FHA Changes Part III

Real Estate Appraiser with Miller Appraisals

This may be old news for some people but not everyone is familiar with the changes made by FHA.

FHA Changes Part II          FHA Changes Part I

Excerpts from MORTGAGEE LETTER 2005-ML-48 This Mortgagee Letter is effective for all appraisals performed on or after January 1, 2006.

FHA no 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:
    Corrosion of pipes (plumbing)
    Areas of intensive agriculture within 1/4 mile
    Coal mining or gas drilling operations within 1/4 mile
    Dump, junkyard, landfill, factory, gas station, or dry cleaner within 1/4 mile
    Unusually objectionable taste, smell or appearance of well water
(superseding 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

Examples of conditions that will continue to require automatic inspections include, but are not limited to:

1. Standing water against the foundation and/or excessively damp basements
2. Hazardous materials on the site or within the improvements
3. Faulty or defective mechanical systems (electrical, plumbing, or heating)
4. Evidence of possible structural failure (e.g., settlement or bulging
foundation wall)


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Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Thanks Ken!

Great post and if everyone knew this we would not be in the sub-prime problem we have today. While I am not trying to imply that FHA is the new sub-prime us brokers and Realtors did not know how easy it is to do FHA loans.

Again, great info

Happy Selling!

Tony Grego - Indiana Mortgage Broker 

Jan 30, 2008 08:42 AM #1
Cherimie Crane
Cherimie Crane & Associates - Beaufort, SC
Thanks Ken.....I am working with an FHA right now. Useful stuff!!
Jan 30, 2008 09:22 AM #2
Sara Goodwin
Ashcroft & Associates - Portland, OR
Portland, Oregon Appraiser
Gads... I can't think of too many houses around here that don't have a gas station or dry cleaner or agriculture within 1/4 mile... This should be fun!
Jan 30, 2008 11:08 AM #3
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Kenneth Miller

NW Ohio FHA Appraiser
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