Freddie Mac Single-Family Seller/Servicer Guide 4607.6 — Eligible renovations for CHOICERenovation® Mortgages

Freddie Mac Single-Family Seller/Servicer Guide 4607.6 — Eligible renovations for CHOICERenovation® Mortgages

Effective 2025-06-04 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Eligible and ineligible uses of Mortgage proceeds ■ Compliance with applicable laws and project documents ■ Renovations to Manufactured Homes ■ Payoff of short-term financing that financed renovations completed prior to the Note Date (a) Eligible and ineligible uses of Mortgage proceeds CHOICERenovation® Mortgage proceeds must only be used to finance renovations that are made to a property with an existing dwelling and may include: ■ Fees related to plans and specifications, permits, title updates, appraisals, draw inspections and the final inspection ■ An amount up to, but no more than, six monthly payments of principal, interest, taxes and insurance ■ Contingency reserve funds as described in Section 4607.11(b) ■ The payoff of short-term financing that provided the Borrower with funds to repair, restore, rehabilitate or renovate an existing home as described in Section 4607.6(d) ■ Adding or renovating outdoor structures used for leisure and recreation, including, but not limited to, swimming pools, decking, screening and porch and patio additions Note: In accordance with Section 4607.11(b), CHOICERenovation Mortgages whose proceeds are used exclusively to finance the addition or renovation of outdoor structures used for leisure and recreation will not be subject to the minimum contingency reserve requirements. ■ Renovations or repairs to a property that has been damaged in a disaster or for renovations that will protect the Mortgaged Premises in case of a future disaster (e.g., storm surge barriers, foundation retrofitting for earthquakes, retaining walls, etc.) ■ Renovations to improve the energy and/or water efficiency, the health and safety and/or the resiliency and preventiveness of the Mortgaged Premises Note: See Section 4607.16(b) for special requirements when CHOICERenovation Mortgages are combined with GreenCHOICE Mortgages® and the eligibility for the credit for Credit Fees for GreenCHOICE Mortgages ■ Adding or renovating an ADU, including a Manufactured Home ADU Note: See Section 4607.6(d) below regarding the payoff of short-term financing that financed the addition or renovation of an ADU prior to the Note Date. CHOICERenovation® Mortgage proceeds may not be used: ■ To raze an existing structure and build a new primary dwelling unit ■ For personal property with the exception of new appliances (b) Compliance with applicable laws and project documents Renovations must comply with all applicable State and local laws and regulations, including zoning regulations. All required permits and approvals must be obtained. Renovations of properties located in Planned Unit Developments (PUDs), Condominium Projects or Cooperative Projects must comply with all applicable project conditions, covenants and restrictions. (c) Renovations to Manufactured Homes Renovations to a primary dwelling unit that is a Manufactured Home or a Manufactured Home ADU are allowed, provided the Manufactured Home remains in compliance with HUD’s property acceptability criteria for Manufactured Homes and the general requirements in Section 5703.2, property eligibility requirements for Manufactured Homes in Section 5703.3(a) and requirements for eligible properties with an ADU in Section 5601.2, as applicable. Renovations may include the removal of a Manufactured Home on the property that is not the primary dwelling unit, provided any effect of its removal on the value of the Mortgaged Premises is reported by the appraiser when determining the “as completed” value of the property pursuant to the appraisal requirements for CHOICERenovation Mortgages in Section 4607.8. (d) Payoff of short-term financing that financed renovations completed prior to the Note Date For CHOICERenovation Mortgages that are “no cash-out” refinance Mortgages, proceeds can be used to pay off short-term financing that financed renovations (including, but not limited to, the addition or renovation of an ADU) completed prior to the Note Date, provided the following requirements are met: ■ The CHOICERenovation Mortgage is not secured by a Manufactured Home ■ The CHOICERenovation Mortgage is not a CHOICEReno eXPress® Mortgage ■ The Borrower on the CHOICERenovation Mortgage must be the Borrower on, and obligated to repay, the short-term financing. Exceptions: ❑ A Borrower may be omitted in the event of death or divorce, or ❑ A Borrower who is a Related Person may be added, provided that all Borrowers on the CHOICERenovation Mortgage are owner-occupants of the Mortgaged Premises and considered in the underwriting of the CHOICERenovation Mortgage ■ All renovations financed by the short-term financing must be completed prior to the Note Date of the CHOICERenovation Mortgage with no outstanding obligations related to such financing ■ All renovations financed by the short-term financing must be completed prior to the appraisal, which must reflect these renovations having been made. The appraisal report obtained in accordance with CHOICERenovation Mortgage appraisal requirements in Section 4607.8 must only be completed subject to completion of any proposed renovations also being financed with the CHOICERenovation Mortgage. ■ The Mortgage file must contain copies of all relevant documentation, including, but not limited to: ❑ The short-term financing agreement ❑ Sufficient documentation (e.g., purchase contracts, plans and specifications, receipts, invoices, lien waivers, etc.) on which to validate the actual cost of all renovations financed by the short-term financing ❑ A document clearly showing the calculation of the short-term financing ❑ The Settlement/Closing Disclosure Statement or an alternative form required by law for the closing of the short-term financing ❑ The payoff statement

Source: Freddie Mac Single-Family Seller/Servicer Guide 4607.6 — Eligible renovations for CHOICERenovation® Mortgages · source URL · snapshot 4c94f67729042dd6