T here are a number of activities underway in Washington D.C. affecting the interests of the ASHI Membership. The substantial number of legislative and regulatory initiatives being discussed suggest ASHI has successfully reversed the lack of attention it was receiving during the 1990s from the Housing and Urban Development (HUD) agency and on Capitol Hill. Today, ASHI is THE voice for the home inspection profession in HUD and on the Hill, and increasingly ASHI is seen as a positive player and a force to be reckoned with in federal housing policy. Here’s a recap of current activity with my recommendations for ASHI’s ongoing involvement.
Introduction of Housing Bill HR3995
The House Subcommittee on Housing recently introduced a new housing bill for consideration prior to adjournment. The schedule will be tight with the upcoming elections, but the Subcommittee will work diligently to pass a bill in 2002. We are working equally diligently to add provisions favorable to ASHI to the bill.
On the last housing bill, ASHI’s centerpiece request was a General Accounting Office (GAO) study, the goal of which is to examine/quantify how the lack of home inspections hurts homebuyers and puts FHA insurance programs at risk. The study we sought is already underway (more on that later), so we need not pursue that further in HR3995.
After researching the home sale issues that are most pressing today, I identified three new proposals to ask Congress to include in HR3995 (some of which we may reference in our proposed joint ASHI/Appraisal Institute letter detailed below.)
1. The federal government should reinstate the pre-1999 policy allowing the cost of a home inspection to be rolled into the mortgage (i.e., to be financed) in FHA-backed mortgages.
My research and discussions with HUD verify that this favorable home inspection option, which was eliminated in 1999, is no longer available.
ASHI will argue to reinstate the policy to make it easier for all homebuyers to obtain inspections, and reduce/eliminate the up-front cost as a reason for not obtaining one.
2. The federal government should eliminate confusion caused by the key element of the Cuomo Homebuyer Protection/Enhanced Appraisal: the Homebuyer Summary sheet.
The central piece of the 1999 Enhanced Appraisal that causes the confusion between home inspections and appraisals is the Homebuyer Summary Sheet. In my talks with HUD, it is clear the agency is satisfied with the Sheet and has no plans to alter it; congressional pressure or legislation will be required to nullify the Homebuyer
ASHI will propose that Congress condemn the Sheet as a confusing factor, and
require HUD to review/revise/eliminate it.
3. Congress should direct HUD to improve the means for delivering the pro-home inspection message that it gives homebuyers at the time they apply for mortgages.
Research confirms HUD does indeed require homebuyers to be shown documents that suggest obtaining a home inspection. The problem is the message is not getting through or is being ignored due in part to homebuyers being inundated with documents to sign throughout the contract and mortgage application processes. Homebuyers “glaze over” and don’t fully consider the documents they are signing.
ASHI will urge Congress to pressure HUD to acknowledge this problem and develop solutions, including a) changing the appearance of the presentation material, such as printing the home inspection document in a different color than other documents, increasing the size of the type and adding attention-attracting punctuation; b) rewriting the text to impart a greater sense of immediacy and the full extent of the risk for not obtaining an inspection; c) adding a page to the HUD Web site devoted solely to promoting home inspections; d) creating an economical public relations campaign to better educate consumers on the benefits of obtaining inspections and the pitfalls for not doing so.
The General Accounting Office has accepted responsibility for the home inspection study urged by ASHI. Staff has been assigned to the case and has met twice with our Hill allies to frame the study. The GAO made its first attempts at data collection by contacting HUD; it now wants to talk with private sector interests – the first of which is ASHI as the recognized representative of the home inspection profession.
GAO is inviting a face-to-face meeting with ASHI representatives to assist with data collection and to establish a methodology for proceeding with the study. When Rob Paterkiewicz visits Washington, we plan to present the anecdotal data we have collected from the ASHI Membership, and to present any media reports discussing individual instances of homebuyer disasters as a result of consumers buying homes with serious unknown defects.
HUD expansion of the “Pre-Approval Process”/opportunity for more inspections
HUD has announced it will allow more flexibility to mortgagees to accept local documents, such as building permits and certificates of occupancy, in meeting completion requirements in pre-approvals. HUD asserts, however, that along with this increased flexibility comes increased responsibility by mortgagees to certify that satisfactory completion has indeed occurred. We believe this will require actual knowledge by mortgagees of the satisfactory completion. It would appear that one method by which mortgagees could satisfy a good-faith standard to meet this requirement would be to obtain a home inspection. A suggestion from HUD to the mortgagee community to obtain home inspections for pre-approvals would be a powerful message. We drafted such a letter for HUD’s consideration, and HUD staff will decide whether it will issue it under HUD letterhead. Even if HUD eventually declines, ASHI will send a similar letter to lenders.
HUD proposed Remedy for Property Flipping/testimony to include inspections as an exception
As a result of pressure by Members of Congress, including Sen. Susan Collins (R-ME), HUD has issued a proposed rule to attack property flipping. The HUD rule would deny FHA financing eligibility on any single family dwelling that has been sold within the preceding six months. The rule provides some exceptions to this rule based on the actions of mortgagees to thwart flipping. ASHI submitted testimony requesting that the actions of mortgagor/homebuyers, such as obtaining a home inspection, be added as possible exceptions to this new rule. We await action by HUD to issue a final rule, hopefully with the ASHI suggestions that would establish home inspections as a means to avoid the six-month ineligibility.
Proposed joint ASHI/AI letter
ASHI continues to seek established stakeholder allies in pursuing its efforts on the Hill and in the agencies. ASHI and the Appraisal Institute (AI) recently struck an agreement to develop a joint letter advocating changes to the HUD VC sheet/Enhanced Appraisal scheme.