HECM - major repair requirements
I have a client who has major repairs totalling less than 15% of the value of the home
My understanding of the major repair but the lender is requiring that the repairs be completed before the loan closes. My understanding of the requirements on a HECM loan are that repairs totaling less than 15% of the value of the home can be completed after closing with a repair set aside to be released when the work is finished. If the cost of the repairs are more than 15% there would be not set aside. Repairs must be done before the loan closes. A client that I recently counselor reached out to me because he has repairs of less than 15% of the value of his home that the lender is requiring that they are completed before the loan closed, but they can be paid with the proceeds of the loan. The following are the repairs:
One bathroom does not have any plumbing fixtures and the shower head was removed(the plumbing was capped off under the house according to the homeowner)-repair needed to bring this bathroom to fully functioning.
2) Kitchen sink drain plumbing needs repaired to be fully functioning.
3) The secondary bathroom sink drain needs to be cleared/repaired-bathroom to be fully functioning. Plumbing items cost to cure $1000-$2000
4) Bathroom wainscot needs repaired or replaced. The estimated cost to replace the tile or install a new surround is approximately $2000-$4000.
5) Drywall repairs are needed in the laundry area, below a bathroom sink and behind a toilet. Cost of drywall repairs $500-$1000.
6) All peeling paint on the interior and exterior of the dwelling to be scraped and painted with paint chips removed from the site. $3000-$5000.
7) Repair and repaint all deteriorated stucco. $2000-$4000
The client is wondering why there is a requirement to complete the work before the loan closes as the cost is far under 15% of MCA.
Thanks you!