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This has been misread for long enough - we are not held to only 5 draws

4240.4 REV-2 (5-2.C.) 2) Intermediate draws (four maximum) are inspected by the HUD assigned fee (or DE staff, where applicable) inspector (see paragraph 4-9).

If the cost of rehabilitation exceeds $10,000, then additional draw inspections are authorized provided the lender and borrower agree in writing, and the number of draw inspections are shown on Form HUD 92700, 203(k) Maximum Mortgage Worksheet.

Even HUD is guilty of misinterpretation of this. Now we have lenders who think on large projects there are only 5 draws allowed, 

I just received an accounting from a lender who charged $250 x 5 title update fees... they missed this in the guideliine

4240.4 REV-2
(1-13.)
E. Title Update Fee. To protect the validity of the mortgage position from mechanics liens on the property, reasonable fees charged by a title company may be included as an allowable cost of rehabilitation. Where the mortgage position is protected and is not in jeopardy, this fee may not apply. Borrowers may wish to obtain lien protection, but the fees must be paid by the borrower where such lien protection is not required to ensure the validity of the security instrument (see paragraph 1-20). The allowable fee should not exceed $50.00 per draw release. If all draw inspections are not made, monies left in escrow must be applied to reduce the mortgage balance.

Supplimental origination fee - The lenders get this fee and it is a minimum of $350 or 1.5% of the construction cost.  They think this fee is for writing 5 checks, and they are willing to take $70 per check, that seems reasonable to me... how about you?  But, watch what happens when the project is $500,000 in construction... they get 1.5% and they seem to think it is for writing those same five checks. They don't seem to understand this is to manage the additional draw inspections. Why would it make sense to pay them $1500 each to write five checks.  Of course it doesn't make any sense at all.

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