FHA Risk Assessment & Mitigation 3 — Questions and Answers
Question 1: Under FHA guidelines, what minimum remaining economic life must a property have relative to the mortgage term?
- The remaining economic life must equal or exceed the mortgage term (Correct answer)
- The remaining economic life must be at least 10 years regardless of loan term
- There is no minimum remaining economic life requirement
- The remaining economic life must exceed the mortgage term by five years
Correct answer: The remaining economic life must equal or exceed the mortgage term
FHA requires the appraiser to estimate remaining economic life and confirm it is at least equal to the mortgage term to ensure the collateral will support the loan.
Question 2: When appraising a manufactured home for FHA financing, which foundation requirement must be met?
- A poured concrete perimeter foundation is required in all states
- The home must be on a permanent foundation per the HUD Permanent Foundations Guide for Manufactured Housing (Correct answer)
- Any foundation type is acceptable if installed by a licensed contractor
- The home must be converted to real property only in states with titles
Correct answer: The home must be on a permanent foundation per the HUD Permanent Foundations Guide for Manufactured Housing
FHA requires manufactured homes to be on a permanent foundation that meets HUD's Permanent Foundations Guide, and an engineer certification is typically required.
Question 3: An appraiser discovers that a property is located within 300 feet of a former dry-cleaning facility. What risk must be considered?
- Noise pollution from commercial equipment
- Soil and groundwater contamination from dry-cleaning solvents such as PCE/TCE (Correct answer)
- Increased traffic affecting ingress and egress
- Zoning nonconformity due to industrial proximity
Correct answer: Soil and groundwater contamination from dry-cleaning solvents such as PCE/TCE
Dry-cleaning facilities commonly use perchloroethylene (PCE) and other chlorinated solvents that can contaminate soil and groundwater, posing environmental and health risks.
Question 4: What is the FHA appraiser's responsibility when a property has a private well as the sole water source?
- Report the well location only
- Require water quality testing that meets EPA safe drinking water standards unless waived by the lender (Correct answer)
- Automatically decline the appraisal since municipal water is required
- Note it only if the well is within 50 feet of a septic system
Correct answer: Require water quality testing that meets EPA safe drinking water standards unless waived by the lender
FHA requires water quality testing for private wells to ensure the water meets EPA standards for potability, protecting the health of future occupants.
Question 5: How should an FHA appraiser handle a property where the septic system was recently pumped but shows signs of failure such as surfacing effluent?
- Accept the recent pumping as evidence the system is functional
- Flag the system as a required repair and recommend inspection by a licensed septic professional (Correct answer)
- Report no issue since pumping resets the system condition
- Note it only in the addendum without affecting the as-is value
Correct answer: Flag the system as a required repair and recommend inspection by a licensed septic professional
Surfacing effluent is a clear sign of septic failure; FHA requires the system to be functional, and a professional inspection must be completed before closing.
Question 6: A home's crawl space has standing water and visible mold growth. Under FHA guidelines, this condition is classified as:
- A cosmetic issue that does not require repair
- A health and safety hazard requiring remediation before loan closing (Correct answer)
- An adverse condition reported only if the buyer requests a home inspection
- A deferred maintenance item disclosed in the addendum
Correct answer: A health and safety hazard requiring remediation before loan closing
Standing water and mold in a crawl space constitute a health and safety hazard under FHA Minimum Property Requirements, requiring remediation prior to FHA loan closing.
Question 7: Which statement best describes the FHA appraiser's role regarding radon gas?
- Appraisers must test for radon in all FHA appraisals
- Appraisers should recommend radon testing if the property is in a high-risk zone and evidence of mitigation is absent (Correct answer)
- Radon is not within the scope of an FHA appraisal
- Appraisers must install radon mitigation systems before closing
Correct answer: Appraisers should recommend radon testing if the property is in a high-risk zone and evidence of mitigation is absent
FHA appraisers are expected to be aware of radon risk zones and recommend testing when indicators suggest elevated risk, though testing is not automatically required for all properties.
FHA Risk Assessment & Mitigation 3
Under FHA guidelines, what minimum remaining economic life must a property have relative to the mortgage term?