November, 2002
Washington Watch
Inspection News and Views from the American Society of Home Inspectors



Government Relations Status Report

RANDALL PENCE

I  am pleased to submit the following update on ASHI issues under active consideration before Congress and the pertinent federal agencies. Increasingly, ASHI’s policy-based proposals are being taken seriously, and the ASHI message is beginning to take hold and resonate.

We are beginning to see that when policymakers examine consumer protection for homebuyers, ways to reduce default risks in FHA programs, and ways to combat fraudulent activities like property flipping, home inspection is readily being considered as a potential remedy. This is a new development, explainable as a direct result of ASHI’s lobbying efforts. Updates of six examples follow.

1. Status of Official GAO Study of Home Inspection Issues: GAO is able to conduct the study ASHI requested through Cong. Doug Bereuter (R-NE) to investigate the value of increasing home inspections in FHA-financed mortgages/home sales. However, GAO studies are highly prized, and as such, the competition for GAO time and resources is fierce. Under GAO’s prioritization system, many such projects are not conducted unless they are moved to a higher priority level based on a request from a congressional committee chairman.  

We have been seeking to vault this extra hurdle. According to Housing Subcommittee staff, we have succeeded.

Cong. Marge Roukema (R-NJ), Chairwoman of the House Subcommittee on Housing, has recently agreed to not only endorse the Bereuter study request, but actually use language stronger than what we requested to move the ASHI study to top priority.  It is my impression that the Subcommittee is growing in its acceptance of the ASHI view that independent professional home inspections can be an important positive factor in reducing surprise to homebuyers and reducing default risks. The Committee wants the work product from GAO to provide a basis for further congressional consideration of home inspection issues.  

2. Coalition with Appraisal Institute (AI)/Request to HUD to Revise HSS: The joint effort between the Appraisal Institute and ASHI is already bearing fruit. HUD responded quickly to the joint AI-ASHI letter that requested a wholesale elimination or major modification of the Homebuyer Summary Sheet (this is the series of documents that we believe blurs the distinction between inspections and appraisals, and that fail to explain that distinction in a meaningful way). While HUD defended the HSS (as expected), HUD made the important admission, in writing, that some people are indeed confused about home inspections; further, HUD said it is indeed receptive to considering AI and ASHI recommendations to modify the documents to avoid this confusion.  

Having reviewed the voluminous HUD library, I was able to identify three documents that should be rewritten to achieve the purpose we would like. I have notified HUD that we would like to schedule a meeting with the lead staff in the Single Family Housing Office. Among the recommendations will be to improve the language of the text to provide more immediacy or words of warning to prospective homebuyers about undetected flaws in homes, and make the message favoring home inspections more prominent and recognizable. AI is fully on board with this project and will be part of the meeting.  

3. RESPA Reform Initiative/Hearing: HUD is under increasing pressure to deal with FHA mortgage default rates and the increasingly clear notion that the existing regs under the Real Estate Settlement Procedures Act are out of date. HUD has begun an ambitious undertaking to reform RESPA by publishing a proposed rule, which was open for public comment until October 27, 2002. ASHI comments regarding the rule have been submitted.  

At a House hearing last month on the proposed RESPA rule, Members of Congress were predisposed to accept the argument that the current home sales documentation is so confusing and voluminous that it has little impact in informing or protecting homebuyers; ASHI can suggest clearer words of warning about the need for home inspections. The Society needs to continue to reinforce the concept that HUD documents should clearly, quickly and unavoidably set forth the distinction from appraisals and stress the importance to obtaining home inspections.

4. Property flipping: We have worked with the Senate Permanent Subcommittee on Investigations and the Senate Appropriations Committee to expand awareness of the dangers of property flipping, and to offer home inspections as a means to help reduce property flipping. We have illustrated how property flipping thrives in the absence of sufficient accurate information of house conditions imparted to homebuyers, and how it can be thwarted at least in part by arming homebuyers with better knowledge about their prospective purchasers. If an anti-property flipping bill is introduced in the Senate next year, we are in a good position to play an important role in that debate, submit testimony, and em-phasize the policy ASHI proposes; namely, that home inspections should be strongly suggested, perhaps required, to protect vulnerable homebuyers.

5. Senate Appropriations Report Language Requiring Home Inspections in Certain High-Risk Cases: Continuing with the momentum on property flipping mentioned above, I note that the Senate Appropriations Committee recently adopted language, for the first time in the Senate, that would pressure HUD to consider mandatory inspections in certain high-risk situations:  

This language appears in Senate Report 107-222, the report to accompany the Senate version of the VA, HUD and independent agencies appropriation bill for FY 2003. It is not legislative language and does not carry the force of law, but is intended to expand upon the concepts outlined in the appropriations bill.  Report language often signals the direction in which the Committee intends to go in the future, and it sends a strong signal to HUD to get prepared to talk about such matters in a serious vein.  

6. HR3995/Housing Bill Status: It is increasingly unlikely that the House housing bill, HR3995 will pass this year. Failure of HR3995 to pass this year will keep the pressure on for a housing bill early in the cycle next Congress. At that time,
I will recommend that ASHI lobby Congress to reinstate the pre-1997 policy allowing certain closing costs, specifically including home inspection fees, to be financed in FHA mortgages. We may have other requests to make of Congress depending on the progress of our discussions with HUD.

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Lobbying Funded Solely Through Donations

ASHI’s lobbying efforts are paid for by the ASHI Government Relations Fund. Representation on Capitol Hill, such as described in this report, will continue only if the Membership supports the effort by contributing to the ASHI Government Relations Fund. Donations are separate from dues. The Society has established a foothold on the Hill; donations are necessary to ensure forward progress. For information on how to contribute, contact ASHI HQ.

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