If you are able to follow these instructions, it will make
the draw process much easier for access of your funds that have been placed in
escrow for repairs to your home.
Please note, if a permit is required for the work being
completed, a copy of the permit must be included with the first draw
request.In the event a permit is not
required, the 203k inspector/Consultant can write a letter stating that the
work being done at this time does not require a permit.
The lien-waiver (stating whether they are owed money or not)
will be completed and signed by every contractor that is expecting payment from
the escrow account or borrower.Contractor’s licenses and permits (if applicable) will be collected
prior to releasing the first draw.The
lien-waiver will be filled out one of four possible ways:
Partial Conditional- The
contractor will execute this portion of the lien-waiver when they have notfinished their entire job and wish to be paid for the portion of work that has been
completed (this should accompany the draw-request). Upon receiving
payment, the builder will then execute a “Partial Unconditional”
lien-waiver; this is verification that the builder acknowledges their
partial payment.Once the builder
has finished their respective work and has received their entire
compensation, you/the borrower will request the contractor to execute a
“Full Unconditional” lien-waiver.This assures the borrower and lender that the contractor cannot
lien the property in the future for the work he has completed.
Partial Unconditional- The
contractor will execute this portion of the lien-waiver when they havenotfinished the
entire job and have received
their compensation for the work that has been completed.If you/the borrower pays the contractor
from their own funds, they will be required to have this form accompany
the draw request.This will be
necessary to reimburse you/the borrower from the rehab escrow account.The other times this portion of the
draw request will be executed has been outlined under the above section
Full Conditional-The contractor
will execute this portion of lien-waiver if they have finished their work and wish to be paid for the completion of the work.Upon receiving payment, the contractor
will be required to execute the “Full Unconditional” portion of the
Full Unconditional-The contractor
will execute this portion of the lien-waiver if they have finished their work and have received their compensation.You/The borrower will always have the contractor execute
this portion of the draw request whenever the contractor has completed
their work and has been paid from either your/the borrower’s own funds or
the rehab escrow account. This will help protect the borrower if a dispute
concerning payments occurs in the future.
Please keep the following facts in mind while requesting your draw funds:
borrower must contact the consultant who did the original “Specification
of Repairs”, when you are requesting your repair funds.It is best to ask your contractor(s)
of their expected finish date, and call your consultant in advance to
schedule his inspection.
consultant will complete the “Draw Request”, and have the form signed by
you/the borrower, contractor, and him/herself.This assures all parties that the work has been completed
consultant will only release money for work (or portion of work) that has
been completed; the draw process is a reimbursement process.It is possible to access funds to
acquire certain materials.You/the
borrower will be required to have a bill, or breakdown of costs, from the
supplier you are requesting the materials from.A check will be issued in the name of you/the borrower and
the supplier.You/The borrower
will have to endorse the check to the supplier, and receive a
“paid-in-full” receipt or executed “Unconditional Lien Waiver”.
borrower will forward the original draw request and lien-waiver(s) to
Flagstar.You/The borrower should
also include all receipts for material you expect reimbursement.The borrower can be reimbursed for
material only; they cannot be paid for their own labor.*Please
note lien waivers are required, they will be sent to the Title Insurance
Company, so they can insure over any liens.
amount of the lien-waivers and paid-in-full receipts/cancelled checks
should match the dollar amount being requested on the draw request.If the amounts do not match, please
include a letter explaining the logic/reason causing the difference.
be sure to remind the contractor that there will be a “10% hold-back” on
any draw where the work has not been 100% completed.An Example:If $4,000 has been escrowed for repairs to the roof, and the
builder is 60% finished, he would be paid $2,160 ($4,000 x 60% = $2,400,
$2,400 – 10% (or $240)= $2,160).Upon completion of the roof, the builder would be paid for the
balance, plus the funds that have been included in previous “10%
event you/the borrower, the contractor, or the consultant wishes to draw
funds from the contingency, move funds from one area to another, or
add/delete a repair; the consultant must fill out a “Change Order”.You/The borrower must sign this form,
which also will be given to an underwriter for approval.
contractor or you/the borrower will only be reimbursed for work/materials
that have been purchased after loan closing.
requires that no thirty-day period lapses after loan closing without some
of the construction/rehabilitation occurring.
time period FHA expects all work to be completed is six (6) months. In the
event this time period will be exceeded, please include a letter of
explanation with the new, expected finish date.
In recap, each draw request will have a completed or fully executed
“Draw Request” and the matching “Lien Waivers”. These steps will be required
for each draw; there is a maximum of five draws per-property.Upon completing the final draw you/the
borrower will also include the “Letter of Completion” form, which must be
filled out and returned to the lender with the rest of the draw request
documentation.Any funds remaining in
the rehab escrow account will be placed against the principle balance of the