I purchased my first home in 2017 via a 203k Standard loan.  Property needed extensive repairs.  My understanding is that with a Standard 203k Loan, you do not make any mortgage payments until the rehab is complete, 6 months or so post purchase.  

We are now 40% of the way complete and my lender (still holding $100k plus in escrow) wants me to make FULL mortgage payments.  I have communicated to them that 1- they are suppose to have a mortgage payment reserve since I am not supposed to make mortgage payments yet and 2- how do they expect me to start paying on a fully funded loan when they are still holding over $100k in escrow.  If anything, I should be paying only what I have used so far.  

The contractors are pending payment and the lender won't disbursed because I haven't paid 2 months worth of mortgage. Lender stated that FHA sent a cease and desist letter, however when I contacted FHA, they confirmed, they do not get involved until guidelines have been violated.

I have documented everything and sent letters to the Lender and they are refusing to speak with me.  Now I am getting calls from the Loss Mitigation Dept about avoiding foreclosure, but I have repeated I AM NOT SUPPOSED TO MAKE MORTGAGE PAYMENTS YET, MY HOME IS NOT HABITABLE AND I DO NOT HAVE POSSESSION OF IT YET.  FURTHERMORE, YOU ARE STILL HOLDING $100K IN ESCROW.  HOW DO YOU EXPECT ME TO PAY ON MONIES YOU ARE STILL HOLDING AND HAVEN'T YET DISBURSED? To no answer.  

At this point, I have reached out to FHA and asked a supervisor to get involved because my Lender's refusal to communicate is extremely worrysome. Not to mention, I am at risk of having my contractor place a lien on my property all the while the lender wants to initiate foreclosure. My home has no windows/doors/electricity/plumbing or HVAC and to make matters worse, Lender still owes me money for out of pocket permits that I paid in order to expedite repairs and they agreed to reimburse when renovation is complete.

 All I want is to complete my home so that I may finally move in.  I am researching how to obtain a private mortgage since my lender is now misreporting and hurting my credit.  Since my home is not complete, I cannot refinance in order to transfer to a conventional mortgage.  Nevertheless, my home has increased in value despite it's current condition.

Can anyone help me out?  The ideal situation for me is to obtain a loan for $300k so that I may payoff my existing lender and finish the rehab of my home.  At this time, my home is worth in upwards of $500k and it is located in a up and coming gentrified area of Jersey City.  Where can I go? Who should I speak to? Please provide me with some feedback if possible.

Hi Paola--

You mentioned you purchased the home in 2017.  What was settlement date?  If settlement was December 29, your first payment would have been Feb 1, 2018.  Even if house is uninhabitable your (6) escrowed payments would have been exhausted July1.  How long has this project been going on?  Unfortunately, the Lender didn't choose the Contractor, so can't be held responsible for their performance or any unforseen delays in the completion of your project.

You really don't want to go down on your mortgage payments, as it will be extremely difficult to get other financing down the road.  If this has already happened, you may want to consider selling at the as-is value and at least walking away with a tidy profit.

Agreed, You have misunderstood somethimgin the process here.  Also, the $100k or so you haven't drawn yet Is accruing interest as it has been funded into your lender's possession, it doesn't matter that you haven't completed the work to receive the draw.  You need to start making your payments.  You are already at 7 months at least since you closed....you should have the reno completed by now and That is what's causing your issues.

We used a 203k loan on a house we bought in NJ in 2016. We started making payments the month after we closed. The house was uninhabitable for 4 months, but we still made payments. That’s what WE agreed to; your contract is probably different. Check your loan documents. I’m sure they clearly outline everything you need to know.

You should start making payments on the mortgage to not let the house go to foreclosure and impact your credit for future deals. the first payment of the mortgage is always about 2 months after closing depending on the day of close. if you have escrow money specifically for payments then that money should be used as a lot of time has passed. start making the payments asap. Hope you can get this sorted out and it doesn't prevent you to move on to your next deal when this nightmare is complete. take all the lessons you can and move forward.

@Paola K. ??