Transcription

1 REALTOR TRAINING COURSE DELAWARE STATE HOUSING AUTHORITY FIRST TIME HOME BUYER RESOURCES

2 AGENDA Welcome: Delaware State Housing Authority (DSHA) History Organization Mission Funding Sources Products Eligibility Common misconceptions Marketing DSHA and Lender Convert knowledge into action Benefits Procedures Funding Source: Tax exempt bonds Internal Revenue Service (IRS) guidelines

3 OVERVIEW Who is DSHA? Mission Organization

4 MISSION STATEMENT Our mission is to efficiently provide, and to assist others to provide, quality affordable housing opportunities and appropriate supportive services to responsible low- and moderate- income Delawareans.

5 ORGANIZATIONAL STRUCTURE Administration Asset Management Community Development & Planning Community Relations Development Director s Office Housing Finance Housing Management

6 BENEFITS Homebuyers Lenders Realtors Communities Others

7 BENEFITS Homebuyers Attractive terms Expanded affordability Safe product

8 BENEFITS Lenders Competitive loan product Resources for Closing Costs and Down Payment requirements Stream of referrals

9 BENEFITS Realtors Powerful marketing tool Larger prospect base Motivated referral source

10 TV Billboards DSHA - MARKETING Homebuyer seminars Community housing agencies Public workshops Radio Word of Mouth Online at:

11 HOUSING FINANCE PRODUCTS Single Family Mortgage Revenue Bond (SFMRB) Second Mortgage Assistance Program (SMAL) Live Near Your Work

12 HOUSING FINANCE PRODUCTS Single Family Mortgage Revenue Bond Also known as: First Time Home Buyers Program Bond Program

13 SINGLE FAMILY MORTGAGE REVENUE BOND PROGRAM DSHA issues Mortgage Revenue Bonds. Tax-Exempt bonds Attractive to Investors Revenue is used to provide mortgage dollars through participating lenders.

14 ELIGIBILITY CRITERIA Borrowers Property Mortgage Product

15 BORROWER ELIGIBILITY Household Income First Time Home Buyer Status Owner Occupant Utilize Participating Lender

16 HOUSEHOLD INCOME LIMITS Non Targeted Household Size County 1 or 2 Persons 3 or More Persons New Castle $77,800 $89,470 Kent & Sussex $70,800 $81,420

17 PURCHASE PRICE LIMITS Non-Target Areas County SFMRB New Castle $378,000 Kent $338,625 Sussex $337,500

18 FIRST TIME HOME BUYER Definition: No Ownership of Principal Residence in Past 3 Years Exceptions: Qualified Veterans Targeted Area Buyers Note: Ownership of a mobile home does not disqualify if: On rented lot AND/ OR Not permanently affixed to property

19 FIRST TIME HOME BUYER Exceptions: Qualified Veteran First time home buyer requirement waived for Qualified Veterans. Qualified Veteran, as defined in 38 USC Section 101, will demonstrate military discharge or release under conditions other than dishonorable by providing a copy of their DD 214.

20 FIRST TIME HOME BUYER Exceptions: Targeted Areas Buyers First time home buyer requirement waived for Buyers purchasing in Targeted Areas.

21 TARGETED AREAS Increase opportunity for home ownership through: Increased Purchase Price Limits Increased Income Limits Waive FTHB Status Requirement Areas of Chronic Economic Distress (ACEDs) Delaware Targeted Areas Census Tracts: City of Wilmington (1, 7, 9, 17, 20, 21) Kent County (411)

22 Targeted Area Income Limits Target Area Income Limits County 1 or 2 Persons 3 or More Persons New Castle $93,360 $108,920 Kent & Sussex $84,960 $99,120

23 PURCHASE PRICE LIMITS Targeted Areas County SFMRB New Castle $462,000 Kent $413,875 Sussex N/A

24 PROPERTY ELIGIBILITY Location Residential Use Purchase Price Home Inspection Property Types

25 LOCATION AND RESIDENCE Location: Property must be within State of Delaware. Residential: Property use is residential. Unit may not be used for business nor commercial use in excess of 15% of the home s area. Borrower must intend to occupy as primary residence.

26 PROPERTY TYPES 1 4 Unit Properties Only All Property Types That Meet First Mortgage Product Guidelines, including: Modular Manufactured Condominiums

27 Q & A What is the time frame for prior non-ownership? ownership? What is the definition of household Income? How is the maximum sales price determined?

28 MORTGAGE PRODUCT Participating Lender Approved Products ELIGIBILITY Lenders Role and DSHA Role

29 Participating Lenders Allied Mortgage Group, Inc. Graystone Tower Bank Atlantic Home Loans, Inc. Bank of America Primary Residential Mortgage C & F Mortgage Corp. Embrace Home Loans Fairway Independent Mtg. Fulton Bank Gilpin Financial Services MetLife Home Loans Mortgage Network Inc. Prosperity Mortgage Superior Mortgage Corp. Trident Mortgage Weichert Financial Services Wells Fargo Home Mortgage Wilmington Trust

30 PRODUCTS Conventional Federal National Mortgage Association (FNMA) & Federal Home Loan Mortgage Corporation (FHLMC) Veterans Administration (VA) Federal Housing Administration (FHA) United Stated Department of Agriculture (USDA) / Rural Housing Service

31 NEW- FHA 203K Acquisition-Rehabilitation Loan Potential 203K Properties as of November-2010 * County Number of Units New Castle 247 Kent 102 Sussex 54 *Source MLS System-Properties not exceeding SFMRB Price Limits noted as needing work

32 FHA 203K Delaware State Housing Authority (DSHA) is pleased to announce the addition of the Federal Housing Administration (FHA) 203(k) Acquisition/ Rehabilitation Product. The product is available to DSHA s Single Family Mortgage Revenue Bond (SFMRB) network of lenders which are FHA 203(k) lenders who wish to participate. 2 Types 203K 203K Streamline

33 203K Overview The FHA Section 203(k) insurance program enables borrowers to finance the purchase of a home and the cost of its rehabilitation through a single mortgage. Rehab may include energy conservation improvements (such as new double pane windows, steel insulated exterior doors, insulation, solar domestic hot water systems, or caulking and weather-stripping)

34 203K Streamline Overview The Streamline 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.

35 203K Overview All SFMRB guidelines apply, including first time home buyer (exemptions for targeted area home buyers and qualified veterans), income, purchase price, primary residence, and other program eligibility criteria. Lenders will follow FHA standard underwriting guidelines. As allowed per FHA product guidelines, in some cases the borrower will also be able to secure six months of their monthly mortgage payments within the loan to insure on time payments during construction.

36 203K Rehabilitation Amounts FHA 203(k) Minimum:$5,000. Maximum: No maximum provided the total base loan amount does not exceed HUD s statutory maximums. Up to 100% of the loan amount may be allocated to rehabilitation Streamline FHA 203(k)- Minimum: None Maximum: $35,000

37 BOND RATES 30 year fixed rate: Existing Homes 4.375% 30 year fixed rate: New Homes 4.375% 30 year fixed rate: 203K Loans 3.875% 2011 Bond Issue Rates, released December 2, Rates subject to change.

38 QUALIFYING PROCESS Lender qualifies and approves. DSHA does not set Credit Standards. Lenders defer to their product guidelines. Example: My Community Mortgage, FHA, etc.

39 USE OF FUNDS The proceeds from the bond sales provide a constant stream of below market rate money for lenders to originate new loans. Bond issues are run concurrently to fulfill the DSHA commitment to always make funds available.

40 TAX EXEMPT BONDS Financing structure Mortgage Backed Securities (MBS) Wall Street investors Lower risk level Compatible with many loan products Government Sponsored Enterprises (GSE) FNMA FHLMC FHA - USDA

41 INTERNAL REVENUE SERVICE (IRS) ROLE Because the bond issue is tax exempt, the Internal Revenue Service (IRS) establishes guidelines for those who may qualify, including: First Time Home Buyer Status Maximum Household Income Maximum Purchase Price

42 MYTH v. FACT MYTH: : Availability of funds is sporadic. FACT: DSHA is committed to provide continuous funding availability. Total issuance for 2010 is $108.5 million dollars. MYTH: Interest rates fluctuate often. FACT: Rates average bps below market. Rates, historically, are fixed for the duration of the series issue. However they are subject to change with market adjustments. MYTH: File processing time may present delays to settlement. FACT: Incoming files are tracked within the processing system. DSHA commits to a (maximum) 3 business day turn around time. MYTH: Sale of the home triggers a repayment penalty or tax. FACT: Three different conditions must be met to determine if tax liability exists.

43 Q & A How does DSHA get the money? What is the benefit to the consumer?

44 RECAPTURE TAX Loans are funded with the proceeds of tax-exempt Mortgage Revenue Bonds (MRBs) Borrowers receive benefit, and could be subject to tax on those benefits when they sell their home. Enacted into law by US Congress, effecting loans closed on or after January 1, 1991.

45 RECAPTURE TAX (continued) Relationship between the buyer and the IRS -(not DSHA) Recapture Tax may be due if specific conditions are met. IRS form 8828 will further direct borrower if they may or may not be subject to recapture tax.

46 RECAPTURE TAX (continued) Borrower may be subject to recapture tax if ALL of the following 3 specific conditions are met: 1) Sell the home within 9 years, AND 2) Realize a net gain on the sale, AND 3) Income at time of sale exceeds newly calculated IRS household income limit (See table provided to borrower at time of settlement). IRS Form 8828 will assist in calculating any recapture tax.

47 RECAPTURE TAX (continued) Question: If borrower is subject to the Recapture Tax, will it eliminate a borrower s gain from the sale of the home? Answer: No, Recapture Tax can never exceed 50% of the gain. Nor can it exceed 6.25% of the original mortgage loan amount.

48 RECAPTURE TAX (continued) Disclaimer: The above information provided for Recapture Tax is for educational purposes only. It is not intended to provide tax advice. Borrowers are encouraged to seek tax advice from a certified tax advisor.

49 Q & A What are the 3 conditions for which a borrower may be subject to the recapture tax?

50 PROCEDURE Application Process Explanation of Recapture Tax Pre-approval by Lender Submission to DSHA Maximum 72 hour compliance review Lender list to reaffirm existing partnership

51 REALTOR MARKETING Existing campaigns integrate FTHB funds available New campaigns print, billboards, direct mail, & FTHB seminars Lender co-op op marketing OK to use DSHA logo and materials with prior review and approval Speakers available for FTHB seminars

52 Q & A What type of marketing do you use now? How effective is that in creating new leads? How would 5 to 10 more leads per month affect your production/income level?

53 WHY FIRST TIME HOMEBUYER A nationwide survey from 2005 shows that approximately 40 45% of total home sales were made to first time homebuyers. Can you afford to ignore this potential market source? Down payment and settlement assistance using SMAL allows little or no money out of pocket. Source: 2005 MBA website

54 OBSTACLES Down payment = 65% Affordable housing = 51% Finding right neighborhood = 36% Credit record = 33% Source: New Mexico Mortgage Finance Authority

55 LOAN COMPARISON Typical FHA financing for sample sales price of $174,000: 1 st lien of 4.875% = $ Requires borrower cash down payment of $6,090 plus settlement costs of $7,794 (less seller concession of $5,220.00) = $8, cash required to close DSHA 100% financing: 4.375% = $ SMAL loan of $ to cover down payment and closing costs requires no payment for first 360 months.

56 DELAWARE HOMEOWNERSHIP STATISTICS 2009 Statewide homeownership rate: 73.6% Number of owner occupied households: 240,908 Statewide median value: $249,400 DSHA average purchase price: $172,300 DSHA average loan amount: $168,000 Homeownership demand forecast 2008 to 2012: total of 47,881 units (existing, new and manufactured) Anticipated first time and affordable home buyers; 6,332 Source: Delaware Housing FACT Sheet

57 ? QUESTIONS

58 SMAL Loan Program

59 Overview of SMAL Program Provides Down Payment and Settlement Assistance Resource up to $10,000 for Eligible Home Buyers. SMAL loan payment is deferred for 360 months Interest accrues at 6% simple interest, compounds annually No prepayment penalty

60 Eligibility Criteria Borrowers Property Must be used in conjunction with DSHA 1 st mortgage Home Inspection Homeownership Education Required

61 Borrower Eligibility Household Income First Time Home Buyer Status Owner Occupant HUD-Approved Housing Counseling Utilize Participating Lender

62 Household Income Limits Non Targeted Household Size County 1 or 2 Persons 3 or More Persons New Castle $77,800 $89,470 Kent & Sussex $70,800 $81,420

63 Calculation of Income Calculated household income can and probably will be different than the underwriting income used for loan qualification purposes. All forms of household income must be used in determining income for DSHA eligibility.

64 Owner Occupancy All Borrowers and/ or Mortgagors Must Occupy Property as Primary Residence within 60-days of Settlement. All Borrowers and/ or Mortgagors must meet all program requirements. No Co-Signers

65 HUD Housing Counseling HUD-Approved Housing Counseling Agencies: CCCS of MD & DE Inc. First State Community Action Agency Hockessin Community Center HOND Interfaith Community Housing Delaware NCALL Research Neighborhood House West End Neighborhood House YWCA Delaware

66 Participating Lenders Allied Mortgage Group, Inc. Graystone Tower Bank Atlantic Home Loans, Inc. Bank of America C & F Mortgage Corp. Fulton Bank Primary Residential Mortgage Embrace Home Loans Fairway Independent Mtg. Gilpin Financial Services MetLife Home Loans Mortgage Network Inc. Prosperity Mortgage Superior Mortgage Corp. Trident Mortgage Weichert Financial Services Wells Fargo Home Mortgage Wilmington Trust

67 Property Eligibility Location Residential Use Purchase Price Home Inspection Property Types

68 Location and Residence Location: Property must be within State of Delaware. Residential: Property use is residential. Unit may not be used for business nor commercial use in excess of 15% of the home s area.

69 Purchase Price Limits County SMAL New Castle $378,000 Kent $338,625 Sussex $337,500

70 Home Inspection Home Inspection Required Home Inspection must be conducted by either: ASHI-Certified Home Inspector NAHI-CRI NACHI-Delaware Chapter Inspector

71 Property Types 1 4 Unit Properties Only All Property Types That Meet First Mortgage Product Guidelines, including: Modular Manufactured Condominiums

72 Mortgage Terms 1 st Mortgage Products SMAL Terms Repayment Structure

73 SFMRB 1 st Mortgage Products 30-year Fixed

74 1 st Mortgage Products FNMA/ FHLMC/ FHA/ VA/ USDA 30-Year FRM; Fully Amortizing No points (One point may be charged on a 203K loan to offset additional upfront work required by lender).

75 SMAL Terms Loan Amount up to $10,000 Applicable Uses: Customary Settlement Costs Required Down Payment Pre-PaidsPaids

76 SMAL Mortgage Terms 2 nd Mortgage (2 nd Lien Position) 6% Interest Compounded Annually Calculated every July 1 st Borrowers receive principal and interest statement annually.

77 SMAL Repayment Structure Mortgage payment deferred until trigger date (whichever occurs 1 st ): 30 years Sale of Property Refinance No Longer Primary Residence Mortgage payment due (month 361) = 1 st Mortgage payment

78 SMAL Borrower Payment Info Borrowers may begin payments at any time. No prepayment penalty For payment remittance, borrowers should mail payments payable to DSHA at: 18 The Green Dover, DE Reference the account number on their checks

79 CONTACT INFORMATION Bill Salamone Housing Mortgage Loan Officer II Enid Beltran Housing Mortgage Loan Officer II 820 N. French Street, 10 th Floor Wilmington, DE Phone: FAX:

80 DSHA First Time Homebuyer Program On behalf of Delaware State Housing Authority Thank you for attending today s training.

81 Contact Information DSHA 820 N. French Street 10 th Floor Wilmington, DE Phone: Fax: Bill Salamone, HMLO II Enid Beltran, HMLO II Gary Hecker, Housing Finance Manager

82 CONGRATULATIONS You have just completed three credit hours towards your continuing education. Your certificate will be mailed.