• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Defective Paint Potential Loophole For Lenders On FHA/usda Loans?

Status
Not open for further replies.

Autumndawn03

Thread Starter
Sophomore Member
Joined
May 24, 2010
Professional Status
Certified Residential Appraiser
State
Wyoming
Dear Fellow Appraisers,

Situation: I have 2 properties I am appraising/did appraise. Both are, or were, REOs in somewhat poor condition. Both have defective paint on the interior and were built pre-1978.


I submitted the 1st appraisal on the REO and recommended repair of the interior defective paint surfaces. Loan Officer freaked out, threatened me, etc. He was basically worried that the loan will not go through since owner is VA and will not perform repairs. Obviously, not okay for loan officer to go atomic on me for recommending repair of potential lead based paint. BUT, I DO want to help in whatever way I can and be able to advise them if alternate options exist.

I am appraising another property in a similar situation (but with WORSE interior defective paint surfaces) due tomorrow for the same client. Obviously, this will not go over well. I will not compromise my integrity on recommending repair of defective paint surfaces, HOWEVER, if alternate options exist, I would like the lender to know their options.

As a result, I did some more research into defective paint and found the following quotes on FHA's online database while doing an advanced search. :



Ref: FHA CFR §206.45: Eligible Properties (04/01/99):

“(d) Lead-based paint poisoning prevention. If the appraiser of a dwelling constructed prior to 1978 finds defective paint surfaces, §200.810(d) of this chapter shall apply unless the mortgagor certifies that no child who is less than six years of age resides or is expected to reside in the dwelling.”

When asking whether this document is still in force, all I've been told is that 4000.1 supercedes all prior documents. But no one can tell me if prior documents are still in force (as long as they don't conflict with 4000.1).

When I questioned the Denver Homeownership Center, I received the following quote via email, originally from Fred Schuler, Acting Branch Chief, Appraiser Technical Support:

Ref: 4235.1 REV-1

1)When children under the age of seven will be residing in the property, the borrower must treat the defective paint surfaces in accordance with LPPPA requirements.

Since this quote was just emailed to me, I ASSUME it is still in force. (The Denver HoC rep that emailed it to me also assumed it was still in force and emailed that he believed it was.)

So, does this mean that if a mortgagor can certify that no child under age 7 will be residing in the property that defective paint does not need to be addressed as a part of the loan requirement? Obviously, as the appraiser I would still recommend repair. And in the 1st appraisal, I also offered the option to perform lead based paint testing to find out if the chipped paint is lead based. (There are quotes in 4000.1 that if the defective paint is tested and no lead is found, the defective paint is considered cosmetic and does not require repair).

But my question is: Does anyone have any experience with the above quotes? Or has anyone received a straight answer from FHA on what to do if the mortagor CAN certify that no one under the age of 6/7 will be residing or is expected to reside in the property?



The second property I am appraising was an REO when it was purchased 3 years ago. No improvements have been done. Interior features SIGNIFICANT peeling paint. It is a familial sale between cousins with the buyer going for a USDA loan (USDA uses HUD's requirements). The buyer is a single male with no children who could certify to the above. If defective paint must be addressed, almost the entire interior and a 4' picket fence surrounding the entire lot would need to be addressed prior to closing. So, you can see why, if the above quotes apply, they might make for a MUCH simpler closing on this particular property for this buyer.

Thanks in advance.
 

Vermonter

Senior Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Vermont
What would the borrower certifying anything have to do with your reporting an MPR?

The LBP is an MPR. You report it, they decide what to do. I've seen waivers for all kinds of things over the years, but that doesn't change what's in my report.
 

Autumndawn03

Thread Starter
Sophomore Member
Joined
May 24, 2010
Professional Status
Certified Residential Appraiser
State
Wyoming
As stated in my original post "Obviously as the appraiser I would still recommend repair," but if the lender has options for waivers, I would like to be able to direct them to those options since it will make closing easier for them and also minimize any potential anger as I experienced with the first report I referred to.

That is the reason I am asking.
 

RSW

Elite Member
Joined
Feb 18, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
Why would an appraiser be concerned with if there are any children in the dwelling. It has nothing to do with the valuation of the property and you are required to report the necessary MPR required repairs. Let the DEU wave the MPR required repairs. You are just doing your job. Don't worry about the lender. Tell them you are going to file a complaint if they continue to harass you.
 

Vermonter

Senior Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Vermont
As stated in my original post "Obviously as the appraiser I would still recommend repair," but if the lender has options for waivers, I would like to be able to direct them to those options since it will make closing easier for them and also minimize any potential anger as I experienced with the first report I referred to.

That is the reason I am asking.
I understand what you're saying, but that's not your job....and ill advised. Best case the lender is appreciative for a few minutes. Worst case the lender tells the borrower "the appraiser said we could get a waiver, but I guess not"....and then the fun begins.

This is on the lender. If they can't figure how to apply for a waiver, then they're not the lender you want to work with.
 

Tom D

Senior Member
Gold Supporting Member
Joined
May 22, 2015
Professional Status
Certified Residential Appraiser
State
Pennsylvania
i had a HUD reviewer, on an appraisal that the loan had settled, who picked up some peeling paint from a photo. i was told never to miss that again. so i will tell you never to miss requesting something to be scraped, primed & painted for FHA, if it has peeling or missing paint built prior to 1978 especially. and irreguardless of no childre in the house.
 

jay trotta

Elite Member
Joined
Feb 8, 2004
Professional Status
Certified Residential Appraiser
State
Connecticut
i had a HUD reviewer, on an appraisal that the loan had settled, who picked up some peeling paint from a photo. i was told never to miss that again. so i will tell you never to miss requesting something to be scraped, primed & painted for FHA, if it has peeling or missing paint built prior to 1978 especially. and irreguardless of no childre in the house.
Just a thought in addition; Lead Paint is an "Environmental Issue", Federally related notice and applicable to State Law requirements; Do Not take what you found out of the report, Recommend a "Licensed Expert in the Field of Lead Paint Disclosure" to provide the Test Result finding to the appraiser to determine any Value Impact. Done
 

Jim Onderisin

Senior Member
Joined
Sep 15, 2003
Professional Status
Certified Residential Appraiser
State
Illinois
I don't know the answer to your question. However, it sounds as though you've already gone an extra mile for your client. Why not just pass along the possibility the borrower MAY be able to petition HUD to waive the repair requirement. Let the loan officer do the footwork. He or she is the one that stands to gain only if the transaction closes.
 

Noreen

Senior Member
Joined
Feb 5, 2011
Professional Status
Certified Residential Appraiser
State
New Hampshire
There was a guy that worked for me at Norwest, he was not calling for chipping, peeling paint repair, they did a field review on his work and he lost his FHA Appraising Rights. He took it to court and he lost, HUD has minimum property condition standards before they will agree to INSURE the loan, it's not about what your client wants, these are HUD standards. I'm sure the clients want us to wear our "Rose Colored Glasses" on every property. It also comes down to Ethics, the entities involved should be able to rely on the appraiser to be clear & truthful. Take a good quality FHA Appraising course, read the manual and when in doubt, you can always email at [email protected]. They typically get back to you within 24 hours.
 

Dale Smalley

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Just did one similar and made it subject to repair. I had to field multiple calls on the issue. Held my ground over several months but they eventually fixed it. Now that you mentioned it I did not get any more work from them
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks