Homebuyers in need of an FHA loan can buy a property that had been owned by the seller for less than 91 days as long as the property met certain conditions. The 90-day anti flip rule was introduced to eliminate fraudulent flipping of houses where the seller inflated the price of the house values far beyond its true market worth. Say you buy a rundown house at a bargain price, do some fix-ups here and there, and then sell it after a few days later for a price that is twice what you paid when you bought the house. To curb such predatory lending practices FHA has had a strict rule for years: FHA borrowers can’t buy a property which has been owned by the seller for less than 90 days.

But the recent economic meltdown saw a rapid increase in foreclosures, and, to improve conditions in communities where foreclosure activity is high and also to stabilize home prices the Obama administration came up with a temporary policy that expands access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.
So, does it mean giving a fresh leash of life to the real-estate fraudsters? Well, the FHA has set certain conditions on the waiver. The waiver is limited only to those property sales that meet the following general conditions:

“All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.”

The waiver has been effective from Feb. 1, 2010 through Feb. 1, 2011.