Freddie Mac Single-Family Seller/Servicer Guide 4607.11 — Funds for renovations and contingency reserve requirements for CHOICERenovation® Mortgages

Freddie Mac Single-Family Seller/Servicer Guide 4607.11 — Funds for renovations and contingency reserve requirements for CHOICERenovation® Mortgages

Effective 2026-06-03 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Renovation funds ■ Contingency reserve ■ Unused funds (a) Renovation funds On the Note Date, the renovation funds (sufficient to cover the total cost of the renovations minus any advances for the cost of materials and/or renovation costs paid pursuant to Section 4607.10) 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. For CHOICERenovation® In Progress Mortgages, the renovation funds must be deposited into a Custodial Account for Renovation Funds, as described in Section 4607.12, on or before the Settlement Date. After taking into consideration any advances for the cost of materials and/or renovation costs paid pursuant to Section 4607.10, the renovation costs identified in the renovation contract(s) must be consistent with the amount of renovation funds deposited into the completion escrow account or Custodial Account for Renovation Funds, as applicable. If the CHOICERenovation Mortgage proceeds are insufficient to cover the contracted cost of the renovations, the Borrower must deposit sufficient funds to pay the remaining amount into the completion escrow account or Custodial Account for Renovation Funds, as applicable. (b) Contingency reserve In addition to the renovation funds required to be deposited into the completion escrow account or Custodial Account for Renovation Funds, as applicable, the Seller must also deposit a contingency reserve to cover unforeseen renovation costs. Contingency reserve funds may come from the CHOICERenovation Mortgage proceeds or directly from the Borrower. A contingency reserve is not required for CHOICERenovation Mortgages whose proceeds are used exclusively to finance the addition or renovation of outdoor structures used for leisure and recreation. (See Section 4607.6 for a description of eligible renovations.) (i) Minimum contingency reserve For CHOICERenovation In Progress Mortgages, the minimum contingency reserve amount must be greater than or equal to 10% of the total renovation costs identified in the renovation contract(s), except that if the property utilities are not operable as referenced in the renovation contract(s) and/or plans and specifications, the minimum contingency reserve amount must be greater than or equal to 15% of the total renovation costs identified in the renovation contract(s). (ii) Maximum contingency reserve For CHOICERenovation Mortgages, the contingency reserve amount must be less than or equal to 20% of the total renovation costs identified in the renovation contract(s). While a contingency reserve is not required for CHOICEReno eXPress® Mortgages or CHOICERenovation Mortgages whose proceeds are used exclusively to finance the addition or renovation of outdoor structures used for leisure and recreation, if the Seller chooses to establish a contingency reserve, the contingency reserve amount must be less than or equal to 20% of the total renovation costs identified in the renovation contract(s). (c) Unused funds (i) CHOICERenovation Mortgage is current If the CHOICERenovation Mortgage is current, any unused funds remaining in the completion escrow account or Custodial Account for Renovation Funds, as applicable, after the costs of all renovations have been paid to the appropriate parties must be used for the following: ■ Reduce the UPB ■ Complete additional renovations, provided the Seller must: ❑ Document that additional renovations were paid for from the completion escrow account or Custodial Account for Renovation Funds, as applicable, and verify the funds are being used to further improve the Mortgaged Premises, and ❑ Verify the additional renovation work has been completed by obtaining a completion report pursuant to the appraisal requirements in Section 4607.8 ■ Reimburse Borrower contributed funds to the contingency reserve ■ 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) CHOICERenovation Mortgage is delinquent If the CHOICERenovation Mortgage is delinquent, any unused funds remaining in the completion escrow account or Custodial Account for Renovation Funds, as applicable, after the costs of all 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 CHOICERenovation Mortgage is brought current, any remaining unused funds (including contingency reserve funds not provided by the Borrower) must be used for the following: ■ Reduce the UPB ■ Complete additional renovations, provided the Seller must: ❑ Document that additional renovations were paid for from the completion escrow account or Custodial Account for Renovation Funds, as applicable, and verify the funds are being used to further improve the Mortgaged Premises, and ❑ Verify the additional renovation work has been completed by obtaining a completion report pursuant to the appraisal requirements in Section 4607.8 ■ Reimburse Borrower contributed funds to the contingency reserve ■ 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 4607.11 — Funds for renovations and contingency reserve requirements for CHOICERenovation® Mortgages · source URL · snapshot 4c94f67729042dd6