Freddie Mac Single-Family Seller/Servicer Guide 4607.10 — Contractor requirements and advancing the costs of materials for CHOICERenovation® Mortgages

Freddie Mac Single-Family Seller/Servicer Guide 4607.10 — Contractor requirements and advancing the costs of materials for CHOICERenovation® Mortgages

Effective 2024-11-25 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Borrower as contractor ■ Contractors and/or tradespersons chosen by the Borrower ■ Renovations purchased from a home improvement store (a) Borrower as contractor The Borrower may act as the general contractor and/or may perform some or all of the work to complete the renovations when the following requirements are met: ■ The Borrower must be a licensed contractor when required by applicable local and/or State law ■ The Borrower must be insured to perform the renovations on the subject property ■ The Borrower must be qualified to complete the renovations The Borrower must submit to the Seller a plan detailing the work items the Borrower will perform. CHOICERenovation® Mortgage proceeds may be used to reimburse the Borrower for the cost of materials, but may not be used to reimburse the Borrower for labor costs. (b) Contractor(s) and/or tradespersons chosen by the Borrower Contractor(s) and/or tradespersons chosen by the Borrower to complete the renovations must meet the following requirements in accordance with Section 4607.9(b)(3): ■ The contractor(s) and/or tradespersons entered into an executed, binding renovation contract with the Borrower to complete the renovations no later than the Completion Date. The contract must include an indemnification provision requiring the contractor to indemnify the Borrower for any property loss or damage caused by the contractor, its employees or its subcontractors. ■ The contractor(s) and/or tradespersons must be licensed and insured as required by local and/or State requirements ■ The contractor(s) and/or tradespersons must be financially able to perform the duties necessary to complete the renovation work in a timely manner Except when the Borrower is acting as the contractor and/or tradesperson, up to 50% of the cost of materials may be advanced to the contractor(s) and/or tradespersons at closing in lieu of such funds being deposited into the completion escrow account or Custodial Account for Renovation Funds (as described in Sections 4607.11 and 4607.12), as applicable, when the above requirements are met. (c) Renovations purchased from a home improvement store If the Borrower chooses a home improvement store to have the renovation work completed and the home improvement store’s renovation program requires payment-in-full at the point of purchase, renovations may be purchased from the home improvement store at closing, provided the following requirements are met: ■ The CHOICERenovation Mortgage is a “no cash-out” refinance Mortgage ■ The Seller must review the home improvement store’s renovation program to determine that the following requirements are met: ❑ The home improvement store is financially able to perform the duties necessary to have the renovation work completed in a timely manner and pay the contractor(s) and/or tradespersons chosen by the home improvement store to complete the renovations. A contractor and/or tradesperson may not require payment directly from the Borrower. ❑ The home improvement store has a robust contractor approval process that is managed, maintained and updated regularly ❑ The contractor(s) and/or tradespersons chosen by the home improvement store to complete the renovations is licensed and insured as required by local and/or State requirements, and they must be approved under the home improvement store’s contractor approval process during the course of renovations. In the event a contractor and/or tradesperson becomes unapproved or is unable to complete the renovation work in a timely manner, the home improvement store must choose other approved contractor(s) and/or tradespersons to complete the renovations. ■ The Borrower may not be chosen by the home improvement store to complete the renovations, even if the Borrower is a licensed contractor and/or is licensed and qualified to complete the renovations ■ The home improvement store must have entered into an executed, binding renovation contract with the Borrower to complete the renovations no later than the Completion Date. The contract must include an indemnification provision requiring the home improvement store to indemnify the Borrower for any property loss or damage caused by the contractor(s) and/or tradespersons chosen by the home improvement store to complete the renovations. Up to 100% of the cost of materials and renovation costs identified in the renovation contract (including labor costs) may be paid to a home improvement store at closing in lieu of such funds being deposited into the completion escrow account or Custodial Account for Renovation Funds (as described in Sections 4607.11 and 4607.12), as applicable, if the requirements above are met.

Source: Freddie Mac Single-Family Seller/Servicer Guide 4607.10 — Contractor requirements and advancing the costs of materials for CHOICERenovation® Mortgages · source URL · snapshot 4c94f67729042dd6