November 12, 2015
Since the FHA and HUD published the new single family home loan rulebook, HUD 4000.1 earlier in 2015, we have been examining important aspects of that rulebook. The FHA changed/updated some portions of the rules, added other portions to existing regulations, and issued a message that lenders were expected to become familiar with HUD 4000.1 as a whole, rather than try to explain each and every instance of changed or modified policy in the new publication.
So we’ve been tackling some of these relevant issues, discussing them individually as they appear in HUD 4000.1. One such issue has to do with lead paint disclosure requirements. HUD 4000.1 states, “If the Property was built before 1978, the seller must disclose any information known about lead-based paint and lead-based paint hazards before selling the house, in accordance with the HUD-EPA Lead Disclosure Rule (24 CFR 35, subpart A, and the identical 40 CFR 745, subpart F).”
This directly affects FHA loans, as there are appraisal requirements for lead paint abatement where applicable. But regardless if there is an appraisal correction, the mere existence of the lead paint condition mentioned above requires the following, as found in HUD 4000.1. Chapter II Section A:
“For such Properties, the Mortgagee must ensure that:
The Borrower has been provided the EPA-approved information pamphlet on identifying and controlling lead-based paint hazards (Protect Your Family From Lead In Your Home);
The Borrower was given a 10-Day period before becoming obligated to purchase the home to conduct a lead-based paint inspection or risk assessment to determine the presence of lead-based paint or lead-based paint hazards, or waived the opportunity;
The sales contract contains an attachment in the language of the contract (e.g., English, Spanish), signed and dated by both the seller and purchaser:
–containing a lead warning statement as set forth in 24 CFR 35.92(a)(1).
–providing the sellers disclosure of the presence of any known lead-based paint and/or lead-based paint hazards in the target housing being
sold, or indication of no knowledge of such presence;
–listing any records or reports available to the seller pertaining to lead- based paint and/or lead-based paint hazards in property housing being sold, or indication by the seller that no such records or reports exist;
and
–affirming that the Borrower received the pamphlet, disclosure, and records or reports, above; and
–when any agent is involved in the transaction on behalf of the seller, the sales contract includes a statement that the agent has informed the seller of the sellers Lead Disclosure Rule obligations, the agent is aware of his/her duty to ensure compliance with the requirements of the Rule, and the agent has signed and dated the contract.”
These disclosures are required whether or not an FHA appraisal finds any issues with lead-based paint such as peeling or cracked paint that must be dealt with as a condition of loan approval.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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