2011.

The FHA is trying to encourage investors to quickly rehab depressed properties in order to stabilize home values and prevent neighborhood blight. Investors are often able to rehab and flip a foreclosed property in less than three months, the FHA says.

The FHA initially waived the 90-day rule back in February 2010. At the time, it said the waiver would only last a year, but it has extended it. During the first year of the waiver, some 21,000 homes with FHA-insured mortgages were resold within 90 days. The total value of those mortgages was more than $3.6 billion. Investors like the ability to resell within 90 days because it lowers their transactional costs and prevents properties from sitting idle, which can lead to vandalism and other problems.

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