SAMPLE RENOVATION LOAN AGREEMENT
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
THIS IS A SAMPLE DOCUMENT FOR USE IN FREDDIE MAC CHOICERENOVATION
SM
LOAN
TRANSACTIONS. THIS FORM IS PROVIDED AS AN EXAMPLE AND HAS NOT BEEN EVALUATED FOR
VALIDITY, ENFORCEABILITY OR COMPLIANCE IN ANY JURISDICTION. LENDERS SHOULD CONSULT
WITH LEGAL COUNSEL TO ENSURE THAT ALL FORMS USED TO ORIGINATE THESE LOANS ARE
APPROPRIATE, REFLECT THE AGREEMENT OF THE PARTIES, AND ARE COMPLETED CORRECTLY
AND IN COMPLIANCE WITH APPLICABLE LAW.
THIS SAMPLE DOCUMENT IS MADE AVAILABLE STRICTLY AS AN ACCOMMODATION TO LENDERS
FOR USE WITH THEIR ACTUAL OR POTENTIAL BORROWERS, AND FREDDIE MAC MAKES NO
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE FITNESS OF THE DOCUMENT FOR A
PARTICULAR PURPOSE, AND HEREBY DISCLAIMS SUCH AND ALL OTHER REPRESENTATIONS AND
WARRANTIES WITH RESPECT TO THE FORM.
THIS RENOVATION LOAN AGREEMENT (“Loan Agreement”) dated ______________, _____, is made
by and between: ________________________________________________________________ (“Borrower”,
“I”, “me” or “my”), and _____________________________________________________, a
______________________________________________________ having a principal place of business at
___________________________________________________ (“Lender”).
1. ABOUT THIS LOAN AGREEMENT
1.1. Lender’s Loan to Me. I have signed a Promissory Note payable to Lender (“Note”). The
Note is for the loan by Lender to me in the principal amount of $________________ (“Loan”).
The purpose of the Loan is:
to purchase the real property described in Exhibit “A” to this Loan Agreement
(“Property”);
to pay in full any outstanding liens on the Property;
and to pay for labor and materials to complete certain improvements (“Improvements”) on
the Property (“Work”). “Property” includes the Improvements. I also have executed a
Mortgage or Deed of Trust (“Security Instrument”) granting Lender a first priority lien on the
Property. In this Loan Agreement, “Loan Documents” means the Note, the Security
Instrument, and this Loan Agreement. All terms defined in the Note and the Security
Instrument have the same meaning in this Loan Agreement.
2. MY AGREEMENTS
2.1. The Work.
2.1.1. My Contractor. I have entered into a written agreement (“Renovation Contract”)
with _____________________________________________ with offices at
_____________________________________________________ (“Contractor”) for all the Work.
The Renovation Contract states the total amount that I will pay Contractor for the Work
(“Contract Price”), and includes (i) the blueprints, shop drawings, plans and
specifications for the Work (“Plans”); and (ii) a written itemization of the Work and the
Contract Price. I have provided to the Lender a copy of the Renovation Contract. The
Renovation Contract comprises the entire agreement between the Contractor and me
regarding the Work. The Contractor will give Lender the name, address and telephone
number of each person that has a contract with Contractor to supply materials or labor for
the Work (each, a “Supplier”). I acknowledge that I am authorized to provide the
Contractor with a copy of this Loan Agreement.
2.1.2. Permits. I will get, and keep in force, all approvals of the Work (each, a “Permit”)
that are required by any federal, state, county, or local government agency (each, a
“Government Authority”). I will comply with all applicable laws of any Government
Authority (“Government Regulations”). Contractor will have any license required by any
Government Authority. I will obtain from Contractor and provide to Lender copies of all
licenses and Permits required by Government Authorities.
2.1.3. Change Orders. Any material change in the Contract Price or the Work must be in
a written agreement signed by me and Contractor and approved by Lender (“Change
Order”).
2.1.4. Care of the Property. If Lender requests, I will provide Lender with a certified
report that the Property is free of wood-boring insects. I will comply with all of the
reasonable recommendations of any engineer making a report for the Property. I will
notify Lender promptly of any fire or other casualty relating to the Property or the Work.
2.1.5. Completing the Work. I will cause the Contractor to begin the Work promptly
after the loan closing and all permits are in place. I will use my best efforts to ensure the
Contractor continues the Work diligently and in a commercially reasonable and
workmanlike manner in strict accordance with the Renovation Contract and all
Government Regulations. The Work will not violate any of the conditions, covenants or
restrictions on the Property. I will notify Lender promptly in writing if (i) I think that the
Work does not comply with the Renovation Contract or this Loan Agreement; (ii) any
notice of lien on the Property is served on me or Contractor; or (iii) any Government
Authority issues any notice or claim relating to the Property. I acknowledge that the
Renovation Contract represents that the Work will be completed on or before
_________________ (“Completion Date”), subject to modifications in approved Change
Orders, but no later than twelve (12) months after the loan closing. Lender will accept the
Work as completed when I satisfy all of the conditions in Section 2.8.4.6 of this Loan
Agreement.
2.1.6. Inspections. Lender has the right to enter the Property to inspect the Work,
without notice to me, during normal business hours, or any other times that Lender
arranges with me. I will pay for all inspections performed at the request of Lender or any
Government Authority, at the prevailing rate. Lender inspections are for Lender’s benefit
only. Lender’s inspections create no liability or responsibility to me, Contractor, any
Suppliers, or any third parties. Lender is not obligated to inspect the Property or the
Work.
2.1.7. I Am Responsible for the Work. I have full and sole responsibility to make sure
that the Work complies with the Plans and all Government Regulations. Lender has no
liability, obligation or responsibility for the Work. Lender is not liable for any failure to
construct, complete, protect, or insure the Work. Lender is not liable for any costs of the
Work. Nothing Lender does (including inspecting the Work or disbursing any part of the
Loan) will be a representation or warranty by Lender that the Work complies with the
Renovation Contract, this Loan Agreement, the Permits or any Government Regulations. If
Lender asks, I will repair or replace at my expense any Work that does not comply with
the Plans. I have no right to assert or claim any offset, counterclaim or defense against
Lender because of any claim I may have against Contractor or any Suppliers.
2.2. Costs and Expenses. I will pay all costs and expenses required to satisfy the conditions
of this Loan Agreement, including any Change Orders.
2.3. No Other Financing. Until paid in full, the Loan will be my only financing for the
Property and the Work.
2.4. Title Insurance. I will get and keep in force a mortgagee’s or lender’s policy of title
insurance (“Title Policy”). The Title Policy will insure: (i) that the total amount of the lien of
Lender’s Security Instrument is a valid first priority lien on my interest in the Property; and (ii)
that the title to my interest in the Property is free and clear of all defects and encumbrances
except those Lender approves in writing. At or prior to the closing of the Loan, I will provide
Lender with the commitment of the issuer of the Title Policy (“Title Company”) to issue the
Title Policy (“Title Commitment”). When the Work is completed, I will provide Lender with
endorsements to the Title Policy insuring Lender to the full amount of the Loan disbursed.
2.5. Survey. If Lender requests, I will provide and certify to Lender and to the Title Company
a survey of the Property and the Improvements, including dimensions and locations of all
completed Improvements and all easements or other rights or restrictions (each, a “Survey”).
Each Survey must be satisfactory to Lender and to the Title Company.
2.6. Appraisal. Lender will obtain at my expense an appraisal of the Property and the
Improvements before Lender disburses any part of the Loan. The appraisal will show the
value of the Property and the Improvements, using the property value estimate method.
Lender will choose the appraiser. Each appraisal will reflect an appraised value and be in
form and substance satisfactory to Lender.
2.7. Hazard Insurance.
2.7.1. The Contractor’s Insurance. The Contractor must get and keep in force the
following insurance policies (“Contractor’s Insurance”): (i) a builder’s all risk insurance
policy (with a mortgagee’s loss payable clause in favor of Lender and with a physical loss
form endorsement), without co-insurance, in an amount not less than one hundred percent
(100%) of the replacement cost of the Improvements, with the standard conditions; (ii)
public liability insurance with limits of liability equal to at least $500,000 per occurrence;
(iii) workers’ compensation insurance as required by applicable state law; (iv)
automobile liability insurance with limits of liability equal to at least $300,000 per
occurrence for each vehicle that will be used in providing the services hereunder; and (v)
other insurance as is appropriate for the Work being performed. The Contractor’s
Insurance will be in force until I accept the Improvements.
2.7.2. My Insurance. I will get and keep in force a standard hazard insurance policy as
required by the Security Instrument. This insurance will be effective when the
Contractor’s Insurance terminates.
2.8. The Loan.
2.8.1. Administration. Lender will disburse the Loan proceeds (“Loan Proceeds”): on
the date the Loan closes (“Closing Date”), in escrow, to a federally insured interest
bearing account (“Escrow Account” or “Account”), to be disbursed by Lender, or
Lender’s escrow agent in accordance with this Loan Agreement, unless prohibited by
applicable law.
2.8.2. Use of the Loan Funds.
2.8.2.1. Disbursements. “Disbursement” means Lender’s disbursement of any part
of the Loan under this Loan Agreement, or my endorsement and delivery of any Loan
Proceeds check to Contractor or a Supplier.
2.8.2.2. Loan Commitment Amount. As of the Closing Date, Lender commits to
disburse Loan principal in the total amount of the Loan (“Loan Commitment Amount”).
After the Closing Date, the Loan Commitment Amount will equal the principal amount
of the Loan less the total amount of Disbursements made to date. Any Loan
Commitment Amount that remains after all Disbursements have been made will be
credited as a partial prepayment of the principal amount of the Loan at the time of the
final Disbursement.
2.8.2.3. No Changes. Unless Lender agrees in writing first, I will not change the
Plans or the Renovation Contract, or permit any part of any Disbursement to be paid
except as specified in a Request for Disbursement.
2.8.2.4. Trust Fund. I will receive all Disbursements in trust. I will apply the
Disbursements first to the payment of the cost of the Work before using any part for
any other purpose.
2.8.3. The Escrow Account. If the Loan will be disbursed from an Escrow Account, all
interest on the Account will be paid to me. If Lender is a depository institution that offers
Escrow Accounts, the Account must be with Lender.
2.8.4. Disbursements; Conditions To Disbursements. Each of the promises I make in
this Loan Agreement will be considered made again as of the time (i) Lender, or Lender’s
escrow agent, receives any request from me and Contractor for a Disbursement
(“Request for Disbursement”); or (ii) I endorse any Loan Proceeds check to Contractor or
a Supplier. Lender will hold ten (10%) percent of each Disbursement for the Work
(“Holdback”). Lender will disburse Holdback only as part of the final Disbursement.
2.8.4.1. Plans Approved. I have reviewed the Plans; the Plans are satisfactory and
have been approved by all Government Authorities having jurisdiction over the
Property and the Work.
2.8.4.2. Work Completed; Invoices and Lien Waivers. The Work for which a
Disbursement is requested has been completed in a good and workmanlike manner,
and complies with the Renovation Contract, the Plans, the Permits, and all
Government Regulations.
2.8.4.3. My Financial Condition; No Defaults. There is no material adverse
change in my financial condition or employment status since the time I applied for the
Loan. I am not in default under any of the Loan Documents or the Renovation
Contract. I have complied completely with all of my promises about the Work
(including the promises in Section 2.1.5 of this Loan Agreement).
2.8.4.4. Request for Disbursement. If the Loan will be disbursed from an Escrow
Account, or directly by Lender, Contractor will deliver to Lender or Lender’s escrow
agent (i) a Request for Disbursement, properly completed, and signed by me and the
Contractor; (ii) the invoices for the Work; (iii) unconditional lien waivers from
Contractor and from Suppliers for all Work covered by the Request for Disbursement
and (iv) all other required information described in the Request for Disbursement.
Lender may rely on my statements and Contractor’s statements in the Request for
Disbursement and on the invoices and lien waivers submitted by Contractor. Lender
does not have to verify any of that information. The funds obtained with the Request
for Disbursement will be used to pay for the Work described in the Request for
Disbursement.
2.8.4.5. Monthly Payment Reserve. I elect to pay from the Loan Commitment
Amount the first __ monthly payments of principal and interest and Escrow Items on
the dates those payments become due. These payments designated by Lender are
called the “Monthly Payment Reserve Account.” If the amount in the Monthly
Payment Reserve Account is not enough to pay in full a payment of principal and
interest or Escrow Item, I will pay those amounts directly to Lender from my own
funds.
2.8.4.6. Completion of Improvements. The Work will be completed as required by
this Loan Agreement. I acknowledge that before the final Disbursement, Lender must
obtain a certification of completion stating the Work was completed in accordance
with the Plans, and the final, unconditional certificate of occupancy issued by the
responsible Government Authority, if required by law.
3. DEFAULT AND REMEDIES
3.1. Events of Default. I will be in default under this Loan Agreement and the other Loan
Documents if any of the following events (“Events of Default”) occurs:
3.1.1. Nonpayment. I fail to make any payment due under any Loan Document.
3.1.2. Other Broken Promises. I fail to keep any promise in this Loan Agreement or any
other Loan Document.
3.1.3. False Statements. Any statement of fact, representation or warranty I make to
Lender in my loan application, this Loan Agreement or in any other Loan Document is
false, inaccurate, or incomplete.
3.2. Lender’s Rights and Remedies. Subject to my right to notice of default and right to
cure the default(s), to the extent required by law, if an Event of Default occurs, Lender has the
following rights and remedies (“Rights and Remedies”), subject to applicable law:
3.2.1. Declare a Default. Lender may declare the Note, the Security Instrument, or
both, in default.
3.2.2. Finish the Improvements and Protect the Property. Subject to this Loan
Agreement and applicable law, Lender may take possession of the Property. Lender may
do every act and thing I or any subsequent owner of the Property might or could do for
the protection, construction, repair, operation, maintenance and leasing of the Property. I
authorize Lender, as my attorney-in-fact, to exercise any right I may have in or under the
Renovation Contract or any Permit. I irrevocably authorize and direct each party to any
Permits and Renovation Contracts to provide Lender the benefits of the Permits and the
Renovation Contracts upon Lender’s written notice. I agree that any such party will have
the right to rely upon any written notice from Lender without any obligation or right to
inquire as to whether an Event of Default actually exists and notwithstanding any notice
from me or claim by me to the contrary. I will have no right or claim against any such
party for any benefit provided to Lender by such party. If I cure the Event of Default, or if
Lender reinstates the Loan in good standing, Lender will give written notice of
reinstatement to each such party and authorize each such party to render such benefits to
me.
3.2.3. Take the Escrow Account. Subject to this Loan Agreement and applicable law,
Lender may take any funds in the Escrow Account, if any, to apply to any amounts I owe
under the Loan Documents.
3.2.4. Indemnity. I will indemnify and hold Lender and Lender’s affiliates, and the
officers, directors, employees and agents of Lender and its affiliates (“Indemnified
Parties”), harmless from any liability, claim, loss, cost, legal expenses (including suits,
claims, proceedings, damages, and costs arising from or relating to any third-party
claim), incurred by or alleged against any of the Indemnified Parties arising from or
related to (i) the Property, (ii) the Work, or (iii) my default under this Loan Agreement.
3.2.5. Lender’s Fees, Costs, and Expenses. I will pay to Lender all attorney’s fees,
costs, and other expenses paid or incurred by Lender in enforcing or exercising Lender’s
Rights and Remedies under this Loan Agreement. Interest will accrue on these amounts at
the Note rate from the date the expense is disbursed by Lender and shall be payable,
with such interest, upon notice from Lender requesting payment. The expense plus
interest will become additional debt secured by the Security Instrument.
3.2.6. Remedies Cumulative. Lender may (but is not required to) exercise any or all of
the rights under this Loan Agreement. All of Lender’s Rights and Remedies contained in
this Loan Agreement are cumulative and are in addition to any other Rights and Remedies
created in any other Loan Document or existing at law or in equity.
4. GENERAL
4.1. My Cooperation. Lender may require that I sign other instruments or documents or
supply additional information and data to Lender that it considers necessary to accomplish
the purposes of this Loan Agreement. I will sign such documents or provide such information
at my own cost and expense. All documents delivered to Lender by me will become Lender’s
property.
4.2. Credit Information. I will provide Lender with updated financial or credit information
upon Lender’s reasonable request and notice. Subject to applicable law, Lender may obtain
consumer reports from consumer reporting agencies as part of reviewing my Loan.
4.3. No Waivers. Lender may choose to delay enforcing any of Lender’s rights or waive any
of Lender’s rights under this Loan Agreement. Lender may delay enforcing or waive any of
Lender’s rights without affecting Lender’s other rights. If Lender waives a right, Lender can
still enforce the same right later.
4.4. Entire Agreement. This Loan Agreement and the other Loan Documents are the entire
understanding between Lender and me about the Loan, the Improvements, and the Work, and
may not be modified, amended, or terminated except by written agreement signed by
Lender and me.
4.5. Binding Agreement; Assignment. This Loan Agreement is for the benefit of Lender and
Lender’s successors and assigns, and binds me, my heirs, executors, administrators,
successors and assigns. I may not assign this Loan Agreement without Lender’s prior written
consent, which Lender may withhold in Lender’s sole discretion.
4.6. Survival of Representations. Any promise I make will survive the termination of this
Loan Agreement.
4.7. Joint and Several Liability. Each person executing this Loan Agreement as a Borrower
has joint and several liability.
4.8. Notices. Any communication required by this Loan Agreement will be in writing and
addressed to the addressee at the address indicated on the first page of this Loan Agreement.
4.9. No Third Party Beneficiary. This Loan Agreement is for the sole benefit of Lender and
me, and is not for the benefit of anyone else. All conditions to Lender’s obligation to make
any Advance are solely for Lender’s benefit. No other person or entity will have standing to
require satisfaction of those conditions or be deemed to be the beneficiary of those
conditions.
4.10. Governing Law. This Loan Agreement is entered into in the state where the Property is
located (the “State”) and will be controlled and interpreted by the laws of the United States
and the State.
4.11. Exhibits. The following exhibits are attached to and a part of this Loan Agreement.
Exhibit “A” - Description of the Property
IN WITNESS WHEREOF, Borrower and Lender have executed this Loan Agreement as of the date
first set forth on page one.
LENDER:
[LENDER] ________________________________ BY: __________________________________
NAME: _______________________________ ITS: __________________________________
_______________________________________ (SEAL)
Borrower #1
_______________________________________ _______________________________________
Printed Name Witness
_______________________________________ (SEAL)
Borrower #2
_______________________________________ _______________________________________
Printed Name Witness
_______________________________________ (SEAL)
Borrower #3
_______________________________________ _______________________________________
Printed Name Witness
STATE OF _________________________ )
) ss.:
COUNTY OF _______________________ )
On this _____ day of _______________________ , ______ , before me the subscriber personally
appeared _________________________________ (and) _________________________________ to me
known and known to me to be the same person(s) described in and who executed the foregoing
instrument, and (s)he/they duly (jointly and severally) acknowledged to me that (s)he/they executed
the same.
______________________________
Notary Signature
______________________________
Notary Printed Name
Notary Public; State of __________________________
Qualified in the County of
My commission expires:
Official Seal: