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					                    “The
                    Right
            Alternative”
 Tan Johnson, Regional Trainer



The Myths & Fallacies of
 Government Lending
Introduction

The “The Right Alternative” is designed to
break down barriers and empower Mortgage
Bankers to economic excellence by introducing
government lending as the financing
alternative of choice; while providing increased
homeownership opportunities to the general
population.




                                               2
Lender Misconceptions
Have you heard or said this before?
 “I’m not making government loans, they’re too hard
  and too much trouble.”
 “You can’t get a government loan closed in less than
  60 to 90 days, my borrowers can’t wait that long.”
 “My realtors don’t like them!”
 “Doesn’t it take forever to get approved to make
  government loans?”
 “I don’t need government loans in my market.”


                                                     3
Government Loan Programs

 FHA
 VA
 Rural Development




                           4
Dispelling Common FHA Myths
Myth: Takes more time processing
Truth:
   Takes no more time than a conventional loan
   TOTAL Scorecard/AUS approval allows completion of
    loan in the amount of time it takes to get the
    appraisal

Myth: More paperwork
Truth:
   Requires on additional document signed by the
    borrower at application
   Program specific disclosures                        5
Dispelling Common FHA Myths

Myth: Higher costs

Truth:
   Rates competitive with the best in the
    industry
   Streamlined loan process




                                             6
Dispelling Common FHA Myths
Myth: FHA is too restrictive and the borrower can’t
pay certain loan costs or fees
Truth: The borrower-loan proceeds, may pay all
reasonable and customary charges
   FHA provides guidelines for underwriting just as industry
    investors
   FHA allows for manual underwriting for all loan programs
    and AU Systems
   FHA eliminated the non-allowable closing cost fee schedule
    (ML 06-04, 06-07)
   Tax Service Fee is the only fee that the borrower is not
    allowed to pay
                                                                 7
Information Highway

                                             TAS
                                             ACE
                                    VA


                                              Rural
                                           Development
  Manual
Underwriting                        FHA
               Government Lending
                                            HUDCLIPS
                                          FHA Connection



                                                      8
FHA On-Line Resources
FHA Headquarters:                                Home Ownership Centers:
http://www.hud.gov                               Atlanta HOC:
Mortgagee Letters:                               http://www.hud.gov/local/atlhoc.html
http://www.hud.gov/offices/hsg/mltrmenu.cfm
                                                 Philadelphia HOC:
Lenders Page:                                    http://www.hud.gov/local/philoc.html
http://www.hud.gov/groups/lenders.cfm
                                                 Denver HOC:
FHA Connection:                                  http://www.hud.gov/local/denhoc.html
http://www.hud.gov/offices/hsg/connect.cfm
                                                 Santa Anna HOC:
Maximum Mortgage Limits:                         http://www.hud.gov/local/sanhoc.html
https://entp.hud.gov/idapp/html/hicostlook.cfm
Handbooks and Forms:
http://www.hudclips.org/cgi/index.cgi

FHA Resource Center:                             AND DON’T FORGET:
http://answers.hud.gov

                                                          www.fha.gov

                                                                                        9
VA On-Line Resources
VA National Site:               http://homeloans.va.gov/ls.htm


VA Forms:                      http://www.va.gov/vaforms/


Veterans Information Portal:    http://www.homeloans.va.gov


ACE Automated Cert. of          https://vip.vba.va.gov/portal/VBAH/Home
Eligibility:




                                                                          10
RD On-Line Resources

National Rural Development
http://www.rurdev.usda.gov/

RD Administrative Notice:
http://www.rurdev.usda.gov/regs/anlist.html

Income Eligibility:
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do




                                                                   11
                       FHA
Federal Housing Administration
Federal Housing Administration (FHA)

 Federal Housing Administration (FHA)– 1934
   U.S. was a nation of renters only 40% homeownership
   Today, largest insurer of mortgages in world
      $4.8 m insured single-family & 13,000 multi-family

 HUD – Dept. of Housing and Urban Development –
  1965 regulates Federal Housing Administration
 HUD’s Mission:
   To increase homeownership, support community
    development and increase access to affordable housing free
    from discrimination.


                                                             13
 Benefits of FHA Lending

To Borrowers:                           To Mortgage Bankers:
 No income restrictions                 Expanded borrower markets
 3% borrower contribution                for Originators
 Maximum financing with                 Little or no borrower funds to
  Down Payment Assistance                 verify
  Programs
                                         Automated Underwriting
 Credit scores not required*             available for initial borrower
 No credit or less than                  assessment
  perfect credit borrowers may
  qualify                                On-line processing
                                          capabilities through
 Appraised value may be                  http://www.hud.gov and
  exceeded by Energy Efficient            http://www.fha.gov
  Improvements
  *Some investors impose rate bps for    Bottom line – increased
  credit scores.                          revenues for originators
                                                                           14
Loan Comparison

Conventional                      FHA
 Sales Price          $211,000    Sales Price         $211,000
 Loan Amount          $200,450    Loan Amount         $206,252
 Down Payment         $10,550     Down Payment        $4,748
 Interest Rate        6.25%       Interest Rate       6.25%
 Credit Score         640         Credit Score        640
 YSP (100.968 bp) $2,023          YSP (102.779 bp) $5,732
   P&I          $1,234.21            P&I          $1,269.93
   MI           $   160.36           MI           $   85.94
   Total        $1,394.57            Total        $1,355.87

                                                                 16
                  VA
Veterans Administration
Veterans Administration (VA)

 VA Home Loan Guaranty program
  established 1944 to recognize Veterans and
  their families for services to their countries
  during wars
 April 2006 – VA reached a new milestone of
  $18 million guaranteed home loans totaling
  over $562 B
 VA’s mission:
   To help Veterans and active duty personnel
    purchase and retain homes in recognition of their
    service to the Nation.
                                                    18
Benefits of VA Lending
To Borrowers:                   To Mortgage Bankers:
 100% Financing
                                 Expanded borrower markets
 Sellers can pay all or most     for Originators
  of the closing costs and
  prepaids                       Little or no borrower funds
 VA borrowers are protected      to verify
  from paying certain fees
  referred to as “Non-           Automated Underwriting
  Allowable” fees                 available for initial borrower
 Loans are assumable with        assessment
  credit qualification
 Reduced processing times –
  from application to closing
  no more than 30 days or
  less average

                                                                19
Benefits of VA Lending

To Borrowers:                  To Mortgage Bankers:
 No monthly mortgage           On-line processing capabilities
  insurance premiums             through The Appraisal System
  collected                      (TAS) and Automated
 Borrowers may use benefits     Certificate of Eligibilities (ACE)
  more than once                Lenders underwrite loans
 Maximum loan amounts          Bottom line – increased
  Freddie/Fannie limits          revenues for originators
 Loan may exceed value by
  cost of energy
  improvements


                                                                20
Did you remember?

   FHA & VA loans may be submitted through
    DU and LP for automated analysis
   Generate all necessary forms from LOS
   Retrieve Certificate of Eligibility for VA and
    FHA eligibility processing using on-line
    resources
   Order Appraisal & Case No. on-line
   Be originated, locked and closed within 30
    days
                                                     21
            RD
Rural Development
Rural Development Overview

 The Section 502 Guaranteed loan program is
  intended to provide low- and moderate-income
  families and individuals with the opportunity to
  acquire, build, rehabilitate, improve or relocate
  dwellings in rural areas.
 The standard term for a Section 502 loan is 30
  years.
 Each loan is made at a note rate established by the
  Agency under § 501 of the Housing Act of 1949, as
  amended, and outlined in RD Instruction
    Payment subsidies are available to some borrowers to
     reduce monthly loan payments.
                                                            23
Benefits of RD Lending

To Borrowers:                  To Mortgage Bankers:
 102% LTV                      Community Reinvestment
 No Mortgage Insurance          Act (CRA)
 30 Year Fixed Rate            Minimal funds to verify
 Partner with other Funding    Saleable to Secondary
  Sources                        Market
 No Loan Limit                 Lender Profitability
 Fees & Repairs may be
                                Guaranteed by Government
  Financed
 Unlimited Gifts or Seller     Expand Market Share
  Contributions                 Lender Underwrites Loan
 No Reserves Required

                                                           24
The Right Alternative?
              FHA, VA, RD
  Loan Comparisons
Product Details               VA                    FHA                    RD


Occupancy /            Owner Occupancy        Owner Occupancy       Owner Occupancy
Property Type         Primary Residence      Primary Residence      Primary Residence

LTV/TLTV                   103.30%                97% LTV                 102%
                                                100% (CLTV)
Secondary Financing           NA               Down Payment                NA
                                                 Assistance,
                                               Affordable 2nds
Borrower                 No borrower                 3%                No borrower
Contribution             contribution                                  contribution
                           required                                      required
Loan Purpose          Purchase; Rate/term    Purchase; Rate/term    Purchase & no-cash
                      Refinance & Cash-out   Refinance & Cash-out      out refinance
                           Refinances             Refinances

Seller Contribution      Typical of area       6% plus 3% for           Unlimited
                        Plus 4% for Seller     Down Payment
                      concessions above CC       Assistance
                           & Pre-paids                                                27
Loan Comparison

Product Details          VA                FHA                 RD



Eligible           15 and 30 Fixed   15 and 30 Fixed
                                                         30-Yr Fixed only
Mortgages          and Adjustable    and Adjustable

                                      Submit to LP
Required            Submit to LP
                                         except            Manual UW
Underwriting        except IRRRL
                                      Streamlines


Income Limits           None              None                 Yes


                       41% +          31% / 43%
                                                           29% / 41%
Ratio Guidelines   Residual Income    33% / 45%
                                      Energy Efficient
                                                                       28
Loan Comparison
Product Details            VA                   FHA                  RD


Education/                                                     Required in most
                      Not Required          Not Required
Counseling                                                          states

                                            Allowed on
                                          Purchase loans
Temporary                                 with fixed rates
Subsidy                  Allowed          only. Borrower        2-1-0 allowed
Buy-downs                                 qualifies at note
                                           rate not “buy
                                            down” rate

                                                                 US citizen or
                    Veterans or Active   US Citizens, Perm &
                                                                 admitted for
Eligible Borrower    Duty personnel      Non-perm resident
                                                                  permanent
                        with COE                aliens
                                                                   residency


Reserves              Not Required          Not Required        Not Required
                                                                                 29
Loan Comparison
Product Details         VA                FHA                 RD


                   FNMA/FHLMC        95% Median Home
Loan Limits                           Price or 87% of        None
                                       FHLMC Limits

Mortgage
                       None            .50 monthly           None
Insurance

                  2.15% (1st use)
Guaranty Fee           3.30%          1.5% (UFMIP)        2.0% (GF)
                  (Subsequent use)


                  All funds may be   All funds may be   All funds may be
Gifts                   gifted             gifted             gifted

Secondary
                        N/A              Allowed              N/A
Financing
                                                                       30
Compare Cost to Insure

  $8,000
  $7,000
  $6,000
  $5,000
  $4,000
  $3,000
  $2,000
  $1,000
     $0
              FHA         *FNMA                 VA     RD
           $6,500        $7,560             $2,150   $2,000
                    *30% Level Monthly MI Coverage
              10 Year Cost To Insure $100,000 Loan
                                                              31
How do I sign up?
FHA Approval Process

 Mortgage Banker may be approved as independent
  lenders or as Agents for Lender Sponsors.
 Complete agency application packet
    Submit to agency directly
    Sponsoring Lender who submits to agency on
     your behalf
 Initial application fee is $1,000
    Annual recertification fee of $500 plus
    $200 for each FHA approved branch
     http://www.hud.gov/offices/hsg/sfh/lender/title2ap.cfm
                                                              33
VA Approval Process
 Mortgage Bankers may be approved as
  independent lenders or as Agents for Lender
  Sponsors.
 Complete agency application packet
   Submit to agency directly
   Sponsoring Lender who submits to agency on your
    behalf
 Initial application fee is $100
   Annual recertification fee is $200 per lender plus
   $100 annual renewal fee for each lender agent
                                                                   34
   http://www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch01.doc
Rural Development Approval

Single Family Housing Guaranteed Loan program:
 Complete agency application packet
 Lenders already approved by:
    HUD for application submission to Federal Housing
     Mortgage Ins. or an issuer of GNMA mortgage backed
     securities
    The Veterans Administration as a qualified mortgagee
    Fannie Mae for participation in family mortgage loans &
    Freddie Mac for participation in family mortgage loans
    Any State housing agency
 Any FCS (Farm Credit System) institution with direct lending
  authority
                                                                 35
Benefits of Government Lending

With Government loans in your arsenal of mortgage
products, Mortgage Bankers are empowered to
promote and provide homeownership opportunities to
potential borrowers that may not have otherwise been
in a position to buy their own home.




                                                   36
“We put real life into the classroom”


FHA/VA/RD                                                        What you get for your

Government Workshop                                               time:
                                                                 Instructions from
                                                                  some of the best
 Curriculum provides an introduction to FHA/VA/RD lending from    technicians in the
 application to closing. Course includes the most up-to-date      industry
 government underwriting/approval requirements.                  Advanced marketing
                                                                  techniques
 Course length 2-days classroom training                         Real life situations,
                                                                  scenarios and
                                                                  examples
 For more information on the government workshop and/or other
          mortgage classes, email Info@espleez.com.              An edge over your
                                                                  competitors




                                                                                          37
   For More Information
          Contact:
       Elizabeth Deal
       ICBA Mortgage
      1615 L Street NW,
          Suite 900
   Washington, DC 20036
  Phone: (800) 253-5356
Email: elizabeth.deal@icba.org




                                 38

				
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