HUD Repair Escrows

Properties classified as "IE", Insurable with Repair Escrow, have a fixed dollar amount established by HUD that allocates money for specific repairs to the property if and only if the buyer purchases the home using an FHA 203(b) loan.  If non-FHA financing is used, or if an all cash purchase is made for an IE property, the repair escrow does not apply.

For all contracts on or after November 1, 1999,  the repair escrow is financed into the buyer's FHA mortgage.  The lender originating the new FHA 203(b) loan will establish an escrow account for the amount of repairs plus a 10% contingency.  After the close of escrow, the lender will inspect the completed work on the house and distribute the repair monies as appropriate within 90 days.  Any funds in the escrow account that are not used to make repairs will be applied directly to the unpaid balance of the loan.