Mortgagee letters are typically the way HUD conveys information and rules to the public. Mortgagee letter 94-11 was and is the 203k consultants most productive Mortgagee Letter. It is the first time that HUD actually gave any direction to the consultants.
I find that working with lenders they want everything thing to match perfectly and it is getting to the point of annoying to say the least.
The FHA 203k loan guarantee program was initially thought of as a way to speed this loan process along. You have consultants that are able to independently bid a project. They put together a bid that is sufficient to close the loan while they await a bid from a contractor that "supports their bid" or "confirms" their bid. Then the loan closes.
What should NOT happen -
1) The contractor bids a project then the consultant uses that to create a specification.
2) The consultant makes a site visit and inspection, then brings a contractor back the next day to have the contractor bid the project without having the benfit of a bid specification in hand.
3) the consultant or the contractor should not have to match bids exactly.
In reality what has been happening is that the lenders all have to have these two bids match EXACTLY or they won't close the loan. This means that the consultant or the contractor has to make changes. Interesting.
The guideline is clear in this area that the bids DON'T have to match exactly. If a consultant's bid comes in at $52,000 and the contractor's bid comes in at $50,000 close the loan and when those differences arrise the contractor is paid what he bid and the overage is moved to the contingency and eventually pays down on the loan. On the other hand if the Consultant's bid is $50,000 and the contractor's bid is $52,000 close the loan and we will use the contingency to close the gap OR we can adjust the bid provided the consultant agrees with the contractor.
In New York Michael Faust, 203k consultant, is not only good at doing this process but is also our EEM expert associate. Michael has been working with the EEM for quite some time and is a wealth of knowledge for those wanting to know more about the program. Feel free to contact him if you are looking for some ensite into that program as well as how it merges with the FHA 203k program.
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