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HUD Property Flipping Rule ISSUE: In September 2001, HUD published a proposed rule aimed at preventing fraudulent property flipping in the FHA single-family program. The intended purpose of the proposal is to protect FHA borrowers from being victims of property flipping. "Flipping" is a major example of predatory lending whereby recently acquired property is resold for a considerable profit with an artificially inflated value. The proposed rule would provide that any property sold within 6 months after acquisition by the seller would not be eligible for FHA financing. HUD has indicated that it may grant exceptions to the 6-month holding period on a case-by-case basis. The 6-month holding period does not apply to the sale of HUD REO properties. NAR POSITION: NAR opposes abusive or predatory lending practices and has concerns about mortgage products that encumber homeowner equity or may create opportunities for abusive lending practices. While NAR supports the goal of addressing fraudulent property flipping, we support the preservation of legitimate investment opportunities in property rehabilitation. OPPOSING VIEWS: Some lenders oppose efforts to regulate predatory lending practices arguing that aggressive restrictions on predatory lending may unintentionally limit credit to deserving borrowers. IMPACT ON REALTORS®: REALTORS® support increasing the availability of mortgage credit to potentially creditworthy borrowers whether in the "prime" or in "subprime" credit markets. STATUS/OUTLOOK: NAR submitted comments expressing serious concern about the proposed rule last November. These concerns addressed the fact that HUD currently has the authority to enforce against abusive flipping. The letter also addressed concerns regarding legitimate investors purchases and the 6-month time period. Senator Paul Sarbanes (D-MD), Chairman of the Banking Committee, is committed to addressing the issue of mortgage fraud. HUD has yet to publish a final rule. CONTACTS: Peter Morgan 202-383-1233, Megan Booth 202-383-1222, Gary Weaver 202-383-1038 |
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