We just had a lender ask us to increase the contingency based on all these fees that didn't used to be allowed. Interesting that they want to increase their security and though the borrowers quite often want to keep the loan as low as possible, now they are going to have another 10-20% on fees that many lenders demand we get to the penny. Some lenders like M&T even have a form they want us to fill out with the exact amounts of all permits... nice, and impossible to get eactly unless we submit the plans in many cases and we don't have those plans just yet since the client hasn't paid the architect to draw them till they own the house. You have to laugh at some of these things. But this is a new one. Read carefully as it also states it is up to the lender to require a contingency at all or not, so for this one (not M&T) to actually want them higher than they have been is likely just so they make their loan amount a little bigger for their company.
II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages 8. Programs and Products - 203(k) Rehabilitation Mortgage Insurance Program
Handbook 4000.1 362 Effective Date: 09/14/2015 | Last Revised: 09/30/2015 *Refer to the online version of SF Handbook 4000.1 for specific sections’ effective dates
Limited 203(k) Financeable Contingency Reserves (E)
A Contingency Reserve is not mandated; however, at the Mortgagee’s discretion, a Contingency Reserve account may be established and may be financed. The Contingency Reserve account may not exceed 20 percent of the Financeable Repair and Improvement Costs.
The Borrower may provide their own funds to establish the Contingency Reserves. Where the Borrower has provided their own funds for Contingency Reserves, they must be noted under a separate category in the Repair Escrow Account.
Standard 203(k) Financeable Repair and Improvement Costs and Fees (D)
The following repair and improvement costs and fees may be financed:
· costs of construction, repairs and rehabilitation;
· architectural/engineering professional fees;
· the 203(k) Consultant fee subject to the limits in the 203(k) Consultant Fee Schedule section;
· inspection fees performed during the construction period, provided the fees are reasonable and customary for the area;
· title update fees;
· permits; and
· a Feasibility Study, when necessary to determine if the rehabilitation is feasible.
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