On February 1, the US Department of Housing and Urban Development (HUD) will temporarily lift a rule that does not allow FHA financing to occur on home sales within a ninety day period.

The news followed HUD Secretary Shaun Donovan’s announcement of $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers. The Obama administration initiative is intended to reverse the effects of vacancy and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently forbids insuring a mortgage on a home owned by the seller for less than ninety days. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity,” said FHA Commissioner David H. Stevens of the lifted restrictions.

The policy change permits buyers to use FHA-insured financing to purchase HUD-owned, bank-owned, or privately resold properties. This allows homes to resell much faster, while potentially stabilizing real estate prices and revitalizing neighborhoods.

There are several conditions in place to protect FHA borrowers against predatory “flipping” practices.
This and other details are available on HUD’s website: www.hud.gov

Hustletown readers, will this announcement affect your decision to buy or sell a home in 2010? Please respond in our comments section below!