Starting February 1 and until January 31, 2011, HUD will be waiving its 90-day anti-flipping rule for FHA financing. The policy had originally been put in place to counter quick flipping that, coupled with fraudulent appraisals, had caused inflated pricing and exposed the FHA to a much greater risk for loss during recent market distress. The rule is being lifted to encourage more investors to rehab foreclosed properties while being able to provide their buyers with a reliable source of affordable financing in a shorter period of time. This also reduces the investor's risk of increased overhead costs and vandalism due to the property sitting unoccupied for a full 90 days. There are, however, some restrictions to this waiver:

1. All transactions must be "arms length" with no identity of interest among the key parties of the transaction.
2. When the selling price is 20% or more above what the seller paid, documentation of the renovations and expenses must be provided, such as a second apppraisal, to confirm the valuation. Lenders will also be required to order independent property inspections and provide buyers with the report before closing.
3. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

To read more information about the waiver click here.