Mold-Related Issues and FHA Loans
When it comes to loan approval for a new purchase, rehab loan, or rehab refinance loan, what do borrowers need to know about mold requirements for an FHA appraisal?
FHA Does Not Regulate Mold-Related Issues
The FHA and HUD do not regulate or control guidelines and standards for health issues related to mold. FHA regulations defer to federal, state, or local authority where applicable. If an issue like the presence of mold comes up in the appraisal process, the local health authority and its rules would have an important say on what happens next.
FHA loan rules address environmental issues in general, and it’s safe to assume that mold issues are part of those general guidelines as the presence of mold can affect the resale of the property within the term of the loan where applicable.
Federal Standards for Mold
According to the Environmental Protection Agency’s (EPA) official site, we learn the following about mold and the potential need for sampling:
“Is sampling for mold needed? In most cases, if visible mold growth is present, sampling is unnecessary. Since no EPA or other federal limits have been set for mold or mold spores, sampling cannot be used to check a building’s compliance with federal mold standards.”
According to the EPA, “surface sampling may be useful to determine if an area has been adequately cleaned or remediated”. Furthermore, such sampling for mold should be conducted by professionals and not laypersons. The FHA and HUD rely on such EPA sourcing in addition to local requirements.
Mold in the Home?
What do the FHA loan rules say about mold issues that are revealed by an appraisal? HUD 4000.1 says, “The Appraiser must report known environmental and safety hazards and adverse conditions that may affect the health and safety of the occupants, the Property’s ability to serve as collateral, and the structural soundness of the improvements.”
If mold is present and detected by the FHA appraiser, it’s safe to assume that in such cases, the appraiser would consider recommending corrections/repairs to fix the problem. That said, FHA appraisers are not mold experts and are not required to be.
If you have concerns about the appraisal and a failure to detect mold that you yourself may have observed (or other such circumstances) remember that you have the option (which you should definitely choose) to pay for an independent home inspection that can tell you more about potential problems with the home including moisture and mold issues.
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