HUD Axes Warranty Proposal

The Department of Housing and Urban Development is delaying the release of new guidelines that would have allowed homebuilders to sell one-year warranties on newly constructed FHA-insured homes instead of the customary 10-year policy.Two weeks ago, HUD angered many of the nation's warranty companies by issuing without public comment an interim final rule containing the new guidelines. "Obviously, the warranty companies were facing a loss of revenue and they were angered at HUD because they weren't being given a chance to voice their disapproval," said Steve O'Connor, senior director of single-family housing at the Mortgage Bankers Association of America, which supports the new guidelines. To appease the warranty industry, HUD withdrew the interim final rule on Friday but said it would reissue the guidelines as a proposed rule in a few days. The public will have 60 days to comment on the proposed rule before HUD can act further. "HUD will get what it wants, but it will take a little longer to release the new guidelines," Mr. O'Connor added. Historically, HUD insured a new home loan with a loan-to-value ratio exceeding 90% only if it came with a 10-year builder warranty, which protected the homeowner against structural defects. But the housing agency believes that the quality of housing and building technology has improved over the years, warranting a reduction in its requirements. HUD's website address is http://www.hud.gov.