Consumer complaint received 2018-05-10
Product: Mortgage — FHA mortgage
Issue: Trouble during payment process — 
Company: Michigan Mutual, Inc. (MD)

My fianc and I have an FHA 203K ( Limited ) loan with Michigan Mutual. We closed on our home XX/XX/XXXX. When we closed we had a total renovation budget of XXXX which consisted of {$15000.00} for materials and {$14.00},  XXXX for labor to the contractor. The contractor was given a check for XXXX ( half of the reno budget ) to get renovations started and purchase all our materials. Per 203K guidelines all renovations must be completed within 6 months time ( which would put the completion date at no later than XX/XX/XXXX ) however this did not happen. The contractor requested a 2 week extension which was granted and extended his completion date to XX/XX/XXXX and he did not meet that deadline either. The majority of the work was not completed, what little bit was completed was shoddy at best and we do not have all our materials ordered therefore we decided to terminate him. 

In the week before the extension deadline ( XX/XX/XXXX ) we reached out to the 203K department at Michigan Mutual and explained the situation and that we no longer wanted to do business with this contractor and asked for guidelines on the proper procedures to move forward with terminating him and we were met with resistance. In fact it was not until XX/XX/XXXX of me going back and forth with them that we wanted to fire him and not until we started speaking of our rights did they finally agree to let us terminate him. At this moment it felt as if their only concern was what was easier and less paperwork for them rather than actually listening to us and what we wanted to do with our own home. It was like they were trying to force us to continue to work with a contractor we explained to them is incompetent. 

Michigan Mutual explained to us the following process that is supposed to happen once you terminate your 203K Contractor. 
1. They reach out to the old contractor and request a final invoice for any money they feel like they are owed, if any, and the close out paperwork. 
2. They order an inspection/appraisal as a neutral third party to inspect the house and report on the properties current condition and what work has or has not been finished 3. Once they have the appraisal and the final invoice from the original contractor they compare the two to make sure that what the contractor is saying he has done and should be paid is actually what has been done and what he should be paid. 
4. Once this happens should everything check out you now know what remaining funds you have to hire the new contractor and finish you renovations.

All of this did not happen. In a phone conversation my fianc and I had with the two 203K department representatives we brought up the fact that there is an extensive list of materials that have not been purchased and asked how that would be handled. The underwriting supervisor then told us that they do ask for invoice/receipts from the contractor and that they also verify with us what he says that they purchased and that we actually have those materials in the house, this also did not happen. And if they do not match up they send out an appraiser again to do a materials inventory. This did not happen. 

The appraisal was completed and submitted to the bank XX/XX/XXXX and the invoice was not submitted to the bank by the old contractor until XX/XX/XXXX ( almost a month after termination ). Once the invoice was received there was supposed " back and forth '' between MiMutual and the contractor on some things he was charging on the invoice that according to the appraisal was not complete and we were told we would be informed when that matter was resolved. 

While this was taking place we did some research into the contractor and his business because we read about the Guaranty Fund that Maryland Home Improvement Commission has for all its licensed home improvement contractors ( which he should be ) that would protect us and give us our money back in situations such as ours. This fund is set up to protect home owners in the event of shoddy work and/or wrong doing of the contractor and is paid for by the contractors when they receive and renew their licenses. While looking into this matter we discovered that the contractor that had been working on our home and his business are not MHIC licensed and have never been. ALL contractors in the state of Maryland who are doing home improvement are REQUIRED to be licensed by the MHIC ( Maryland Home Improvement Commission ) When we brought our findings up to Michigan Mutual, along with the proof, and letting them know that they are liable for this because it was their responsibility to vet the contractor and had they done their job we would have never been in this situation instead of owning it they tried to tell us that we were wrong. A direct quote from an email the Underwriting supervisor sent to us is that " they checked with the city of XXXX and the city of XXXX follows the county of XXXX XXXX and that in the county of  XXXX XXXX 's if a permit does not need to be pulled then the person preforming the work does not have to be licensed. '' This is incorrect because regulations state every contractor performing Home Improvement in the State of Maryland is REQUIRED to be MHIC licensed. The Underwriting supervisor then sent us a copy of the contractor 's license. Once we looked at the license we discovered it is a Construction Firm license.

A Construction Firm License is strictly for 100 % new build or Commercial properties ( which our house is neither of ) if you are doing home improvement on an existing RESIDENTAL property then you are required to be MHIC licensed. When we brought this to the attention of Michigan Mutual and also that the license they sent over has been altered as well to cover up the writing under Construction Firm that should read " NOT FOR HOME IMPROVEMENT and that once again they should have caught this they ignored us once again. 

Per HUD guidelines and Michigan Mutual guidelines as well all contractors are required to be licensed unless the local jurisdiction does not require it and the State of Maryland does therefore he should have been. 

When the " final invoice '' was submitted by the old contractor it was for {$15.00},  XXXX there were inconsistencies and we pointed out those inconsistencies. We also pointed out that they have an appraisal that says that he did nothing, the fact once again he is unlicensed, that he is trying to find a way to keep the XXXX check that he was given in the beginning and that they ( as in Michigan Mutual ) were just about to pay him that extra money and not ask any questions. When we asked them for the receipts they informed us that they do not ask the contractors for individual receipts and that was mind boggling as well. We have never seen a FINANCIAL INSTITUTION not ask someone requesting money be paid to them for receipts. Especially after the customer is telling you that they are not telling the truth. 

Michigan Mutual has not only ignored our rights but is assisting a contractor who was working illegally to take money from us. They did not do the job they were required to do. Per HUD 's guidelines it is the Mortgagee ( Lender ) responsibility for vetting the contractor. This contractor should have never passed their approval process because he provided them with a license that was altered and unrelated to what we he was contracted to do. We did not sign up to have an unlicensed contractor work in our home and had we know this we would have never gone into business with him. It is now XX/XX/XXXX and our house is sitting uncompleted and uninhabitable just like it was when we closed 8 months ago on XX/XX/XXXX. Michigan Mutual has dropped the ball on this and if the guidelines they state that they have were followed from the beginning we would not be in the situation we are in today and not living in a home that is supposed to be our primary residence that we pay the bills and mortgage for every month.