ASHI Hails Home Inspection Counseling Provision in Predatory Lending Bill
Washington, D.C. (May 6, 2009) - The American Society of Home Inspectors (ASHI) applauded action by the U.S. House Financial Services Committee to add home inspection counseling to the Mortgage Reform and Anti-Predatory Lending Act, HR1728.
The Financial Services Committee, chaired by Rep. Barney Frank (D-MA) adopted the concept championed by Rep. Nydia Velazquez (D-NY) with support from Rep. Judy Biggert (R-IL).
The development is an important advancement for homebuyers who are confused and frustrated by the complex home-buying process.
Bill Richardson, ASHI president, said, “These provisions constitute the first comprehensive initiative by the U.S. government to educate prospective homebuyers, early in the home buying process, on the importance of obtaining a voluntary home inspection by a qualified independent home inspector. If the new language is implemented as planned, it could help millions of prospective homebuyers make intelligent decisions on when and how to seek home inspections when buying a house.
“Congresswoman Velazquez has won a victory for homebuyers and consumer protection advocates across the country,” added Randall Pence of Capitol Hill Advocates, a Washington lobbyist working on the Predatory Lending Bill. “Her leadership in protecting homebuyers in response to the mortgage crises was crucial in moving this legislation.” Pence advised the congressional representative in developing the legislation.
The provisions accepted by the Financial Services Committee are an outgrowth of HR2130, The Consumer Protection Home Inspection Counseling Act of 2009, sponsored by Rep. Velazquez.
The home inspection language addresses a serious problem that diverts homebuyers from calling on home inspectors for help: the confusion caused by the sheer complexity in buying a home.
The General Accounting Office (GAO) conducted a study finding pervasive homebuyer confusion regarding home inspection. GAO found that, even among people who had just bought a home, most did not know that home inspections are not conducted automatically; that appraisals are not home inspections; that the U.S. Department of Housing and Urban Development (HUD) recommends that buyers obtain a voluntary home inspection. Many thought that FHA performed inspections automatically or did not realize that they would need to initiate an inspection.
“Homebuyers need to ask for a home inspection,” Richardson said. “While homebuyers may eventually consider a home inspection, they often do so too late to make any difference. The bottom line is that many homebuyers fail to seek home inspections based on confusion, poor understanding and ineffective, untimely communication. Hundreds of thousands of homebuyers, perhaps millions, miss their opportunity to seek a home inspection.”
In response, the Financial Services Committee added a major chapter on housing counseling in the Mortgage Reform and Anti-Predatory Lending Act. The Velazquez amendment adds to that counseling chapter.
The provisions added to the Act require HUD to take such actions as are necessary to inform potential homebuyers of the availability and importance of obtaining an independent home inspection.
At a minimum, the new legislation requires HUD to:
- Publish HUD’s advisory “For Your Protection: Get A Home Inspection”;
- Create a new booklet for homebuyers advising them to obtain a voluntary home inspection;
- Publish HUD’s advisory “Ten Important Questions to Ask Your Home Inspector”;
- Ensure that the new booklet addresses both FHA and non-FHA home sales;
- Publish all publications in both English and Spanish to reach the growing market of Hispanic homebuyers;
- Distribute all materials as widely as possible, including electronic distribution on the Internet, and, where appropriate, public service announcements and toll-free hotlines operated by HUD; and
- Give special emphasis to reaching first-time and low-income homebuyers.
One of the greatest challenges is making sure that prospective homebuyers get the message on home inspection with certainty -- and early enough to make a difference.
Under the new home inspection provisions:
- All FHA-approved lenders will be required to provide prospective mortgage applicants these materials at first contact, whether for pre-qualification, pre-approval, or initial application, to ensure that prospective homebuyers consider home inspection as early as possible in any transaction.
- The housing counselors for each counseling agency certified by HUD to provide housing counseling shall be required to provide these home inspection materials to prospective homebuyers as part of the counseling process.
- All HUD-approved housing counselors will be trained to counsel homebuyers on home inspection, including the importance and availability of home inspection, and information on how to locate and select a qualified home inspector.
ASHI members and Pence congratulated Rep. Velazquez for her hard work, and the Financial Services Committee for accepting the language. At press time, the Mortgage Reform and Anti-Predatory Lending Act awaits action on the House floor. The bill is expected to receive priority treatment in the current Congress.
About the American Society of Home Inspectors
In its 32nd year and with more than 5,000 members, ASHI is the oldest and most widely recognized non-profit, professional organization of home inspectors in North America. Its Standards of Practice and Code of Ethics is the industry standard. For more information, visit www.ASHI.org.