NRMLA Asks HUD to Modernize FHA Property Rules

The National Reverse Mortgage Lenders Association (NRMLA) has formally requested that the U.S. Department of Housing and Urban Development (HUD) revise the Federal Housing Administration's (FHA) minimum property requirements for single-family homes. In a letter dated June 29 to HUD’s Office of General Counsel, NRMLA contended that the current standards, designed to ensure safety and habitability, are imposing excessive costs and restricting access to FHA-insured loans, particularly for senior citizens and individuals in rural areas. The trade association argued that these rules often disadvantage borrowers living in older, well-maintained properties.

NRMLA specifically highlighted concerns regarding the FHA's approach to shared well systems within the Home Equity Conversion Mortgage (HECM) program. The association stated that the existing regulations are too rigid and frequently lead to the disqualification of properties that are otherwise financially viable. NRMLA proposed a shift towards more adaptable, performance-based criteria that align with contemporary lending and risk assessment practices. They recommended that shared wells be approved based on demonstrated functionality and the presence of legal protections like recorded easements, maintenance agreements, and water quality assurances. Furthermore, NRMLA urged HUD to permit existing, functional well systems that meet local health standards to be "grandfathered" in, advocating for a performance-based standard focused on practical risk indicators instead of the current prescriptive method.

The association also called for enhanced clarity from HUD concerning swimming pools. NRMLA noted that current FHA guidelines create ambiguity for property appraisers when assessing the safety and valuation of homes with pools. They suggested that FHA policy should be brought more in line with conventional lending standards, differentiating between pools that are operational and those that are abandoned or pose safety hazards. The group also addressed property repairs, indicating a need for more precise FHA guidance to prevent unnecessary expenses and ensure that repairs are essential for safety and marketability, rather than arbitrary requirements.