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2018Fannie Mae Single Family Servicing Guide
Servicer’s Responsibilities for Renovation Mortgage Loans
The following table lists the servicer’s responsibilities when Fannie Mae purchases a renovation mortgage loan before completion of the home improvements or repair work.
For purposes of this Servicing Guide, renovation includes energy-related improvements.
✓ | The servicer must... |
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Exercise all approval and oversight responsibilities that are customary to ensure that clear title to the property is maintained. | |
Administer the renovation escrow account, as described in greater detail below. | |
Ensure that the renovation work is completed in a timely manner. Renovation work must be completed no later than 12 months from date the mortgage loan is delivered. In the rare circumstance a renovation project is expected to exceed 12 months, the servicer must contact their HomeStyle Renovation Mailbox (see F-4-03, List of Contacts) to describe the circumstances contributing to the delay and determine potential remedies. | |
Ensure that the renovation work is completed in accordance with the plans, specifications, and the contractor’s estimated bids. The three key documents used to document the terms of the renovation work are as follows:
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Require the borrower to submit a HomeStyle Change Order Request (Form 1200), or a similar form, to provide a detailed description of the change(s), the cost of the change(s), and the estimated completion date(s) before approving any change a borrower wants to make to the original plans and specifications. | |
Ensure that all renovation work (excluding “Do-It-Yourself” repairs) is performed by licensed contractors and/or sub-contractors, unless contractor licensing is not applicable under state or local regulations for the specific work being completed. | |
Manage the release of funds to pay for the completed work. Property inspections are required to confirm that renovation work is completed timely and according to plan, prior to escrow draw requests being approved. See Administering Escrow Accounts for Renovation Mortgage Loans below for additional details. | |
Refer to the HUD guidelines for specific requirements for government-insured renovation mortgage loans, if applicable. |
If the servicer’s action or lack of action affects Fannie Mae’s ability to acquire clear title to the property, Fannie Mae may require the servicer to repurchase the mortgage loan.
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