What are the Mortgagee's options for satisfying repair requirements on the appraisal?

Required repairs identified on the appraisal report must be satisfied before the mortgage is submitted for insuring. Satisfaction of repairs may take one of the following forms:

Compliance Inspection Report - Form HUD-92051 (CIR): A CIR, prepared by an appraiser or inspector, certifies that the repairs have been completed satisfactorily. For inspections that require architectural expertise (structural or system repairs), a Residential Combination Inspector (RCI) or Combination Inspector (CI) certified by the International Code Council (ICC) must complete form HUD-92051. In addition, a professionally and/or appropriately licensed, bonded, registered engineer, or architect or a trades person or contractor, who has met the licensing and bonding requirements of the State in which the property is located or (other qualified individual); can provide documentation to support that the deficiencies have been corrected.

An Appraisal Update and/or Completion Report – Fannie Mae Form 1004D/Freddie Mac Form 442, may be used to report completion of repairs and/or satisfaction of conditions which do not require architectural expertise.

A Mortgagee's Assurance of Completion – Form HUD-92300 (that conditions have been satisfied) is acceptable in cases where repairs are minor and uncomplicated. If a homeowner can complete the work as normal maintenance, FHA considers the work minor.

Escrow of Funds: In some cases, the Mortgagee may establish an escrow account in accordance with the Repair Completion Escrow Requirements in Handbook 4000.1. The Mortgagee may establish a repair escrow for incomplete construction, or for alterations and repairs that cannot be completed prior to loan closing, provided the housing is habitable and safe for occupancy at the time of loan closing.

For additional information see:

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-03627