The FHA has proposed and adopted new regulations that will control illegal property flipping schemes.

Not all property flipping is a crime, but when documents are falsified, it becomes criminal fraud. In most flipping schemes, false appraisals are made and unqualified homebuyers are provided with false data. The flipper walks away with the equity, while FHA is left with a house not worth the mortgage.

The Department of Housing and Urban Development (HUD) has countered this growing trend by adding in safeguards to protect FHA insured properties.

From now on, only listed owners can sell property back to the FHA. The home must be owned for 90 days before being resold.

If the home is sold within 180 days of the original purchase and the selling price is over 100% of the original sale amount, FHA will demand further documentation.

The new rules will be put aside for presidentially-proclaimed disaster areas. Also, properties that were acquired through inheritance may be exempt from these restrictions.

There are three exceptions to the 90 day rule: the sale of HUD real estate owned properties; the resell of a property by an employer purchased for the relocation of an employee; and, the sell of a newly built home by a builder.

Both HUD and FHA feel that the new regulations will protect FHA from the most serious flipping schemes, thus protecting the market in general.