{"id":2571,"date":"2020-09-30T11:32:42","date_gmt":"2020-09-30T10:32:42","guid":{"rendered":"https:\/\/businessfinancenews.com\/?p=2571"},"modified":"2022-10-05T03:46:03","modified_gmt":"2022-10-05T02:46:03","slug":"fha-peeling-paint-guidelines","status":"publish","type":"post","link":"https:\/\/businessfinancenews.com\/fha\/fha-peeling-paint-guidelines\/","title":{"rendered":"FHA Peeling Paint Guidelines"},"content":{"rendered":"\n
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<\/sup><\/a>. This is done through lead-based paint abatement 3<\/sup><\/a>, an activity regulated at the federal level 4<\/sup><\/a> and at state level 5<\/sup><\/a> 6<\/a><\/sup> et cetera<\/em><\/sup>. <\/p>\n\n\n\n The discovery of peeling paint in properties for residential purposes is one of the issues about what won’t pass FHA inspection<\/a> as we describe thoroughly in our FHA appraisal and inspection guidelines<\/a>. <\/p>\n\n\n\n Peeling paint seems only to be an aesthetic issue, a cosmetic detail. 2<\/sup><\/a> However, in FHA appraisals, there are special situations to consider and specific FHA peeling paint guidelines. 7<\/a><\/sup> If these guidelines are not followed, it is possible that the entire FHA loan cannot be completed 8<\/sup><\/a>, even when you meet all the FHA loan requirements<\/a> and you are within the established loan limits<\/a>.<\/p>\n\n\n\n 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.<\/strong><\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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., \u201cIf 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\u201d, but also the following guidance to the FHA appraiser:<\/p>\n\n\n\n \u201cIf the Property was built before 1978, paint mitigation must be in compliance with the EPA\u2019s Renovation, Repair, and Painting Rule and HUD\u2019s lead-based paint regulations regarding paint mitigation at 24 CFR 200.810(c). Some states may require more specific treatment.\u201d<\/p>\n\n\n\n There is due diligence required for the FHA lender in these cases. He has to provide the borrower a pamphlet called \u201cProtect Your Family From Lead In Your Home\u201d. 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 \u201c\u2026..has been provided the EPA-approved information pamphlet on identifying and controlling lead-based paint hazards.\u201d<\/em><\/p>\n\n\n\n Furthermore, the FHA lender is also obliged to offer the buyer a period of then days \u201c\u2026..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,\u201d. <\/em>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<\/p>\n\n\n\n It is not only the lender who has to pay attention in these cases. HUD 4000.1 states that \u201cWhen 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\u2019s 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<\/em>\u201d.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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? <\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n Sellers are complaining frequently that they are unable to solve peeling paint issues, normally in exterior structures during winter, actually with temperatures under 30\u00b0 F. Pressure washing and painting are very difficult to perform successfully in winter conditions. The attributions of the underwriter are discretionary.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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.<\/p>\n\n\n\nFHA Handbook 4000.1 Peeling Paint<\/h2>\n\n\n\n
Specific Cases Of Application Of FHA Peeling Paint Guidelines<\/h2>\n\n\n\n
Due Diligence For The Lender<\/strong><\/h3>\n\n\n\n
Due Diligence For The Real Estate Agent<\/strong><\/h3>\n\n\n\n
FHA Peeling Paint Waiver<\/strong><\/h2>\n\n\n\n