Addressing congressional criticism of slipshod and fraudulent home appraisals by FHA-approved people, Housing and Urban Development Secretary Andrew Cuomo issued detailed new appraisal standards for homes financed by the FHA.
The announcement Monday was intended to preempt criticism at a Tuesday hearing with Sen. Connie Mack, R-Fla., as chairman.
Though the changes fall short of the mandatory inspections that congressional critics would like, one critic welcomed the move.
Rep. Rick Lazio, R-N.Y., who has frequently blasted the agency's management of housing programs, wrote to Mr. Cuomo: "I am pleased that you recognize the shortcomings of HUD's implementation of the FHA appraisal process."
Hearings with Rep. Lazio as chairman recently detailed case after case of owners with homes whose gaping roofs, termite damage, electrical hazards, and questionable plumbing had escaped the notice of real estate agents, appraisers, and FHA-approved lenders.
Rep. Lazio's subcommittee has highlighted these problems just as the Clinton administration lobbies to expand the mortgage insurance program. The administration wants the FHA to be able to back loans up to $227,000-a 33% increase.
Still the administration and groups such as the Mortgage Bankers Association have managed to garner considerable support for the expansion from many Republicans.
Mr. Cuomo's press conference featured a New Jersey family who bought a sagging, termite-ridden house for $85,000 two years ago without knowing of the damage. The couple-Frank and Shannon Sinigaglio of Penns Grove, N.J.- has hired a lawyer to press its claim, but lacking $20,000 to pay for repairs, they are living with their problems for now.
Mr. Cuomo rejected mandatory inspections, saying they would "inflate the cost of homeownership."
The new standards would require appraisers to undertake a physical evaluation of all homes, inform homebuyers of serious structural problems, and recommend separate home inspections in such cases.
The appraisal report would be an official submission to the federal government, opening the way for legal action under the False Claims Act if appraisers failed to obey the standards. Penalties under the law include stiff fines and imprisonment.