4145.1 REV-2

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CHAPTER 5 - ESCROW PROCEDURES

5-1. GENERAL. Escrow requests on proposed and existing cases

are reviewed by the Architectural Branch when

extenuating circumstances (beyond contractor\'s control)

warrant acceptance of delayed completion items. Direct

Endorsement (DE) Lenders are responsible for approval of

escrows; however, after closing documents are submitted,

HUD Field Office will monitor completion. The following

methods are provided:

A. Mortgagee\'s Assurance of Completion (Use Form
[HUD](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm)

[92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm), for
deferred on-site and limited off-site

work).

B. Escrow Agreement for Postponed Off-Site Improvements

(For deferred off-site work only, use Form HUD

92606).

C. Assurance of Completion by a Public Authority (For

deferred off-site work only).

An assurance of completion using either Forms [HUD
92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm)

or 92606 will be supported by an escrow of cash or an

irrevocable commercial letter of credit (Bonds are

unacceptable).

5-2. MORTGAGEE\'S ASSURANCE OF COMPLETION (Form [HUD
92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm)).

Submit in HUD case binder according to instructions on

form and in Handbook 4190.1 and 4000.4. Prepare escrow

only after issuance of clear final inspection report

(Form [HUD
92051](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm)) by the
fee inspector.

A. Conditions of Use. The following must prevail for a

clear final inspection:

1\) The record of the mortgagee for fulfilling

previous assurances of completion must warrant

approval of submitted form.

2\) The dwelling on the mortgaged premises is

habitable, safe, and essentially complete;

Items essential for customary occupant use

and enjoyment, or for property safety or

durability, may not be escrowed.

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5-1 3/90

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4145.1 REV-2

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(5-2.A.)

3\) The deferred work cannot be acceptably completed

in a reasonable period before closing, due to

weather or other extenuating circumstances; but

there is assurance it can be completed within no

more than eight months.

Completion cannot be later than the date

established on Compliance Inspection Report,

Form [HUD
92051](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm);

4\) The work involved in the escrow arrangement is

minor and uncomplicated; and

5\) All other conditions of the commitment,

including specific conditions not subject to

field inspection, have been fulfilled by

compliance or by an acceptable assurance of

completion (i.e., off-site improvements).

B. Instructions for Completing Form [HUD
92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm) are on

the form and in the Single Family Underwriting

Reports and Forms Catalog (Handbook 4190.1).

C. Minimum Amount of Cash/Irrevocable Letter of Credit

Requirement is \$500 or 1-1/2 times the cost of the

deferred item, whichever is greater.

D. Mortgagee\'s Responsibilities (HUD Processed):

1\) Provide written request for all escrows to HUD

Field Office. DE lender must get written

request from builder; and

2\) Assure completion of the deferred work. If the

escrow proves insufficient, the lender must pay

for the deficit; and

3\) Call fee inspector; obtain a Compliance

Inspection Report (Form [HUD
92051](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm)).

E. Extension of the Completion Date is allowed when

Office Manager (or Director of Housing) determines

that the deferred work could not have been

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3/90 5-2

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4145.1 REV-2

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(5-2.E.)

completed within the established time frame. When

an extension is granted, the tickler file date is

amended.

F. Receiving Clerk Responsibility is to forward all

escrow requests to the Architectural Branch for

disposition.

G. Architectural Branch Responsibility is to review all

escrow requests for HUD processed cases. Consult

with the Valuation Branch, if necessary, on existing

properties. DE underwriter is responsible to review

all escrows on DE cases.

1\) If acceptable, prepare an office report on Form

[HUD 92051](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm),
Compliance Inspection Report, marking

Item 13 - Part I.

a\. Provide a description of the acceptable

escrow item(s) in Part II of form; include

cost estimate of each item;

b\. Provide the name and phone number of a fee

inspector for the mortgagee to contact upon

completion of escrow item(s) or mark Item 12

\- Part I, allowing the mortgagee to

certify;

c\. Provide the total amount of the escrow and

the date of completion in Item B - Part IV;

d\. Place a stamp \"92300 Escrow Acceptable\"

(3/8\" high letters) on the front cover of

the case binder.

2\) If unacceptable, note such on mortgagee\'s

request; initial and date it; then return to the

mortgagee.

H. Closing Clerk Responsibility:

1\) Review Form [HUD
92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm) for
completeness.

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5-3 3/90

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4145.1 REV-2

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(5-2.H.)

2\) If completion date shown on the form has passed,

do not issue Mortgage Insurance Certificate

unless the Director of Housing (Supervisor, or

designee) grants an extension, in writing.

3\) Enter \"92300 Escrow\" and the escrow amount

directly below endorsement stamp on the note.

4\) Prepare a supplementary binder showing \"FHA case

number\", followed by \"92300 Escrow\". Place

Parts 1 and 2 of Form [HUD
92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm) inside
the

binder.

5\) Deliver the binder to the Architectural branch.

I. Monitoring Function. Architectural Branch is

responsible on all proposed and existing property

escrows, including those accepted by DE Lenders.

1\) At least 5 percent of the mortgagee assurances

of completion must be field reviewed to

determine reliability.

2\) Maintain a list of acceptable certifiers

(mortgagees) as well as those certifiers making

false or otherwise unacceptable certifications.

When administrative sanctions are necessary,

follow HUD Handbook 4060.2.

3\) After receipt of the supplementary binder, set

up a tickler card file to trigger the mailing of

Part 2 (Form [HUD
92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm)) 15 days
before the

designated completion date. When an extension

is granted, the tickler card is revised to

reflect the new date.

a\. When Part 4 of Form [HUD
92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm), and Form
HUD

92051 is received from the lender, then:

1\. Pull the supplementary binder.

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3/90 5-4

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4145.1 REV-2

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(5-2.I.3)a.2.)

2\. Remove the original Part 1 (Form HUD

92300), staple it to the certified

Part 4, with Form [HUD
92051](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm).

3\. Mail the forms to Central Files in

Headquarters. Instructions are in

Handbook 4165.1.

4\. Destroy the supplementary binder.

b\. When tickler date is reached and Part 4 of

Form [HUD 92300](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm)
and Form [HUD
92051](http://www.hud.gov/offices/adm/hudclips/forms/hud9.cfm),

Compliance Inspection Report, have not

been received from the mortgagee, send Part

2 of the form to the mortgagee as a

reminder.

The tickler card is refiled with a 30 day

due date.

c\. If Part 4 is not returned with the required

certification before the second date has

passed, prepare a letter to the mortgagee

for the Director\'s signature stating that:

1\. The mortgagee may not use the HUD escrow

procedure in the future until the

subject case deficiency is resolved.

2\. If deferred work is not completed within

30 days, the case will he referred to

the Mortgagee Participation and

Compliance Division in Headquarters.

3\. If the property goes into foreclosure,

the claim will be reduced by the amount

of escrow established for any incomplete

work.

J. Properties Acquired by HUD before completion of

escrow procedure will be handled according to repair

instructions in Handbook 4310.5. The insurance

claim will be reduced accordingly.

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5-5 3/90

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4145.1 REV-2

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(5-2.)

K. Revision of Deferred Completion Items.

1\) Mortgagee (including DE lender) submits request

for waiver or substitution of required work

items. Mortgagor approval must be provided.

2\) Architectural Branch consults with Valuation to

consider acceptability of property changes and

effect, if any, of proposed changes on value.

3\) If approved, and value is adversely affected,

all or any excess of escrow funds must be

applied as a mandatory prepayment to mortgage

principal.

4\) Notify mortgagee of decision, including

prepayment requirements, with a copy to Central

Records in Headquarters.

5-3. ESCROW AGREEMENT FOR POSTPONED OFF-SITE IMPROVEMENTS.

Instructions are in Handbook 4115.1, Administrative

Instructions and Procedures, Chapter 3. Use Form HUD

92606\.

5-4. ASSURANCE OF COMPLETION BY A PUBLIC AUTHORITY.

Instructions are in Handbook 4135.1, Procedures for

Approval of Single Family Proposed Construction

Applications in New Subdivisions.

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3/90 5-6