REGIONAL OFFICE
NORRIS COTTON FEDERAL BUILDING
275 CHESTNUT STREET
MANCHESTER, NH 03101
May 10, 2002
In Reply Refer to:373/26
LOAN GUARANTY INFORMATION LETTER NO. 26-02-07
TO: LENDERS AND INSPECTORS
SUBJECT: IMPACT OF HUD MORTGAGEE LETTER 2001-27 ON VA REQUIREMENTS
The purpose of this release is to inform lenders and VA compliance inspectors in New England
and New York how the Department of Housing and Urban Development (HUD) Mortgagee
Letter 2001-27, "Pre-Approval Requirements for New construction and an Alternative to the
Inspection Requirements-Single Family Loan Production" affects VA requirements concerning
VA stage inspections of proposed construction and under construction case.
When can the required VA first and second stage inspections be waived in proposed and
under construction cases?
Section 14.03 of the Lender's Handbook allows first and second stage VA inspections to be
waived in proposed or under construction cases, if:
- The property is located in an area where the inspection procedures of the local
building authority are acceptable to HUD;
- A certificate of occupancy for the property is issued by the local building
authority; and
- A third stage (final) inspection of the property is made by a VA-assigned fee
inspector.
In light of HUD Mortgagee Letter 2001-27 how can a lender know whether the property is
located in an area whre the inspection procedures of the local building authority are
acceptable?
Where can we obtain the revised form and what is the effective date?
Although Mortgagee Letter 2001-27 eliminated HUD approval of local jurisdictions for Federal
Housing Administration inspection purposes, HUD continues to accept certificates of occupancy
issued by those jurisdictions. This satisfies the VA requirement stated in (1) above. Unlike
HUD, VA does not require lenders to certify that the property is complete and meets VA
minimum property standards, since the lender must obtain both a certificate of occupancy and a
final VA inspection report for the property.
Will this eliminate the need for VA stage inspections in most areas of New England and
New York?
Since the majority of communities in New England and New York issue certificates of
occupancy, VA first and second stage inspections will be waived in most cases.
How will inspectors know whether or not first and second stage inspections are
required?
Inspectors should be familiar with the communities they cover. If the community issues a
certificate of occupancy or the property will be covered by an acceptable 10 year insurance
backed protection plan, only a final inspection is required.
Are there any changes to other VA requirements proposed or under construction?
Other VA requirements for properties appraised as either "proposed or under construction" or
"new construction", including those pertaining to 10-year insured protection plans, remain
unchanged. Those requirements are outlined in sections 10.09 and 10.08 of the Lender's
Handbook.
Who can you call if there are any questions?
Please call our office at (800) 827-6311, extension 6.
Keith C. Boerner
Loan Guaranty Officer