Key facts
- NRMLA is urging HUD to revise FHA minimum property requirements.
- The trade group argues current rules disproportionately impact rural borrowers and senior citizens.
- NRMLA proposed performance-based criteria for shared wells, water systems, and pools.
- The association suggested alternatives to second appraisals for minor repairs and valuation flags.
The National Reverse Mortgage Lenders Association (NRMLA) has formally requested that the U.S. Department of Housing and Urban Development (HUD) revise several property standards under the Federal Housing Administration's (FHA) minimum property requirements. In a letter dated June 29, NRMLA argued that the current rules are overly prescriptive, leading to increased costs and reduced access to FHA-insured Home Equity Conversion Mortgage (HECM) loans, particularly for older individuals and those in rural areas.
The trade group specifically highlighted concerns regarding shared well systems, advocating for a shift towards performance-based criteria that consider factors like easements and water quality, rather than strict prescriptive measures. They also proposed allowing existing, functional shared wells to be "grandfathered" in and recommended aligning FHA policies on swimming pools with conventional lending standards to differentiate between functional and abandoned pools.
Furthermore, NRMLA pushed back against the requirement for FHA Form 1004D to verify minor repairs, suggesting that borrower certifications, photographs, and invoices could suffice to avoid delays and additional costs associated with second appraisals. This flexibility was also recommended for minor "punch-list" items in new construction loans.
For individual water systems, particularly in rural settings, NRMLA called for clearer guidance and the acceptance of alternative sampling methods, such as certified test kits or local professionals, and urged HUD to waive requirements for public water system connections when existing wells are safe. Regarding water purification systems, the association deemed current lifetime maintenance contract requirements "practically impossible to execute" for many senior borrowers and proposed simpler, one-time professional inspections and disclosure standards.
Beyond property condition, NRMLA also criticized the FHA's collateral risk assessment process, specifically the mandatory second appraisals triggered by valuation flags, deeming them redundant and costly. They suggested employing automated valuation models, desktop appraisals, or targeted field reviews as more efficient alternatives.