Standard 203(k) Rehabilitation Mortgage Insurance Program:
For a Standard 203(k) transaction, prior to closing, the Mortgagee must ensure that a qualified general or specialized contractor has been hired and, by contract, has agreed to complete the work described in the Work Write-Up for the amount of the Cost Estimate and within the allotted time frame. To determine whether the contractor is qualified, the Mortgagee must review the contractor’s credentials, work experience and client references, and ensure that the contractor meets all jurisdictional licensing and bonding requirements.
For a Limited 203(k) transaction, the borrower must submit a work plan to the Mortgagee and use one or more contractors to provide the Cost Estimate and complete the required improvements and repairs. The contractors must be licensed and bonded if required by the local jurisdiction. The borrower must provide the contractors’ credentials and bids to the Mortgagee. The Mortgagee must review the contractors’ credentials, work experience and client references and ensure that the contractors meet all jurisdictional licensing and bonding requirements. The Mortgagee must examine the work plan and the contractors’ bids and determine if they fall within the usual and customary range for similar work.
For additional information see Handbook 4000.1 II.A.8.a.vi(H)(1) and II.A.8.a.vii(C) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh