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FHA General Requirements

FHA General Requirements

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FHA General Requirements

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  1. FHA General Requirements Chapter 3

  2. Chapter 3: FHA General Requirements Introduction • There are several general requirements and protocols that FHA appraisers must be aware of and follow. • The FHA reiterates the importance of appraiser independence, and advises of new requirements regarding who is eligible to request an appraisal from an FHA Roster appraiser. • The requirements are effective for all case numbers assigned on or after January 1, 2010, with the existing requirements remaining in effect.

  3. Chapter 3: FHA General Requirements Key Terms • Appraisal Report A report that confirms both USPAP Scope of Work requirements and specific guidelines from HUDdocumenting a property appraisal. • Appraiser Shopping Where lenders order additional appraisals in an effort to assure the highest possible value for the property and/or the least amount of deficiencies and/or repairs noted and required by the appraiser. • Definition of Market Value The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus (USPAP).

  4. Chapter 3: FHA General Requirements Key Terms • Intended Use The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment (USPAP). • Intended User The client and any other party identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment (USPAP).

  5. Chapter 3: FHA General Requirements Key Terms • Lender Select The process by which lenders may select the appraiser from those designated on the FHA Appraiser Roster. • Mortgagee Letter Communication from FHA to lenders, appraisers, and others regarding FHA procedure, application, etc. • Scope of Work The type and extent of research and analyses in an assignment.

  6. Chapter 3: FHA General Requirements FHA Roster Appraiser Protocol: Requirements • Qualifying Appraisers • In order to be placed on the FHA Appraiser Roster, an appraiser must: • Be state certified (no more licensed-level appraisers) • Appear on the ASC’s National Registry • Include credentials in the state-certification requirement based on the minimum certification criteria issued by the Appraisal Qualifications Board (AQB) of the Appraisal Foundation • NOT be listed on GSA’s Excluded Parties List System (EPLS), HUD’s Limited Denial of Participation (LDP) list, or HUD’s Credit Alert Verification Reporting System (CAIVRS). Note: Effective January 1, 2015, a four-year college degree is required for both Residential and General Certification.

  7. Chapter 3: FHA General Requirements Use of Trainees • Per HUD’s rules regarding use of trainees FHA Roster appraisers must • Sign the appraisal • Perform all analysis and reconciliation • Select the comparables and critical analyses in the Market Conditions form and appraisal report • Inspect the subject property and exterior of the comparable properties • Trainees may not • Perform inspections for FHA Roster appraisers • Sign the appraisal report

  8. Chapter 3: FHA General Requirements Appraiser Selection in FHA Connection • Lenders are responsible for ensuring that the appraiser who conducted the appraisal is correctly identified in the FHA Connection. • Lenders who fail to ensure that the FHA Connection reflects the correct name of the appraiser will face administrative sanctions.

  9. Chapter 3: FHA General Requirements Prohibition of Mortgage Brokers and Commission-Based Lender Staff from the Appraisal Process • FHA-approved lenders are prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained, or compensated by a mortgage broker or a member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan.

  10. Chapter 3: FHA General Requirements Appraisal and Appraisal Management Company(AMC)/Third Party Organization Fees • The FHA does not require the use of AMCs or third-party organizations for appraisal ordering, but they are available to ensure appraiser impartiality. FHA-approved lenders must ensure that: • FHA Roster appraisers may record the appraisal performance fee. • FHA Roster appraisers are compensated at a reasonable, customary rate for appraisal services. • The FHA appraisal completion fee may not include a management fee, or any activity other than the performance of the appraisal. • Management fees charged by an AMC or other third party must be for services related to ordering, processing, or reviewing appraisals performed for FHA financing. • AMC and other third-party fees must not exceed what is customary and reasonable.

  11. Chapter 3: FHA General Requirements Affirming Existing Requirements:Prevention of Improper Influences on Appraisers • FHA Roster appraisers must avoid actual (and the appearance of) conflicts of interest. In order to help appraisers avoid this conflicts, no members of a lender’s loan production staff or any person • (i) who is compensated on a commission basis upon the successful completion of a loan, or • (ii) who reports, ultimately, to any officer of the lender not independent of the loan production staff and process, shall have substantive communications with an appraiser relating to or having an impact on valuation, including ordering or managing an appraisal assignment.

  12. Chapter 3: FHA General Requirements Affirming Existing Requirements:Prevention of Improper Influences on Appraisers (cont.) • The underwriter who has responsibility for the quality of the appraisal report is allowed to request clarifications and discuss with the appraiser components of the appraisal that influence its quality. • If absolute lines of independence cannot be achieved as a result of the lender’s small size and limited staff, the lender must be able to show there are safeguards to prevent influence and interference in the loan production process.

  13. Chapter 3: FHA General Requirements Appraiser Independence Safeguards • As the FHA transitioned from rotational assignment of appraisers to lender select (the process by which lenders may select the appraiser from those designated on the FHA Appraiser Roster), the issue of appraisal independence was amplified. • Loan officers and loan production staff are prohibited from supervising or directing appraisers. • The mortgagee and the appraiser avoid even the appearance of a conflict of interest, including providing the appraiser with anything of value in consideration of returning the appraisal at a given value. • Mortgagees may not condition continued selection of an appraiser on inflating values or disregarding repair requirements.

  14. Chapter 3: FHA General Requirements Appraiser Independence Safeguards (cont.) • Mortgagees and third parties working on behalf of mortgagees are prohibited from: • Withholding, or threatening to withhold: • Timely or partial payment for an appraisal report. • Future business for an appraiser, or demoting, terminating, or threatening to demote/terminate an appraiser. • Expressly or impliedly promising future business, promotions, or increased compensation for an appraiser. • Conditioning the ordering of an appraisal report or the payment of an appraisal fee, salary, or bonus on the opinion, conclusion, or valuation to be reached, or on a preliminary value estimate requested from an appraiser.

  15. Chapter 3: FHA General Requirements Appraiser Independence Safeguards (cont.) • Mortgagees and third parties working on behalf of mortgagees are prohibited from: • Requesting that an appraiser provide comparable sales, and estimated, predetermined, or desired valuation in an appraisal report prior to the completion of the appraisal report. • Providing to the appraiser an anticipated, estimated, encouraged, or desired value for a subject property or a proposed amount to be loaned to the borrower, except that a copy of the sales contract for purchase must be provided. • Providing to the appraiser, appraisal company, appraisal management company, or any entity or person related to the appraiser, appraisal company, or management company, stock or other financial or non-financial benefits.

  16. Chapter 3: FHA General Requirements Appraiser Independence Safeguards (cont.) • Mortgagees and third parties working on behalf of mortgagees are prohibited from: • Allowing the removal of an appraiser from a list of qualified appraisers or the addition of an appraiser to an exclusionary list of qualified appraisers without prompt written notice to the appraiser. • The notice must include written evidence of the appraiser’s illegal conduct including improper or unprofessional behavior, or another substantive reason for removal which constitutes, a violation of the USPAP or state licensing standards.

  17. Chapter 3: FHA General Requirements Appraiser Independence Safeguards (cont.) • Ordering, obtaining, using, or paying for a second or subsequent appraisal or automated valuation model (AVM) in connection with a mortgage financing transaction unless: • There is a reasonable basis to believe that the initial appraisal was flawed or tainted and such appraisal is clearly noted in the loan file, or • Unless such appraisal or automated valuation model is done pursuant to written, pre-established bona fide pre- or post-funding appraisal review or quality control process or underwriting guidelines, and so long as the lender adheres to a policy of selecting the most reliable appraisal, rather than the highest value.

  18. Chapter 3: FHA General Requirements Appraiser Engagement, Knowledge of Market Area, and Geographic Competency • Mortgagees and appraisers are responsible for the quality and accuracy of the appraisal, in the event there were foreseeable problems with the appraisal (integrity, precision, thoroughness). • The valuation principles for appraising all residential properties are essentially the same, no matter the market in which a property is located. However, not all appraisers (even state-certified) are knowledgeable and experienced or have access to sources of data for all markets. • The lender must determine whether an appraiser’s qualifications are sufficient to enable him to competently perform appraisals before assigning appraisals.

  19. Chapter 3: FHA General Requirements Appraiser Engagement, Knowledge of Market Area, and Geographic Competency (cont.) • The Uniform Standards of Professional Appraisal Practice (USPAP), including the Competency Rule, apply to all appraisals performed for properties that are security for FHA-insured financing. • Per the Appraiser’s Certifications contained in the property-specific Fannie Mae/Freddie Mac appraisal reporting forms adopted by the FHA, appraisers must certify that: • “I have knowledge and experience in appraising this type of property in this market area.” (Appraiser’s Certification # 11) AND • “I am aware of, and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records and other such data sources for the area in which the property is located.” (Appraiser’s Certification #12)

  20. Chapter 3: FHA General Requirements Reconsideration of Value • Reconsideration of value can only be ordered by the FHA underwriter. • Appraisers must reconsider their analyses, based upon relevant information available in the normal course of business, as of the date of the appraisal. • The information can include listings, comparable sales, or pending listings, as of the date of the appraisal. After the data is considered; the appraiser is not required to change his opinion of value. • Information and data which was not available until after the effective date of the appraisal may not be provided. • Additional charges are prohibited, as the information was available during the appraisal and should have been considered. • Only one reconsideration of value is permitted.

  21. Chapter 3: FHA General Requirements Appraiser Portability • Mortgagee Letter 2009-29 is effective for all case numbers assigned on, or after, January 1, 2010. • Included is a discussion of portability of appraisals for the purpose of facilitating the loan process when a borrower switches from one FHA-approved lender to another and an appraisal was ordered by and completed for the first lender.

  22. Chapter 3: FHA General Requirements Appraiser Portability (cont.) • The FHA prohibits appraiser shopping, where lenders order additional appraisals in an effort to assure the highest possible value for the property and/or the least amount of deficiencies and/or repairs noted and required by the appraiser. • A second appraisal may be ordered by the second lender if: • The first appraisal contains material deficiencies as determined by the Direct Endorsement underwriter for the second lender. • The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers. • The first lender fails to provide a copy of the appraisal to the second lender, causing a delay in closing and posing potential harm to the borrower.

  23. Chapter 3: FHA General Requirements Appraisal Transfer and Change of Client Name in Appraisal Report • In situations where a transfer of an FHA case number between lenders becomes necessary and lender A provides a copy of the original appraisal to lender B, the appraiser cannot change the name of the client, readdress the appraisal, or transfer a completed appraisal report. In these situations, the FHA requires that the original appraiser perform a new appraisal assignment (Mortgagee Letter 9-29).

  24. Chapter 3: FHA General Requirements Changes to Valuation Protocol • The particular Mortgagee Letter, communication from the FHA to lenders, appraisers, and others regarding FHA procedure, application, etc., cited in the discussion or Appendix D of HUD Handbook 4150.2, should be referenced. • Appraisal Reports • Any appraisal report, other than a Restricted Appraisal Report, is now simply considered an appraisal report, a report conforming to both USPAP Scope of Work requirements and specific guidelines from HUD documenting a property appraisal. • The “Self-Contained Appraisal Report” in USPAP is eliminated. • The description “Summary” has been removed in USPAP.

  25. Chapter 3: FHA General Requirements Changes to Valuation Protocol (cont.) • Housing Trends • All FHA Roster appraisers are required to report on housing trends in the Neighborhood section of the applicable property-specific appraisal reporting form. • To ensure greater transparency and accuracy of appraisals performed for FHA-insured financing, the FHA adopted the Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form 71), released November 2008. • The Market Conditions Addendum must be included in all appraisals of properties that are to be security for FHA-insured mortgages and that are performed on or after April 1, 2009.

  26. Chapter 3: FHA General Requirements Changes to Valuation Protocol (cont.) • The Appraisal Update Report • Effective for all case numbers assigned on or after February 15, 2010, Mortgage Letter 2010-13 stipulates that for all Appraisal Update Reports using Fannie Mae Form 1004D/Freddie Mac Form 442, the following requirements are applicable to the use of an Appraisal Update Report: • An original appraisal report can only be updated one time via the Appraisal Update Report. • The Appraisal Update Report may not be used when ordered by a lender who is not identified as an intended user in the original appraisal report unless the appraiser incorporates the original report being updated by attachment rather than by reference per Advisory Opinion 3 of USPAP. • The appraiser must include a completed Market Conditions Addendum, Fannie Mae For 1004C/Freddie Mac Form 71, for the subject property that is reflective of market conditions as of the effective date of the Appraisal Update Report.

  27. Chapter 3: FHA General Requirements Permissible Appraisal Validity Periods • Appraisals with No Appraisal Update Report • 150-Day Validity Period: A loan may not be insured if the loan is not closed within 150 days from the effective date of the appraisal report (120-day validity period for original appraisal, plus 30-day extension period permitted in Handbook 4155.2). • Appraisal with an Appraisal Update Report • 240-Day Validity Period: A loan may not be insured where the original or underlying appraisal is subsequently updated if the loan is not closed within 240 days from the effective date of the original appraisal report being updated (120-day validity period for original appraisal, plus 120-day validity period for Appraisal Update Report). • The 30-day extension period permitted in Handbook 4155.2 cannot be used for cases when the original appraisal is updated.

  28. Chapter 3: FHA General Requirements Permissible Appraisal Validity Periods • REO Property Appraisal • On March 8, 2010, HUD issued Mortgagee Letter 2010-08, pertaining to the appraisal validity period for REO properties, which stipulates that all appraisals utilized to establish the listing price on an REO property owned by the Department of Housing and Urban Development, with an effective date on or after April 1, 2010, will be valid for a period of 120 days from the effective date of the appraisal. • If the buyer is financing the purchase with an FHA insured mortgage, a valid HUD REO sales contract must be ratified within 120 days of the appraisal effective date or the mortgagee must order a new appraisal or appraisal update in accordance to the guidance given in Mortgagee Letter 2009-51 to support the mortgage transaction. • This update is a change from the current six-month validity period.

  29. Chapter 3: FHA General Requirements REO Second Appraisals to Support a Higher Purchase Price • Mortgagee Letter 2010-08 established that effective March 8, 2010, when FHA financing is used to purchase a HUD REO property, the appraisal utilized to determine the list price will remain effective for obtaining the FHA-insured mortgage.* • A second appraisal may not be ordered to support a purchase price that is higher than the value on the current appraisal. • A second appraisal can only be ordered to support a higher sales price if there are material deficiencies with the current appraisal or the present appraisal will not be valid on the date of contract ratification. • The Direct Endorsement (DE) underwriter is responsible for deciding if there are material deficiencies with respect to the current appraisal. • The lender must document why a second appraisal was ordered and retain both appraisal copies in the loan file.

  30. Chapter 3: FHA General Requirements Repair Conditions • Only repairs for property conditions that rise above the level of cosmetic defects, minor defects, or normal wear and tear are now required. Specifically, these are livability issues. • Appraisers must still report property deficiencies and adverse conditions. Then, the lender judges and relies upon underwriting practices to determine threats posed to occupant safety, and/or jeopardized soundness and structural property integrity. Inspections or repairs may then be assigned. • An “as is”appraisal is permitted for existing properties when minor property deficiencies, which result from deferred maintenance and normal wear and tear, do not affect occupant safety, and property security or soundness.

  31. Chapter 3: FHA General Requirements Repair Conditions (cont.) • The FHA no longer requires repairs for minor cosmetic deficiencies to bring a property into compliance with FHA minimum property requirements. These items in Chapter 3 of the Handbook, 4150.2, CHG-1 no longer apply: • All-weather road surfaces • Debris and trash in crawl spaces • Poor workmanship • Lack of handrail(s) on stairs • Bare floors, badly soiled carpeting, and non-hazardous defects in plaster and sheetrock

  32. Chapter 3: FHA General Requirements Repair Conditions (cont.) • The following items no longer require repair for existing properties: • Missing handrails • Cracked or damaged exit doors that are otherwise operable • Cracked window glass • Defective paint surfaces in homes constructed after 1978 • Minor plumbing leaks • Defective floor finish or covering (e.g., worn-through finish, badly soiled carpeting) • Evidence of non-active wood-destroying insect/organism damage where there is no evidence of unrepaired structural damage • Rotten or worn-out countertops • Damaged plaster, sheetrock, or other wall and ceiling materials in homes constructed after 1978 • Poor workmanship • Trip hazards (e.g., cracked or partially heaving sidewalks, poorly installed carpeting) • Crawl spaces with debris and trash • Lack of an all-weather driveway surface

  33. Chapter 3: FHA General Requirements Repair Conditions (cont.) • The following items no longer require automatic inspections for existing properties, however, require inspections only for the following circumstances: • Wood destroying insects/organisms inspections: • If there is evidence of active infestation. • If it is mandated by the sate or local jurisdiction. • If it is customary to the area. • At the lender’s discretion.

  34. Chapter 3: FHA General Requirements Repair Conditions (cont.) • Well inspections if: • It is mandated by state or local jurisdictions. • There is knowledge that well water may be contaminated. • The water supply relies on a water purification system due to the presence of contaminants. • There is evidence of: • Corrosion of pipes. • Areas of intensive agriculture within one quarter of a mile. • Coal mining or gas drilling operations within one quarter of a mile. • Dump, junkyard, landfill, factory, gas station, or dry cleaning operation within one quarter of a mile. • Unusually objectionable taste, smell, or appearance of well water.

  35. Chapter 3: FHA General Requirements Repair Conditions (cont.) • Septic test or inspection: • If there is evidence of system failure. • If it is mandated by state or local jurisdiction. • If it is customary to the area. • At the lender’s discretion. • Flat and/or unobservable roof conditions if there is: • Standing water against the foundation and/or excessively damp basements. • Hazardous materials on the site or within the improvements. • Faulty or defective mechanical systems. • Evidence of possible structural failure.

  36. Chapter 3: FHA General Requirements Repair Conditions (cont.) • Examples of property conditions that may represent a risk to the health and safety of the occupants or the soundness of the property and for which the FHA will continue to require automatic repair for existing properties include: • Inadequate access/egress from bedrooms to exterior of home • Leaking or worn-out roofs (if there are three or more layers of shingles on a leaking or worn-out roof, all shingles must be removed before re-roofing) • Evidence of structural problems • Defective paint surfaces in homes constructed prior to 1978 • Defective exterior paint surfaces in homes constructed after 1978, where the finish is otherwise protected

  37. Chapter 3: FHA General Requirements FHA Adoption of the Uniform Appraisal Dataset (UAD) • The FHA announced on August 11, 2011 via Mortgagee Letter 2011-30 that the agency has adopted the Uniform Appraisal Dataset (UAD) and two of the UAD compliant appraisal reporting forms effective January 1, 2012. • The UAD is the result of collaboration between Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency (FHFA), to standardize data reporting quality and improve the collection of electronic appraisal data. • UAD field requirements for FHA Appraisal Reports are generally mirrored with that specified by Fannie Mae and Freddie Mac, but there are added compliance requirements.

  38. Chapter 3: FHA General Requirements FHA Adoption of the Uniform Appraisal Dataset (UAD) (cont.)

  39. Chapter 3: FHA General Requirements FHA Residential General Reporting Requirements (cont.) • The FHA has adopted the use of the following Fannie Mae appraisal reporting forms: • Uniform Residential Appraisal Report (Fannie Mae Form 1004) for all one-unit single-family dwellings • Manufactured Home Appraisal Report (Fannie Mae Form 1004C) for all manufactured homes • Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073) for all individual condominium units • Small Residential Income Property Appraisal Report (Fannie Mae Form 1025) for all two- to four-unit single-family dwellings • Appraisal Update and/or Completion Report (Fannie Mae Form 1004D/Freddie Mac Form 44) • Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form 71)

  40. Chapter 3: FHA General Requirements FHA Residential General Reporting Requirements (cont.) • UAD reporting compliance is only required for the following appraisal reporting forms: • Uniform Residential Appraisal Report (Fannie Mae Form 1004) for all one-unit single-family dwellings • Exterior only Residential Appraisal Report for a one-unit single-family dwelling (2055) • Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073) for all individual condominium units • Exterior only Individual Condominium Unit Appraisal Report (Fannie Mae Form 1075) • The appraisal process is used to determine a property’s minimum requirements/eligibility standards for FHA-insured mortgages.

  41. Chapter 3: FHA General Requirements FHA Residential General Reporting Requirements (cont.)

  42. Chapter 3: FHA General Requirements Minimum Property Requirements and Minimum Property Standards • For new construction to be eligible for FHA financing, it must comply with HUD’s Minimum Property Standards. • Existing construction must comply with HUD’s Minimum Property Requirements. • The appraiser must denote any deficiency in the appraisal report. • The lender will determine which repairs for existing properties must be made for the property to be eligible for FHA-insured financing. • Cosmetic repairs are not required; however, they are to be considered in the overall condition rating and valuation of the property.

  43. Chapter 3: FHA General Requirements Minimum Property Requirements and Minimum Property Standards (cont.) • Appraisers determine during the appraisal whether repairs, alterations, or inspections are essential to eliminate threatening property conditions • Required repairs will be limited to necessary requirements to: • Protect the health and safety of the occupants (safety). • Protect the security of the property (security). • Correct physical deficiencies or conditions affecting structural integrity (soundness).

  44. Chapter 3: FHA General Requirements Minimum Property Requirements and Minimum Property Standards (cont.) • Properties are unacceptable until the defects or conditions have been remedied and the probability of further damage eliminated. • Defective conditions include: • Defective construction • Other readily observable conditions that impair the safety, sanitation, or structural soundness of the dwelling • Conditions requiring inspection or testing by qualified individuals: • Infestation—evidence of termites • Inoperative or inadequate plumbing, heating, or electrical systems • Structural failure in framing members • Leaking or worn-out roofs • Cracked masonry or foundation damage • Drainage problems • Appraisers should not recommend inspections only as a means of limiting liability.

  45. Chapter 3: FHA General Requirements On-site Inspection by the Appraiser • Appraisers must have full access to property improvements. • If unable to visually evaluate the improvements in their entirety, appraisers must contact the lender and reschedule a time when a complete visual inspection can be performed. • This includes access to the crawl space and attic. • The appraiser is not required to disturb insulation, or move personal items, furniture, equipment, plant life, soil, snow, ice, or debris that obstruct access or visibility.

  46. Chapter 3: FHA General Requirements General Site and Location Requirements • Unacceptable Locations • FHA guidelines require that a site be rejected if the property being appraised is subject to hazards, environmental contaminants, noxious odors, offensive sights, or excessive noises to the point of endangering the physical improvements or affecting the livability of the property, its marketability, or the health and safety of its occupants. • Lenders must be contacted prior to appraisal completion. • Site Hazards and Nuisances • The appraiser must note and comment on all hazards and nuisances affecting the subject property including: • Subsidence; operating and abandoned oil and gas wells; abandoned wells; slush pits; heavy traffic; airport noise and hazards; proximity to high pressure gas, liquid petroleum pipelines; radio/TV transmission tower; and excessive hazard from smoke, fumes, odors, and stationary storage tanks containing flammable or explosive material.

  47. Chapter 3: FHA General Requirements General Site and Location Requirements (cont.) • Soil Contamination • Check readily observable evidence of hazardous substances in the soil. Conditions that could indicate soil contamination include pools of liquid, lagoons, stressed vegetation, or odors. If any of these conditions exist, further analysis or testing is required. Note proximity to sites that could contain hazardous wastes. • If there is any readily observable surface evidence of leakage from an underground storage tank, further analysis or testing is required. • Grading and Drainage • Check for observable evidence of grading and drainage problems. Proper drainage control measures may include gutters, or appropriate grading or landscaping to divert the flow of water away from the foundation. If the grading does not provide positive drainage from the improvements, make a repair requirement. • Note any readily observable evidence of standing water near the property that indicates improper drainage. If the standing water is problematic, make a repair requirement in the Site section of the report.

  48. Chapter 3: FHA General Requirements General Site and Location Requirements (cont.) • Individual Water Supply and Sewage Systems • Identify the type of utilities in the appraisal report. • Appraisers must note any readily observable deficiencies regarding private well or septic systems. • The appraiser is also required to report on the availability of connection to public and/or community water/sewer systems. The lender is responsible for the determination of the feasibility for requiring connection. • Private Road Access and Maintenance • Private streets must be protected by permanent recorded easements or owned and maintained by a homeowners association. • Each property must have vehicular or pedestrian access. • The FHA defines an all-weather surface as a road surface over which emergency vehicles can pass in all types of weather.

  49. Chapter 3: FHA General Requirements General Requirements for the Dwelling and Improvements • Roofing • Identify roofing material type and the condition.* • Mechanical Systems • Report on the condition of the improvements, which include mechanical systems.* • Check mechanical, plumbing, and electrical systems in the subject property to ensure they are in proper working order. This examination includes observing turned on system performance. *The nature and degree of any noted deficiency will determine if it should be noted in the appraisal.

  50. Chapter 3: FHA General Requirements General Requirements for the Dwelling: Mechanical Systems • Electrical System • Examine the electrical system to ensure that there is no visible frayed wiring or exposed wires and note if the amperage is adequate for the property. • Operate a representative number of lighting fixtures, switches, and receptacles to note any deficiencies. If the appliances appear undersized, determine if there is adequate amperage to run “standard” appliances. • The appraiser is not required to insert any device inside the panels or to dismantle any electrical device or control. • Plumbing System • Operate the toilets and faucets to determine that the plumbing system is intact, that it runs cold and hot water, does not emit foul odors, and that there is no observable evidence of leaks or structural damage under fixtures. • Turn on cold-water faucets to check water pressure and flow. • Examine the property’s septic system for signs of failure or malfunction.