source:
  type: guide
  id: hud-4000-1-ii-f-post-closing-and-insurance
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — f. Post-closing
    and Insurance (05/09/2022)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — f. Post-closing
    and Insurance (05/09/2022).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-f-post-closing-and-insurance-full
  canonical_id: hud-4000-1-ii-f-post-closing-and-insurance-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — f. Post-closing
    and Insurance (05/09/2022)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — f. Post-closing
      and Insurance (05/09/2022)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'f. Post-closing and Insurance (05/09/2022) i. Disbursement Requirements
      (A) Direct Loans For Direct Loans, the Lender disburses the funds before the
      work is started. (B) Dealer Loans For a Dealer Loan, the Lender disburses the
      loan funds only after the work is completed. (1) Standard Before Disbursement,
      the Lender must obtain form HUD-56002 executed by each Borrower, and the Dealer/contractor.
      The Lender must conduct a telephone interview with the Borrower after the Borrower(s)
      and the Dealer/contractor sign the form HUD-56002. The telephone interview must
      confirm that: • the Dealer has completed the work; • the work is satisfactory;
      and • the form HUD-56002 was signed by the Borrower and the Dealer. The pre-Disbursement
      telephone interview with the Borrower(s) is in addition to a Lender’s credit
      underwriting telephone interview. The Lender must document any disagreements
      between the Borrower and the Dealer brought to their attention that may assist
      in proper supervision and monitoring of the Dealer. (2) Required Documentation
      The Lender must document the pre-Disbursement interview. ii. HUD Pre-insurance
      Loan Reviews The Lender is not required to submit the loan case file to HUD
      prior to insurance. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title
      I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1 986
      Last Revised: 11/26/2025 For Property Improvement Loans, HUD reviews Loans only
      as part of a Loan’s Post- Endorsement Technical Review (PETR) or a claim process.
      iii. Lender’s Pre-insurance Loan Review The Lender must complete a pre-insurance
      review of the case binder to ensure all required loan documents are retained
      in the case binder. The Lender must exercise due diligence in performing its
      pre-insurance responsibilities. The Lender must evaluate all information and
      documentation regarding the Borrower(s) and the proposed Loan in order to confirm
      that the Loan is eligible for the Title I program and meets its underwriting
      requirements. Once the Lender determines that the Loan complies with Title I
      program requirements, it may proceed with the insurance application process.
      (A) Reporting Loan for Insurance Lenders must apply for Title I loan insurance
      using FHAC within 31 Days from the later of the following dates: • loan Note;
      • Disbursement of proceeds, or final Disbursement for stage Disbursements; or
      • purchase from a Dealer or another Lender. To initiate the insurance process,
      the Lender must complete the Title I Insurance Application function in FHAC.
      FHAC is used for the following steps in the insurance process: • case number
      assignment; • completing the insurance application; • reporting transfers prior
      to insuring; • reporting case updates; and • checking the case status. Instructions
      for specific requirements for data format and delivery to FHAC are found in
      the FHA Connection Guide. The Application for Insurance screen requires the
      Lender to enter additional data about the Lender. The system will either confirm
      that the data entered was accepted, or will provide information regarding corrections
      the Lender must make to successfully complete this step. Data fields that must
      be completed are grouped by the following subject areas: • general Lender information
      • Lender information • credit/underwriting information • Borrower information
      • address Information II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title
      I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1 987
      Last Revised: 11/26/2025 (B) Confirmation of Insurance After new loan information
      is entered into FHAC, users view a message indicating that the Title I Property
      Improvement Loan was successfully completed. The new FHA case number is displayed,
      along with a summary of the loan information submitted. (C) Loan Insurance Certificate
      A Loan Insurance Certificate (LIC) is not produced in FHAC for Title I Property
      Improvement Loans. (D) Late Reporting The Lender may report the Loan for insurance
      after 30 Days provided that the Loan is not in Default. Lenders must certify,
      via FHAC, that all Loans reported for insurance after 30 Days from the Disbursement
      are not currently in Default. A certification window automatically appears when
      a Loan is reported past the deadline and must be checked in order to continue
      the insurance submission process. At the time of the certification the Lender
      is confirming that: • no Loan Payment was currently past due more than 30 Days;
      and • the Lender or its agents did not provide the funds to bring and/or keep
      the Loan current or to bring about the appearance of an acceptable payment history.
      (E) Upfront Insurance Premium Not Required The Title I Property Improvement
      Loan program does not require a UFIP. (F) Annual Premium Charges HUD requires
      that payment be made within 25 Days from the date of each billing statement.
      The billing statement will specify the payment due date. Lenders must follow
      procedures for Annual Insurance Premium and Billing and Remittance. iv. Inspection
      Requirements for Loans Pending Closing or Insurance in Presidentially-Declared
      Major Disaster Areas All Properties with pending Loan closing or insurance in
      Presidentially-Declared Major Disaster Areas (PDMDA) must have a damage inspection
      report that identifies and quantifies any dwelling damage. The report must be
      dated after the Incident Period (as defined by FEMA). FHA does not require a
      specific form for a damage inspection report. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1
      988 Last Revised: 11/26/2025 Streamline Refinances are allowed to proceed to
      closing and/or insurance without any additional requirements. Lenders must ensure
      that any damage identified on the report is repaired and that the Property is
      restored to pre-disaster condition prior to submitting for insurance endorsement.
      FHA does not require that utilities are on at the time of this inspection if
      they have not yet been restored for an area. v. Property Improvement Period
      The property improvement period starts after the Loan closes. For Direct Loans
      the improvement period begins when the loan proceeds are disbursed. For Dealer
      Loans, the improvement period begins before the loan proceeds are disbursed.
      Property improvements must be completed within six months of loan closing. vi.
      Completion Certificate Form HUD-56002 is required for all Title I Property Improvement
      Loans, with exceptions as described below. (A) Standard The Lender must obtain
      form HUD-56002 for all Property Improvement Loans. The Completion Certificate
      must be signed only after the improvement work is completed. For Direct Loans,
      only the Borrower is required to sign. The Dealer/contractor may sign the Completion
      Certificate, but this is not required. For Dealer Loans, the Borrower and Dealer
      must sign prior to Disbursement of loan funds. (B) Lender Responsibility The
      Lender must provide the Borrower(s) with a Completion Certificate and instructions
      regarding when and how it should be returned to the Lender. The Lender must
      track the status of the Completion Certificates and follow up with the Borrowers
      as necessary to ensure that it has a properly completed Completion Certificate.
      The Borrower must submit the Completion Certificate to the Lender not later
      than 6 months after disbursement of the loan proceeds, with one six-month extension
      if necessary. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured
      Programs 2. Property Improvement Loan Program Handbook 4000.1 989 Last Revised:
      11/26/2025 (1) Extension of Improvement Period The Lender may grant an extension
      of this deadline for up to an additional six months. The Lender must document
      any time extensions that it grants in the case binder. If the Borrower does
      not submit the Completion Certificate within these time limits, the Lender should
      conduct an onsite inspection. If the Borrower will not cooperate in permitting
      an onsite inspection or if the inspection determines that the improvements were
      not completed, the Lender must send a report of noncompliance to HUD. (2) Exception
      for Government Agencies and Nonprofits The Borrower is not required to submit
      a Completion Certificate for a Direct Property Improvement Loan made by or on
      behalf of a: • state or local government agency; or • nonprofit organization
      if the loan proceeds are held in an escrow account pending completion of the
      improvements, and if the loan proceeds are disbursed from the escrow account
      in stages, with the written approval of the Borrower and based on the percentage
      of work completed. (C) Borrower’s Certification of Completion of Work The Borrower
      must sign a form HUD-56002 to certify that: 1. The loan proceeds have been spent
      on property improvements that are eligible under the Title I regulations and
      in accordance with the contract or cost estimate furnished to the lender with
      my (our) credit application. 2. The property improvements have been completed
      in general accordance with the contract or cost estimate to my (our) satisfaction.
      3. I/We have not obtained and will not receive any cash payment, rebate, cash
      bonus, sales commission, or anything of value in excess of $25 from the dealer
      or contractor as an inducement to enter into the loan transaction. 4. I/We understand
      that the selection of the dealer or contractor and the acceptance of the materials
      used and the work performed is my (our) responsibility; and HUD does not guarantee
      the quality or workmanship of the property improvements. (D) Dealer’s Certification
      of Completion of Work By signing, the Dealer/contractor certifies that: II.
      ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 2.
      Property Improvement Loan Program Handbook 4000.1 990 Last Revised: 11/26/2025
      1. The property improvements are eligible under the Title I regulations and
      in accordance with the contract or cost estimate furnished to the borrowers.
      2. The property improvements have been completed in general accordance with
      the contract or cost estimate and to the satisfaction of the borrowers. 3. The
      borrowers have not been given or promised any cash payment, rebate, cash bonus,
      sales commission, or anything of value in excess of $25 as an inducement to
      enter into this loan transaction (except for any discount points paid by the
      undersigned to the lender). 4. Any discount points paid by the undersigned dealer
      are from the dealer’s own resources and will not be reimbursed by the borrowers
      or any other party. 5. The borrowers signed this certificate after completion
      of the property improvements, and all signatures on this certificate are genuine.
      (E) Failure to Sign Completion Certificate or Improvements Not Completed The
      Borrower must submit the signed form HUD-56002 to the Lender promptly upon the
      completion of the improvements. If the Borrower does not submit the Completion
      Certificate upon completion of the improvements or within minimum time limits
      for completing the improvements, the Lender must conduct an onsite property
      inspection. If the Borrower will not cooperate in permitting an onsite inspection
      or if the inspection determines that the improvements were not completed, the
      Lender must make a Report of Non-compliant Activities to report Title I Loan
      Findings to FHA. The report must detail the problem, and must contain the following
      information to assist in any investigation: borrower name, borrower address,
      borrower telephone number, loan amount, loan date, inspection date, lender loan
      number, loan officer name, dealer name, dealer address, dealer telephone number,
      and dealer Taxpayer Identification Number (TIN). The Lender must send the report
      to: Housing Office of Lender Activities and Program Compliance Attn: Director,
      Quality Assurance Division Department of Housing and Urban Development 451 7th
      Street, S.W. Washington, DC 20410 Insurance on the Loan will stay in effect
      unless the non-compliant activity was caused or sanctioned by an employee of
      the Lender, and provided that the promissory Note II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1
      991 Last Revised: 11/26/2025 or any required lien on the Property was not invalidated
      or made legally unenforceable by the noncompliance. vii. Post-Disbursement Onsite
      Property Inspection Requirement The purpose of the inspection is to verify the
      eligibility of the improvements and whether the work has been completed. The
      Lender or its agent must conduct an inspection of improvements for: • Title
      I Loans where the principal obligation is $7,500 or more; and • any unsecured
      Direct Loan if the Borrower fails to submit a form HUD-56002. The Lender’s fee
      for inspection of the Property must be an amount that is reasonable and customary
      for the area, not to exceed the maximum financeable limit for inspections. (A)
      Inspector Qualifications The inspection may be conducted by an employee of the
      Lender or by the Lender’s agent. The Lender may also accept an inspection conducted
      by local authority. Through education or work experience, the inspector must
      be qualified to evaluate contracts or work estimates and to perform property
      inspections. There must be an “arm’s length” relationship between any inspector
      and the contractor. (B) Deadline for Property Inspection For a Dealer Loan,
      the inspection must be completed within 60 Days after the date of Disbursement.
      For a Direct Loan, the inspection must be completed within 60 Days after the
      Lender receives the form HUD-56002, or as soon as the Lender determines that
      the Borrower is unwilling to cooperate in submitting a form HUD-56002. (C) Documenting
      the Inspection The Lender must document the inspection. This documentation must
      include the following information: • date of the inspection; • name of the inspector;
      • name of the Borrower; • property address; • date of the Note; • loan amount;
      • name of the Dealer/contractor (if a Dealer Loan); • a description of the improvements;
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs
      2. Property Improvement Loan Program Handbook 4000.1 992 Last Revised: 11/26/2025
      • photographs of the improvements, if submitted by the inspector; and • the
      inspector’s opinion as to whether cost of improvements are commensurate with
      improvements inspected. The inspection report must either identify improvements
      that were completed and/or incomplete. Incomplete work may be described in terms
      of specific items in the work plan, percentage of completion, or an estimate
      regarding the dollar value of the completed improvements. The Lender is responsible
      for reviewing the inspection report and ensuring that there is no evidence of
      inconsistency between the photographs and the narratives. (D) Incomplete Improvements
      If the inspection determines that the contracted improvements were not completed,
      the Lender should seek an explanation from the Borrower (and Dealer if applicable).
      If the Lender is able to confirm that the proceeds of the Loan were used exclusively
      for eligible improvements and eligible fees or charges, the Lender should document
      in the case binder regarding this determination. This Lender’s documentation
      should identify items from the work proposal that were not completed. viii.
      Reporting Misuse of Proceeds If the Lender determines that any portion of the
      loan proceeds was used for ineligible improvements or for ineligible purposes,
      they must make a Report of Non-compliant Activities to report Title I Loan Findings
      to FHA. If Findings of noncompliance relate to an approved Dealer used in the
      Dealer Loan process, the Lender must determine whether it should terminate the
      Dealer from participation in the Title I program. The report must detail the
      problem, and must contain the following information to assist in any investigation:
      borrower name, borrower address, borrower telephone number, loan amount, loan
      date, inspection date, lender loan number, loan officer name, dealer name, dealer
      address, dealer telephone number, and dealer TIN. The Lender must send the report
      to: U.S. Department of Housing and Urban Development Quality Assurance Division
      451 Seventh St., SW Washington, DC 20410 II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      E. Title I Insured Programs 2. Property Improvement Loan Program Handbook 4000.1
      993 Last Revised: 11/26/2025 Insurance on the Loan will stay in effect unless
      the non-compliant activity was caused or sanctioned by an employee of the Lender,
      and provided that the promissory Note or any required lien on the Property was
      not invalidated or made legally unenforceable by the noncompliance.'
  judgment: false
