NATIONAL ASSOCIATION
OF REALTORS ®
®
The Voice for Real Estate
500 New Jersey Avenue, NW
Washington, DC 20001-2020
www.REALTOR.org
June 9, 2008
The Honorable Steven C. Preston
Secretary of Housing and Urban Development
Washington, DC 20410
Dear Secretary Preston:
On behalf of the 1.2 million members of National Association of Realtors® (NAR), I am writing
to request your consideration of a change to FHA’s property flipping rules. We are concerned
that this policy is now having the unintended consequence of preventing eligible homebuyers
from purchasing foreclosed properties.
On May 1, 2003, HUD published a final rule in The Federal Register amending its mortgage
insurance regulations to prevent the practice of flipping properties financed with Federal Housing
Administration (FHA) insured mortgages. Under the regulation, FHA requires that 1) only
owners of record may sell properties that will be financed with FHA insured mortgages; 2) any
resale of a property may not occur 90 or fewer days from the date of the last sale to be eligible for
FHA financing; and 3) that for resales occurring between 91-180 days after the original sale
where the new sales price exceeds the previous sales price by 100% or more, FHA will require
additional documentation to validate the property’s value. HUD exempted from the property
flipping rules properties sold by HUD through its Real Estate Owned activities, new homes being
sold by builders and properties being sold by relocation companies and the property owner’s
employer as part of a job relocation.
Subsequent to the May 1 regulations, HUD expanded the categories of properties that are exempt
from the property flipping time restrictions to include inherited properties, properties sold by
Federal, state and local government agencies, properties sold by State and Federally chartered
financial institutions and the government sponsored enterprises, properties sold by nonprofits
approved to purchase HUD REO and sales of properties in Presidentially declared disaster areas.
HUD’s property flipping rules have accomplished their goal of eliminating the potential for abuse
in the FHA mortgage insurance program.
NAR is concerned that the requirements of this property flipping rule are having an adverse
impact on the financing of bona fide sales of recently foreclosed properties. At NAR’s Mid-year
Conference, Realtors® from areas with serious foreclosure problems repeatedly brought up
HUD’s property flipping rule as an impediment to the use of FHA financing.
Given the continued increase in the number of property foreclosures and REO, we believe that the
exemptions from the time restrictions in the flipping rule should be expanded. We urge HUD to
exempt from the time restrictions all REO properties sold by any entity that has as its principal
business activity the lending or investment of funds in real estate mortgages. With this change,
FHA can maintain its prohibition against property flipping by speculators while, at the same time,
providing homeownership opportunities to eligible families. Moreover, it will facilitate the
stabilization of distressed markets around the country.
We will be pleased to discuss this matter at your convenience. If you have any questions or
comments regarding this letter, please contact our Regulatory Policy Representative, Jerry Nagy
at 202.383.1233 or jnagy@realtors.org.
Sincerely,
Richard F. Gaylord, CIPS, CRB, CRS, GRI
2008 President, National Association of Realtors®
REALTOR® is a registered collective membership mark which may be used only by
real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics.