www.hudclips.org 


U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

 
DECEMBER 9, 1996
 
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
 
MORTGAGEE LETTER 96-67
 
TO:  ALL APPROVED MORTGAGEES
 
SUBJECT:  Single Family Loan Production - Importance of Home
          Inspections
 
     As discussed in Mortgagee Letter 96-29 (ML 96-29 ), FHA would no
longer be prescribing the document that notifies homebuyers of
potential lead-based paint hazards.  After December 6, 1996, EPA
pamphlet "Protect Your Family From Lead in Your Home" would become the
official lead-based paint disclosure.  That disclosure is the
responsibility of the owner of the living unit selling or renting the
property.  Lenders no longer need to have evidence the disclosure was
provided and do not need to retain anything in the case binder.
However, the previous lead-based paint notice required by FHA served
an additional purpose by alerting homebuyers to the importance of
obtaining a home inspection when purchasing an existing home.
 
     FHA believes that homebuyers are best served when they are aware
of their own responsibilities for assuring that the property is
acceptable to them and that FHA does not warrant the condition of the
home.  Homebuyers are also encouraged to obtain an inspection service
to make the determination that the house is free of defects.
 
     Therefore, we have developed the attached Importance of Home
Inspections form which is to be signed and dated by the borrower(s) on
or before the date that the sales contract is executed (or re-executed
if necessary) for all transactions that will involve FHA mortgage
insurance on existing property.  New construction is exempt since the
house was recently inspected during construction; refinance
transactions are also exempt.  This new form replaces the dual
inspection notice/lead-based paint disclosure required by ML 96-10 .
Either notice on inspections may be used until January 1, 1997 at
which time the attached Importance of Home Inspections form must be
used.  Neither form is required to be submitted in the endorsement
binder.
 
                                 -2-
 
     If you have any questions regarding this issue, please contact
your local FHA office.
 
Sincerely,
 

Nicolas P. Retsinas
Assistant Secretary for Housing-
Federal Housing Commissioner
 
Attachment
           U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                    FEDERAL HOUSING ADMINISTRATION
 
                    IMPORTANCE OF HOME INSPECTIONS
 
      FHA DOES NOT WARRANT THE VALUE OR THE CONDITION OF A HOME!
 
While FHA requires the lender to have an appraiser determine the value
of the property, it is an estimate only and is used to determine the
amount of mortgage FHA will insure and if the condition of the property
makes it eligible for FHA mortgage insurance.  It is not, however, a
guarantee that the property is free of defects.
 
As the purchaser, YOU should carefully examine the property or have it
inspected by a qualified home inspection company to make sure that the
condition is acceptable to you.  You should do this before you sign the
sales contract or make the contract contingent on the inspection.  If
repairs are needed, you may negotiate with the owner about having the
faults corrected.
 
There is no requirement that you hire an inspector.  If you choose to,
the cost of the inspection up to $200 may be included in your mortgage
loan.  Names of home inspection companies can be found in the yellow
pages of your telephone directory under the heading "Home Inspection
Services".
 
***************************************************************************
 
I/We have carefully read this notice and fully understand that FHA will
not perform a home inspection nor guarantee the price or condition of
the property we are purchasing.
 
______    I/We choose to have a home inspection performed.
 
______    I/We do not choose to have a home inspection performed.
 
Borrower_________________________________________ Date___________
Co-Borrower______________________________________ Date___________
 
(11/96)