American Income Life Complaint - PowerPoint

							           USDA Rural Development
     Nebraska Tribal USDA Listening Session


Working Effectively With American Indians
Housing Session
May 11, 2010
  WHAT DOES USDA RURAL
  DEVELOPMENT DO???

Mission Statement:

“To increase economic opportunities
and improve the quality of life for all
rural Americans.”
FUNDING
   Funds are available through direct and
    guaranteed loan programs and grants
   Requirements:
    –   Repayment Ability
    –   Loan/Grant Eligibility (Economic Need)
    –   Security
   Sustainability
    –   Long term community investment
 USDA Rural Development


Types of Program Delivery
  –   Guaranteed Loans
  –   Direct Loans
  –   Grants
Program Areas
  –   Rural Business and Cooperative
          Business, Energy & Cooperatives
  –   Rural Housing and Community Facilities
          Single Family, Community Facilities & Multi Family
  –   Rural Utilities
          Water and Environmental, Telecomm & Electric
Business Loans & Guarantees
     Ho-Chunk Industries – Walthill, NE


before…                   after…
COMMUNITY FACILITY LOANS & GRANTS


Water Tower in Kelly Property   Library - Winnebago, NE
  Addition – Winnebago, NE
Little Priest Tribal
College Classroom
Winnebago Fire Truck
USDA Rural Development’s
Single & Multi-Family Housing Programs

Single Family Programs
 Single Family Housing Direct & Guaranteed Loans
 Single Family Housing Repair Loans & Grants
 Mutual Self Help Technical Assistance Grants
Multi Family Programs
 Housing Preservation Grants
 Multi Family Housing Direct Loans
 Multi Family Housing Guaranteed Loans
       USDA RURAL
      DEVELOPMENT


Single Family Housing
Loan Programs
Many Would Like to Own Their
Own Home, but…

                   They don’t have the
                    money for a down
                    payment.
                   Afraid the mortgage
                    payments will be too
                    high to afford.
                   Believe past credit
                    problems will be a
                    barrier.
                 KEYS TO HOME
                  OWNERSHIP
   Affordable
     Housing is typically considered affordable
    when it costs no more than 30% of a
    household’s income
   Partners
   Homebuyer Education
   SUCCESSFUL HOMEOWNERS
     Our goal is not just to get families in homes,
    but to allow them to be successful to stay in
    the home
       Partners For Affordable Housing
         Private & non-profit sectors


   NIFA / Lenders
   Realtors
   Non-Profit Organizations
   DED – (CDBG , HOME , TRUST)
   Federal Home Loan Bank
   Nebraska Assistive Technology
USDA RURAL DEVELOPMENT
AFFORDABLE HOUSING PRODUCTS

     LENDER OF FIRST OPPORTUNITY IN RURAL
                   NEBRASKA

   Guarantee Rural Housing (GRH) Program

   Direct Housing Program

   Self-Help Housing
USDA RURAL DEVELOPMENT

   Housing loan programs designed for very-
    low to moderate income households to
    purchase homes, who would otherwise not
    qualify for bank financing.
   Provides 100%-102% financing to purchase,
    repair, and pay loan closing costs.
   No private mortgage insurance (PMI) is
    required.
USDA RURAL DEVELOPMENT

   Provides fixed interest rates and terms that
    are affordable.

   Loan programs leverage very well with local
    down payment assistance programs.

   Credit counseling and servicing options
    available for customers.
LOAN PURPOSES


    The purchase of a new or existing dwelling;
    refinance construction loan to build house;
    any needed repairs for an existing dwelling;
    finance closing costs (if equity)
2 “Rurals”

 Eligible   area

 Eligible   adjusted income
                    Eligibility Website: LOG ON:
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

                                                               Click here
                                                               for
                                                               property
                                                               eligibility




                                                               Click here
                                                               for
                                                               income
                                                               limits
   Eligibility for Rural Development
Single Family Housing Loan Programs
            Eligibility for a Loan

   Combined household income within the current
    published limits.

   Have a dependable source of income that indicates
    repayment ability. Repayment is determined by debt
    to income ratios.

   Credit History that demonstrates an ability and
    willingness to pay debt obligations in a timely
    manner.
     Other Eligibility for a Loan

   Do not currently own a home adequate to
    meet the family’s needs.
   Lack the resources to afford conventional
    financing.
   Citizen or Permanent Resident Alien.
   Have the legal capacity to apply for a loan or
    legal guardian who may apply for the loan.
HOMEBUYER EDUCATION

   Direct Program – required for 1st time
    homebuyers through qualified providers (ie
    REACH)
   GRH – typically recommended. Lender will
    determine type of homebuyer education to
    be completed.
Credit Scores

   No Minimum credit score to qualify
   Baselines for reduced documentation
   GRH Program – 620 or above
   Direct Program – 640 or above
       PROPERTY REQUIREMENTS
         EXISTING DWELLINGS

                            DIRECT RH-502
                             Instead of meeting
   GUARANTEED               HUD/FHA minimum
    Existing dwellings       property standards,
    must meet HUD/FHA        homes must be
    minimum property         inspected by RD staff,
                             electrician, plumber,
                             heating/A/C
                             professionals.
PROPERTY REQUIREMENTS


             Property may not be a part of
              an income producing
              operation and may not have
              farm service buildings

             Properties must be located in
              rural areas/communities of
              under 20,000 and
              communities of Norfolk and
              Columbus
        PROPERTY REQUIREMENTS


   The appraised value of the property
    must be sufficient to cover the
    purchase price plus any closing fees
    and repairs being financed.
GUARANTEED HOUSING LOANS
     GUARANTEED HOUSING LOAN
           HIGHLIGHTS

   100% Financing
   Moderate income households Generous income
    limits: ADJUSTMENTS
   Loans originated by approved lenders
   30-year loans at fixed interest rates.
   Rate is negotiable between Buyer and Lender.
   NIFA rates available for qualified Buyers.
    100% Guaranteed financing

   True 100% program
   No maximum purchase price
   No monthly mortgage insurance – one time 2% GRH fee can be
    financed
   Expanded qualifying ratios 29/41 and above
   No asset limit / No reserve minimum
   Not FICO driven: Does the loan make sense?
    Emerging Markets/Non Traditional histories, etc.
   NOT just for first time homebuyers
   Maximize buying power
Clients Choose An Approved
Lender
GRH LOAN PROCESSING

   Loans processed and underwritten by
    approved lenders
 USDA GRH Moderate Income
 Limits

County                                   1 - 4 person    5-8 person
Omaha MSA (Cass, Douglas, Wash, Sarpy)    $80,350       $106,050
Lincoln MSA (Lancaster)                  $78,550        $103,700
Seward                                   $76,900        $ 101,500
Saunders                                 $75,200        $ 99,250
All Other Counties                       $73,600        $ 97,150
DEDUCTIONS TO INCOME:
Dependents: $480 each
  Children 18 yrs. or younger
  Disabled household members 18 yrs. or older
  Full time students 18 yrs. or older
  Care expenses (DAYCARE) of minor children 12 yrs. or younger
Elderly family: $400 (single deduction)
        100% GUARANTEED FINANCING OFFERS:
        *Lowest payment                             *Least out of pocket cost
        *Competitive fixed rate                     *Affordable loan terms
        *Opportunity to serve more clients

NO PMI LOAN         5% down $8,750 9% Rate NO MI                                                          $1338
FLEX 97     3% down $5250   680-699 FICO   35% MI                                                  $1259
FLEX 97      3% down $5250   700 + FICO    18% MI                                             $1245
FHA     3.5% down $6125 2.25% UFMIP + 55 bp MI                                             $1229                   April
                                                                                                                 5th, 2010

95% LTV CONVENTIONAL                       5% down $8750       30% MI                    $1214
MCM®/HOME POSSIBLE                  3% down $5250      680 – 699 FICO   18% MI       $1213
80/20   80% 1st 7% 30 YR TERM        20% 2nd 8.5% 30 YR TERM                       $1201
MCM®/HP        3% down $5250    700 + FICO    18% MI                             $1196
VA    2.15% GUARANTY FEE       NO MI                                        $1189
                                                                                             $175,000 Loan
                                                                                                7% rate
102% LTV RURAL DEVELOPMENT                             NO MI             $1188             No r.e. taxes & insurance included

100% LTV RURAL DEVELOPMENT                             NO MI             $1164
DIRECT RH-502 LOANS
Single Family Housing Direct
Loans

 Primary goal is to provide affordable quality
    housing to low and very low income households.
   100% financing available.
   Mortgages are fixed rate for 30-38 years
   Current interest rate 4.875%
   Interest Rates subsidized down to as low as 1%
   Partial “Recapture” of interest subsidy
DIRECT RH-502 LOAN HIGHLIGHTS


   Loans are originated in the local USDA Rural Development
    offices.
   Mortgage limit: $170,000 (Cass, Douglas, Sarpy, Saunders,
    Washington)
   $165,000 in (Lancaster, Saline, Seward, Otoe and Gage)
   $155,000 in (Cheyenne, Madison, Platte, Stanton)
   $145,000 all other counties
DIRECT RH-502 LOAN HIGHLIGHTS


   Debt to income ratios are 29%-33% PITI and 41%
    total debt ratio.
   Compensating factors to allow higher ratios:
    -Energy efficient systems being
     installed to reduce utility costs
    -Comparable or higher rental costs
    -Savings
    -Proposed pay increase

   Payment Subsidies are available to reduce
    mortgage payments for most qualified buyers.
            RH-502 Loan Eligibility

   Wages or other sources of income must be dependable
    and sufficient for repayment of the loan.

   Credit history must demonstrate a willingness to pay credit
    obligations on time.

   Combined adjusted household income must be within the
    published Low Income limits.
USDA Direct Low Income Limits


County 1 person 2 person 3 person 4 person 5 person
(general*) $30,050 $34,350 $38,650 $42,950 $46,400
*Income limits vary by County

DEDUCTIONS TO INCOME:
Dependents: $480 each
  Children 18 yrs. or younger
  Disabled household members 18 yrs. or older
  Full time students 18 yrs. or older
  Care expenses (DAYCARE) of minor children 12 yrs. or younger
Elderly family: $400 (single deduction)
PAYMENT SUSBIDY

Subsidies are available to reduce

monthly payment to as low at 1% for
eligible low and very-low income
households.
This gives the buyer more
purchasing power!
HOW SUBSIDY WORKS:



   Subsidies help reduce the monthly mortgage
    payment for low and very-low income
    households to make the payment affordable.

   The subsidy is paid with Federal funds, on the
    Home Owner’s behalf each month. It is money
    you would pay out of pocket for interest at full
    note interest rate on a mortgage loan.
AFFORDABILITY THROUGH SUBSIDIZED PAYMENTS
DIRECT LOAN PROGRAM



   GRH loan - terms: 30 yrs, $100,000 @ 5.75% =
    $584 monthly principal & interest (P&I) payment

   Rural Development Direct loan - terms: 33 yrs,
    $100,000 @ 4.875% (The Rural Development “full
    note rate” is typically lower than conventional rates)
    = $509 P&I payment, HOWEVER,

   Payment assistance is granted to eligible
    applicants.
      FOR EXAMPLE PURPOSES ONLY: RE taxes $2,400 yr and insurance $600/yr =
      $3,000 / 12 mo = $250 month

                                               PAYMENT ASSISTANCE CALCULATION
      Household Income

   4 person household:                        (calc #1) calculated at 24% of AAI
      annual income              $30,000
                                                RD mo. full note pymt ($509) + mo taxes & ins
     Less:Dependent deductions    - 960
                                                ($250) = $759 PITI - $580.80 (24% of mo AAI)
    Adjusted Annual Income       $29,040
     Monthly AAI                 $ 2,420       Difference $178.20

                                               (Calc #2) calculated at 1% note rate
                                                Full Note Pymt $509.00 - $296.58 (mo pymt
                                                @ 1%)
                                               Difference     $212.42

                                               House Payment with Payment Assistance
                                                $330.80 monthly P&I payment by borrower
                                               Applicant receives monthly Payment
                                                Assistance of $178.20. Monthly full note rate
                                                $509 - $178.20 mo Payment Assistance
Do We Pay Back The Subsidy?


 All, or a portion of the subsidies that are paid
 on the Buyer’s behalf to reduce your monthly
 payment is subject to repayment when you
 move out of the home, sell the home, or
 refinance your Rural Development loan with
 another lender.
Subsidy Payback Example

   Buyer’s received $90,000 loan @ 5.75% for 33 years = $508.50 per month
    Principal + Interest (P&I)

    Eligible for subsidy at 1% rate P&I = $267.30
    $241.20/mo paid on their behalf by the Government

    Had loan for 5 years at 1% subsidy rate:
    $241.20/mo x 60 mos. = $14,472 subsidized

   Home is now selling for $100,000
   Unpaid P&I on RD loan is $85,000
   Selling costs total approximately $6,000
Subsidy Payback Example

     Selling Price   $100,000
     Unpaid P&I     -$ 85,000
     Selling costs  -$ 6,000
  Remaining Equity = $ 9,000

RD only recaptures a maximum of 50% of “remaining equity” to
  pay back some or all of the subsidy paid on buyer’s loan

50% x $9,000 = $4,500 additional owed to RD to payback on
  subsidy.
Subsidy Payback Example

Conclusion:

Buyer received $14,472 in subsidies,
but is only paying back $4,500 =
                          $9,972 granted to them

REMEMBER:
This was a 5.75% loan. The above subsidies were money the buyer
   would have paid out of pocket for interest payments on a non-RD loan
   at that rate.
Let Rural Development Help You
Qualify For a Housing Loan!


  If you have credit issues at the present time,
   or too much other debt to afford a loan right
   now, we will try to advise you on what steps
   to take and will continue to work with you
   until you are ready to buy a new home.

DON’T GIVE UP! ANYTHING IS POSSIBLE!!
Let Rural Development Help You
Qualify For a Housing Loan!


   Contact USDA RD Office and request a pre-
    qualification review

   RD staff will do a prequalification and call you
    regarding what amount you might qualify for and
    which program would benefit you the most -
    Direct or Guarantee
              Rural Home Repair Loan
                and Grant Program

   Applicants must own their own home and are very-low
    income households.
   Grant funds can only be used to remove health & safety
    hazard. Grants are only available to homeowners 62 years
    of age or older who cannot afford a loan
   Loan funds can be used to improve or modernize dwelling
    as well as removal of health & safety hazards
             Rural Home Repair Loan
               and Grant Program

   Fund Uses: Installation or repair of waste disposal systems,
    connection fees for utilities, energy conservation, electrical,
    plumbing, heating systems, repair or replace roof, replace
    deteriorated siding, handicap accessibility

   Loans-1% interest rate
    Up to 20 year term
    Maximum amount-$20,000

   Maximum lifetime grant-$7,500

   Leverage with partners to provide maximum utilization
    of funds
Single Family Housing
Home Improvement Loan & Grant Program

 “Note Only” feature facilitates
  Lease/Mortgaging problems
  (loans less than $7,500)
 If no experience with Rural
  Development - this is a great     504 Customer Joyce Jefferson
                                      Lummi Reservation, WA
  place to start
 Grant has 3 year recapture
  clause
RURAL HOME REPAIR LOAN
RURAL HOME REPAIR GRANT


*BEFORE REPAIRS*



                   *AFTER REPAIRS*
       Self-Help Housing Program

   Assist low and very low income families to
    build their own home
   Construction method where a group of 6-10
    families work together to utilize their own
    labor to build their homes and reduce total
    construction costs of the homes (families
    must contribute 65% of total labor on each
    house)
   A public or private non-profit organization
    obtains a USDA grant to provide technical
    assistance to the participating families.
    Organizations can use grant
             funds to:
   Hire personnel to carry out program
   Pay necessary and reasonable office and
    administrative expenses & salaries
   To make essential equipment, such as power
    tools available to households participating in
    self-help construction
   Training expenses
Grantee responsibilities

   Recruit applicants & assist with loan applications
   Locate and or develop sites & obtain site options
   Obtain house plans & specifications & develop
    building cost estimates
   Provide construction training to applicants
   Coordinate family work groups & provide
    construction supervision
   Maintain accounting of construction materials and
    use of loan funds
Self-Help – Scottsbluff
Housing Preservation Grant
Program

 Used to renovate deteriorating homes and rental
  properties of low and very low income categories
 Eligible entities consist of nonprofits, local
  governments, and Indian Tribes

•   Used in conjunction with
    other leveraged funds
         HELPFUL WEB SITES

   www.rurdev.usda.gov/ne (Nebraska Rural DevelopmentPrograms)

   http://eligibility.sc.egov.usda.gov/eligibility/mainservlet (Determine potential
    eligibility for USDA home ownership programs. View eligible and non eligible areas.)

   http://www.resales.usda.gov/sfhdirect/propertyco.cfm?StateAbbreviation=NE
    (Housing properties in Nebraska for sale by USDA Rural Development and guaranteed lenders,
    and upcoming foreclosures.)

   http://www.nifa.org/customers/project_listings.html (Assists renters to find
    affordable rental housing complexes. Research type of affordable rental housing located in
    county, community, zip code area, etc. in Nebraska. Contact information available.)

   http://www.nenedd.org/HousingLoanPrograms.asp (Down Payment Assistance and
    Housing Rehab programs)

   http://www.housingdevelopers.org/REACHweb/index.htm (Home buyer education
    programs)

   http://www.annualcreditreport.com (Free annual credit reports.)
RD OFFICES

 State Office                       (402) 437-5551     Fax (402) 437-5408
 Rm 152 Federal Bldg, 100 Centennial Mall North, Lincoln, NE 68508


 Kearney Area Office                (308) 237-3118     Fax (308) 236-6290


 4009 6th Avenue, Kearney, NE 68845-2386


 Ainsworth Sub-Area Office          (402) 387-2242     Fax (402) 387-0968

 731 E. 4th, Ainsworth, NE 69210


 Lincoln Area Office               (402) 423-9683      Fax (402) 423-7614


 8000 South 15t h Street, Suite E, Lincoln, NE 68512


 Norfolk Area Office               (402) 371-5350      Fax (402) 371-8930
 1909 Vicki Lane, Suite 103, Norfolk, NE 68701


 Scottsbluff Area Office           (308) 632-2195      Fax (308) 635-2787

 818 Ferdinand Plaza, Suite B, Scottsbluff, NE 69361-4401


 North Platte Sub-Area Office (308) 534-2360                 Fax (308) 534-8645

 1202 S. Cottonwood, North Platte, NE 69101
                      Mike Buethe, Rural Housing Program Director
                      Phone 402-437-5574 ; e-mail mike.buethe@ne.usda.gov


“USDA Rural Development is an Equal Opportunity provider, employer and lender.” To file a complaint of discrimination
write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington D.C. 20250-9410 or call
(800) 795-3272 (voice), or (202) 720-6382 (TDD).