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DOCUMEAT RESUME
00548 - [AC590898 I
Effectiven ,ss of the Builder's Warranty on New Houses with
Mortqages Insured by HUD or Guaranteed by VA]. B-114860;
CED-77-20. January 5, 1977. 8 pp.
Report to Carla H.l1s, Secretary, Department of Housing and
Urban Development; by Henry Eschwege, Director, Community and
Economic Development Div.
Issae Area: Domestic Housing and Community Development (2100).
Contact: Community and Economic Development Div.
Budget Function: Community and Regional Development: Community
Development (451).
Organization Concerned: Department of Agriculture; Department of
Housing and Urban Development; Veterans Administration.
Congressional Relevance: House Committee on Banking, Currency
and Housinq; Senate Committee on Banking, Housing and Urban
Affairs.
Authority: National Housing Act of 1949, as amended, sec.
518(a). Servicemen's Readjustment Act, sec. 1827.
Federal agencies can suspend or debar Luilders who
retuse to repair warranted defects, but can not require
compliance with warranty provisions. In some cases, the
Department of Housing and Urban Development (HUD) and the
Veterans Administration (VA) are authorized to correct defects
or compen!, ate home buyers. Findings/Conclusicns: From an
eximination of 181 complaint files, it was determined that 48
builders had been suspended or debarred or had gcne cut of
business. Defects in homes, mostly of a s'srious nature, were not
corrected. Better p-otec-ion for homeowners and the Federal
Government could be obtained trom a comprehensive warranty by a
third party such as the National Association cf Pomebuilders.
Other possible approaches are holding builders' funds in escrow
to insure correction of defects, or requiring builders to obtain
performance bonds. Pecommendations: HUD shculd initiate a pilot
proqram to test these protection alternatives. If results
indicdte that one is most effective, it should be expanded and
its use encouraged. (H1W)](ViewImageLocal?handle=hein.gao/gaobaabxi0001&div=1&collection=&method=preview&ext=.png&size=3)