HOMEBUYER PROGRAM MANUAL by kp00p7

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									                 HOME
        INVESTMENT PARTNERSHIP
               PROGRAM


         HOMEBUYER
       PROGRAM MANUAL
     (Existing & New Construction)
          AMENDED DECEMBER, 2008


            ADMINISTERED BY:

HARLINGEN COMMUNITY DEVELOPMENT
          CORPORATION
             518 E. HARRISON
         Harlingen, Texas 78550
               956-421-2351
     E-Mail: ahuerta@harlingencdc.org



               FUNDED BY:




        CITY OF HARLINGEN
COMMUNITY DEVELOPMENT DEPARTMENT
          502 E. TYLER ST.
     HARLINGEN, TEXAS 78550
                     TABLE OF CONTENTS

Section I.     Introduction                               2

Section II.    Program Overview                           2-3

Section III.   Eligible Areas                             3

Section IV.    Eligible Applicants                        3-5

Section V.     Eligible Properties                        5

Section VI.    Other Program Requirements                 5

Section VII. Maximum per Unit Subsidy                     5-6

Section VIII. Affordability & Recapture Provisions        6-7
              & Rules

Section IX.    Application Process                        8-9

Sections X. Property Appraisals                           9

Section XI. Construction Procedures & Property            9
Inspections

Section XII. Environmental Review                         9-10

Section XIII. Loan Servicing                              10

Section XIV. Fair Housing & Marketing                     10

               Income Limits                              11

Appendix A.    Low Income Census Tract Map
Appendix B.    HUD Income Limits
Appendix C.    Total Family Income
Appendix D.    Occupancy Certification
Appendix E.    Homebuyer Program Application
Appendix F.    Homebuyer File Checklist
Appendix G.    Program assistance preliminary worksheet
Appendix H.    Mortgage Qualification Worksheet
Appendix I.    Good Faith Estimate Worksheet
Appendix J.    FHA 203(b) Mortgage Limits
Appendix K.    Contractor Eligibility Requirements
Appendix L.    Environmental…
Appendix M.    Fair Housing


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       HARLINGEN COMMUNITY DEVELOPMENT CORPORATION
               HOMEBUYER PROGRAM GUIDELINES
                                   (Amended 12/08)


I. Introduction

       A. The Harlingen Community Development Corporation (HCDC) is the
          recipient of funds under the City of Harlingen’s HOME Investment
          Partnership Program (HOME) that is administered through the U.S.
          Department of Housing and Urban Development (HUD). The Homebuyer
          Program (HP) will address three key issues in Harlingen, (a) a means of
          stabilizing property values and enhancing the overall quality of life in one
          or more neighborhoods; (b) eliminating housing overcrowding, given the
          limited availability of three & more bedroom rental units; and (c) will serve
          as a means of increasing the number of affordable single-family housing
          units in the community.


II. Program Overview

       A. The HP is designed to assist families and individuals realize the “American
          Dream” of Homeownership by providing cooperative financing assistance
          between HCDC and Lending Institutions (banks). The Lending Institution’s
          terms will be at a rate negotiated between the Lending Institution(s) and
          HCDC but at no time will it be above the current mortgage-lending rate at
          the time of the Lending Institution’s approval of applicant with a term of
          thirty (30) years. The HP may provide the following types of assistance:

                      Down payment Assistance
                      Closing Cost
                      Gap Financing (Principal Reduction) or an
                      Alternative Interest Buy-Down

       B. Upon qualifying for private mortgage financing, the above referenced
          financial assistance will be determined based on the borrower’s
          demonstrated re-payment capacity or the amount the Lending Institution
          approves as a loan plus the owner’s required down payment minus the
          sales price & closing costs. The following is the underwriting ratio that will
          be utilized: a back ratio of 45% of monthly gross income plus the
          borrowers meeting the other program criteria. The HP assistance will be
          determined as delineated in Section VII of this manual. The amount of

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            assistance will be determined on a case-by-case basis. The assistance
            will be in the form of a deferred loan forgiven over the affordability period
            requirement as described on table in Section VIII (a). The assistance will
            be secured with a second lien (Deed of Trust) subject to the Recapture
            Provision as delineated in the HOME Investment Partnership Program
            Rules and Regulations.

         C. The Homebuyer Program assistance will be an amount determined based
            on the sales price plus closing costs minus total repayment capacity and
            participant down payment (3%) will equal the amount of Homebuyer
            Assistance. The Homebuyer assistance can be used to cover additional
            down payment, closing costs and gap financing. Should the home be sold
            or no longer occupied by the participant within the affordability period, the
            HOME Homebuyer assistance will be due and payable to the HCDC (See
            Sect. VIII. [B] Loan Recapture) and in accordance with the HOME
            Investment Program Regulations at 24 CFR Part 92.254 (a) (5).

III. Eligible Area(s)
         A. HCDC has designated its project area as the incorporated city limits of
            Harlingen. Efforts will be undertaken to identify lots or developed land in
            the low-income census tracts of the city (see Appendix A).

IV. Eligible Applicant’s
         A. To be eligible for the Homebuyer Program, families or single individuals
            must be:
               a) Considered low or moderate income at the time of application. For
                  the purpose of this program, low or moderate income means total
                  gross earnings equal to or less than 80% of median family income
                  for this area, adjusted for family size, as defined by the most
                  recently published HUD Income Limits for Brownsville-Harlingen-
                  San Benito MSA, (see Appendix B).
               b) Applicants must be residing or employed by a company located
                  within the city limits of Harlingen. Special considerations will be
                  provided to migrant family/individual or others. HCDC Loan Review
                  Committee will evaluate each application on a case by case basis.
               c) Approved applicants must occupy the property as their principal
                  residence insured by a restrictive covenant set out in the mortgage
                  instrument (Deed of Trust). No subleases of the property will be
                  allowed, even on a temporary basis. The ownership interest must
                  be subject only to the first lien mortgage and any restrictive
                  covenants that exist in the chain of title.
         B. Income Verification
               a) Although the financial institution’s process for mortgage loan
                  approval will include an evaluation of the applicants income, HCDC
                  will use the definition for income according to criteria in 24 CFR
                  Part 813 (Section 8 Housing Programs) to determine total family

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          income (see Appendix C). Income verification is valid for a six-
          month period following receipt of information. If the applicant does
          not occupy the home within six months, income must be re-verified.
          NOTE: a self-employed individual who has not been self-employed
          for a full two-year period is not likely to be considered for the
          program. (This is due to the lack of time involved in determining
          earning consistency. Tax returns will be used for employment
          verification for self-employed individuals). Additionally, after
          qualifying and receiving the HP assistance, if the applicant’s
          income increases during the affordability period the second lien will
          not be affected.

C. Debt to Income Ratios
     a) HCDC will gather and verify the information on the applicant’s
          employment stability, income, assets, liabilities, and net worth.
          HCDC staff will then proceed to analyze the data and make a
          determination regarding the applicant’s ability to make a monthly
          mortgage payment. In making this determination, staff will only
          consider an underwriting back ratio of 45% for total debt obligations
          (monthly housing expense, installment payments on revolving
          accounts that extend beyond ten (10) months, and child support
          payments are considered in the total debt obligation). Lending
          Institutions may opt for a higher back ratio as long as it does not
          exceed 45% and is still within the loan to value ratio (LTV)
          approved by the Lending Institution (s).

D. Creditworthiness

      a) HCDC and Lending Institution will provide all credit reports, which
         will be used to analyze the applicant’s creditworthiness. Staff will
         pay particular attention to those items on the credit report that are
         indicators of the applicant’s creditworthiness. These items include
         payment history on any previous mortgages, undisclosed debt,
         revolving    and     installment    credit    accounts,     judgments,
         garnishments, liens and bankruptcies.
      b) Applicant’s with foreclosures or current bankruptcies (Chapter 7 or
         13) are not good credit risks and will not be considered under the
         program. Participants with Chapter 13 bankruptcies plans paid and
         released will be considered on a case-by-case basis. If the credit
         report reveals adverse (poor) creditworthiness or the applicant did
         not disclose a significant debt, a written explanation of the adversity
         or omission shall be required to be submitted to HCDC.

E. Rental Payments Record

      a) HCDC will obtain and verify rental payments from the landlord if the
         applicant is renting a house or an apartment. The verification is not
         only to check on the manner of payment (history), but also to see if


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                      the amount of rent paid varies a great deal from the amount of the
                      proposed loan payment.

 V. Eligible Properties

         A. Eligible properties include HCDC newly constructed single-family or
            rehabilitated dwelling units located within the incorporated city limits of
            Harlingen with a fair market or appraised value that does not exceed 95%
            of the median purchase price for the area, as described in 92.254 (a) (iii).
            NOTE: Family Mortgage Limits under Section 203(b) of the National
            Housing Act dated 12/08 ($210,695*95%=$200,160.00)

VI. Other Program Requirements
            HCDC will process applications on a first come first serve basis for the
            Homebuyer Program as taken from the existing waiting list. In addition,
            applications will be accepted from families participating in the Harlingen
            Housing Authority “Family Self-sufficiency Program.” All qualified
            applicants must attend a Homeownership Training provided by HCDC or
            the Lending Institution.
         A. All qualified and approved applicants must provide, at a minimum, 3% of
            the sales price as a down payment. Any additional assistance offered
            through the Homebuyer Program will be determined on a case-by-case
            basis.
         B. Applicants must not have outstanding unpaid obligations (ad-valorum
            taxes/municipal liens) due to the City of Harlingen, Texas.

VII. Maximum Per Unit Subsidy Determination
         A. The Homebuyer Program assistance will be determined as follows:

                a) Sales Price (SP) + Closing Costs (CC) minus [Repayment Capacity
                   (RC) or Amount of Loan Approved by Lending Institution (LAL)]
                   Plus Owners Investment (OI) equals HOME HP assistance {which
                   includes down payment and gap financing}. HB Assistance will be
                   the minimum amount necessary to make the purchase feasible.
                   The maximum amount of assistance will be determined using the
                   above formula. (Note: Other available homebuyer assistance
                   programs can affect the amount HB Assistance approved,
                   Example: Federal Home Loan Bank Affordable Housing Program or
                   Texas Department of Housing Community Affairs’ Bond Program
                   HB assistance.)

         Example 1:      SP + CC – [ RC + OI + OAH ] = HB assistance
                         $65,000.00 + 3,500 - [45,570 + 1,950+ 5,980] = $15,000

                                              OR

         Example 2:      SP + CC –[ LAL + OI ] = HB Assistance


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                         $65,000.00 + 3,500 – [52,000 + 1,950] = $14,550

   The HP assistance will be in the form of a second (2nd) lien (deferred) as delineated
   in Section VIII.

VIII. Affordability Period & Loan Recapture Provisions/Rules
         A. Affordability Period is the length of time in which the approved applicant
            must occupy the HOME assisted unit in relation to the amount of HOME
            funds invested in the unit.
                a) HCDC will ensure that if a HOME-assisted property is sold during
                   the affordability period, HOME funds will be recaptured. The
                   affordability period will commence on the anniversary date of loan
                   closing date and will be determined as follows:

         HOME Investment                Length of the                  Percentage
         Per Unit                       Affordability Period           Forgiven/Year*

         $1,000-40,000                          10 years                     10%
         $40,001 +                              15 years                     15%


         B. Recapture Provisions/Rules

                a) This is an important mechanism to recapture all or a portion of the
                   direct HOME subsidy if a HOME assisted property is sold within the
                   affordability period. The approved (Homeowner) may sell the
                   property to any willing buyer regardless of income and for whatever
                   price the market will bear. The sale of the property during the
                   affordability period triggers repayment of some or the entire direct
                   HOME subsidy that was provided that enabled the approved
                   applicant (Homeowner) to purchase the home when the home was
                   originally purchased.

                    In order to calculate recapture amounts, the terms referred to shall
                    be defined as follows:

                    The direct home subsidy includes down payment, closing cost,
                    interest subsidies, or other HOME assistance provided directly to
                    the homebuyer. In addition, direct subsidy includes any assistance
                    that reduced the purchase price from fair market value to an
                    affordable price.

                    The net proceeds are an amount equal to the sales price minus
                    closing costs and any non-HOME loan repayments.

                    The homebuyer investment consists of the portion of initial down
                    payment paid by the approved applicant (homebuyer) combined



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                 with the value of any capital improvements made with the approved
                 applicant’s (homebuyer’s) funds.

              b) Amount of Repayment: The HOME Program will require partial or
                 full repayment of the direct HOME subsidy when resale or leasing
                 of the property occurs during the affordability period. The amount to
                 be repaid will be reduced using the following:

              Sharing of net proceeds: When the net proceeds are insufficient to
              repay the direct HOME subsidy and the homebuyer’s investment, the
              net proceeds will be shared. The recapture of HOME funds will be
              based on the ration of the HOME subsidy to the sum of the approved
              applicants (Homeowner) investment, plus the HOME subsidy:

                            HOME Subsidy
                                                x Net Proceeds = HOME recapture
                  HOME Subsidy + Applicants Investment

Example: Mrs. Hinojosa invested $3,000 in her home, including a $2,000 down
payment and $1,000 in closing costs. When she sells the home at the end of two
years, the net proceeds are $5,000. The amount of direct HOME subsidy to be
recaptured equals:

                              $4,000
                     _____________________ x $5,000 = $2,857
                          $4,000 + $3,000

Mrs. Hinojosa receives the balance of the proceeds, or $2,143 ($5,000 - $2,857)

              c) In the event there are excess proceeds, (amount necessary to
                 repay both the approved applicants investment and the HOME
                 subsidy), said excess proceeds shall be shared.

HCDC applicants should bear in mind that if they retain ownership of the property for
the full affordability period and personally reside in the unit, no recapture restrictions
will apply and the HOME loan is fully forgiven. If however, the approved applicant
(homeowner/homebuyer) sells or leases the home at some point during the
affordability period, the recapture provisions will apply.

       C. Occupancy Verification - During the affordability period compliance with
          the principal-residence requirement will be verified annually. Confirmation
          of residency will be accomplished through a certification process
          (Appendix D). In addition, HCDC staff will conduct site-specific monitoring
          of HOME assisted properties on an annual basis to verify residency. The
          sites to be monitored will be selected on a random basis.




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IX. Application Process
        A. Initial Applicant Interview

               a) During the initial interview, basic program requirements shall are
                  explained to the Homebuyer Program Applicant (see Appendix E).
                  Copies shall be provided to the applicant of all documents
                  referenced during the interview. The applicant should also have a
                  basic understanding of the application process and approximate
                  time frames involved.

        B. Program requirements include an explanation of:

               a) Assistance provided to approved applicants through the
                  Homebuyer Program
               b) Underwriting criteria (employment, income, debt to income ratios,
                  credit history, rental payment record, loan to value ratio)
               c) Basic conditions of the deferred payment loan
               d) Income verification requirements
               e) Flood plain restrictions
               f) Lead-Based Paint Disclosure Notice
               g) Construction Procedures & Property inspections
               h) Home design & site selection
               i) Basic recapture/resale provisions

        C. An applicant’s file will contain items listed on the Homebuyer File Checklist
           (see Appendix F).
        D. All applications for participation in the Homebuyer Program must be
           Approved/Disapproved by the participating lending institution and HCDC
           Administrative Loan Review Committee. HCDC Administrative Loan
           Review committee consists of: Executive Director, Accountant, and
           Administrative Assistant.
        E. HCDC staff will arrange appointments for the initial interview for families /
           individuals registered on the HP waiting list. Applications for HOME
           assistance are processed in the order in which they are registered on the
           waiting list, based on a first come, first serve basis.
        F. Applicants requesting HP assistance must qualify according to the
           requirements of the Program. At the initial interview, HCDC staff will
           provide the applicant(s) with the basic HP eligibility requirements and if the
           applicant is determined to qualify, staff will proceed in filling out a
           complete program application. As part of the full application, applicants(s)
           will be required to sign the proper Authorization for Information Disclosure,
           and Employment and Deposit Verification Forms. In addition to the
           application, other pertinent information shall be provided to HCDC by the
           applicant(s) which includes but is not limited to:

               a) Three (3) check stubs (most recent)


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              b) 2005 W2 Forms & Income Tax Returns (for the last two years)
              c) Rent Receipts (most recent)
              d) Receipts of outstanding debts (most recent)

        G. If a determination is made that the applicant meets the HP requirements,
           HCDC will forward the completed program file to the participating lending
           institution. This will also include a preliminary worksheet of the Program
           assistance to be offered (Appendix G).
        H. The Lending Institution, at the time of referral or within a reasonable time,
           should provide HCDC a copy of their mortgage qualification worksheet
           (Appendix H), containing such information as borrower’s (applicants)
           name and income, property address, sales price, loan approval amount,
           their debt-to-income ratios, total monthly housing costs to include principal
           and interest, and estimated amounts for taxes and insurance. The lending
           institution should also provide a copy of their good faith estimate
           worksheet (see Appendix I) containing such information as itemized
           closing costs, breakdown of prepaid items, and a total of settlement
           charges.

 X. Property Appraisal
        A. As a requirement for HOME assisted units, an appraisal of the property by
           a qualified third-party is necessary. A signed copy of the appraisal should
           be included with the Homebuyer Program application. This appraisal must
           be received by HCDC before any HOME funds can be disbursed.
        B. The appraised property value must not exceed 95% of the median value
           for the area. HUD regulations governing the HOME Program use the FHA
           203(b) mortgage limits [dated 12/08] as the proxy for the 95% of the
           median value for one to four family homes. The value for the City of
           Harlingen is $200,160.00 (Appendix J).

XI. Construction Procedures/Property Inspection
        A. Once an application is approved and the applicant has attended the
           mandatory Homeowners Training, HCDC staff will proceed with the
           Construction phase of the Program. HCDC will utilize the current adopted
           Construction Policies & Procedures, however all homes constructed under
           this program must, at a minimum, meet the City of Harlingen’s adopted
           International Building Code, ordinances and the Model Energy Code.
           HCDC Construction policies also include Contractor Eligibility
           Requirements (Appendix K).

XII. Environmental Review
        A. HCDC will assist in the coordination of an environmental review (full
           assessment or the statutory checklist) of the property as required by
           HOME regulations. Property sites will be identified with respect to the 100
           year Flood Plain and the Runway Clear Zone of a civilian airport or the

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            Clear Zone of military airfield (Appendix L) and other federal requirements
            pertaining to federal funds.

      NOTE: This Homebuyer Program activity is categorically Excluded (58.35) and
      not subject to National Environmental Policy Act (NEPA) or Statutory/Regulatory
      Requirements but applicable to the requirements under 58.6.

XIII. Loan Servicing
         A. Lending Institution will undertake this responsibility. Approved HB
            Program applicants shall be responsible to comply with Lending
            Institution’s payment and late payment obligations.

XIV. Fair Housing & Marketing
         A. HCDC will comply with the Fair Housing and marketing rules and
            regulations of the HOME program (Appendix M).




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                                     Appendix B




           HUD HOME INVESTMENT PARTNERSHIP PROGRAM

                                   INCOME LIMITS

              BROWNSVILLE-HARLINGEN-SAN BENITO, MSA
                       FY 2009 Median Family Income $32,900
                              Adjusted Income Limits



1 person 2 person 3 person 4 person 5 person      6 person   7 person   8 person

$25,550   $29,200   $32,850   $36,500   $39,400   $42,350    $45,250    $48,200




  (3/19/2009)
  HUD HOME Program Income Limits
  State: Texas


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