Think your title is clear when the Contractor leaves? Consider how the 203(k) Consultant looks at the project. Tracking lien waivers is one of the most important roles of the 203(k) Consultant – and yet most Borrowers aren’t aware of what this means, or how important it is.
The 203(k) Consultant And The Monitored Loan.
On a “Full 203(k)” loan the 203(k) Consultant is the person responsible for releasing money to the validated Contractor of record – via the Draw Request forms- across the life of the construction loan. Each time that the Contractor, or Borrower, calls the Consultant to visit the site there are 2 forms that absolutely have to be signed off on: The Draw Request form, and the Lien Waiver. Lien laws are specific to each state, and GA recently tightened up it’s lien requirements (2008), so Lenders rely on a proprietary lien waiver that keeps their bases covered – and lien rights extinguished.
Draw Requests Pay Everyone on site.
There are up to 5 draws for each project, this includes a Change Order inspection, all of which require a lien waiver in order to be processed by the lenders draw center. Over the years, we have learned that requiring the contractor to provide lien waivers for ALL their subcontractors is KEY to insuring a clear title at the end of the project. When the Consultant performs the final inspection, and the Mortgagors Letter of Completion is completed, the Lender checks title prior to releasing the final 10% Holdback to the Contractor -Just in case things aren’t as rosy as they seem. We have resolved a lot of lien problems over the years, and more often then not, liens are placed by someone we have never actually seen on site. Like the electrician, or HVAC company that hits the place like a ton of bricks and then goes off to the next job – all the while thinking the check is on the way. What the Contractor doesn’t often realize is that not paying the Subcontractor in a timely fashion not only keeps him from his 10% retainage, but puts their names on a do-not-use list with the Lender… so it is in their best interest to pay their subs.
A 203(k) Consultant On Every Renovation
We believe firmly, and are outspoken about the 203(k) Consultant being MANDATORY on ALL FHA 203(k) Streamline loans, not just the Full 203(k). Generally speaking, a Streamline loan is $35,000 and below – and the banks look at it this way… ‘Just how much trouble can someone get into with only 35k?’-experience has taught us that the answer is A LOT. When you look at the renovation industry thus far – it has been laced with fraud, arrogant investors and homeowners acting as their own General Contractor, or worse, architect. Having a 203(k) Consultant on every FHA loan is an important step in rebuilding this countries housing stock – and bringing back a strong housing market one house at a time.