House-flipping has grown in popularity in the past few decades, but the massive reversal in the housing market from 2007 to 2009, that started to affect investors in 2006, and that which still packed a residual punch as late as 2011, caused the entire mortgage market to garner the attention of regulators.

With the additional regulatory interest came new rules, laws, and regulations. This attention was not of the local ilk, but rather the entire market became the focus of the Federal Housing Administration (FHA). The implosion of mortgages, which indiscriminately swallowed up major investment banks, was so widespread, the federal government got involved.

90 and 180

The FHA has a primary role of setting policies under which mortgages can be enacted between borrowers and lenders, and they serve to provide a lender near full-value should the property be foreclosed on.

Prior to the mortgage crisis, the FHA attempted to curb house-flipping, which is basically buying and selling in less than 180 days, in an attempt to slow the flipping market.

They established policies that require additional inspections and safeguards taken on mortgages that have been applied for on properties owned less than 180 days, and this serves to completely protect buyers.

In addition, the FHA outright forbids extending mortgages on homes owned less than 90 days.

Second Appraisals

Housing and Urban Development (HUD) also wished to negate collusion between lenders and appraisers, who might inflate property value on the selling end of a flip.

So, they implemented a rule for second home appraisals (in some cases). They are vigilantly watching the flipping market, and in the event a home value is 5% higher than the first appraisal, the lesser of the 2 values will be used to obtain an FHA loan.

PDMDA

One exception that is utilized quite regularly is if the property falls within a “Presidentially Declared Major Disaster Area (PDMDA).” FHA loans protect lenders from loss, so they are coveted in the housing market.

When it comes to flipping homes and rebuilding areas decimated by natural disaster, the ability to work and relocate to these areas can be both altruistic and lucrative. In these cases, the 180-day and 90-day rules are completely disregarded.

Whatever comes your way, Orchard Funding has the experience and know-how to  help you make sense of the complex landscape of fix and flip properties.

We offer hard money loans at competitive rates to help you get started with your business endeavors. To see how we can help, contact us at (310) 356 – 7373.