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									                                   FNMA REHAB PROGRAM
                       (Colonial’s Version of the FNMA Homestyle Program)

Program Guidelines: Conforming loan amounts only. Minimum loan amount $50,000. All
                    FNMA Homestyle guidelines per the Seller/Servicer Guide apply in addition to
                    any Colonial program overlays.

Eligible Properties:    One-to-four-family owner-occupied principal residences. Second homes and
                        investments properties, single-family only.

Maximum LTV’s:          Owner-occupied: 1-unit 90% 2- 4 unit 75% Second Homes 80%
                        Investment Property 70%
                        No second liens or assistance programs allowed.

Purchase Rehab:         The LTV for a Purchase transaction is calculated from the LESSER of the
                        purchase contract plus the cost of rehab and required 10% contingency or
                        the “as- completed” appraised value.

Refi Rehab:             The LTV for a refinance transaction is calculated from the “as-completed”
                        appraised value. The loan cannot be greater than the total of current debt
                        plus the cost of the rehab, required 10% contingency and allowable closing
                        costs. No cash back to borrower.

Loan Terms:             15 & 30 year Fixed rates ONLY (No balloons; No ARMs; No Interest-only).

Pricing:                 Use regular FNMA pricing for fixed rate loans.

MI Requirements:        85.01 to 90%; 30% coverage
                        80.01 to 85%; 25% coverage

Rehab limitations:      Maximum 50% of the “as-completed” appraised value. No minimum amount.
                        No work started prior to closing. Rehab solely for foundation work is not
                        permitted.    Any foundation repairs may require a licensed foundation
                        contractor. Other underwriting requirements may apply, i.e. structural
                        engineer’s report.

                        Completion Date: The renovations must be completed within six (6)
                        months. A 30 day extension fee of $750 will be charged to borrower for
                        non-completion. An additional $750 will be charged for each additional 30
                        day extension.

                        Any additional work other than that stated in the rehab contract(s)
                        must be completed at the time of the final inspection report by the
                        appraiser. A final appraisal report cannot be obtained if the property
                        is incomplete and the borrower may be subject to penalty fees until
                        all work is satisfactorily completed and inspected by the appraiser.

                        Do-it-yourself Projects. Maximum LTV of 75%.

                        “Do-it-yourself” borrower projects are allowed under the Colonial
                        program only to the extent allowed under the FNMA Homestyle
                        program. Under Fannie Mae’s “Do It Yourself” repair option, which is

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                 available for one-unit properties only, the borrower may complete
                 repairs that the lender reviews and approves in advance.

                 Do It Yourself repairs may not represent more than 10% of the “as
                 completed” value of the property; the lender must inspect the
                 completion of all repair items that cost more than $5,000. A
                 borrower may request reimbursement for his or her payments for
                 the cost of materials or for the cost of properly documented contract
                 labor, but not for the cost of his or her sweat equity.

                 When a borrower chooses this repair option, the lender must fully
                 budget for the cost of labor and materials related to the repairs so
                 that, should the borrower be unable to complete the work, a
                 contractor can be hired to finish any of the Do It Yourself repairs.

                 Owner/contractor projects fall under Do It Yourself guidelines.

                 No Modification of Loan Amount. The loan amount may not be modified
                 to change the balance based on change orders or increases to the
                 construction contract.

                 Renovation Escrow Account. Funds for renovation will be placed in an
                 insured, interest-bearing account with Colonial Savings. Interest accrued
                 from this account will be paid to borrower at completion of improvements.
                 Any unused remaining funds may be applied to reduce the principal balance;
                 however, the loan payments will remain the same. No funds may be paid to
                 the borrower as cash-out.

Contractor:      All contractors must submit a Contractor Questionnaire, be accepted by CNM
                 for the program and provide a W-9. Contractors must be licensed and/or
                 registered as required by individual state and/or local guidelines.      All
                 contractors must meet credit and reference guidelines as established from
                 time to time by Construction Loan Committee and in accordance with FNMA
                 HomeStyle guidelines.

                 A Social Security number for the business principal is required for all
                 business organizations except corporations. The Social Security
                 number will be used to obtain a current credit report to assist in
                 determining the financial stability of the contractor. The Contractor
                 Questionnaire must be filled out and signed by the business
                 principal and include vendor and homeowner references related to
                 the proposed project(s). The proposed borrower is not considered
                 an acceptable reference.

                 The contractor (individual or entity) named on the rehab
                 construction contract must be identical to the contractor (individual
                 or entity) accepted by Colonial for the program, unless a registered
                 dba name can be verified of record.

                 Multiple Contractors: Borrower may use more than one contractor,
                 but no more than three (3) contractors. Additional charges may
                 apply for doc prep and construction administration.     Contact
                 Construction Lending for additional fee quote.

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                          Texas loans require all contractors to sign mechanic’s lien
                          documentation for the total amount of the project.      Multiple
                          mechanic’s lien contracts must cover the entire rehab amount for
                          the project.

Underwriting:             Under FNMA Homestyle conventional mortgage guidelines, a 10%
                          contingency is required. Loan must receive an Approve/Eligible finding
                          through DU (EA approvals are not permitted)

Closing:                  There is a 3-day rescission period on all refinance transactions and applicable
                          to the rehab portion of the loan on Texas purchase transactions. Locks must
                          cover the 3-day rescission period.

Minimum FICO:             Primary Residence       660
                          Second Homes            660
                          Investor Properties     680

Eligible States:          Texas, Oklahoma, Colorado, Louisiana

FEES – These fees are in addition to any Branch fees.

    Construction Fee      (Fees Line 830)         $ 500 – Pools (3 draws maximum)
                                                  $ 500 – Improvements to $30,000 (3 draws
                                                  $1000 – Improvements over $30,000
    Closing Fee           (Fees Line 831)         $ 300 - Add $50 for each additional contractor
    Underwriting Fee      (Fees Line 810)         $ 200
    Doc Prep Fee                                  $ 275 - Add $50 for each additional contractor
    *Final to Appraisal   (Fees Line 808)         $ 200
    *Inspections          (Fees Line 832)         $ 100 each Texas/$135 each outside Texas (3 Min.)
    **Survey:             (Fees Line 1303)
        Non-Acreage:                              $ 700 or actual cost for all required surveys
        1-10 Acres:                               $1000 or actual cost for all required surveys
        Over 10 Acres:                            $1400 or actual cost for all required surveys



Note: Any fees not properly disclosed on the GFE and/or exceeding acceptable fee
increase guidelines require re-disclosure to the borrower or, if not re-disclosed, will be
charged to the originating branch as cost to cure.

* Fees exceeding amounts collected at closing will be billed to the borrower.

** An amended final survey may be required showing any improvements made to the Property after
closing that would change or add to the location of any improvements including, but not limited to,
any housing additions, fences, garages, car ports, driveways, pools, walkways, etc. Only an initial
survey is needed if the improvements are only to the interior of the Property.

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Step by Step

Contractor Questionnaire: A general contractor should be designated for the construction
project. The general contractor must complete a Contractor Questionnaire. Forward a complete
Questionnaire to the Construction Lending Department. Contractors must be registered or licensed in
accordance with applicable state laws. Multiple contractors may be allowed (no more than 3) on a
case-by-case basis. All contractors must provide completed Contractor Questionnaire and W-9 tax

Home Renovation Check List: To be completed by Borrower and Builder.

Agreed Budget: An Agreed Budget must be completed with a copy provided to the appraiser with
contract, plans, and specs detailing work to be done. Borrower and Contractor must sign the Agreed
Budget to acknowledge final and complete contract, plans, specs, and Agreed budget including 10%

Contingency fund of 10%: A Contingency Fund of 10% of the improvement contract must be
added on all jobs to allow for future upgrades or change orders. Make sure this contingency plus any
allowable closing costs to be financed is included in the final numbers.

Appraisal: Appraisal to be subject to improvements as defined in Contract, Home Renovation
Check List, Plans, Specs and Agreed Budget. Improvements cannot be greater than 50%
of the as improved appraised value. Appraiser must reference the existing condition of the
property and specify the work to be done in detail. The details should match the Contract, Home
Renovation Check List, Plans, Specs, and Agreed Budget. Appraiser must also reference if this “is” or
“is not” an over-improvement to the area, and provide documentation (comps) to support the
statement. Appraiser to include drawing of proposed additions, with new square footage or stories
shown in dashed, shaded or dotted outlines.

Underwriting: Send loan to Underwriting Department with FNMA Rehab Worksheet, Agreed
Budget, Home Renovation Checklist, Contractor Questionnaire and FNMA Rehab Program
Notice at top of file. File will not be underwritten without Worksheet, Agreed Budget, Home
Renovation Check List, Contractor Questionnaire and FNMA Rehab Program Notice.

Copy file to be sent to Construction Lending when submitted to Underwriting.

Closing: Closing will be done through the Construction Lending Department with documents prepared
by PiersonPatterson. Borrower will pay per diem interest and full PITI same as any loan. Refi Rehabs
will require a three day right of rescission. In Texas, closing documents must be available for the
borrower to review one business day prior to closing per House Bill 740.

Construction Lending requires 48 business hours to prepare loan closing documents once
all closing documentation is received from the Branch. The following documents must be
provided to Construction Lending before closing documents can be ordered:

Title Commitment
Insured Closing Letter
Wiring Instructions
Tax Certs
Hazard Insurance and Flood Insurance, if applicable
Survey, if applicable
Closing Information Sheet completed by Branch

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NO Cash-out: Borrower’s closing statement cannot show cash to Borrower.

Draws: Draws will be wired by Lender to Contractor.       Draw requests must be signed by both
Borrower and Contractor before submitting to Lender.

Completion: All improvements per original plans and specs must be completed in 6 months from
closing. A 30 day extension fee of $750 will be charged to Borrower for non-completion. An
additional $750 will be charged for each additional 30 days.

Contractor Questionnaire

       To be completed by contractor. Include with the Borrower’s credit package.

FNMA Rehab Worksheet

       To be completed by loan officer. Compete and submit with your loan package.

Home Renovation Check List

       To be completed and signed by both Borrower and Contractor. Include as an attachment to
       the appraisal.

Agreed Budget

       This is a template of a detailed itemized description of work to be contracted. This Agreed
       Budget will be used by the inspector prior to each draw. Borrower / Contractor agree that
       draws will be requested only after the line item description has been completed. A Draw
       Request will be deemed a warranty and promise by the signing party that said itemized line
       item has been completed according to the original contract submitted by Owner and
       Contractor and “as improved” appraisal. Draws will not be made in advance of the work
       completed. Lender will not fund greater than any line item cost except through contingency.
       Any items not covered by contingency must be paid in cash by Borrower.

FNMA Rehab Program Notice

       To be completed and signed by both Borrower and Contractor.          Submit with your loan

Draw Request Form

       The contractor will use this form to fax in draw requests to Lender. Draw requests must be
       signed by both Borrower and Contractor.

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