We bought a HUD home and are now being told we have penalties to pay when we weren’t aware of them. Help?

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We bought a HUD home under an FHA 203(b) with escrow repair. I work with the 203(k) loans on a daily basis, but not the 203(b)’s. I am aware that there are penalties that are assumed by the homeowner with a 203(k) if the repairs are not completed after a certain number of days that is placed on the “homeowner/contractor agreement” that all parties must sign. We didn’t sign anything like this and when the contractor and myself asked the loan officer if there would be any penalties we were told there were no penalties.

NOW, the lender is saying that we are assuming penalties that we’d never heard of, they sent us a document I’ve never seen that is UNSIGNED by anyone. How do I deal with this? We didn’t sign anything or acknowledge any emails or phone calls about penalties, but they’re still pushing us to pay them. This seems VERY shady and unfair…

3 Comments
  1. Reply
    Common Sense
    July 21, 2011 at 1:15 am

    READ your paperwork carefully…you may have agreed to this. I bet you did. If not ignore them.

  2. Reply
    Janet P
    July 21, 2011 at 1:37 am

    You agreed to this, you have a construction loan. It is not a gift.

    You either construct with the money of pay up and refi out of the loan. They will keep after you until construction is complete.

  3. Reply
    teran_realtor
    July 21, 2011 at 2:21 am

    As a Realtor, I’ve sold many HUD houses using the 203(b) with repair escrow. This is the first time I’ve heard of the possibility of a penalty to the homeowner for failure to get the repairs done in time. However, it does make sense for this to be the case – you got an FHA 203(b) loan that the lender cannot sell unless you get the repairs done as scheduled. It’s going to cost the lender money because of your failure, not theirs.

    To push you to pay a penalty using an unsigned form seems shady – but the costs that will be incurred are YOUR fault, not the lender’s, so I wouldn’t call it unfair.

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