The National Reverse Mortgage Lenders Association (NRMLA) is urging the U.S. Department of Housing and Urban Development (HUD) to overhaul several single-family property standards, arguing that current rules under the Federal Housing Administration (FHA)’s minimum property requirements are creating unnecessary costs and limiting access for older and rural borrowers.

In a June 29 letter to HUD’s Office of General Counsel — responding to a request for information on FHA’s Single Family Minimum Property Requirements — NRMLA said the rules, while intended to ensure safety and habitability, are often applied in ways that “disproportionately impact rural borrowers, senior citizens on fixed incomes, and those residing in older, well-maintained homes.”

The trade group wrote that the FHA’s application of property standards in the Home Equity Conversion Mortgage (HECM) program should shift toward more flexible, performance-based criteria that better reflect modern lending and risk practices.

One of the association’s primary concerns is FHA’s treatment of shared well systems. NRMLA argued that current requirements are overly prescriptive and often disqualify otherwise financeable properties.

Instead, the group recommended allowing shared wells to qualify based on basic performance and legal safeguards, such as recorded easements, maintenance agreements and water quality protections. It also urged HUD to “grandfather” existing systems that are functioning and compliant with local health standards, and to replace its current approach with a performance-based standard that focuses on practical risk indicators.

NRMLA also called for clearer FHA guidance on swimming pools, saying current rules create uncertainty for appraisers when determining valuation and safety status. The group suggested aligning FHA policy more closely with conventional lending standards, and distinguishing between functional pools and those that are abandoned or unsafe.

Regarding property repairs, the association pushed back on the use of FHA Form 1004D to verify completion of minor repairs, arguing it adds delays and costs. It proposed allowing lenders to use borrower certifications, photographs, invoices and other documentation instead of requiring a second appraisal inspection in all cases.

The group recommended expanding these flexibilities to minor “punch-list” items in new construction loans.

The letter also raised concerns about FHA requirements tied to individual water systems, particularly in rural areas. NRMLA said rules governing wells, springs and surface water sources can be ambiguous and difficult to comply with, especially where testing services are limited.

It recommended allowing alternative sampling methods, such as certified test kits or licensed local professionals, and urged HUD to waive requirements that borrowers connect to public water systems when existing wells are safe and functional.

On water purification systems, NRMLA said current rules requiring lifetime maintenance contracts and complex documentation are “practically impossible to execute” for many senior borrowers. It called for replacing these requirements with a one-time professional inspections and simpler disclosure standards.

Beyond property condition standards, the association also urged HUD to modernize its collateral risk assessment process. It criticized the FHA requirement for second appraisals when valuation flags are triggered, calling it redundant and costly.

Instead, NRMLA recommended allowing the use of automated valuation models, desktop appraisals or targeted field reviews to resolve discrepancies more efficiently.

Across its recommendations, NRMLA argued that the current framework increases transaction costs and delays for older borrowers who seek reverse mortgages under the FHA-insured HECM program.

This article was written by Sarah Wolak and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.

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