Highlights from HUD's Mortgagee Letter 2024-13

On July 9th, 2024, HUD published through the Federal Housing Administration (FHA) an updated set of policies for the 203(k) Renovation Mortgage program. The goal of these updates according to HUD is to “modernize the program and enhance its usefulness for individuals and families seeking affordable financing for renovating or rehabilitating a single-family home when purchasing or refinancing” (HUD No. 24-170). Some of the highlights of these updates include…

? Increasing the allowable total rehabilitation costs a borrower can finance under the Limited 203(k) program from $35,000 to $75,000 and reviewing this limit annually to ensure it continues to keep pace with market conditions;

? Providing more time for rehabilitation and repair work to be completed by extending the rehabilitation period to 12 months for the Standard 203(k) and nine months for the Limited 203(k);

? Allowing the financing of the 203(k) Consultant Fee in the total mortgage amount for the Limited 203(k) if a borrower chooses to use a 203(k) Consultant; and

? Increasing the allowable fees that a 203(k) Consultant can charge for various activities, which have not been updated since 1995. The new fee structure is designed to appropriately compensate Consultants for their role and encourage more Consultants to participate in the program.

In addition to these highlights, HUD released an updated mortgagee letter to inform lenders and consultants on all the changes which are set to take effect on November 4th, 2024.

Within the updated mortgagee letter, one section that HUD highlights pertains to mortgagees and how they select and review their 203(k) Consultants. The letter states..

“When using a Consultant, the Mortgagee must select an FHA-approved 203(k) Consultant that is active on the FHA 203(k) Consultant Roster for the state in which the Property is located. The Mortgagee must not use the services of a 203(k) Consultant who has demonstrated previous poor performance based on reviews conducted by the Mortgagee.” (Mortgagee Letter 2024-13)

Having included this information more than once on the mortgagee letter could indicate that HUD will look to mortgagees/lenders for either documentation and/or a system of reviewing 203(k) consultants performance on mortgage loans. If that is the case, lenders will need a system in place for reviewing consultants.

One of the many features of Renovation Lending Software is the ability to include internal ratings and notes on 203(K) consultants that work with your company on renovation loan types. Having a system of record in place for tracking this information allows you to stay compliant with HUD while giving your internal team the visibility of your consultants performance to ensure that your 203(K) consultants meet your company and HUD’s standard.

To learn more about how Renovation Lending Software can help you manage your renovation business, visit our website https://renovationlendingsoftware.com/ . You can also contact us via email at [email protected] or by phone at (866) 217-6191.