Well here I am again, wondering if our market "conditions" are moving faster then our government can respond and take action.

HUD/FHA has done a wonderful thing with lead base paint.  This harmful chemical has been addressed and no longer can you buy a HUD home and move in with out the lead base paint being remediated. 

When buying a true HUD home, HUD takes care of all lead base paint surfaces before the buyer can close on the home.

So why is mold not treated the same..........this harmful substance should be taken care of as well.

I am in the middle of a deal with a HUD home and a catch 22! 

A little history:

My client - a single mother, hard working gal!  She has been working for a year to buy this particular home.  When I met her, she needed to work on her credit a bit...........she has worked so hard to become credit ready, got a great job...........now ready to buy this home.

She is approved for a loan and has a "clear to close" other then the mold in the home, (it was just a small amount in the beginning).  The lender had seen the reports on the HUD appraisal there was mold presence and required a new mold report, as we all know it grows.  Now to the tune of $3,500.00 worth of repairs.  The lender said fine you can add this repair bill to your loan to be paid out to the servicer to re-mediate, however needs to be done before close.................

I have supplied this information to HUD and they say no way, nobody can touch the home till the sale is complete other then fixing the lead base paint.  Now if HUD sees lead base paint harmful, why are we not treating mold the same way?

I understand there are several law suits out and pending where banks/lenders are getting sued by buyers for lending them money on a home with mold, where the buyer got very ill.  So lenders are now saying "fix it" or no deal.  I can not blame them as really we should not be letting people move into these homes with issue.

Here is the statement from one underwriting department:

Even on HUD REO property, the lender (DE Underwriter) is responsible for establishing that the property meets FHA minimum standards. If the Appraiser identified mold, there needs to be a satisfactory inspection from a qualified inspector to establish the next steps. If there is mold present, it must be satisfactorily re-mediated as it is considered a health issue. This cannot be an escrowed item.

Response from HUD:

The HUD Radon Gas and Mold Notice specifically states that this is the buyers responsibility.  Work can not be performed prior to closing.  This either has to be a post closing escrow set up or you have to change this to Conventional with a lender that is willing to stick by HUD guidelines.  

However here is Grand Rapids Michigan I can not even find a lender that will hand out a conventional loan with this amount of mold issues. 

It seems to me the right hand does not know what the left hand is doing................FHA will not allow it, but HUD is FHA - kind of, right? So HUD will allow it.

Now my client is willing to pay for it out of escrows - like a prepaid item such as insurance...paid at close to the supplier, just needs to be done before hand.  Unlike lead base paint remediation, where HUD takes care of it at their cost prior to close.

Many of our bank owned homes and HUD homes have mold in the home, some very small amounts and some large amounts.  This is now a small problem waiting to become a HUGE problem if we do not address this issue real soon, in my opinion. 

So what does a buyer and a buyers agent do, other then move on?