Do well to septic distances being insufficient and grandfathered override known FHA d

[Krystal Schware]

HELP Do well to septic distances being insufficient & grandfathered trump FHA

Hi. Called FHA;HUD. The department I need won't get back to me for 48 hours and as we all know, no lenders wanna wait 48 hours for a report to be started. lol
Do well to septic distances being insufficient and grandfathered override known FHA distance requirements? They do not meet current local code or FHA 50' distance requirement.
Working on an FHA appraisal where well and septic and property line distances to do meet FHA requirements. (On site well and septic make up most of the market area.) Client/realtor has given me a letter via/through the lender prepared by a realtor's hubby's 'code business' who claims to be a code guy. Per his signature, he has made up a signature title for himself of "FHA/VA/HUD 203K Specialist" to leave the impression he would know more and hold more sway than me or anyone else. He states that these distances are 'approved.' Per this letter, "They are legal from the standpoint of separation because they are grandfathered." So, legal non-conforming. In my opinion, since they still do not meet CURRENT requirements, the grandfathered aspect still does not over step this FHA requirement. However, I obviously don't want to cause issues if I am over-thinking this and am incorrect.
My subject is 100 years old so the 32' well to septic distance is grandfathered in as well as the holding tank sitting only a foot or two from the property line. If anything goes wrong with these systems that require replacement, as this code guys letter further confirms, they cannot be reinstalled and must be redone up to current code, ie, they do not meet local requirements.
Any relevant thoughts or advice is greatly appreciated. Thanks to all who try to assist.
And Happy New Year. :new_all_coholic:

 

[TEL2002]

I've not done FHA in some time, but how would this impact value. As a buyer, I would run from this deal unless a new septic/well arrangement was part of the purchase.

Interesting 'comparable' challenge. Only pick properties for comps...if they have the same problem?

 

[CANative]

"Grandfathering" is not the relevant issue here. Compliance with Minimum Property Requirements is the issue. This property fails MPR. Just report the condition. The DEU will decide if correction is feasible. If not, they will reject the property.

See HUD Handbook 4000.2

2-6 GENERAL ACCEPTABILITY STANDARDS FOR PROPERTY. There are minimum property standards for existing and proposed construction. A property is considered "existing construction" if it was completed more than one year prior to application. See HUD Handbooks 4905.1 and 4910.1 for additional information on existing and proposed construction, respectively.
Underwriters bear primary responsibility for determining eligibility of a property for FHA mortgage insurance. However, the FHA appraiser is the on-site representative for the Mortgagee and provides preliminary verification that these standards have been met. The “Notice to the Lender” requires the FHA appraiser to report the physical conditions that are readily observable on the date of the site visit and to detail the repairs needed to establish and/or maintain the marketability of the property, protect the health and safety of the occupants, and protect the security of the property. These criteria must be addressed by the Mortgagee before closing.
When examination of existing construction reveals noncompliance with the General Acceptability Criteria, an appropriate specific condition to correct the deficiency is required if correction is feasible. If correction is not feasible and only major repairs or alterations can effect compliance, the Mortgagee will reject the property.

 

[Krystal Schware]

Thanks for replying. I'm not going to think too far into the other factors until I get past problem #1.
The extra fun to this one is it is a realtor's daughter buying this. I believe 'the guy' who wrote that code letter is a friend of her family. So unfortunately it does not deter them. I am viewed as the bad guy 'because the 'FHA/VA/HUD 203K Specialist said it was OK."
This is yet another reason I want to be 100% sure no stone is left unturned in every aspect of my due diligence. I don't need anymore reason to make realtors dislike me if I am incorrect. Since I am one of a small percentage of 'non-number hitters' in my area, I am sure my realtor fan club is large enough.

 

[CANative]

Refer to Mortgagee Letter 2002-25. HUD will allow local requirements that are less stringent but they will only go so far.

If, however, the locality permits distance requirements less than those prescribed by FHA, the property may be considered eligible for a mortgage insured by FHA provided that the lender submits evidence in the case binder that the subject property is in compliance with the applicable local or state distance requirements and meets the conditions stated below. Therefore, waivers from the Homeownership Centers (HOCs) will no longer be necessary for properties meeting these distance requirements:

• Domestic Well from Septic Tank Drain Field: FHA will recognize state/local distance requirements provided they do not allow for less than 75 feet of separation.
• Domestic Well from Property Line: FHA will recognize state/local distance requirements provided that the well is not within 10 feet of any roadway or the property line of other than a single-family residential property, i.e., the well cannot be within 10 feet of a commercial, industrial, or multifamily building.

Evidence of compliance includes, but is not limited to, an appraisal clearly showing the location of private wells and septic systems on the site sketch and the distance between the two. If unable to determine the distance between the well and the drainfield, or if the well is within 10 feet of any property line, a condition requirement should be made on the Valuation Conditions (VC) form. The underwriter can clear the condition by obtaining satisfactory evidence from a qualified party that the distance requirements (between the two systems, and from the well to the property line) have been met.

 

[Vermonter]

"Grandfathered" or not, the subject well does not meet HUD MPRs.
Report and determine any impact on value.
Let the DEU decide.....Ignore the "Specialist".

 

[Krystal Schware]

Thanks guys! I really appreciate it. At least now when I am blamed for 'ruining everything' and being a deal-killer, I know that I was correct in what I did. lol

 

[Noreen]

I had one on a small 5000 SF lot in a lake/bungalow neighborhood. House was totally renovated up to and including a state of the art, self contained biodegradable septic "chamber" well & septic were less than 30' apart. We are attached to the Philadelphia HOC, they stated although it was a state approved system (all our have to be here), it did not comply with HUD MPR (75' in State of NH) and did not meet MPR for FHA/HUD insured loan.

 

[Mike Garrett RAA]

And...HUD can issue an exception in most cases.

8 to go

 

[sputnam]

It's not our jobs as appraisers to make this kind of decision. Our job is to report what we find and to develop and report an opinion of value.

As an appraiser, you will encounter 'deal killers' throughout your career. It's important to remember that it's not you killing the deal, it's some aspect of the property that leads the underwriter to determine that the subject is not suitable collateral for the loan that's been applied for.