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EXHIBIT A LETTER OF UNDERSTANDING HOMEBUYER

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					                                              EXHIBIT A
                                      LETTER OF UNDERSTANDING
                               HOMEBUYER ASSISTANCE PROGRAM GUIDELINES

The HOME Investment Partnership Program (HOME) has given the City of Amarillo, Community
Development Department the ability to fund a HOMEbuyer Assistance Program (HB). The HOME
program is provided to the City of Amarillo annually from the U.S. Department of Housing and Urban
Development (HUD). Many families can afford a house payment but have difficulty paying the closing
costs and the down payment. The Community Development Department through the HOME program
and in cooperation with approved participating lenders will assist low to moderate-income homebuyers.
Four forms of assistance are available to qualified homebuyers:

     1. Down Payment and Closing Cost Assistance can provide up to 75% of the down payment and
        approved closing costs up to a maximum assistance of $5,000.00 per qualified homebuyer. The
        homebuyer must be at or below 80% of the median family income (MFI) for Amarillo. The
        assistance must result in a housing expense that does not exceed 40% of the homebuyer’s gross
        income.

     2. Principal Reduction Program can assist a homebuyer, at or below 60% MFI, with up to $15,000
        for a combination of down payment and 75% of reasonable and customary closing costs. The
        purpose of the Principal Reduction Program is to reduce the homebuyer’s housing expense to
        below 30%, but not less than 25% of their gross income and their total debt to loan ratio to 41%
        or less.

     3. Section 8 Homeownership Principal Reduction Program can assist a qualified City of Amarillo
        Section 8 homebuyer, at or below 50% MFI, with up to $20,000 for a combination of down
        payment and 75% of reasonable and customary closing costs. The homebuyer’s housing expense
        ratios will not be used to qualify. A Section 8 household must pay a minimum of 30% of their
        adjusted gross income at all times. Their total debt to income ratio cannot exceed 41%.

     4. American Dream Down Payment Initiative (ADDI) program can assist a “first time” homebuyer
        at or below 80% of the median family income of Amarillo. A “first time” homebuyer is an
        individual who has not owned a home during the 3-year period prior to purchase of a home with
        ADDI assistance. The assistance may not exceed the greater of 6% of the purchase price of a
        single-family housing unit or $10,000 for a combination of down payment and 75% of reasonable
        and customary closing costs. The assistance must result in a housing expense that does not exceed
        40% of the homebuyer’s gross income.

The Community Development Department will advertise the programs and refer interested families to
participating lenders. Families that qualify will be required to participate in homebuyer education
training that has been developed to assist families in finding a home they can afford, selecting a realtor,
loan information, budgeting, and home maintenance.

PARTICIPATING LENDERS

Lenders interested in participating in the HB Program must be located in Amarillo and offer mortgage
programs designed to assist lower income households. The City and each lender will enter into a Letter
of Understanding that establishes the roles and responsibilities of each party.



Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                                          Page 1 of 8
HOMEBUYER ELIGIBILITY

The homebuyer must meet the following eligibility criteria:

     1. The homebuyer must be a lower income household as defined annually by HUD according to
        income and family size. The City will provide the lender income limits annually. The homebuyer
        must have a gross annual income that does not exceed the median family income (MFI) for the
        Amarillo Metropolitan Statistical Area (MSA) as follows:

                a.    Down Payment and Closing Cost Assistance       at or below 80% MFI
                b.    Principal Reduction Program                    at or below 60% MFI
                c.    Section 8 Homeownership Principal Reduction    at or below 50% MFI
                d.    American Dream Down Payment Initiative         at or below 80% MFI

     2. The homebuyer may not own any real estate other than their principal residence that must be sold
        prior to or as part of homebuyer’s purchase of another residence under the HB Program.
        Exception: The ADDI program is for “first time” homebuyers who cannot have owned a home in
        the most recent 3 years.

     3. The homebuyer may have savings of 15% of the qualifying income level at 80% MFI or the total
        estimated down payment and closing costs at application which ever is less. Example: 15% of
        $35,850 (income level for family of 4 at 80% MFI) = $5,378. The estimated down payment and
        closing costs on the good faith estimated submitted with the application = $3,445. Maximum
        amount of savings allowed = $3,445 which is the lesser of the two amounts.

     4. The homebuyer must occupy the property as their principal and sole residence continuously for
        the required period of affordability as described below. This requirement will be secured by a
        separate promissory note and deed of trust between the City and the homebuyer.

                a. Down Payment and Closing Cost Assistance              5 years from funding date
                b. Principal Reduction Program
                        i. Up $7,499                                     5 years from funding date
                       ii. $7,500 to $15,000                            10 years from funding date
                      iii. $15,000 to $20,000                           10 years from funding date
                c. American Dream Down Payment Initiative                5 years from funding date

ELIGIBLE PROPERTY

     1. The property purchased must be an existing site-built property or a newly constructed site-built
        property with a certificate of occupancy. Newly constructed units are subject to site approval by
        the Community Development Department. The ADDI program may not be used for new
        construction.

     2. The property must be a site-built single-family dwelling that will serve as the homebuyer’s
        principal residence. Town homes and condominiums are also eligible property types. The
        property can be privately or publicly held and is not restricted to federal properties.

     3. The purchase price of the property must not exceed the FHA 203(b) mortgage limits for Amarillo.
        An appraisal of the property will be required. The City will provide lenders the mortgage limits
        as updated by HUD.
Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                                        Page 2 of 8
     4. To avoid displacement of persons, the property being purchased must be vacant at least 60 days
        prior to the closing, or must be occupied by the seller or buyer. The ADDI program does not
        require the 60-day waiting period.
     5. For existing units, the City must perform a pre-purchase inspection of the property selected for
        purchase. Housing units assisted under the HB Program must comply with the City’s locally
        adopted property standards and codes.
     6. For newly constructed property, documentation must be provided with the sales contract that the
        housing unit complies with all of the City’s codes and ordinances for residential construction,
        including the applicable energy codes. A certificate of occupancy is required prior to closing.

     7. Housing units assisted under the HB Program are subject to HUD regulations regarding the
        reduction of lead based paint (LBP) hazards in housing units built prior to 1978. The
        owner/seller of the property must provide all required LBP disclosure notices with the sales
        contract. These rules, at a minimum, require the following:

                a. visual assessment of paint conditions by City’s certified risk assessor or certified lead
                   inspector
                b. notifications and disclosures to the owner and the buyer
                c. appropriate correction or stabilization of deteriorated paint by a trained contractor and/or
                   trained workers hired by the seller or buyer
                d. clearance inspections by City’s certified risk assessor or lead inspector which includes a
                   visual inspection and if needed laboratory test of dust and soil samples taken from the
                   affected areas of the housing unit.

           The lender will notify the buyer and seller of their responsibility to pay the cost of the laboratory
           clearance testing at closing. The Community Development office will submit an invoice for the
           laboratory clearance testing to the title company for inclusion of the costs on the closing
           statement. The costs for samples sent to the laboratory under the City’s standard contract are
           eligible buyer costs. However, the costs to expedite samples to the laboratory are not eligible
           buyer costs and must be paid by the seller.

     8. City will send a letter itemizing the property standard deficiencies to the Lender. All deficiencies
        must be corrected and reinspected by City prior to closing. The City will reinspect the property
        when the deficiencies are corrected. Properties that do not pass inspection will not be eligible
        properties for assistance.

           When applicable, the city will also conduct a LBP clearance inspection and collect dust and soil
           samples for laboratory testing. City will issue a letter of compliance to the Lender that will
           include, when applicable, the test results from the LBP clearance tests. Lender will provide
           copies of the lead based paint clearance tests and notices to the buyer and seller prior to closing.
           Properties that do not pass LBP clearance testing will not be eligible properties for assistance.

     9. Ownership must be fee simple title, with the ownership interests subject only to mortgages, deeds
        of trust, or other debt instruments as approved.




Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                                               Page 3 of 8
PROCEDURES FOR PARTICIPATION

     1. A family interested in buying a home under the HB Program should apply for a mortgage with
        one of the participating lenders who will refer the homebuyer to the Community Development
        office as a candidate for the HB Program. A lender may pre-approve the homebuyer for a
        mortgage and make a referral for assistance. Acceptance into the HB Program will be on a first
        come, first served basis.

     2. The Community Development office will confirm the homebuyer’s eligibility and issue a Letter
        of Participation to the lender that will be valid for 120 days. The Letter of Participation will
        reserve the estimated assistance based on the limits of the Down Payment and Closing Cost
        Program; the Principal Reduction Program, the Section 8 Homeownership Principal Reduction
        Program or the American Dream Down Payment Initiative. A closing date for the purchase of the
        property must be scheduled within this 120-day period.

     3. The Community Development office will maintain a waiting list of eligible homebuyers. In the
        event a HB reservation of funds expires, the next eligible homebuyer on the waiting list will be
        considered for assistance.

     4. Homebuyers must complete a homebuyers education program sponsored by the lender or other
        community homebuyer education program. The education program must, at a minimum, address
        issues such as: loan qualifications, selection of a realtor, selection of a home, household budgets,
        and home maintenance. Those homebuyers participating in the Section 8 Homeownership
        Program must comply with the homebuyer education requirements for that program. The
        homebuyers participating in the Principal Reduction and ADDI programs must complete a
        homebuyer education seminar provided by a HUD approved instructor with a minimum
        classroom time of 4 hours.

RESTRICTIONS ON MORTGAGES

     1. The City will not participate in loans with a non-occupant co-borrower or a co-signer.

     2. The maximum allowable interest rate to be charged on the first lien by the participating mortgage
        lender can not exceed the higher of the FNMA or FHLMC posted yields on 30 year mortgage
        commitments for delivery within 60 days plus a margin of 1.0%. FNMA/FHLMC Expanded
        Programs will be allowed a margin of 2.0% with acceptable program verification provided to the
        City by the lender.

     3. Lenders may submit their criteria for in-house programs for households that do not fall within the
        guidelines of the secondary market. Approval of such programs is solely at the discretion of the
        Community Development Department. If approved, the lender may be allowed to exceed the
        1.0% margin but no more than the 2.0% margin for interest rates. Additional requirements may
        be established if the program is approved. Additional requirements may include but are not
        limited to 1.) copy of secondary market underwriting rejection, 2.) copy of signed in house
        approval and 3.) completion of a homebuyer education seminar provided by a HUD approved
        instructor with a minimum classroom time of 4 hours.

     4. A copy of the interest rate lock in form will be required from the lender when the interest rate is
        locked in with the lender or the investor. The interest rate will be established on the day the loan

Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                                           Page 4 of 8
           is locked in. Homebuyer referrals with interest rates that exceed the maximum allowed interest
           rate will be rejected.

     5. A participating lender cannot charge discount points unless the fee is used to reduce the
        homebuyer’s interest rate. The lender must provide acceptable documentation to the City for
        approval before a discount point can be charged.
     6. The mortgage loan housing payment must include taxes, insurance and mortgage insurance. The
        program will not provide assistance if the escrows are not included in the payment.

SUBROGATION AND REFINANCING

At times during the affordability period, it may be advantageous for a homebuyer to refinance the existing
first mortgage. The City may not require the HB Program lien to be repaid at the time of the refinance if
the following documentation is submitted. The City must approve the refinance terms and conditions
prior to closing. The homebuyer must benefit from the refinancing transaction. The resulting interest rate
must be lower than the original loan and the payment and/or term must be lower. Home equity loans and
cash advances are not allowed.

The request must include the submission the following documents:

     a. Loan application for the refinancing
     b. Good faith estimate
     c. Written statement from current mortgage company showing the payoff amount and current
        payment for principal, interest, and escrows.
     d. Acknowledgment of Mortgage Loan Refinancing signed by the homebuyer and the lender

Closing on the refinancing can take place after the City reviews and approves the promissory note, the
renewal and extension of the deed of trust, and the final HUD-1 closing statement. The City’s HB
Program lien must be reflected on the deed of trust renewal and extension.

RECAPTURE PROVISIONS

In the event the homebuyer sells the property assisted with HOME funds within the required period of
affordability, the City will recapture the HB assistance from the net proceeds of the sale. The amount
subject to recapture will be reduced proportionately based on the time the homebuyer has owned and
occupied the property. In the event the net proceeds are not sufficient to recapture the amount due, the
amount of the HB assistance to be repaid to the City will be based on shared net proceeds from the sale.

The definitions and formulas that apply to recapture are explained below:

Net Proceeds                          Sales price minus the mortgage loan pay off amount.

Shared Net Proceeds                   A proportional distribution of net proceeds between the City and the
                                      homebuyer.

Shared Proceeds Formula                    HOME Assistance divided by the HOME Assistance plus the homebuyers
                                           share of the down payment and closing costs equals the proportion of
                                           HOME assistance. This amount is multiplied times the net proceeds to
                                           determine the amount of funds to be shared with the City and the
                                           homebuyer.
Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                                               Page 5 of 8
The following are examples of the recapture scenarios:

     1. A homebuyer received $4,668 from the HOMEbuyer Assistance Program as 75% of the down
        payment and closing costs on the purchase of the $77,000 home. The cost to the homebuyer was
        $1,556. The homebuyer lives in the home for 3 years and decides to sell the property and repay
        the City. The sales price is $87,000. The loan payoff is $72,500. The net proceeds are $14,500.

                a. The amount due in repayment is calculated as follows:
                       i. Credit for time lived in the property             $4,668 x 36/60 months or 0.6
                      ii. Amount to be recaptured                           $2,801

     2. A homebuyer received $3,119 from the HOMEbuyer Assistance Program as 75% of the down
        payment and closing costs on the purchase of the $58,000 home. The cost to the homebuyer was
        $1,040. The homebuyer lives in the home for only 1 year and decides to sell the property. The
        sales price is $59,000. The loan payoff is $57,280. The net proceeds are only $1,720.

                a. The amount due in repayment is calculated as follows:
                       i. Credit for time lived in the property             $3,119 x 12/60 months or 0.2
                      ii. Proportional amount to be recaptured              $2,495

                b. In this case the City and the homebuyer will share the net proceeds as follows:
                         i. $3,119/ ($3,119 + $1,040) = 0.75
                        ii. $1,720 x 0.75 = $1,290 in HOME funds recaptured
                       iii. $1,720 - $1,290 = $430 to dispersed to the homebuyer.

Should the homebuyer fail to occupy the property as their principal residence within 60 days after closing
or after occupying the property as homebuyer’s principal residence, fails to occupy the property as
homebuyer’s principal residence any time during the required period of affordability, the homebuyer will
be in non compliance. At that time, the City will recapture the entire amount of the HB assistance. In
addition, if the homebuyer sells the property without notice to the City, the City will recapture the entire
amount of the HB assistance.

The recapture provisions will be secured by a personal promissory note and related deed of trust in the
format prescribed by the City. The City’s deed of trust will be subordinate to the Lender’s mortgage deed
of trust. In the event the homebuyer defaults on the promissory note, the City will seek a personal
judgment against the homebuyer/borrower. The City will monitor homebuyer compliance annually.

The homebuyer will be allowed a grace period of 90 days from the date of vacating the property to the
date of closing on the sale of the property to remain eligible for proration and/or shared proceeds.
Homebuyer must provide documentation to verify the date the home was listed for sale and placed on the
market. (i.e. newspaper ad, listing agreement, etc.) Once this grace period is exceeded, the City will
recapture the entire amount of the HB assistance as the HB will be in noncompliance. This grace period
is only available to homebuyers who submit proper documentation.


Example:

     HB moves out of property 1/15/06 and closes on sale 4/25/06. The property has been vacant is for
     100 days therefore the grace period is not longer in effect. The HB is considered noncompliant and
     the entire amount of the HB assistance will be recaptured.
Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                                             Page 6 of 8
     HB moves out of property 1/15/06 and closes on sale 3/01/06. The property has been vacant for 45
     days and the HB assistance will be prorated and/or shared proceeds will be applied. The HB is
     considered in compliance.

RELEASE OF LIEN

Upon satisfactory completion of the required period of affordability, the City will prepare and record a
release of lien. The recorded release will be mailed to the homebuyer. The City will maintain a copy of
the recorded release in its document imaging system.

TYPE AND PAYMENT OF ASSISTANCE

The HB Program will assist lower income families by offering one of three types of deferred payment
loans to the homebuyer. The HB assistance will consist of the applicable down payment and 75% of the
approved closing costs depending upon the lender’s underwriting requirements for the mortgage loan

     Down Payment and Closing Cost Assistance can provide up to 75% of the down payment and
     approved closing costs up to a maximum assistance of $5,000.00 per qualified homebuyer. The
     homebuyer must be at or below 80% of the median family income (MFI) for Amarillo. The
     assistance must result in a housing expense that does not exceed 40% of the homebuyer’s gross
     income.

     Principal Reduction Program can assist a homebuyer, at or below 60% MFI, with up to $15,000 for a
     combination of down payment and 75% of reasonable and customary closing costs. The purpose of
     the Principal Reduction Program is to reduce the homebuyer’s housing expense to below 30%, but
     not less than 25% of their gross income and their total debt ratio to 41% or less.

     Section 8 Homeownership Principal Reduction Program can assist a qualified City of Amarillo
     Section 8 homebuyer, at or below 50% MFI, with up to $20,000 for a combination of down payment
     and 75% of reasonable and customary closing costs. The homebuyer’s housing expense ratios will
     not be used to qualify. The Section 8 household must pay a minimum of 30% of their adjusted gross
     income at all times. The total debt to income ratio cannot exceed 41%.

     American Dream Down Payment Initiative (ADDI) program can assist a “first time” homebuyer at or
     below 80% of the median family income of Amarillo. A “first time” homebuyer is an individual who
     has not owned a home during the 3-year period prior to purchase of a home with ADDI assistance.
     The assistance may not exceed the greater of 6% of the purchase price of a single family housing unit
     or $10,000 for a combination of down payment and 75% of reasonable and customary closing costs.
     The assistance must result in a housing expense that does not exceed 40% of the homebuyer’s gross
     income.

Approved closing costs may include, but are not limited to, the survey, appraisal, title insurance,
inspection fees, application and recording fees, and credit reports at cost. Reasonable and customary
prepaid costs and origination fees are eligible closing costs.

Payment of the final approved amount will be made to the title company at closing upon receipt of
instruction from the title company. Lenders and title companies should anticipate three days for the City
to process a payment.



Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                                         Page 7 of 8
ATTACHMENTS

The following documents referenced in the Exhibit A are included as attachments.

     1.    City of Amarillo Promissory Note
     2.    City of Amarillo Deed of Trust
     3.    Release of Lien
     4.    Request for Refinancing of Existing First Mortgage Loan
     5.    Notice to Real Property Owner/Seller
     6.    Notice to Home Buyers Pre-Inspection Disclosure
     7.    Notice to Buyer and Buyer’s Affidavit of Occupancy as Primary Residence



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Exhibit A to the Letter of Understanding
Revised January 30, 2009                                                             Page 8 of 8

				
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