FHA Single Family Housing Policy Handbook 4000.1, Part II — o. Utility Services (04/18/2023)

FHA Single Family Housing Policy Handbook 4000.1, Part II — o. Utility Services (04/18/2023)

o. Utility Services (04/18/2023) i. Definition Utility Services refer to those services consumed by the public such as individual electric, water, natural gas, sewage, and telephone. ii. Required Analysis and Reporting The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the subject Property is an attached, detached, or manufactured Single Family dwelling and the utilities are not independent for each living unit. This does not apply to ADUs. The Appraiser must also notify the Mortgagee of the deficiency of MPR or MPS if utilities are not located on Easements that have been permanently dedicated to the local government or appropriate public utility body. (A) Multiple Living Units Under Single Ownership A Property may contain multiple living units under a single Mortgage or ownership (two- to four-family Properties) that utilize common services, such as water, sewer, gas and electricity and is served by one meter in jurisdictions that allow single meter rental properties. In such cases, the Appraiser should note a deficiency of MPR or MPS if separate utility service shut-offs are not provided for each living unit. The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if utilities or services are not provided with independent shut-offs for each living unit, except common services such as laundry, storage space or heating, in two- to four-living unit buildings under a single Mortgage. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 3. Acceptable Reporting Forms and Protocols (04/10/2025) Handbook 4000.1 837 Last Revised: 11/26/2025 (B) Living Units Under Separate Ownership The Appraiser should not note the deficiency of MPR or MPS if the Property contains living units under separate ownership and part of a larger planned community, that utilize common utility services provided from the main to the building line when protected by an Easement or covenant and maintenance agreement, unless individual utilities serving a living unit pass over, under, or through another living unit without provision for repair and maintenance of utilities without trespass on adjoining properties, or legal provision for permanent right of access for maintenance and repair of utilities. If a single drain line in the building serves more than one unit, and the building drain clean-outs are not accessible from the exterior, the Appraiser must note the deficiency of MPR or MPS to the Mortgagee. iii. Public Water Supply Systems (A) Definition A Public Water Supply System refers to a system that is owned by a governmental authority or by a utility company that is controlled by a governmental authority. (B) Standard When a public water supply system is present, the water quality is considered to be safe and potable and to meet the requirements of the health authority with jurisdiction unless: • the Appraiser indicates deficiencies with the water or notifies the Mortgagee that the water is unsafe; or • the health authority with jurisdiction issues a public notice indicating the water is unsafe. (C) Required Analysis and Reporting The Appraiser must: • report any readily observable or known deficiencies with the water; • notify the Mortgagee when water is determined to be unsafe, report, and provide a cost to cure; and • address any impact on value and marketability, and make the appropriate adjustments. iv. Community Water Systems (A) Definition A Community Water System refers to a central system that is owned, operated, and maintained by a private corporation or a nonprofit property owners’ association. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 3. Acceptable Reporting Forms and Protocols (04/10/2025) Handbook 4000.1 838 Last Revised: 11/26/2025 (B) Standard A Community Water System must comply with local jurisdiction requirements. (C) Required Analysis and Reporting If the Property is on a Community Water System, the Appraiser must note the name of the water company on the appraisal report. v. Individual Water Supply Systems (A) Definition An Individual Water Supply System refers to a potable water source providing water to an individual Property. (B) Standard When an Individual Water Supply System is present, water quality must meet the requirements of the health authority with jurisdiction. If there are no local (or state) water quality standards, then water quality must meet the standards set by the EPA, as presented in the National Primary Drinking Water regulations in 40 CFR §§ 141–142. (C) Required Analysis and Reporting The Appraiser must report on the availability of connection to a public and/or Community Water System and any jurisdictional conditions requiring connection. When the Appraiser obtains evidence that any of the water quality requirements are not met, the Appraiser must notify the Mortgagee and provide an estimated cost to cure. The Appraiser must note the deficiency of MPR or MPS if the subject Property contains a well located within the foundation walls of an existing dwelling, unless there is evidence that: • the local jurisdiction recognizes and permits such a location; • it is common for the market area; and • it does not adversely affect marketability. A well located within the foundation walls of a dwelling is not acceptable for New Construction except in arctic or subarctic regions. The Appraiser must report when water to a Property is supplied by dug wells, cisterns, or holding tanks used in conjunction with water purchased and hauled to the site. The Appraiser must report whether such systems are readily accepted by local market participants. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 3. Acceptable Reporting Forms and Protocols (04/10/2025) Handbook 4000.1 839 Last Revised: 11/26/2025 The Appraiser must note the deficiency of MPR or MPS if the subject Property has a water source that includes a mechanical chlorinator or is served by springs, lakes, rivers, sand-point wells, or artesian wells. A pressure tank with a minimum capacity of 42 gallons must be provided. However, pre-pressured tanks and other pressurizing devices are acceptable if delivery between pump cycles equal or exceed that of a 42-gallon tank. Tanks must be equipped with a clean-out plug at the lowest point and a suitable pressure relief valve. The Appraiser must note any readily observable deficiencies regarding the well and require test or inspection if any of the following apply: • the water supply relies upon a water purification system due to the presence of contaminates; • corrosion of pipes (plumbing); • areas of intensive agricultural uses within one quarter mile; • coal mining or gas drilling operations within one quarter mile; • a dump, junkyard, landfill, factory, gas station, or dry cleaning operation within one quarter mile; or • an unusually objectionable taste, smell, or appearance of well water. The Appraiser must also be familiar with the minimum distance requirements between private wells and sources of pollution and, if discernible, comment on them. The Appraiser is not required to sketch or note distances between the well, property lines, septic tanks, drain fields, or building Structures but may provide estimated distances where they are comfortable doing so. When available, the Appraiser should obtain from the homeowner or Mortgagee a copy of a survey or other documents attesting to the separation distances between the well and septic system or other sources of pollution. vi. Shared Wells (A) Definition A Shared Well refers to a well that services two to four homes where there is a binding Shared Well Agreement between the property owners that meets FHA requirements. (B) Required Analysis and Reporting If the Property has a Shared Well, the Appraiser must report it and note any readily observable deficiencies. The Appraiser must also obtain a Shared Well Agreement and include it in the appraisal report so that the Mortgagee may review the agreement to determine eligibility. The Appraiser must also require an inspection and water testing under the same circumstances as an individual well. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT D. Appraiser and Property Requirements for Title II Forward and Reverse Mortgages 4. Valuation and Reporting Protocols Handbook 4000.1 840 Last Revised: 11/26/2025 vii. Individual Residential Water Purification Systems (A) Definition An Individual Residential Water Purification System refers to equipment, either point-of-entry or point-of-use, installed on Properties that otherwise do not have access to a continuous supply of safe and potable water. (B) Required Analysis and Reporting If a Property is served by an individual residential water purification system, the Appraiser must indicate which type of system is installed on the Property, either point-of-entry or point-of-use. The Appraiser must report on the conditions requiring connection of the individual residential water purification system.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part II — o. Utility Services (04/18/2023) · source URL · snapshot 8c03836f77f317e1