Freddie Mac Single-Family Seller/Servicer Guide 4606.7 — Funds for eligible renovations and contingency reserve requirements

Freddie Mac Single-Family Seller/Servicer Guide 4606.7 — Funds for eligible renovations and contingency reserve requirements — PENDING VERSION, takes effect 2027-01-25

Not yet in force. This is the pending version of the section, which takes effect 2027-01-25. The other version on this page governs until then.

Effective 2027-01-25 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Eligible renovation funds ■ Contingency reserve ■ Unused funds (a) Eligible renovation funds On the Note Date, the eligible renovation funds (sufficient to cover the total cost of the eligible renovations minus any advances for the cost of materials and/or eligible renovation costs paid pursuant to Section 4606.6) must be deposited into a completion escrow account. The Seller and the Borrower must execute a written escrow agreement detailing how the funds will be managed and disbursed. A copy of the escrow agreement must be retained in the Mortgage file. After taking into consideration any advances for the cost of materials and/or eligible renovation costs paid pursuant to Section 4606.6, the eligible renovation costs identified in the renovation contract(s) must be consistent with the amount of eligible renovation funds deposited into the completion escrow account. If the CHOICEReno eXPress® Mortgage proceeds are insufficient to cover the contracted cost of the eligible renovations, the Borrower must deposit sufficient funds to pay the remaining amount into the completion escrow account. (b) Contingency reserve A contingency reserve is not required for CHOICEReno eXPress Mortgages. However, if the Seller chooses to establish a contingency reserve, the contingency reserve amount must be less than or equal to 20% of the total eligible renovation costs identified in the renovation contract(s). The contingency reserve funds may come from the CHOICEReno eXPress Mortgage proceeds or directly from the Borrower. (c) Unused funds (i) CHOICEReno eXPress Mortgage is current If the CHOICEReno eXPress Mortgage is current, any unused funds remaining in the completion escrow account after the costs of all eligible renovations have been paid to the appropriate parties must be used for the following: ■ Reduce the UPB ■ Complete additional eligible renovations, provided the Seller must: ❑ Document that additional eligible renovations were paid for from the completion escrow account and verify the funds are being used to further improve the Mortgaged Premises, and ❑ Verify the additional eligible renovation work has been completed by obtaining a completion report pursuant to the appraisal requirements in Section 4606.4 ■ Reimburse Borrower contributed funds to the contingency reserve if one was established ■ If a “no cash-out” refinance Mortgage, disburse to the Borrower the remaining proceeds, provided the total amount disbursed to the Borrower at closing and from the unused funds does not exceed the maximum amount allowed under Section 4301.4 for “no cash-out” refinance Mortgages (ii) CHOICEReno eXPress Mortgage is delinquent If the CHOICEReno eXpress Mortgage is delinquent, any unused funds remaining in the completion escrow account after the costs of all eligible renovations have been paid to the appropriate parties must be applied in accordance with the application of payment requirements in the Note and Security Instrument. After the CHOICEReno eXPress Mortgage is brought current, any remaining unused funds must be used for the following: ■ Reduce the UPB ■ Complete additional eligible renovations, provided the Seller must: ❑ Document that additional eligible renovations were paid for from the completion escrow account and verify the funds are being used to further improve the Mortgaged Premises, and ❑ Verify the additional eligible renovation work has been completed by obtaining a completion report pursuant to the appraisal requirements in Section 4606.4 ■ Reimburse Borrower contributed funds to the contingency reserve if one was established ■ If a “no cash-out” refinance Mortgage, disburse to the Borrower the remaining proceeds, provided the total amount disbursed to the Borrower at closing and from the unused funds does not exceed the maximum amount allowed under Section 4301.4 for “no cash-out” refinance Mortgages

Source: Freddie Mac Single-Family Seller/Servicer Guide 4606.7 — Funds for eligible renovations and contingency reserve requirements · source URL · snapshot e399c3dcaab28da0