Maybe you didn’t know that you can’t use an FHA loan to purchase a property that has been owned by the seller for less than 90 days. Or at least, that’s the rule until February 1.

The purpose of this rule is to prevent “flipping,” buying a property and then immediately turning around and selling it for more money, pocketing thousands of dollars in a couple of months with little actual work on the property itself. Of course, the market downturn put a stop to most of that but the rule remains.

There is one huge loophole already in this rule. It doesn’t apply to sellers who are stare or federally chartered banks, and it doesn’t apply to HUD itself. So you can (theoretically) use an FHA mortgage to buy a newly foreclosed home from Wells Fargo or Nevada State Bank, but not Vinnie’s Pawn and Loan or Joe’s Mortgage Company. So will suspending this rule do what HUD says it will, “speed the resale of foreclosed properties“? Maybe.

There is another class of investor who sometimes gets hamstrung by the 90 day rule: investors who buy cheap, highly distressed properties. They quickly do the necessary repairs, paint and renovate, and sell the property for a profit. These investors are a necessary part of the foreclosure food chain, because they make homes out of properties that most buyers would never consider. Joe and Jane Average are not experts in repairing such properties, but these investors are. The temporary change to the HUD rule — and if successful, expect it to be extended — should make it easier for trashed out foreclosures to become owner occupied homes.