What happens when an FHA 203k loan goes sideways?
We hear all kinds of stories and everyone wants to lay blame on someone else when these loans go side ways and go sideways some to.
1) One our our associates in NJ called me and his client called him to say they were ready for a draw inspection, they had about $30,000 ready to draw. He gets there and finds that not one thing on his scope of work was completed. Not one thing. Wow, I asked how much did you pay for the things that were completed... his answer was "nothing" and he was exactly correct.
YOU must do what is on the scope of work. That is what the appraiser expects to see when they go out to complete their final inspection.
2) Same inspector in NJ called a week later with the same issue, another client did the same thing. The contractor said when he got to the job the owner says "scrap all that scope of work, we are doing something entirely different". NO, you aren't, not with money from the FHA Guaranteed loan.
3) We go to great lengths to insure this doesn't happen to you. HUD thought they did but they did it with the borrower's acceptance of conditions and again on the borrower's acknowledgment notifying the borrower no changes in the seop would be allowed without going through the lender.
The contractor however was n't duly informed so we include a set of notes in line item 35 that the contractor has to read and they sign just below that area. That particular note is as follows:
35. Note 8: CONTRACTOR NOR HOMEOWNER HAVE THE RIGHT TO CHANGE THESE SPECIFICATION OF REPAIRS WITHOUT PRIOR WRITTEN AUTHORIZATION FROM THE LENDER AND THE CONSULTANT. BY SIGNING BELOW, THE CONTRACTOR AND HOMEOWNER AND THEIR AGENTS CERTIFY AND AGREE THAT THEY HAVE READ THESE SPECIFICATION OF REPAIRS IN ITS ENTIRETY AND HERE BY AGREE TO ITS TERMS, CONDITIONS, PROCEDURES, POLICIES, DIMENSIONS AND PRICING AND HERE BY RELEASE THE CONSULTANT FROM LIABILITY FROM ANY POSSIBLE FUTURE DAMAGES THAT MAY OCCUR.
** One of the biggest issues is brought on by the borrowers when they want to "keep the loan amount as low as possible" yet will hire the contractor secretly to do allot more work on their project. That additional money they are putting down could have increased their down payment and possibly got them into a HomeStyle Renovation loan and save the PMI.
Keep us in mind if you need our assistance... 203k911.com
Downtown
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