Results 1 to 11 of 11
  1. #1
    Join Date
    Mar 2007
    Location
    Spring City/Surrounding Philadelphia area
    Posts
    3,473

    Default From Hero to Zero

    I received a message from an apparently perturbed client of mine tonight. Back when I did the inspection, she and her father (who gave me a tip) were very appreciative of what they described as a very thorough job and my attention to detail. Fast forward one month and things seem to have changed. She said she is getting her mortgage through Rural Housing Development (?) and they are requiring her to fix every item I listed as defective or in need of some type of repair in the report. Like many of us do, I recommend in the report that all repairs be completed by licensed and certified professionals in that specific field of expertise. Well, they are telling her that everybody that does the work needs to be licensed. However, some things in PA such as general contractors don't have licenses. She apparently is having trouble finding a licensed chimney professional among other things and is trying to put it back on me to tell her who to call or change the verbiage in my report (changing the report is not going to happen). The agitation in her voice was obvious and it seems she is taking her frustration with the lending institution out on me.

    She was particularly pointed in her message about saying "I required soil testing done because of the oil that leaked from tanks in the basement". One, I never REQUIRED anything or used that verbiage. The two oil tanks in the basement both leaked oil in a room that is exposed earth floor and has no slab. Knowing what I have heard about the way the EPA views buried oil tanks and contaminated soil, I said in my report that testing may be necessary if it is determined the leaking oil has contaminated the soil. Never once did I state REQUIRED. But the lender is requiring her to get the soil tested.

    She is in the unfortunate situation of going through the most stringent lender I have ever heard of. I know she has no money to spend on repairs as she didn't even want to spend $85 for a termite inspection. Her agent said she has no money either. How she's buying the house is beyond me.

    Similar Threads:
    2018 ASHI InspectionWorld

  2. #2
    Join Date
    Mar 2007
    Location
    Plano, Texas
    Posts
    4,170

    Default Re: From Hero to Zero

    Lesson #1
    Tell your clients - NEVER show the report to a lender.
    Lesson #2
    If the lender FORCES the buyer to show them proof of an inspection, don't show the lender the report, show them the receipt as proof that they got an inspection.
    Lesson #3
    Tell the client that the lender may require all sorts of acrobatics if they see the report.
    Lesson #4
    Realize that this is good (in the long run) for your client since they will have everything repaired.

    Jim Luttrall
    www.MrInspector.net
    Plano, Texas

  3. #3
    Join Date
    Mar 2007
    Location
    Ormond Beach, Florida
    Posts
    26,252

    Default Re: From Hero to Zero

    Quote Originally Posted by Jim Luttrall View Post
    Lesson #4
    Realize that this is good (in the long run) for your client since they will have everything repaired.

    In this case, the client may end up homeless, as there is apparently no money for the repairs or anything, there is no good in that.

    Sounds to me like she needs to try to find a different mortgage source.

    Wait, if everything was "repaired" the house would be worth more, that means she can borrow enough more to pay for all of the repairs and finance that cost out over the next 30 years. It may be her only hope.

    Jerry Peck, Construction / Litigation Consultant
    Construction Litigation Consultants, LLC ( www.ConstructionLitigationConsultants.com )
    www.AskCodeMan.com

  4. #4
    Join Date
    Mar 2007
    Location
    Spring City/Surrounding Philadelphia area
    Posts
    3,473

    Default Re: From Hero to Zero

    I truly feel bad for her. She is single mom with 3 school-aged kids and at least one of them goes to my son's school.

    I've never heard of a lender placing such demands on somebody as a condition of the loan. I can understand them wanting some things fixed but everything? It's very unfortunate for my client as I know she wants the house and the space it will provide for her kids. But the lender is in control of the money and they can place whatever conditions on it they want.


  5. #5
    Kevin Barre's Avatar
    Kevin Barre Guest

    Default Re: From Hero to Zero

    Nick--
    In the "good old days" lenders didn't care about the inspection report. All they cared about was the credit rating of the applicant. Hell, sometimes they didn't even care about that. But now, after the give anyone a loan debacle, the rules are tighter. I haven't heard of a lender requiring an inspection, or even looking at it under normal circumstances. But given the vast number of foreclosures lately it's easy to imagine that they don't want to get a property back that is full of deficiencies...even if the borrower is currently credit worthy.


  6. #6
    Join Date
    Jul 2008
    Location
    Snowbird (this means I'm retired and migrate between locations), FL/MI
    Posts
    4,086

    Default Re: From Hero to Zero

    Rural Housing Development Loans - Usually, just another name for a Section 502 program loan (assuming single family home).

    Section 502 program loan sources:

    1. Any State housing agency;
    2. Lenders approved by:
    • HUD for submission of applications for Federal Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities;
    • the U.S. Veterans Administration as a qualified mortgagee;
    • Fannie Mae for participation in family mortgage loans;
    • Freddie Mac for participation in family mortgage loans;
    3. Any FCS (Farm Credit System) institution with direct lending authority;
    4. Any lender participating in other USDA Rural Development and/or Farm Service Agency guaranteed loan programs


    Same Federal Section 502 just another underwriter/guarantor - USDA Rural Development and/or Farm Service Agency.


    Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.


    Eligibility:Applicants for loans may have an income of up to 115% of the median income for the area. Area income limits for this program are .... Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.

    There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.


    Standards:Under the Section 502 program, housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.

    Approval:Rural Development officials have the authority to approve most Section 502 loan guarantee requests.

    Dollars to donuts she submitted your Buyer's provisional offer, HI report as the "HUD"/FHA type report - in this case its the USDA not HUD.

    Oops any referance to deficiencies/standards that don't apply to the subject property or oops on buyer for sharing your report.

    Were you aware that you were employed to do an inspection for a Section 502 program loan? Do you do other rehabillitation lending inspections?

    FYI: USDA Rural Development - Rural Housing Service Home Page



  7. #7
    Join Date
    Mar 2007
    Location
    Oregon
    Posts
    2,365

    Default Re: From Hero to Zero

    I had this exact situation once. It's never pretty.... the main problem is a gross misunderstanding on the lender's part as to what a home inspection is and even what a house is. This clown just kept telling me he needed a completley 'clear' report on a 1970's house. And, until I stated in writing that the house was completely free of any defect they wouldn't fund the loan.

    In the end, the buyer found another lender. It's an unfortunate situation for the buyer but it's in no way your problem. The fact that you feel bad shows you care which is more than a lot would even do. I get the same way with clients sometimes. It's hard to not feel bad for a single mom getting jerked around by a lender. In the end, she'll see it's not your fault.


  8. #8
    Join Date
    Mar 2007
    Location
    Plano, Texas
    Posts
    4,170

    Default Re: From Hero to Zero

    Quote Originally Posted by Jerry Peck View Post
    In this case, the client may end up homeless, as there is apparently no money for the repairs or anything, there is no good in that.
    Notice I stipulated (in the long run) but realize, you have to get past the short run to get to the long term results.


    Editorial Notice!
    This goes back to part of what got us into this housing crisis in the first place though, not everyone can afford a house. That is not a happy and socially acceptable thought, but there IS more to owning a house that just mortgage, taxes, and insurance...
    Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.
    If you can't afford a safe house and reasonable upkeep expenses, you will either loose the house to foreclosure, fire, rot, or some other deferred maintenance issue.

    I feel for the woman, but maybe a house in better condition would be a better choice for them.

    Jim Luttrall
    www.MrInspector.net
    Plano, Texas

  9. #9
    Ted Menelly's Avatar
    Ted Menelly Guest

    Default Re: From Hero to Zero

    Quote Originally Posted by Matt Fellman View Post
    I had this exact situation once. It's never pretty.... the main problem is a gross misunderstanding on the lender's part as to what a home inspection is and even what a house is. This clown just kept telling me he needed a completley 'clear' report on a 1970's house. And, until I stated in writing that the house was completely free of any defect they wouldn't fund the loan.

    In the end, the buyer found another lender. It's an unfortunate situation for the buyer but it's in no way your problem. The fact that you feel bad shows you care which is more than a lot would even do. I get the same way with clients sometimes. It's hard to not feel bad for a single mom getting jerked around by a lender. In the end, she'll see it's not your fault.
    I just wrote a house up beyond the point of being condemned because number one it was and number 2 USDA would not give them a loan on a home where they already owned one. They had to prove the home could not be sold to anyone trying to obtain a loan and a cash buyer had to come along to sell it.

    They are not messing around lately when lending money.


  10. #10
    Join Date
    Jul 2008
    Location
    Snowbird (this means I'm retired and migrate between locations), FL/MI
    Posts
    4,086

    Default Re: From Hero to Zero

    Quote Originally Posted by Nick Ostrowski View Post
    She said she is getting her mortgage through Rural Housing Development (?) and they are requiring her to fix every item I listed as defective or in need of some type of repair in the report.
    ....

    She is in the unfortunate situation of going through the most stringent lender I have ever heard of. I know she has no money to spend on repairs as she didn't even want to spend $85 for a termite inspection. Her agent said she has no money either. How she's buying the house is beyond me.
    I should have mentioned there are also 502 Direct lending programs for those of even more modest incomes, which are tied in to direct monthly payment subsidies.

    Very low income is below 50 percent of the area median income. Payment subsidy is available to applicants to enhance repayment ability. For those with incomes below 60 percent of AMI and cannot affort 33-year terms they can get Loan terms for 38 years. Otherwise loans are for up to 33 year terms.

    The Standards for direct HCFP Sect 502, housing must be modest in size, design and cost. Modest housing is property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features. Houses still must meet the locally adopted voluntary national model building code applicable and HCFP thermal and site standards.

    Rural Development officials should make a decision within 30 days of the Rural Development office's receipt of the application.

    7CFR Part 3550 and HB-1-3550.

    Here's a direct link to chapter 5 (Property Requirements) of HB-1-3550:
    http://www.rurdev.usda.gov/regs/hand...50/1chap05.pdf

    HTH,
    H.G.

    Last edited by H.G. Watson, Sr.; 04-03-2009 at 09:32 PM.

  11. #11
    Join Date
    Mar 2007
    Location
    Spring City/Surrounding Philadelphia area
    Posts
    3,473

    Default Re: From Hero to Zero

    Quote Originally Posted by H.G. Watson, Sr. View Post
    Were you aware that you were employed to do an inspection for a Section 502 program loan? Do you do other rehabillitation lending inspections? [/SIZE][/FONT]

    FYI: USDA Rural Development - Rural Housing Service Home Page
    [/SIZE][/FONT]
    No and no.


Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •