1992 HUD regulations pertaining to water treatment of wells FHA

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Home > About Us > Real Estate Products and Services For Buildings With Wells > HUD Acceptance of Water Treatment Equipment

source: http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_16737.txt

 

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U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

June 5, 1992
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 92-18
    TO:  ALL APPROVED MORTGAGEES
    SUBJECT:  Single Family Loan Production - Acceptance of
                Individual Residential Water Purification Equipment
 
         Effective immediately, the Department will accept individual
    water purification units on all single family properties
    including both proposed and existing construction.  This
    Mortgagee Letter sets forth the requirements for HUD acceptance
    of these individual water purification units.  This Mortgagee
    Letter supersedes Mortgagee Letter 91-4, dated January 25, 1991.
 
         All requirements in this letter must be followed, without
    exception, or FHA mortgage insurance will not be available,
    because of health and safety considerations.  The lender must
    ensure that all of the information required below is in the HUD
    Case Binder prior to insurance endorsement.  The acceptance of
    water purification units is conditioned on the homebuyer(s)
    understanding the serious health and safety hazards involved if
    the equipment does not perform properly.  The homebuyer(s) must
    be aware of their responsibilities for maintaining a water
    purification unit and the consequences if the water purification
    unit is not maintained properly.
 
         On all proposed construction cases, Section 518(a) of the
    National Housing Act does not apply to the water purification
    unit.  The Department does not warrant the condition of the water
    purification unit and will not provide any money to the
    homebuyer(s) for repairs.  The Department relies upon the local
    (or State) health authority to assure that the water supply, when
    processed by a properly maintained water purification unit, is
    acceptable for human use and consumption.
 
         The following requirements must be complied with prior to
    the water purification unit being accepted by HUD.  The lender
    must provide appropriate documentation that addresses each of
    these requirements.
 
    A.   EQUIPMENT.  The water purification unit(s) must be approved
         by the National Sanitation Foundation.
 
_____________________________________________________________________
                                                            2
 
B.   CERTIFICATION BY LOCAL (or STATE) HEALTH AUTHORITY.  A local
     (or State) health authority certification must be submitted
     to HUD which certifies the following:
 
     1.   That a "point-of-use" or "point-of-entry" water
          purification unit is operating on the property.
 
          If "point-of-use" equipment is used, a water
          purification unit must be employed on each water supply
          source (inside and outside faucet) serving the
          property.  (If a "point-of entry" system is used, a
          separate water supply system carrying untreated water
          for flushing toilets may be used);
 
     2.   That the water purification unit is sufficient to
          assure an uninterrupted supply of safe and potable
          water, adequate to meet household needs;
 
     3.   That the water supply, when treated by the water
          purification unit, meets the water quality standards of
          the local (or State) health authority.
 
          If there are no local (or State) water quality
          standards, then water quality must meet the standards
          set by the Environmental Protection Agency (EPA), as
          prescribed in the National Primary Drinking Water
          requirements in 40 CFR Parts 141 and 142; and
 
     4.   That there exists a Plan that provides for the
          monitoring, servicing, maintenance, and replacement of
          the water purification equipment, and which meets the
          requirements listed in paragraph G below.
 
C.   MORTGAGOR NOTICE.  The homebuyer(s) must be notified in
     writing, prior to the sales contract being signed, that the
     property has a hazardous water supply that requires
     treatment for the water to be safe and acceptable for human
     consumption.  The specific contaminant(s) and the related
     health hazard(s) must be disclosed.  Also, a good faith
     estimate of the maintenance and replacement costs of the
     water purification equipment must be provided in writing
     with this notice.
 
     A copy of the notice (including cost estimates), dated prior
     to the date of the sales contract, and signed by the
     homebuyer(s) must accompany the submission for insurance
     endorsement.  If the sales contract is signed prior to the
     disclosure being provided to and signed by the homebuyer(s),
     another sales contract must be executed after the
     information is provided to the homebuyer(s) and he/she has
     acknowledged receipt of the notice.
 
_____________________________________________________________________
                                                            3
 
D.   MORTGAGOR CERTIFICATION.  The homebuyer(s) must sign the
     attached certification included in this letter at the time
     he/she signs the loan application.  This certification must
     also be submitted to HUD with the request for insurance
     endorsement.
 
E.   SERVICE CONTRACT.  Before closing the mortgage loan, the
     homebuyer(s) must enter into a service contract with an
     organization or individual specifically approved by the
     local (or State) health authority to carry out the
     provisions of the required Plan for servicing, maintenance,
     repair and replacement of the water purification equipment.
     A signed copy must be submitted to HUD with the request for
     insurance endorsement.
 
F.   ESCROW FOR MAINTENANCE AND REPLACEMENT.  The lender must
     establish and maintain an escrow account which provides for
     the accumulation of funds paid with the monthly mortgage
     payment adequate to assure proper maintenance and
     replacement of the water purification equipment.  The amount
     of funds to be collected by the lender will be based upon
     information provided by the manufacturer for the maintenance
     and replacement of the water purification equipment and for
     other charges anticipated by the service contractor.
 
     The lender's estimate of escrow requirements is based on the
     best information available as to probable payments required
     to be made from the escrow account in the coming year.
     Reflected in the estimate must be an adequate reserve to
     meet longer term costs associated with replacement or
     extensive repair(s), as needed, to ensure the water
     purification unit is performing properly.
 
     The initial monthly escrow amount must be stated in the Plan
     (see paragraph G).  Disbursements from the account are
     limited strictly to costs associated with the normal
     servicing, maintenance, repair or replacement of the water
     purification equipment.  Disbursements may only be made to
     the service contractor (or its successor), to equipment
     suppliers, to the local (or State) health authority for the
     performance of testing or other required services, or to
     another entity approved by the local (or State) health
     authority.  So long as water purification is necessary and
     the mortgage is insured by HUD, the mortgagee must maintain
     the escrow account.
 
     Provision for the escrow should be made in the security
     instrument by incorporating the "Water Purification
     Equipment Rider" in HUD Handbook 4165.1 REV-1, Appendix XV,
     dated April 22, 1992.
 
_____________________________________________________________________
                                                            4
 
G.   APPROVED PLAN.  A Plan, in the form of a contract entered
     into by the mortgagor and mortgagee, and approved by the
     local (or State) health authority, must set out conditions
     that must be met by the parties as a condition to insurance
     of the mortgage by HUD.  A signed copy must be submitted to
     HUD with the request for insurance endorsement.  To be
     approved by the local (or State) health authority, the
     following requirements must be met:
 
     1.   The Plan must set forth the respective responsibilities
          to be assumed by the mortgagor and the mortgagee, as
          well as the other entities who will implement the Plan,
          (i.e., the local health authority, the maintenance
          organization, etc.)  In particular:
 
          a.   The Plan must state the responsibilities of the
               local (or State) health authority for monitoring
               and enforcing the performance of the service
               contractor, including any successor that the local
               (or State) health authority may be compelled to
               name.  By its approval of the Plan, the local (or
               State) health authority documents its acceptance
               of these responsibilities and the Plan should so
               indicate;
 
          b.   The Plan must provide for the monitoring of the
               operation of the water purification equipment, as
               well as for servicing (including disinfecting),
               and for repairing and replacing the system, as
               often as needed, taking into consideration the
               systems design, anticipated use, and the type and
               level of contaminants present.  Installation,
               servicing, repair and replacement of the water
               purification unit must be performed by an
               individual or organization approved by the local
               (or State) health authority and identified in the
               Plan.  The Plan may incorporate by reference
               specific terms and conditions of the service
               contract required under paragraph E above;
 
          c.   Under the Plan, responsibility for monitoring the
               performance of the service contractor and for
               assuring that the water purification unit is
               properly serviced, repaired, and replaced rests
               with the local (or State) health authority that
               has given its approval to the Plan.  The Plan must
               confer on the local (or State) health authority
               all power necessary to effect compliance by the
               service contractor.
 
_____________________________________________________________________
                                                            5
 
               The Plan must provide that, upon any notification
               of noncompliance received from the local (or
               State) health authority, the mortgagor(s) must
               have the right to discharge the service contractor
               for cause and to appoint a successor organization
               or individual as service contractor; and
 
          d.   The Plan must provide for the mortgagor(s) to make
               monthly escrow payments necessary for the
               servicing, maintenance, repair and replacement of
               the water purification unit, and for the mortgagee
               to disburse funds from the escrow account as
               required, to the appropriate party or parties.
 
     2.   The Plan must provide that in the event the dwelling is
          refinanced, sold or otherwise transferred with a
          HUD/FHA insured mortgage, the Plan will:
 
          a.   Continue in full force and effect;
 
          b.   Impose an obligation on the mortgagor(s) to notify
               the purchaser(s) or transferee(s) of the necessity
               for the water purification unit and for its proper
               maintenance, as well as the costs for maintaining
               the system and the obligation to make escrow
               payments; and
 
          c.   Require the mortgagor(s) to furnish the
               purchaser(s) with a copy of the Plan, before any
               sales contract is signed.
 
     3.   The Plan must provide that a water quality analysis be
          obtained by the local (or State) health authority no
          less than once a year, but more frequently if deemed
          necessary by the local (or State) health authority or
          by the service contractor.
 
      If you have any questions, please contact the HUD Field
Office in your jurisdiction.
 
                     Very sincerely yours,
 
                     Arthur J. Hill
                     Assistant Secretary for
                       Housing-Federal Housing Commissioner
 
  Attachment
 
_____________________________________________________________________
 
                     MORTGAGOR'S CERTIFICATE
 
     I hereby acknowledge and understand that the home I am
purchasing has a water purification system which I am responsible
for maintaining.  I understand that the individual water supply
is unsafe for human consumption unless the system is operating
properly.  I am aware that if I do not properly maintain the
water purification unit, the water supply will not be purified or
treated properly, thereby rendering the water supply unsafe for
human consumption.
 
     I also understand that the Department of Housing and Urban
Development does not warrant the condition of the water
purification system, is not authorized to give me any money for
repairs to the water purification system, and has relied upon the
local (or state) health authority to assure that the water
supply, when processed by properly maintained water purification
equipment, is acceptable for human use and consumption.
 
                               ____________________________________
                                Mortgagor's Signature and date
 
           *U.S. Government Printing Office: 1992 - 312-218/60168

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