The Federal Housing Administration (FHA) announced Friday that it is extending the suspension of its ‘anti-flipping rule’ through the remainder of 2011.

FHA Commissioner David Stevens says the temporary waiver will accelerate the resale of foreclosed homes in neighborhoods that are overrun with abandoned properties and blight. The move is intended to help stabilize home values and improve conditions in communities experiencing high foreclosure activity.

FHA regulations typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days, but in February of last year, FHA temporarily waived this regulation through January 31, 2011, noting that in today’s foreclosure-ravaged marketplace, the agency’s research has shown that acquiring, rehabilitating, and reselling distressed properties often takes less than 90 days.

With the sunset date for that first extension just days away, FHA posted a notice on Friday extending the waiver through December 31, 2011. This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.

“As I noted when we first announced this policy change early last year, because of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” Stevens said. “Today I can report that this policy change has been effective.”

Stevens says since the original waiver went into effect, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days.

FHA said it the notice that prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days would adversely impact the willingness of sellers to consider offers from potential FHA buyers, because the seller must also factor in holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

“Because of past restrictions, FHA borrowers have often been shut out from buying affordable properties,” Stevens added. “This action enables our borrowers, especially first-time buyers, to take advantage of this opportunity and buy a home that has recently been rehabilitated. It will also help to move more foreclosed properties off the market and reduce the number of vacant homes in neighborhoods throughout this country.”

The waiver contains strict conditions and guidelines to protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices. The agency’s anti-flipping waiver is limited to those sales meeting the following criteria:

• 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.

RealtyTrac has released its 2010 foreclosure tallies for the nation’s largest metropolitan areas. The tracking firm found that foreclosure activity increased from 2009 in 149 of the 206 metros with a population of 200,000 or more, or 72 percent.

Interestingly enough, the metro areas with the 10 highest foreclosure rates all posted decreasing activity from 2009, but RealtyTrac says foreclosures became more widespread last year as high unemployment drove activity up in parts of the country that had been relatively insulated from the initial foreclosure tsunami.

“Foreclosure floodwaters receded somewhat in 2010 in the nation’s hardest-hit housing markets,” said James J. Saccacio, RealtyTrac’s CEO. “Even so, foreclosure levels remained five to 10 times higher than historic norms in most of those hard-hit markets, where deep fault lines of risk remain and could potentially trigger more waves of foreclosure activity in 2011 and beyond.”

Among the 20 largest metros, RealtyTrac says Houston (+26%), Seattle (+23%), and Atlanta (+21%) saw the biggest increases in foreclosure filings last year. However, cities in California, Florida, Nevada, and Arizona once again accounted for the nation’s 10 highest foreclosure rates, despite the fact that their activity retreated.

The Las Vegas metro claimed the No. 1 spot, with one in every nine homes there receiving a foreclosure filing last

year – nearly five times the national average. That’s despite the fact that filings were down 7 percent from 2009. A total of 88,198 Las Vegas-area properties received a foreclosure filing in 2010.

Cape Coral-Fort Myers, Florida documented the nation’s second highest metro foreclosure rate, with one in every 12 housing units (8.40%) receiving a foreclosure filing in 2010. A total of 30,660 properties in the metro area received a filing in 2010, down 28 percent from 2009.

Modesto, California also reported a decrease in foreclosure activity from 2009 of more than 28 percent, but the metro area still posted the nation’s third highest foreclosure rate with one in every 14 homes (7.34%) in some stage of foreclosure in 2010.

Other metro areas with foreclosure rates in the top 10 were Phoenix-Mesa-Scottsdale, Arizona (7.27%); Miami-Fort Lauderdale-Pompano Beach, Florida (7.08%); Riverside-San Bernardino-Ontario, California (6.95%); Stockton, California (6.94%); Merced, California (6.93%); Orlando-Kissimmee, Florida (6.86%); and Vallejo-Fairfield, California (6.25%).

The Phoenix-Mesa-Scottsdale metro area reported 55,372 bank repossessions, or REOs, in 2010, the most of any metro area and up 17 percent from 2009.

The Chicago-Naperville-Joliet metro area had 45,555 REOs in 2010, the second most of any metro area and an increase of nearly 20 percent from 2009.

And the Detroit-Warren-Livonia metro reported 43,541 REOs in 2010, the third most of any metro area and up 19 percent from 2009.

The Washington, D.C., metro area posted the biggest decrease in overall foreclosure activity from 2009 among the nation’s 20 largest metro areas, down 22 percent, followed by three Southern California metro areas: Riverside-San Bernardino-Ontario, with a 20 percent decrease; San Diego-Carlsbad-San Marcos, with a 17 percent decrease; and Los Angeles-Long Beach-Santa Ana, with a 16 percent decrease.

By: Carrie Bay