19.3.4.1 Disputes

A. Occasionally, Borrower and General Contractor dispute change orders, the quality or cost of completed construction work, or other matters related to project completion or payment. These disputes can delay Final Closing if the Contractor is unwilling to complete all of the required forms and provide required documentation of project costs and completion. If Borrower and Contractor enter into mediation, litigation, or both, the delay may be extensive. HUD’s expectation is that the Lender and Borrower will engage in a good faith effort to resolve disputes with the Contractor prior to requesting Final Endorsement.

B. However, if a dispute remains unresolved and results in extension fees or other hardship (e.g., Lenders need to convert the underlying financing of the mortgage Loan to permanent status), the Lender may request that HUD proceed to Final Closing while the dispute is pending. HUD will consider such requests on a case-by-case basis as outlined in this Section 19.3.4. HUD’s priority in evaluating these requests is to ensure that Final Endorsement is statutorily and regulatorily compliant, that the construction of the Project is satisfactory, and that sufficient funds are made available to cover potential liabilities of the

MAP Guide, March 2021 Go to beginning of Chapter 19

Bookmarked Version Go to Acronym and Abbreviation List, Glossary, Index

Chapter 19 Page 19-17

To return to this page after clicking a link, press ALT + Back Arrow

Chapter 19 Closing Guide 19.3 Final Loan Closing Procedures for New Construction and Substantial Rehabilitation

Go to Table of Contents

Borrower thereby mitigating significant risk to (a) the Project (e.g., mechanic’s liens) and (b) the viability of the FHA-insured Loan.