Does FHA require property re-inspections for loans pending closing or insuring in Disaster Areas?

All Properties with pending mortgages or endorsements in areas under a Presidentially-Declared Major Disaster Area (PDMDA) designated for individual assistance must have a damage inspection report that identifies and quantifies any dwelling damage. The damage inspection report must be completed by an FHA Roster Appraiser even if the inspection shows no damage to the property, and the report must be dated after the Incident Period (as defined by the Federal Emergency Management Agency - FEMA) or 14 days from the Incident Period start date, whichever is earlier.  If the effective date of the appraisal is on or after the date required above for an inspection, a separate damage inspection report is not necessary.

Streamline Refinances are allowed to proceed to closing and/or endorsement without any additional requirements.

Damage inspections should be completed by the original Appraiser.  However, if the original Appraiser is not available, another FHA Roster Appraiser in good standing with geographic competence in the affected market may be used. If the Mortgagee uses a different Appraiser to inspect the property, the Appraiser performing the damage inspection must be provided with a complete copy of the original appraisal.

All damage must be repaired by licensed contractors or per local jurisdictional requirements. All damage, regardless of amount, must be repaired and the Property restored to pre-loss condition with appropriate and applicable documentation.

Inspection and repair escrow requirements can be found in Handbook 4000.1, Section II.A.7.c. available at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

FEMA Disaster Declarations located at:    
 
https://www.fema.gov/disasters 

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-01958