source:
  type: guide
  id: fnma-sel-b5-3.2-03
  authority: 'Fannie Mae Selling Guide B5-3.2-03 — HomeStyle Renovation Mortgages:
    Collateral Considerations'
  description: 'Fannie Mae Selling Guide B5-3.2-03 — HomeStyle Renovation Mortgages:
    Collateral Considerations.'
  coverage_tier: operative
obligations:
- id: fnma-sel-b5-3.2-03-full
  canonical_id: fnma-sel-b5-3.2-03-full
  section: 'Fannie Mae Selling Guide B5-3.2-03 — HomeStyle Renovation Mortgages: Collateral
    Considerations'
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: 'Fannie Mae Selling Guide B5-3.2-03 — HomeStyle Renovation Mortgages:
      Collateral Considerations'
    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: 'B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations
      (12/10/2025) Introduction This topic contains information on HomeStyle Renovation
      mortgage collateral considerations, including: Appraisal Requirements Contractor
      Requirements Plans and Speciﬁcations Unplanned Changes in Scope or Incomplete
      Work Appraisal Requirements The appraisal report for a HomeStyle Renovation
      mortgage must provide an “as completed” appraised value that estimates the value
      of the property after completion of the renovation work. (See B5-3.2-02, HomeStyle
      Renovation Mortgages: Loan and Borrower Eligibility, for requirements pertaining
      to the cost of the renovations as a percentage of the appraised value. See also
      Unplanned Changes in Scope or Incomplete Work later in this topic. Contractor
      Requirements Published May 6, 2026 735 All renovation work must be performed
      by a licensed contractor or subcontractor, unless contractor licensing is not
      applicable under state or local law for the speciﬁc trade or type of renovations
      being performed. The borrower must choose the contractor to perform the needed
      renovation, subject to the lender’s determination that the contractor is qualiﬁed
      and experienced, has all appropriate credentials required by the state, is ﬁnancially
      able to perform the duties necessary to complete the renovation work in a timely
      manner, and agrees to indemnify the borrower for all property losses or damages
      caused by its employees or subcontractors The lender may not choose the contractor
      or refer the borrower to any one speciﬁc contractor. However, the lender may
      require the borrower to obtain a completed Contractor Proﬁle Report (Form 1202)
      from the contractor that is selected to ensure that the lender has suﬃcient
      information available to make a determination about the contractor’s qualiﬁcations.
      The borrower may also complete repairs under the “Do It Yourself” option described
      in B5-3.2-02, HomeStyle Renovation Mortgages: Loan and Borrower Eligibility.
      Plans and Speciﬁcations The plans and speciﬁcations must be prepared by a registered,
      licensed, or certiﬁed general contractor, renovation consultant, or architect.
      The plans and speciﬁcations should 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 lender must
      use the plans and speciﬁcations to document and evaluate the quantity, quality,
      and cost of the renovation work that is to be done and to determine the amount
      of ﬁnancing that will be available. These plans and speciﬁcations also must
      be used by the appraiser in the development of their opinion of the “as completed”
      value of the property. Before approving any change a borrower wants to make
      to the original plans and speciﬁcations, the lender must require the borrower
      to submit a HomeStyle Change Order Request (Form 1200) or a substantially similar
      document, that provides a detailed description of the changes, the cost of the
      changes, and the estimated completion date(s). Unplanned Changes in Scope or
      Incomplete Work Lenders must work with borrowers and contractors to ensure renovations
      are completed as planned, within an acceptable timeframe. If unforeseen circumstances
      occur during the renovation work, such as property damage from a natural or
      manmade disaster, or a life altering event such as death or divorce, the lender
      must take additional steps to evaluate the materiality of the change to any
      renovations in progress. The lender must obtain an updated appraisal to determine
      whether the changes will impact the “as completed” Published May 6, 2026 736
      value of the property, and must self-report any change in value by entering
      it into Loan Quality Connect. In some cases, the lender may be responsible for
      additional mortgage insurance or LLPAs. When the new LTV exceeds Fannie Mae’s
      eligibility criteria, or the changes result in a home that does not meet Fannie
      Mae’s general property standards and appraisal requirements, the lender may
      be required to repurchase the loan. 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-2022-01 February 02, 2022'
  judgment: false
