source:
  type: guide
  id: hud-4000-1-ii-a-property-acceptability-criteria-2
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Property
    Acceptability Criteria (04/10/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Property
    Acceptability Criteria (04/10/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-a-property-acceptability-criteria-2-full
  canonical_id: hud-4000-1-ii-a-property-acceptability-criteria-2-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Property
    Acceptability Criteria (04/10/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — a. Property
      Acceptability Criteria (04/10/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'a. Property Acceptability Criteria (04/10/2025) i. Definitions
      HECM Property refers to a Property that is either Existing Construction or New
      Construction which will serve as collateral for the HECM. Minimum Property Requirements
      (MPR) refer to general requirements that all homes insured by FHA be safe, sound,
      and secure. Minimum Property Standards (MPS) refer to regulatory requirements
      relating to the safety, soundness, and security of New Construction. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 4. Underwriting the Property Handbook 4000.1 600 Last Revised: 11/26/2025
      Combination Inspector (CI) or Residential Combination Inspector (RCI) refers
      to an inspector that has met certification requirements as determined by the
      International Code Council (ICC). Shared Well refers to a well that services
      two to four homes where there is a binding Shared Well Agreement between the
      property owners that meets FHA requirements. ii. Standard The Mortgagee must
      evaluate the appraisal and any supporting documentation to determine if the
      Property complies with HUD’s Property Acceptability Criteria. HECM Properties
      must comply with Application of Minimum Property Requirements and Minimum Property
      Standards by Construction Status. See HECM for Purchase product sheet for additional
      Property Acceptability Requirements. (A) Defective Conditions The Mortgagee
      must evaluate the appraisal in accordance with the requirements for defective
      conditions. When defective conditions exist and correction is not feasible,
      the Mortgagee must reject the Property. The Mortgagee may only approve a Property
      after the Mortgagee confirms that all defects reported by the Appraiser have
      been corrected or a Repair Set-Aside is established in accordance with HECM
      Repair Set- Aside Requirements. (B) Minimum Property Requirements and Minimum
      Property Standards As the onsite representative for the Mortgagee, the Appraiser
      provides preliminary verification that a Property meets the Property Acceptability
      Criteria, which includes HUD’s MPR and MPS. When the Appraiser’s observation
      of a Property reveals noncompliance with the Property Acceptability Criteria,
      the Appraiser must note all repairs necessary to make the Property comply with
      HUD’s Property Acceptability Criteria, together with the estimated cost to cure.
      If the Appraiser cannot determine that a Property meets HUD’s MPR or MPS, the
      Mortgagee may obtain an inspection from a qualified entity to make the determination.
      Mortgagees must use professional judgment in determining when inspections are
      necessary to determine that a Property meets MPR or MPS. Mortgagees must also
      use professional judgment in determining when a property condition poses a threat
      to the health and safety of the occupant and/or jeopardizes the soundness and
      structural integrity of the Property, such that additional inspections and/or
      repairs are necessary. The Mortgagee must confirm that the Property complies
      with the following eligibility criteria. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property
      Handbook 4000.1 601 Last Revised: 11/26/2025 (1) Encroachment The Mortgagee
      must ensure the subject’s dwelling, garage, or other improvements do not encroach
      onto an adjacent Property, right-of-way, utility Easement, or building restriction
      line. The Mortgagee must also ensure a neighboring dwelling, garage, or other
      improvements do not encroach onto the subject Property. Encroachment by the
      subject or adjacent Property fences is acceptable provided such Encroachment
      does not affect the marketability of the subject Property. (2) Overhead Electric
      Power The Mortgagee must confirm that any Overhead Electric Power Transmission
      Lines do not pass directly over any dwelling, Structure, or related property
      improvement, including pools. The power line must be relocated for a Property
      to be eligible for an FHA-insured HECM. The residential service drop line may
      not pass directly over any pool, spa, or water feature. If the dwelling or related
      property improvements are located within the Easement area, the Mortgagee must
      obtain a certification from the appropriate utility company or local regulatory
      agency stating that the relationship between the improvements and Local Distribution
      Lines conforms to local standards and is safe. (3) Access to Property The Mortgagee
      must confirm that the Property is provided with a safe pedestrian access and
      Adequate Vehicular Access from a public or private street. Streets must either
      be dedicated to public use and maintenance or retained as private streets protected
      by permanent recorded Easements. Private streets, including shared driveways,
      must be protected by permanent recorded Easements, ownership interest, or be
      owned and maintained by an HOA. Private streets and shared driveways do not
      require a joint maintenance agreement. (4) Onsite Hazards and Nuisances The
      Mortgagee must require corrective work to mitigate potential adverse effects
      from any onsite hazards or nuisances reported by the Appraiser. (5) Abandoned
      Gas and Oil Well If the Property contains any abandoned gas or oil wells, the
      Mortgagee must obtain a letter from the local jurisdiction or appropriate state
      agency stating that the subject well was permanently abandoned in a safe manner.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 4. Underwriting the Property Handbook 4000.1 602
      Last Revised: 11/26/2025 If the Property contains any abandoned petroleum product
      wells, the Mortgagee must ensure that a qualified petroleum engineer has inspected
      the Property and assessed the risk, and the appropriate state authorities have
      concurred on clearance recommendations. (6) Minimum Requirements for Living
      Unit The Mortgagee must confirm that each living unit contains: • a continuing
      and sufficient supply of safe and potable water under adequate pressure and
      of appropriate quality for all household uses; • sanitary facilities and a safe
      method of sewage disposal. Every living unit must have at least one bathroom,
      which must include, at a minimum, a water closet, lavatory, and a bathtub or
      shower; • space adequate for healthful and comfortable living conditions; •
      heating adequate for healthful and comfortable living conditions; • domestic
      hot water; • electricity adequate for lighting and mechanical equipment used
      in the living unit; and • kitchen facilities adequate for the preparation and
      cooking of food. Every living unit must have at least one area with kitchen
      facilities, which must include, at a minimum, a sink with potable running water
      and a stove utility hookup. The Mortgagee must ensure that Appliances that are
      to remain and that contribute to the market value opinion are operational. FHA
      does not have a minimum size requirement for one- to four-family dwellings and
      Condominium Units. For Manufactured Housing requirements, see the Manufactured
      Housing section. (7) Swimming Pools The Mortgagee must confirm that any swimming
      pools comply with all local ordinances. (8) Structural Conditions The Mortgagee
      must confirm that the Structure of the Property will be serviceable for the
      life of the HECM. The Mortgagee must confirm that all foundations will be serviceable
      for the life of the HECM and adequate to withstand all normal loads imposed.
      (9) Environmental The Mortgagee must confirm that the Property is free of all
      known environmental and safety hazards and adverse conditions that may affect
      the health and safety of II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B.
      Title II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property
      Handbook 4000.1 603 Last Revised: 11/26/2025 the occupants, the Property’s ability
      to serve as collateral, and the structural soundness of the improvements. (10)
      Lead-Based Paint For properties built before 1978 with lead-based paint hazards,
      the Mortgagee must confirm whether any child under six years of age resides
      or is expected to reside in the home and comply with the following: • If a child
      under six years of age resides or is expected to reside in the home, the Mortgagee
      must confirm that the Property is free of lead-based paint hazards in accordance
      with the requirements of the Lead-Based Paint Poisoning Prevention Act (LPPPA).
      • If no children under six years of age resides or is expected to reside in
      the home, the Mortgagee must obtain certification from the Borrower that no
      child under six years of age resides, or is expected to reside, in the home.
      In accordance with the requirements of the LPPPA, the mitigation of defective
      lead-based paint surfaces will not be required. The Mortgagee must notify the
      Appraiser of the LPPPA exemption, provide a copy of the Borrower certification,
      and ensure the appraisal reflects the “As-Is” value of the subject Property’s
      defective lead-based paint surfaces. (11) Defective Exterior Paint Surfaces
      The Mortgagee must confirm that the exterior of the Property is free from any
      defective paint that exposes the dwelling subsurface to the elements (e.g.,
      cracking, chipping, peeling, flaking, scaling paint, etc.). (12) Methamphetamine
      Contamination If the Mortgagee or the Appraiser identifies a Property as contaminated
      by the presence of methamphetamine (meth), either by its manufacture or by consumption,
      the Property is ineligible due to this environmental hazard until the Property
      is certified safe for habitation. (13) Repair Requirements The Mortgagee must
      determine which repairs must be made for a HECM Property to be eligible for
      an FHA-insured HECM. (14) Utility Services If utilities are not located on Easements
      that have been permanently dedicated to the local government or appropriate
      public utility body, the Mortgagee must confirm that this information is recorded
      on the deed record. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property Handbook
      4000.1 604 Last Revised: 11/26/2025 (15) Water Supply Systems (a) Public Water
      Supply System The Mortgagee must confirm that a connection is made to a public
      or Community Water System whenever feasible and available at a reasonable cost.
      If connection costs to the public or community system are not reasonable, the
      existing onsite systems are acceptable, provided they are functioning properly
      and meet the requirements of the local health department. When a public water
      supply system is present, the water quality is considered to be safe and potable
      and to meet the requirements of the health authority with jurisdiction unless:
      • the Appraiser indicates deficiencies with the water or notifies the Mortgagee
      that the water is unsafe; or • the health authority with jurisdiction issues
      a public notice indicating that the water is unsafe. (b) Individual Water Supply
      Systems (Wells) When an Individual Water Supply System is present, the Mortgagee
      must ensure that the water quality meets the requirements of the health authority
      with jurisdiction. If there are no local (or state) water quality standards,
      then water quality must meet the standards set by the Environmental Protection
      Agency (EPA), as presented in the National Primary Drinking Water regulations
      in 40 CFR §§ 141–142. If the subject Property has a water source that includes
      a mechanical chlorinator or is served by springs, lakes, rivers, sand-point
      wells, or artesian wells, the Property is not eligible for FHA mortgage insurance.
      (i) Requirements for Well Water Testing A well water test is required for, but
      not limited to, Properties: • that are newly constructed; • where an Appraiser
      has reported deficiencies with a well or the well water; • where water is reported
      to be unsafe or known to be unsafe; or • located in close proximity to dumps,
      landfills, industrial sites, farms (pesticides), or other sites that could contain
      hazardous wastes. All testing must be performed by a disinterested third party.
      This includes the collection and transport of the water sample collected at
      the water II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured
      Housing Programs Reverse Mortgages 4. Underwriting the Property Handbook 4000.1
      605 Last Revised: 11/26/2025 supply source. The sample must be collected and
      tested by the local health authority, a commercial testing laboratory, a licensed
      sanitary engineer, or other party that is acceptable to the local health authority.
      At no time will the Borrower/owner, or other Interested Party collect and/or
      transport the sample. Requirements for the location of wells for FHA-insured
      Properties are located in 24 CFR § 200.926d(f)(3). The following tables provide
      the minimum distance required between wells and sources of pollution for an
      Existing Construction: Individual Water Supply System for Minimum Property Requirements
      for Existing Construction* 1 Property line/10 feet 2 Septic tank/50 feet 3 Drain
      field/100 feet 4 Septic tank drain field reduced to 75 feet if allowed by local
      authority 5 If the subject Property line is adjacent to a residential Property,
      then local well distance requirements prevail. If the subject Property is adjacent
      to a nonresidential Property or roadway, there needs to be a separation distance
      of at least 10 feet from the property line. * distance requirements of local
      authority prevail if greater than stated above The following provides the minimum
      requirements for water wells: Water Wells Minimum Property Standards for New
      Construction 24 CFR § 200.926d(f)(1) 1 Lead-free piping 2 If no local chemical
      and bacteriological water standards, state standards apply 3 Connection of public
      water whenever feasible 4 Wells must deliver a continuous water flow of five
      gallons per minute over at least a four-hour period Water Wells Minimum Property
      Requirements for Existing Construction 1 Existing wells must deliver a continuous
      water flow at a minimum of three to five gallons per minute 2 No exposure to
      environmental contamination 3 Continuing supply of safe and potable water 4
      Domestic hot water 5 Water quality must meet requirements of local jurisdiction
      or the EPA if no local standard II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property
      Handbook 4000.1 606 Last Revised: 11/26/2025 (ii) Required Documentation The
      Mortgagee must obtain a valid water test from the local health authority or
      a lab qualified to conduct water testing in the jurisdictional state or local
      authority. When a well test is required, the report may not be more than 180
      Days old from the Disbursement Date. (c) Shared Wells The Mortgagee must confirm
      that a Shared Well: • serves Properties that cannot feasibly be connected to
      an acceptable public or Community Water Supply System; • is capable of providing
      a continuous supply of water to involved Dwelling Units so that each Existing
      Construction Property simultaneously will be assured of at least three gallons
      per minute (five gallons per minute for Proposed Construction) over a continuous
      four-hour period. (The well itself may have a lesser yield if pressurized storage
      is provided in an amount that will make 720 gallons of water available to each
      connected existing dwelling during a continuous four-hour period or 1,200 gallons
      of water available to each proposed dwelling during a continuous four-hour period.
      The shared well system yield must be demonstrated by a certified pumping test
      or other means acceptable to all agreeing parties.); • provides safe and potable
      water. An inspection is required under the same circumstances as an individual
      well. This may be evidenced by a letter from the health authority having jurisdiction
      or, in the absence of local health department standards, by a certified water
      quality analysis demonstrating that the well water complies with the EPA’s National
      Interim Primary Drinking Water Regulations; • has a valve on each dwelling service
      line as it leaves the well so that water may be shut off to each served dwelling
      without interrupting service to the other Properties; and • serves no more than
      four living units or Properties. (i) Requirements for Well Water Testing A well
      water test is required for, but not limited to, Properties: • that are newly
      constructed; • where an Appraiser has reported deficiencies with a well or the
      well water; • where water is reported to be unsafe or known to be unsafe; or
      • located in close proximity to dumps, landfills, industrial sites, farms (pesticides)
      or other sites that could contain hazardous wastes. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages
      4. Underwriting the Property Handbook 4000.1 607 Last Revised: 11/26/2025 All
      testing must be performed by a disinterested third party. This includes the
      collection and transport of the water sample collected at the water supply source.
      The sample must be collected and tested by the local health authority, a commercial
      testing laboratory, a licensed sanitary engineer, or other party that is acceptable
      to the local health authority. At no time will the Borrower/owner or other Interested
      Party collect and/or transport the sample. For both New and Existing Construction,
      the Mortgagee must ensure that the shared well agreement complies with the guidance
      provided in the following table. Item Provisions that must be reflected in any
      acceptable shared well agreement include the following: 1 Require that the agreement
      is binding upon signatory parties and their successors in title, recorded in
      local deed records when executed and recorded, and reflects joiner by any Mortgagee
      holding a Mortgage on any Property connected to the Shared Well. 2 Permit well
      water sampling and testing by the local authority at the request of any party
      at any time. 3 Require that corrective measures be implemented if testing reveals
      a significant water quality deficiency, but only with the consent of a majority
      of all parties. 4 Ensure continuity of water service to “supplied” parties if
      the “supplying” party has no further need for the Shared Well system. (“Supplied”
      parties normally should assume all costs for their continuing water supply.)
      5 Prohibit well water usage by any party for other than bona fide domestic purposes.
      6 Prohibit connection of any additional living unit to the Shared Well system
      without: • the consent of all parties; • the appropriate amendment of the agreement;
      and • compliance with item 3. 7 Prohibit any party from locating or relocating
      any element of an individual sewage disposal system within 75 feet (100 feet
      for Proposed Construction) of the Shared Well. 8 Establish Easements for all
      elements of the system, ensuring access and necessary working space for system
      operation, maintenance, improvement, inspection, and testing. 9 Specify that
      no party may install landscaping or improvements that will impair use of the
      Easements. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured
      Housing Programs Reverse Mortgages 4. Underwriting the Property Handbook 4000.1
      608 Last Revised: 11/26/2025 Item Provisions that must be reflected in any acceptable
      shared well agreement include the following: 10 Specify that any removal and
      replacement of preexisting site improvements, necessary for system operation,
      maintenance, replacement, improvement, inspection, or testing, will be at the
      cost of their owner, except for costs to remove and replace common boundary
      fencing or walls, which must be shared equally between or among parties. 11
      Establish the right of any party to act to correct an emergency in the absence
      of the other parties onsite. An emergency must be defined as failure of any
      shared portion of the system to deliver water upon demand. 12 Permit an agreement
      amendment to ensure equitable readjustment of shared costs when there may be
      significant changes in well pump energy rates or the occupancy or use of an
      involved Property. 13 Require the consent of a majority of all parties upon
      cost sharing, except in emergencies, before actions are taken for system maintenance,
      replacement, or improvement. 14 Require that any necessary replacement or improvement
      of a system element(s) will at least restore original system performance. 15
      Specify required cost sharing for: • the energy supply for the well pump; •
      system maintenance, including repairs, testing, inspection, and disinfection;
      • system component replacement due to wear, obsolescence, incrustation, or corrosion;
      and • system improvement to increase the service life of a material or component
      to restore well yield or to provide necessary system protection. 16 Specify
      that no party is responsible for unilaterally incurred shared well debts of
      another party, except for correction of emergency situations. Emergency correction
      costs must be equally shared. 17 Require that each party be responsible for:
      • prompt repair of any detected leak in this water service line or plumbing
      system; • repair costs to correct system damage caused by a resident or guest
      at their Property; and • necessary repair or replacement of the service line
      connecting the system to the dwelling. 18 Require equal sharing of repair costs
      for system damage caused by persons other than a resident or guest at a Property
      sharing the well. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property Handbook
      4000.1 609 Last Revised: 11/26/2025 Item Provisions that must be reflected in
      any acceptable shared well agreement include the following: 19 Ensure equal
      sharing of costs for abandoning all or part of the shared system so that contamination
      of ground water or other hazards will be avoided. 20 Ensure prompt collection
      from all parties and prompt payment of system operation, maintenance, replacement,
      or improvement costs. 21 Specify that the recorded agreement may not be amended
      during the term of a federally-insured or -guaranteed Mortgage on any Property
      served, except as provided in items 5 and 11 above. 22 Provide for binding arbitration
      of any dispute or impasse between parties with regard to the system or terms
      of agreement. Binding arbitration must be through the American Arbitration Association
      or a similar body and may be initiated at any time by any party to the agreement.
      Parties to the agreement must equally share arbitration costs. (ii) Required
      Documentation The Mortgagee must obtain a valid water test from the local health
      authority or a lab qualified to conduct water testing in the jurisdictional
      state or local authority. When a well test is required, the report may not be
      more than 180 Days old from the Disbursement Date. (16) Individual Residential
      Water Purification Systems (a) Definition An Individual Residential Water Purification
      System refers to equipment, either point-of-entry or point-of-use, installed
      on Properties that otherwise do not have access to a continuous supply of safe
      and potable water. (b) Standard If a Property does not have access to a continuous
      supply of safe and potable water without the use of a water purification system,
      the Mortgagee must ensure that the Property has an individual residential water
      purification system as well as a service contract for the ongoing maintenance
      of the system, a plan approved by the local or state health authority. (i) Approved
      Equipment for Individual Residential Water Purification Systems Water purification
      equipment must be approved by a nationally recognized testing laboratory acceptable
      to the local or state health authority. The II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property
      Handbook 4000.1 610 Last Revised: 11/26/2025 Mortgagee must obtain a certification
      from a local or state health authority which certifies that: • A point-of-entry
      or point-of-use water purification system is on the Property. If the system
      employs point-of-use equipment, the purification system must be employed on
      each water supply source (faucet) serving the Property. Where point-of-entry
      systems are used, separate water supply systems carrying untreated water for
      flushing toilets may be constructed. • The system is sufficient to ensure an
      uninterrupted supply of safe and potable water adequate to meet household needs.
      • The water supply, when treated by the equipment, meets the requirements of
      the local or state health authority, and has been determined to meet local or
      state quality standards for drinking water. If neither state nor local standards
      are applicable, then quality must be determined in accordance with standards
      set by the EPA pursuant to the Safe Drinking Water Act in 40 CFR Parts 141–142.
      • A plan exists that provides for the monitoring, servicing, maintenance, and
      replacement of the water equipment, and the plan meets the service contract
      requirements. (ii) Borrower Notice of Water Purification System The Mortgagee
      must provide written notification to the Borrower that the Property has a hazardous
      water supply that requires treatment in order to remain safe and acceptable
      for human consumption. The notification to the Borrower must identify specific
      contaminants in the water supply serving the Property, and the related health
      hazard arising from the presence of those contaminants. The Mortgagee must ensure
      that the Borrower has received a written estimate of the maintenance and replacement
      costs of the equipment necessary to ensure continuous safe drinking water. (iii)Service
      Contract for Individual Residential Water Purification Systems Before mortgage
      closing, the Mortgagee must ensure that the Borrower has entered into a service
      contract with an organization or individual specifically approved by the local
      or state health authority to carry out the provisions of the required plan for
      the servicing, maintenance, repair, and replacement of the water purification
      equipment. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured
      Housing Programs Reverse Mortgages 4. Underwriting the Property Handbook 4000.1
      611 Last Revised: 11/26/2025 (iv) Approved Plan for Individual Residential Water
      Purification Systems An approved plan is a contract entered into by the Borrower
      and Mortgagee and approved by the local or state health authority, and that
      sets out conditions as described below that must be met by the parties as a
      condition to insurance of the HECM by HUD. The plan must set forth the respective
      responsibilities to be assumed by the Borrower and the Mortgagee, as well as
      the other entities who will implement the plan, such as the health authority
      and the service contractor. In particular: • The plan must set out the responsibilities
      of the health authority for monitoring and enforcing the performance of the
      service contractor, including any successor contractor that the health authority
      may later have occasion to name. By its approval of the plan, the health authority
      documents its acceptance of these responsibilities, and the plan should so indicate.
      • The plan must provide for the monitoring of the operation of the water purification
      equipment, as well as for servicing (including disinfecting) and repairing and
      replacing the system as frequently as necessary, taking into consideration the
      system’s design, anticipated use, and the type and level of contaminants present.
      Installation, servicing, repair, and replacement of the water purification system
      must be performed by an individual or organization approved for this purpose
      by the local or state health authority and identified in the plan. The plan
      must refer to specific terms and conditions of the required service contract.
      • Under the plan, responsibility for monitoring the performance of the service
      contractor and for ensuring that the water purification system is properly serviced,
      repaired, and replaced rests with the local or state health authority that approved
      the plan. The plan must confer on the health authority all powers necessary
      to effect compliance by the service contractor. The health authority’s powers
      must include the authority to notify the Borrower of any noncompliance by the
      service contractor. The plan must provide that upon any notification of noncompliance
      received from the health authority, the Borrower may discharge the service contractor
      for cause and appoint a successor organization or individual as service contractor.
      • The Mortgagee must ensure that any plan developed in accordance with this
      section must provide that an analysis of the water supply must be obtained from
      the local or state health authority no less frequently than annually, but more
      frequently if determined at any time to be necessary by the health authority
      or by the service contractor. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property
      Handbook 4000.1 612 Last Revised: 11/26/2025 The plan must provide that if the
      dwelling served by the water purification system is refinanced, or is sold or
      otherwise transferred with a HUD- insured Mortgage, the plan will: • continue
      in full force and effect; • impose an obligation on the Borrower to notify any
      subsequent purchaser or transferee of the necessity for the water purification
      system and for its proper maintenance; and • require the Borrower to furnish
      the purchaser with a copy of the plan before any sales contract is signed. (c)
      Required Documentation (i) Borrower Notice of Water Purification System A copy
      of the notification statement (including cost estimates), dated before the date
      of the sales contract and signed by the prospective Borrower to acknowledge
      its receipt, must accompany the submission for insurance endorsement. If a sales
      contract is signed in advance of the disclosure required by this paragraph,
      an addendum must be executed after the information is provided to the prospective
      Borrower and after they have acknowledged receipt of the disclosure. (ii) Borrower’s
      Certification of Water Purification System At the time the application is signed,
      the Borrower must sign a certification acknowledging that the Property has a
      water purification system that must be maintained. (iii)Approved Plan for Individual
      Residential Water Purification Systems The Mortgagee must ensure a copy of the
      approved plan is provided to HUD. (iv) Service Contract for Individual Residential
      Water Purification Systems The Mortgagee must ensure a copy of the service contract
      signed by the Borrower is provided to HUD. (v) Water Purification Equipment
      Rider for Individual Residential Water Purification Systems The Mortgagee must
      ensure a copy of the Water Purification Equipment Rider is provided to HUD.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing
      Programs Reverse Mortgages 4. Underwriting the Property Handbook 4000.1 613
      Last Revised: 11/26/2025 (17) Sewage System The Mortgagee must confirm that
      a connection is made to a public or community sewage disposal system whenever
      feasible and available at a reasonable cost. If connection costs to the public
      or community system are not reasonable, the existing Onsite Sewage Disposal
      Systems are acceptable provided they are functioning properly and meet the requirements
      of the local health department. When the Onsite Sewage Disposal System is not
      sufficient and an off-site system is available, the Mortgagee must confirm connection
      to an off-site sewage system. When the Onsite Sewage Disposal System is not
      sufficient and an off-site system is not available, the Mortgagee must reject
      the Property unless the Onsite Sewage Disposal System is repaired or replaced
      and complies with local health department standards. (18) Termites The Mortgagee
      must confirm that the Property is free of wood destroying insects and organisms.
      If the appraisal is made subject to inspection by a qualified pest control specialist,
      the Mortgagee must obtain such inspection and evidence of any required treatment
      to confirm the Property is free of wood destroying insects and organisms. Soil
      poisoning is an unacceptable method for treating termites unless the Mortgagee
      obtains satisfactory assurance that the treatment will not endanger the quality
      of the water supply. (19) Special Airport Hazards If a Property is Existing
      Construction and is located within Runway Clear Zones (also known as Runway
      Protection Zones) at civil airports or within Clear Zones at military airfields,
      the Mortgagee must obtain a Borrower’s acknowledgment of the hazard. Properties
      located in Accident Potential Zone 1 (APZ 1) at military airfields may be eligible
      for FHA mortgage insurance provided that the Mortgagee determines that the Property
      complies with Department of Defense guidelines. (C) Minimum Required Repairs
      When the appraisal report or inspection from a qualified entity indicates that
      repairs are required to make the Property meet HUD’s MPR, the Mortgagee must
      comply with Repair Requirements. Where major property deficiencies threaten
      the health and safety of the homeowner and/or jeopardize the soundness and security
      of the Property, all repairs must be completed prior to closing. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse
      Mortgages 4. Underwriting the Property Handbook 4000.1 614 Last Revised: 11/26/2025
      If repairs for the HECM Property can be completed after closing, the Mortgagee
      may establish a Set-Aside account in accordance with HECM Repair Set-Aside Requirements.
      (1) Estimate of Required Repairs An estimate of the cost of required repairs
      must be provided by the Appraiser. If the Appraiser cannot determine that a
      Property meets HUD’s MPR or MPS, an inspection by a qualified individual or
      entity may be required. For more information, see Inspection by a Qualified
      Individual or Entity. The Borrower may obtain the services of a general contractor
      to complete the repairs. (2) Repair Set-Aside Requirements (a) Definition Repair
      Set-Aside refers to an amount withheld from the HECM proceeds to fund repairs
      required to bring the mortgaged Property into compliance with Minimum Property
      Standards (MPS). (b) Standard The Borrower must establish a Repair Set-Aside
      equal to 150 percent of the cost of the repairs, plus the repair administration
      fee, when the required repairs will be completed after closing. The Mortgagee
      may charge a repair administration fee for this agreement not to exceed the
      greater of $50 or 1 ½ percent of the amount advanced for repairs. This fee is
      paid to the Mortgagee and is independent of the fees paid by the Borrower for
      compliance inspections. HECM proceeds placed in a Repair Set-Aside must not
      be held in an escrow account. The Borrower must complete the required repairs
      in a satisfactory manner, within the time frame specified in the Repair Rider,
      but not to exceed 12 months from the date of closing. The Borrower may have
      the repairs completed with the intention of paying the contractors with HECM
      proceeds, Borrower funds, or a combination of HECM proceeds and Borrower funds.
      However, any amounts owed must be paid at closing and all mechanic’s liens removed
      at closing. Any amount owed must not exceed the Initial Disbursement Limit or
      Borrower’s Advance. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title
      II Insured Housing Programs Reverse Mortgages 4. Underwriting the Property Handbook
      4000.1 615 Last Revised: 11/26/2025 (3) Required Repairs Estimated to Cost No
      More Than 15 Percent of Maximum Claim Amount The Borrower may complete the required
      repairs after closing when the estimated repairs cost no more than 15 percent
      of the MCA using a Repair Set-Aside. (4) Required Repairs Estimated to Exceed
      15 Percent of the Maximum Claim Amount The Borrower must complete the required
      repairs before closing when the estimated repair cost exceeds 15 percent of
      the MCA. The Mortgagee must include required repairs on form HUD-92800.5B, Conditional
      Commitment Direct Endorsement Statement of Appraised Value, as a condition of
      closing. (D) Leased Equipment The Mortgagee must ensure that the Property Value
      does not include the value of any equipment, including an energy system, that
      is not fully owned by the Borrower. The Mortgagee must review the terms of the
      lease on any equipment to ensure they do not contain any unacceptable Legal
      Restrictions on Conveyance (Free Assumability). (E) Appraisal Review The Mortgagee
      must review the appraisal and ensure that it is complete, accurate, and provides
      a credible analysis of the marketability and value of the Property. When there
      are multiple appraisals, the underwriter must confirm the appraisal selected
      by the HECM collateral risk assessment is used to complete form HUD- 92800.5B.
      (F) Quality of Appraisal The Mortgagee must evaluate the appraisal and ensure
      it complies with the requirements in Valuation and Reporting Protocols, and
      any additional appraisal requirements that are specific to the subject Property.
      (G) Opinion of Market Value The Mortgagee must ensure the Market Value of the
      Property is sufficient to adequately secure the FHA-insured HECM. (H) Reconsideration
      of Value The underwriter may request a reconsideration of value when the Appraiser
      did not consider information that was relevant on the effective date of the
      appraisal. The underwriter must provide the Appraiser with all relevant data
      that is necessary for a reconsideration of value. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      B. Title II Insured Housing Programs Reverse Mortgages 5. Performing the Financial
      Assessment of the Borrower Handbook 4000.1 616 Last Revised: 11/26/2025 The
      Appraiser may charge an additional fee if the relevant data was not available
      on the effective date of the appraisal. If the unavailability of data is not
      the fault of the Borrower, the Borrower must not be held responsible for the
      additional costs. The effective date of the appraisal is the date the Appraiser
      inspected the Property.'
  judgment: false
