Wednesday, May 20, 2009

FHA Seasoning Rules- Another Option?

Most of Clear Day Capital's borrowers deal with the FHA's "90-day" rule.  A property needs to be titled for 90 days before it can qualify for FHA financing.  The challenge is a good rehab professional can fix the house in 2-4 weeks, have it under contract in another 2 weeks and then sit for 45-60 days with the property under contract while the clock ticks.

New York attorney Kathleen Scanlon has analyzed the FHA rules and indicates that if a property is transferred into a trust the property never sold, it simpley changes the identity of the owner.  To read the full article in her blog, go to

Could a Real Estate Trust be used as a vehicle to control property and then sell it inside the 90 time limit?  I'll be working with Ronn Dunn ( to confirm if this can be done, and if so, exactly how.

1 comment:

  1. A no-consideration transfer from a homeowner (in title more than 90 days since date of purchase) to a Trustee while retaining 100% of the beneficial ownership of the trust does not reset the "Seasoning Clock". Therefore, there is no FHA prohibition against insuring a loan to a borrower purchasing a property from said Trust.

    Your biggest stumbling block will be FHA underwriters who really do not understand the rule.

    We close these transactions often, I just have to explain to the underwriter what the guidelines legally require and differentiate between the amount of time in title v. the amount of time from date of purchase. The first is overbroad and often the wrong application.

    Kathleen A. Scanlon
    Scanlon & Pinto, PLLC