Servicing Guide

Published September 9, 2020

For best results, pose your search like a question.

Guide Resources

For a comprehensive list of resources such as forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

Customers Recommend Ask Poli

AskPoli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Launch Ask Poli  

Download PDF Guide

You can also download the printable ~800 page PDF, which include links.

Download Now

What are the required actions for servicing renovation mortgage loans before completion of the home improvements or repair work?

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...
 

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:

  • The plans and specifications, which fully describe all of the work to be done and provide an indication of when various jobs or stages of completion will be scheduled (including both the start and completion dates).

  • The renovation or construction contract between the borrower and the contractor which sets out the specific work the contractor agrees to perform, states the agreed-upon costs of the renovation work, identifies all subcontractors and suppliers, and includes an itemized description that establishes the schedule for completing each stage of the work and the corresponding payments to the contractor. It also provides the contractor’s agreement to complete the work in compliance with the contract and all applicable government regulations (such as building codes and zoning restrictions) and to obtain the necessary building permits (including a certificate of occupancy, if required).

  • The renovation or construction mortgage loan agreement between the borrower and the lender which states the terms and conditions of the mortgage loan prior to the completion of the work. It also includes the details about the timetable for completing the renovation or construction work; details about the use of proceeds of the renovation mortgage loan (and any amount the borrower has to provide from his or her own funds), the method and timetable for payment of the funds to the contractor and the borrower; procedures for documenting requests for disbursements, establishing and maintaining contingency reserves, and processing change orders; and details about conditions that apply to repayment of the mortgage loan, completion requirements, and resolution of disputes.

 

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.

See below for related Q&A's:

What actions are required upon completion of the renovation work for a renovation mortgage loan?

What funds must the servicer ensure are included in a renovation escrow account?

What are the servicer’s responsibilities for administering renovation escrow accounts for renovation mortgage loans?

For more information please see: D1-2-01: Renovation Mortgage Loans

© 2018 Fannie Mae

Have You Tried Ask Poli?

Poli knows. Just ask.

Ask Poli features exclusive Q&As and
more—plus official Selling & Servicing
Guide
content.

Try Ask Poli

Related Articles


AskPoli

Customers Recommend Ask Poli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Guide Resources

For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

X
Having Issues with Seeing this Page Correctly?

Use Firefox or Chrome   How to do a hard refresh in Internet Explorer
We recommend that you use the latest version of FireFox or Chrome.

Download Firefox
Download Chrome
  A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page.
    Hold the Ctrl key and press the F5 key.
     

Email Us
If you still have Technical Support questions, feel free to emailAsk_Poli@fanniemae.com.