Streamlining Inspection and Warranty Requirements for Federal Housing Administration (FHA) Single-Family Mortgage Insurance: Removal of the FHA Inspector Roster and of the Ten-Year Protection Plan Requirements for High Loan-to-Value Ratio Mortgages
In February of this year HUD proposed this rule change:
If passed, HUD proposes to eliminate its national Inspector Roster (Roster). The Roster is a list of inspectors, approved by HUD, to perform inspections in the limited circumstances when either:
- (1) A local jurisdiction did not already perform its own inspections for new construction, and issue building permits and certificates of occupancy; or
- (2) when the inspection of a repair or renovation was not performed by a licensed professional as specified by regulation.
High LTV mortgages would now be governed solely by the inspection requirements proposed in this rule because the proposed inspection requirements would apply to all new construction, regardless of LTV ratio.
What will the lender’s new requirements be?
For all new construction as well as structural repairs and/or renovations of existing properties, to the extent that an inspection is required to determine if construction quality of a one-to four unit property is acceptable as security for an FHA-insured loan, the following requirements apply:
- In areas where local jurisdictions provide building code enforcement and the requisite documentation, the lender shall provide a copy of:
- The building permit, or its equivalent, and a copy of the certificate of occupancy, or its equivalent; or
- A satisfactory inspection notice for work completed, or its equivalent.
- The documentation provided shall be considered satisfactory evidence of completion of the work.
- In jurisdictions that do not provide building code enforcement and requisite documentation, three inspections are required for new construction. For existing construction, only one inspection and certification of work completed for repairs and renovations is required. For both new and existing construction, the lender shall, in order to ensure compliance with FHA requirements:
- Select a Residential Combination Inspector – RCI – (or its successor designation) certified by the International Code Council (or its successor organization) who is licensed or certified as a home inspector in accordance with the applicable State and local requirements governing the licensing or certification of those jurisdictions that license or certify such inspectors in the respective jurisdiction. The lender shall provide a certification from such inspector that the new construction and/or structural repair or renovation work is completed satisfactorily and in compliance with any applicable building code.
- In the absence of such Residential Combination Inspector, the lender shall obtain an inspection performed by a third party, who is a registered architect, a professional engineer, or a tradesman or contractor, and who has met the licensing and bonding requirements of the State in which the property is located. The lender shall provide a certification from such inspector that the inspector is licensed and bonded under applicable State law, and that the new construction and/or structural repair or renovation work is completed satisfactorily and in compliance with any applicable building code.
The learn more about becoming a Residential Combination Inspector – RCI visit this link: http://www.iccsafe.org/Accreditation/Documents/ComboCertificate.pdf
The learn more about this proposed rule change visit this link: https://federalregister.gov/a/2013-02668