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Examples of "Damaged" Siding
These are examples of what is considered "damaged" siding. The definitions come from the Masonite settlement document. Most all of the settlements include these types of damages.
Swelling around the nails
Swelling around the nail holes.
Surface welting, or swelling around nail heads This example is from a Masonite Woodsman lap siding.

Look at a picture of siding without swelling around the nails.

bowing siding
Buckling of Siding 
in excess of 1/4" between studs spaced not more  than 18" on center;  
Edge Checking
Edge Checking
Edge checking, where a feeler gauge of .025" thickness and one-half  inch width can be inserted one-half inch into a suspected delaminated edge  with moderate hand pressure; 
(horse shit! The inspectors do not and have not used a feeler gauge on any house I've seen inspected.)

Look at a good edge of siding.

 

Swelling of the edge
Thickness Swelling.
Thickness swell in excess of 15% of the maximum ANSI/AMA 135.6  standard tolerance, that is, a measure of .065" for siding with a nominal thickness of  one- half inch and .518" for boards with a nominal thickness of 7/16 inch; 
Fungal Degradation
fungal degradation which results in soft board in which moderate  thumb pressure deforms or punches a hole in the board; 
Wax Bleed.
wax bleed, raised or popped fibers or fiber bundles, where the  condition exists on more than 25% of the board surface and, in the case of wax bleed,  where the Siding in question was painted within four years of the date of the inspection. "Wax bleed" does not include paint discoloration; 


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