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In August 2016, the FHA issued a press statement announcing amended policies for the FHA 203(k) Rehabilitation Mortgage Insurance Program. The policies were specifically changed regarding the 203(k) Consultant Draw Inspection Fee.

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FHA Loan Articles

News and Updates for Homeowners

FHA Amends Rehab Loan Policies

FHA Amends Rehab Loan Policies
September 19, 2016 - In August 2016, the FHA issued a press statement announcing amended policies for the FHA 203(k) Rehabilitation Mortgage Insurance Program. The policies were specifically changed regarding the 203(k) Consultant Draw Inspection Fee.

According to the FHA official site, the rule change is designed to revise the maximum fee that may be charged by a 203(k) consultant for the “Draw Inspection”. While this isn’t a massive policy alteration, it can affect a borrower’s costs for the loan so it’s good to know what to expect with the new FHA guidelines.

Mortgagee letter 2016-12 announced that FHA and HUD continue to “analyze the overall Consultant Fee structure” established in 1995 for FHA rehab loans. The FHA and HUD have “determined that the current $100 limit on the Draw Inspection Fee discourages consultant participation in the Section 203(k) program and has the potential to limit access to credit” according to the mortgagee letter.

As part of the revised policy, FHA has altered the fee limit. “The Consultant Draw Inspection Fee is amended to permit a fee that is reasonable and customary for that area provided such fee does not exceed a new dollar limit”. That limit is, at the time of this writing, set at $350.

For each draw request,”...consultant may charge an Inspection Fee that is reasonable and customary for work performed in the area where the property is located, provided the fee does not exceed a maximum of $350″. Each area may have a different “reasonable and customary” fee for this type of service, so the actual dollar amount will vary depending on the housing market. If you need to know what specific dollar amount is customary in your area, ask your loan officer for further information.

FHA/HUD policy changes such as these can happen when rules enacted years ago become outdated due for various reasons; changes in the economy, the need for more flexibility in the regulations,etc. In some instances, it may be that changes in federal law or the FHA loan program itself are responsible for new policies or amended older policy.

The Consultant Draw Fee change is effective immediately. It is important to note that this policy change specifically affects FHA rehab loans and is not extended (in its current form at the time of this writing) to other FHA loan programs.

FHA 203(k) rehab mortgages allow borrowers to buy or refinance properties that are in need of repairs; such property to be purchased or refinanced with an FHA 203(k) rehab loan must meet certain energy efficiency and structural standards once the rehab is complete according to the FHA official site.

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