
FHA Extends Disaster Waivers for 4 Additional California Counties
The Federal Housing Administration, in response to a request from the Mortgage Bankers Association, issued a Disaster-Related Policy Waiver for four additional counties in California affected by recent wildfires.
The waiver (https://www.hud.gov/sites/dfiles/Main/documents/CAWildfires_Inspection_waiver.pdf), issued Nov. 2, involve Lake, Napa, Mendocino and Sonoma counties in northern California. The waiver allows damage inspections to be conducted in these counties. The waiver comes in addition to the waiver issued by FHA on October 24, of its policy on the timeframe for completing inspection of properties prior to closing, or submitting the mortgage for FHA insurance endorsement in the Presidentially Declared Major Disaster Areas in certain counties in the state of California impacted by wildfires.
“FHA believes that the situations in certain counties in California have stabilized to the extent that further damage to the properties appear unlikely, despite FEMA not having closed its Incident Period for the PDMDAs in these four areas,” FHA said in FHA Info #17-50 (https://www.hud.gov/sites/dfiles/Housing/documents/SFH_FHA_INFO_17-50.pdf). “However, mortgagees should continue to monitor FEMA’s website to ascertain the latest information on these PDMDAs as additional municipalities or counties could be added to them until the Incident Periods have closed.”
MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills said the new waiver resulted from an MBA request. He said MBA members need the waivers in order to proceed with re-inspections and allow borrowers to complete transactions on properties that experienced little or damage.
“This actually expedites the reinspection process rather than waiting on FEMA,” Mills said. “MBA reached out for HUD/FHA in the wake of Harvey and Irma after it became apparent that FEMA’s extended incident period designations were delaying the ability to close loans that were in process prior to disasters, but that had little or damage. This issue arises out of HUD’s use of a FEMA ‘incident period’ designation that prevents lenders from reinspecting properties and closing loans.”
Mills said waivers were needed because there were borrowers waiting close on purchases that could not proceed until FEMA designated an end to the incident period, even though the hurricanes and fires had long passed. “FEMA’s incident period designations reflect a wide variety of conditions on the ground that do not necessarily relate to whether it’s safe to reinspect a property or not,” he said. “With the waivers, MBA members can complete loans in process and better serve their customers. Waiting for the end of an incident period–in Katrina it took two months–unnecessarily blocks borrowers seeking to purchase undamaged in the impacted areas, making it even harder for these areas to get back normal.”
Mills noted MBA worked collaboratively with HUD to identify these concerns. More importantly, he added, “MBA is working with HUD to consider a longer-term change to FHA guidelines that does not rely on the FEMA incident period.”
FHA said for mortgages in process secured by properties in a PDMDA that have not closed or are pending endorsement, mortgagees must follow the guidance contained in the Single Family Housing Policy Handbook 4000.1 (SF Handbook) Section II.A.7.c, Inspection and Repair Escrow Requirements for Mortgages Pending Closing or Endorsement in Presidentially Declared Major Disaster Areas. FHA’s current policy requires that a damage inspection be performed following the close of the Incident Period as defined by the Federal Emergency Management Agency.
FHA noted these waivers do not affect mortgagees’ obligations to exercise prudent lending practices and ensure that mortgages they submit for endorsement fully comply with FHA’s property eligibility requirements, as well as any property condition requirements related to claims processing.