Servicing Guide

Published October 14, 2020

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What are the servicer’s responsibilities following completion of the renovation work?

The following table provides the servicer’s responsibilities upon completion of the renovation work.

Following completion of the renovation work, the servicer must...
 

Obtain an Appraisal Update and/or Completion Report (Form 1004D) from a renovation consultant, architect, or appraiser to confirm that the renovation was completed in accordance with the plans and specifications.

Note: Form 1004D must be reviewed to confirm that all “subject to” items listed in the appraisal were completed.

  Obtain a certificate of occupancy, if required.
  Ensure that the appraisal on file accurately reflects the final scope of completed work.

Note: When improvements to the property were not completed to plan, tis may require an updated appraisal to determine whether the changes affect the “as completed” value. The servicer must self-report any reduction in value to the HomeStyle Renovation Mailbox (see F-4-03, List of Contacts).

 

Obtain an endorsement to the title insurance policy, concurrent with the date of the last disbursement of funds, to extend its effective date through the date the renovation was completed, ensuring the continuance of Fannie Mae’s first-lien priority.

Note: When the property is in a state in which contractors’, subcontractors’, or materialmen’s liens have priority over mortgage liens, the servicer must obtain all necessary lien releases or take any other action that may be required to ensure that the title to the property is clear of all liens and encumbrances.

 

Obtain a certification regarding the property insurance to confirm that the coverage has been increased, if necessary, to comply with Fannie Mae’s standard property and flood insurance requirements. See B-2, Property Insurance Requirements and B-3, Flood Insurance Requirements for Fannie Mae’s applicable property insurance coverage requirements.

 

Use all funds remaining in the renovation escrow account that were not deposited separately by the borrowers to reduce the UPB of the mortgage loan. However, in some cases, unused contingency funds can be used to make additional improvements or repairs to the property. 

See below for related Q&A's:

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

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

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