What's the 90 day flip rule and why is it still bugging me?

I may be about to get bitten by this one again.

Before the great mortgage meltdown, FHA had a rule in place that said in effect, "if you buy a property and then try to flip it within 90 days for 20% more than you paid for it, then we won't approve a mortgage for the purchase!!".

The purpose of this rule was primarily to prevent evil property investors, buying foreclosures (usually HUD homes) dirt cheap, cleaning the carpets and painting the walls and then selling to unsuspecting first time buyers for twice what they paid for it.

Since those days the whole process of selling REOs has got a whole lot more sophisticated and giant profits are a whole lot harder to come by for flippers.  In any case about 3 years ago HUD "suspended" the rule because with the mountain of foreclosed property on the market the powers that be were looking for any way at all to reduce the pile and investors were deemed not to be so evil after all.

Just to be clear the 90 rule says you can't write a contract within 90 days, so effectively the seller is likely to have to hold the property for at least 4- 5 months.

Now as I said before FHA suspended the rule a couple of years ago and although they've threatened to reinstate they haven't done so yet.  HOWEVER, one of the results of the recent persecution of the mortgage industry has been a level of paranoia on the part of underwriters that results in an additional layer of rules being overlaid on the FHA guidelines by individual lenders, so that apparently the rule is still going to affect one of my sales, unless we can find a way around it.

Any ideas?