source:
  type: regulation
  id: hud-4000-1-ii-a-3
  authority: "HUD Handbook 4000.1 II.A.3 — Underwriting the Property"
  description: 'HUD Handbook 4000.1 Part II.A.3 (Underwriting the Property) for Title

    II Insured Housing Programs Forward Mortgages. Covers Property

    Acceptability Criteria, Minimum Property Requirements/Standards,

    defective conditions, water supply, lead paint, environmental hazards,

    and appraisal review.

    '
obligations:
- id: hud-4000-1-ii-a-3-underwrite-appraisal
  canonical_id: hud-4000-1-ii-a-3-underwrite-appraisal
  section: "HUD Handbook 4000.1 II.A.3 — Underwriting the Property"
  description: '[LENDER] must underwrite the completed appraisal report to

    determine if the Property provides sufficient collateral for the

    FHA-insured Mortgage and complies with FHA Property Acceptability

    Criteria.

    '
  type: do
  audit_question: For every FHA-insured Mortgage, can [LENDER] evidence its underwriting review of the completed appraisal report and its determination that the Property provides sufficient collateral and meets FHA Property Acceptability Criteria?
  workflow_phase: underwriting
  owner_role: underwriter
  secondary_owner_role: appraisal_desk
  cadence: per-loan
  consequence: Failure to underwrite the appraisal is a HUD finding and exposes [LENDER] to indemnification.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - property-underwriting
  - appraisal
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.3 — Underwriting the Property"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: The Mortgagee must underwrite the completed appraisal report to determine if the Property
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17, II.A.3).

      '
  promoted_at: '2026-05-25T17:33:52+00:00'
  promoted_from: hud-4000-1-ii-a-3-roundd-v1.yaml
  auditor_minimum_evidence:
    derivation: snapshot_extract
    derivation_source:
      snapshot_id: 3bf33edadcf6461d
      paragraph_quote: "The Mortgagee must underwrite the completed appraisal report to determine if the Property"
      page_or_section: "HUD Handbook 4000.1 II.A.3"
      fetched_at: '2026-05-25T14:10:11Z'
    pathway_selection_kind: mutually_exclusive_by_facts
    pathways:
    - pathway_id: csh-amep-hud-ii-a-3-appraisal-accepted
      name: "Appraisal underwritten and accepted — property meets FHA eligibility + valuation supports loan"
      evidence_items:
      - evidence_id: csh-ev-hud-ii-a-3-appraisal-uw-review
        kind: record
        description: "Underwriter appraisal-review record (DE underwriter signoff or equivalent) documenting Property eligibility check, comparable selection analysis, and final value reconciliation."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
      - evidence_id: csh-ev-hud-ii-a-3-property-conditions-pass
        kind: document
        description: "Property-condition acceptance documentation — no health/safety/security issues outstanding, MPR/MPS met, repair conditions satisfied or cleared via 203(k) if applicable."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
    - pathway_id: csh-amep-hud-ii-a-3-appraisal-rejected
      name: "Appraisal rejected — defective conditions identified, loan does not proceed without remediation"
      evidence_items:
      - evidence_id: csh-ev-hud-ii-a-3-defect-identification
        kind: record
        description: "Defective-conditions identification record per II.A.3 with specific health/safety/security/eligibility findings cited."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
      - evidence_id: csh-ev-hud-ii-a-3-remediation-or-denial
        kind: document
        description: "Either (a) remediation documentation showing defects cured prior to closing, OR (b) loan-denial / appraisal-rejection record per RESPA/ECOA notification rules."
        retention_rule_ref: hud-4000-1-iii-a-1
        examiner_question_ref: "HUD Office of Inspector General / Mortgagee Review Board — FHA Title II oversight"
        cite_verified: true
    pathway_selection_logic: |
      Two pathways by appraisal outcome: A — appraisal acceptable, property and value support the loan; B — appraisal identified defective conditions per II.A.3, loan cannot proceed without remediation OR is denied with required adverse-action notifications.
  program_review: Do the P&Ps ensure the completed appraisal report is underwritten to determine sufficient collateral and compliance with FHA Property Acceptability Criteria?
  file_review: Review the appraisal-underwriting in a sample; the compliance person judges whether the collateral-sufficiency and Property-Acceptability determination is adequately supported.
  judgment: true
- id: hud-4000-1-ii-a-3-defective-conditions-reject
  canonical_id: hud-4000-1-ii-a-3-defective-conditions-reject
  section: "HUD Handbook 4000.1 II.A.3.a.i — Defective Conditions"
  description: '[LENDER] must evaluate the appraisal in accordance with FHA''s

    requirements for Defective Conditions. When defective conditions

    exist and correction is not feasible, [LENDER] must reject the

    Property. [LENDER] may only approve a Property after confirming

    that all defects reported by the Appraiser have been corrected.

    '
  type: do
  audit_question: For every FHA-insured Mortgage, can [LENDER] evidence its evaluation of defective conditions identified in the appraisal, and either confirmed correction or rejected the Property where correction was not feasible?
  workflow_phase: underwriting
  owner_role: underwriter
  secondary_owner_role: appraisal_desk
  cadence: per-loan
  consequence: Closing on a Property with uncorrected defective conditions is a HUD finding and produces an uninsurable Mortgage.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - property-condition
  - underwriting
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.3.a.i — Defective Conditions"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: The Mortgagee must evaluate the appraisal in accordance with the requirements for
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17, II.A.3.a.i).

      '
  promoted_at: '2026-05-25T17:33:52+00:00'
  promoted_from: hud-4000-1-ii-a-3-roundd-v1.yaml
  program_review: Do the P&Ps ensure Defective Conditions in the appraisal are evaluated, the Property is rejected when correction is not feasible, and approval follows only after all appraiser-reported defects are confirmed corrected?
  file_review: Review files with appraiser-noted defects; confirm correction was evidenced before approval, or the Property was rejected where correction was infeasible.
  judgment: false
- id: hud-4000-1-ii-a-3-property-eligibility-confirm
  canonical_id: hud-4000-1-ii-a-3-property-eligibility-confirm
  section: "HUD Handbook 4000.1 II.A.3 — Property Eligibility Confirmation"
  description: '[LENDER] must confirm that the Property complies with all FHA

    eligibility criteria, including those concerning use, location,

    ingress/egress, hazards, and environmental conditions, before

    approving the Mortgage for FHA insurance.

    '
  type: do
  audit_question: For every FHA-insured Mortgage, can [LENDER] evidence its confirmation that the Property complies with all FHA eligibility criteria (use, location, ingress/egress, hazards, environmental conditions)?
  workflow_phase: underwriting
  owner_role: underwriter
  secondary_owner_role: appraisal_desk
  cadence: per-loan
  consequence: FHA insurance of a non-conforming Property is grounds for indemnification and HUD finding.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - property-eligibility
  - underwriting
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.3 — Property Eligibility"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: The Mortgagee must confirm that the Property complies with the following eligibility
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17, II.A.3).

      '
  promoted_at: '2026-05-25T17:33:52+00:00'
  promoted_from: hud-4000-1-ii-a-3-roundd-v1.yaml
  program_review: Do the P&Ps ensure the Property is confirmed compliant with all FHA eligibility criteria (use, location, ingress/egress, hazards, environmental conditions) before approval?
  file_review: Pull files; confirm documented confirmation of FHA property-eligibility criteria.
  judgment: false
- id: hud-4000-1-ii-a-3-environmental-hazards-free
  canonical_id: hud-4000-1-ii-a-3-environmental-hazards-free
  section: "HUD Handbook 4000.1 II.A.3 — Environmental Hazards"
  description: '[LENDER] must confirm that the Property is free of all known

    environmental and safety hazards before approving the Mortgage for

    FHA insurance.

    '
  type: do
  audit_question: For every FHA-insured Mortgage, can [LENDER] evidence its confirmation that the subject Property is free of all known environmental and safety hazards?
  workflow_phase: underwriting
  owner_role: underwriter
  secondary_owner_role: appraisal_desk
  cadence: per-loan
  consequence: Approving a property with known environmental hazards exposes [LENDER] to indemnification and HUD finding.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - environmental-hazards
  - property-condition
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.3 — Environmental Hazards"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: The Mortgagee must confirm that the Property is free of all known environmental and
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17, II.A.3).

      '
  promoted_at: '2026-05-25T17:33:53+00:00'
  promoted_from: hud-4000-1-ii-a-3-roundd-v1.yaml
  program_review: Do the P&Ps ensure the Property is confirmed free of all known environmental and safety hazards before approval?
  file_review: Pull files; confirm documented confirmation that the Property is free of known environmental/safety hazards.
  judgment: false
- id: hud-4000-1-ii-a-3-lead-paint-free
  canonical_id: hud-4000-1-ii-a-3-lead-paint-free
  section: "HUD Handbook 4000.1 II.A.3 — Lead Paint"
  description: '[LENDER] must confirm that the Property is free of lead paint

    hazards before approving an FHA-insured Mortgage.

    '
  type: do
  audit_question: For every FHA-insured Mortgage, can [LENDER] evidence its confirmation that the subject Property is free of lead paint hazards (per FHA standards)?
  workflow_phase: underwriting
  owner_role: underwriter
  secondary_owner_role: appraisal_desk
  cadence: per-loan
  consequence: Insuring a Property with lead paint hazards is a HUD finding and may produce HUD/EPA liability.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - lead-paint
  - property-condition
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.3 — Lead Paint"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: The Mortgagee must confirm that the Property is free of lead paint hazards.
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17, II.A.3).

      '
  promoted_at: '2026-05-25T17:33:53+00:00'
  promoted_from: hud-4000-1-ii-a-3-roundd-v1.yaml
  program_review: Do the P&Ps ensure the Property is confirmed free of lead paint hazards per FHA standards before approval?
  file_review: Pull files; confirm documented confirmation that the Property is free of lead paint hazards.
  judgment: false
- id: hud-4000-1-ii-a-3-market-value-sufficient
  canonical_id: hud-4000-1-ii-a-3-market-value-sufficient
  section: "HUD Handbook 4000.1 II.A.3 — Market Value Adequacy"
  description: '[LENDER] must ensure the Market Value of the Property is sufficient

    to adequately support the FHA-insured Mortgage being underwritten,

    based on its review and analysis of the appraisal report.

    '
  type: do
  audit_question: For every FHA-insured Mortgage, can [LENDER] evidence its determination that the Property's Market Value is sufficient to adequately support the Mortgage being underwritten?
  workflow_phase: underwriting
  owner_role: underwriter
  secondary_owner_role: appraisal_desk
  cadence: per-loan
  consequence: Insuring a Mortgage that is not adequately collateralized by Property Market Value is a HUD finding.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - market-value
  - appraisal
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.3 — Market Value Adequacy"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: The Mortgagee must ensure the Market Value of the Property is sufficient to adequately
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17, II.A.3).

      '
  promoted_at: '2026-05-25T17:33:53+00:00'
  promoted_from: hud-4000-1-ii-a-3-roundd-v1.yaml
  program_review: Do the P&Ps ensure the appraisal review establishes that Market Value is sufficient to adequately support the Mortgage being underwritten?
  file_review: Review the appraisal analysis in a sample; the compliance person judges whether Market Value adequately supports the Mortgage.
  judgment: true
- id: hud-4000-1-ii-a-3-wood-destroying-insects
  canonical_id: hud-4000-1-ii-a-3-wood-destroying-insects
  section: "HUD Handbook 4000.1 II.A.3 — Wood Destroying Insects"
  description: 'For existing Properties, [LENDER] must confirm that the Property is

    free of wood destroying insects, fungi, or dry rot, or that

    compliant treatment was performed prior to closing.

    '
  type: do
  audit_question: For every FHA-insured Mortgage on an existing Property, can [LENDER] evidence its confirmation that the Property is free of wood destroying insects/fungi/dry rot (or that compliant treatment was performed)?
  workflow_phase: underwriting
  owner_role: underwriter
  secondary_owner_role: appraisal_desk
  cadence: per-loan
  consequence: Approving a Property with active wood-destroying-insect infestation is a HUD finding.
  tags:
  - round-d
  - regulator-direct
  - fha
  - hud-4000-1
  - wood-destroying-insects
  - property-condition
  - promoted
  primary_source:
    tier: 1
    authority: "HUD Handbook 4000.1 II.A.3 — Wood Destroying Insects"
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/sites/dfiles/OCHCO/documents/40001HSGH.pdf
    snapshot_id: 3bf33edadcf6461d
    fetched_at: '2026-05-25T14:10:11Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: For existing Properties, the Mortgagee must confirm that the Property is free of wood
    drafter_attestation: 'Copied verbatim from snapshot 3bf33edadcf6461d (HUD Handbook 4000.1

      Update 17, II.A.3).

      '
  promoted_at: '2026-05-25T17:33:53+00:00'
  promoted_from: hud-4000-1-ii-a-3-roundd-v1.yaml
  program_review: Does the program account for the existing-Property condition — confirming freedom from wood-destroying insects/fungi/dry rot, or compliant treatment prior to closing?
  file_review: Spot-check existing-Property files; confirm freedom from wood-destroying insects/fungi/dry rot or evidence of compliant pre-closing treatment.
  judgment: false
_promotion_history:
- promoted_at: '2026-05-25T17:33:53+00:00'
  candidate_path: obligations\_remediation\round-d-investor-guides\hud-4000-1-ii-a-3-roundd-v1.yaml
  candidates_promoted: 7
  candidates_skipped_existing: 0
