Monday, June 24, 2013

FHA 203K STREAMLINE

KENTUCKY HOUSING CORPORATION 

FHA 203K STREAMLINE TPO QUICK REFERENCE GUIDE

The FHA 203K Streamline Program provides up to $35,000 toward repair/rehabilitation.
This program combines funds needed to purchase or refinance along with the funds needed
to repair/rehabilitate the property. The borrower is given three months from the closing
date to complete all the work.
Procedures All standard FHA borrower and credit underwriting guidelines apply.
10% contingency required (inclusive of the $35,000).
Submission package must include203K worksheet (HUD-92700), FHA Underwriting
and Loan Transmittal Summary (HUD-92900 LT), executed Homeowner/Contractor
Agreement and all repair bids.
A Supplemental Origination Fee must be charged. The Supplemental Origination Fee
is calculated as the greater of $350 or 1.5% of rehabilitation cost (reflected on page 2 of
GFE in Block 1). This fee will be paid to KHC for maintaining the repair escrows.
Regular DAP may be used.
Home DAP cannot be used with the FHA 203K Streamline.
Eligible
Improvements
Repair/Replacement/Upgrade:
o Roofs, gutters and downspouts, HVAC systems, plumbing, electrical, and flooring
Painting, both exterior and interior
Minor remodeling, such as kitchens, but no structural repairs
Weatherization, including storm windows and doors, insulation, weather stripping, etc.
Purchase and installation of appliances including:
o Free standing ranges, refrigerators, washers/dryers, dishwashers, microwave ovens
Accessibility improvements for persons with disabilities
Repair/replace/add exterior decks, patios, porches
Basement finishing/remodeling and waterproofing, but no structural repairs
Window/door replacements and exterior wall re-siding
Septic system and or well repair or replacement
Ineligible
Improvements
Major rehabilitation/remodeling, such as the relocation of a load-bearing wall, new
construction (including room additions), repair of structural damage, landscaping, leadbased paint stabilization or abatement of lead-based paint hazards and any repair
causing the mortgagor to be displaced from the property for more than 30 days.
Contractors
and
Rehabilitation
Criteria:
Must use
contractors to
complete the
repairs and
rehabilitation
The Contractor(s) must be licensed with the State of Kentucky (if applicable) and
provide evidence of insurance at time of loan submission.
www.contractors-license.org/ky/Kentucky.html (to check if contractor is licensed)
Two bids are required for each work item to show cost is customary for area.
The cost estimate must clearly state the nature and type of repair and the cost for
completion of the work item(s). Breakdown of material and labor cost must also be
shown. Additional cost estimates may be necessary.
When purchasing appliances the invoices from dealer must be provided.
Lender indicates which contractor’s bid has been chosen by the borrower so KHC can
provide to the appraiser.
The Contractor(s) must sign a Homeowner/Contractor’s Agreement to complete the
work for the amount of the cost estimate and within the allotted time frame.
The rehabilitation period begins when the mortgage loan is closed.KENTUCKY HOUSING CORPORATION
FHA 203K STREAMLINE TPO QUICK REFERENCE GUIDE
Page 2 of 2 5/30/2012
Self-Help Self-Help work items only permitted if borrower meets eligible contractor criteria and is
currently employed in same profession as work to be performed (i.e.; borrower is a licensed
plumber and will complete that portion of the work)
A Self-Help Agreement is executed by the borrower and lender.
Borrowers who utilize self-help will not be compensated for their labor, however the
cost of labor will be included in the repair/rehabilitation cost (in case the borrower is
unable to complete the work, and a contractor must be hired).
Borrower to provide two estimates for each work item.
Appraisal
Requirements
Only one “after improved” appraisal (subject to completion of repairs) is required.
Property value must be sufficient to purchase and complete rehabilitation
Eligible
Property
Types
Single family residences, including HUD REO properties
Manufactured Homes
Condominiums (FHA Approved Condominiums)
o Must follow FHA Agency Guidelines.
Rehabilitation
Period and
Disbursements
All work must be completed within three months from the loan closing.
No more than two payments may be made to each contractor
The first payment is intended to defray material costs and shall not be more than 50%
of the estimated costs of materials and permits (use Disbursement Authorization Form).
The final payment to the contractor(s) will be made following completion of all work
using the Mortgagor/Contractor Letter of Completion.
Once all work is completed then the lender will request a Final Inspection. Once KHC
receives the Final clear Inspection, the escrow account will be finalized.
Change Order
Guidelines
If during the repair process there are unforeseen repairs necessary to complete the
original work a change order must be approved by a KHC Underwriter
The following must be submitted to KHC Underwriting Department;
o Two bids with labor and materials broken down for the change request.
o Completed HUD Form-92577 (change order request form).
Once received, KHC will determine if there is enough money in the escrow account.
If sufficient funds in the escrow account, the KHC Underwriter will sign and date form
92577 and fax back to the lender.
If forms are acceptable but not sufficient funds in the escrow account, verify the
borrower has sufficient funds to cover the changes. The funds must be verified,
collected and deposited into the escrow account.
Closing
Guidelines
and Forms
There will no disbursements advanced at closing.
Once the repairs are completed with the funds appropriately disbursed, rehabilitation
escrow account is closed out and FHA Connection is updated to show the close-out.
The following documentation is required on all 203K streamline loans:
o Rehabilitation Loan Agreement: This agreement is between the lender and the
borrower establishing the conditions under which the lender will advance the 203K
streamline mortgage proceeds and 203K Rider.