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					FHA 203(K) Streamline

 Rehabilitation Mortgage
         Program
      FHA Section 203 (k) Streamline
         Rehabilitation Program
• Enables borrowers to finance both the purchase or refinance
  of a home and the cost of its rehabilitation through a single
  mortgage.
• Standard FHA guidelines apply (1-4 units/ No Condo’s)
• Cash out is not allowed. Loan proceeds not advanced must
  be applied to principal.
• Streamlined FHA 203 (K) allows for limited improvements up
  to $35,000 Maximum. Up to 50% of the repairs released
  ($17,500 max)
• Minimum repair amount for a streamline 203(k) : NONE
• Term: 30 year fixed, 30 year fixed w/buydown, 1 year ARM
          ***Buydown and Adjustable rate qualify @ 1% above start rate***
   FHA Section 203 (k) Streamline
      Rehabilitation Program
The Streamlined FHA 203(k) program is intended to facilitate
uncomplicated rehabilitation and/or improvements to a home for
which plans, consultants, engineers and/or architects are not
required. Due to the rehabilitation amount limitation of $35,000,
eligible improvements are limited and can not include any major
rehabilitation or remodeling, new construction such as a room
addition, repairs to structural damage, or site amenity
improvements.

Repairs of this nature should be completed under the standard
FHA 203(k) program. (Full 203(k) Not yet available)
                Streamline 203(k) Eligible
                     Improvements
   Examples of eligible improvements are listed below (this list is not all-inclusive):

• Repair/Replacement of roofs, gutters, and downspouts
• Repair/Replacement/Upgrade of existing heating, ventilation, and air conditioning systems
• Repair/Replacement of plumbing and electrical systems
• Repair/Replacement of flooring
• Minor remodeling that does not involve structural repairs, such as kitchens
• Exterior and interior painting
• Weatherization, including storm windows and doors, insulation, and weather stripping
• Purchase and installation of appliances, including free-standing ranges, refrigerators,
   washers and dryers, dishwashers, and microwaves
• Improvements for accessibility for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/Replacement/Addition of exterior decks, patios, porches
• Basement finishing and remodeling that does not involve structural repairs
• Basement waterproofing
• Replacement of windows and doors and exterior wall re-siding
           Appraisal Requirements
• After Improved Value                       (2 appraisals not required)
  Appraiser to provide appraised value with improvements – Appraisals is requested from
  the appraiser as a 203(k) streamline appraisal. Provide appraiser with a copy of bid
  from contractor, prior to inspection.

• As is value
  Appraiser to provide an as is value in the body of the appraisal. (Purchase)
  Refinance- Use the Existing Liens as the “As is” value when this does not exceed a
  reasonable estimate of value.
  (Not required for HUD-owned Property/ HUD contract sales price is the “AS IS value)

• List Improvements/Repairs
  Appraiser to review and list on the appraisal as included repairs. List of repairs to
  correspond with the Contractors Bid.
HUD FORM-92700
203(K) Worksheet
Purchase Transaction
A1 Purchase Contract
A2 Appraisal
A3 Appraised Value (After Imp. Value)
A4 A3 X 110%
A5 Good Faith Estimate
B1 Contractors Bid/Appraisal
B2 Contingency Reserve Schedule
B3 1 Inspection Fee ($100 approx)
B10Sub-total Lines B5 thru B9
B11Origination Fee greater 1.50% or $350
B12N/A Disc. Pts.
B13Sub-Total Release for Closing
B14Total Rehab cost less than $35,000
C1 Lesser of A1 or A2
C2 B14
C3 Lesser of C1+C2 or A4
C4 96.50% of Line C3*
    *Maybe less if HUD Owned Property (REO)
C5 Will auto populate (ignore this figure)
C6 C3+C5-C4= required cash into transaction
   Down payment + closing costs
C7 C4 (re-enter)

Enter UFMIP Premium, Interest Rate & Discount
Points. (Total loan amount will self calculate)

DE Underwriter and Borrower(s) signature
required.
HUD FORM-92700
203(K) Worksheet
Refinance Transaction
A1     Existing Liens for Refinance
A2     Existing Liens for a Refinance
A3    Appraised Value
A4    A3 X 110%
A5    Good Faith Estimate
B1    Contractors Bid/Appraisal
B2    Contingency Reserve Schedule
B3    1 Inspection Fee ($100 approx)
B10   Sub-total Lines B5 thru B9
B11   Origination Fee greater 1.50% or $350
B12    N/A Disc. Pts
B14   Total Rehab cost less than $35,000

D1 A1 + B14 + A5 + Discount Point on Total
loan amount minus (-) B12 minus (-) MIP
Refund
D2 Lesser of A2 + B14 or A4
D3 D2 multiplied by 97.75%
D4 Base Loan amount lesser of D1 or D3
D5 D1 – D4 = Borrowers required cash to
close
Enter UFMIP, Interest Rate & Discount
Points.

DE Underwriter and Borrowers signature(s) required
                        203(k) Codes
Section of the Act          Loan Description   ADP Code



203(k)               Improvements/First Lien      702

203(k)           Adjustable Rate Mortgage (ARM) 730

203(k)               Interest Buy-down (IBD)      813
               Contingency Reserve
• A contingency reserve is typically required to cover unexpected expenses.
  On properties older than 30 years and over $7,500 in rehabilitation costs,
  the cost estimate must include a contingency reserve. The reserve must
  be a minimum of:

• 10% of the cost of rehabilitation

• If utilities were not turned on for inspection, a minimum 15% is required.

• The contingency reserve can only be used on those changes that affect
  the health, safety, or an increase in cost due to a necessity item.
   203(k) Lender Collected Fee
Supplemental origination fee When the mortgage
involves issuance of advances, the Lender will collect
from the borrower supplemental origination fee.
This fee is calculated at the greater of 1.5% of the
portion of the mortgage allocated to rehabilitation, or
$350.
Essex deducts this fee from wire proceeds for the
management of the rehabilitation.
The supplemental origination fee is collected in
addition to the 1% origination fee.
          ***Refer to line 11 of HUD Form 92700 (203k worksheet)***
            Contractors Requirements
• W-9 form
   Required for every contractor signed and completed. (Check appropriate box)
• Contractors Bid
   Signed & dated by borrower(s) and Contractor(s). Contractors Name, address & phone number.
   Contractor to list repairs, supplies, labor costs, etc. (Detailed)
• Contractors License
   Verify on the appropriate State website. (State specific)
   Contractor must be licensed for the work requested. (General)
   Bond information is also available
• Contractors Liability Insurance
• Contractors Resume
   2 year as a licensed contractor
• 3 Reference letters.
   Reference letters from previous customers, detailing specific work completed. (Name/addresses/phone
   numbers)
• Homeowner/Contractor Agreement
   Signed & dated by borrower(s) and Contractor(s). Enter cost of work and target completion date.
W-9 Form
Contractor
to Complete


Contractor to complete and
check the appropriate box
for type of business.

Contractor to enter Social
Security Number or Employer
ID number.
                               Contractor to sign   and date
Contractor to sign and date.
Must be submitted with loan
package.
Sample
Contractor Bid
•Business Letterhead

•Detailed and list each item
 of work and cost of each
 item.

•Detail % of funds to be
 released at first draw.

•Must include labor costs

•Signed & dated by borrower
 and contractor. Including
 Phone numbers.
California State Contractors License
California State
Contractors Bond

•Verify contractors
  information

•Commercial General Liability

•Valid- verify on the
 California State website that
 the contractor renews
 annually.
Nevada State Contractors License
Nevada State Contractors Bond
Sample
Contractor
Resume


•Minimum
 2 years experience

•Business Letterhead
2nd Sample of
Contractor
Resume


•Minimum
 2 years experience

•Business Letterhead
3 Reference
Letters

•Include name, address and
phone number of client.

•Detail specific work
completed by the contractor.

•Completed in a timely
manner and to customer
satisfaction.

•Signed by client
     Documents signed by Borrower
• 203 (k) Worksheet
  Send out final with loan documents.
• Contractors Bid
• Homeowner/Contractor Agreement
  Complete form, include rehabilitation amount, and completion date
• Borrowers Acknowledgment
  Signed by borrower(s) and Lender. Borrower(s) must check a box.
• Rehabilitation Loan Agreement
  Enter date, borrower(s) and contractors names, rehabilitation amount
• Essex Draw Request
• Rehabilitation escrow account & fees acknowledgment
  Underwriter completes, send out with docs for signature
Homeowner
Contractor
Agreement
•Complete name,
 addresses and phone
 numbers

•Enter agreement date

•Enter the property address

•Enter dollar amount of
 rehabilitation

•Borrowers and Contractors
 to sign and date
203 (k) Borrower’s
Acknowledgement

• Borrower to check
  one of the three
  boxes.

• All borrower s to
  sign and Date

• Lender (Essex) to
  sign at funding
Rehabilitation
Loan Agreement

• This form will be populated and
  sent out with loan documents.

• Item #4 of this form is not
  completed by the doc system. The
  underwriter will be required to
  enter this figure. This figure is
  taken from line B14 of the 203(k)
  Streamline Worksheet(HUD Form
  92700)

• Borrower(s) to sign and date

• Lender to sign, date and add title




                                       Sent out with Docs
Essex Mortgage
Initial Draw
Request

• Contractors Name
  List every contractor

• Dollar amount of check
  (not to exceed 50%)

• All borrowers and
  Contractors to sign & date

• Must be submitted Prior to
  documents
Rehabilitation Escrow
Account and Fees
Acknowledgment

•Underwriter to complete

•Verify with 203(k)                              This information
                                                 Is transferred
 rehabilitation worksheet                        from the final
                                                 203k worksheet
 (HUD Form 92700)

•Borrowers to sign with
 loan documents. This
 document should be
 dated the day docs are
 signed.


                            Sent out with Docs
         Funders Requirements
• Sign Rehabilitation Loan Agreement
• Sign Borrowers Acknowledgment
• Disbursements issued per Essex Draw Request
• Checks must be payable to Borrower and
  Contractor
• May release up to 50% of Rehabilitation not to
  exceed $17,500
            Streamline Disbursement
•   Up to 50% of the rehabilitation funds are disbursed immediately. Included with the
    disbursement is an instruction letter that explains how the final disbursement
    works.

•   A W-9 must be provided to set up the contractor in our system, and a two-party
    check is made out to the borrower and the contractor and sent to the borrower. If
    multiple contractors are being used, up to 50% of the cost of the repairs for each
    contractor is disbursed up front. (Complete Essex Initial Draw Request)

•   The balance is disbursed upon completion of all work. If the cost of the
    renovation is over $15,000, an inspection by the original appraiser is required. As
    with the rest of the rehabilitation process.

•   Streamlined FHA 203(k) has two disbursements; one initially disbursed at closing,
    and the second and final disbursement once all work has been completed.
       Repair Escrow Account

    The amount designated for repair and
   improvement, including the contingency
reserve, are deposited into an interest-bearing
 repair escrow account, insured by the Federal
    Deposit Insurance Corporation (FDIC).
QUESTIONS


  ?
                                  References
•   HUD references: HUD 203k Handbook 4240.4
    http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4240.4/index.cfm
•   203k Mortgagee letters: http://www.hud.gov/offices/hsg/sfh/203k/203kltrs.cfm
•   FHA 203k reference site: http://www.hud.gov/offices/hsg/sfh/203k/203kmenu.cfm
•   FHA Frequently asked questions: http://www.fhaoutreach.gov/FHAFAQ/
•   Contractors State License Board:
•   California:    http://www.cslb.ca.gov/
•   Nevada:             http://www.nvcontractorsboard.com/
•   Utah:               https://secure.utah.gov/llv/search/index.html
•   Washington:         http://www.lni.wa.gov/TradesLicensing/Contractors/HireCon/
•   Arizona:            http://www.azroc.gov/ContractorInfoMenu.html
•   All State Lookup:   http://www.crimcheck.com/resources/state-contractor-license-
    lookup.aspx

				
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