Shortly after the latest HUD/FHA industry conference call* on April 9th, problems surfaced when the Presenters opened up to questions from participants. Several active 203(k) Consultants voiced their concerns over the “Consultant Fee Schedule” that is published (refer to page #410-411) in the draft Handbook.
This Fee schedule is identical to the one published in Mortgagee Letter 95-40. In other words, HUD/FHA has not authorized an increase in Consultants’ fees for work related to the preparation of the Work Write-Up and review of architectural exhibits (if any) in at least 10 years.
The primary concern voiced by the Consultants was the requirement listed on page #411 of the draft 4000.1 Handbook that states that “the Consultant may charge $100 per draw request”. HUD Headquarters staff responded that this fee has been in existence since the publication of ML 95-40 so it is not something new.
However, in reviewing this Mortgagee Letter – the Consultant fees allowed for preparation of the Work Write-Up are shown but a statement is made relative to the Draw or Compliance Inspections that “maximum fees for compliance inspections on completed work will continue to be set by each HUD office”.
In this regard, HUD consolidated all of its single family housing operations in 1996 from 81 Field Offices to 4 Homeownership Centers. Also, HUD ceased regulating the fees that appraisers can charge as well as most closing costs in lieu of a policy that permits fees on FHA loan transactions that are reasonable & customary. As a result – Draw Inspections fees trended up over time but not to unreasonable levels.
All of the Consultants that voiced their concerns over the $100 Draw Inspection Fee limitation stated that they would no longer be able to process such requests if this policy did not change. HUD Headquarters staff promised to take another look at this policy before the June 15, 2015 effective date.
Let’s hope that HUD formally adopts a reasonable & customary standard for Consultant fees since this 203(k) rehab loan program continues to help improve our existing housing stock and also enable first-time buyers to purchase and rehab a dwelling in one loan transaction.
To access the draft Handbook & new 203(k) worksheets go to the www.hud.gov website and type in “203(k) Sample Documents” in the Search box.
* On April 9, 2015, HUD/FHA Headquarters staff conducted an industry conference call to discuss the recently published new Section of the draft “Origination Through Post-Closing/Endorsement” Handbook (4000.1) dealing with the 203(k) Rehabilitation Mortgage Insurance Program and 203(k) Consultant Requirements. Information as to how to best access the new & updated 203(k) maximum mortgage amount worksheets was provided as well as instructions on how to calculate LTVs relative to Mortgage Insurance Premiums for 203(k) loans. It was also pointed out that the Streamlined 203(k) program will now be referred to as the “Limited 203(k) Program”.