The U.S. Department of Housing and Urban Development has passed a measure that will ban the use of the HUD mortgage insurance program by sellers who have owned the property for less than 6 months.

Lenders please note, this will reduce the price that could be bid at a foreclosure sale by legitimate real estate investors who want to buy your foreclosure, fix it up and resell it.

Real estate investors, this will remove a vital avenue for you to resell properties at a profit that you have legitimately purchased at below market prices and fixed up for resale at fair market price.

Fannie Mae and Freddie Mac may well follow HUD.

The new rules are summarized as follows:

Sale by Owner of Record:

Only the owner of record may sell a home to an individual who will obtain FHA mortgage insurance for the loan; it may not involve any sale or assignment of the sales contract, a procedure often observed (according to HUD) when the homebuyer is determined to have been a victim of predatory practices.

Time requirements

	A property being resold within 90 days of its acquisition is not eligible for FHA financing.
	Re-sales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a re- sale percentage threshold established by FHA. (Whatever that means).
	Re-sales occurring between 90 days and one year will be subject to a requirement that the lender obtain additional documentation to support the value to address circumstances or locations where HUD identifies property flipping as a problem.

Keep in mind that these rules apply ONLY to FHA loans. If you are in the flipping business, make sure your buyer is not seeking FHA financing. If you list the property with an agent on the MLS, make sure the terms clearly state "NO FHA LOANS." The good news is that there are plenty of first-time homebuyer programs from that rival the FHA loan programs.

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