VA Renovation Post-Close Policies & Procedures

VA Renovation Post ClosePolicies & Procedures

 

About This Document

This document, in conjunction with the order form, contains the Client’s policies and procedures for post-closing loan administration. Updates to these policies and procedures may occur to reflect program changes, regulatory issues, and industry best practices. Client’s ‘Loan Program Point of Contact’ designated on the order form will be notified of updates and changes when they occur.

Initial File Set-Up Process

Company will review the Client-provided data file and documents for acceptability. If issues are found, Company will place the service request on ‘Hold’ and alert the Client. Company will provide welcome messages and online portal access to the borrower and contractor. In cases where the borrower/contractor do not have the capabilities of accessing the Company’s online portal, the Company will alert the Client. Company will restrict Contractor(s) online visibility to any Borrower contingency and interest reserve line items.

Required Documents

Final Closing Documents
Final Maximum Mortgage Worksheet or equivalent
Homeowner and Contractor Agreements
Renovation Loan Agreement
Final Repairs Bid
Appraisal
Self-Help Agreement (if applicable)
Borrower’s Certification
Architectural Exhibits (if applicable)
Course of Construction aka Builder’s Risk Insurance (if applicable)
Contractor’s Questionnaire
Contractor’s General Liability Insurance
Contractor’s Worker’s Compensation
Contractor License (If applicable)
Contractor’s IRS Form W-9
VA builder identification number

Material Draw

Company will label the draw container ‘Material Draw’ on all material draws. Up to 50% of the material cost line items for deposit items may be disbursed after closing to the contractor. Company will provide the following items for approved material draws:

  1. Executed Draw Request Form by Contractor and Borrower
  2. Conditional Lien Waiver from Contractor receiving material draw
  3. Copy of any State Statute Required Documents (if applicable)

The following is considered as allowable items to be disbursed for a material draw.

Interim Draw

Company will provide the following items for approved draws.

  1. Executed Draw Request Form by Contractor and Borrower
  2. Progress Inspection
    • Fee billed to Client unless inspections are included in the escrow holdback where they will be billed to client but paid from the escrow holdback and included in the draw request.
    • Land Gorilla On-Site Progress Inspection when Land Gorilla Remote Inspections are not feasible.
  3. Permit(s) (if not previously submitted).
  4. Change Orders (If Applicable)
  5. Conditional Lien Waiver from Contractor and any parties that provided pre-lien notifications
  6. Copy of any State Statute Required Documents
  7. New Additions Only
    • Foundation Survey or Foundation Endorsement (New Additions)

Final Draw

Company will provide the following items for the final draw:

  1. Final Inspection 1004D Completion of Repairs ordered through Land Gorilla showing all work is completed. The final inspection must be ordered by the lender/Client through the VA web portal to obtain a VA Appraiser.
  2. Certificate of Occupancy (or equivalent) from local jurisdiction having authority over the project. Equivalent meaning permit cards showing completion, inspections by the local jurisdiction demonstrating completion, or letter from the local jurisdiction stating that all inspections were performed successfully.
    • In projects where a COO is not issued by the local authority, the local authority’s final inspection card is acceptable.
    • If the local jurisdiction is not involved in the project, an executed document by the borrower and their contractor stating that a COO or final inspection card is not available will be satisfactory.
  3. Title Update showing no mechanics or tax liens
    • AFX Title Update at Final Inspection and Terminated Contractors (paid from borrower’s contingency)
  4. Executed Draw Request Form by Contractor and Borrower
  5. Change Orders and Corresponding Invoice (If Applicable)
  6. Conditional Lien Waiver from Contractor and any parties that provided pre-lien notifications
  7. Borrower’s Letter of Completion
  8. Copy of any State Statute Required Documents

Change Orders

Company will review all change orders for acceptance on behalf of the Client using industry best practices to help ensure that the Borrower will have enough funds to complete the project, project stakeholders agree on the change, and the change order document is properly executed. Company will provide notice and involve the Client when the change order requested either ‘decreases’ the Scope of Work, when the project is no longer feasible to complete within the term, or when an appraisal update is required. Fees for appraisal services such as 1004D appraisal updates will be paid from the Borrower’s contingency account.

File Closeout

Review the VA policies on disbursing unused escrow funds.

Client will be required to maintain the State Table ‘Escrow Interest Rate’ within ‘Settings’ of the Construction Loan Manager to control the ability for Company to perform the File Closeout. Clients that do not maintain the ‘Escrow Interest Rate’ will be responsible for performing the ‘Post Escrow Interest’ transaction.

Company will label the draw container ‘Final Disbursement’ and perform the following for file closeout:

  1. Post the ‘Post Escrow Interest Transaction’ (excluded if client is not managing the ‘State Table’)
  2. Add all remaining balances to final disbursement draw container with the Borrower payee information.
    • Posted Escrow Interest amounts resulting in the budget from the ‘Post Escrow Interest’ transaction
    • Remaining Budget Amounts not used in the renovation
    • Remaining Title and Inspection Fees if not used
    • Remaining reserves from contingency and interest reserve
  3. Approve all line items and approve the draw container.
  4. Generate the loan level report for ‘Escrow Statement’ and place a copy of the Escrow Statement in the loan’s document center.
  5. Send message to Client that the loan’s final disbursement has been approved and attach a copy of the advancement advice to Client.

Dispute Resolution

Company’s involvement in disputes is limited to facilitating communication between the Borrower and Contractor and documenting next steps expected by involved parties. Company will not be expected to participate in legal matters regarding the dispute.

  1. Disputes arising between the Borrower and their Contractor shall be marked as a complaint to notify the Client.
  2. Company will direct the Borrower and Contractor towards any contractual obligations such as the Homeowner/Contractor Agreement and Renovation Loan Agreement to resolve the dispute.
  3. Company will attempt to keep the disputing parties communicating and setting ‘next steps’ to facilitate resolution of the dispute and keep the client updated.

Contractor Transitions

Occasionally Contractors are not able to complete the project due to a variety of circumstances. In the event that the homeowner’s contractor can not proceed with work, either by right of the homeowner or decision by the Contractor, Company will work with the homeowner to transition the current contractor and assist the homeowner regarding next steps in acceptability of a new contractor. Company will collect the new contractor package and submit an order for service for a new contractor review and project feasibility report. Expense of the new review shall be either paid from the borrower’s contingency reserve or directly by the homeowner. Company will update the Contacts status to reflect any negative impact caused by the contact to provide visibility of the acceptance status.

Disbursement Methods

ACH is the preferred disbursement method, however joint checks mailed to the payee may be used when ACH is not acceptable to the payee. Company will be responsible for collecting the payment instructions from the payee and storing them within the Construction Loan Manager software.

Loan Term Extensions

The Company will monitor the loan term in relationship to project progress. Company will obtain a borrower/contractor extension request prior to the end of the loan term when the project will not be completed within the current loan term. Loan extension requests will be executed by the borrower and contractor, contain the requested term extension time period, and provide a supporting reason for the extension request. Company will notify the Client of the request and apply the risk label ‘Extension Requested’. Client will promptly review the request and notify the Company of the decision to extend. Company will inform the borrower and contractor of the decision, remove the risk label, and extend the loan term using the transaction ‘modify loan term’.

Client Responsibilities

Client will be responsible for the following:

  1. Submit all orders for services through the API or online order submission and provide all documents required to provide loan administration service.
  2. Avoid material deposits at closing to allow for the draw to be performed by the Company.
  3. Verify that the Construction Loan Manager software loan balances match the Client’s escrow holdback when the loan is onboarded, prior to each draw disbursement, and at the escrow closeout.
  4. Respond to issues and complaints in a timely manner. Notify Company of any mortgage or servicing related issues that may impact the service being provided by Company.
  5. Serve as point of contact for disbursement payment tracking and mortgage related inquiries.
  6. Field inquiries from Client’s employees and/or Client’s vendors.
  7. Notify Company of any state notices received regarding liens.
  8. Manage escrow accounts and escrow servicing on the loan including interest income earned by the Borrower during the renovation period.
  9. Assume management of loans that have a risk level of 4, as determined by Company.
  10. Process all disbursements by the end of the next business day upon receipt of the Draw Statement from Company.
  11. Perform any document retention actions at file closeout.
  12. If applicable, maintain the ‘State Table’ for ‘Escrow Interest Rates’ in the settings section of Client’s account.
  13. Move the loan to the ‘Completed’ loan status after the Client has reviewed the file closeout documents.
  14. Initiate recourse removal.
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