The following terms and conditions apply to private lender loans originated and serviced by FVS Enterprises LLC (doing business as Watershed Renovation Capital) and hereinafter referred to as "WRC".
GETTING PRELIMINARY LOAN APPROVAL ON A SPECIFIC PROPERTY
- You send us an earnest money contract for the property signed by all parties and a completed Loan Request Form.
- We do a drive-by of the property to determine whether the property meets the lender's guidelines and review your estimated After Repaired Value.
- We notify you whether you have received preliminary loan approval.
If you are a first time borrower, or if our loan program or policies & procedures have changed, we email you a Mortgage Brokerage Agreement with the latest version of this document "Important Information about Rehab Loans". You need to read this material to be sure you understand how our program works, and sign the Mortgage Brokerage Agreement and email it back to us.
PROCESSING THE LOAN AFTER GETTING PRELIMINARY LOAN APPROVAL
- You open title with a title company, order the title commitment, and direct the title company to send a copy to WRC.
- You pay WRC the initial inspection, appraisal and flood determination fees. We order the inspection, appraisal and flood determination letter.
- You coordinate the scheduling of the inspection and appraisal with the seller, if needed.
- You meet with the appraiser and inspector to discuss your plans for the rehabbing, renovation or remodeling of the property. The inspector may adjust your plans as he finds appropriate, including adjusting costs and adding other work that is needed. The inspector will tell you if you need to get bids, further inspections and/or permits.
- The inspector provides WRC with a Scope of Work Form with cost estimates, or in rare instances recommends that the loan be denied because of insurmountable repair problems.
- We compare the work specified in the Scope of Work Form with the required work shown in the Appraisal Report for consistency in what needs to be done to bring the property to a good and marketable condition.
- We email you the final Scope of Work Form and Rehab Reserve calculation.
- We email you a Loan Calculation Worksheet showing the actual loan amount, initial funding, and the estimated cash, if any, you will need at closing. Borrower is required to bring minimum cash of 5% of Loan Amount to closing. In conventional lending terms, this is a "downpayment".
- When the flood determination letter is received we let you know if flood insurance is required. If required, you order the flood policy.
- You obtain hazard insurance on the property subject to certain lender requirements.
- When the title commitment is received, we let you know whether a survey is required. If required, you order the survey or request the title company to do so. A survey is required if the property legal description is in metes and bounds or there is obvious encroachment issues resulting from additions or buildings erected on the property.
- We instruct the attorney to prepare the legal documents and closing instructions.
- We review the legal documents and send the title company the legal documents and closing instructions.
- You coordinate with the title company, seller and WRC to determine the closing date and time.
- We receive and review the HUD-1 closing statement draft prepared by the title company.
- In most cases, we order a wire transfer of the initial funding amount so the closing can be table funded. The title company must provide certain documents to WRC in advance of the closing in order for table funding to occur. In addition, the borrower's insurance must be received prior to funding.
- You and any co-borrowers or loan guarantors go to the title company for closing.
This Scope of Work Form does not cover items that can't be evaluated by the inspector because utilities are not turned on as well as non-visible items in need of repair that may be revealed in the course of renovation.
The Rehab Reserve is an estimate of contractor and subcontractor costs (even if you plan to do some of the work yourself or already have certain materials in inventory). Your actual rehab costs may be more or less than the Rehab Reserve. You are responsible for paying any and all costs in excess of the Rehab Reserve as well as all costs for repairs needed that are not described in the Scope of Work Form. Neither WRC nor any inspector is liable for any costs that Client incurs in excess of the amounts shown in the Scope of Work Form.
REHAB RESERVE DRAW PAYMENTS
- You call the inspector at any time during normal business hours to order the draw and final inspections.
- The inspector works the inspection into his schedule. Normally, he will be able to inspect the property within two days your call. The inspector determines the amount of rehab funds to be released.
- We wire the draw payments to you usually the next day after the inspection is completed.
No change in the Scope of Work shall be made after closing without the prior written consent of WRC.
The inspector's Rehab Reserve will be withheld from the loan amount by the lender and released in as many draws as Client requires, provided, however, that each draw payment must represent a minimum of $5,000 of work completed (except for the final draw payment). WRC does not advance any Rehab Reserve Funds (i.e., no funds will be paid before work is completed and inspected).
Draw payments are based on the work that has been completed since the last draw inspection for each category of work described on the Scope of Work Form (uninstalled materials are not considered work completed). The inspector will hold back amounts he deems necessary to complete each portion of the work as described in the inspection report.
Also, the inspector is required at all times to hold back sufficient funds which, in the opinion of the inspector, are required to complete the rehabilitation and bring the property to a good and marketable condition.
Each draw is subject to WRC's standard draw inspection fee, which shall be paid to WRC from the Rehab Reserve.
If an inspection appointment is canceled after 5:00pm on the day prior to the inspection appointment, a draw inspection fee will be charged for the canceled inspection.
Draw payments made to a Loan Guarantor, a Beneficiary or Co-Beneficiary of a Trust, or to one person when more than one person jointly holds title to a property, are considered made to Client.
Draw payments will not be made if: (1) work is not finished, (2) materials (e.g. appliances, floor coverings, cabinets, fixtures, etc.) are not installed, (3) substandard workmanship is observed, (4) permits, where required, are not posted or signed off by municipal inspectors, (5) WRC's inspector has no access to the house interior to do an inspection, (6) the scope of work has changed without WRC's prior written approval, (7) the house is occupied, or (8) the loan has matured.
- Interest payments are due on the 1st day of each month for interest owed for the use of loan funds during the prior month (i.e., called "billing in arrears").
- We mail statements on or about the 20th of the month showing the payment due on the 1st day of the following month.
- Interest on draw payments made after the statements have been mailed will be included in the next month's statement.
- Interest for the balance of the month on loans closing on or after the 20th of the month is collected at closing.
Lender has a zero tolerance delinquency policy, and making payments late jeopardizes your ability to get loan extensions and additional loans from WRC. Payments are due on the 1st day of the month. If payment is not received by 5:00 pm on the 6th day of the month or the next business day if the 6th falls on a holiday or weekend (i.e., the "grace period"), the payment is delinquent and the loan is in Default.
Delinquent payments are subject to a Late Payment Fee that is the greater of: (a) 1/10th of one percent of the loan amount and (b) $25 for each day the payment is delinquent. This fee is applied to each loan for which payments are delinquent.
Example: A delinquent payment on a $70,000 loan is paid 5 days late. Therefore: (a) = .001 x $70,000 = $70.00, and (b) = $25 x 5 = $125.00. Thus, the Late Payment Fee is $125.00. If the payment is one day late, the Late Payment Fee is $70.00
Delinquent payments plus the applicable Late Payment Fee must be paid in good funds (i.e., cash, cashiers check, postal money order, or by wire transfer with an additional $12 wire transfer fee). Regular checks will not be accepted for delinquent payments Ð no exceptions.
Any checks returned to WRC (regardless of the reason) are considered delinquent and subject to the Late Payment Fee calculated from the day following the grace period through the date of payment in good funds.
The real estate lien note will be accelerated (i.e., the note must be paid off in full) and the property posted for foreclosure if the delinquent payment plus applicable Late Payment Fee is not received by WRC on the day before the statutory filing date for the next foreclosure auction. Once the Loan has been accelerated and the property posted for foreclosure, the Lender has sole discretion whether to accept anything less than the full payment of the outstanding principal balance plus lenders fee, attorney's fees, and insurance premiums due.
OTHER LOAN DEFAULTS SPECIFIED IN DEED OF TRUST
Loan defaults under the Deed of Trust, if not cured, can result in Lender accelerating the note and posting the property for foreclosure. Also, loan defaults under the Deed of Trust, if not cured, will result in loan extensions being denied.
One hundred twenty Day Renovation Period: The Deed of Trust provides that Client will cause certain repairs and improvements to be made to the property in accordance with the Scope of Work approved by WRC, and such repairs and improvements will begin immediately after the closing date and will be completed within 120 days of the loan date (or such subsequent date as WRC and Client may agree to in writing). Failure to complete the rehabilitation work by such time constitutes a loan default. Also, Client's failure to cause the property to be protected, maintained and kept in good repair constitutes a loan default.
Vacant Property: Client shall not occupy the property, claim it as a homestead, or permit any person to occupy the property without the prior written consent of WRC. If Client or any other person occupies the property without the prior written consent of WRC, such occupancy constitutes a loan default.
Payment of Property Taxes: Client shall pay all taxes and assessments when due (i.e. prior to incurring any penalty and/or interest charges). Failure to do so constitutes a loan default.
Maintain Insurance Coverage: Client shall maintain hazard insurance (including windstorm insurance and flood insurance if required). Failure to do so constitutes a loan default.
Labor & Materials: Client shall pay, when due, all bills of contractors, subcontractors, suppliers and other persons for labor, materials and services in connection with the rehabilitation of the property. Failure to do so constitutes a loan default.
Other: See the loan documents for other acts or omissions constituting a loan default.