SPECIFIC PROCEDURE ............................................................................................................................................. 3
UNDERWRITING FORMS ................................................................................................................................................... 9 ESCROW HOLDBACKS REPAIR SCREEN IN ENCOMPASS .......................................................................................................... 10
Completing the Escrow Holdback Repairs Screen ................................................................................................ 10 Field Descriptions within the Escrow Holdback Repairs Screen ........................................................................................ 11
CLOSING RESPONSIBILITIES ............................................................................................................................................. 17 Forms ................................................................................................................................................................... 19 Title Report .......................................................................................................................................................... 19
INSURING – GOVERNMENT ............................................................................................................................................. 19 BRANCH RESPONSIBILITIES AFTER CLOSING ........................................................................................................................ 19 RENOVATION SPECIALIST RESPONSIBILITIES AFTER CLOSING .................................................................................................. 19
Section H – Completion Certification ................................................................................................................... 21 Section View ...................................................................................................................................................................... 21 Field Descriptions .............................................................................................................................................................. 21
FORMS COMPLETION..................................................................................................................................................... 22 POST-CONSUMMATION CD ............................................................................................................................................ 22 LOAN IN DEFAULT PRIOR TO ESCROW CLOSEOUT ................................................................................................................ 22 CONTACT .................................................................................................................................................................... 22
REVISION HISTORY ............................................................................................................................................... 23
This standard operating procedure (SOP) defines what an escrow holdback is and provides
clear, defining steps of which CrossCountry Mortgage, Inc. (CCM) employees are responsible
for what actions when processing a loan with an escrow holdback.
RESPONSIBILITIES
Please reference the Employee Roles for Handling Escrow Holdbacks workflow (link found in
the References section of this document) for a breakdown of responsibilities per CCM
employee role when handling escrow holdbacks.
DEFINITIONS
Term Definition Escrow Holdback Funds which are held back at closing until all home repairs
are completed.
Mechanic’s Lien Sometimes called a construction lien, it is a security interest in the title to property for the benefit of those who have supplied labor or materials to improve the property. The lien exists for both real and personal property. A mechanic’s lien
may be placed on the subject property if the contractor, sub-contractor or supplier is not paid for his or her services.
BACKGROUND
CrossCountry Mortgage, Inc. (CCM) may allow for an escrow holdback on a loan for the
following types of repairs:
• Weather
• Safety/soundness/structural – requires additional approval due to inability to
deliver the loan file
• Inspection/testing
• Cosmetic
• Other
Escrow holdback requests must go through the exception process and be approved by
Underwriting department management and/or the director of Credit Risk. CCM holds the
funds for repairs in a non-interest-bearing trust account. The CCM Renovation specialist
works with the CCM Accounting department to disburse funds in a timely manner. Escrow
holdbacks are for purchase transactions only.
Note: The CCM minimum amount for repairs is $500. If repairs are less than $500, the
seller and buyer must complete the repairs prior to closing.
The escrow holdback amount is disclosed in section N, Due from Seller at Closing (page three of the CD within Encompass).
The borrower is providing the funds for the
escrow holdback
The escrow holdback amount is disclosed in section K, Due from Borrower at Closing (page three of the CD within Encompass).
ADDITIONAL FORMS
The following additional forms are located in Encompass in the Companywide folder within
the Custom Forms tab. Once completed, they are uploaded into the Property-Escrow Hold
Document eFolder. A description of each form is included, as well as indication of who
completes which:
Form Description Escrow Holdback Agreement A branch member prints this form after the escrow
holdback exception has been approved by the Underwriting department manager or director of Credit Risk. The selected contractor executes the agreement prior to closing. The borrower and seller execute the agreement at closing. The underwriter adds a condition and the branch member attaches
the form to ensure it is signed at closing. Note: If the property is a new construction, the Underwriting department manager or director of Credit Risk sends an email to [email protected], requesting a modified Escrow Holdback Agreement specific to a
builder holdback.
Self-Help Agreement for Escrow Holdbacks After the CCM Renovation manager reviews and confirms the borrower to conduct self-help (work himself/herself), a branch member has the borrower(s) sign this form prior to closing.
Different repair reasons determine the timeframe granted for repairs. See the If/Then table
below on how either the Underwriting department manager or director of Credit Risk
determine the repair timeframe.
If Then The escrow holdback for repairs is weather-related
An appropriate timeframe is determined based on the subject property’s weather conditions.
Management researches the area’s weather forecast to determine a realistic timeframe. Note: The timeframe cannot exceed 120 days (180 days for FNMA new construction) for weather-related repairs, or they must be completed by the
end of April (whichever comes first).
The escrow holdback for repairs is safety/soundness/structural-related
The branch member and underwriter are informed of the timeframe (maximum timeframe permitted is three weeks). If it is required for the rate lock to be extended past the date of expected completion, the branch is notified.
Note: If the work is not completed on time and an extension is necessary, the branch is charged with the standard extension fee.
The escrow holdback for repairs falls under the
“Other” category
The appropriate timeframe in which the work must
be completed is determined.
The escrow holdback for repairs is cosmetic The appropriate timeframe in which the work must be completed is determined.
The escrow holdback for repairs is for inspections/testing
The appropriate timeframe in which the work must be completed is determined.
UNDERWRITER RESPONSIBILITIES
The underwriter confirms that the escrow holdback request has been approved by the
Underwriting department manager or director of Credit Risk.
PRIVATE MORTGAGE INSURANCE
Most private mortgage insurance (PMI) companies leave the escrow details up to the lender.
The postponed improvements must meet agency guidelines. Loans with mortgage insurance
(MI) are submitted to the MI company for a full underwrite.
RUNNING AUS FINDINGS WITH FINANCED REPAIRS
The underwriter runs the automated underwriting system (AUS) on loans with financed
repairs. See below steps:
1. On 1003 Page 3, go to section VII. Details of Transaction, line b. (Alterations field)
and enter the repair cost plus contingency.
2. Unlock line f. (Estimated Closing Costs field) and reduce the repair cost plus the
contingency from the total estimated closing costs.
3. Run the AUS findings.
4. Lock line f. once all findings are acceptable. This step adds the repair cost plus
contingency to the closing cost.
5. Navigate to line i., and in the drop-down, type Cost for Repairs. Next, enter the
Note: Letters (fields) b. and i. cancel each other out so it is not double-counting
repair costs in the cash to close. The AUS should not be submitted this way, as it
may give false findings considering the cost for repairs as a credit. The process
above ensures findings are accurate. If an AUS error is received, contact the
Renovation manager.
ADDITIONAL CONDITIONS – ADDED BY UNDERWRITER
The CCM underwriter adds and completes the following conditions from the condition set
“Escrow Holdback Conditions” that includes the following:
APPROVAL CONDITIONS
1. The selected contractor signs the Escrow Holdback Agreement prior to closing.
2. If the borrower(s) is handling repairs himself/herself, a signed Self-Help Agreement for
Escrow Holdbacks is required prior to closing. This is approved by the Renovation team
manager prior to signing.
CLOSING CONDITIONS
1. The borrower(s) signs the Escrow Holdback Agreement at the time of closing (if it is a
VA loan locked at Money Source [investor], utilize form 26-1849).
2. The seller signs the Escrow Holdback Agreement at the time of closing (if the funds held
in the escrow account are the seller’s).
3. Funds in the amount of $<enter dollar amount> will be held in an escrow account with
CCM or the title company for a maximum of ___ days or no later than ___ date, for the
following repairs <list repairs>. These funds are to be held from the _____. (Be sure to
type this out with inserted dollar amount and listing of repairs.)
4. If the Escrow Holdback Agreement doesn’t match the underwriter’s condition, as well as
the screen approved by management, the underwriter reviews the file.
PRIOR-TO-PURCHASE CONDITIONS
1. If the appraisal is “subject to completion,” a final 1004D/442 is required once repairs are
completed. Funds for the inspection are held by CCM in an escrow account.
2. Necessary repairs require an inspection by a licensed professional (if applicable).
3. If the property has a septic/well system, an approval tag is necessary from the county.
4. Remaining funds after repairs are completed are given back to the party which
contributed the funds when the repairs were not financed into the loan amount.
or
Remaining funds after repairs are completed are applied as a principal curtailment when
the repairs were financed into the loan amount.
UNDERWRITING FORMS
Please see If/Then table below regarding what form(s) the underwriter completes per loan
type:
If the loan is Then utilize Conventional Transmittal Summary 1008 – List the escrow holdback amount in the
Underwriter Comments section.
FHA • HUD 928005b – Conditional Commitment – Complete section 3 and a Mortgagee Assurance of Completion HUD 92300 – page 1, 2 and 3 are completed at time of approval
and • HUD 92900-LT – Loan Transmittal – List the escrow holdback and the
Section Field Description Escrow Hold Y/N Y auto-populates for the UW Summary CC screen.
Escrow Holdback Reason Select from one of the drop-down options: • Weather • Safety/Soundness/Structural
• Other • Other-Cosmetic • Inspection/Testing
1004D or Inspection Select the appropriate option (either 1004D or Inspection) to confirm work is completed after
close.
Estimated Completion Enter this date per guidelines above.
Deliverable Management either selects Yes or No to indicate to the Secondary Marketing department and Delivery department as to whether the file may be delivered
to the investor or agency prior to escrow completion. When No is selected, the file is held and not delivered, and the lock needs extended to allow for the time to complete the repairs. If the lock expires, the branch is charged a lock extension fee.
Construction Loan Check this checkbox if the hold is new construction, final requirements are held from the builder/seller and no additional contractor is obtained.
Management Approval: Either the Underwriting department manager or director of Credit Risk selects his/her name.
Funds Held At: Select where the funds are being held (CCM or Title Company). Note: Additional management review is required to permit the title company to hold funds.
Self-Help Select Yes or No from this drop-down if self-help was approved for repairs.
MSHA PPI Loan Check this checkbox if the loan qualifies as a MSHA PPI loan.
Section Field Description Lock Extension Required If the repair reason is due to
safety/soundness/structural issues, the rate lock is extended until after repairs are completed. Either the Underwriting department manager or the director of Credit Risk determines this and enters Yes or No.
Extended Lock To If it is required that the rate lock needs extended
past the expected completion date, management enters the date to which the lock needs extended. Note: It is up to branch to monitor these loans, and if an extension is needed due to repairs not being completed, a branch member requests an extension from the Secondary Marketing department.
Section C – REO/EEM Information
Section View
Field Descriptions
Section Field Description REO Type Select the appropriate REO type from the drop-
down listing. • REO – is used when the loan is FHA and
the seller is HUD • $100 Down REO – is used when the loan
is FHA, the seller is HUD and using the $100 down program
• Not REO – is used only on FHA loans • N/A – is on all other property types and
loan programs
Is this an EEM Y/N From the drop-down options select whether it is an energy-efficient mortgage (EEM) (Y for yes, N for
no, N/A for conventional loans).
EEM Completed Y/N Indicate whether the EEM Calculation screen is completed – select Yes or No. Note: Select Yes or No for FHA and VA loans only; for all other loan types, leave this field blank.
Section Field Description Repair Amount List the higher estimate from the two bids obtained.
Repair + Contingency The amount entered is the total cost of the repair plus contingency. Click on the Contingency Guide button to determine the additional funds to be held back for
unexpected repairs/cost.
Seller/Buyer/Both/Fin Select the party (from the drop-down listing) which is paying for the repairs or if the repairs are being financed.
Contingency Guide When clicked, provides the following information, which serves as a general guide for contingencies:
• EEM – Use the worksheet to determine the repair + contingency amount
• FHA HUD REO – The maximum repair amount is $10,000; the contingency is 10 percent of the repair amount
• USDA – The repair amount cannot exceed 10 percent
of the loan amount; the contingency is 50 percent of the repair amount
• FNMA New Construction – Follow FNMA guidelines • For all others, the contingency is 50 percent of the
repair amount, with no cap
Total Amount This is the total of the Seller Amount, Buyer Amount or Financed Amount field. It equals the Repair +
Contingency field total.
Section Field Description
EEM Calculation Select this button for a shortcut to the Energy Efficient Mortgage Calculation input form. Print the worksheet once completed and upload to the
eFolder.
Sales Contract Date Enter the date of the sales contract/purchase agreement.
Section Field Description Required Repairs The underwriter completes this field (its content
populates into the Holdback Agreement signed at closing). The required repairs are entered into this field based on the contractor’s bid.
Escrow Holdback Conditions Include the following into this section: amount; whether it is financed; who is paying for it; and a detailed description of the work. Note: If the funds held for repairs are split, the buyer and seller must determine if the remaining
funds are to be returned to the buyer, seller or split. If split, indicate percentage of split. See below example: **Funds in the amount of $__________ will be held by CCM for the repairs as noted. Funds to be held from the borrower in the amount of
$__________ and seller in the amount of $__________; upon verification of completion of repairs, funds are to be distributed to the contractor or buyer/seller for invoice; excessive funds held to be “applied toward the principal of the loan” / disbursed back to buyer / disbursed back to seller.
Notes This section is for the Underwriting department manager or director of Credit
Risk, in addition to CCM Renovation team members, to document all activity on the escrow holdback. Newest notes are entered on top so that the current notes show in the pipeline view. As updates are added, each note begins with the date and the note ends with initial or name. See screenshot below for Notes section example.
If the loan is Then FHA Complete the closeout in FHA Connection.
VA Upload the escrow holdback closeout documentation to the WEBLGY website.
Conventional or USDA No action is needed to close out the escrow holdback. Note: If the agency audits the file, part of the audit is to ensure all the final escrow holdback documents
were provided.
Sold to an investor Review the investor guidelines and verify who is responsible to close out the escrow account with the agency and where to send the escrow holdback closeout documentation.
o Verify documentation is uploaded into the correct folders in Encompass and
marked as “Ready to Ship”
▪ Place the re-inspection documentation into the Appraisal – 442/1004D
Completion Certificate within the Encompass eFolder
▪ Place checks, inspections, letters and the renovation/escrow holdback
statement into the Property-Escrow Holdback Release Docs folder
within the Encompass eFolder
o Complete the Completion Certification section of the Escrow Holdback Repairs
screen (see Section H below) within Encompass. A breakdown of the fields
within this section and their description is listed within the table beneath the
screenshot in section H
SECTION H – COMPLETION CERTIFICATION
SECTION VIEW
FIELD DESCRIPTIONS Section Field Description
Inspection Received Date Enter the inspection received date.
1004D Received Date Enter the 1004D received date.
Signoff Date Enter the date signed off by the underwriter.
Check Disbursed Date Enter this date when final funds are disbursed. (Officially completed with no follow up necessary.)
FHA Connection Closed Enter the date that FHA Connection Escrow Closeout was completed.
FHA Form 92300 Y/N Select Yes to confirm the form was added to the eFolder, No if it has not, or N/A if it is not needed.
Section Field Description VA Form 26-1849 Y/N Select Yes to confirm the form was added to the eFolder, No if
it has not, or N/A if it is not needed.
VA Form 26-1839 Y/N Select Yes to confirm the form was added to the eFolder, No if it has not, or N/A if it is not needed.
Completion Certification Notes Add notes into this section on the dates that the checks were disbursed, including check numbers.
FORMS COMPLETION
The following forms are completed once all repairs are completed. A description of each is
listed below.
Note: These forms need completed prior to entering information into the Completion
Certification section (information contained within next section).
Form Description Borrower’s Release Letter for Escrow Holdbacks Upon repair completion, the borrower(s) signs and
completes this letter prior to disbursing funds from the holdback account.
Unconditional Lien Waiver and Affidavit Note: This is not housed within Encompass; rather, the Renovation Specialist provides this to the contractor prior to releasing funds.
Prior to funds being disbursed to the contractor, the contractor signs this form and obtains notarization on it. The waiver is the contractor acknowledging full payment and confirming that he or she has paid any sub-contractors. This prevents any mechanic’s liens being placed on the subject property.
POST-CONSUMMATION CD
A CCM Renovation specialist notifies the closer (who closed the file) whether a post-
consummation CD needs sent to either the borrower or seller due to the escrow holdback.
The closer then sends the post-consummation CD. The post-consummation CD is necessary
if CCM collects funds for an inspection and those funds are not used.
LOAN IN DEFAULT PRIOR TO ESCROW CLOSEOUT
If the loan falls into default and the work was completed by the contractor, funds are
released to the contractor to prevent any mechanic liens. CCM requires evidence that work
was completed prior to releasing funds.
CONTACT
Contact your underwriting manager with any questions regarding escrow holdbacks.
CONCLUSION
To conclude, escrow holdback requests may be allowed for the following types of repairs:
weather-related; safety/soundness/structural-related; inspection/testing-related; or
cosmetic-related. Repairs may also fall into an “other” category bucket. Regardless of the
category, all requests must be approved by CCM Underwriting department management
and/or the director of Credit Risk. The responsibilities of various CCM employees who work
escrow holdbacks have been outlined within this SOP (including useful screenshots and
instructions). Reference the Employee Roles for Handling Escrow Holdbacks workflow (link
found in the Internal References section below) for a complete snapshot view of CCM
employee roles and responsibilities. Also, see other links below (for the escrow holdbacks
exception process and the MSHA PPI-specific content).
