FHA Peeling Paint Guidelines

FHA Peeling Paint Guidelines

FHA peeling paint guidelines relate to the mandatory elimination of lead-based paint hazards from HUD-owned family dwellings constructed prior to 1978 when their use is intended for residential habitation. 1. This is done through lead-based paint abatement 3, an activity regulated at the federal level 4 and at state level 5 6 et cetera.

The discovery of peeling paint in properties for residential purposes is one of the issues about what won’t pass FHA inspection as we describe thoroughly in our FHA appraisal and inspection guidelines.

Peeling paint seems only to be an aesthetic issue, a cosmetic detail. 2 However, in FHA appraisals, there are special situations to consider and specific FHA peeling paint guidelines. 7 If these guidelines are not followed, it is possible that the entire FHA loan cannot be completed 8, even when you meet all the FHA loan requirements and you are within the established loan limits.

FHA peeling paint guidelines state that homes built before the 1978 lead paint ban went into effect in American housing are presumed to be contaminated with lead paint. If the appraisal includes detection of peeling paint in such homes, that paint is further presumed to be a lead-based health hazard requiring its abatement.

It will happen when the appraiser reviews the home during the appraisal that a correction of a peeling paint issue is performed as a condition of loan approval when the property was built in 1978 or earlier. The age of the home plays a big part in that decision to require a correction. If the house was built before 1978, that peeling paint is NOT just a cosmetic issue.

FHA Handbook 4000.1 Peeling Paint

HUD 4000.1, the FHA loan handbook mandates that in the cases of properties constructed before 1978, the seller is obliged to disclose information known regarding paint that contains lead and hazards related to that lead-based paint before the buyer concludes the purchase of the house., “If the Property was built before 1978, the seller must disclose any information known about lead-based paint and lead-based paint hazards before selling the house”, but also the following guidance to the FHA appraiser:

“If the Property was built before 1978, paint mitigation must be in compliance with the EPA’s Renovation, Repair, and Painting Rule and HUD’s lead-based paint regulations regarding paint mitigation at 24 CFR 200.810(c). Some states may require more specific treatment.”

Specific Cases Of Application Of FHA Peeling Paint Guidelines

  • Properties built prior to 1978, even if the peeling paint was applied recently.
  • Properties built prior to 1978, even when the parties can evidence that the paint does not contain lead.
  • This includes all structures within the surface of the real estate object. Therefore, it includes the outbuildings: exterior objects such as barns, sheds, fences, etcetera.
  • Applies to all surfaces, including wood surfaces.
  • FHA peeling paint guidelines apply also to VA and USDA appraisals. Likewise, they can also apply to conventional loans.

Due Diligence For The Lender

There is due diligence required for the FHA lender in these cases. He has to provide the borrower a pamphlet called “Protect Your Family From Lead In Your Home”. For more precision, the FHA loan handbook is clear that in these situations, the FHA lender is obliged to ensure that the borrower of the loan, also for our purposes, the prospective buyer “…..has been provided the EPA-approved information pamphlet on identifying and controlling lead-based paint hazards.”

Furthermore, the FHA lender is also obliged to offer the buyer a period of then days “…..before becoming obligated to purchase the home to conduct a lead-based paint inspection or risk assessment to determine the presence of lead-based paint or lead-based paint hazards,”. We understand that this can be subject of waiver, however, at the state level, there is a trend noticed since 2020, to limit waivers where the borrower loses a right, in order to protect him as he is considered the weakest party in this relationship

Due Diligence For The Real Estate Agent

It is not only the lender who has to pay attention in these cases. HUD 4000.1 states that “When any agent is involved in the transaction on behalf of the seller, the sales contract includes a statement that the agent has informed the seller of the seller’s Lead Disclosure Rule obligations, the agent is aware of his duty to ensure compliance with the requirements of the Rule, and the agent has signed and dated the contract”.

Cases are very specific and should be discussed thoroughly with the loan officer. However, this article provides you a good reference to discuss with the underwriters and officers. Appraisers only detect and enter the peeling paint event they notice. Lead paint that is not peeling will not require any entry in the appraisal document.

FHA Peeling Paint Waiver

Now the question is whether these obligations that arise from peeling paint problems can be waived through an arrangement between the contract participants. What happens in winter when it is very cold and impossible to paint or pressure wash until spring?

An FHA peeling paint waiver is possible in few circumstances, notably in winter months, and the competence for this waiver belongs to the underwriter and not to the appraiser. The reason for the limitation of the waiver is the special situation observed by legislation in these FHA mortgage loans.

Waivers for FHA peeling paint are granted by underwriters during the underwriting phase. This waiver is granted only after the appraisal. Any incorrect appraisal, inflated values, or factual errors, would get caught in the underwriting phase. 

Peeling paint, and also chipped paint, we refer to those built before 1978, must be completely scrapped and painted afterwards, and the appraiser must note later these repairs. There will be no closing of the loan, no FHA closing phase, without them.

Sellers are complaining frequently that they are unable to solve peeling paint issues, normally in exterior structures during winter, actually with temperatures under 30° F. Pressure washing and painting are very difficult to perform successfully in winter conditions. The attributions of the underwriter are discretionary.

The mandatory activities for the FHA appraiser are reporting the conditions of the property as related to the Minimum Property Requirements. The appraiser does not participate in any agreement between the borrower, lender, or Direct Endorsement Underwriter.

These Direct Endorsement Underwriters have normally at their disposal an underwriting form with many sections. There we will see many sections where some of the paragraphs may be waived. This is in practice, mostly a discretionary decision of the underwriter.

fha peeling paint guidelines

Alternatives To Solve FHA Peeling Paint Issues

What is possible also, are the two following situations, that, however, are not actually waivers. Let’s see them:

  • The borrower accepts to fulfill the payment for the repair of the peeling paint events detected and obtains a lower price as compensation for the cost of the repair performed.
  • As part of the sales operation, the seller will agree to execute the payment for the repairs so the loan can be finally closed.
  • An alternative is actually to do an FHA 203K loan so you can get certain repairs like this taken care of without spending money out-of-pocket. You would actually buy the property and then specific, predetermined repairs would be made after the close of escrow from money bundled in your loan with a determined and streamlined purpose.

In both aforementioned cases, the repair must take place before the closing of the loan and there is no waiver in FHA mortgage loans for the peeling paint cases.

The FHA appraisal will detect peeling paint due to the possible presence of lead, but this will happen just in those cases where the house was built before 1978.

Any painted surface that is defective (flaking, chipping, or peeling paint) will have to be properly remedied and sealed when the real estate object was built before 1978. There will not need to be any lead-based paint test.

What Won´t Pass FHA Inspection

The property will not pass the FHA inspection if there is evidence of lead-based paint (code VC-12).

Must have surfaces free of chipping or peeling lead-based paint in homes constructed before 1978. The concern is here about the presence of exposed lead.

We have more information about peeling paint and the entire code VC-12 during FHA inspections here.

Since lead poisoning is a serious health concern, checking for the possibility of peeling or chipping paint is a must for any appraiser completing an appraisal for FHA, VA, or USDA financing.

Some appraisal issues are clearly NOT cosmetic; homes that have a high voltage or high-pressure easement on the property may not be suitable for an FHA mortgage, and a house located within certain coastal barrier areas may not qualify depending on circumstances.

FHA Appraisal Re-Inspection Afterwards

What happens after the peeling paint issue is detected and noted by the appraiser is the following

If you are getting a standard FHA loan where everything is going to need to meet FHA standards in order for cash to be pulled out, then the paint issue will need to be cured at some point before the loan can close.

In that regard, I would recommend handling the repair before the appraiser comes if it is an easy and less expensive repair.

If the appraiser does call for the repairs though, then the appraiser will have to come back out to verify the repairs were done before escrow can close.

Thus it can extend an escrow a bit and cost you more money to pay for the re-inspection.

A re-inspection cannot be avoided here. The underwriter could waive and override the appraiser but not in an issue like this one with presumably lead-based paint.

In any case, even in a cash-out refinance, avoid these FHA peeling paint issues following the guidelines, and avoid chipping paint.

I would probably just spend a couple of hours handling the repair in advance so you avoid paying a second inspection and the cost of about $40 to cure, paint, or pressure wash, depending on the solution.

FHA Peeling Paint After 1978

Homes built before 1978 are considered to have lead-based paint, whereas properties constructed after 1978 do not. Therefore, chipped or peeling paint is regarded as hazardous for the health, and not an esthetic issue that simply would be nice to avoid 9

Peeling paint identified in properties constructed prior to 1978 must undergo an abatement process in this regard, in order to fulfill the legal requirements of FHA appraisals.

The Federal Housing Administration stated that a property with peeling paint identified is required to perform mandatory activities in relation to the construction year of that property.

Therefore, for FHA mortgage loan purposes, the peeling paint for properties built prior to 1978 must undergo scraping, sanding, and repainting. It includes interior and exterior property objects.

Furthermore, the chips of the paint remaining in the ground must be picked up and dismissed through proper disposal. Children can ingest these chips of paint that contain lead.

FHA Appraisal Guidelines 2022 In Relation To Peeling Paint

FHA home loan rules for appraisers include the following requirements:

”The Appraiser must note the condition and location of all defective paint and require repair in compliance with 24 CFR § 200.810(c) and any applicable EPA requirements. The Appraiser must observe all interior and exterior surfaces, including common areas, stairs, decks, porches, railings, windows, and doors, for defective paint (cracking, scaling, chipping, peeling, or loose). Exterior surfaces include those surfaces on fences, detached garages, storage sheds, and other outbuildings and appurtenant Structures.”

Note that in the context of the appraisal for an FHA mortgage, peeling paint is defined as “defective paint” and must be treated as such.

Lead paint abatement is required in these cases as a condition of home loan approval.

An appraiser will not know if a property contains lead-based paint and he is not required to know that at all. The appraiser just must note in his report that he detected a surface showing signs of being peeled or chipped. He will call to remove the peeling paint from the involved parties.

  1. The peeling paint rule always applies to FHA, USDA, and VA appraisals, but it can also apply to conventional appraisals.  If an appraiser notes that peeling paint is a health or safety concern, even on a conventional appraisal, it will need to be remedied before the loan can close.
  2. This rule applies to any surface showing signs of peeling and/or chipping paint, regardless of when the material (i.e. wood) was painted.  You may have painted the wood trim three years ago, but if the paint has started to peel, and your home was built in 1945, the peeling paint must be removed.
  3. Remember that this rule applies to any structure on the property.  This includes the home (interior and exterior), of course, plus any other structures like garages, storage buildings, and decks. Everything within the parcel lines has to meet FHA standards. including outbuildings
  4. This rule applies to any home built before 1978.  Several sites on the internet state 1979, but per HUD, the correct year is in fact 1978.

FHA Paint Guidelines

Most of the FHA paint guidelines refer to the peeling paint issue and the necessity of lead abatement.

We get to the heart of the FHA’s view on peeling paint in these cases with the next passage in the rulebook:

“Cosmetic repairs include missing handrails that do not pose a threat to safety, holes in window screens, cracked window glass, defective interior paint surfaces in housing constructed after 1978, minor plumbing leaks that do not cause damage (such as a dripping faucet), and other inoperable or damaged components that in the Appraiser’s professional judgment do not pose a health and safety issue to the occupants of the house. “

The issue with peeling paint in homes with potential lead paint contamination is the health and safety aspect. FHA rules, as evidenced above, don’t take exception to minor cosmetic problems unless there is an underlying factor that makes them a potential hazard.

Chipping paint and peeling paint have to be cured even when you can demonstrate that the paint does not contain lead. Same thing with a fence. A fence does not need to be painted when it is brand new, but if someone did paint it in the past, and now there is chipping paint, it needs to be cured.

If there is chipping paint, it should be scraped and painted. Keep in mind that the portions that are chipping are the issue as opposed to re-painting absolutely everything. This may be a pain, but hopefully, just a few portions need some work as opposed to everything.

The FHA standard has to do with bare wood because without paint or a sealant the bare wood can rot and create some problems. Bare stucco is not in this same category at all, so this rule does not apply.

According to the HUD website, peeling, chipping or flaking paint must be removed by the approved method of scraping the defective surface(s) and then reapplying new paint.

It’s very important to pay close attention to flakes of paint that might fall during the removal process, as they could still present health and safety concerns. To be safe, remove any flaking or peeling paint down to the bare wood and repaint. And keep a drop cloth under you so cleanup is a breeze!

Here it is in even simpler terms:

  1. Scrape.  Any surface that has peeling or chipping paint needs first to be scraped.  It’s important to not skip this step and go straight to step 2 (paint). First things first:  scrape the old flaking paint off.
  2. Paint.  Apply a new coat of paint over any bare surfaces, or any surface you just scraped.
  3. Remove.  Get rid of those old paint chips!  This may be the most often-overlooked step in the whole process.  If you follow steps one and two, but fail to pick up the paint chips you scraped off, the appraiser will need to come back again.  Often times, leaving loose paint chips on the ground is more of a health concern than when they were on the house, because now, the chips are easier for little fingers to grab when the kiddos are playing out in the yard.  

FHA Peeling Paint In Winter

FHA peeling paint can be waived in winter during the underwriting phase by the underwriter when temperatures are expected to be below 35° F and it is difficult to perform painting or pressure washing on the affected surfaces.

The Direct Endorsement Underwriter underwrites FHA loans for Direct Endorsement Approved lenders, including mortgage bankers. They review the appraisal for reporting in accordance with FHA guidelines. They do take classes and must be approved by FHA.

An appraiser’s job is to report what is noticed visually during the visit. The lender is the one who makes the decisions, and to them is where I urge borrowers to place their calls and drive their attention. The parties should address the underwriter to grant the waiver for an FHA peeling paint in winter.

FHA Deck Requirements

For any home with a porch, landing, or steps 30 inches or higher, the FHA requires the following items:

  • Treated wood for both handrails and balusters.
  • Handrails height should be 30 inches.
  • Balusters should be installed vertically, 32 inches long and 6 inches center to center.
  • Steps need handrail and balusters on one side only.

For example, we have a conventional or manufactured home, with a fifty-inches deck, a raised deck, to accommodate a hot tub. It requires handrails on at least one side of the stairs.

fha deck railing requirements
The appraiser indicated in the first appraisal that a handrail was required to advance with the FHA loan. The lender agreed immediately and the handrail is being installed. In a second visit, the appraisal might approve and we could continue through until the closing phase.

Another FHA deck requirement can come in regards to the exposed wood.

FHA is not okay with bare wood on decks, porches, and such, so there should not be any bare wood.

An appraiser would note this situation and call for correction when exposed bare wood is noticed.

Normally, a treatment could be required and a wood sealant applied on the affected surface should suffice.

My experience says that it is better to agree with the appraisal, solve it, and advance to the closing phase.

However, after all, the lender has to decide, the appraiser will only

We have an article here about FHA deck railing requirements where we go into the topic with a little more depth.

FHA Window Screen Requirements

Regarding FHA window screen requirements, they are generally not required even when there is no central air conditioning.

HUD 4905.1 determines several minimum property requirements. It discusses attic and crawlspace venting, but no window venting.

Nevertheless, the lack of window screens should be mentioned within the appraisal report, as this report reflects the condition of the real estate object.

There are no current FHA window screen requirements. HUD 4905.1 minimum property requirements do not include them. They can be mentioned by the appraisal in the report and the underwriter has the final decision thereof.

So even though it is not an FHA requirement, the underwriter has the final decision and can request the installation of window screens in a discretionary decision.

However, it could be a requirement in places such as Louisiana, near the bayou, or locations where there are mosquitoes, such as the West Nile mosquito, but I do not have any evidence of this in the appraisal practice.

On the opposite side, appraisers might think that the window screens should be removed. It takes a long to be removed, especially those new construction window screens. What happens if there is a fire? Could you get out quickly?

Frequently Asked Questions (FAQ)

Are there FHA peeling paint guidelines applicable for chips on the ground?

No paint chips on the ground, no peeling paint. It is in the FHA Handbook.  It is a government-funded loan. Otherwise, you should go through a conventional mortgage or a hard money loan.

Who will note the violation of the FHA peeling paint guidelines?

The appraiser will take note of the situation related to the FHA peeling paint guidelines. In the second visit, the issue should be solved. It is the lender who will decide what to do with the peeling paint discovered. Also, an independent home inspection can tell you this. Appraisers are not home inspectors. Those are two different licenses.

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Author D Laidler

I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go.  I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.

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