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Hello Arlo,I've had an FHA Reverse Mortgage, 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 house) that my home was next to an Ameren substation with power lines above my house. (I live in a small town). I was unaware it would make a difference since the sub-station is fenced and sits 30 feet above the fence. The appraiser said no point in doing the appraisal. I was turned down! I had already paid for the certification and everything. So, would a non-FHA reverse mortgage pass? I have a conventional loan now on the home.

By Karen J. on 02.17.2020

Hello Karen,

HUD does have requirements for 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 concerning 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), whether you were located near a substation. 

I am still determining if a 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 they will write you a letter that your property is outside the fall zone of any power lines, you meet HUD eligibility requirements.  The appraiser will still be required to comment on the property's marketability resulting from the proximity to the substation. 

There is a possibility that an appraiser or underwriter may look at the appraisal and determine that the substation is highly 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 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 also make sure that your lender sent out a different appraiser, as this one has 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 have the right to decline an appraiser based on previous experience.

Also See: 

Here are the Property Requirements for a Reverse Mortgage

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