The lender is not required to ensure that the borrower has had this work completed prior to delivery of the loan to Fannie Mae.
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Minor conditions and deferred maintenance items include, but are not limited to, worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass and are typically due to normal wear and tear. If the appraiser reports the existence of minor conditions or deferred maintenance items that do not affect the safety, soundness, or structural integrity of the property, the appraiser may complete the appraisal “as is” and these items must be reflected in the appraiser’s opinion of value. Requirements for Existing Construction When There are Minor Conditions or Deferred Maintenance Items that Do Not Affect the Safety, Soundness, or Structural Integrity of the Property
If the final title report is issued before the completion of the improvements, lenders must obtain an endorsement to the title policy that ensures the priority of Fannie Mae’s lien. Lenders must obtain a final title report, which must not show any outstanding mechanic’s liens, take any exceptions to the postponed improvements, or take any exceptions to the escrow agreement. Once a certificate of completion is obtained, the lender must release the final draw from the escrow account, which should include any funds in excess of the amount needed to pay for completion of the postponed items. The completion escrow may not adversely affect the mortgage insurance or title insurance. Lenders and borrowers must execute an escrow agreement that states how the escrow account will be managed and how funds from the escrow account will be disbursed. Lenders must ensure the escrow account is a custodial account that satisfies Fannie Mae’s criteria for custodial accounts and depositories as outlined in Servicing Guide topic A4-1-02, Establishing Custodial Bank Accounts.
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However, if the contractor or builder offers a guaranteed fixed-price contract for completion of the improvements, the funds in the completion escrow only need to equal the full amount of the contract price. Lenders must establish a completion escrow for the postponed improvements, by withholding from the purchase proceeds funds equal to 120% of the estimated cost for completing the improvements. The cost of completing improvements must not represent more than 10% of the “as completed” appraised value of the property. State that the improvements were completed in accordance with the requirements and conditions in the original appraisal report, andīe accompanied by photographs of the completed improvements. Acceptable postponed items include items that:Īre part of the sales contract (third-party contracts are not permissible) Īre postponed for a valid reason, such as inclement weather or a shortage of building materials andĭo not affect the ability to obtain an occupancy permit.Ī certification of completion must be obtained to verify the work was completed and must: Mortgages may be delivered before postponed items are complete however, the postponed improvements must be completed within 180 days of the date of the mortgage note. Requirements for New or Proposed Construction
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