Bank Rules To Not Recognize FHA Waiver

Bank Rules To Not Recognize FHA Waiver

Recently I had the pleasure of working with a client pre approved through a local bank here in Big Rapids. I was kind of excited as they were next door to my office and in 5 years had not worked with them. We looked at a few houses and found one that was perfect for their needs. It was owned by a fellow Realtor® who had purchased it as a FSBO in hopes of flipping it and making extra money. The did a beautiful job on the remodeling. My client loved the kitchen, having all new cabinets and counters was icing on the cake. Full basement and a really nice lot with a stream flowing through the back yard. Should be good to go. Wrote the offer and it was accepted first time through. Appraisal was ordered, water tested and came back fine.

Should close even a little early.....Early? I think fate heard that cause here comes the twist. The sellers had only owned the house for 65 days prior to flipping and my client was pre approved for an FHA loan. The underwriter threw the red flag saying we had to wait 90 days before we could purchase. But wait I said...FHA has a waiver for that Flipping rule that came out Feb 1, 2010 so we are good right? Right? The processor would have to call the underwriter and see. I emailed her a copy of the FHA waiver stating for one year FHA would allow flipping as long as certain criteria was met. We went down the list and everything looked good...until it went bad. The response from the underwriter was that "they" as a company have decided to NOT allow the FHA waiver. I was stunned. Immediately I called another local bank and was told no problem they would accept the waiver. I called them back and questioned why their competition would accept it and they would not.

She was sorry, the processor was sorry, even the underwriter was sorry but we would still have to wait 25 more days and rewrite our offer. From there it could get way worse as another new FHA rule is dropping the seller concessions from 6% to 3% starting March 1st. The bank says we should be ok but nothing in writing. Our rate lock may expire before the 25 days also. I mentioned if, as a company, they put up too many road blocks clients would use other avenues but they are holding firm. I was told they may eventually accept it but it would probably be too late for my client. I am not used to working with banks that decide which FHA rules to follow. I know in the future I will find out before my client has spent money on an appraisal if they accept both rules and waivers or pick and choose which to follow. Seems everyday there are more ways to stop a deal, it would be nice to see banks helping to make them work.