12.17.1.2 Payment for Repairs

A. For critical repairs completed before closing, mortgage proceeds may be advanced at Initial/Final Endorsement only upon verification that repairs have been completed.

• B. Non-Critical repairs completed after closing are funded by a repair escrow.

1. A repair escrow account must be established for the full amount of the costs of deferred repairs and alterations plus an additional assurance of completion amount equal to 10% or 20% of the estimated cost of deferred repairs and alterations (see Chapter 5, Section 5.10.8.F) depending upon program guidance.

2. The Schedule of Values for deferred repairs and alterations will be provided to the HUD inspector, who will recommend progress payments based on this Schedule as a part of form HUD-95379, HUD Representative’s Trip Report following the inspection as described below.

C. Payments for repairs completed after closing when a Project Architect and/or General Contractor are involved must be handled as follows:

1. The General Contractor or Architect initiates by completing and providing supporting documentation for form HUD-92464M, Requests for approval of advances of Repair Escrow Funds.

2. Both the Project Architect and the HUD Inspector (when applicable) should have performed the inspection of the completed repairs and signed the form HUD-92464 which the Architect submits to the owner who signs the form and forwards the request for advance of funds to the Lender.

3. Funds may be released for completed hard costs, i.e., repairs and alterations. Partial payment for a certain percentage of completion of a particular repair work item should only be allowed when such a progression is distinctly inspectable.

4. Generally, deposits or down payments on materials should not be funded from the Escrow. The HUD CA may allow case-by-case exceptions for affordable properties or Section 202 refinancing projects.

5. For any completed repair work item, HUD will approve the release of funds up to, but not exceeding, the originally estimated amount for that item or an amended amount based on an approved change order(s).

6. Soft costs are payable pro-rata, based on the percentage of hard cost approved for disbursement.

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Chapter 12 Construction Period 12.17 Completion of Repairs and Alterations Pursuant to Section 223(a)(7) and 223(f)

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7. A non-prorata portion of the overall general requirements may be paid consistent with accomplishing a particular milestone or completing a relevant group of repairs and alterations that made necessary a particular item of cost classified as general requirements.

8. When the entire work is executed by a General Contractor under the administration of a Project Architect with contractual relationships established by AIA Contract Documents (i.e., AIA B104 & A104), the release of Escrow funds may be based on AIA Document G702 and G703 submitted by the General Contractor at appropriate intervals of progress of the work.