Servicing Guide

Published July 15, 2020

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

The following table describes the funds that the servicer must ensure are included in a renovation escrow account, as applicable.

Types of funds held in a renovation escrow account Description

A Contingency Reserve

An amount of at least 10%, and up to 15% of the total costs for the renovation work, which the servicer must only release to cover required, necessary, and unforeseen repairs or deficiencies that are discovered during the renovation.

Construction Related Costs

Documented charges that may be considered part of the renovation work include, but are not limited to, the following:

  • property inspection fees,

  • fees for the title update,

  • architectural and engineering fees,

  • independent consultant fees,

  • costs for required permits,

  • fees for review of renovation plans,

  • appraisal fees, and

  • fees charged for processing construction draws.

Mortgage Loan Payments

If the property is a principal residence that cannot be occupied during the renovation period, the servicer must use this amount to fund mortgage loan payments that become due during the renovation construction period.

Note: The servicer must ensure that this represents only those payments that come due during the period that the property cannot be occupied and that the amount funded does not exceed six full mortgage loan payments of PITIA.

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

 

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