You start out by noting:
1. No Permit
2. Demo of Home
3. Draw Was Paid
Based on your first two sentences, both the mortgagee and the consultant have crossed HUD guidelines. Begin with HOC - Homeownership Center for your area - WA = Santa Ana, CA. They (mortgagee and consultant) could loose their privileges to participate in the 203K into the future.
Before you move to a construction loan, notify the HOC (HUD's first layer of management for the 203K Loan). Inform them of the details and ask for a ruling. HUD Homeownership Centers insure single family FHA mortgages, assure FHA mortgage quality, help homeowners & homebuyers through effective housing counseling, & oversee the selling of HUD homes. The Santa Ana Homeownership Center (SAHOC) serves the states of Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon and Washington. We also serve the Pacific Islands of American Samoa, Guam, & the Commonwealth of the Northern Marianas.
Please come back here and keep us abreast of the scenario.
Mississippi HUD Consultant