What is a Rehabilitation Self-Help Agreement?

The Rehabilitation Self-Help Loan Agreement is an agreement between the borrower and lender to establish the conditions under which the rehabilitation project will be completed.   Under a 'self-help' arrangement, the borrower must understand that they will get paid only for materials, not for labor on work they perform.  

The Mortgagee must also verify and document that the borrower is either a licensed general contractor or can document experience in completing rehabilitation projects and ensure the borrower demonstrates the necessary expertise and experience to perform the specific repair competently and timely.  
Example:  A homeowner who is a licensed electrician would be considered having the expertise to perform electrical work needed.    

The Mortgagee must obtain written Cost Estimates for each work item, broken down by labor and materials, to be performed by the borrower under a self-help agreement.  The borrower must maintain complete records documenting actual costs of rehabilitation, including paid receipts for materials and lien waivers from any subcontractors. The lender must ensure the borrower understands the 203(k) Rehabilitation Mortgage Insurance Program at the construction stage and the risks inherent in rehabilitation projects.   

Additional information and a sample Rehabilitation (Self-Help) Loan Agreement can be found at https://www.hud.gov/sites/documents/SFH_203K_SAMP_SELFHELP.PDF

For additional information see Handbook 4000.1 II.A.8.a.xiv(A)(2) at  https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

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-04859