Underwriter issue when prop. does not meet FHA MPR's

[Jim Kliegl]

Received this request from one client recently(direct lender), and figured I was just dealing with an inexperienced UW as it related to FHA. Now I have another client asking the same (small bank).

Long story made short.....I'm here in the land of beat up REO's reselling at very low sales pricing and minimal exposure/marketing times. I'd estimate that 3/4 of the FHA appraisals that I perform are in need of repairs to meet FHA/HUD MPR's. So mileage is up, as well as CIR side income.

Anyway, I state all repair requirements in addendum with photos. Everybody happy.

Check the box that value conclusions are subject to these repairs being completed. Within reconcilation area I state that the property in its current condition DOES NOT meet FHA/HUD minimim property requirements as set forth in Handbook 4150.2. Compliance inspection report required upon satisfactory completion of repairs.

I'm curious if the the last paragraph is common for all of you FHA appraisers out there?

I've now been asked by 2 companies to state specifically, within a report that states that repair is required, that the property WILL meet minimum property requirements upon satisfactory completion of repairs.

Am I being difficult by being reluctant to state this?

Remember that I'm in an area (So. Cal's Inland Empire) that is among the hardest hit in the nation as it relates to foreclosures, vacant homes, REO's ,etc. In my mind, there's no guarantee that the property WILL meet minimum property requirement upon only performing the itemized repairs as seen after the original inspection, as I can't guarantee that more repairs may not become necessary (further vandalism, more repairs becoming evident upon activating utilities, earthquake, etc.).

I prefer to state that it doesn't meet MPR's in the original report. Then, within the CIR, state that in it's current condition (when I physically see it), that the property DOES meet MPR's. Is anyone out there reporting this similarly? Or am I missing the boat?

 

[Michael Tipton]

I would probably rephrase the FHA MPR statement.

As of the date of appraisal the subject does not meet FHA MPR. Upon completion of the following repairs, the subject will comply with FHA MPR.

Some clients require more hand holding. :icon_mrgreen::icon_mrgreen:

 

[supertens]

I don't inspect them without the utilities and damage in the future would be after your effective date. I always include the statement that once repaired they will meet guidelines.

 

[Mr Rex]

Page D-2

In the performance of an FHA appraisal, the appraiser must denote any deficiency in the appropriate section(s) (site issues in the site section, improvement issues in the improvements section) of the appraisal report. The appraiser is to note those repairs necessary to make the property comply with FHA’s Minimum Property Requirements (MPR) or Minimum Property Standards (MPS) together with the estimated cost to cure. The lender will determine which repairs for existing properties must be made
for the property to be eligible for FHA-insured financing.​

 

[hglenbetts]

"Upon completion of stated repairs, re-inspection will be necessary to insure FHA/HUD standards have been met".

In the spring, I had two properties inspections the same week where there were leaking pipes due to improper winterizing. Called for repair. When I went back to reinspect, I was greeted with several large holes in the walls where they tore into them to fix the pipes.

More photos and called for repair of wall finishes. Got double the inspections and double the trip fees.

 

[Jim Kliegl]

Thanks all.

Anyone consider an extraordinary assumption? Where the property in its current state does not meet MPR. But, upon completion of repairs, it is assumed that the property will meet MPR, based upon the assumption that no further repairs will become necessary during time to needed complete original repairs. (I know this probably sounds tacky, but those of us in areas of high vandalism/theft know that what we see one day, can change in the next hour....literally).

Supertens......I also "try" to require that all utilities are on. Always cal the agent prior to visiting. Like to have an idea as to what I may be seeing. And to ensure lockbox codes are current. BUT...I'd say a high percentage of these REO agents out here in Cali have ever even visited the property after the lockbox is installed. Performed one last week where it had been listed 9 days ago. Home inspection had been performed 2 days ago with all utilities and mechanical systems verified to be in working order. I get there......the water company beat me there that day and slapped a padlock on the water meter for non-payment of bills.

Similarly, sellers/banks often get these notices (that utilies are past due) and refuse to turn utilities back on until just prior to closing. As sellers/banks are too cheap to pay utility bill during marketing time. Plus, I run into a lot of busted pipes, exposed wiring, etc. that makes it dangerous to even put the utilities on in the first place. Yet they'll give me the OK to perform an FHA inspection (love it). May be some underlying liability issues there (but who cares if the appraiser gets zapped by an exposed live wire?).

Fun times!!!!

 

[RSW]

Thanks all.

Anyone consider an extraordinary assumption? Where the property in its current state does not meet MPR. But, upon completion of repairs, it is assumed that the property will meet MPR, based upon the assumption that no further repairs will become necessary during time to needed complete original repairs. (I know this probably sounds tacky, but those of us in areas of high vandalism/theft know that what we see one day, can change in the next hour....literally).

Supertens......I also "try" to require that all utilities are on. Always cal the agent prior to visiting. Like to have an idea as to what I may be seeing. And to ensure lockbox codes are current. BUT...I'd say a high percentage of these REO agents out here in Cali have ever even visited the property after the lockbox is installed. Performed one last week where it had been listed 9 days ago. Home inspection had been performed 2 days ago with all utilities and mechanical systems verified to be in working order. I get there......the water company beat me there that day and slapped a padlock on the water meter for non-payment of bills.

Similarly, sellers/banks often get these notices (that utilies are past due) and refuse to turn utilities back on until just prior to closing. As sellers/banks are too cheap to pay utility bill during marketing time. Plus, I run into a lot of busted pipes, exposed wiring, etc. that makes it dangerous to even put the utilities on in the first place. Yet they'll give me the OK to perform an FHA inspection (love it). May be some underlying liability issues there (but who cares if the appraiser gets zapped by an exposed live wire?).

Fun times!!!!

I'm not trying to be rude. But, how long have you been doing FHA appraisals? Either the subject property meets HUD/FHA's MPR or MPS or it will after the repairs have been made that you noted. It's not that difficult. No EAs are necessary unless you are calling for an inspection of something. Read what Rex posted above and then go back and read the 4150.2, the revised appendix D and all other related materials for FHA protocol.

 

[Jim Kliegl]

Thanks a lot Scott.....could do without the first 2 sentences.

So....by what you're saying......if the repairs that are called out originally are performed (for instance, repairing a broken window).....the property 100%, without a shadow of a doubt, WILL meet MPR?

I wasn't comfortable stating that, and simply was curious as to others opinions. As other non-compliance issues may arise during the time needed to perform repairs (For example, in the time I call for a window to be repaired with broken glass removed, the house could have its water heater stolen). Thus making the statement that the property WILL meet MPR's when the original repairs are completed incorrect by no fault of my own.

I'm assuming that stating it WILL comply upon satisfactory repair is OK with those that I've heard from here. Where additional repairs, if required (as in the example above) can be simply described and required when performing first CIR inspection. Where I can state that once that additional repair is done, the property WILL then comply at that time.

Was simply curious how others word it. As it appears I'm thinking too much.

 

[RSW]

Thanks a lot Scott.....could do without the first 2 sentences.

So....by what you're saying......if the repairs that are called out originally are performed (for instance, repairing a broken window).....the property 100%, without a shadow of a doubt, WILL meet MPR?

I wasn't comfortable stating that, and simply was curious as to others opinions. As other non-compliance issues may arise during the time needed to perform repairs (For example, in the time I call for a window to be repaired with broken glass removed, the house could have its water heater stolen). Thus making the statement that the property WILL meet MPR's when the original repairs are completed incorrect by no fault of my own.

I'm assuming that stating it WILL comply upon satisfactory repair is OK with those that I've heard from here. Where additional repairs, if required (as in the example above) can be simply described and required when performing first CIR inspection. Where I can state that once that additional repair is done, the property WILL then comply at that time.

Was simply curious how others word it. As it appears I'm thinking too much.

As I said, I didn't want to be rude. But, your question sounded like it came from someone that is inexperienced in doing FHA appraisals. And if so, you have certified that you understand FHA protocol for completing appraisals for the FHA. That in itself would be a violation of USPAP if you do not understand FHA protocol.

Now, to answer you most recent questions. You are only making a statement such as, "the subject meets or will meet HUD/FHA's MPRs or MPS after the repairs noted are completed." This only goes for what you have seen and verified by your inspection. You will need to report any new MPR required repairs on the CIR form (HUD-92051) either as a line item or in an addendum to that form. There are several boxes that you could possibly check. Just make sure you ckeck the correct boxes and then report what was repaired, what was not repaired, and any new MPR required repairs noted during the CIR inspection.