Originally Posted By: gromicko
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On February 21, 2004, thirty days after their January announcement, the U.S. Department of Housing and Urban Development will begin requiring two new documents to be distributed to every applicant for an FHA mortgage.
The first document, revised HUD Form 92564-CN is entitled, ?For Your Protection: Get a Home Inspection.? In addition to explaining to the mortgagee why a buyer needs a home inspection and clarifying the distinction between a home inspection and an appraisal, this form now clearly discloses that ?The U.S. Environmental Protection Agency and the Surgeon General have recommended that ALL houses should be tested for radon? and explains, ?As with a home inspection, if you decide to test for radon, you may do so before signing your contract, or you may do so after signing the contract as long as your contract states the sale of the home depends on your satisfaction with the results of the radon test.?
At the bottom of the document, the Mortgagee must initial whether he has chosen or not chosen to have a home inspection performed and provide date and signature documenting that he has carefully read the notice, understands the importance of an independent inspection and that FHA will not perform a home inspection nor guarantee the price or condition of the property.
The second document, ?HUD Mortgagee Letter 2004-04? fully explains that all mortgages will be required to submit the signed form above and proudly proclaims, ?The Department of Housing and Urban Development through FHA continues to be responsive to public safety concerns by informing Mortgagees and borrowers of the Environmental Protection Agency and Surgeon General?s recommendation for radon testing. The revised form incorporates radon testing as one of the components of a home inspection.? The letter goes on to reiterate that the signed form MUST be submitted to FHA with the lender?s request for insurance endorsement.
Based on new reports from the National Academy of Sciences, the EPA now estimates 21,000 Americans die of radon induced lung cancer every year. The American Association of Radon Scientists and Technologists (AARST) estimate 10 million homes and 38 million Americans are at risk from dangerous radon exposure.
While the American Radon Policy Coalition (ARPC) continues to assert that the Code of Federal Regulations written for HUD compliance with the National Environmental Policy Act requires HUD to mandate a radon test for Federal mortgage insurance eligibility, these new notices reveal HUD?s growing concern over liability regarding the radon issue.
ARPC is a group of organizations, scientists, educators, oncologists and individuals who have joined together to strengthen public radon policy and advocate for effective radon action. Their members include AARST, the American Lung Association (ALA), the National Environmental Health Association (NEHA), the National Housing Law Project (NHLP), the Guild Law Center for Economic and Social Justice and the Alliance For Healthy Homes.
ARPC has been actively pressuring HUD on the issue for the last 18 months as members submitted hundreds of letters to Congress complaining of HUD?s failure to comply with existing federal radon laws. The organization recently distributed a twelve-minute video presentation featuring interviews with prominent oncologists and terminal radon victims to every U.S. Congressional representative. The film asserts HUD?s willful noncompliance with NEPA and the 1988 Radon Abatement Act is causing thousands of preventable lung cancer deaths each year.
The McKinney Amendments to the Radon Abatement Act required HUD to test all government-subsidized housing. Fifteen years after passage, the housing covered by the legislation has still not been tested.
?In light of HUD?s poor track record on radon,? says AARST Executive Director Peter Hendrick, ?the HUD Mortgagee notices are at least a moral victory.
WHAT THE NEW HUD MORTGAGEE NOTICES MEAN TO HOME INSPECTORS
Some legal advisors have long recommended that professional home inspectors require a signed acknowledgement that the homebuyer was presented with written disclosure of EPA?s radon test recommendation. The argument has been that since the inspector is aware the recommendation applies to ALL homebuyers, he has a duty to disclose it. The new HUD Mortgage Letter and Form may add more importance to the inspector obtaining a signed radon recommendation disclosure statement from every client.
First, assume that other Government Service Entities (FANNIE and FREDDIE) as well as traditional mortgage underwriters are going to follow HUD?s lead in order to obtain conforming loan packages that can easily be bought or sold.
Second, HUD Form 92564-CN clearly recommends that for their protection, all purchasers should get a home inspection. According to the Mortgagee Letter, the form ?incorporates radon testing as one of the components of a home inspection.? The Mortgagee is to initial by their choice to have or not to have a home inspection; it does not provide the same choice for a radon test. To avoid any inference that the inspection included a radon test in the event the purchaser declined, it may be imperative for the inspector to obtain a signed radon disclosure that acknowledges that fact.
Another less known factor is a HUD regulation requiring the use of ?current techniques by qualified professionals? when performing environmental testing. An inspector performing a radon test when he is not certified or licensed to perform radon testing may leave everyone open to potential liability.
WHAT THE NEW HUD MORTGAGEE NOTICES MEAN TO REAL ESTATE AGENTS
The obvious ramification is agents may be even more liable for persuading the buyer from performing a radon test because, ?we don?t have any radon in this neighborhood,? or ?this house doesn?t have a basement? or whatever excuse they can provide to avoid a perceived hurdle to closing the deal. HUD is requiring their Form to be signed and dated prior to the contract being signed and clearly recommends that all houses be tested for radon.
A common practice is for the home inspector to carry E&O insurance that also protects the agent that referred him in the event of a claim. Industry leaders are speculating how the new HUD Mortgagee notices will impact the underwriter?s willingness to protect an agent or inspector without signed documentation that the purchaser was duly notified that all houses should be tested for radon - regardless of location or construction characteristics
A number of real estate brokers are now reconsidering language in the offer to purchase concerning all inspections, especially when the buyer has been expected to accept or decline such rights at the time the offer is signed. If the purchaser declines a radon test as part of the inspection, adding verbiage that the decision was not unduly influenced by any party to the transaction may be wise. Simple acknowledgement of being informed of EPA and HUD recommendations and the buyer?s right of inspection may be preferable since it would be easy for an attorney to argue that any right declined was improperly influenced by the agent.
by Dallas Jones