source:
  type: guide
  id: fnma-sel-b4-1.2-05
  authority: Fannie Mae Selling Guide B4-1.2-05 — Requirements for Verifying Completion
    and Postponed Improvements
  description: Fannie Mae Selling Guide B4-1.2-05 — Requirements for Verifying Completion
    and Postponed Improvements.
  coverage_tier: operative
obligations:
- id: fnma-sel-b4-1.2-05-full
  canonical_id: fnma-sel-b4-1.2-05-full
  section: Fannie Mae Selling Guide B4-1.2-05 — Requirements for Verifying Completion
    and Postponed Improvements
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B4-1.2-05 — Requirements for Verifying Completion
      and Postponed Improvements
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B4-1.2-05, Requirements for Verifying Completion and Postponed
      Improvements (12/10/2025) Introduction This topic contains information on requirements
      for verifying completion of construction and repairs, and requirements for postponed
      improvements, including: Published May 6, 2026 544 Overview Form 1004D and Completion
      Alternatives Veriﬁcation of Completion: New or Proposed Construction Veriﬁcation
      of Completion: Existing Construction Postponed Improvements Uniform Appraisal
      Dataset (UAD) 3.6 Policy Overview Generally, improvements, alterations, and
      repairs on the subject property must be complete when the loan is sold to Fannie
      Mae. Lenders must obtain evidence of completion and Fannie Mae allows for a
      variety of methods depending on the type of valuation method and condition (completion,
      alteration, or repair) that must be conﬁrmed. Additionally, in some circumstances,
      Fannie Mae allows a loan to be sold prior to improvements or repairs being completed
      if the lender complies with the requirements related to postponed improvements.
      Form 1004D and Completion Alternatives Form 1004D The Appraisal Update and/or
      Completion Report (Form 1004D) is used to update an appraisal or provide conﬁrmation
      that the requirements or conditions in an appraisal report have been met (such
      as completion of construction or repairs). The appraiser can complete the Completion
      Report section of Form 1004D based on an on-site visual inspection of the property.
      The appraiser may also complete the form based on alternative methods, such
      as virtual inspections, digital photos, site videos, or other technological
      solutions. All completion documentation must include one or more visually veriﬁable
      exhibits. A link to the digital exhibits from within the form is acceptable
      but must be accessible by Fannie Mae for the life of the loan. These exhibits
      must be unaltered and able to be authenticated using metadata and the geocode
      for the subject property. See B4-1.2-04, Appraisal Age and Use Requirements,
      for certiﬁcations completed by substitute appraisers. Attestation Letters Fannie
      Mae also permits other completion alternative methods - attestation letters
      - to verify completion of construction, alteration, or repairs in lieu of Form
      1004D. Borrower/builder attestation letter: For new or proposed construction,
      a letter is permitted to conﬁrm the property was completed and constructed in
      conformity with the plans and speciﬁcations, amendments, and change orders.
      The borrower/builder attestation letter must include (at a minimum) the following
      items: borrower name, property address or legal description if the address is
      not available, certiﬁcation language that the property was constructed in conformity
      with the plans and speciﬁcations including any amendments or changes, Published
      May 6, 2026 545 signatures and dates by the borrower(s) and builder, and exterior
      and interior photos of the property (see B4-1.2-01, Appraisal Report Forms and
      Exhibits). If a letter signed by both parties is not obtainable, then a Form
      1004D completed by the appraiser is required. Borrower attestation letter: A
      letter is permitted to conﬁrm completion of certain alterations or repairs for
      existing construction. The letter must include (at a minimum) the following:
      borrower name; property address; certiﬁcation language that the alteration or
      repair was satisfactorily completed; signatures and date of the borrower; visually
      veriﬁable exhibits of the completed work; and one of the following signature
      of the qualiﬁed professional, a professionally prepared report, or paid invoices
      for the alterations or repairs. When either of these attestation letter options
      is used, a link within the letter to any digital exhibits is acceptable but
      must be accessible by Fannie Mae for the life of the loan. These exhibits must
      be unaltered and able to be authenticated using metadata and the geocode for
      the subject property. The letter and all documentation must be retained in the
      loan ﬁle. Criteria for Use of Form 1004D and Completion Alternatives Use of
      Form 1004D and completion alternatives varies depending on the type of valuation
      method and condition (completion, alteration, inspection, or repair) that must
      be veriﬁed. Appraisals (Any appraisal report form including Hybrid and Desktop)
      Appraisal "Subject to" Condition Performer Documentation Options New or proposed
      construction - completion per plans and speciﬁcations Appraiser Form 1004D with
      site visit Appraiser Form 1004D with virtual inspection Borrower and builder
      Borrower/builder attestation letter with supporting evidence Existing construction
      - repairs or alterations Appraiser Form 1004D with site visit Appraiser Form
      1004D with virtual inspection Borrower Borrower attestation letter with supporting
      evidence Existing construction - inspections requiring a professionally prepared
      report Qualiﬁed professional Professionally prepared inspection report The lender
      must determine if repairs are required as a result of the inspection, veriﬁcation
      per above requirements. Property Data Collection Condition Performer Documentation
      Published May 6, 2026 546 Existing construction - repairs or alterations Borrower
      Borrower attestation letter with supporting evidence Existing construction -
      inspection requiring a professionally prepared report Qualiﬁed professional
      Professionally prepared inspection report The lender must determine if repairs
      are required as a result of the inspection, veriﬁcation per above requirements.
      Note: The alternative Form 1004D completion method and attestation letters are
      not permitted for verifying completion for HomeStyle Renovation transactions.
      Veriﬁcation of Completion: New or Proposed Construction When the property securing
      the loan is new or proposed construction, the appraisal must be based on either
      plans and speciﬁcations, an existing model home, or other information suﬃcient
      to identify its quality and character to accurately report the interior features
      of the proposed improvements. Veriﬁcation of completion of construction is required
      (in accordance with the requirements above) before sale of the loan to Fannie
      Mae, unless the lender complies with the postponed improvements policies described
      below. Veriﬁcation of Completion: Existing Construction Lenders must review
      the appraisal to ensure that the property does not have minor conditions or
      deferred maintenance items that aﬀect the safety, soundness, or structural integrity
      of the subject property. See B4-1.3-06, Property Condition and Quality of Construction
      of the Improvements, for information concerning property condition and quality
      of construction ratings. The tables below provide requirements related to existing
      properties that have physical deﬁciencies, minor conditions, or deferred maintenance
      items that may or may not aﬀect the safety, soundness, or structural integrity
      of the property. ✓ Requirements for Existing Construction When There are Minor
      Conditions or Deferred Maintenance Items that Do Not Aﬀect the Safety, Soundness,
      or Structural Integrity of the Property Published May 6, 2026 547 ✓ Requirements
      for Existing Construction When There are Minor Conditions or Deferred Maintenance
      Items that Do Not Aﬀect the Safety, Soundness, or Structural Integrity of the
      Property When the appraisal shows the existence of minor conditions or deferred
      maintenance that does not aﬀect the safety, soundness, or structural integrity
      of the property, these items must be reﬂected in the appraiser''s opinion of
      value and the appraisal report must be completed "as-is." Items meeting these
      criteria require the appraiser to report and comment on the eﬀect these items
      may have on the subject property''s value and marketability. The lender will
      then evaluate and determine if any additional course of action is required to
      comply with Fannie Mae''s safety, soundness, and structural integrity requirements.
      Minor conditions and deferred maintenance items include, but are not limited
      to, worn ﬂoor ﬁnishes or carpet, minor plumbing leaks, holes in window screens,
      missing handrails, or cracked window glass and are typically due to normal wear
      and tear. The lender is not required to ensure that the borrower has had these
      items repaired prior to sale of the loan to Fannie Mae when the appraisal is
      completed "as-is." If there are minor conditions or deferred maintenance items
      to be remedied or completed after closing, the lender may escrow for these items
      at its own discretion and still sell the loan to Fannie Mae prior to the release
      of the escrow as long as the lender can ensure that these items do not aﬀect
      the safety, soundness, or structural integrity of the property. Lenders must
      ensure the escrow account is a custodial account that satisﬁes Fannie Mae’s
      criteria for custodial accounts and depositories as outlines in Servicing Guide
      topic A4-1-02, Establishing Custodial Bank Accounts. ✓ Requirements for Existing
      Construction When There are Incomplete Items or Conditions that Aﬀect the Safety,
      Soundness, or Structural Integrity of the Property When an appraisal is required
      and there are incomplete items, physical deﬁciencies, or items aﬀecting the
      safety, soundness, or structural integrity of the improvements, the appraisal
      must be "subject to" completion of the speciﬁc repairs or alterations. This
      may include but is not limited to foundation settlement, water seepage, active
      roof leaks, worn roof shingles, inadequate electrical service or plumbing ﬁxtures,
      etc. Incomplete items, physical deﬁciencies, or items aﬀecting safety, soundness,
      or structural integrity may also be identiﬁed through the property data collection
      process. In all cases, the lender must verify completion before the loan is
      sold to Fannie Mae. See Form 1004D and Completion Alternatives above for the
      speciﬁc requirements. Postponed Improvements Fannie Mae allows the sale of a
      loan before construction or improvements are complete if certain requirements
      Published May 6, 2026 548 are met. The table below describes requirements related
      to properties that are new or proposed construction that are not complete when
      the loan is sold to Fannie Mae. ✓ Requirements for New or Proposed Construction
      Loans may be sold before postponed items are complete; however, the postponed
      improvements must be completed within 180 days of the note date. Acceptable
      postponed items include items that: • are part of the sales contract (third-party
      contracts are not permissible); • are postponed for a valid reason, such as
      inclement weather or a shortage of building materials; and • do not aﬀect the
      ability to obtain an occupancy permit. Completion must be conﬁrmed using Form
      1004D or an acceptable completion alternative as described above. All documentation
      must be retained in the loan ﬁle. The cost of completing improvements must not
      represent more than 10% of the “as completed” appraised value of the property.
      Lenders must establish a completion escrow for the postponed improvements, by
      withholding from the purchase proceeds funds equal to 120% of the estimated
      cost for completing the improvements. However, if the contractor or builder
      oﬀers a guaranteed ﬁxed-price contract for completion of the improvements, the
      funds in the completion escrow only need to equal the full amount of the contract
      price. Lenders must ensure the escrow account is a custodial account that satisﬁes
      Fannie Mae’s criteria for custodial accounts and depositories as outlined in
      Servicing Guide A4-1-02, Establishing Custodial Bank Accounts. Lenders and borrowers
      must execute an escrow agreement that states how the escrow account will be
      managed and how funds from the escrow account will be disbursed. The completion
      escrow may not adversely aﬀect the mortgage insurance or title insurance. After
      a satisfactory Form 1004D or completion alternative is obtained, the lender
      must release the ﬁnal draw from the escrow account, which should include any
      funds in excess of the amount needed to pay for completion of the postponed
      items. Published May 6, 2026 549 ✓ Requirements for New or Proposed Construction
      Lenders must obtain a ﬁnal title report, which must not show any outstanding
      mechanic’s liens, take any exceptions to the postponed improvements, or take
      any exceptions to the escrow agreement. If the ﬁnal title report is issued before
      the completion of the improvements, lenders must obtain an endorsement to the
      title policy that ensures the priority of Fannie Mae’s lien. Requirements for
      HomeStyle Refresh Improvements on Existing Construction The table below provides
      the postponed improvement requirements for a HomeStyle Refresh loan. ✓ Requirements
      for HomeStyle Refresh Improvements on Existing Construction Loans may be sold
      before the improvements are complete; however, the postponed improvements must
      be completed within 180 days of the note date. Acceptable postponed items include
      items that will not prevent the issuance of an occupancy permit. A certiﬁcation
      of completion must be obtained to verify the work was completed and must: •
      be completed by the appraiser, • state that the improvements were completed
      in accordance with the requirements and conditions in the original appraisal
      report, and • be accompanied by photographs of the completed improvements. Lenders
      must establish a completion escrow for the total cost of the improvements. Lenders
      may include a contingency reserve of up to 20% of the total cost of improvements.
      Lender must ensure the escrow account is a custodial account that satisﬁes Fannie
      Mae’s criteria for custodial accounts and depositories as outlined in Servicing
      Guide topic A4-1-02, Establishing Custodial Bank Accounts. Lenders and borrowers
      must execute an escrow agreement that states how the escrow account will be
      managed and how funds from the escrow account will be disbursed. The completion
      escrow may not adversely aﬀect the mortgage insurance or title insurance. Published
      May 6, 2026 550 ✓ Requirements for HomeStyle Refresh Improvements on Existing
      Construction Once a certiﬁcate of completion is obtained, the lender must release
      the ﬁnal draw from the escrow account, which should include any funds in excess
      of the amount needed to pay for completion of the improvements. Any funds remaining
      in the escrow account after the work is completed must be applied to reduce
      the unpaid principal balance of the loan. The value of sweat equity and “Do
      It Yourself” improvements are not reimbursable. Lenders must obtain a ﬁnal title
      report, which must not show any outstanding mechanic’s liens, take any exceptions
      to the improvements, or take any exceptions to the escrow agreement. If the
      ﬁnal title report is issued before the completion of the improvements, lenders
      must obtain an endorsement to the title policy that ensures the priority of
      Fannie Mae’s lien. See B5-3.3-01, HomeStyle Refresh for Improvements on Existing
      Properties, for other requirements related to HomeStyle Refresh loans. Uniform
      Appraisal Dataset (UAD) 3.6 Policy Lenders using UAD 3.6 must follow the requirements
      in the UAD 3.6 Policy Supplement. Recent Related Announcements The table below
      provides references to recently issued Announcements that are related to this
      topic. Announcements Issue Date Announcement SEL-2025-10 December 10, 2025 Announcement
      SEL-2025-04 June 04, 2025 Announcement SEL-2023-02 March 01, 2023 Announcement
      SEL-2019-01 February 06, 2019 Section B4-1.3, Appraisal Report Assessment Published
      May 6, 2026 551'
  judgment: false
