HUD HOC Reference Guide

A: Requiring Reports and Treatment: Wood destroying insects and other organisms can cause serious problems in the wood structural components of a house and may go undetected for a long period of time. FHA requires inspection only if there is evidence of active infestation, if mandated by the state or local jurisdiction, if customary to the area, or at the lender's discretion. Please see: Mortgagee Letter 2005-48 (ML 05-48) for more information.

Based on maps published in the IRC (International Residential Code), CABO One and Two Family Dwelling Code, and/or the US Department of Agriculture's Bulletin 64, the four HUD Homeownership Centers (HOCs) have identified areas of the country were potential damage by termites is considered extremely high. These areas, are called Termite Infestation Probability Zones, a.k.a. TIP Zones, are available as a resource at the TIP zones website. (Please see ML 01-04 for more information.)

1. New Construction: The Department's policy concerning the requirement for a builder's warranty against termite infestation in new homes is outlined in MLs 99-03, 01-04 and 03-11. The Department has determined that if the property meets requirements in the International Residential Code (IRC) by the International Code Council (ICC) on protection against subterranean termites, (specifically Sections R317 and R318) they will satisfy the requirements of HUD's minimum property standards. Acceptable treatment methods for protection include chemical soil treatment, pressure preservatively treated wood, naturally termite resistant wood), bait systems, or any combination of these methods.

New construction is defined as properties processed as proposed construction, under construction and existing less than 1 year old. In those geographic areas favorable to damage from termite or other wood destroying insects, the builder must complete the form HUD-NPCA-99-A, Subterranean Termite Protection Builder's Guarantee, as indicated in MLs 99-03 and ML 01-04, providing a 1-year guarantee and indicating that one of the following accepted treatment methods was used:

1. Bait system, OR
2. Wood (pressure preservative treated wood as outlined in ML 01-04) - Under "Type of Treatment", check the box titled "wood" and add statement "Complies with Mortgagee Letter 2001-04 for use of preservative treated wood", OR
3. Soil (Chemical Soil treatment) - HUD-NPCA-99-B is to be used with form HUD-NPCA-99-A only if the property is treated with a soil termiticide. (The licensed pest control company is responsible for completing form HUD-NPCA-99-B, as appropriate, and providing it to the builder who is responsible for distribution. Please see: ML99-03.) OR
4. Buildings using steel, masonry or concrete building components (with only minor interior wood trim and roof sheathing.) - Under "Type of Treatment" on form the builder is to add in the space to the right of the box titled "Soil" the statement "Masonry (steel, or concrete) construction, no treatment needed. Complies with ML 01-04."

The use of post-construction soil treatment where a chemical termiticide is applied only around the perimeter of the foundation is NOT acceptable.

Note: All chemical soil treatments, bait systems, and chemical wood treatment must be approved by the Environmental Protection Agency (EPA) and applied in accordance with the EPA label instructions.

2. Existing (over 1 year old): (Please see: ML 05-48) Appraisers are to indicate on the appraisal form if there was evidence of infestation of wood boring insects in the house and/or other structures within the legal boundaries of the property.

• Further inspection is required when any of the following apply:
  
  • At the lender's discretion;
  • When it is required by local and/or state laws - FHA does not require the lender to submit evidence or documentation in the case binder that the state or local jurisdiction does or does not require a test or inspection;
  • When it is customary to the area;
  • There is evidence of:
    • Decay
    • Pest infestation
    • Suspicious damage
• When a clear inspection report is required on an existing property seeking FHA mortgage insurance:
  
  • The National Pest Management Association form NPMA-33, Wood Destroying Insect Inspection Report must be completed. Or if the property is located in a state having a mandated wood infestation form, then the state mandated form must be used. At this time the following states have their own mandated form for wood destroying insect infestation and the use of the NPMA-33 is NOT required: Alabama, Arizona, California, Florida, Georgia, Hawaii, Louisiana, Maryland, Mississippi, Nevada, North Carolina, Oklahoma, South Carolina and Texas. When a clear report is required, all improvements within the property lines must be inspected and be free of active infestation. The validity period is 90 days from the initial date of inspection. (Please See ML 95-33. Form NPMA-33 replaced form NPCA-1 effective January 1, 2005).
  • (The use of a bait/monitoring system is acceptable when used in conjunction with an applied liquid chemical treatment.)

3. Condominiums: A condominium is subject to the same inspection requirements as stated in the section titled "Existing (over 1 year old)" The inspection is to include the unit, attached and/or detached garage, and other structures that are a part of the subject.

• If an inspection reveals problems with sections of the condo held in common with other owners a letter from the homeowners association listing the date of scheduled repairs, name of the contractor awarded the work, and acknowledgment that the funds necessary to pay for those repairs have already been budgeted and/or collected should be in the insuring binder.

B: Appraiser's Observations: Appraisers are to observe all areas of the house and other structures/areas within the legal boundaries of the property that have potential for infestation by termites and other wood destroying organisms. Appraisers are to record any condition that might be active infestation.

C: Sectioned Reports and Condition Clearance: The following are guidelines for clearance of termite report conditions in states where section termite reports are provided. On these reports each finding/recommendation will be noted in either Section I or Section II, or the equivalent.

a. Section I: contains items where there is evidence of active infestation, infection or conditions that have resulted in or from infestation or infection.

b. Section II: items are conditions deemed likely to lead to infestation or infection, but where no visible evidence of such was found. The Structural Pest Control Board has advised that Section II items will probably be major items that have not become infestations/infections, but possibly will become in the future.