source:
  type: guide
  id: fnma-svc-d1-2-01
  authority: Fannie Mae Servicing Guide D1-2-01 — Renovation Mortgage Loans
  description: Fannie Mae Servicing Guide D1-2-01 — Renovation Mortgage Loans.
  coverage_tier: operative
obligations:
- id: fnma-svc-d1-2-01-full
  canonical_id: fnma-svc-d1-2-01-full
  section: Fannie Mae Servicing Guide D1-2-01 — Renovation Mortgage Loans
  type: do
  tags:
  - regulator-direct
  - fnma
  - servicing-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Servicing Guide D1-2-01 — Renovation Mortgage Loans
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/servicing-guide
    snapshot_id: cf63a82bbb4adfba
    fetched_at: '2026-05-22T23:53:19Z'
    content_hash: sha256:89df66c43baad07f8a8dd9d224492fff7d15e8839edba02ad0e74c7e50fe5da3
    paragraph_quote: 'D1-2-01, Renovation Mortgage Loans (12/17/2025) Introduction
      This topic contains the following: Servicer’s Responsibilities for Renovation
      Mortgage Loans Administering Escrow Accounts for Renovation Mortgage Loans Servicer’s
      Responsibilities upon Completion of Renovation Work Servicer’s Responsibilities
      for Renovation Mortgage Loans The following table lists the servicer’s responsibilities
      when Fannie Mae purchases a renovation mortgage loan before completion of the
      home improvements or repair work. For purposes of the Servicing Guide, renovation
      includes HomeStyle Renovation and HomeStyle Refresh. Note: HomeStyle Renovation
      loans are delivered with Special Feature Code (SFC) 215, and HomeStyle Refresh
      loans are delivered with SFC 892. ✓ The servicer must... Exercise all approval
      and oversight responsibilities that are customary to ensure that clear title
      to the property is maintained. Administer the renovation escrow account, as
      described in greater detail below. Published May 13, 2026 256 ✓ The servicer
      must... HomeStyle Renovation Ensure that the renovation work is completed in
      a timely manner. Renovation work must be completed no later than 15 months from
      the mortgage loan closing date. The servicer is authorized to request an extension
      not to exceed 18 months from the mortgage loan closing date if • the borrower
      is not in default under any of the mortgage loan documents, including the renovation
      or construction contract; and • the renovation work cannot be completed on time
      because extenuating circumstances exist that are beyond borrower''s control.
      In the rare circumstance a renovation project is expected to exceed 15 months,
      the servicer must submit an extension request in Fannie Mae Loan Quality Connect™
      (see F-4-02, List of Contacts) and describe the circumstances contributing to
      the delay and determine potential remedies. HomeStyle Refresh Ensure that the
      renovation work is completed in a timely manner. Renovation work must be completed
      no later than six months from the mortgage loan closing date. Published May
      13, 2026 257 ✓ The servicer must... Ensure that the renovation work is completed
      in accordance with the plans, speciﬁcations, and the contractor’s estimated
      bids. The three key documents used to document the terms of the renovation work
      are as follows: • The plans and speciﬁcations, which fully describe all of the
      work to be done and provide an indication of when various jobs or stages of
      completion will be scheduled (including both the start and completion dates).
      • The renovation or construction contract between the borrower and the contractor
      which sets out the speciﬁc work the contractor agrees to perform, states the
      agreed-upon costs of the renovation work, identiﬁes all subcontractors and suppliers,
      and includes an itemized description that establishes the schedule for completing
      each stage of the work and the corresponding payments to the contractor. It
      also provides the contractor’s agreement to complete the work in compliance
      with the contract and all applicable government regulations (such as building
      codes and zoning restrictions) and to obtain the necessary building permits
      (including a certiﬁcate of occupancy, if required). • The renovation or construction
      mortgage loan agreement between the borrower and the lender which states the
      terms and conditions of the mortgage loan prior to the completion of the work.
      It also includes the details about the timetable for completing the renovation
      or construction work; details about the use of proceeds of the renovation mortgage
      loan (and any amount the borrower has to provide from their own funds), the
      method and timetable for payment of the funds to the contractor and the borrower;
      procedures for documenting requests for disbursements, establishing and maintaining
      contingency reserves, and processing change orders; and details about conditions
      that apply to repayment of the mortgage loan, completion requirements, and resolution
      of disputes. • A renovation loan agreement is not required for HomeStyle Refresh.
      Require the borrower to submit a HomeStyle Change Order Request (Form 1200),
      or a similar form, to provide a detailed description of the change(s), the cost
      of the change(s), and the estimated completion date(s) before approving any
      change a borrower wants to make to the original plans and speciﬁcations. Ensure
      that all renovation work (excluding “Do-It-Yourself” repairs) is performed by
      licensed contractors and/or sub-contractors, unless contractor licensing is
      not applicable under state or local regulations for the speciﬁc work being completed.
      Manage the release of funds to pay for the completed work. Property inspections
      are required to conﬁrm that renovation work is completed timely and according
      to plan, prior to escrow draw requests being approved. See Administering Escrow
      Accounts for Renovation Mortgage Loans below for additional details. Published
      May 13, 2026 258 ✓ The servicer must... Refer to the HUD guidelines for speciﬁc
      requirements for government-insured renovation mortgage loans, if applicable.
      If the servicer’s action or lack of action aﬀects Fannie Mae’s ability to acquire
      clear title to the property, Fannie Mae is authorized to require the servicer
      to repurchase the mortgage loan. Administering Escrow Accounts for Renovation
      Mortgage Loans The following table describes the funds that the servicer must
      ensure are included in a renovation escrow account, as applicable. Types of
      funds held in a renovation escrow account Description A Contingency Reserve
      An amount of at least 10%, and up to 15% of the total costs for the renovation
      work, which the servicer must only release to cover required, necessary, and
      unforeseen repairs or deﬁciencies that are discovered during the renovation.
      HomeStyle Refresh does not require a contingency reserve. The lender or servicer
      is authorized to establish a contingency reserve up to 20% of the total renovation
      costs. Construction Related Costs Documented charges that may be considered
      part of the renovation work include, but are not limited to, the following:
      • property inspection fees, • fees for the title update, • architectural and
      engineering fees, • independent consultant fees, • costs for required permits,
      • fees for review of renovation plans, • appraisal fees, and • fees charged
      for processing construction draws. Published May 13, 2026 259 Types of funds
      held in a renovation escrow account Description Mortgage Loan Payments If the
      property is a principal residence that cannot be occupied during the renovation
      period, the servicer must use this amount to fund mortgage loan payments that
      become due during the renovation construction period. Note: The servicer must
      ensure that this represents only those payments that come due during the period
      that the property cannot be occupied and that the amount funded does not exceed
      six full mortgage loan payments of PITIA. The following table lists the servicer’s
      responsibilities for administering renovation escrow accounts for renovation
      mortgage loans. ✓ The servicer must... Deposit all of the applicable renovation
      costs into an interest-bearing renovation escrow account at the time that the
      mortgage loan is delivered. The servicer may commingle the renovation escrow
      accounts for diﬀerent borrowers in the same custodial account. Note: If there
      is an increase in costs during the renovation period, the borrower or the servicer
      must fund the amount of the increase. The servicer must ensure that the borrower
      obtains the additional funds in a manner that will not aﬀect the priority of
      Fannie Mae’s lien. Ensure that the renovation escrow account • is a custodial
      account that satisﬁes Fannie Mae’s criteria for custodial accounts and depositories
      as outlined in A4-1-02, Establishing Custodial Bank Accounts, and • includes
      all required funds previously described to pay for the renovation. Pay or credit
      all interest earned on the renovation escrow account, less any administrative
      expenses involved in maintaining the account, to the borrower. If requested
      by the borrower, release an amount not to exceed 50% of total planned renovation
      costs upon request, provided funds were not released upon, or immediately following,
      loan closing. Note: A portion of this initial draw may be used to pay for permits,
      architect fees, and design or planning expenses that were incurred during the
      initial planning phase of the project. Published May 13, 2026 260 ✓ The servicer
      must... Release any additional funds from the renovation escrow account to the
      contractor and the borrower only when • requested in accordance with the agreed
      upon schedule; and • an inspection has occurred to validate that all work is
      being completed in accordance with the renovation plans (including any changes
      to the renovation plans submitted to Fannie Mae via HomeStyle Change Order Request
      (Form 1200), or a similar Form. Servicer’s Responsibilities upon Completion
      of Renovation Work The following table provides the servicer’s responsibilities
      upon completion of the renovation work. ✓ Following completion of the renovation
      work, the servicer must... Obtain an Appraisal Update and/or Completion Report
      (Form 1004D) from a renovation consultant, architect, or appraiser to conﬁrm
      that the renovation was completed in accordance with the plans and speciﬁcations.
      Note: Form 1004D must be reviewed to conﬁrm that all “subject to” items listed
      in the appraisal were completed. Obtain a certiﬁcate of occupancy, if required.
      Ensure that the appraisal on ﬁle accurately reﬂects the ﬁnal scope of completed
      work. Note: When improvements to the property were not completed to plan, this
      may require an updated appraisal to determine whether the changes aﬀect the
      “as completed” value. The servicer must self-report any reduction in value to
      the HomeStyle Renovation Mailbox (see F-4-02, List of Contacts). Obtain an endorsement
      to the title insurance policy, concurrent with the date of the last disbursement
      of funds, to extend its eﬀective date through the date the renovation was completed,
      ensuring the continuance of Fannie Mae’s ﬁrst-lien priority. Note: When the
      property is in a state in which contractors’, subcontractors’, or material men’s
      liens have priority over mortgage liens, the servicer must obtain all necessary
      lien releases or take any other action that may be required to ensure that the
      title to the property is clear of all liens and encumbrances. Published May
      13, 2026 261 ✓ Following completion of the renovation work, the servicer must...
      Obtain a certiﬁcation regarding the property insurance to conﬁrm that the coverage
      has been increased, if necessary, to comply with Fannie Mae’s standard property
      and ﬂood insurance requirements. See B-2, Property Insurance Requirements and
      B-3, Flood Insurance Requirements for Fannie Mae’s applicable property insurance
      coverage requirements. Use all funds remaining in the renovation escrow account
      that were not deposited separately by the borrowers to reduce the UPB of the
      mortgage loan. However, in some cases, unused contingency funds can be used
      to make additional improvements or repairs to the property. Recent Related Announcements
      The table below provides references to recently issued Announcements that are
      related to this topic. Announcements Issue Date Announcement SVC-2025-07 December
      17, 2025 Announcement SVC-2022-01 February 9, 2022 Chapter D1-3, Providing Assistance
      to a Borrower Impacted by a Disaster Event Introduction This chapter contains
      information on providing assistance to borrowers impacted by a disaster event.'
  judgment: false
