12.6 WATER AND WASTEWATER DISPOSAL SYSTEMS [7 CFR 3555.201] (05/17/17)

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

The site must have acceptable water and wastewater disposal systems to ensure the property is decent, safe, sanitary, and meets community standards. Public water and wastewater disposal systems are presumed to meet state and local requirements with no additional documentation or inspections. Private well and wastewater systems may require inspections or documentation as discussed in this section. Evidence will be retained in the lender's permanent loan file.

A. Water

Water systems, for existing or new construction, that require continuous or repetitive treatment to be safe bacterially or chemically may be used if the individual water system, with purification, meets the requirements of the state department of health or other comparable reviewing and regulatory authority.

1. Individual Privately Owned

Individual water systems are owned and maintained by the homeowner and subject to compliance with all requirements of the local and/or State Health Authority codes. Individual water supply systems may be acceptable when the cost to connect to a public or community water system is not reasonable as defined by the lender. The lender is responsible for determining if connection is feasible. Water quality tests are required as follows:
- The water quality of the well must meet the requirements of the state or local authority. If the state or local authority does not have specific requirements, the maximum contaminant levels established by the Environmental Protection Agency (EPA) will apply.
- The local health authority or a state certified laboratory must perform a water quality analysis. The Safe Water Drinking Act does not apply to private wells. Contact the Environmental Protection Agency (EPA) at (800) 426-4791 for referral to certified labs and other inquiries.
- The water analysis report must be no greater than 150 days old at loan closing. If the Agency is aware of any recent environmental impacts that may render the previous analysis invalid (for example – chemical spills, natural disasters, etc.) a new report may be required.
The well location for individual water supply systems must be measured to establish the distance from the septic system. The separation distance between the well and septic systems must meet the SF Handbook (HUD Handbook 4000.1) or be found acceptable by the Local and/or State Health Authority.
Individual water systems/wells should be located on the subject property site. If located on an adjacent property, evidence of water rights and recorded maintenance agreement must be retained in the lender’s permanent loan file as acceptance of the well as the primary source of water.

2. Individual Privately Owned Shared

If the property is served by a shared well or off-site facility, the lender must ensure the private system will provide a continuous and adequate supply of safe and potable water. The following requirements must also be met:

The well serves properties that cannot feasibly be connected to an acceptable public or community water supply system. It is the lender's responsibility to make this determination.
A shared well must have a valve on each dwelling.
The water supply is adequate for all families served. A shared well must service no more than four living units or properties.
The water quality of the well must meet the requirements of the state or local authority. If the state or local authority does not have specific requirements, the maximum contaminant levels established by the Environmental Protection Agency (EPA) will apply.
The well must have an agreement that meets the following requirements:
- Is binding upon all signatory parties and their successors in title;
- Is recorded or will be recorded no later than the closing date;
- Makes provisions for maintenance and repair of the system and the sharing of costs to do so. These provisions must include a permanent easement that allows access for maintenance and repair.

3. Community Owned

If the property is served by a community water system operated by a private corporation or nonprofit property owners association, the lender must ensure the following conditions are met:

The system and the water supply meet all applicable Federal, State and local requirements.
The system has the capacity to provide a sufficient water supply during periods of peak demand.
The system is operated under a legally binding agreement that allows interested third parties to enforce the obligation of the operator to provide satisfactory service.

4. Required Inspections and Documentation

The lender must obtain documentation the water quality meets state and local standards as discussed in this section. Lenders will retain all documentation in their permanent loan file. Inspection and documentation requirements are discussed later in this chapter.

B. Wastewater

1. Individual Privately Owned

Individual sewage systems may be acceptable when the cost to connect to a public or community sewage system is not reasonable as defined by the lender. The lender is required to obtain a septic evaluation. A FHA roster appraiser who certifies the property meets required HUD’s Single Family Housing Policy Handbook, a government health authority, a licensed septic system professional, or a qualified home inspector may perform the septic evaluation. The inspector may require additional inspections as a result of the inspection. The septic system must be free of observable evidence of failure. Existing dwellings appraised by a HUD roster appraiser, who has indicated the dwelling meets the required HUD handbook policy does not require further septic certification.If the property is served by an individual sewage disposal system, the lender must ensure the system:

Meets any applicable requirements of the state or local health authority with jurisdiction;
Is located entirely on the subject property. If any part of the system is located on an adjacent property (for example leach lines), evidence such as a perpetual encroachment easement must be recorded to establish the rights of the property owner's permitted use;
Is operating properly and has the capacity to dispose of all domestic wastes in a manner that will not create a nuisance or endanger public health.

2. Community Owned

If the property is served by a community wastewater system operated by a private corporation or nonprofit property owners association, the lender must ensure that the system:

Meets any applicable requirements of the state or local health authority with jurisdiction;
Is licensed, operating properly and has the capacity to dispose of all domestic wastes in a manner that will not create a nuisance or endanger public health;'
Is subject to a legally binding agreement that allows interested third parties to enforce the obligation of the operator to provide satisfactory service.

3. Required Inspections and Documentation

The lender must obtain documentation the wastewater system meets state and/or local standards. Lenders will retain all documentation in their permanent loan file. Inspection and documentation requirements are discussed later in this chapter.