FHA extends the 90-day seasoning waiver.   On Friday, January 28, 2011, HUD announced the extension of the 90-day seasoning waiver.

There are 4 things you should know about the waiver: 
1. The extension is effective for all sales contracts executed on or after 2/01/2011 through 12/31/2011 unless otherwise extended or withdrawn by FHA
2. All transactions must be arms-length, with no identity of interest between the buyer and the seller or other parties participating in the sales transacation.  The following may be grounds for denial of the file if deemed to circumvent the arms-length rule:

A. Seller on contract does not hold title to the property

B. Property is being sold by an LLC, trust or corporation

C. A pattern of flipping exists with subject property within last 12 months

D. Property was not marketed openly and fairly.

3. In cases where the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the Lender follows these criteria:

A. Justify the increase with supporting documentation and/or a second appraisal.

B. Provide a home inspection report to the borrower (borrower can be charged)

1. Inspector can only be paid by the Lender

2. Inspector can not have an interest in the property or a relationship with the seller.

3. Inspector can not pay a referral fee.

4. Inspector can not receive payment for recommending a contractor for repairs.

4. The waiver is limited to forward mortgages and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.