HUD 203(k) Mortgage Participation


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;
Functions Operations; Product Administration; Social
Countries United States of America
Category
State
Products Banking; Loan; Mortgage
Regions Am
Rule Type Final
Rule Date 7/9/2024
Effective Date 11/4/2024
Rule Id 218564
Linked to Rule :163300
Reg. Last Update 7/9/2024
Report Section US Banking

Last substantive update on 07/11/2024