FHA New Construction Transactions - Freddie Mac

FHA New Construction Transactions

New construction loans can be assessed by FHA TOTAL Mortgage Scorecard through Loan Product Advisor?. This job aid contains information specific to identifying new construction transactions using Loan Product Advisor. Refer to the Processing FHA TOTAL Mortgage Scorecard job aid for additional data specific for all FHA loan applications.

For latest updates and changes from FHA regarding their policies and regulations, refer to their HUDCLIPS website.

Terms and Definitions HUD Single Family Housing Policy Handbook 4000.1 refers to New Construction as follows: Proposed Construction, Properties Under Construction, and Properties Existing Less than One Year. Additional resource, Mortgagee Letter (ML) 2020-36.

New Construction

Proposed Construction

Property where no concrete or permanent material has been placed. Digging of footing is not considered permanent.

Under Construction

The period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.

Existing Less than One Year

A property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The property must have never been occupied.

Note: FHA treats the sale of an occupied Property that has been completed less than one year from the issuance of the Certificate of Occupancy (CO), or equivalent, as an existing Property.

Eligibility Requirements

? Site Built Housing (1- to 4-units) ? Condominium units in Approved Projects or Legal Phases ? Manufactured Housing

PUBLIC

March 2022

Construction-to-Permanent

Defined

Construction of a dwelling on land owned or being purchased by the borrower. This program combines the features of a construction loan with that of a traditional long-term permanent residential mortgage using a single mortgage closing prior to the start of construction.

Property Eligibility

The borrower must either be purchasing the land at the closing of the construction loan, or already own the land.

Construction Data Fields: Tips and Best Practices

The following tips and best practices are provided to guide you through the steps to submit a new construction transaction through Loan Product Advisor and help you avoid Data Quality and System Messages returned on the Loan Product Advisor Feedback Certificate.

Data Field

New Construction

Construction-toPermanent

Construction Loan Indicator

(Required field)

No/False, this will avoid the data quality messages referenced below.

Yes/True

Note: Refer to Table 1 if your system requires you to indicate "Yes/True" for tips to resolve the error messages.

Construction Status Type

Construction Loan Type

Select: ? Proposed ? Under Construction

Not applicable (leave blank)

Select: ? Proposed

Construction to Permanent

Construction to Permanent Closing Type

Not applicable (leave blank)

Select:

? SingleClosing

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Table1: New Construction Data Quality Message Tips

If, the Construction Loan Indicator is "Yes/True" and the Construction Status Type is not provided, then, the following messages will be returned in the Data Quality and System Messages section of the Loan Product Advisor Feedback Certificate. Refer to this table to guide you through the cause and resolution for these specific error messages.

Message Code

Message

Reason Reason

New Construction Transaction

DQC0661

Review for accuracy: Construction Status Type was not submitted and has been defaulted to Under Construction. If this value is not accurate, update the field with the correct value and resubmit.

Field left blank

Ignore the message and instructions.

DQC0112 Construction Status Type is required if Mortgage Type is FHA or VA.

Field left blank

Ignore the message and instructions.

Table 2: Construction-to-Permanent Data Quality Message Tips

If the following messages are returned in the Data Quality and System Messages section of the Loan Product Advisor Feedback Certificate use the following information to guide you through the cause and resolution for these specific error messages.

Message Code

Message

Reason Reason

Construction-to-Permanent Transactions

DQC0661

Review for accuracy: Construction Status Type was not submitted and has been defaulted to Under Construction. If this value is not accurate, update the field with the correct value and resubmit.

Field left blank

If value is not accurate, update and resubmit.

DQC0112

Construction Status Type is required if Mortgage Type is FHA or VA.

Field left Update (FHA) and

blank

resubmit.

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Reviewing Results

Each time you successfully submit a loan application to FHA TOTAL through Loan Product Advisor, you will receive results providing important data, process and documentation information for the transaction. The results, including merged credit, are valid for 120 days prior to the Note Date. If the results are not dated within 120 days of the Note Date, then the loan application must be resubmitted.

NOTE: If you rescore the loan >120 days you must obtain a new Merged Credit Report.

General Message Section:

Additional messages will be provided in the General Messages section of the Loan Product Advisor Feedback Certificate:

? If the loan is new construction, the following message will be returned: ? FGM0066 ? "The FHA Statutory Investment Requirement for this loan is $~FHAStatInv~." ? If the loan is construction to permanent the following message will be returned.

FGM0071- "Review for Accuracy: FHA Underwriting Guidelines vary for New Construction and may affect Maximum Mortgage calculations/LTV. Please consult the HUD Handbook 4000.1, Section II, and review corresponding Assessment expiration date on feedback certificate"

? Message: FGM0071 ? "Review for accuracy: FHA Underwriting Guidelines vary for New Construction and may affect Maximum Mortgage calculations/LTV. Please consult the FHA

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Handbook 4000-1, Section II and review corresponding Assessment expiration date on feedback certificate."

? Message: FGM0041 ? "Lender is responsible for documenting any situation not addressed on this feedback certificate according to the FHA TOTAL Mortgage Scorecard User's Guide and/or HUD Handbook 4000.1, Section II, FHA Single Family Housing Policy Handbook."

This document is not a replacement or substitute for the information found in the Freddie Mac SingleFamily Seller/Servicer Guide or terms of your Master Agreement or other Pricing Identifier Terms.

? 2022 Freddie Mac

Freddie Mac Learning

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