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HUD letter on water well test requirements. Here is the December 2005 US HUD letter outlining
the current water testing requirements for people who are seeking FHA mortgage financing in the purchase of
FHA & HUD Well Water Test Requirements - 2005 HUD LETTER
December 19, 2005
US HUD FHA MORTGAGEE LETTER 2005- ML-48
APPROVED MORTGAGEES & ALL APPROVED
Repair and Inspection Requirements for existing properties and revisions to FHA
In September 2005, the Federal Housing
Administration (FHA) issued Mortgagee Letter 2005-34, which announced
the adoption of four of Fannie Mae’s revised appraisal reporting forms as
well as the release of Revised Appendix D of Handbook 4150.2, CHG-1.
Mortgagee Letter provides additional guidance regarding FHA’s repair and
inspection requirements for existing properties and the use of the Fannie Mae
appraisal reporting forms.
All appraisal guidance for new construction that
serves as security for FHA-insured mortgages remains unchanged beyond the
clarification in the Revised Appendix D that the appraiser may appraise a home
that is under construction and that is 90% or more complete without benefit of
plans and specifications.
In a continuing effort to reform and standardize
its appraisal requirements, FHA has shifted from its historical emphasis on the
repair of minor property deficiencies and now only requires repairs for those
property conditions that rise above the level of cosmetic defects, minor
defects or normal wear and tear.
FHA Roster Appraisers are reminded to
report all readily observable property deficiencies, as well as
any adverse conditions discovered performing the research involved in
completing the appraisal, within the appraisal reporting form.
should use professional judgment and rely upon prudent underwriting practices
in determining when a property condition poses a threat to the safety of an
occupant and/or jeopardizes the soundness and structural integrity of the
property, such that additional inspections and/or repairs are necessary.
Revisions to the appraisal reporting guidance
contained in Chapters 2 and 3 of Handbook 4150.2, CHG-1 are limited to those
described in this Mortgagee Letter and Mortgagee Letter 2005-34 and Revised
Appendix D. The specific areas of guidance that are rescinded by this Mortgagee
Letter are delineated below. FHA intends to retire and replace Handbook
4150.2, CHG-1 in the near future.
As stated in Revised Appendix D, FHA now permits an
"as-is" appraisal for existing properties that serve as security
for FHA-insured mortgages when minor property deficiencies, which generally
result from deferred maintenance and normal wear and tear, do not affect
the safety of the occupants or the security and soundness of the
FHA no longer requires repairs for these types of minor
cosmetic deficiencies to bring a property into compliance with FHA Minimum
Specifically, the guidance provided in Handbook
4150.2, CHG-1, Chapter 3, Paragraph 3-6, A-7 referencing all-weather road
surfaces; Paragraph 3-6, A-8 referencing poor workmanship; Paragraph 3-6, A-11
referencing debris and trash in crawl space; Paragraph 3-6, A-16 referencing
steps without a handrail; Paragraph 3-6, C referencing bare floors, badly
soiled carpeting and cracked plaster and sheetrock is no longer
Additionally, the guidance provided in Handbook 4905.1,
REV-1, Chapter 2, Paragraph 2-7, A-2 referencing all weather road surfaces;
Paragraph 2-8 referencing poor workmanship and Paragraph 2-14, C referencing
crawl spaces with debris and trash is no longer applicable.
to the Valuation Condition form (form HUD-92564-VC) and protocol for its
completion contained in Handbook 4150.2 is no longer applicable as well.
Examples of minor property conditions that no longer require automatic repair
for existing properties include, but are not limited to:
Cracked or damaged exit doors that are otherwise operable
Cracked window glass
Defective paint surfaces in homes constructed post 1978
Minor plumbing leaks (such as leaky faucets)
Defective floor finish or covering (worn through the finish,
badly soiled carpeting)
Evidence of previous (non-active) Wood Destroying Insect/Organism
damage where there is no evidence of un repaired structural damage
Rotten or worn out counter tops
Damaged plaster, sheetrock or other wall and ceiling materials in
homes constructed post- 1978
Trip hazards (cracked or partially heaving sidewalks, poorly
Crawl space with debris and trash
Lack of an all weather driveway surface
Examples of property conditions that may represent
a risk to the health and safety of the occupants or the soundness of the
property for which FHA will continue to require automatic repair for existing properties include, but are not limited to:
Inadequate access/egress from bedrooms to exterior of home
Leaking or worn out roofs (if 3 or more layers of shingles on
leaking or worn out roof, all existing shingles must be removed before
Evidence of structural problems (such as foundation damage caused
by excessive settlement)
Defective paint surfaces in homes constructed pre-1978
Defective exterior paint surfaces in home constructed post-1978
where the finish is otherwise unprotected.
Lenders must review the appraisal to determine
whether the appraiser has reported any property conditions that will affect the
health and safety of the occupants or the security and the soundness of the
property and must require immediate repair where the property condition poses a
threat to these criteria.
longer mandates automatic inspections for the following items and/or conditions
in existing properties:
Wood Destroying Insects/Organisms: inspection required only
if evidence of active infestation, mandated by the state or local jurisdiction,
if customary to area, or at lender’s discretion
Well (individual water system): test or inspection required
if mandated by state or local jurisdiction; if there is knowledge that well
water may be contaminated; when the water supply relies upon a water
purification system due to presence of contaminants; or when there is evidence
of pipes (plumbing)
intensive agriculture within ¼ mile
mining or gas drilling operations within ¼ mile
junkyard, landfill, factory, gas station, or dry cleaning operation within
objectionable taste, smell or appearance of well water
the guidance in Mortgagee Letter 95-34 that requires well water testing in the
absence of local or state regulations)
Septic: test or inspection required only if evidence of
system failure, if mandated by state or local jurisdiction, if customary to the
area, or at lender’s discretion
Flat and/or unobservable roof
Consequently, the guidance provided in Handbook
4150.2, Chapter 3, Paragraph 3-6, A-6 referencing mandatory termite inspections
for any structure that is ground level and for any structure where wood touches
the ground; Paragraph 3-6, A-5 referencing mandatory well and septic tests; and
Paragraph 3-6, A-12 referencing mandatory inspections for a flat roof is no
Additionally, the guidance provided in Handbook
4905.1, REV-1, Chapter 2, Paragraph 2-5, B-1 referencing mandatory well water
tests is no longer applicable. In cases where well tests are necessary,
as described above, FHA’s existing testing standards outlined in Chapter
3, Paragraph 3-6, A-5a. of Handbook 4150.2 remain in effect and supercede
Mortgagee Letter 95-34.
If the appraiser reports a potential property
deficiency that may pose a threat to the safety of the occupants or the
security and soundness of the property, the lender will require an inspection
of the condition to determine whether repairs are necessary to mitigate or
resolve the problem.
Examples of conditions that will continue to require
automatic inspections include, but are not limited to:
Standing water against the foundation and/or excessively damp
Hazardous materials on the site or within the improvements
Faulty or defective mechanical systems (electrical, plumbing, or
Evidence of possible structural failure (e.g., settlement or
bulging foundation wall)
Additional Changes to
Appendix D, Valuation Protocol
As a result of these changes in FHA’s repair
and inspection requirements for existing properties, Revised Appendix D of
Handbook 4150.2, CHG-1 has been updated. The following pages in Revised
Appendix D have been updated to reflect these changes: 2, 4, 19, 23, 27, 50,
55, 60, 85, 92, 112, 116 and 120. Revised Appendix D is attached to
this Mortgagee Letter and will be available online at:
Mortgagee Letter 2005-34 instructed the mortgagee
to provide a copy of the completed form HUD-92800.5B (Conditional Commitment
Direct Endorsement Statement of Appraised Value) to the mortgagor at least five
business days prior to loan closing. The five-business day delivery date
prior to loan closing of the Conditional Commitment form is hereby rescinded
and lenders are instructed to ensure that the mortgagor receives either a
completed copy of HUD 92800.5B, or a copy of the completed appraisal report, at
or before loan closing.
This Mortgagee Letter is effective for all
appraisals performed on or after January 1, 2006.
If you have any questions regarding
this Mortgagee Letter, please contact your local Home ownership Center (HOC) in Atlanta (888) 696-4687, Denver (800) 543-9378, Philadelphia (800) 440-8647, or Santa Ana (888) 827-5605.
Secretary for Housing
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