Page 249
The borrower is not to receive funds after closing. Lenders must apply any excess funds from the construction proceeds to reduce the principal balance of the permanent loan. In the event funds remain after closing from unused prepaid expenses including, but not limited to, per diem interest to the end of the month on the new loan, hazard insurance premium deposits, and/or real estate tax deposits needed to establish the escrow accounts, the borrower may receive cash back if the borrower paid these items from their personal funds and they do not represent loan funds. Funds that remain in the contingency reserve account after the completion of construction may be utilized for an eligible loan purpose or applied to the principal balance of the permanent loan. 12.26 MORTGAGE FILE DOCUMENTATION