Lenders may be able to get the Federal Housing Administration to approve more of their loans if newly released plans for modernizing longstanding property requirements move forward.
The proposal generally loosens minimum standards or
The property requirements have been "one of the most significant impediments to the utilization of FHA financing by prospective homebuyers," groups representing housing, nondepository lenders, brokers, and banks wrote in
However, mortgage firms reviewing the proposal for potential later incorporation into underwriting may also want to consider whether the FHA's new standards are the same as their own or if they should add overlays that account for any of the changes.
Some ways the rules could change
The proposal would formally require that FHA appraisals meet the enterprises' addition of
On the enterprises' scale of C1 to C6 for the property's condition, FHA's minimum would be C4. C4 properties can have "moderate, normal wear and tear" but cannot require anything other than cosmetic or mechanical component repairs.
On a similar six-notch scale the enterprises have for a home's quality of construction, the minimum would be Q5. That "as is" assessment allows for use of less costly materials, simpler designs and basic compliance with building codes.
Mechanical utilities would no longer have to be turned on and operated during an appraisal. Appraisers also would no longer have to specifically inspect kitchen appliances or visit crawl spaces and attics.
Current requirements for manufactured home's perimeter and installation and certification would be removed. Department of Housing and Urban Development model installation standards and a structural modification certification would replace these.
Wells would no longer have to meet minimum distances from sources of pollution on existing properties. Requirements calling for lenders to ensure that public water and sewer connections exist "whenever feasible at a reasonable cost" also be removed.
FHA cited an ability to rely on local authorities to oversee these last two concerns as a reason for removing them from its requirements.
Rules for paint also would be eased, with specific repair requirements related to the home's exterior removed so long as the property meets GSE standards.
In cases where there is lead-based paint, repairs could be contained to the primary residence rather than the whole property, allowing for the removal of other structures.
Some concerns that the industry coalition showed interest in avoiding through FHA standards are still part of the rule set but have been consolidated in broader categories.
Requirements around concerns like storage tanks and
While there has been a broad federal effort to de-emphasize environmental restrictions, this still exists as an umbrella category for concerns like high-pressure gas lines and slush pits.
FHA will accept feedback on its proposed revisions to minimum property standards through Nov. 6.
Ginnie Mae President Joseph Gormley is serving as the acting FHA commissioner due to the departure of Frank Cassidy. The White House has nominated
