Comment Submitted by NH Housing Finance Authority

Re: HUD Docket No. FR-6609-N-01 Thank you for the opportunity to provide comments on MPRs as they apply to FHA's Single Family mortgage insurance programs. The following recommendations are offered to improve clarity, consistency, and efficiency while maintaining risk management. Most recommendations relate to questions 3-5 and 9 of the Specific Information Requested section. 1. Standardization and Objectivity in Property Requirements Greater consistency in appraisal standards would be helpful to reduce subjectivity and ensure uniform application: - Handrails and Safety Features: Clearly defined, uniform criteria should be established for when railings and handrails are required, rather than relying on individual appraiser discretion. - Pre-1978 Structures: Additional guidance should be provided to appraisers for evaluating properties and outbuildings constructed prior to 1978 to promote objective and consistent reporting. - Post-1978 Properties: Appraisers should be afforded greater latitude for properties built after 1978, which typically present fewer material concerns. - Well and Septic Setbacks: Where state or local authorities have approved well and septic system setbacks, those determinations should supersede FHA requirements. If setbacks cannot be verified, a water quality test should suffice as an alternative. 2. Clarification of Repair and Inspection Requirements Current requirements often necessitate repairs and reinspections for issues that are minor or cosmetic: - Cosmetic Deficiencies: Conditions such as peeling or chipping paint, torn screens, minor window issues, or deck paint should not require repair or a final inspection when they do not present health or safety risks. - Minor Repairs Threshold: A a de minimis threshold (e.g., $1,500) should be established, below which repairs do not trigger mandatory completion or reinspection prior to closing. -Roof Condition Assessments: When roofing materials appear to be in sound condition, a roof inspection should not be automatically required due to minor visual issues, such as slight sagging. It is not uncommon in states, such as New Hampshire and others across New England, for homes to be exceptionally old, structurally sound, but otherwise reflecting that they were constructed 100+ years ago. - Outbuildings: Minimum property standards should not automatically extend to detached structures (e.g., garages, sheds, barns), particularly for cosmetic or non-safety-related issues. 3. Appraisal Scope and Property Classification Clarification is needed regarding what constitutes required livable space and acceptable property conditions: - Unfinished Areas: Properties should not be required to finish unfinished areas solely to meet appraisal standards; such areas should simply be excluded from gross living area calculations. - Outbuilding Standards: Evaluation criteria for detached structures should be clearly distinguished from those applied to primary dwellings. 4. Process Efficiency and Market Impact Certain FHA appraisal practices may discourage participation in FHA lending or delay transactions: - Appraisal Portability: Tying appraisals to FHA case numbers and requiring transfer between lenders can create uncertainty and discourage sellers from accepting FHA offers, particularly if valuations are lower than expected. Consider greater flexibility in appraisal use. See also section #5 below. - Remote Final Inspections: Allowing remote or digital final inspections would improve efficiency and reduce delays in the closing process, which can be a significant factor in very rural states like New Hampshire. 5. Alignment with GSE Standards Greater alignment with Fannie Mae and Freddie Mac requirements would reduce complexity and improve adoption: - Water Testing and Filtration: For new construction, eliminate water flow test requirements and align water quality and filtration standards with those of the GSEs. - 90-Day Flip Rule: Consider eliminating the requirement for a second appraisal within the 90-day resale period, or allow acknowledgment without additional valuation requirements. - Interchangeable Appraisals: Standardizing appraisal requirements across FHA and GSEs would allow appraisals to be more readily transferable, improving efficiency for borrowers and lenders. - Condominium and Deed-Restricted Properties: Harmonizing condominium approval requirements and expanding eligibility for deed-restricted communities (e.g., age-restricted housing) would broaden access to FHA financing. Conclusion These recommendations are intended to enhance clarity, reduce unnecessary subjectivity, eliminate non-value-added requirements, and align FHA standards more closely with broader industry practices. This will help improve efficiency, reduce transaction costs, and support continued access to affordable mortgage financing without compromising property safety or soundness. Thank you for your consideration.