FHA Updates Guidance to Streamline Two ‘Redundant’ Mortgage Rules

The Federal Housing Administration (FHA) released two Mortgagee Letters on Tuesday, with both stating an intent to “streamline” its guidance on two different lending provisions. This, the agency says, is in an effort to reduce potential obstacles in the mortgage process for borrowers.

In Mortgagee Letter (ML) 2019-04 titled “Removal of the Federal Housing Administration (FHA) Inspector Roster,” FHA describes its efforts to, “streamline inspection requirements for FHA single family mortgage insurance,” according to the press release announcing the letter’s publication.

“The elimination of the FHA Inspector Roster relaxes the restrictions to entry of inspectors and would expand the pool of inspectors from which lenders may choose for the inspection of a home where the mortgage would be FHA-insured,” the release said. “Current industry standards and local regulations are sufficiently rigorous to render HUD’s standards redundant.”

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That same day, FHA published ML 2019-05 titled “Removal of the Ten-Year Protection Plan Requirements.” In an effort to “streamline” the requirements for FHA single family mortgage insurance, this letter describes a removal of the requirement that borrowers purchase ten-year protection plans in order to qualify for certain mortgages on single family homes that have been recently constructed.

“This guidance saves the homeowner the cost of the protection plan and follows the December 14, 2018, publication of the final rule of the same name, which streamlined these home warranty requirements,” the release said.

FHA will still require that the homebuilder and the corresponding buyer engage in a one-year warranty of completion of construction. This, “provides FHA with assurances that the home was built according to plan and protects the buyer against defects in equipment, material, or workmanship supplied or performed by the builder, subcontractor, or supplier,” the release said.

That one-year warranty begins on one of three dates, whichever one is soonest: the date the title is conveyed to the buyer, the date that construction on the home is complete or upon occupancy. The changes are effective for all case numbers assigned on or after March 14.

Read both new Mortgagee Letters at FHA’s ML archive.

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