By 
In December 2005, HUD announced changes to the types of repairs and inspections it requires for residential properties. According to HUD:
“In an ongoing effort to reform and standardize its appraisal requirements,
The FHA has shifted from its historic emphasis on minor property repair
deficiencies and now only requires repairs for those property conditions that
rise above the level of cosmetic defects, minor defects, or normal wear and tear and
tear. Appraisers on the FHA list are reminded to report all
property deficiencies, as well as any adverse conditions discovered by conducting
the research involved in completing the appraisal, within the appraisal
report form.
“Lenders must use their professional judgment and trust
prudent underwriting practices to determine when a property condition raises
a threat to the safety of an occupant and / or jeopardizes the soundness and
structural integrity of the property, so that additional inspections and / or
repairs are necessary. “
The Mortgage Creditor’s Letter 2005-ML-48 shows the following clarifications:
Repair requirements
Examples of minor property conditions that no longer require automatic repair for
properties include, but are not limited to:
* Missing handrails
* Cracked or damaged exit doors that would otherwise be operable
* Cracked window glass
* Defective paint surfaces in homes built after 1978
* Minor plumbing leaks (like leaky faucets)
* Faulty floor covering or finish (worn through finish, very dirty
carpeting)
* Evidence of a previous wood-destroying insect / organism (not active)
damage where there is no evidence of unrepaired structural damage
* Rotten or worn countertops
* Damaged plaster, plasterboard, or other wall and ceiling materials in homes
built after 1978
* Poor workmanship
* Trip hazards (cracked or partially cracked sidewalks, improperly installed
carpeting)
* Crawling space with debris and garbage
* Lack of an all-weather inlet surface
Examples of property conditions that may pose a health risk and
occupant safety or soundness of the property for which the FHA
continue to require automatic repair for existing properties include, but are
Not limited to:
* Inadequate access / exit from the bedrooms to the outside of the house
* Leaky or worn roofs (if 3 or more layers of shingles are leaking or
worn roof, all existing shingles must be removed before re-roofing)
* Evidence of structural problems (such as foundation damage caused by
excessive settlement)
* Defective paint surfaces in homes built before 1978
* Defective exterior paint surfaces in homes built after 1978 where the
the finish is otherwise unprotected.
Inspection requirements
The FHA no longer requires automatic inspections for the following items and / or
conditions on existing properties:
* Insects / Wood Destroying Organisms: inspection is required only if there is evidence of
Active infestation, mandated by state or local jurisdiction, if customary to
area, or at the lender’s discretion
* Well (individual water system): test or inspection required if required
state or local jurisdiction; if it is known that well water can be
contaminated; when the water supply depends on a water purification system
due to the presence of contaminants; or when there is evidence of:
1.Piping corrosion (plumbing)
2. Intensive agriculture areas within a 1/4 mile radius
3. Coal mining or gas drilling operations within a 1/4 mile radius
4. Unloading, junkyard, landfill, factory, gas station or dry cleaning operation within
1/4 mile
5. Unusually unpleasant taste, smell, or appearance of well water
(replacing the guidance in Mortgage Letter 95-34 which requires a good
water testing in the absence of local or state regulations)
* Septic: test or inspection required only if there is evidence of system failure, if
mandated by state or local jurisdiction, if customary in the area, or in
lender discretion
* Flat and / or unobservable roof