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					SECTION 184 INDIAN HOUSING LOAN
      GUARANTEE PROGRAM
       Fargo, North Dakota
         September 2010



    U.S. Department of Housing and Urban Development
PROGRAM OVERVIEW




    Section 184 Training, Sponsored by
                   HUD
      PROGRAM OVERVIEW



• 1992 Housing and Community
  Development Act
• Annual funding by Congress
• Nationwide Program




         Section 184 Training, Sponsored by
                        HUD
         LENDING IN INDIAN
        COUNTRY IS UNIQUE

• Unique land status
  – Tribal Trust Land
  – Allotted Trust Land
  – Unrestricted Land

• Underserved markets
  – Non-traditional credit
  – Limited access/exposure to financing
  – Manual underwriting

         Section 184 Training, Sponsored by
                        HUD
                              184 PARTNERS

• HUD 184 Program Staff
• Lenders
• Tribes
• TDHEs (Tribally Designated Housing
  Entities)
• BIA (Bureau of Indian Affairs)



            Section 184 Training, Sponsored by
                           HUD
            LENDER INCENTIVES/
                OPPORTUNITIES


• 100% guaranteed loan

• Assign or foreclose
• Up to 2.5% loan origination fee on
  construction/rehab loans
• Community Reinvestment Act (CRA)



           Section 184 Training, Sponsored by
                          HUD
        PARTNER
ROLES AND RESPONSIBILITES




        Section 184 Training, Sponsored by
                       HUD
       WHAT DOES HUD DO?


• Develops and implements policies
• Conducts training and marketing
• Underwrites the loan
• Issues the Loan Guarantee
  Certificate



          Section 184 Training, Sponsored by
                         HUD
                     WHAT DOES THE
                       LENDER DO?

• Lends the money!
• Explains the 184 mortgage loan
  process
• Processes and prepares the loan
  package
• Serves as liaison between borrower
  and HUD
• Underwrites the loan (Direct
  Guarantee approved)
          Section 184 Training, Sponsored by
                         HUD
                 ELIGIBLE LENDERS

• Bank, Savings & Loan, Credit Union
• Mortgage Companies approved
  through FHA, VA or RD
• FHA approved Brokers with 184
  Program Sponsorship
• Lenders/Tribe obtain approval
  through NAHASDA (Chapter 3 of
  Guidebook)


           Section 184 Training, Sponsored by
                          HUD
                   3 STEP LENDER
               APPROVAL PROCESS

1. Submission of a Lender Package
     HUD OLG in Washington Dc
     Electronically or mailed

2. Completion of mandatory training for
   staff.
 (Lender approval letter issued after completion of steps 1.
  and 2.)

3. Submission of executed Code of Conduct
   form.


                Section 184 Training, Sponsored by
                               HUD
                                   Lender Package

HUD Form 11701, Application for Lender Approval
Sponsor Agreement
Funding
Evidence of federal approval
Financial Statements
Fidelity Bond
Errors and Omissions Insurance
Licenses
Credit Reports
Resumes
Quality Control Plan
State Approval of dba
Evidence of Acceptable Facilities
Sanctions Letters




                     Section 184 Training, Sponsored by
                                    HUD
        RETAINING AN ACTIVE
                     STATUS

• Submit annual, updated certification
  package to designated OLG staff. (In
  the planning stages)
• Request training for all new/inactive
  staff.
• Process at least 2 applications within
  a 6 months period .



           Section 184 Training, Sponsored by
                          HUD
          CONTENTS OF LENDER
                    PACKAGE

Statement requesting approval to
  include:
• Name and address of applicant,
  geographic service area
• EIN number for applicant and date
  on Incorporation,

Companies that are already approved lenders
  need not resubmit a new Lender package, but
  training is mandatory for all new staff.
             Section 184 Training, Sponsored by
                            HUD
        CONTENTS OF LENDER
           PACKAGE (CONT.)

• List of Officers/Directors who
  supervise staff and persons holding
  more than 10 percent of stock in the
  entity including phone numbers ,
  home addresses and social security
  numbers.

• List of employees who will participate
  in the program to include social
  security numbers , positions and
  residential credit reports.
            Section 184 Training, Sponsored by
                           HUD
                       WHAT DOES THE
                           TRIBE DO?

• Implements foreclosure, eviction,
  lien & leasing procedures
  – Model One-Stop Docs
• Conducts environmental reviews
• Completes land status form




          Section 184 Training, Sponsored by
                         HUD
                      WHAT DOES THE
                      TRIBE PROVIDE?


• Land
• Homeownership counseling
• Financial Assistance
• Infrastructure




         Section 184 Training, Sponsored by
                        HUD
         WHAT DOES BIA DO?


• Serves as a trustee for tribal trust
  land
• Approves lease/mortgage
• Provides/updates title status
  reports
  – Records mortgage/lease
• Underwrites/reviews loan package
  (if allotted/restricted)

           Section 184 Training, Sponsored by
                          HUD
PROGRAM FEATURES AND
    REQUIREMENTS




      Section 184 Training, Sponsored by
                     HUD
    Who can get a 184 Loan?
      ELIGIBLE BORROWERS

• Indian or Alaska Native individual
  enrolled in a Federally recognized
  tribe. Copy of enrollment
  card/enrollment letter required.

• TDHE/IHA (Indian Housing Authority)

• Tribe. Tribal federal designation
  available on Federal Register
  accessed on Dept. of Agriculture/BIA
  website

            Section 184 Training, Sponsored by
                           HUD
    Who can get a 184 Loan?
                   ELIGIBLE
       BORROWERS (Cont.)

• Citizenship/Immigration
  – Not required for eligibility
  – Lawful permanent resident aliens –
    document evidence of permanent
    residency
  – Non permanent resident aliens
     • Principal residence
     • SSN
     • Eligible to work in the US


              Section 184 Training, Sponsored by
                             HUD
                     LOAN FEATURES


• Term: 30 years or less
• Fixed interest rate determined by
  lender
• 1% guarantee fee
• Minimal down payment requirement
• No Adjustable Rate Mortgages
• No commercial structures


         Section 184 Training, Sponsored by
                        HUD
             HOMEOWNERSHIP
               OPPORTUNITIES


• Purchase existing house
• Rehabilitation of existing house
• Purchase and rehabilitation
• New construction
   – Manufactured
   – Modular/stick built
• Refinancing


          Section 184 Training, Sponsored by
                         HUD
                           PROPERTY
                       REQUIREMENTS

• Trust land or land within an Indian
  area
• Meet construction and safety codes
• Single family (1-4 units)
  – Examples include: house, duplex,
    tri-plex, four-plex, town home,
    manufactured/modular home
• Manufactured Housing
  – Affixed to a permanent foundation
  – Manufactured after 6/15/76
             Section 184 Training, Sponsored by
                            HUD
               LAND OWNERSHIP


• Tribal trust land
• Allotted individual trust land
• Fee simple land in a defined Indian
  operating area




           Section 184 Training, Sponsored by
                          HUD
              LAND OWNERSHIP


• Program requirements and
  processing procedures vary
  depending upon how land is held

• Land in an Indian Area = area in
  which a Tribe/TDHE is authorized
  to provide housing



          Section 184 Training, Sponsored by
                         HUD
    LAND CHARACTERISTICS

         Tribal Trust Land
• Land or interest in land held in trust
  by BIA for a Tribe
• Land may not be encumbered or
  alienated (leasehold)




           Section 184 Training, Sponsored by
                          HUD
    LAND CHARACTERISTICS

Allotted Individual Trust Land

• Land or interest in land held in
  trust by the BIA for an individual
  Indian
• Tribe has no interest in land
• Subject to restrictions against
  alienation or encumbrance


          Section 184 Training, Sponsored by
                         HUD
    LAND CHARACTERISTICS

        Fee Simple Land

• Estate in land that is absolute or
  unrestricted
• Owner can dispose of land
  – Subsequent sale of home and/or
    foreclosure; land and home sold
    together
• Located on reservation or within
  Tribe’s operating area for housing

           Section 184 Training, Sponsored by
                          HUD
             184 LENDING ON
          TRIBAL TRUST LAND

• Leasehold interest must be
  established between borrower and
  tribe
• Title Status Report from BIA
  – preliminary with lease
  – final with lease/mortgage
• Parties to lease: BIA, Tribe, and
  Borrower
  – HUD approval/review

          Section 184 Training, Sponsored by
                         HUD
      184 LENDING ON TRIBAL
        TRUST LAND (cont.)



Note: Leasing instrument normally
  approved when tribe submits
 documentation to participate in
          184 program




          Section 184 Training, Sponsored by
                         HUD
           184 LENDING ON
      INDIVIDUAL ALLOTTED
               TRUST LAND


• Generally no lease
• BIA approval required
• BIA issues Title Status Report with
  recorded mortgage & approval



          Section 184 Training, Sponsored by
                         HUD
            184 LENDING ON
       INDIVIDUAL ALLOTTED
                TRUST LAND

• Fractionated ownership
• Lease (due to fractionated
  ownership)
• Foreclosure can result in loss of
  land
• Excess land


          Section 184 Training, Sponsored by
                         HUD
                 184 LENDING ON
                 FEE SIMPLE LAND


• Lease not required
• Title policy required
• Property must be in a designated
  Indian Operating Area (Tribal
  certification on Land Status and
  Jurisdiction Form)


          Section 184 Training, Sponsored by
                         HUD
                           184 LEASE
                       REQUIREMENTS

• Not to exceed 50 year term
• Provision preventing termination
  without HUD approval
• Language indicating lessee can
  mortgage the leasehold, and
  foreclosure is allowed
• Language preventing transfer or
  assignment of leasehold interest
  without HUD/Tribe approval

          Section 184 Training, Sponsored by
                         HUD
LOAN PROCESS FOR TRUST
     TRANSACTIONS




       Section 184 Training, Sponsored by
                      HUD
    LOAN PROCESS For TRUST
            TRANSACTIONS


• Land status verified with tribe
  and/or BIA:
  – Title Status Report needed to verify
    individual allotment ownership
  – Land Status and Jurisdiction Form




            Section 184 Training, Sponsored by
                           HUD
   LOAN PROCESS For TRUST
           TRANSACTIONS

Underwriting the Title Status Report
• Documentation required from the
  Bureau of Indian Affairs
  – Tribal Trust
     • Certified TSR (1 years or less) with/without
       recorded lease
     • Executed lease




              Section 184 Training, Sponsored by
                             HUD
   LOAN PROCESS For TRUST
           TRANSACTIONS

Underwriting the Title Status Report
 (Cont.)

  – Individual Allotted Trust land
     • Certified TSR (6 months or less)
     • BIA approval to mortgage

  – Individual Allotted Trust Land with lease
     • Title Status Report with recorded lease
     • NO BIA approval to mortgage


              Section 184 Training, Sponsored by
                             HUD
  LOAN PROCESS For TRUST
    TRANSACTIONS (Cont.)

• Borrower works with Tribe/BIA to
  obtain 184 lease if tribal trust land
  – Lease is recorded with BIA and TSR
    issued

• Borrower works with Tribe/BIA to
  get environmental review
  completed. REQUIRED ON ALL
  LOANS

           Section 184 Training, Sponsored by
                          HUD
  LOAN PROCESS For TRUST
    TRANSACTIONS (Cont.)

• Lender submits simultaneously:
  – Complete underwriting package to
    HUD (fee simple, tribal trust and
    individual allotment)
  – Copy of proposed mortgage/DOT to
    BIA for approval (trust land)
  – Complete underwriting package to
    BIA (individual allotted land)



         Section 184 Training, Sponsored by
                        HUD
  LOAN PROCESS For TRUST
    TRANSACTIONS (Cont.)
• Lender receives commitment for
  BIA (individual allotment)
• Lender receives commitment from
  HUD
• BIA Issues Certificate of Mortgage
  Approval (trust land)
• BIA Title Plant completes certified
  Title Status Report for lender
  (trust land)
• Guarantee Package to HUD for
  Loan Guarantee Certificate
          Section 184 Training, Sponsored by
                         HUD
SECTION 184 LOAN
   PROCESSING




    Section 184 Training, Sponsored by
                   HUD
                                          LOAN
                                   ORIGINATION

• Borrower contacts approved lender
• Lender determines if borrower
  meets program eligibility
  – Native American (ID/Enrollment Card)
  – Tribe on 184 approved list
  – Indian operating area
• Lender requests case number from
  HUD using forms and process as
  described.
          Section 184 Training, Sponsored by
                         HUD
                           LOAN
              ORIGINATION (Cont.)

• Lender obtains loan documents and
  construction/purchase documents
• Lender orders an appraisal
  – HUD Manual 4150.2
  – Cost approach can be utilized if comps
    not available
  – FHA approved Appraiser
  – Appraisal good for 120 days
• Lender prepares loan package and
  submits for underwriting

           Section 184 Training, Sponsored by
                          HUD
          REQUESTING A CASE
                   NUMBER

• Files will NOT be accepted for HUD
  underwriting until a case number
  has been assigned by OLG staff.

• Case number assignments represent
  internal funds management for HUD
  and reservation of funds for lenders.



           Section 184 Training, Sponsored by
                          HUD
          REQUESTING A CASE
             NUMBER (Cont.)

• Must be requested prior to
  submission of underwriting package
• Electronic (MS Word compatible)
  form is available and preferred
• Submit electronically as a Word
  document (.doc or .docx formats) via
  email to HUD for fastest turnaround



           Section 184 Training, Sponsored by
                          HUD
                                     Underwriting
                                     Components


            • Credit
            • Capacity
            • Collateral

The underwriting review determines
the borrower’s ability and willingness
to repay the mortgage debt.

            Section 184 Training, Sponsored by
                           HUD
                                    Underwriting
                                    Components

• The borrower’s ability to repay the
  debt is assessed by considering:
     • Income history and stability;
     • Employment history and stability
     • Debts
• The borrower’s willingness to repay the
  mortgage debt is assessed by
  considering
     • Credit
     • Pay history

              Section 184 Training, Sponsored by
                             HUD
                                     Underwriting
                                     Components
• The maximum allowable mortgage amount
  is determined as the lower of these 3
  factors:
  – 150% of FHA Loan limits (03/2008) for the
    County where the property is located
  – Loan to Appraised Value Ratio:
     • 97.75% when $50,000 or greater
     • 98.75% when $49,999 or less
  – Acquisition cost (sales price + closing costs):
     • 97.75% when $50,000 or greater
     • 98.75% when $49,999 or less
               Section 184 Training, Sponsored by
                              HUD
                               CLOSING COSTS


    • Costs not included when calculating
      mortgage basis (paid in cash):
        – Prepaids (hazard/taxes/interest)
        – Discount points




Note: 1% guarantee fee is not included in closing
costs when calculating mortgage basis. It is added
on at 100% after calculating the mortgage basis.
                 Section 184 Training, Sponsored by
                                HUD
                           PREQUALIFYING
                             BORROWERS
• Lender responsibility prior to
  submission to HUD 184
• Determine threshold eligibility:
  1. Enrollment in Federally recognized
     tribe.
  2. Credit worthiness. (see Chapter 5 of
     “Draft” Guide of 12/30/09 for
     detailed Underwriting standards).
  3. Acceptability /Cost of property.
  4. Evidence of stable employment,
     sufficient cash availability for
     transaction, etc.
          Section 184 Training, Sponsored by
                         HUD
                                                URLA

• Uniform Residential Loan Application
  – (URLA, Fannie Mae 1003, Freddie
    Mac 65)

• This document must be
  completed in its entirety for all
  Section 184 loan requests



           Section 184 Training, Sponsored by
                          HUD
                                                INCOME

Income - Types:
  – Salary or Wages
  – Overtime and Bonus
  – Commissions
  – Seasonal and Part Time
  – Retirement, Alimony, Child Support
  – Rental
  – Trust and Non-Taxable
  – Self Employment
  – Tribal Distribution
           Section 184 Training, Sponsored by
                          HUD
                          INCOME (Cont.)

Income and Employment-
   Determination and Documentation


• Verification of 2 full years of
  employment
   – Salaried or hourly:
      • Written or verbal VOE
      • All W-2’s for 2 years
      • Recent paystubs covering a full one
        month period
             Section 184 Training, Sponsored by
                            HUD
                             INCOME (Cont.)

Income and Employment-
   Determination and Documentation


• Verification of 2 full years of
  employment
   – Self Employed:

      • Signed/Dated personal tax returns (2yrs)
      • Signed/Dated business tax returns (2yrs)
      • Signed/Dated year to date Profit & Loss

                Section 184 Training, Sponsored by
                               HUD
                          INCOME (Cont.)

Rental Income-
  Determination and Documentation


• Rental Income documented on Tax Return
   – Schedule E and current lease w/6 months
     remaining
• Rental Income NOT documented on Tax
  Return
   – Comp factor with current lease w/6
     months remaining
   – Full payment (PITI) counted as debt for
     qualifying
             Section 184 Training, Sponsored by
                            HUD
                            INCOME (Cont.)

Tribal Distribution-
   Determination and Documentation


1. Two year history (1099’s)
   Current year distribution
   Documented 3 year continuation

  OR
2. Letter from tribe verifying a prior two year
   distribution to tribal members
   Current year distribution
   Documented 3 years continuation
               Section 184 Training, Sponsored by
                              HUD
                                         LIABILITIES


• Recurring Obligations
  – Include with 6 months or more
    remaining (all debts)
  – Subject to underwriter discretion


• Projected Obligations
  – Scheduled to commence within 12
    months


           Section 184 Training, Sponsored by
                          HUD
                                               LIABILITIES
• Contingent liabilities
  – Co-signed obligations
     • Originator made 12 consecutive payments
     • Divorce Decree/legal separation with designated
       responsibility to ex-spouse
        – Current at time of separation/divorce
        – Copy of separation agreement
  – Mortgage Obligations (within the last 5 years
    without a release of liability); unless:
     • Originator made 12 consecutive payments
     • Divorce decree/legal separation with designated
       responsibility to ex-spouse
     • Transfer by employer and covered by home sale
       guarantee plan
                 Section 184 Training, Sponsored by
                                HUD
       What are we looking for?
               CREDIT HISTORY


• Show borrower(s) payment pattern
• Show previous/existing debt
• Show court order judgments,
  collections and liens which may
  affect borrower’s ability to obtain a
  loan

Note: Lack of Credit is not basis for denial

             Section 184 Training, Sponsored by
                            HUD
                              CREDIT HISTORY
                                Special Notes

• Non Purchasing Spouse
  – Not to appear on the security
    instrument or otherwise take title to
    the property at loan settlement; unless
  – Required by state law to perfect a valid
    and enforceable first lien

• Community Property States
  – Debts of non purchasing spouse must be
    included in the borrower's qualifying ratios
  – Credit history not to be considered a
    reason for credit denial
  – States: AZ, CA, ID, LA, NV, NM, TX, WA, WI
             Section 184 Training, Sponsored by
                            HUD
                               CREDIT REPORT

• The credit report must:
  – Be a RMCR or Tri-Merge Credit Report
     • Credit Scoring
  – Be the original provided by the credit
    reporting agency
  – Contain all credit available in the repositories,
    be accurate and complete, provide an
    account of the credit, residence history, and
    public record information of each applicant.
    This includes bankruptcies, judgments,
    lawsuits, foreclosures, and tax liens that have
    occurred within the last 7 years.
  – Contain a 24 months employment and 24
    months residency history if not verified
    otherwise.
               Section 184 Training, Sponsored by
                              HUD
        CREDIT REPORT (Cont.)
• The credit report must:
  – Identify each applicant’s name, social
    security number, date accounts were
    opened, credit limit, required payments,
    unpaid balance and payment history of
    each account.
  – Payment history must appear in the
    "number of times past due" format and be
    otherwise easy to read and
    understandable.
  – Must have no whiteouts, erasures, or
    alterations.
            Section 184 Training, Sponsored by
                           HUD
                            CREDIT REVIEW


• Bankruptcy- general requirements
  – Chapter 7:
     • Discharge with credit reestablished
     • Two years since discharge
     • 12-23 months with documented unusual
       circumstances
  – Chapter 13:
     • One year payout with good performance
     • Court approval


            Section 184 Training, Sponsored by
                           HUD
                                       CREDIT
                                 REVIEW (Cont.)


• Foreclosure
  – Extenuating circumstances
  – Re-established good credit

• Short Sales
  – Must have been approved by the lender
    prior to the becoming delinquent or in
    default



           Section 184 Training, Sponsored by
                          HUD
                                            CREDIT
                                      REVIEW (Cont.)
• Collections
   – Paid in full (at or before closing)
      • Resulted in collection 12 months prior or more
      • Written letter of explanation
      • Medical (can remain if documented 3rd party
        responsibility)

• Liens/Judgments
   – Paid in full 12 months prior to date of
     application
      • Written letter of explanation
      • Re-established good credit
     Exceptions: Executed repayment agreement
     with two year history; caution
                Section 184 Training, Sponsored by
                               HUD
                                       CREDIT
                                 REVIEW (Cont.)

• Recent Debt and Undisclosed Debt
• Delinquent Federal debts – LDP/GSA:
  – Borrower not eligible unless account is
    current, paid or otherwise satisfied
• Credit Alert Interactive Voice
  Response System (CAIVRS):
  – FHA system to verify if borrower is/has
    been delinquent on Federal debt


             Section 184 Training, Sponsored by
                            HUD
                                CREDIT
                          REVIEW (Cont.)
 Credit Requirements:
 • No late payments within 12 months
 • No late mortgage payments within
   12 months
 • No bankruptcy, judgments in
   24months (special circumstances
   reviewed on case by case basis)
 • No accounts reverting to collection
   in 12 months

Lack of credit not grounds for rejection; alternative
credit accepted; 1 to 3 sources. by
                 Section 184 Training, Sponsored
                                HUD
                         DEBT-TO-INCOME
                                   RATIO


• 41% debt-to-income ratio (guide):
  – Determines if borrower(s) has/have
    the ability to repay the mortgage
  – Compensating factors when ratio
    exceeds guide
     • Documented in underwriting file




           Section 184 Training, Sponsored by
                          HUD
                                 BORROWER’S
                                 INVESTMENT

• Cash investment — difference
  between the mortgage loan and
  the cost to acquire the property
• Range of investment — 1.25% to
  2.25% based on maximum
  mortgage limit



          Section 184 Training, Sponsored by
                         HUD
                       FUNDS TO CLOSE

Borrower can obtain the down
payment and closing cost funds from
any of the following sources:

•   Saving/Checking          •Sale of personal items
•   Secured funds            • Sale of home proceeds
•   Gifts                    • 401K loan
•   Cash                     • Sale of Investments
•   Land equity



             Section 184 Training, Sponsored by
                            HUD
                           FUNDS TO CLOSE
                             VERIFICATION

• Savings/Checking/Deposit Accounts
   – Verification of Deposit
   – Two months bank statements (all pages)
• Secured funds
   – Copy of signed loan docs showing collateral
• Gifts
   – Gift letter
   – Verification of donors ability
   – Documented receipt of funds
• Sale of current home
   – Certified copy of signed HUD-1


               Section 184 Training, Sponsored by
                              HUD
                                      TRIBE/TDHE
                                      ASSISTANCE

• Provide a gift or loan to borrower:
  – Gift letter
  – 2nd mortgage letter
  – Recorded documents with the
    endorsement package

• Tribal funds:
  – No restriction on use/amounts


          Section 184 Training, Sponsored by
                         HUD
                                           APPRAISAL


• Market Approach
  Using FHA appraiser/guidelines
• Cost Approach
  Trust land, rural areas
• Types of Appraisals
   – Manufactured
   – Condominium
   – Standard 1 – 4 Units

             Section 184 Training, Sponsored by
                            HUD
                                          APPRAISAL


• Appraisal Issues
  – Land value > 50%
  – Declining market loans > $400,000
  – Other
• FHA Approved Certified Appraisers
• Appraisal valid for 120 days


            Section 184 Training, Sponsored by
                           HUD
  SUBMITTING
 UNDERWRITING
PACKAGE TO HUD




  Section 184 Training, Sponsored by
                 HUD
FIRM COMMITMENT
    CHECKLIST




See Handout




 Section 184 Training, Sponsored by
                HUD
 SECTION 184 MCAW




• See Handout




 Section 184 Training, Sponsored by
                HUD
                                       HUD FILE
                                    PROCESSING
• OLG staff receives file, conducts
  preliminary completeness review,
  logs file and accepts in pipeline.
• Incomplete, improperly packaged
  files subject to rejection/return by
  Program.
• Files generally processed in date
  order as received.


            Section 184 Training, Sponsored by
                           HUD
                      HUD FILE
             PROCESSING (Cont.)
• Consideration given when possible for
  occasional emergencies (expiring
  contracts, expiring rate locks, delays
  beyond the control of Lender/Borrowers).
• Turn time for issuance of Firm
  Commitment/Conditional
  Commitment 5-7 days.( Longer response
  times may occur during peak work load
  periods)
• Commitment or declination letter issued
  by Underwriter, signed and faxed to
  Lender.
              Section 184 Training, Sponsored by
                             HUD
   CLEARING COMMITMENT
              CONDITIONS

• Additional submission required for
  all items referenced in pre-closing
  section of commitment.
• Preference is for submission of a
  complete package of all
  documentation needed to clear. May
  be faxed or e-mailed.


           Section 184 Training, Sponsored by
                          HUD
   CLEARING COMMITMENT
       CONDITIONS (Cont.)

• Underwriter will review (within 24
  hours), approve, initial date and
  return by fax to Lender.
• Closing not authorized until fully
  cleared commitment is received from
  HUD. Loan closing to be scheduled
  before the commitment expiration
  date. (Extensions are not automatic).

           Section 184 Training, Sponsored by
                          HUD
THE TRIBE OR TDHE AS
     BORROWER




      Section 184 Training, Sponsored by
                     HUD
                              UNDEVELOPED
                                  MARKETS
• Limited Housing Supply
  – Low turnover, vacancy rate
  – Limited availability of developed lots
  – Limited sales
• Modest homes
• Tribal developers
  – Financing generally grant based
  – Limited exposure/access to financial markets
• Subsidies
  – Construction (grants, guarantees, interest rate)
  – Down payment & closing costs
              Section 184 Training, Sponsored by
                             HUD
           TRIBE/TDHE LOANS


• When the Tribe or TDHE borrowers
  for the construction/purchase of
  rental property, they must
  demonstrate:
  – Property management skills
  – Rental and maintenance plan
  – Renters able to pay



          Section 184 Training, Sponsored by
                         HUD
                         TRIBE/TDHE
                       LOANS (Cont.)

• These properties are eligible for
  assumption by qualified
  borrowers:
  – Tribe/TDHE pays cash investment
    and loan payments during
    construction
  – Qualified Borrowers able to assume
  – After qualifying assumption, Tribe or
    TDHE is released from liability

          Section 184 Training, Sponsored by
                         HUD
  TRIBE/TDHE LOANS(Cont.)
                             Financial Capacity


• Demonstrated ability to pay
  mortgage loan:
  – Credit History (Dunn & Bradstreet)
  – Sources of funds to close
  – Income
  – Liabilities




          Section 184 Training, Sponsored by
                         HUD
                                   TRIBE/TDHE
                                 LOANS (Cont.)

• Coverage of debt service
• Skills, experience to undertake
  project
• Demonstration of need
• Marketing plan
• Audited financial statements


          Section 184 Training, Sponsored by
                         HUD
                                 TRIBE/TDHE
                               LOANS (Cont.)

• Evidence of authority to borrow
• Evidence of ability to obtain
  deficiency judgment
• Plans for projects exceeding 20
  homes must be built in phases




          Section 184 Training, Sponsored by
                         HUD
  184 SINGLE CLOSE
CONSTRUCTION LOANS




     Section 184 Training, Sponsored by
                    HUD
                            CONSTRUCTION
                             LOAN OPTIONS

• 2 options available to borrowers:
  – Lender or Bank carries interim
    construction loan
     • 184 loan used to payoff construction
       loan; not closed or guaranteed until after
       house is complete

  – 184 single close construction loan



             Section 184 Training, Sponsored by
                            HUD
              SINGLE CLOSE
        CONSTRUCTION LOAN

• One time Single Close
• Construction starts within 60 days
  after closing
• Mortgage payments begin after
  closing
• 6 month construction period
• Guarantee issued after closing
          Section 184 Training, Sponsored by
                         HUD
            SINGLE CLOSE
  CONSTRUCTION EXPENSES

The following expenses can be included
  in the loan amount , if supported by
  the appraisal:
  – Inspections
  – Up to 2.5% loan origination fee
  – Contingency Reserve
  – 0-6 mortgage payments
  – Title update fees
  – Permits

           Section 184 Training, Sponsored by
                          HUD
   SINGLE CLOSE CONTINGENCY
                REQUIREMENT

• $0 - No contingency for
  manufactured and modular homes
• 10% requirement for site built, site
  work, rehabilitation
  – Included in loan: unused portion used
    to pay down unpaid principal balance
  – Excluded from loan: separate escrow;
    unused portion may be returned to
    borrower


           Section 184 Training, Sponsored by
                          HUD
                                 SINGLE CLOSE
                                 REHAB LOANS

• Acquisition or existing debt +
  improvements can’t exceed program
  LTV requirements
• $10,000 + of improvements required
  for eligibility
• Appraisal requirements or borrower’s
  wish list allowable.
• Luxury items and items not a
  permanent part of the property are not
  eligible
           Section 184 Training, Sponsored by
                          HUD
                 SINGLE CLOSE
             LOAN PROCESSING


• Borrower/contractor determine cost
  to construct /rehabilitate
• Appraisal based on completed or
  after improved value
• Lender completes construction/rehab
  worksheet; to determine mortgage
  amount


          Section 184 Training, Sponsored by
                         HUD
                 SINGLE CLOSE
       LOAN PROCESSING (Cont.)

• Lender submission package to
  include all construction documents:
  – Single Close Max Mortgage Worksheet
  – Plans & Specs/Description of Materials
  – Site Map and Plot Plan
  – Proposed Contractor/Homeowner
    Agreement and Breakdown of Costs
  – Proposed Construction Schedule
  – Builders Certification, HUD 92541

            Section 184 Training, Sponsored by
                           HUD
                SINGLE CLOSE
      LOAN PROCESSING (Cont.)

• Closing Requirements:
  – Section 184 applicant acknowledgment
  – Construction loan rider
  – Construction loan agreement
  – Evidence of construction escrow
  – Notice to Proceed issued to Borrower and
    included in closing package
  – Final release of contingency reserve funds
    approved by the lender; final accounting
    sent to HUD


            Section 184 Training, Sponsored by
                           HUD
              SINGLE CLOSE
    LOAN PROCESSING (Cont.)


• Post Endorsement Documents
  – Sent to HUD after completion of
    construction

• Post Endorsement Checklist




           Section 184 Training, Sponsored by
                          HUD
REFINANCES




 Section 184 Training, Sponsored by
                HUD
                                    REFINANCES

• Statute and regulations amended to
  allow refinance under Section 184
• No statutory or regulatory authority
  to refund Loan Guarantee fee
• Loan Guarantee fee required
• Loan amounts must be within
  mortgage limits for area (150% of
  FHA limit published March 2008)


           Section 184 Training, Sponsored by
                          HUD
                                        TYPES OF
                                     REFINANCES

• Streamline refinances (existing 184
  loans)
  – With or without an appraisal
  – With or without credit qualifying
• Cash out with an appraisal and credit
  qualifying
• No cash out with an appraisal and
  credit qualifying


            Section 184 Training, Sponsored by
                           HUD
                                   TRUST LAND
                                   REFINANCES

• Acceptable existing lease:
  – Sufficient term remaining
  – Current TSR with recorded lease

• New lease when existing lease is
  unacceptable:
  – Old lease must be canceled
  – Current TSR with new lease recorded
    and old lease removed


           Section 184 Training, Sponsored by
                          HUD
                  TRUST LAND
            REFINANCES (Cont.)

• Responsibility of Lender after closing:
  – Satisfaction of existing mortgage is
    recorded on TSR
  – New mortgage and rider approved and
    recorded on TSR




            Section 184 Training, Sponsored by
                           HUD
                TRUST LAND
          REFINANCES (Cont.)


• Appraisals:
  – Follow HUD Handbook 4150.2
  – Cost approach usually utilized




          Section 184 Training, Sponsored by
                         HUD
                                     STREAMLINE
                                     REFINANCES
• Limited to existing Section 184 loans
• Purpose:
  – Lower borrower’s monthly payment; or
  – Reduce mortgage term
• Subordinate financing can remain in
  place if subordinated to new loan
• No repairs financed
• Cash back to borrower cannot exceed
  $250
             Section 184 Training, Sponsored by
                            HUD
               STREAMLINE
         REFINANCES (Cont.)

• Social Security numbers/Tribal
  enrollment verified
• Loan must be current prior to
  refinance
• Premium pricing allowed for no
  cost loans
• Evidence of cash to close not
  required but at OLG discretion
         Section 184 Training, Sponsored by
                        HUD
                                         CASHOUT
                                        REFINANCE


•   Not limited to 184
•   Credit qualifying
•   No DG approval, HUD underwritten
•   Appraisal
•   All subordinate liens paid off
•   Mortgage payments on time


            Section 184 Training, Sponsored by
                           HUD
                    CASHOUT
             REFINANCE (Cont.)


• Tribal approval when down
  payment assistance provided on
  original loan
• Maximum cash back limited by
  OLG ($25,000 cash in hand)




          Section 184 Training, Sponsored by
                         HUD
                                         CASHOUT
                                        REFINANCE
Credit Requirements:
• No late payments within 24 months
• No late mortgage payments within
  36 months
• No bankruptcy, judgments in 48
  months ( special circumstances
  reviewed on case by case basis)
• No accounts reverting to collection in
  24 months
            Section 184 Training, Sponsored by
                           HUD
                               NO CASHOUT
                                REFINANCE

• Used to refinance mortgage loans
  other than existing Section 184
• No cash back
• Max mortgage amount may include
  payoff, closing costs, and prepaids
  – Not to exceed the appropriate
    program LTV and FHA loan limits on
    03/2008


          Section 184 Training, Sponsored by
                         HUD
                                 NO CASHOUT
                                  REFINANCE
Credit Requirements:
• No late payments within 12 months
• No late mortgage payments within
  12 months
• No bankruptcy, judgments in
  24months (special circumstances
  reviewed on case by case basis)
• No accounts reverting to collection in
  12 months
            Section 184 Training, Sponsored by
                           HUD
                                 PROCESSING
                                  RESOURCES


• Chapter 5 of the Guidebook
• Chapter 7 of the Guidebook
• Chapter 11 of the Guidebook
• All Forms with HUD number can be
  obtained on www.hudclips.org



         Section 184 Training, Sponsored by
                        HUD
LOAN CLOSING




  Section 184 Training, Sponsored by
                 HUD
                             LOAN CLOSING

• Lender closes loan
  – All commitment conditions met
  – All closing documents including
    specific to 184
  – 1% guarantee fee sent to HUD
    Lockbox
  – Lender sends Mortgage/DOT for
    recording to BIA and/or county/tribe
    and requests final TSR/Title Policy

           Section 184 Training, Sponsored by
                          HUD
                         ENDORSEMENT
                             PACKAGE

• Received within 60 days after closing
• Reviewed
  – 184 required documents
  – Commitment conditions
  – Closed as underwritten
• Late endorsement (more than 60
  days after closing)
  – Special processing requirements , fees
    may apply

           Section 184 Training, Sponsored by
                          HUD
                     GUARANTEE FEE


• HUD 53038, Guarantee Fee
  Transmittal Form
• Check to lock box in Atlanta, GA
  – Must be received 15 calendar days
    after closing
  – Late charge/interest




          Section 184 Training, Sponsored by
                         HUD
                    LOAN SERVICING


• Protecting HUD’s interest
• File retention (life of mortgage + 3
  years)
• Escrow accounts
• Notification of servicing change



           Section 184 Training, Sponsored by
                          HUD
                                      DELINQUENT
                                        SERVICING

• Face-to-face interview before 3
  payments owed
• Borrower information packet
• Delinquency letter (30-45 days)
• Notice of intent to foreclose
• Leased land (review for reporting
  requirements to tribe)

           Section 184 Training, Sponsored by
                          HUD
                      FORECLOSURE
                    OR ASSIGNMENT


• Option to foreclose or assign
• 100% payment
• Claim submission




           Section 184 Training, Sponsored by
                          HUD
                          REPORTING
                       REQUIREMENTS

• Notify HUD when delinquent 30-45
  days
• Quarterly reports to HUD
  – Principal balance
  – Delinquency status (if applicable)

• 184 Servicing Contact:
  – Thelma Pillay (202) 402-2786

           Section 184 Training, Sponsored by
                          HUD
                                   SECONDARY
                                     MARKETS


• Ginnie Mae
• Fannie Mae
• Freddie Mac
• Local Markets




          Section 184 Training, Sponsored by
                         HUD
          THANK YOU!


• More information on the 184
  program:
  – http://www.codetalk.fed.us/loan184.ht
    ml
  – HUD/Office of Native American
    Programs
    Toll Free: 1-800-561-5913

            Section 184 Training, Sponsored by
                           HUD

				
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