Federal Housing Administration (FHA): Temporary Exemption From Compliance With FHA's Regulation on Property Flipping Extension of Exemption, 81363-81365 [2011-33411]
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Federal Register / Vol. 76, No. 249 / Wednesday, December 28, 2011 / Rules and Regulations
PART 901—REGULATIONS
GOVERNING THE PERFORMANCE OF
ACTUARIAL SERVICES UNDER THE
EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974
Paragraph 1. The authority citation
for part 901 continues to read in part as
follows:
■
Authority: These rules are issued under
authority of 88 Stat.1002; 29 U.S.C. 1241,
1242.
See also 5 U.S.C. 301; 31 U.S.C. 330; and
31 U.S.C. 321.
Par. 2. Section 901.11 is amended by:
1. Revising the first sentence of
paragraph (f)(1)(i).
■ 2. Revising paragraph (l)(4)(ii).
■ 3. Revising the last sentence of
paragraph (o) Example 4. (i), and
paragraphs (o) Example 6. (iii) and (o)
Example 7. (ii).
The revisions read as follows:
■
■
§ 901.11
Enrollment procedures.
*
*
*
*
*
(f) * * *
(1) * * *
(i) Core subject matter is program
content and knowledge that is integral
and necessary to the satisfactory
performance of pension actuarial
services and actuarial certifications
under ERISA and the Internal Revenue
Code. * * *
*
*
*
*
*
(l) * * *
(4) * * *
(ii) Placement on the inactive roster
after notice and right to respond. The
Executive Director will move an
enrolled actuary who does not submit a
timely application of renewal that
shows timely completion of the required
continuing professional education to the
inactive roster only after giving the
enrolled actuary 60 days to respond as
described in paragraph (l)(1) of this
section.
*
*
*
*
*
(o) * * *
Example 4. (i) * * * Accordingly, effective
April 1, 2014, H is placed on the roster of
inactive enrolled actuaries and is ineligible to
perform pension actuarial services as an
enrolled actuary under ERISA and the
Internal Revenue Code.
mstockstill on DSK4VPTVN1PROD with RULES
*
*
*
*
*
Example 6. * * *
(iii) Note that the total of 15 hours of
continuing professional education credit that
H completes between January 1, 2011, and
December 31, 2013, as well as the 10 hours
of continuing professional education credit
between January 1, 2014, and December 31,
2016, are not counted toward H’s return to
active status and are not taken into account
toward the additional hours of continuing
professional education credit that H must
complete between January 1, 2020, and
VerDate Mar<15>2010
17:19 Dec 27, 2011
Jkt 226001
December 31, 2022, in order to be eligible to
file an application for renewal of enrollment
active status effective April 1, 2023.
Example 7. * * *
(ii) J completes 5 hours of core continuing
professional education credit and 4 hours of
non-core continuing professional education
credit between January 1, 2014, and October
6, 2014. Because J did not complete the
required 12 hours of continuing professional
education (of which at least 6 hours must
consist of core subject matter) during J’s
initial enrollment cycle, J is not eligible to
file an application for a return to active
enrollment on October 6, 2014,
notwithstanding the fact that had J completed
such hours between January 1, 2012, and
December 31, 2013, J would have satisfied
the requirements for renewed enrollment
effective April 1, 2014.
*
*
*
*
*
Guy R. Traynor,
Acting Chief, Publications and Regulations
Branch, Legal Processing Division, Associate
Chief Counsel (Procedure and
Administration).
[FR Doc. 2011–33200 Filed 12–27–11; 8:45 am]
BILLING CODE 4810–25–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
21 CFR Part 113
[Docket No. FDA–2007–N–0265] (formerly
2007N–0026)
Temperature-Indicating Devices;
Thermally Processed Low-Acid Foods
Packaged in Hermetically Sealed
Containers; Correction
AGENCY:
Food and Drug Administration,
HHS.
ACTION:
Final rule; correction.
The Food and Drug
Administration (FDA) is correcting a
final rule that appeared in the Federal
Register of Thursday, March 3, 2011 (76
FR 11892). The final rule amended
FDA’s regulations for thermally
processed low-acid foods packaged in
hermetically sealed containers to allow
for use of other temperature-indicating
devices, in addition to mercury-in-glass
thermometers, during processing. The
final rule was published with one error.
This document corrects that error.
DATES: Effective March 5, 2012.
FOR FURTHER INFORMATION CONTACT:
Mischelle B. Ledet, Center for Food
Safety and Applied Nutrition (HFS–
625), Food and Drug Administration,
5100 Paint Branch Pkwy., College Park,
MD 20740, (240) 205–1165.
SUPPLEMENTARY INFORMATION: In FR Doc.
2011–4475, appearing on page 11892, in
SUMMARY:
PO 00000
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81363
the Federal Register of Thursday, March
3, 2011, the following correction is
made:
§ 113.40
[Corrected]
On page 11921, in the third column,
seventh line from the bottom, in
§ 113.40(g)(2)(i)(A), the word
‘‘implemented’’ is corrected to read
‘‘instrumented’’.
Dated: December 21, 2011.
Leslie Kux,
Acting Assistant Commissioner for Policy.
[FR Doc. 2011–33183 Filed 12–27–11; 8:45 am]
BILLING CODE 4160–01–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 203
[Docket No. FR–5397–N–04]
RIN 2502–ZA05
Federal Housing Administration (FHA):
Temporary Exemption From
Compliance With FHA’s Regulation on
Property Flipping Extension of
Exemption
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, HUD.
ACTION: Notice of waiver extension.
AGENCY:
This notice announces that
FHA is extending the availability of the
temporary waiver of its regulation that
prohibits the use of FHA financing to
purchase single family properties that
are being resold within 90 days of the
previous acquisition, until December 31,
2012. This waiver, which was first
issued in January 2010, took effect for
all sales contracts executed on or after
February 1, 2010, and was extended in
February 2011. The waiver is set to
expire on December 31, 2011, and
therefore HUD is extending the waiver
for another calendar year. Prior to the
waiver, a mortgage was not eligible for
FHA insurance if the contract of sale for
the purchase of the property that is the
subject of the mortgage is executed
within 90 days of the prior acquisition
by the seller and the seller does not
come under any of the exemptions to
this 90-day period that are specified in
the regulation. As a result of the high
foreclosures that have been taking place
across the nation, FHA, through the
regulatory waiver, encourages investors
that specialize in acquiring and
renovating properties to renovate
foreclosed and abandoned homes with
the objective of increasing the
availability of affordable homes for firsttime and other purchasers and helping
SUMMARY:
E:\FR\FM\28DER1.SGM
28DER1
81364
Federal Register / Vol. 76, No. 249 / Wednesday, December 28, 2011 / Rules and Regulations
mstockstill on DSK4VPTVN1PROD with RULES
to stabilize real estate prices as well as
neighborhoods and communities where
foreclosure activity has been high.
While the waiver is available for the
purpose of stimulating rehabilitation of
foreclosed and abandoned homes, the
waiver is applicable to all single family
properties being resold within the 90day period after prior acquisition, and
was not limited to foreclosed properties.
Additionally, the waiver is subject to
certain conditions, and eligible
mortgages must meet these conditions to
take advantage of the waiver. The
waiver is not applicable to mortgages
insured under HUD’s Home Equity
Conversion Mortgage (HECM) Program.
DATES: Effective Date: January 1, 2012,
through December 31, 2012.
FOR FURTHER INFORMATION CONTACT:
Karin B. Hill, Director, Office of Single
Family Program Development, Office of
Housing, Department of Housing and
Urban Development, 451 7th Street SW.,
Washington, DC 20410–8000; telephone
number (202) 708–2121 (this is not a
toll-free number). Persons with hearing
or speech impairments may access this
number through TTY by calling the tollfree Federal Information Relay Service
at (800) 877–8339.
SUPPLEMENTARY INFORMATION:
I. Background
Section 203.37a(b)(2) of HUD’s
regulations (24 CFR 203.37a(b)(2))
establishes FHA’s rule on property
flipping and this regulatory section
provides that FHA will not insure a
mortgage for a single family property if
the contract of sale is executed within
90 days of the acquisition of the
property by the seller. Section
203.37a(c) lists the sales transactions
that are exempt from this rule. The
exempt transactions include, for
example, sales by HUD of real estateowned (REO) properties under HUD’s
regulations in 24 CFR part 291, sales by
another federal agency of REO
properties, sales of properties by
nonprofit organizations that have been
approved to purchase and resell HUD
REO properties, and sales by state- and
federally-charted financial institutions
and government sponsored enterprises,
to name a few.
Property ‘‘flipping’’ refers to the
practice whereby a property recently
acquired is resold for a considerable
profit with an artificially inflated value,
often the result of a lender’s collusion
with the appraiser. Most property
flipping occurs within a matter of days
after acquisition, and usually with only
minor cosmetic improvements, if any. In
an effort to preclude this predatory
lending practice with respect to
VerDate Mar<15>2010
17:19 Dec 27, 2011
Jkt 226001
mortgages insured by FHA, HUD issued
a final rule on May 1, 2003 (68 FR
23370) that provides in 24 CFR 203.37a
that FHA will not insure a mortgage if
the contract of sale for the purchase of
the property that is the subject of the
mortgage is executed within 90 days of
the prior acquisition by the seller and
the seller does not come under any of
the exemptions to this 90-day period
that are specified in § 203.37a(c).
In a final rule published on June 7,
2006 (71 FR 33138), HUD expanded the
exceptions contained in § 203.37a(c) to
the 90-day time restrictions to include
such transactions as sales of single
family properties by governmentsponsored enterprises (GSEs), state- and
federally-chartered financial
institutions, nonprofits organizations
approved to purchase HUD Real EstateOwned (REO) single family properties at
a discount with resale restrictions, local
and state governments and their
instrumentalities, and, upon
announcement by HUD through
issuance of a notice, sales of properties
in areas designated by the President as
federal disaster areas.
The downturn in the housing market
over the past few years has led to a
rapid rise of homeowners defaulting on
mortgages, and consequently an
increase in foreclosed homes. A variety
of measures to avoid foreclosures have
been initiated at the federal, state and
local level, most notably the
Administration’s Home Affordable
Modification Program. Despite these
efforts to keep families in their homes,
foreclosures continue to remain high
and not only do foreclosures affect the
families that lost their homes, but they
affect neighborhoods and communities.
While HUD continues its efforts to help
homeowners remain in their homes,
through waiver of its regulation on
property flipping, HUD seeks to help
stabilize neighborhoods and
communities.
HUD undertook similar waiver action
in a narrower context in 2009, regarding
HUD’s Neighborhood Stabilization
Program (NSP). NSP, a temporary
program authorized by the Housing and
Economic Recovery Act 2008 (Public
Law 110–289, approved July 30, 2008),
was established for the purpose of
stabilizing communities that have
suffered from foreclosures and
abandonment, by allocating funds
through a formula to States and units of
general local government, for the
purchase and redevelopment of
foreclosed and abandoned homes and
residential properties. HUD’s waiver of
its regulation on property flipping for
NSP removed an impediment to the
purchase of affordable homes that had
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
been rehabilitated and sold under this
program.
With the home foreclosure rate
remaining high across the nation, HUD
determined, early in 2010, that a
temporary waiver of this regulation on
a nationwide basis, subject to certain
conditions, may contribute to stabilizing
real estate prices and neighborhoods
that have been heavily impacted by
foreclosures, and may facilitate the sale
and occupancy of foreclosed homes that
have been rehabilitated by making the
mortgages of such homes eligible for
FHA mortgage insurance. The original
waiver granted in 2010 was discussed in
a HUD Federal Register notice
published on May 21, 2010 (75 FR
28633), which solicited public
comment. HUD addressed the public
comments in the extension of the
original waiver published on February
3, 2011 (76 FR 6149). Given that the
housing market, although improving,
remains in a vulnerable states, and the
foreclosure rate, while lower than
previously, nevertheless remains high,
HUD is extending the waiver for another
calendar year. The conditions for the
waiver set forth in both the May 10,
2010, and February 3, 2011, Federal
Register notices remain applicable and
are set out in this notice for the
convenience of the reader.
While the waiver remains available
for the purpose of stimulating
rehabilitation of foreclosed and
abandoned homes for another calendar
year, the waiver continues to remain
applicable to all properties being resold
within the 90-day period after prior
acquisition. The waiver is not limited to
the resale of foreclosed properties.
II. Eligibility for Waiver of 24 CFR
203.37a(b)(2)
To be eligible for the waiver of the
Property Flipping Rule, an FHAapproved mortgagee must meet the
following conditions:
1. All transactions must be armslength, with no identity of interest
between the buyer and seller or other
parties participating in the sales
transaction. Some ways that the lender
can ensure that there is no inappropriate
collusion or agreement between parties,
are to assess and determine the
following:
a. The seller holds title to the
property;
b. Limited liability companies,
corporations, or trusts that are serving as
sellers were established and are
operated in accordance with applicable
state and federal law;
c. No pattern of previous flipping
activity exists for the subject property as
evidenced by multiple title transfers
E:\FR\FM\28DER1.SGM
28DER1
mstockstill on DSK4VPTVN1PROD with RULES
Federal Register / Vol. 76, No. 249 / Wednesday, December 28, 2011 / Rules and Regulations
within a 12 month time frame (chain of
title information for the subject property
can be found in the appraisal report);
d. The property was marketed openly
and fairly, through a multiple listing
service (MLS), auction, for sale by
owner offering, or developer marketing
(any sales contracts that refer to an
‘‘assignment of contract of sale,’’ which
represents a special arrangement
between seller and buyer may be a red
flag).
2. In cases in which the sales of the
property is greater than 20 percent
above the seller’s acquisition cost, an
FHA-approved mortgagee is eligible for
the waiver only if the mortgagee:
a. Justifies the increase in value by
retaining in the loan file supporting
documentation and/or a second
appraisal, which verifies that the seller
has completed sufficient legitimate
renovation, repair, and rehabilitation
work on the subject property to
substantiate the increase in value or, in
cases where no such work is performed,
the appraiser provides appropriate
explanation of the increase in property
value since the prior title transfer; and
b. Orders a property inspection and
provides the inspection report to the
purchaser before closing. The mortgagee
may charge the borrower for this
inspection. The use of FHA-approved
inspectors or 203(k) consultants is not
required. The inspector must have no
interest in the property or relationship
with the seller, and must not receive
compensation for the inspection for any
party other than the mortgagee.
Additionally, the inspector may not:
compensate anyone for the referral of
the inspection; receive any
compensation for referring or
recommending contractors to perform
any repairs recommended by the
inspection; or be involved with
performing any repairs recommended
by the inspection. At a minimum, the
inspection must include:
i. The property structure, including
the foundation, floor, ceiling, walls and
roof;
ii. The exterior, including siding,
doors, windows, appurtenant structures
such as decks and balconies, walkways
and driveways;
iii. The roofing, plumbing systems,
electrical systems, heating and air
conditioning systems;
iv. All interiors; and
v. All insulation and ventilation
systems, as well as fireplaces and solid
fuel-burning appliances.
3. Only forward mortgages are eligible
for the waiver. Mortgages insured under
HUD’s HECM program are ineligible for
the waiver.
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17:19 Dec 27, 2011
Jkt 226001
III. Guidance on the Conditions for
Waiver Eligibility
A. Seller’s Acquisition Cost
The seller’s acquisition cost is the
purchase price which the seller paid for
the property, and the following costs (if
paid by the seller):
• Closing costs, plus
• Prepaid costs, including
commissions.
The seller’s acquisition cost does not
include the cost of repairs that the seller
makes to the property.
B. Justification and Documentation of
Increase in Value
If the resale price of the property is
greater than 20 percent above the
seller’s acquisition cost, the property
will be eligible for an FHA-insured
mortgage only if the Mortgagee justifies
the increase in value. The Mortgagee
must verify that the seller has
completed sufficient legitimate
renovation, repair, or rehabilitation
work on the subject property to
substantiate the increase in value by
retaining supporting documentation in
the loan file or by providing a second
appraisal.
• If the Mortgagee uses a second
appraisal:
Æ An FHA roster appraiser must
perform the appraisal in compliance
with all FHA appraisal reporting
requirements.
Æ The Mortgagee may not use an
appraisal done for a conventional loan
even if it was completed by an FHA
roster appraiser.
Æ The Mortgagee may not charge the
cost of the second appraisal to the
homebuyer.
If the Mortgagee has ordered a second
appraisal to document the increase in
value, the Mortgagee must not use this
appraisal for case processing and must
not enter it into FHA Connection.
C. Property Inspection Report
If the resale price of the property is
greater than 20 percent above the
seller’s acquisition cost, the property
will be eligible for an FHA-insured
mortgage only if the Mortgagee obtains
a property inspection and provides the
inspection report to the buyer before
closing. The borrower, lender, or
mortgage broker (if one is involved in
the transaction) may order the property
inspection. The lender or mortgage
broker may charge the borrower for this
inspection.
those repairs must be completed prior to
closing. After completion of repairs to
address structural or ‘‘health and safety’’
issues, the inspector must conduct a
final inspection to determine if the
repairs have been completed
satisfactorily and eliminated the
structural or ‘‘health and safety’’ issues.
The borrower, lender, or mortgage
broker may order the final inspection.
IV. Compliance With the Paperwork
Reduction Act
The information collection
requirements applicable to this waiver
have been submitted to the Office of
Management and Budget (OMB) under
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) and assigned
OMB Control No. 2502–0059. In
accordance with the Paperwork
Reduction Act, an agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information, unless the collection
displays a currently valid OMB control
number.
V. Period of Waiver Eligibility
The waiver that is the subject of this
notice remains effective through
December 31, 2012, for all sales
contracts executed on or after February
1, 2010, the availability date provided
by the issuance of the waiver in January
2010, unless extended or withdrawn by
HUD.
By notice, HUD shall notify the public
of any extension or withdrawal of this
waiver. If as a result of this waiver, there
is a significant increase in defaults on
FHA-insured mortgages and an increase
in mortgage insurance claims that are
attributable to mortgages insured as a
result of exercise of this waiver
authority, HUD may withdraw this
waiver immediately.
Dated: December 22, 2011.
Carol J. Galante,
Acting Assistant Secretary for Housing—
Federal Housing Commissioner.
[FR Doc. 2011–33411 Filed 12–27–11; 8:45 am]
BILLING CODE 4210–67–P
D. Repairs
If the inspection report notes that
repairs are required because of
structural or ‘‘health and safety’’ issues,
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E:\FR\FM\28DER1.SGM
28DER1
]]>Agencies
[Federal Register Volume 76, Number 249 (Wednesday, December 28, 2011)]
[Rules and Regulations]
[Pages 81363-81365]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33411]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 203
[Docket No. FR-5397-N-04]
RIN 2502-ZA05
Federal Housing Administration (FHA): Temporary Exemption From
Compliance With FHA's Regulation on Property Flipping Extension of
Exemption
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice of waiver extension.
-----------------------------------------------------------------------
SUMMARY: This notice announces that FHA is extending the availability
of the temporary waiver of its regulation that prohibits the use of FHA
financing to purchase single family properties that are being resold
within 90 days of the previous acquisition, until December 31, 2012.
This waiver, which was first issued in January 2010, took effect for
all sales contracts executed on or after February 1, 2010, and was
extended in February 2011. The waiver is set to expire on December 31,
2011, and therefore HUD is extending the waiver for another calendar
year. Prior to the waiver, a mortgage was not eligible for FHA
insurance if the contract of sale for the purchase of the property that
is the subject of the mortgage is executed within 90 days of the prior
acquisition by the seller and the seller does not come under any of the
exemptions to this 90-day period that are specified in the regulation.
As a result of the high foreclosures that have been taking place across
the nation, FHA, through the regulatory waiver, encourages investors
that specialize in acquiring and renovating properties to renovate
foreclosed and abandoned homes with the objective of increasing the
availability of affordable homes for first-time and other purchasers
and helping
[[Page 81364]]
to stabilize real estate prices as well as neighborhoods and
communities where foreclosure activity has been high. While the waiver
is available for the purpose of stimulating rehabilitation of
foreclosed and abandoned homes, the waiver is applicable to all single
family properties being resold within the 90-day period after prior
acquisition, and was not limited to foreclosed properties.
Additionally, the waiver is subject to certain conditions, and eligible
mortgages must meet these conditions to take advantage of the waiver.
The waiver is not applicable to mortgages insured under HUD's Home
Equity Conversion Mortgage (HECM) Program.
DATES: Effective Date: January 1, 2012, through December 31, 2012.
FOR FURTHER INFORMATION CONTACT: Karin B. Hill, Director, Office of
Single Family Program Development, Office of Housing, Department of
Housing and Urban Development, 451 7th Street SW., Washington, DC
20410-8000; telephone number (202) 708-2121 (this is not a toll-free
number). Persons with hearing or speech impairments may access this
number through TTY by calling the toll-free Federal Information Relay
Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
Section 203.37a(b)(2) of HUD's regulations (24 CFR 203.37a(b)(2))
establishes FHA's rule on property flipping and this regulatory section
provides that FHA will not insure a mortgage for a single family
property if the contract of sale is executed within 90 days of the
acquisition of the property by the seller. Section 203.37a(c) lists the
sales transactions that are exempt from this rule. The exempt
transactions include, for example, sales by HUD of real estate-owned
(REO) properties under HUD's regulations in 24 CFR part 291, sales by
another federal agency of REO properties, sales of properties by
nonprofit organizations that have been approved to purchase and resell
HUD REO properties, and sales by state- and federally-charted financial
institutions and government sponsored enterprises, to name a few.
Property ``flipping'' refers to the practice whereby a property
recently acquired is resold for a considerable profit with an
artificially inflated value, often the result of a lender's collusion
with the appraiser. Most property flipping occurs within a matter of
days after acquisition, and usually with only minor cosmetic
improvements, if any. In an effort to preclude this predatory lending
practice with respect to mortgages insured by FHA, HUD issued a final
rule on May 1, 2003 (68 FR 23370) that provides in 24 CFR 203.37a that
FHA will not insure a mortgage if the contract of sale for the purchase
of the property that is the subject of the mortgage is executed within
90 days of the prior acquisition by the seller and the seller does not
come under any of the exemptions to this 90-day period that are
specified in Sec. 203.37a(c).
In a final rule published on June 7, 2006 (71 FR 33138), HUD
expanded the exceptions contained in Sec. 203.37a(c) to the 90-day
time restrictions to include such transactions as sales of single
family properties by government-sponsored enterprises (GSEs), state-
and federally-chartered financial institutions, nonprofits
organizations approved to purchase HUD Real Estate-Owned (REO) single
family properties at a discount with resale restrictions, local and
state governments and their instrumentalities, and, upon announcement
by HUD through issuance of a notice, sales of properties in areas
designated by the President as federal disaster areas.
The downturn in the housing market over the past few years has led
to a rapid rise of homeowners defaulting on mortgages, and consequently
an increase in foreclosed homes. A variety of measures to avoid
foreclosures have been initiated at the federal, state and local level,
most notably the Administration's Home Affordable Modification Program.
Despite these efforts to keep families in their homes, foreclosures
continue to remain high and not only do foreclosures affect the
families that lost their homes, but they affect neighborhoods and
communities. While HUD continues its efforts to help homeowners remain
in their homes, through waiver of its regulation on property flipping,
HUD seeks to help stabilize neighborhoods and communities.
HUD undertook similar waiver action in a narrower context in 2009,
regarding HUD's Neighborhood Stabilization Program (NSP). NSP, a
temporary program authorized by the Housing and Economic Recovery Act
2008 (Public Law 110-289, approved July 30, 2008), was established for
the purpose of stabilizing communities that have suffered from
foreclosures and abandonment, by allocating funds through a formula to
States and units of general local government, for the purchase and
redevelopment of foreclosed and abandoned homes and residential
properties. HUD's waiver of its regulation on property flipping for NSP
removed an impediment to the purchase of affordable homes that had been
rehabilitated and sold under this program.
With the home foreclosure rate remaining high across the nation,
HUD determined, early in 2010, that a temporary waiver of this
regulation on a nationwide basis, subject to certain conditions, may
contribute to stabilizing real estate prices and neighborhoods that
have been heavily impacted by foreclosures, and may facilitate the sale
and occupancy of foreclosed homes that have been rehabilitated by
making the mortgages of such homes eligible for FHA mortgage insurance.
The original waiver granted in 2010 was discussed in a HUD Federal
Register notice published on May 21, 2010 (75 FR 28633), which
solicited public comment. HUD addressed the public comments in the
extension of the original waiver published on February 3, 2011 (76 FR
6149). Given that the housing market, although improving, remains in a
vulnerable states, and the foreclosure rate, while lower than
previously, nevertheless remains high, HUD is extending the waiver for
another calendar year. The conditions for the waiver set forth in both
the May 10, 2010, and February 3, 2011, Federal Register notices remain
applicable and are set out in this notice for the convenience of the
reader.
While the waiver remains available for the purpose of stimulating
rehabilitation of foreclosed and abandoned homes for another calendar
year, the waiver continues to remain applicable to all properties being
resold within the 90-day period after prior acquisition. The waiver is
not limited to the resale of foreclosed properties.
II. Eligibility for Waiver of 24 CFR 203.37a(b)(2)
To be eligible for the waiver of the Property Flipping Rule, an
FHA-approved mortgagee must meet the following conditions:
1. All transactions must be arms-length, with no identity of
interest between the buyer and seller or other parties participating in
the sales transaction. Some ways that the lender can ensure that there
is no inappropriate collusion or agreement between parties, are to
assess and determine the following:
a. The seller holds title to the property;
b. Limited liability companies, corporations, or trusts that are
serving as sellers were established and are operated in accordance with
applicable state and federal law;
c. No pattern of previous flipping activity exists for the subject
property as evidenced by multiple title transfers
[[Page 81365]]
within a 12 month time frame (chain of title information for the
subject property can be found in the appraisal report);
d. The property was marketed openly and fairly, through a multiple
listing service (MLS), auction, for sale by owner offering, or
developer marketing (any sales contracts that refer to an ``assignment
of contract of sale,'' which represents a special arrangement between
seller and buyer may be a red flag).
2. In cases in which the sales of the property is greater than 20
percent above the seller's acquisition cost, an FHA-approved mortgagee
is eligible for the waiver only if the mortgagee:
a. Justifies the increase in value by retaining in the loan file
supporting documentation and/or a second appraisal, which verifies that
the seller has completed sufficient legitimate renovation, repair, and
rehabilitation work on the subject property to substantiate the
increase in value or, in cases where no such work is performed, the
appraiser provides appropriate explanation of the increase in property
value since the prior title transfer; and
b. Orders a property inspection and provides the inspection report
to the purchaser before closing. The mortgagee may charge the borrower
for this inspection. The use of FHA-approved inspectors or 203(k)
consultants is not required. The inspector must have no interest in the
property or relationship with the seller, and must not receive
compensation for the inspection for any party other than the mortgagee.
Additionally, the inspector may not: compensate anyone for the referral
of the inspection; receive any compensation for referring or
recommending contractors to perform any repairs recommended by the
inspection; or be involved with performing any repairs recommended by
the inspection. At a minimum, the inspection must include:
i. The property structure, including the foundation, floor,
ceiling, walls and roof;
ii. The exterior, including siding, doors, windows, appurtenant
structures such as decks and balconies, walkways and driveways;
iii. The roofing, plumbing systems, electrical systems, heating and
air conditioning systems;
iv. All interiors; and
v. All insulation and ventilation systems, as well as fireplaces
and solid fuel-burning appliances.
3. Only forward mortgages are eligible for the waiver. Mortgages
insured under HUD's HECM program are ineligible for the waiver.
III. Guidance on the Conditions for Waiver Eligibility
A. Seller's Acquisition Cost
The seller's acquisition cost is the purchase price which the
seller paid for the property, and the following costs (if paid by the
seller):
Closing costs, plus
Prepaid costs, including commissions.
The seller's acquisition cost does not include the cost of repairs
that the seller makes to the property.
B. Justification and Documentation of Increase in Value
If the resale price of the property is greater than 20 percent
above the seller's acquisition cost, the property will be eligible for
an FHA-insured mortgage only if the Mortgagee justifies the increase in
value. The Mortgagee must verify that the seller has completed
sufficient legitimate renovation, repair, or rehabilitation work on the
subject property to substantiate the increase in value by retaining
supporting documentation in the loan file or by providing a second
appraisal.
If the Mortgagee uses a second appraisal:
[cir] An FHA roster appraiser must perform the appraisal in
compliance with all FHA appraisal reporting requirements.
[cir] The Mortgagee may not use an appraisal done for a
conventional loan even if it was completed by an FHA roster appraiser.
[cir] The Mortgagee may not charge the cost of the second appraisal
to the homebuyer.
If the Mortgagee has ordered a second appraisal to document the
increase in value, the Mortgagee must not use this appraisal for case
processing and must not enter it into FHA Connection.
C. Property Inspection Report
If the resale price of the property is greater than 20 percent
above the seller's acquisition cost, the property will be eligible for
an FHA-insured mortgage only if the Mortgagee obtains a property
inspection and provides the inspection report to the buyer before
closing. The borrower, lender, or mortgage broker (if one is involved
in the transaction) may order the property inspection. The lender or
mortgage broker may charge the borrower for this inspection.
D. Repairs
If the inspection report notes that repairs are required because of
structural or ``health and safety'' issues, those repairs must be
completed prior to closing. After completion of repairs to address
structural or ``health and safety'' issues, the inspector must conduct
a final inspection to determine if the repairs have been completed
satisfactorily and eliminated the structural or ``health and safety''
issues. The borrower, lender, or mortgage broker may order the final
inspection.
IV. Compliance With the Paperwork Reduction Act
The information collection requirements applicable to this waiver
have been submitted to the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned
OMB Control No. 2502-0059. In accordance with the Paperwork Reduction
Act, an agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information, unless the collection
displays a currently valid OMB control number.
V. Period of Waiver Eligibility
The waiver that is the subject of this notice remains effective
through December 31, 2012, for all sales contracts executed on or after
February 1, 2010, the availability date provided by the issuance of the
waiver in January 2010, unless extended or withdrawn by HUD.
By notice, HUD shall notify the public of any extension or
withdrawal of this waiver. If as a result of this waiver, there is a
significant increase in defaults on FHA-insured mortgages and an
increase in mortgage insurance claims that are attributable to
mortgages insured as a result of exercise of this waiver authority, HUD
may withdraw this waiver immediately.
Dated: December 22, 2011.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-33411 Filed 12-27-11; 8:45 am]
BILLING CODE 4210-67-P
