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FHA Updates Home Warranty and Inspection Requirements

Phil Hall
Mar 15, 2019
Inventory problems related to construction costs will hamper the single-family housing market, even though the economy will continue to remain solid

The Federal Housing Administration (FHA) has issued two mortgagee letters that update its guidelines related to home warranty and inspection requirements for single-family FHA loans.
 
Mortgagee Letter 2019-04 eliminates the FHA Inspector Roster, effective Aug. 2. In its letter, the FHA explained that for “local jurisdictions that do not provide building code enforcement and requisite documentation, the rule allows inspections performed by the International Code Council (ICC) RCI or CI, who is licensed or certified as a home inspector in accordance with the applicable state and local requirements governing the licensing or certification of inspectors in the respective jurisdiction. For jurisdictions that have an absence of RCIs or CIs, the rule requires lenders to obtain an inspection performed by a third party who is a registered architect, a professional engineer, or a trades person or contractor with a minimum of 5 years’ experience and has met the licensing and bonding requirements of the state in which the property is located, as specified.”
 
Mortgagee Letter 2019-05 eliminates the 10-year protection plan requirements, now allowing borrowers to qualify for FHA mortgage insurance on high loan-to-value mortgages where the dwelling was not approved for guaranty, insurance, or a direct loan before the beginning of construction and where the dwelling is less than one year old. These changes are effective for all case numbers assigned on or after March 14.
 
FHA Commissioner Brian Montgomery stated on his LinkedIn page that these changes were part of his effort to upgrade the agency’s procedures.
 
“Shortly after arriving back at FHA in June 2018, I indicated one of our goals was to streamline and update our program guidelines and procedures,” he wrote. “In parallel with the Administration’s objectives of reducing regulatory barriers, late yesterday we released two Single Family Mortgagee Letters (2019-04 and 2019-05) where we’ve eliminated two unnecessary and outdated regulations that have been barriers for lenders.”

 
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