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I've had an FHA Reverse Mortgage in the past and sold the house and paid off the loan. I bought another home and was going to get another reverse mortgage; midway through the loan process, the appraiser alerted the lender (before he appraised the home), that my home was next to an Ameren sub-station with power lines above my home. (I live in a small town). I was not aware that it would make a difference, since the sub-station is fenced and sits a good 30 ft beyond the fence. Appraiser said no point in doing the appraisal. Turned down! Had already paid for the certification and everything. So, I was wondering if a non-FHA reverse mortgage would pass. I have a conventional loan now on the home.

By Karen Johnson on 02.17.2020

Hello Karen,

HUD does have requirements of properties when it comes to the effects of external hazards and nuisances.  However, I would like to show you the comments directly from the HUD manual with respect to high voltage lines:

If you will note, there is no direct statement that a dwelling located near a substation is ineligible.  I will tell you that if the power lines run over the top of your property that would render your property ineligible under HUD rules (and proprietary programs as well), whether you were located near a substation or not. 

No program I am aware of will allow properties with power lines that extend over the property.  So, knowing this, the big issue on HUD’s mind is whether the property is in the designated fall zone of the cables should something happen. 

If you contact the utility company and if they will write you a letter that your property is outside of the fall zone of any power lines, you meet HUD eligibility requirements.  The appraiser will still be required to comment on the marketability of the property resulting from the proximity to the sub-station. 

There is a possibility that an appraiser or underwriter may look at the appraisal, determine that the substation is extremely unsightly and without sales of similar properties available, there is no way to support the marketability of the home or how much effect the station really has on the value. 

In that case, you may still not be able to get the loan but there is no way to know all that just by driving up and looking at the house (unless of course you do have the lines extending overhead and he saw that from his first visit). 

I would definitely also make sure that your lender sent out a different appraiser as this one seems to have a preconceived notion that may or may not have been correct and may have been formed based on the degree of difficulty of the assignment.  You cannot choose the appraiser, but you do have the right to decline an appraiser based on a previous experience.


Also See: 

Here are the Property Requirements for a Reverse Mortgage

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