Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Administration (FHA) released a pair of mortgagee letters earlier this month that remove a pair of regulations.
The first communication announced the removal of the FHA Inspector Roster. FHA has deregulated the Inspector Roster requirements and will no longer keep an inspector roster. The change is part of FHA’s efforts to streamline inspection requirements for Single Family Mortgage Insurance.
The Department of Housing and Urban Development (HUD) established the inspector roster to standardize the inspection process for properties with FHA-insured mortgages. This was done because of the lack of uniformity between city and state building codes.
That has been rectified by the adoption of the International Residential Code (IRC) by 49 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands. Inspectors are certified by the International Code Council (ICC), which requires a “rigorous set of examinations.” According to the mortgagee letter, the ICC and the IRC make it unnecessary for HUD to maintain and administer a standardization process for inspectors.
FHA says the elimination of its roster expands the pool of available inspectors. If there is not a registered inspector available in an area, the new FHA rule requires lenders to obtain an inspection by a registered architect, professional engineer or contractor with at least five years experience. The third party must also meet licensing and bonding requirements of the state in which the property is located.
In a separate mortgagee letter, FHA announced the elimination of the Ten-Year Protection Plan Requirements.
This move streamlines home warranty for FHA single family mortgage insurance by removing the requirement that borrowers purchase 10-year protection plans on newly constructed homes.
Homebuyers and builders will continue to execute a one-year Warranty of Completion of Construction. This assures that the home is built according to plan and protects the buyer against defects in equipment, material, or workmanship. The warranty further states that the warrantor agrees to fix and pay for any defects and restore any component of the home damaged in fulfilling the terms and conditions of the warranty. The one-year warranty begins on the date that title is conveyed to the buyer, the date that construction is complete, or upon occupancy, whichever date occurs first.
“FHA has determined that the inspection requirements and the Warranty of Completion of Construction achieve the intent of providing assurance of quality more effectively than the ten-year protection plan, while eliminating the additional cost of the ten-year protection plan,” FHA wrote in the mortgagee letter.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.