Okay, I emailed HUD in regards to final inspections. This encompasses both new construction and repair items:
FAQ : How many inspections are needed for new construction?
Solution Details : The number of inspections required for new construction will depend on the process used by the lender to qualify the property for FHA insured financing and the type of property. If the lender uses the process in Mortgagee Letter 2001-27, then the Certificate of Occupancy (or equivalent, such as a building inspection card) issued by the local government agency will be equivalent to a final inspection and that is the only inspection required under this process. (However, condominium units and manufactured housing are not eligible for processing under Mortgagee letter 2001-27.)
If the lender uses the Early Start process or has the appraisal completed prior to the beginning of construction, then three inspections are required: an initial inspection, a framing inspection and a final inspection.
If the lender uses a ten year warranty, then just a final inspection is needed. If the property is 100% complete at the time of appraisal the appraisal can serve as the final inspection. If not 100% complete, a final inspection by an inspector on HUD's Roster is required. If the property is under construction at the time of the appraisal and a ten year warranty is not being used, a final inspection by an inspector on the HUD Roster is required. If the property is a new manufactured home only two inspections (not three) are required. The final inspection must be done by a HUD Roster inspector or an engineer--not the appraiser.
Handbook 4145.1, Section 4-4
Mortgagee Letter 01-27'
FAQ : What are my options for satisfying repair requirements on the appraisal?
Solution Details : Required repairs outstanding on the appraisal report must be satisfied before the mortgage is submitted for endorsement. Satisfaction of required repairs can take one of the following three forms.
1. Compliance Inspection Report (Form HUD-92051). A Compliance Inspection Report, prepared by an appraiser or inspector, certifies that the repairs have been completed satisfactorily. Generally, since an appraiser places the repair requirements, the same appraiser would be able to determine whether the repair has been made. For inspections that require architectural expertise (structural or basic system repairs), an inspector must complete Form HUD-92051. A FHA fee inspector must complete the report. A FHA-approved inspector list is available via FHA Connection located at https://entp.HUD.gov/clas/. In addition to the appraiser or inspector, a professionally licensed, bonded, registered engineer, licensed home inspector or appropriately registered/licensed trades person, as applicable, can provide the documentation to support that all deficiencies requiring repair noted by the FHA appraiser have been acceptably corrected.
2. Mortgagee Certification. Mortgagee certification (that the conditions have been satisfied) is acceptable in instances in which the required repair items are minor and uncomplicated. If the homeowner could complete the work himself or herself as normal maintenance, FHA considers the work minor.
3. Escrow of Funds. If adverse weather conditions prevent completion of the repairs, it is not always necessary to complete all new construction items (for example, landscaping) or required repairs (such as exterior painting) before submitting the mortgage for insurance endorsement. In certain situations, funds may be escrowed, and FHA will accept a Mortgagee's Assurance of Completion, Form HUD-92300, at the time of endorsement. This procedure may be used only when the following conditions apply:
a. The dwelling is habitable, safe, and essentially complete
b. The deferred work cannot be acceptably completed prior to loan closing, but will be completed within six months
c. All other conditions of the appraisal have been satisfied by compliance inspections or by an acceptable Mortgagee's Assurance of Completion, and
d. The lender has not been denied the privilege of using a Mortgagee's Assurance of Completion due to poor follow-up or non-satisfaction of outstanding escrows.
The lender assumes the obligation to satisfactorily complete the improvements, regardless of the adequacy of the funds reserved by escrow or letter of credit.
Handbook 4155.2: 4.6.a-e
HOC Reference Guide, Section 1-22
DISCLAIMER: All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.
