calculating a mortgage

FHA 101 WHY ARE YOU HERE? 05/04/07 FHA LOANS CAN INCREASE YOUR MARKET SHARE! • Cash on hand • Rate/term refinance to 97% LTV including seasoned second liens • 3% Borrower Investment can be met with down payment and borrower paid closing costs – Gifts are permitted to be used towards borrower 3%cash investment • Secured or Unsecured loans from family members are acceptable for funds to close 05/04/07 How else can FHA help? • • • • Cash out refinance to 95% Non-occupant co-borrowers Streamline refinances FHA is currently working on revisions to be more in line with current available products 05/04/07 FHA Definition • FHA loans are insured by HUD • Specific guidelines must be met • Specific documentation is required • Loans are for Owner-Occupied only 05/04/07 Full Eagle Originate, Underwrite and Close Delegated Remits MIP and secures Mortgage Insurance 05/04/07 Mini-Eagle Originate, Close and Insure Need Full Eagle Lender’s Sponsorship for DE Underwriting Decision Test Case Phase/Firm Commitment 05/04/07 HOW DOES FHA KNOW THAT YOU ARE ORIGINATING A LOAN? CASE NUMBER ASSIGNMENT COMMUNICATING WITH FHA THROUGH THE FHA CONNECTION 05/04/07 FHA Connection Overview • An interactive system on the Internet that gives approved FHA lenders real-time access to FHA systems • Streamlined, user-friendly operation via familiar, cost-effective web browser technology • Users navigate loan processing functions in the Connection as easily as they navigate the web Excerpt from https://entp.hud.gov/qckstart/introfha.pdf 05/04/07 Single Family FHA Functions • • • • • • • • • Single Family Origination Single Family Servicing Property Improvement/Manufactured Housing Lender Approval Lender Assessment Physical Assessment HMDA Data Submissions Neighborhood Watch Mortgagee Letters 05/04/07 FHA Connection • Web Address – https://entp.hud.gov/clas/ • Used for: – – – – – – Case # Assignment Case # Transfer CAIVRS LDP GSA Condo Approvals • Print “Details” 05/04/07 FHA Connection • TO GET SIGNED UP TO USE FHA CONNECTION • GO TO FHA CONNECTION WEB SITE • https://entp.hud.gov/clas/ • • • • • • • • Click on “Frequently Asked Questions” After reading the information – go back to beginning menu Click on “About This Site & Registration” Click on “FHA Connection Guide” Print out the Instruction Booklet Click on “Mortgagee Packet” Click on “Registering a User” Follow the instructions 05/04/07 FHA (HUD) Home Ownership Offices--HOC OFFICE Atlanta, GA Denver, Co Philadelphia, PA Santa Ana, CA HEADQUARTERS ADDRESS 75 Spring Street, SW 30303-3388 1405 Curtis Street 80202-2349 100 Penn Square East 19107-3380 PHONE 1-888-696-4687 1-800-543-9378 1-800-440-8647 1600 N. Broadway, #100 1-888-827-5605 92707 451 Seventh S1. SW Washington, DC 20410 202-708-3175 05/04/07 “HOC” Jurisdictions Atlanta Alabama Florida Georgia Illinois Indiana Kentucky Mississippi North Carolina South Carolina Tennessee Denver Arkansas Colorado Iowa Kansas Louisiana Minnesota Missouri Montana Nebraska New Mexico North Dakota Oklahoma Texas South Dakota Utah Wisconsin 05/04/07 Wyoming Philadelphia Connecticut Delaware District of Columbia Maine Maryland Massachusetts Michigan New Hampshire New Jersey New York Ohio Pennsylvania Santa Ana Alaska Arizona California Hawaii Idaho Nevada Oregon Washington Types of Loans • Purchase • Owner occupied • Fixed Rate • 5 to 30 years in 5 year increments • ARM • 1 Year ARM • 3/1 Hybrid ARM • Buy Down - Purchases Only • Refinances • Specific details 05/04/07 Eligible Borrowers • • US Citizens Permanent Resident Aliens – Same terms as US Citizens – Evidence of lawful, permanent residency issued by the Bureau of Citizenship and Immigration Services (BCIS), formerly the INS. – Copy of the Alien Registration Receipt Card (Resident Alien card), I-55 • Non-Permanent Resident Aliens – – – – Primary residence Borrower must be eligible to work in the U.S Evidence of valid Social Security number required Evidence of residency and work status to be obtained through documentation from US Bureau of Citizenship and Immigration Services (BCIS) formerly INS • Copy of the Employment Authorization Card, I-688B. This card carries an expiration date. • A social security card is not acceptable as evidence of work status 05/04/07 APPLICATION •FORMS AT APPLICATOIN •QUALIFYING THE BORROWER Forms at Application • • • • • • • • • Fully executed contract with amendatory clause complete & Truth Statement “For Your Protection: Get a Home Inspection” – form needs to be provided to the borrower GMAC requires that the borrower acknowledge receipt Notice to Homeowner/ Assumption of Insured Mortgage FHA – (008312/04) Signed/dated Good Faith Estimate and TIL Informed Consumer Choice Disclosure * 92900B – Notice to Homebuyer Page 1 of 92900A signed by loan officer Page 2 of the 92900 signed by the borrower Refinance Specific Forms – Refinance MCAW – FHA Streamline Checklist 05/04/07 Qualifying Ratios • • • Ratios should not be exceeded when qualifying the borrower on a temporary buydown or ARM loan Qualify at the note rate for temporary buydowns Qualify at 1% over the Note rate for One Year ARM loans 95% or greater – – – Calculate PITI at qualifying rate and input in “ARM Qualifying PITI” in LP ARM Information Screen DU will automatically qualify at 1% over the Note rate for LTV 95% or higher Must document that income can be expected to increase to account for adjustments to rate • • • Hybrid ARM regardless of LTV and One Year ARMs with LTV’s less than 95% qualify at start rate Ratios: – Housing 31% – Total Debt 43% If ratios exceed the above then obtain: Automated - Approve / Eligible from Desktop Originator or Loan Prospector 05/04/07 Processing •INCOME •CREDIT •ASSETS Basic Loan Amount Tiers • Low Cost Area Loan Limits – In areas where 95% of the median house price is less than 48% of the Freddie Mac limit, the FHA limits are set at the 48% amount, i.e., the "floor," as follows: One Unit Two Unit Three Unit Four Unit $200,160 $256,248 $309,744 $384,936 Limits vary from county to county and should be verified by visiting: https://entp.hud.gov/idapp/html/hicostlook.cfm 05/04/07 Basic Loan Amount Tiers • High Cost Area Loan Limits – In areas where 95% of the median house price exceeds the 87% figure, the mortgage limits are set at the 87% amount, i.e., the "ceiling," as follows: One Unit Two Unit Three Unit Four Unit $362,790 $464,449 $561,411 $697,696 Limits vary from county to county and should be verified by visiting: https://entp.hud.gov/idapp/html/hicostlook.cfm 05/04/07 Documenting Income • Most recent 30 days worth of pay stubs ALWAYS required • Standard VOE • Internet VOE • Alternative Documentation – Most recent 2 years of W-2 statements – Verbal VOE with employer number documented by third party source (such as directory assistance) – Signed IRS 8821 or 4506 at closing – Documentation expires in 120 days for existing construction and 180 days for new construction 05/04/07 Income • Non- Taxable income such as Social Security can be grossed up 115% • Additional Documentation – Tax returns required when borrower: Has 25% or greater interest in company Works for family owned business Self employed Receives Commissions 2106 Expenses Claimed 05/04/07 Credit Issues FHA financing is NOT subprime financing • YOU SHOULD KNOW THAT……… – FHA requires that there be a reasonable expectation that borrower will succeed at homeownership – FHA Connection contains information on delinquency rates by lender and by broker (Credit Watch) – While there are no credit score guidelines, the lending community generally accepts that loans with scores below 585 require additional scrutiny – Both DU and LP are being re-programmed with higher restrictions on credit and ratios 05/04/07 Adverse Credit • Collections – Case by case basis - discuss with underwriter • Judgments & Tax Liens – Must be paid prior to or at funding OR – Have a repayment plan with 12 month history must subordinate at closing • Delinquent Federal Debt – Disqualifies borrower for FHA financing unless paid or a payment plan is in effect with at least 12 consistent payments made 05/04/07 Adverse Credit • CAIVRS beginning with “C” or “D” – Disqualifies borrower for FHA financing unless there is a compelling reason to waive (“C” stands for claim. “D” stands for default. “A” is acceptable.) Defaults/claims are reported for three years. • FHA Foreclosure – Foreclosure sale or Deed-in-lieu must have occurred at least 3 years previous (3 years starts when claim is paid) • Foreclosure – Requires that three years elapse or a clear CAIVR be provided 05/04/07 Brick by Brick—Non-Traditional Credit • Building a credit history – Acceptable rental history – if renting from relative or interested party to transaction, such as seller, provide cancelled checks – Utilities (phone, electricity, gas, paper, cell phone) – Payments to furniture stores, car dealerships, etc. – Automobile insurance – Documented savings pattern, including 401K deposits – Child care • Alternate credit should be documented in standard form 05/04/07 Bankruptcy • Chapter 7 Must be discharged at least 2 years Borrower has re-established good credit Or chosen not to incur new credit obligation • Chapter 13 1 year of the pay-out period has elapsed Performance has been satisfactory Print out of pay history & list of debts covered Borrower receives court approval: Letter from Trustee FHA does not require that borrowers open new credit, but a pattern of timely payments using alt credit is needed 05/04/07 Consumer Credit Counseling • CCCS acceptable under same terms as Chapter 13 Have been in for at least 12 months • Print out of payment history & list of debts covered in payment • Counselor must recommend them for mortgage • Letter from Counselor • Debt / Collections of Disclaiming Spouse Must qualify with Spouse debt • Exception: If debt occurred prior to marriage • Must document - Copy of Marriage License • Spouse’s collections - use 5% of balance of debt for Community Property States only 05/04/07 Credit Report Requirements • Tri-Merged with 3 bureau scores OR • Full RMCR Credit Report Tri-Merged Credit Report required on Disclaiming Spouse for Community Property States only • Looking closely at pay history for last 12 months • Considering pay history for last 24 months 05/04/07 Credit • On Traditionally Underwritten Loans or Loans that have received an Automated “Refer” will need an acceptable written explanation for: • Bankruptcies • Consumer Credit Counseling • Foreclosures • Lates, Collections, etc • Inquiries in last 90 days 05/04/07 Sources of Assets • • • • • Checking deposits Savings deposit Gift - Relative or Gift Program Withdrawal from 401k (use 60%) of balance Seller paid FHA allowable closing costs and/or pre-paids – 6% Seller Contributions regardless of LTV and can be combined with Gift program or secondary financing • Gift and non-profit seconds are permitted, but program must be approved by GMAC. • Cash on Hand – Limited user of credit – No bank accounts • • Earnest Money deposits must have cleared bank and use balance after funds cleared Must have sufficient funds verified prior to final approval 05/04/07 Documenting Assets • Standard VOD • Internet VOD • Alternate Documentation – Most recent 2 months of bank statements – all pages required – Bank print-out 05/04/07 Gift Documentation Requirements • Mortgagee Letter 00-28 – Gift letter required, that includes donor’s name, address, phone number, relationship, amount of gift not to be repaid, and that no funds were obtained from an interested party to the transaction – Documentation that funds were withdrawn from donor’s bank account (withdrawal slip, bank statement) • Cash on hand not an acceptable source of gift--Donor’s funds must be verified • If borrowed funds, donor must provide source that is not an interested party to transaction – Documentation that funds were received from donor by borrower 05/04/07 Gift Funds Traditionally Underwritten Including Refers • If Gift Funds are in Borrower’s account – Completed Gift Letter – Copy of canceled check or other withdrawal document showing the withdrawal is from donor’s personal account – Proof of Donor’s ability to give funds (copy of Bank statement) – Copy of Borrower’s deposit slip or bank statement showing the deposit • If Gift Funds are provided at closing – Completed Gift Letter – Copy of certified check (with donor’s account number on check) made on donor’s account OR Money Order (withdrawal slip) – Proof of Donor’s ability to give funds (copy of Bank statement) 05/04/07 Gift Funds AUTOMATED UNDERWRITING • WARNING: The funds must have been in the borrower’s bank account at the time that the loan was first input into DU/LP. If the funds were not in the account at that time, then requirements of Mortgagee Letter 00-28 apply – DU messaging will state requirements – LP documentation grid indicates requirements • • If Gift Funds are in Borrower’s account at time of initial application – Completed Gift Letter If Gift Funds are to be provided at closing – Completed Gift Letter – Copy of certified check (with donor’s account number on check) made on donor’s account OR Money Order (withdrawal slip) – Proof of Donor’s ability to give funds (copy of Bank statement) 05/04/07 Secondary Financing • Secondary Financing is allowed IF the second lien comes from: – An Approved government Entity – An Approved non-profit entity 05/04/07 Documenting Assets • Gift documentation – Downpayment assistance – Downpayment assistance programs require prior approval – Borrower’s application and approval for downpayment assistance must be included in loan file – Program’s tax ID# and 501(c) 3 designation must be shown on MCAW • Program funds may only be used for downpayment, closing costs, and prepaid items. They may never be used to pay borrower’s outstanding personal debts, whether timely or delinquent. 05/04/07 Documenting Assets • Sale of previous home – HUD-1 from sale of home, netting sufficient funds for closing on subject property • Sale of asset – Bill of sale – Evidence of ownership and value – Evidence that funds were received • Liquidation of stocks or 401K accounts – Document value with current statements – Document receipt of funds – 401k loans are not included in the debt ratio 05/04/07 Documenting Assets • Cash on hand – Borrower typically does not use bank accounts • Savings account acceptable • Checking account with minimal activity acceptable on a case by case basis – Borrower has little or no credit – Borrower provides a letter explaining how much was saved and how long was needed to save it, accompanied by a budget based on net income that supports the explanation 05/04/07 Allowable Closing Costs • Certain fees may never be charged to the borrower: – Tax Service Fee and Origination fee over 1% • Certain fees may be charged to the borrower AND may be included in calculating the mortgage amount: – See Mortgagee Letter 2006-04 • Information on closing costs can be found in the HOC Reference Guide at: http://www.hud.gov/offices/hsg/sfh/ref/sfhp2-15.cfm 05/04/07 May Be Paid by Borrower & Included as part of 3% investment • • • • • 1% Origination Fee Credit Report Fee Appraisal Fee Title Insurance Recording, Notary and Endorsement Fees • Escrow/Settlement Fees • Attorney’s Fees • Flood Cert Fee • • • • • • • • Home Inspection Fee MCC Application Fee Doc Prep Fees Termite Inspection Fee Repair Inspection Fee Survey Fee Courier Fees Reconveyance Fee 05/04/07 FHA Up Front & Monthly MIP 30 YEAR Up Front MIP Monthly MIP 1.50% 0.50% 15 YEAR 1.50% 0.25% • No Monthly MIP on 15 yr less than 90% LTV • Cancellation of annual mortgage insurance premium (Monthly) after loan amount reduced to 78% or less, and the mortgagor has paid the annual premiums for at least three years. 05/04/07 Appraisal & Property Requirements Existing Construction New Construction Appraisal Requirements • One Completed URAR (full appraisal report – Form 1004) with all necessary addendums and attachments 05/04/07 FHA allowances and unique issues: • 2 - 4 Unit properties will permit rental income from units using FHA’s Vacancy factor: • • • • Santa Anna 10% Philadelphia 15% Atlanta 15% Denver 10%,15%, 20% varies depending on property location • 3 - 4 Unit properties are required to be selfsufficient, after deducting vacancy factor and 3 months PITI reserves are required 05/04/07 New Construction • Some definitions: – Proposed construction exists where the case number was ordered and the appraisal completed prior to commencement of building the home – “Under construction” is an appropriate description when the case number is ordered and the appraisal completed during the course of construction – New construction is a home that was completed less than one year prior to the date the application was signed 05/04/07 Documentation requirements • • • • • • Builder’s Certification (#92541 revised 4/01) – must be completed and signed with original signatures on both pages Builder’s Warranty of Completion (#92544 revised 9/92) Plans and specifications where there is no local authority Subterranean Termite Report (NPCA 99A and NPCA 99B) where required Evidence of enrollment and acceptance in a 2-10 warranty plan Evidence of 2-10 warranty plan may be waived in some circumstances – An “early start” letter provided by a DE Underwriter accompanied by inspections during the course of construction by either FHA, VA, or the local building authority and a final inspection by FHA – Building permit and certificate of occupancy issued by local building authority (does not apply to manufactured homes) 05/04/07 Condominium • Condominiums may be approved by HUD – Regardless of prior approval, lender must certify that number of owner-occupied units in project is at least 51% • Condominiums may also be approved on a “spot” basis by a Direct Endorsement Underwriter – Mortgagee Letter #96-41 provides requirements and checklist for “spot” approval • Online address to check for approval: https://entp.hud.gov/dapp/html/condolook.cfm 05/04/07 Types of Construction • Manufactured Home is a structure that is transportable in one or more sections. In traveling mode, the home is eight feet or more in width and forty feet or more in length. A Manufactured Home is designed and constructed to the Federal Manufactured Construction and Safety Standards and is so labeled. – Modular construction is also a factory-built home, but is treated the same as stick-built housing. 05/04/07 Manufactured Housing Criteria • To be eligible for FHA mortgage insurance, all manufactured home must comply with the following: – Have a floor area of not less than 400 square feet – Be constructed after June 15, 1976; manufactured homes produced prior to that date are ineligible for insured financing – Be classified and subject to taxation as real estate – The mortgage must cover both the manufactured unit and its site and shall have a term of not more than 30 years – Be built and remain on a permanent chassis – Designed to be used as a dwelling with a permanent foundation – The finished grade elevation beneath the manufactured home or, if a basement is used, shall be at or above the 100-year flood plain. 05/04/07 Other property requirements • When required by appraiser, a termite inspection (Form NCPA-1 or state equivalent) is required on existing constructions – Active infestation must be treated prior to closing – Debris in crawl space must be removed and property re-inspected – Prior infestation may require an engineer’s inspection if damage to structural systems in noted • • • • Must confirm distance between well and the septic field Septic systems must be inspected if the property is vacant at time of appraisal, regardless of when property was vacated, on existing construction. Well Water and Septic systems need only be inspected if the appraiser notes any problems for occupied existing construction Septic system installment permit must be provided for new construction loans 05/04/07 CALCULATING THE MORTGAGE AMOUNT FOR A PURCHASE EXCEL worksheet can be obtained from Mortgagee Letter 98-29 on Internet FHA Maximum Mortgage and Cash Needed Calculator Instructions 10. Statutory Investment Requirements a. Contract Sales Price b. Borrower-Paid Closing Costs c. Acquisition (before adjustments) (10a+10b) d. Statutory Investment Req. (10a X 0.03) 11. Maximum Mortgage Calculation a. Lesser of Sales Price (10a) or Value b. Required Adjustments (+/-) * c. Mortgage Basis (11a + 11b) d. Max Mort. (11c x LTV Factor Below _______% ) Select Appropriate Maximum Loan-to-Value Factor If State Avg. Closing Costs Are High, for Line 11d use 0.9875 if Line 11a is $50,000 or less 0.9775 if Line 11a > $50,000 If State Avg. Closing Costs Are Low, for Line 11d use 0.9875 if Line 11a is $50,000 or less 0.9765 if Line 11a is >$50,000 up to $125,000 0.9715 if Line 11a is >$125,000 Maximum LTV Multiplier 12. Actual Cash Investment Requirements a. Minimum Down Payment (10c-11d) (This amount must equal or exceed 10d!!) ** b. Prepaid Expenses c. Discount Points d. Repairs/Improvements (Non-Financeable) e. MIP Paid in Cash f. Non-Realty and Other Items g. Total Cash to Close (Sum of 12a thru 12f) MortgageReduction (if Required per05/04/07 Line 12a)** 0.9875 0.9765 0.9715 0.9715 0.9875 0.9775 $200,000 $4,000 $204,000 $6,000 $200,000 $0 $200,000 $195,300 Select One Unadjusted Acquisition Statuto ry Investment Requirements Statutory Investment Req Required Adjustments Mortgage Amount 0.9765 $8,700 $1,850 $100 $2,500 $80 $50 $13,280 $0 Minimum Down Payment Total Cash to Close How to Calculate Loan Amounts FHA requires a minimum of a 3% investment • The 3% investment can consist of Down Payment and FHA allowable closing costs that the borrower is actually paying. • The amount of FHA allowable closing costs that can be included varies based on sales price. • The only fee that CANNOT be paid by the borrower is the Tax Service Fee 05/04/07 Maximum LTV (Purchase Transactions Only on Proposed and Existing Construction) States with Average Closing Costs AT or BELOW 2.1% of Sales Price Value/Sales Price < $50,000 Value/Sales Price $50,000 to $125,000 Value/Sales Price $125,000+ Value/Sales Price < $50,000 Value/Sales Price > $50,000 98.75% 97.65% 97.15% 98.75% 97.75% States with Average Closing Costs AT or BELOW 2.1% of Sales Price 05/04/07 Low Closing Cost States • • • • • • • Arizona California Colorado Idaho Illinois Indiana New Mexico • • • • • • Nevada Oregon Utah Washington Wisconsin Wyoming 05/04/07 High Closing Costs States • • • • • • • • • • • • • Alabama Alaska Arkansas Connecticut District of Columbia Delaware Florida Georgia Hawaii Iowa Kansas Kentucky Louisiana • • • • • • • • • • • • Massachusetts Maryland Maine Michigan Missouri Minnesota Mississippi Montana North Carolina North Dakota Nebraska New Hampshire • • • • • • • • • • • • • New Jersey New York Ohio Oklahoma Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Virginia Vermont West Virginia 05/04/07 CALCULATING THE MORTGAGE AMOUNT FOR A REFINANCE Full doc – no cash out Full doc – cash out Streamline with appraisal Streamline - no appraisal Refinance Transactions • APPRAISALS FROM PREVIOUS TRANSACTIONS MAY NOT BE USED AGAIN. A NEW APPRAISAL IS REQUIRED, EVEN IF THE CURRENT APPRAISAL HAS NOT EXPIRED. • “SKIPPED PAYMENTS” ARE NOT ACCEPTABLE. IF THE PAYMENT FOR THE MONTH DUE HAS NOT BEEN MADE, IT MUST BE BROUGHT TO CLOSING. 05/04/07 Types of FHA Refinances • STREAMLINE WITH and WITHOUT APPRAISAL – Not Credit Qualifying • NO CASH OUT WITH APPRAISAL – Credit Qualifying • CASH OUT REFINANCE – Credit Qualifying 05/04/07 Streamline Without Appraisal NOT Credit Qualifying • Appraisal NOT required • Rate must be LOWER than existing rate • Limited to current Principal Balance + FHA allowable costs • No cash back allowed • Existing Loan must be an FHA • Must have current pay off, Hazard Ins. Prem. & renewal date to calculate loan amount • LDP/GSA on borrowers, LO, Broker 05/04/07 Streamline Without Appraisal NOT Credit Qualifying • Provide current Mortgage Rating • Prelim • Lien Seasoning – Only required if loan has been assumed. Borrower must be on title & made payments for 6 months • Adding Borrower – without credit review • Deleting Borrower - credit qualifying required • Assets – No verification required • Be sure to have enough in Rebate, or charge Discount Points to cover items Borrower can’t pay 05/04/07 Streamline With Appraisal NOT Credit Qualifying • Appraisal required • Rate must be LOWER than existing rate • Limited to current Principal Balance + FHA allowable costs. Pre-paids, points. • If loan amt. exceeds original principal bal. Must provide tri-merged credit report • Can roll in FHA allowable closings costs actually paid by borrower, pre-paids, discount (up to 2%), 30 days interest on old loan) – use worksheet • Be sure to have enough in Rebate, or charge Discount Points to cover items Borrower can’t pay. 05/04/07 Streamline With Appraisal NOT Credit Qualifying • • • • • • • • • • No cash back allowed Existing Loan must be an FHA Must have current pay off, Hazard Ins. Prem. & renewal date Provide current Mortgage Rating Prelim Seasoning – Only required if loan has been assumed. Borrower must be on title & made payments for 6 months Adding Borrower – without credit review Deleting Borrower - credit qualifying required Assets – No verification required LDP/GSA on borrower, loan officer, broker, appraiser & company 05/04/07 Streamline Refinance with Appraisal • If the appraisal indicates repairs that will have to be completed, the appraisal may be ignored and the loan processed as if there were no appraisal • If the new balance exceeds the original principal balance, a single bureau credit report indicating no mortgage lates is required. 05/04/07 FHA NO CASH REFINANCE With Appraisal & Credit Qualify • Appraisal required • Can roll in FHA allowable closings costs actually paid by borrower, pre-paids, discount (up to 2%), 30 days interest on old loan) – use worksheet • Can pay off Seasoned Second – Must have been seasoned 1 year • No cash back allowed • Must have current pay off, Hazard Ins. Prem. & renewal date • Asset verification required • LDP/GSA on Borrower, LO, Broker, appraiser & company • Must provide complete credit package 05/04/07 FHA Cash Out Refinance • LOAN AMOUNT = – Appraised Value X 95% (1-2 units) – Appraised Value X 85% (3-4 units) • Complete credit package required 05/04/07 CAUTIONARY TALES Property Flipping • Mortgagee Letter #2003-07, issued May 22, 2003, states: – Lenders must document that the seller of the property is the owner of record – If the current seller purchased the property within the most recent 90 days prior to the current sale, the property is not eligible for FHA financing* – If the resale date is between 91 days and 180 days, AND if the resale price is 100% or more than the price paid by the property seller, a second appraisal is required. The cost of the second appraisal may NOT be charged to the buyer. – If the resale date is between 91 days and 12 months, AND the resale price is 5% or greater than the lowest sales price of the property during the preceding 12 months, HUD may require documentation supporting the new sales price. *Exceptions are made for HUD-owned REO sales and properties acquired by employers or relocation agencies in connection with the relocation of an employee. 05/04/07 Underwriting Issues • AUS Refer Recommendation w/no compensating factors • Prior Bankruptcy or Foreclosure with no Reestablished Credit • 3 - 4 Units rental income was not self-sufficient • Excessive Ratios; income exaggerated or debt underestimated • Poor Credit History in the past 12 - 24 months • Outstanding collections, judgements, charge-offs with no assets verified to cover payoff at closing • Comprehensive Risk Assessment Worksheet determined High Risk (completed on all declined loans by underwriter) 05/04/07 How to Overcome Issues • Demonstrate compensating factors – – – – Little or no increase in housing costs Reserves: 3 months PITI With the same employer: 5 + years Borrower has potential for increased earnings, as indicated by education or training – Tax Benefits – Home being purchased is the result of primary wage-earner transfer & secondary wage-earner has history of employment & is expected to return to work in a similar line of work – Military Benefits • • Evidence inaccurate or disputed accounts Document extenuating circumstances, etc. 05/04/07 FHA Web Sites • Home Ownership Manual – www.hud.gov/fha/sfh/ref/fhatrans.html • HUD Web Page – www.hud.gov or www.hud.org • FHA Connection – https://entp.hud.gov/clas/ 05/04/07 Compliance • GMAC BANK – FHA#1803700002 • Case # Assignment – Print out from FHA Connection • CAIVRS – On all Borrowers –Print out from FHA Connection • LDP / GSA – Borrowers (all AKA’s), Sellers, Real Estate Agents, Real Estate Companies, Broker Company and Loan Officer--Print out from FHA Connection • FHA Condo Approval – Don’t forget the “Details”--Print out from FHA Connection 05/04/07 Benefits • Large Market • Rising Interest Rates • Customers for Life 05/04/07 FHA Program Questions? 05/04/07 Further Information • Refer to: – GMAC RFC Website • www.gmacmwholesale.com – The Correspondent Manual – Product Matrix • Contact: – Client Services 877-700-4622, Option 9 Correspondent_Lending@gmacm.com – Your Sales Director 05/04/07