www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 December 5, 1990 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 90-42 TO: ALL APPROVED MORTGAGEES SUBJECT: Single Family Development - Acceptance of Individual Residential Water Purification and Treatment Equipment Questions have arisen concerning use of individual water purification or treatment units (water equipment) to provide an acceptable supply of water from individual wells to properties financed with HUD/FHA insured mortgages. In this Mortgagee Letter, the Commissioner is clarifying the requirements imposed by current HUD property standards, particularly in light of Section 424 of the Housing and Community Development Act of 1987 (text attached). 1. With respect to new construction for which a loan-to-value ratio (LTV) greater than 90% is proposed, the use of water equipment to render water safe and potable would violate 24 CFR 200.926d(f)(2)(ii) and is not permitted. 2. With respect to existing properties and new construction for which an LTV of 90% or less is proposed, including rehabilitation loans under section 203(k), reliance on water equipment is governed by the following requirements. a. Handbook 4905.1, Requirements for Existing Housing, paragraph 2-5(a)(1), states that each residential unit must be served by a continuing supply of safe and potable water. Paragraph 2-5(b)(1) explains that in the case of an individual water supply: Water quality shall meet the requirements of the health authority having jurisdiction. If the local health authority having jurisdiction does not have specific requirements, the maximum contaminant levels established by the Environmental Protection Agency (EPA) shall apply. _____________________________________________________________________ 2 b. Therefore, the appraiser will include as a condition on the appraisal that a local health authority certification must be obtained and a copy provided with the submission for insurance endorsement. The certification must certify that the water supply, when processed by properly maintained water equipment, meets the requirements of the local health authority, or, alternatively, is within the contaminant levels set by EPA. c. In addition to such determination, the local health authority must determine that a plan providing for the maintenance, replacement and monitoring of the water equipment to assure its continued proper operation is in existence. Maintenance and replacement must be in accordance with the manufacturer's specifications and maintenance, replacement and monitoring must all conform to particular local conditions. Maintenance and replacement is the responsibility of the mortgagor and monitoring is the responsibility solely of the local health authority. The plan described above must be approved by the local health authority as being sufficient to assure continued proper operation of the water equipment in providing an uninterrupted supply of safe and potable water. Approval of the plan must be evidenced by a certification from the local authority, and a copy of the certification must be provided to HUD with the submission for insurance endorsement. d. A point-of-entry system (serving all water taps and sources that are a part of the dwelling and any related structure) is preferable to a point-of-use system (serving only the specific tap on which it is installed). If safe and potable water is not supplied to all taps or sources that are a part of the dwelling and related structures, the plan must include a requirement for labelling and maintaining the labelling of all unwholesome water taps or sources. The label must clearly warn any occupant or user that water from the tap is unsafe to drink. If the water supply contains concentrations of contaminants such that inhalation or skin contact may be hazardous, clearly only a point-of-entry system would be acceptable. e. The plan must include a requirement for notifying the purchaser/mortgagor at the time of application for mortgage insurance that unpurified or untreated water supplied to the property is hazardous to drink. The specific contaminant and the related health hazard must be identified, and if a point-of-use system is used, the notification must list all _____________________________________________________________________ 3 taps and sources that are a part of the dwelling and related structures, indicating which supply safe and potable water and which do not. A copy of this notification must also be maintained in the dwelling in a highly visible location at all times. f. Finally, the following certification must be presented to and acknowledged by the purchaser/mortgagor at the time the application for mortgage credit approval is signed by the prospective mortgagor. It must also accompany the submission for insurance endorsement. Mortgagor's Certificate. I hereby acknowledge and understand that the home I am purchasing has a water purification or treatment system which I am responsible for maintaining. I understand that the individual water supply is unsafe for consumption unless the system is operating properly. I am aware that if I do not properly maintain the system, the water supply will not be purified or treated properly, thereby rendering the water supply unsafe for consumption. I also understand that the Department of Housing and Urban Development does not warrant the condition of the property, is not authorized to give me any money for repairs to the water purification or treatment system, and has relied upon the local health authority to assure that the water supply, when processed by properly maintained equipment, is acceptable for human use and consumption. _______________________ Mortgagor's Signature If a point-of-use system is involved, the notification must also include the following language: The following is a list of water sources that I am advised have untreated water which is contaminated and not fit for human consumption: List _____________________________________________________________________ 4 In addition, the following certification must be forwarded by the mortgagee at the time the mortgage is submitted for insurance. Mortgagee's Certificate. I hereby certify that I have provided the borrower(s) with the proper notification from the applicable health authority approving the water supply to the home being purchased and that a water purification or treatment system has been installed in the home. I have also made the borrower(s) aware of the risks involved if they do not properly maintain the system. If the system is installed at point(s) of use, the notification lists the taps or sources supplying contaminated water and informs the mortgagor of the requirement that those taps or sources supplying contaminated water be affixed with labels warning that the water is unfit for human consumption. I further certify that the mortgagor has been instructed to post a copy of the notification in the dwelling at a highly visible location and to maintain that copy in good condition at all times, especially at such time as the mortgagor may resell or otherwise transfer the property. _______________________ Mortgagee's Signature If you have any questions, contact the appropriate HUD Field Office or the Office of Insured Single Family Housing, Valuation and Technical Support Branch in Washington, D.C. at (202) 708-2720. Very sincerely yours, ______________________________ Arthur J. Hill Acting Assistant Secretary for Housing-Federal Housing Commissioner _____________________________________________________________________ ATTACHMENT SEC. 424. APPROVAL OF INDIVIDUAL RESIDENTIAL WATER PURIFCATION OR TREATMENT UNITS. (a) IN GENERAL.--When the existing water supply does not meet the minimum property standards established by the Department of Housing and Urban Development and a permanent alternative acceptable water supply is not available, a continuous supply of water may be provided through the use of approved residential water treatment equipment or a water purification unit that provides bacterially and chemically safe drinking water. (b) APPROVAL PROCESS.--A performance-based approval of the equipment or unit and the maintenance, monitoring, and replacement plan for such equipment or unit shall be certified by field offices of the Department of Housing and Urban Development based upon general standards recognized by the Department as modified for local or regional conditions. As a part of such approved plan, a separate monthly escrow account may be required to be established through the lender to cover the cost of the approved yearly maintenance and monitoring schedule and projected replacement of the equipment or unit.