Mortgage Lenders Require Proof of Safe Water for Flint Homebuyers
Potential homebuyers of properties in Flint, Mich. who are considering applying for a home mortgage will need to present additional documentation before the loan application is accepted. Some mortgage lenders are now requiring borrowers to present proof that a Flint property has safe water.
Flint residents have been dealing with lead-contaminated drinking water, but now homeowners who are planning to sell their properties will face further challenges. A report from the Wall Street Journal stated that local real estate agents and mortgage lenders raised concerns that the new safe water requirement will further impact Flint's housing market. Michigan Mutual is one of the firms who sent out a notice to its staff of the new safe water requirement for loan applications. Major banks such as Wells Fargo and Bank of America have stated that borrowers may face a hard time securing a loan for a property without potable water.
Daniel Jacobs, an executive with Michigan Mutual, told the Wall Street Journal, "The tragedy [in] an already depressed community is now likely to see housing values plummet not only because of the hazardous water, but because folks cannot obtain financing."
The city's realtor's association is planning to meet with local mortgage lenders on how Flint's water problems are impacting the area's mortgage market, according to the same report. One of the issues is the interpretation of government mortgage guidelines such as the Federal Housing Administration's rule that a home must have "a continuing and sufficient supply of safe and potable water." However, a representative from the agency shared that they plan to send out an announcement soon to clarify lender's concerns about the issue.
Flint's water problems started in April 2014 when the city switched its tap water source from Detroit's system to Flint River, Reuters stated. The river water affected the city's water pipes which resulted to lead contamination. The city has switched its water source back to the Detroit system in October after children's blood tests showed high levels of lead, which can damage nervous systems. The city has also embarked on several attempts to address the problem.
However, alleged email communications between high ranking Michigan officials indicate that they knew of the problem long before Governor Rick Snyder's January announcement of an outbreak of Legionnaires' disease, as stated in the same report. The disease is linked to Flint's contaminated water issue since the bacteria that causes the disease is typically found in both potable and unsafe water. The allegations are currently under investigation.