FHA draft, comments due Nov. 6, 2026FHA’s proposed property rules replace a repair checklist with condition ratings

The draft lists examples of deficiencies consistent with C5 or C6, and examples of “minor needed repairs or cosmetic deferred maintenance” that can be reported “as is” with adjustments. Every card below is one of those listed examples. Decide which side each falls on, then check the draft. Missing handrails and curled roof shingles are both on the lists.

The draft says: “If any portion of the improvements is impacted by one or more deficiencies that are consistent with a C5 or C6 condition rating, the property must be identified with a C5 or C6 condition rating.” The same applies to quality: any portion consistent with Q6 gives the property a Q6. The rating does not average. Tick items below to see how the property’s overall rating responds to the draft’s own examples.

What happens next is a cure path. The report is written subject to the repairs, and the rating reflects the house as it would stand after them. HUD’s draft names two exceptions. A C5 property with incomplete improvements can be cured after closing if it meets the Repair Completion Escrow Requirements, and C5 or C6 deficiencies can be cured after closing within a 203(k) mortgage that meets the program’s requirements.

The same section removes a sentence from II.A.3.a. Today the mortgagee may approve the property only “after the Mortgagee confirms that all defects reported by the Appraiser have been corrected.” HUD labels the edit a clarification, and the draft keeps “When defective conditions exist and correction is not feasible, the Mortgagee must reject the Property.” What replaces the confirmation step is not stated.

This is the chapter that tests the idea that the rating replaces the checklist. Of the 23 removed items, 4 defer to the rating: heating and cooling, roof covering, party or lot-line walls, and defective exterior paint. HUD calls heating and cooling and roof covering “redundant” to the UAD condition guidance, and party or lot-line walls “unnecessary” given it. Twelve fold into broader standards, mostly Onsite Hazards and Nuisances and Environmental, so soil, grading, sinkholes, storage tanks, gas lines and similar hazards stay covered under those headings. HUD’s summary does not name the destination for topography and soil suitability, only “a broader standard.” Two, attic and crawl space observation, give way to the appraiser’s general duty. Five are dropped or relocated: kitchen appliances, perimeter enclosure for manufactured homes, PUD approval, excess land and a section header.

The roof shows what absorption means in practice. The redline shows the current appraiser text asking whether the roof covering prevents entrance of moisture, provides reasonable future utility, durability and economy of maintenance, and has a remaining physical life of at least two years, with the appraisal made subject to a professional roofer’s inspection when it has less. The draft keeps one test: the appraiser notifies the mortgagee if the roof covering “does not prevent entrance of moisture.” It also lists active roof leaks and curled, cupped or missing shingles among C5 and C6 examples, and describes C5 roofing as “significantly worn, cupped or curled but with no apparent active leaks.” A roof near the end of its life with no leak and no curling is a case the draft does not address by name.

Appraisers are affected in four ways. The specific attic and crawl space observation requirements are removed, with the general duty carrying them. Utilities no longer have to be turned on and operated, which HUD says follows VA and industry practice. Kitchen appliance requirements are gone. And “cost to cure” comes out of the defective-conditions language and the repair requirements, while descriptive photographs remain. The draft also adds appraiser protocols for highest and best use: the highest and best use of the property as improved, or as proposed per plans and specifications, must be the present use.

On June 26, the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and MBREA wrote to HUD on the RFI. They supported modernization and wrote that much of the burden comes from “inconsistent interpretation and application of MPR requirements rather than from the standards themselves.” They said appraisers “perform property observations rather than home inspections,” and asked FHA to preserve the appraiser’s role in observing and reporting readily observable conditions, citing refinance and reverse mortgage transactions where an inspection may not occur. They supported repair escrows and holdbacks for non-critical items, with the condition that any post-closing flexibility “should not alter the appraiser’s responsibility to identify and report material property conditions.” They also asked FHA to evaluate whether the attic and crawl space rules were still necessary, and for a framework separating material deficiencies from cosmetic conditions. The draft removes the specific attic and crawl space steps and supplies lists of both kinds of conditions.

The draft and the letter agree on some points and diverge on others. Both keep the safety, soundness and security purpose and the appraiser’s observation duty. The draft goes further than the letter on utilities, appliances and cost to cure, which the letter did not address. Two of the letter’s requests, a return-visit workaround and reliance on seller photographs to clear conditions, are not in the draft text we found; the draft does not say how conditions are cleared.

Lenders and reviewers have four things to settle if the draft becomes final. They can adopt the ratings as FHA writes them, or keep stricter rules on roofs and mechanical systems as overlays. National Mortgage News advises lenders to decide whether FHA’s standards match their own or whether they need overlays. They can set a review test for rating consistency across comparables. They can decide how a cure before closing gets verified, because the draft is silent on it. And they can write panel guidance for the new C4 examples, since that is where appraisers will place borderline files.

HousingWire reports that the Mortgage Bankers Association, the Broker Action Coalition and Community Home Lenders of America urged HUD to address the minimum property requirements and appraisal reforms. The ABA and 10 other associations wrote in July that FHA’s property requirements are among the largest obstacles to FHA financing, and that some of them “do not reduce the lenders’ collateral risk.” National Mortgage News quotes the groups calling the requirements “one of the most significant impediments to the utilization of FHA financing by prospective homebuyers.” WRE News adds that older and lower-cost housing may be most affected by repair triggers, and that the final language will decide whether friction falls in practice. We found no statement from the appraisal organizations on the September draft as of October 27, 2026.