WASHINGTON (Reuters) - The Obama administration on Friday extended through the end of the year a popular program allowing buyers of flipped homes to obtain loans backed by the Federal Housing Administration.
Flipping refers to the practice of buying a home and quickly reselling it in order to make a profit. The FHA in 2003 banned buyers from obtaining government-backed mortgage insurance on homes they bought less than 90 days after a previous sale.
The FHA temporarily lifted the ban a year ago to help investors sell foreclosed properties in an effort to aid the depressed housing market. That waiver was set to expire on Monday.
“This action enables our borrowers, especially first-time buyers, to take advantage of this opportunity and buy a home that has recently been rehabilitated,” said FHA Commissioner David Stevens.
“It will also help to move more foreclosed properties off the market and reduce the number of vacant homes in neighborhoods throughout this country,” he added.
The FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition since last February, when the waiver was first issued, the agency said.
Mortgage lending is still very tight and loans backed by the FHA, which does not make loans directly but guarantees them for borrowers who meet certain restrictions, are the only option available to many borrowers.
The Mortgage Bankers Association earlier this week said it sees U.S. residential mortgage lending falling below $1 trillion this year to levels not seen since 1997.
FHA-backed loans accounted for about 34 percent of mortgages used to purchase a home in 2010, according to industry publication Inside Mortgage Finance.
The move comes just weeks before the Obama administration is expected to unveil its proposals for overhauling the entire U.S. housing finance system, including what to do about mortgage finance giants Fannie Mae and Freddie Mac.
Reporting by Corbett B. Daly; Editing by Dan Grebler