source:
  type: guide
  id: fnma-sel-b5-3.2-06
  authority: 'Fannie Mae Selling Guide B5-3.2-06 — HomeStyle Renovation: Renovation
    Contract, Renovation Loan Agreement, and Lien Waiver'
  description: 'Fannie Mae Selling Guide B5-3.2-06 — HomeStyle Renovation: Renovation
    Contract, Renovation Loan Agreement, and Lien Waiver.'
  coverage_tier: operative
obligations:
- id: fnma-sel-b5-3.2-06-full
  canonical_id: fnma-sel-b5-3.2-06-full
  section: 'Fannie Mae Selling Guide B5-3.2-06 — HomeStyle Renovation: Renovation
    Contract, Renovation Loan Agreement, and Lien Waiver'
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: 'Fannie Mae Selling Guide B5-3.2-06 — HomeStyle Renovation: Renovation
      Contract, Renovation Loan Agreement, and Lien Waiver'
    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: 'B5-3.2-06, HomeStyle Renovation: Renovation Contract, Renovation
      Loan Agreement, and Lien Waiver (12/11/2024) Introduction This topic contains
      information on HomeStyle Renovation documents, including: Renovation Contract
      Renovation Loan Agreement Lien Waiver Renovation Contract The renovation contract
      must itemize the speciﬁc work that the contractor agrees to perform for the
      borrower; state the agreed-upon cost of the renovation; identify all subcontractors
      and suppliers; and include an itemized description that establishes the schedule
      for completing each stage of the work and the corresponding payments to be made
      to the contractor. Published May 6, 2026 741 This contract, which must be fully
      executed by both the contractor and the borrower prior to closing, must require
      the contractor to be duly licensed (if required by applicable law); obtain all
      required insurance coverages (such as all-risk, public liability, workmen’s
      compensation, and automobile liability); complete the work in compliance with
      the contract and all applicable government regulations (such as building codes
      and zoning restrictions); obtain the necessary building permits (including a
      certiﬁcate of occupancy, upon completion of renovations, if required by local
      law); and provide for appropriate remedies for resolving disputes (including
      an agreement to indemnify the borrower for all property losses or damages caused
      by the contractor’s employees or subcontractors). Fannie Mae has developed a
      model Renovation Contract (Form 3730) to document the renovation contract between
      the borrower and the contractor. The lender must keep a copy of the fully executed
      renovation contract in the loan ﬁle. HomeStyle Renovation mortgages may be subject
      to a variety of laws and regulations, based on the type of transaction or the
      types of lenders originating the mortgages. Therefore, when Fannie Mae’s model
      document is used, all appropriate, required changes must be made. Renovation
      Loan Agreement A renovation loan agreement is a written agreement between the
      borrower and the lender. This agreement must be fully executed by both the lender
      and the borrower. Both parties may execute the agreement any time during the
      closing process, however, the agreement date must match the note date. The agreement
      must state the original principal amount of the related promissory note payable
      to the lender; include the property address; state the terms and conditions
      of the loan prior to the completion of the improvements; state the events that
      constitute a borrower default, including, but not limited to, failing to keep
      any promise or to perform any obligation in the agreement; indicate the remedies
      available to the lender if the borrower defaults under the terms of either the
      renovation contract or other loan documents; require the contractor to have
      any license required by any government regulations, and to obtain and keep in
      force an all-risk insurance policy (with a physical loss form endorsement and
      a mortgagee’s loss payable clause) equal to 100% of the full replacement cost
      of the improvements, public liability insurance, workmen’s compensation insurance
      (as required by applicable state law), and automobile liability insurance; require
      that either the borrower or the contractor obtain (and keep in force) all work
      permits required by any government agency, and comply with all applicable laws
      or government regulations; require the borrower to Published May 6, 2026 742
      submit to the lender a title policy and assist the lender in obtaining the appraisal
      and a survey; agree that all renovation work will be completed no later than
      15 months from the date the loan is closed and in accordance with the terms
      of the renovation contract (subject to approved change orders); permit the lender
      to make property inspections; and pay all costs and expenses required to satisfy
      any conditions of the agreement (including costs overruns, the costs of change
      orders, and the costs of enforcement of the agreement in the event of default);
      state the terms and conditions under which the lender may extend the 15 month
      completion deadline if the renovation cannot be completed on time (due to extenuating
      circumstances outside of the borrower''s control), including limiting any extension
      to no later than 18 months after the loan closing; and requiring any extension
      to be in writing and the borrower to not be in default under any of the terms
      of the loan documents or the renovation contract; include provisions related
      to the time, manner, and method by which the lender disburses the loan proceeds;
      conditions on how the disbursements may be used; procedures on how to request
      a disbursement (including the proper format, information, and required signatories);
      documentation required to support each request for disbursement (such as the
      title policy, any required lien waivers from all contractors, subcontractors,
      and suppliers) and any required inspection reports; the number and amount of
      payments that the lender is to make to the borrower and/or the contractor; and
      obligate the borrower and the contractor to enter into a renovation contract
      for all labor and materials to renovate the improvements, and provide the lender
      with a copy of that contract; the applicable plans and speciﬁcations that fully
      describe all work to be performed; the renovation budget (which provides a timetable
      for stages of completion and the schedule for disbursements for payment of amounts
      due); a schedule of disbursements for payment of the renovation costs; and the
      requirements for requesting (and obtaining approval of) change orders. Fannie
      Mae has developed a model Renovation Loan Agreement (Form 3731) to document
      the renovation loan agreement between the borrower and the lender. Because HomeStyle
      Renovation mortgages may be subject to a variety of laws and regulations based
      on the type of transaction or the type of lender originating the mortgages,
      a lender that uses Fannie Mae’s model documents must make all appropriate, required
      changes to them. The fully executed renovation loan agreement is a custodial
      document. The lender must maintain a copy of the agreement in the loan ﬁle and
      send the original to the document custodian as part of the loan delivery package
      Published May 6, 2026 743 (see E-2-01, Required Custodial Documents, for additional
      information). Lien Waiver Before a lender makes the ﬁnal disbursement upon the
      completion of renovation, it must obtain a lien waiver from the contractor,
      all subcontractors, and suppliers or a clear title report that releases all
      contractor, subcontractor, and supplier liens. Fannie Mae’s model document—Lien
      Waiver (Form 3739)—may be used for this, provided the lender makes any changes
      to it that are required by applicable law. Recent Related Announcements The
      table below provides references to recently issued Announcements that are related
      to this topic. Announcements Issue Date Announcement SEL-2024-08 December 11,
      2024 Announcement SEL-2022-01 February 02, 2022 Section B5-3.3, HomeStyle Refresh
      Mortgages'
  judgment: false
