low interest rates mortgages

Low Interest Rate Mortgage Program Technical Assistance Meeting Notes April 2007 General Notes LENDER INFORMATION Use SONYMA’s Seller’s Guide and subsequent announcements as defining tool to originate and sell mortgage loans to SONYMA. SONYMA Seller’s Guide, appendices, program forms, and lender announcements may be downloaded from SONYMA’s website (http://www.nyhomes.org/home/index.asp? page=103). Annual review of participating lenders. SONYMA=s review includes all of the following: ~ ~ Financial analysis Submission of Seller/Servicer Annual Certification (Form 240) – Must be submitted within 90 days of end of Lender’s fiscal year. Compliance with in-house quality control program as specified in Section 2.713(b) of the Seller’s Guide. Performance review - 20 loans minimum. ~ ~ Communication and correspondence to and from lender. ~ Lender identifies its' primary contact and branch contacts in lender application and Seller/Servicer Annual Certification. Lender should submit written notice to SONYMA if any changes are made with respect to branches, branch contacts or primary contacts. Please send such notices to the attention of Susan Pline, Assistant Vice President. Weekly reservation confirmation and monthly pipeline reports are sent to primary contacts only. Responsibility of Lender’s primary contact to disseminate information to appropriate lender personnel. Seller’s Guide modifications and the Availability of Funds and Notice of Terms Bulletin is e-mailed to all branch locations, as well as the primary contact, and can be downloaded from SONYMA’s website (http://www.nyhomes.org/home/ index.asp?page=103). SONYMA assigns a three character alphanumeric Originator ID and Servicer ID ~ ~ ~ ~ (1) number for each lender. If your institution does not service for SONYMA, the Servicer ID for our master servicer, M&T Bank is 954. ~ SONYMA also assigns a unique one letter branch code for each branch listed on the lender application. Assists lender in identifying the originating office for each loan. Use SONYMA directory to contact appropriate Agency personnel. ~ GENERAL PROGRAM PARAMETERS Maximum loan-to-value (LTV) of 97% on single family (including condominiums and doublewide manufactured homes) and two family properties. Borrower must have 3% of own funds in the transaction (unless gift from acceptable donor is at least 20%). Maximum LTV of 90% on 3 & 4 families and co-ops. For these properties, borrowers must have 5% of own cash in the transaction (unless gift from acceptable donor is at least 20%). Terms of 20, 25, 30, and 40 years only. Note: The interest rate on 40 year terms is 0.125% higher than 20, 25, and 30 year mortgages. Loans will be automatically locked upon loan reservation with the interest rate available on the application date. (All loans must be reserved within 20 days of application.) See the most recently published Availability of Funds and Notice of Terms Bulletin for current rates. PMI is required on loans over 80% LTV. LTV is calculated based on the lower of the sales price or the appraised value. Coverage amount should not exceed the amount necessary to reduce SONYMA=s exposure to 72%. Note: SONYMA does not permit PMI to be eliminated based on appreciation of the property’s appraised value. All loans require pool insurance. ~ Pool insurance is a credit enhancement, in addition to PMI, required by rating agencies to protect SONYMA bondholders. MIF is the pool insurer for the Low Interest Rate Program. Genworth Mortgage Insurance Corporation (Genworth) administers the pool policy on behalf of MIF. Unless otherwise notified, all communication and correspondence regarding credit underwriting should be directed to Genworth. SONYMA pays the pool insurance premium. ~ ~ Points and Other Fees ~ ~ Points paid by the borrower are currently 1%. Lender must collect a 1% lock-in deposit at application. The 1% deposit is the (2) property of SONYMA until the loan closing date. • If the loan application closes, the lock-in deposit will be retained by the lender as part of its origination fee. If it is rejected, the lock-in deposit must be refunded to the borrower. If the applicant cancels, withdraws, or makes material misrepresentations on application, borrower forfeits lock-in deposit. SONYMA will bill lender for the 1% lock-in deposit. Billing statements are generated on a monthly basis. • ~ The remainder of lender’s compensation for originating a loan (0.75%) will be remitted by SONYMA to the lender at loan purchase. Lender also may charge an application fee up to $200. Other than usual and customary out-of-pocket expenses (i.e. appraisal fee, credit report fee, flood insurance certification, document preparation fees up to $200), no other fees or costs may be charged to the borrower. ~ Homebuyer counseling requirements - Applicable for all loans where the borrower(s) contributes less than 5% of their own cash in the transaction, the LTV is greater than 95%, and/or the CLTV is greater than 100% where subsidies are being utilized. ~ Source of counseling must be approved by either the PMI insurer, Fannie Mae or Freddie Mac. Evidence of course completion must be sent to PMI insurer with PMI application file. Mortgage servicer must be set up to manage and administer a post-closing early delinquency intervention counseling program. The counseling program implemented must satisfy the requirements of Fannie Mae (or Freddie Mac) and the PMI company. Note: If your institution does not service the loans it sells to SONYMA, the master servicer, M&T Bank, will administer the counseling program. ~ ~ IRS REQUIREMENTS - Because SONYMA issues tax-exempt bonds to fund this and other programs, all loans, borrowers, and properties must comply with the following requirements as specified by the IRS. SONYMA has no flexibility with these requirements. Borrower Eligibility Requirements Must be first-time homebuyer ~ Definition: All borrowers must not have had ownership interest in a primary residence for the 3 years immediately preceding the application date and as of the application date, must not currently own a vacation or investment home. SONYMA requires all borrowers to submit the last three years signed federal tax returns including all schedules. ~ (3) ~ If borrowers itemized deductions on Schedule A of Form 1040 for real estate taxes and/or home mortgage interest, SONYMA requires a notarized affidavit to explain deductions. Depending on the explanation, SONYMA will determine if the borrower is eligible. Note: In order to be eligible for SONYMA financing, SONYMA will require any borrower, who has taken real estate tax and/or home mortgage interest deductions on a property not owned by the borrower, to amend their tax returns to eliminate these deductions. ~ If either spouse, domestic partner, or fiancé is not a first-time homebuyer, neither qualifies regardless of whom signs mortgage. First-time homebuyer requirement and submission of tax returns is waived for properties located in designated target areas. (See below section on Target Areas.) First-time homebuyer requirement is waived for military veterans who served in active military, naval, or air service and was discharged or released from their military duties under conditions other than dishonorable. ~ ~ Must owner-occupy property - All borrowers ~ ~ For 2 to 4 family properties, all borrowers must occupy at least one of the units. Borrowers must occupy within 60 days of the closing date and continue to occupy until such time as the property is disposed or the SONYMA loan refinanced. Must meet household income limits based on household size. ~ Household income definition: includes income of all persons expecting to occupy the mortgaged premises, age 21 or older and earning income regardless of whether they sign the mortgage documents. Based on current income. For income limit purposes only, calculate year-to-date income and project to determine annual income. Note: Please see page 5 of the SONYMA Pre-Closing File Review Specifications notes for more details on how to treat certain types of income. ~ To verify other household income, SONYMA requires a recent pay stub for any person expecting to live in the household (age 21 or older), but who will not be on the mortgage and title. ~ If borrower owned a manufactured home during previous three years, may qualify - must complete Section II, item 9 (A) or (B1) of the Recapture Notification and Mortgagor’s Affidavit to determine eligibility. (4) Recapture - borrowers may be subject to a potential recapture tax from IRS - lender discloses at application via Recapture Notification and Mortgagor's Affidavit (Form 211) SONYMA makes disclosure directly to borrower after closing. The FAQ section of SONYMA’s website (http://www.nyhomes.org/home/index.asp? page=11&select_faq_by_faq_cat=17) is an excellent source of information regarding recapture. Three events must occur for borrower to be subject to recapture tax: 1. Must sell home within first nine (9) years of purchase 2. Must realize a profit on the sale of property 3. Household income (as defined above) must increase above a set amount (depending on the year in which the home is sold) The average SONYMA borrower's chance of incurring a penalty is minimal. SONYMA’s website has examples to support this. Any recapture tax, if due, is paid to the IRS at the time the mortgagor files his or her Federal tax return for the tax year in which the property was sold. Property Eligibility Requirements Definitions The following definitions are important in determining whether the property is eligible for SONYMA financing. Existing Housing - previously used as a residence - includes conversions from previous residential uses (e.g. rental apartments). New Construction - completed buildings not previously used as a residence - includes conversions from non-residential uses (e.g. schools, warehouses, etc.). SONYMA provides take-out financing for newly constructed properties. It does not provide construction financing. Property Types Single Family - Existing Housing and New Construction (includes condos, co-ops, PUDs and prefabricated homes permanently affixed to real property). Two Family - Existing Housing and New Construction - Newly constructed properties and properties less than 5 years old must be located in a Target Area. Properties that are 5 or more years old as of the application date must have been held out for residential use during the previous 5 years. Three and Four Family - Existing only - must be at least 5 years old as of application date and have been held out for residential use during the previous 5 years. (5) Purchase Price limits - purchase price based on acquisition cost calculation in Recapture Notification and Mortgagor's Affidavit (Form 211), must be within SONYMA limits. Property must be used for residential purposes only. Note: An exception to this requirement can be made if no more than 10% of the borrower’s current residence was used for a business or commercial purpose. Please see Item 13 of the Pre-Closing File Review Specifications for details. Property must not have more land appurtenant to it than required to maintain the basic livability of the residence. ~ Zoned areas: maximum amount of land is five acres. If the property contains more than five acres, SONYMA will require a letter from the appropriate local municipal authority stating that the property is not subdividable and/or the additional lot or lots is not buildable. If the property exceeds five acres, is subdividable, and/or the additional lot(s) is buildable, SONYMA will require that the additional lot(s) be subdivided and not secured by the SONYMA loan. Rural (unzoned) areas: no more than five acres. Properties in excess of five acres will be required to be parceled so that SONYMA's mortgage encumbers only the parcel containing the dwelling, not to exceed five acres. SONYMA will make an exception up to 10 acres if the local municipal authority provides a letter that the property can only be used for residential purposes and not for business, commercial or agricultural uses. ~ Target Areas Federal law permits SONYMA to provide special incentives for applicants purchasing homes in Federally designated Target Areas. These incentives are: ~ ~ ~ the first-time home buyer requirement is waived*; higher household income and home purchase price limits; and two-family homes that are newly constructed or are an existing home that is less than 5 years old are eligible for financing. (*However, applicants must sell their existing home and are not be eligible if they currently own and intend to retain ownership of a vacation or investment home.) Note: These incentives do not apply to the Achieving the Dream Mortgage Program. To determine if a property is located in a target area, lender may contact SONYMA with a specific property address, including zip code, by calling 1-800-382-HOME. The following website can also assist lenders in determining the census tract of a property: http://factfinder.census.gov/home/saff/main.html?_lang=en&_ts= (6) LOAN RESERVATION AND RATE LOCK-IN PROCESS - All loans must be reserved. Lock-In Periods Defined Short-Term Lock-Ins: Existing housing and any new construction or rehabilitation loans that can be closed within 100 days of application. Long-Term Lock-Ins: New construction or rehabilitation loans that Lender believes cannot be closed within the Short-term Lock-in time-frames. Lender has 220 days from application to close the loan. Refer to attached chart (Table 1) for details on lock-in and closing timeframes. In order to lock an interest rate that was available on the application date, loans must be reserved within 20 days of loan application. Reservations not received within 20 days of the application date could result in a penalty to the lender. Prescreen Borrower - Prior to application, lender should ensure borrower has a fully executed contract of sale (binders are not acceptable), is within purchase price and income limits, is a first-time homebuyer, and has preliminary debt carrying ability. Process ~ The application date (not the date SONYMA receives the Loan Reservation Worksheet and Lock Certification Form) is considered the lock-in date. The lock-in date counts as the first day of the lock-in period. Obtain interest rate from current Availability of Funds and Notice of Terms Bulletin. Decide whether Reservation/Lock-in will be Short-Term or Long-Term. Complete in full the Loan Reservation Worksheet and Lock Certification Form (Form 238/9-04) and fax (212-872-0406) or overnight mail to SONYMA within 20 days from application date. Enter Originator ID and branch code, as assigned by SONYMA, on appropriate lines. Check box for “Low Interest Rate” Program. Submit Form 238 with a copy of the dated signature page of the loan application (FNMA 1003) and the CCAL Interest Rate Option Form (Form C9). If the borrower is utilizing a SONYMA Closing Cost Assistance Loan (CCAL), Form C5 must also be completed and attached. Note: Borrower must be in firm contract at the time of mortgage application. Be sure to indicate the date contract became fully executed on Form 238. Loans reserved without verified contracts are subject to penalty. ~ Lender is liable to SONYMA for 1% lock-in fee as of the reservation date. ~ ~ ~ (7) ~ SONYMA will confirm in writing all reservations and lock-ins on a weekly basis. Reports will include the SONYMA loan number assigned to each loan. Lender should review these reports promptly and report any discrepancies immediately to Gail Kresge, Senior Manager – Mortgage Loan Originations. Note: All loans are assigned to a temporary bond series. The final bond series will be determined at loan purchase. Note: Please be reminded that a fax confirmation is not a rate lock confirmation. ~ Lender is responsible to make sure the PMI company and the pool insurer have approved the loan at an interest rate that is greater than or equal to the lock-in rate. Note: If an expiration date occurs on a weekend or holiday, the loan may close on the next immediate business day and still close at the initially locked-in interest rate. If the loan cannot close by the next immediate business day following the weekend or holiday in which the expiration date occurred, an extension as described below must be requested and if the extension is granted, the loan must close at the rate as stated below. Commitment Extensions ~ ~ Granted at SONYMA=s sole discretion. Must be requested by submitting a completed and executed Commitment Extension Request Form (Form 235) with documentation to support the request to the attention of Gail Kresge, Senior Manager – Mortgage Loan Originations. Closing Interest Rates: If a Short-Term Lock-In, the loan will close at the higher of (a) the initial lock-in interest rate, or (b) the interest rate available on the loan closing date. If a Long-Term Lock-In, the loan will close at the lower of (a) the initial LongTerm Lock-in interest rate, or (b) the interest rate available for Short-Term Lock-ins on the loan closing date. Note: SONYMA only extends the commitment period and will not extend the interest rate. Lock-in Fee Waivers ~ If lender rejects a reserved loan before submission of loan file to SONYMA or pool insurer, lender must request from SONYMA a waiver of the lock-in fee. Complete Form 234, Request for Lock-in Fee Waiver and submit, to the attention of Gail Kresge, Senior Manager – Mortgage Loan Originations, with appropriate documentation. Note: Lock-in fee waivers are not required if SONYMA or the pool insurer denies the loan application. The 1% lock-in fee must be automatically refunded to the applicant. Availability of Funds and Notice of Terms Bulletin. ~ At minimum, will be published on SONYMA’s website and e-mailed to all primary ~ (8) and branch contacts by the 1st calendar day of each month. ~ ~ ~ Legal document referred to in Seller=s Guide and Mortgage Purchase Agreement. Publishes current lock-in and closing interest rates. Contains other program information and reminders. OVERVIEW OF PROCESS - The following assumes that the loan application passes each step as listed below. 1. 2. Lender prescreens borrowers as stated above in the Reservations section. Lender takes application, reserves loan and locks the interest rate within 20 days of the application date. Lender processes application and underwrites loan. Lender submits loan file to PMI Insurer, if necessary, and Pool Insurer. Insurance certificates (pool and if applicable, PMI) will be sent directly to the lender. Lender submits file with insurance certificates to SONYMA. SONYMA reviews loan and will fax and mail hard copy of decision to lender within 48 to 72 hours of receipt of loan file. Once approved, lender may close loan: ~ Extensions: If loan cannot close by original expiration date, prior to closing, lender must request an extension as stated above. Before closing, any changes to the loan amount and/or loan terms must be approved by SONYMA and Pool Insurer. Any title exceptions, certificate of occupancy problems, easements, right-of-ways, building violations, etc. that might adversely affect SONYMA=s security or future marketability of the property must receive SONYMA=s prior written approval. Requests for SONYMA consent as well as any escrow issues should be addressed to Quentin Hannah, Senior Manager – Closed Documents. Lender must escrow for taxes, PMI, hazard insurance & flood insurance, if any. 3. 4. 5. 6. 7. 8. ~ ~ ~ 9. If borrower is utilizing a SONYMA Closing Cost Assistance Loan (CCAL), lender must submit 5 business days prior to closing a CCAL Request for Disbursement Form (Form C6) with required accompanying documentation. SONYMA will fax to lender 2 business days prior to the closing date the amount of CCAL approved. Lender must place a copy of the (9) SONYMA approved and signed CCAL Request for Disbursement Form (Form C6) in the closed loan file package that is submitted to SONYMA. 10. Lender closes loan in lender’s name. Loans subject to post-closing early delinquency intervention counseling must be Aflagged@ on the Servicer=s computer system. Lender submits initial closing file to SONYMA - at least three business days in advance of approval date. If SONYMA does not approve the initial closing file within 35 days of the closing date, lender will incur penalties. Refer to attached chart (Table 2) for details on penalties. 11. 12. SONYMA reviews file and within 24 to 72 hours of receipt of the file, advises of decision by fax. Files will be returned to lender if: ~ Closed Loan Document Checklist (Form 223 or 224, as applicable) is omitted. ~ More than one document, other than checklist is omitted. ~ Any major error occurs (those requiring correction from third parties - e.g. borrowers, title companies, etc.). ~ Minor errors are not corrected within 72 hours. When approved, SONYMA will notify lender of purchase date (each Thursday). Lender has 180 days from closing date to submit recorded mortgage, assignment of mortgage documents and final title policy (the “final documents”), and if property is a cooperative, the original acknowledgement copy of the county clerk filed National UCC Financing Statement Amendment (Form UCC3). (Note: The fee to record an Assignment of Mortgage to SONYMA is waived under law.) SONYMA will assess penalties for any final documents not delivered to SONYMA with 1½ years of the loan closing date. Please see Section 2.710 of Seller’s Guide. PURCHASE PROCESS SONYMA will buy loans at the amortized balance. SONYMA will net from the loan balance: any penalties, and if the loan is closed and purchased in the same month, any short-term interest due SONYMA. (10) SONYMA will contact Servicer two days prior to purchase for loan balance and paid to date. Confirmation of purchase amount will be sent to lender. A report will be sent to Lender and Servicer identifying exactly how much interest and principal is due SONYMA and Originator. Also: All insurance companies and taxing authorities must be notified that SONYMA is owner of mortgage in care of Servicer and Servicer's address. If not servicing, a copy of servicing file, as required by SONYMA's master servicer, M&T Bank, must be sent to M&T within five (5) days of closing with a check for all prepaid escrows. Loans subject to post-closing early delinquency intervention counseling must be clearly identified as such on M&T=s loan transmittal form. Very Important: M&T needs to book loan and begin servicing to provide SONYMA with current unpaid balance. If M&T does not receive file as required, the purchase of the mortgage loan will not take place or will be delayed. (11) STATE OF NEW YORK MORTGAGE AGENCY LOW INTEREST RATE PROGRAM CLOSING AND LOAN DELIVERY TIMEFRAMES TABLE 1 CLOSING TIMEFRAMES (FROM LOCK-IN DATE) LOCK-IN [Collect 1.0% Fee (1)] LOAN FILE SUBMISSION DATE (3) CLOSING (4) (5) (6) TABLE 2 LOAN DELIVERY TIMEFRAMES (FROM CLOSING DATE) SHORT-TERM AND LONG-TERM LOCK-INS PURCHASE (AS % OF ORIGINAL LOAN AMOUNT) (7) NO PURCHASE LOCK-IN TYPE SHORT-TERM LOCK-IN Lock-in at Application DAY 1 (Application Date) DAY 60 DAY 100 DAY 1-35 100.00% (0% penalty) DAY 36-60 99.75% DAY 61-90 DAY 91-120 DAY 121-180 99.50% 99.00% 98.25% (1% penalty) (1.75% penalty) DAY 181+ (0.25% penalty) (0.50% penalty) LONG-TERM LOCK-IN (Qualify at One Point Over Short-Term Rate) (2) Lock-in at Application DAY 1 (Application Date) (1) For both Short-Term and Long-Term Lock-ins, the one percent (1%) fee is to be collected by the lender at Lock-in and retained at closing. (2) For Long-Term Lock-ins, loans must be qualified at a rate one point higher than the current Short-Term interest rate. (3) Lenders will be penalized 0.25% for any pre-closing loan file not received in a complete and accurate manner within 60 days of the application date. (4) SONYMA requires that lenders close loans within the timeframes in Table 1 above. For Short-Term Lock-ins, if loan cannot be closed within this timeframe and if SONYMA grants an extension of the commitment, then loan must close at the HIGHER of (a) the initial lock-in interest rate or (b) the lock-in interest rate available on the closing date. For Long-Term Lock-ins, if loan closes within this timeframe, the closing rate will be the LOWER of (a) the Short-Term Lock-in rate available on the closing date or (b) the Lock-in (Qualifying) Rate. If loan cannot be closed within the required timeframe and if SONYMA grants an extension of the loan commitment, then loan must close at the LOWER of (a) the Lock-in (Qualifying) Rate or (b) the Short-Term Lock-in rate available on the closing date. (5) The application date shall be the first counted day of these timeframes. If the lock-in expiration date should occur on a non-business day, the loan may close at the initial lock-in interest rate if it closes on the immediate business day following the lock-in expiration date. (6) SONYMA will pay lender 0.75% at loan purchase. (7) If SONYMA receives and approves the closed loan document file within 35 days of the closing date, SONYMA will purchase the loan at its unpaid principal balance. After 35 days, SONYMA will automatically assess a penalty against the lender in accordance with the schedule in Table 2 above and such penalty will be netted from the purchase amount. Assumes no amortization has occurred at time of loan purchase. Dated: 9/06 DAY 60 DAY 220 STATE OF NEW YORK MORTGAGE AGENCY SCHEDULE OF PENALTY CHARGES ___________________________________________________________________________________ ORIGINATIONS PENALTIES: A. Loan closes at wrong rate 1/8% of rate difference = 1/2 point. 1/4% of rate difference = 1 point. Over 1/4% of rate difference = 1 3/4 points. B. No reservation within 20 days of application = rate differential (Difference between rate at application and current SONYMA rate). Closed after commitment expiration = If loan was closed beyond expiration date, minimum 1/4 point + rate differential. New construction reserved under short-term lock = 1/4 point penalty, if extension of more than 30 days is needed. No pre-closing loan file received within 60 days of application = 1/4 point penalty C. D. E. NOTE: In addition to the above, all loans are also subject to the below closed loan delivery penalties. CLOSED DOCUMENT DELIVERY (PRE-PURCHASE): A. B. Loan file delivered and approved within 35 days of closing date = no penalty. Loan file delivered and approved between the 36th and 60th day from closing date = 1/4 point penalty. Loan file delivered and approved between the 61st and 90th day from closing date = 1/2 point penalty. Loan file delivered and approved between the 91st and 120th day from closing date = 1 point penalty. Loan file delivered and approved between the 121st and 180th day from closing date = 1 3/4 point penalty. Loan delivered over 180 days from closing = no purchase. C. D. E. F. (OVER) FINAL DOCUMENT DELIVERY (POST-PURCHASE): A. B. All final documents delivered within 540 days (1 ½ years) of closing date = no penalty. All final documents delivered between the 541st day and 730th day (2 years) from closing date = $25 per document per month. All final documents delivered between the 731st day and 1,095th day (3 years) from closing date = $50 per document per month. All final documents not received by the 1,095th day from closing = Possible repurchase of the loan. C. D. Dated: 3/04 (PENSCHED)