Here is some interesting news that Jon Ischinger (Wells Fargo, Harrisonburg) shared with me last week... If a sales contract is contingent upon a well inspection, septic inspection or termite inspection, the loan underwriter must be privy to any issues, and must approve how the buyer and seller choose to address those issues.  And this is on all new FHA and conventional loans!

It is my understanding from talking to Jon that this won't change the loan process drastically, but it will make things slower, and may make things more problematic if there are any issues with the termite, well or septic inspections.  As Jon notes, "In the past you could have worked something out with the borrower/seller and it would happen very quickly, outside of the lender's scope - now, if there is any inspection mentioned in the purchase contract, we have to see it and send it to underwriting.  If any maintenance is required, it will need to be addressed and re-inspected and then that documentation will have to be reviewed."

I'm curious to see how this plays out in a real transaction --- but I'm not too surprised to see yet another tightening on the loan process as lenders become more conservative in their lending practices.