HUD moved recently to implement new rules stating that a home is not eligible for the buyer to obtain an FHA-insured mortgage unless the seller has owned that property for at least 90 days. The seller must also be the owner of record. This rule is effective as of June 9, 2006. Under these regulations, "flipping" involves reselling a property shortly after its purchase, and at times these property flips involve either mortgage fraud or predatory lending practices. The new regulations focus on homes being sold at a considerable profit with an artificially inflated value, often abetted by a lender's collusion with the appraiser. This will make it tougher for investors attempting to take advantage of the rapid appreciation of new construction in the Santa Clarita area. Typically, investors have been buying new construction from the builder, waiting 6 months for the home to be built, and then flipping the home to a new owner at a higher price once the home is ready for occupancy. Of course, builders have been making efforts to stop this practice anyways, with agreements stating that the original buyer cannot sell or rent the home for up to 18 months after close of escrow, but many investors are obviously finding ways around these agreements. This will also affect investors in the fix-and-flip market, where homes in need of repairs and updates are bought below market value and then resold at or near market value in a short timeframe after the work is complete. A mortgagee letter from HUD stated that FHA financing will not be available for homes sold within 90 days of purchase. Sellers will also have to provide additional valuation data to sell properties between 91 and 180 days after the last transaction in cases where the new sales price is 100% or more higher than the previous sales price. Entities exempt from this new ruling are HUD itself, Fannie Mae, Freddie Mac, lenders selling real estate owned portfolios, local or state housing agencies, nonprofits with HUD permission to purchase discounted real estate-owned properties, inherited properties and homes located in presidentially declared disaster areas. Will this put a lid on the new-home flipping and fix-and-flips? Likely not, but it will create a need for alternative buyer financing in some cases. | 
