Occupancy is not required in effect. Just the intention. It can take 90 days to resell a house anyway, and by that time, any restrictions are gone.
I know at least three investors that prospect for short sales on dog houses, and there's no way, they're able, much less willing to move into these hell holes. They buy them, and resell them as fixers after the allotted time passes, and move on. Or they fix them, and rent them.
One of these investors personally trained me on how to flip these deals without getting in trouble with the law. First thing, don't plan on an immediate flip. Second thing, stick with dog houses. Nobody pays attention to what happens after a sale. The bank sure doesn't.
It's the same with securing FHA owner occupied financing. It's not unusual for an investor to apply for an o/o loan, and fail to move into the house. Unless you're just a gross offender, no judge is going to rule in favor of the FHA, if an investor gets o/o financing and them rents out the house. Same with short sales. Any number of things can happen that the investor cannot practically move in, and must rent to cover the mortgage. And covering the mortgage is the major issue in favor of the investor.
I know of a lady that was a serial o/o loan abuser, and the worst she got was having to sell her houses. In her case, she made money. However, she was hard-pressed to try that twice.
****EDIT The lady in question was forced to refinance out of the o/o loans, not sell the houses.
I'm not saying it's OK to break the rules. I'm just saying the rules are breakable in many circumstances.