MBA Asks HUD to Re-Align Property Damage Re-Inspection Policies
The Mortgage Bankers Association, in response to numerous inquiries from its members, asked HUD to align its re-inspection policies with those of the GSEs and other federal agencies in the wakes of Hurricanes Harvey and Irma.
MBA President and CEO David Stevens, CMB, told HUD Secretary Ben Carson aligning HUD re-inspection policies would allow lenders to resume working with FHA homebuyers to expedite the process of re-inspecting properties, make repairs where necessary and help families (both the buyers and the sellers) return to normal.
MBA noted current HUD policy could be interfering with the ability of some families to complete home sales transactions that were in process prior to the hurricanes, but had not closed when the storms hit. MBA said HUD policy for re-inspections of properties securing loans that were in process prior to a declared disaster requires that the inspection be completed after the FEMA “incident period.” HUD’s interpretation is that this means the end date of the incident period. Because FEMA incident periods can run anywhere from a few weeks to a couple of months (and often get reopened or extended), many borrowers are needlessly delayed from completing transactions, even where there is no damage to the home.
MBA also noted FEMA has not designated an ending date to the incident period for either Harvey or Irma. Recent examples of extended incident periods include Superstorm Sandy (2012): incident period was Oct. 27-Nov. 9 (for New York); Hurricane Matthew (2016): Oct. 3-19 (for Florida); and Hurricane Katrina (2005), Aug. 29-Nov. 1 (for Louisiana).
“We have reviewed the policies of both the GSEs and the VA, and it appears that only HUD ties its re-inspection requirement to the end date of the FEMA incident period,” Stevens said. “This is an area where we believe HUD alignment with GSE standards would seem to make common sense.”
MBA recommended FHA alter its policy to state that the re-inspection needs to be dated after the START date of the FEMA incident period. “This policy alignment would allow literally thousands of pending home sales transactions get back on track, allowing loans to close on properties where there is no damage and expediting the repair process where necessary to restore the damage and complete the home sale,” Stevens said.
In an email to members, Stevens said “until FHA changes its policy officially, we caution lenders about the risks to insurability of closing FHA loans in the designated area. We are hopeful the policy will be changed soon and we will apprise the industry of any developments as they occur.”
