Effectiveness of the Builder's Warranty on New Houses with Mortgages Insured by HUD or Guaranteed by VA]

CED-77-20: Published: Jan 5, 1977. Publicly Released: Jan 5, 1977.

Additional Materials:


Office of Public Affairs
(202) 512-4800

Federal agencies can suspend or debar builders who refuse 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 compensate home buyers.

From an examination of 181 complaint files, it was determined that 48 builders had been suspended or debarred or had gone out of business. Defects in homes, mostly of a serious nature, were not corrected. Better protection for homeowners and the Federal Government could be obtained from a comprehensive warranty by a third party such as the National Association of Homebuilders. Other possible approaches are holding builders' funds in escrow to insure correction of defects, or requiring builders to obtain performance bonds.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: HUD should initiate a pilot program to test these protection alternatives. If results indicate that one is most effective, it should be expanded and its use encouraged.

    Agency Affected:


Explore the full database of GAO's Open Recommendations »

Jan 30, 2018

Jan 18, 2018

Jan 17, 2018

Jan 11, 2018

Dec 7, 2017

Dec 4, 2017

Nov 27, 2017

Nov 8, 2017

Looking for more? Browse all our products here