On Jul. 9, HUD issued policies to increase rehabilitation financing.
HUD, FHA published Mortgagee Letter ML 2024-13 re rehabilitation program guidance.
Updates 203(k) Rehabilitation Mortgage Insurance Program Standard, Limited policies.
Revises consultant fees and requirements, program cost limits, and financing periods.
Objective is to increase use of the program and increase affordable housing inventory.
Background
FHA 203(k) Rehabilitation Mortgage Insurance Program provides financing on single-home mortgages that include structural, interior, energy efficiency repair, rehab costs.
Standard 203(k) is used for major repairs financing; Limited 203(k) for minor repairs.
Decline in program participation instigated request for information (RFI) in Feb. 2023 to determine causes of deficiencies and barriers to program use, see rule #163300.
General Program Guidance
Extend Standard 203(k) financing to 12 months and Limited 203(k) to 9 months.
Increase Limited 203(k) cost allowance for minor repairs to from $35,000 to $75,000.
Limit will be reviewed annually to ensure it continues at pace with market conditions.
The updates also increase the number of days that a borrower is unable to occupy the subject property during rehabilitation period for Limited 203(k) from 15 to 30 days.
Consultant-Related Guidance
Require 203(k) consultant for Standard 203(k) financing, but optional for Limited.
Update consultant fees to $1,000 to $1,400 for costs up to $140,000 and fee of 1% of costs or $2,000 (whichever is lower) for repair expenses greater than $140,000.
Allow consultant fees to be financed for the Limited 203(k) rehabilitation program.
Make consultants valid on the official roster for two years, subject to recertification.
Effectiveness
Enhancements must be implemented for all FHA cases assigned on/after Nov. 4, 2024.
Regulators
HUD
Entity Types
Bank; CNSM; MG Orig; Servicer; Thrift
Reference
PR 24-170, Lt 2024-13, Info 2024-44, 7/9/2024; ESG;