Removal of the Ten-Year Home Warranty Requirement

Background of Rule The National Housing Act was amended in 1979 to permit FHA to insure mortgages with high LTV ratios (more than 90 percent of the appraised property value) for newly built single-family homes if each of the homes satisfied at least one of the following two conditions: * the dwellin...

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Bibliographic Details
Published in:Cityscape (Washington, D.C.) D.C.), 2021-01, Vol.23 (1), p.299-318
Main Author: McFarlane, Alastair
Format: Article
Language:English
Subjects:
Building codes
Construction
Consumer protection
Consumers
Cost control
Defects
Homeowners
Housing & Economic Recovery Act 2008-US
Impact
Insurance coverage
Mortgage insurance
Purchasing
Third party
Warranties
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Summary:Background of Rule The National Housing Act was amended in 1979 to permit FHA to insure mortgages with high LTV ratios (more than 90 percent of the appraised property value) for newly built single-family homes if each of the homes satisfied at least one of the following two conditions: * the dwelling was approved for mortgage insurance before construction. * the dwelling is covered by a consumer protection plan or warranty plan acceptable to the Secretary and satisfies all requirements which would have been applicable if such dwelling had been approved for mortgage insurance prior to the beginning of construction. If the structure does not meet the applicable building codes and fails to pass inspection by an International Code Council (ICC)-certified inspector, then the warrantor agrees to fix and pay for the defect and restore any component of the home damaged in fulfilling the terms and conditions of the warranty. The combination of construction codes, educated inspectors, building technology, and statutes of repose provide adequate protection for FHA-insured homes against construction defects.2 At the time the original rule was promulgated, long-term warranties were predicted to significantly reduce the risk for FHA; however, requiring long-term warranties is no longer believed to be optimal. [...]party home warranties can also be purchased directly by homebuyers, builders, and title agents.
ISSN:1936-007X
1939-1935