FHA 203(k) Streamline Training

Transcription

1 FHA 203(k) Streamline Training Guidelines Forms Point MyKey 12/11

2 FHA 203(k) Streamline Help qualified borrowers purchase and renovate a primary residence all with a single loan Allows Loan Officers to expand their market by allowing borrowers to: Purchase a home that needs repair Borrow against the value of the home after improvements Program Eligibility Standard FHA investment of 3.5% required max 96.5% LTV Based on final acquisition cost Min fico 640 Absolutely no identity of interest transactions are allowed Seller contributions up to 6% of the Contract Sales Price (not adjusted acquisition cost) FHA credit guidelines apply, all loans to be run through DU, and must receive an approve/eligible. A refer from DU is not allowed. Manual u/w is only allowed if u/w downgrades but DU has approved Full credit only, non-traditional credit NOT allowed Loans in Hawaii are not eligible HUD REO: 2 4 units not allowed Loan officer and Processor must complete 203k Training prior to disclosing from MyKey. Principal Reductions are not allowed, whatsoever.

3 FHA 203(k) Streamline Eligible Properties Owner Occupied 1-4 Units (3-4 units must have 3 months PITI in reserves) 2-4 units not allowed on HUD REO PUD s FHA Approved Condos Only REO Properties Must be at least one year old, previously occupied Graded Average or higher on the appraisal Ineligible Properties Manufactured Homes Unfinished Remodels Conversions (Barn to SFR) Unfinished Builder/Developer Properties Properties deemed uninhabitable Graded Average- (average minus) or lower on the appraisal Property in which utilities cannot be turned on Flips within the last 180 days are not allowed

4 Overview Borrower locates property in need of repairs Branch processes credit file Request from closing agent a 122 endorsement Borrower obtains contractor bids (Submit to Appraiser) (maximum of 3 contractors) Appraisal must be SUBJECT TO repairs. Purchase appraisals should NOT include an as-is value statement; the purchase price is considered as-is value on purchase transactions. After improved value based on contractors bids provided to the appraiser Loan is underwritten & closed at Corporate 1 st disbursement at funding Loan purchased by M & T Work is completed; M & T completes 2 nd disbursement Final check may take 6 to 8 weeks (after purchase by investor) **Prepare borrower and contractor Please note: Table Funding States: Fully Executed Loan documents must be reviewed prior to wire release

5 Streamline Repairs 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. Minimum of $5,000 Maximum of $35,000 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. The limit of $35,000 includes repairs and costs associated with the repairs. Ineligible Repairs CANNOT BE STRUCTURAL IN NATURE (no framing, exposed beams, etc) SUBJECT MUST BE HABITABLE/LIVEABLE WHILE REPAIRS ARE BEING MADE BORROWER CANNOT BE DISPLACED OVER THIRTY DAYS FOR REPAIRS LUXURY ITEMS NOT ALLOWED (POOLS, SPAS, GAZEBOS, ETC) SITE AMENITIES (adding a fence, landscaping ) NOT ALLOWED

6 Underwriting Requirements All loans must receive a DU approval 640 credit score is required Manual underwriting is only allowed if DU has approved and u/w is downgrading. Refer out of DU is not allowed Borrowers must have two credit scores. It is okay, with DU approval, if the co borrower does not have a score as long as they do not have derogs either If DTI is > 43% then borrower must possess 2 comp factors below: 1) 2 months in reserves 2) LTV < = 90% 3) Residual income (gross income less all debts) > = 1.5 months PITI 4) Payment shock of les than 25% 5) Documented additional income not being used to qualify Max DTI is 50% regardless of DU findings If high balance loan and property is in a declining market, a second appraisal will be required if LTV is above 95%. Must be completed by an FHA roster appraiser If one unit, a 2055 can be used. No need for second case number

7 203(k) Fees Contingency Reserve A contingency reserve is used to cover unexpected expenses that may arise after the loan is closed The amount of reserve that is collected is 10%-20% of the rehab cost Guild requires a minimum collection of 10% 15% required if property is vacant Underwriter has discretion to require additional contingency reserve PC1 Inspection Fee Charge applied by the investor to pay for final inspection Required on all repairs over $15,000 GMC Standard charge is $100 for one Title Update Fee Charge applied by the investor to pay for title update fee Investor will run a title update to insure that the property has no liens GMC Standard charge is $50 for one All of these fees are included in the maximum rehab amount of $35,000 Supplemental Origination Fee Charge applied by the investor to facilitate final inspection/disbursement/updates. Greater of 1.5% of repair amount or $ (not included in origination fee) ****203k fees affect your TIL & your loan amount make sure they are entered in correctly****

8 Slide 7 PC1 phyllisc, 2/1/2011

9 Contractor Info All contractors must be approved by underwriting and carry liability insurance up to $500K for smaller projects. Up to $1MM is preferred Self Help is not allowed All contractors must be qualified and experienced. They do not have to be licensed. Borrower may not use relatives/employers as their contractors Borrower is limited to a total of 3 sub contractors or a General Contractor will be required. The big box stores do count as one of your contractors Contractors resume should be completed by all contractors. Form located in MyKey Underwriters must approve the contractor selected by the borrower A Homeowner-contractor agreement is required for each contractor (check loan forms)

10 Eligible Improvements Repair/Replace/Remodel Must be cosmetic in nature, permanent part of the property that adds value Replace/Repair/Upgrade items that already exist Heating/ventilation or air conditioning (cannot add duct work, has to exist) Kitchen cabinets, countertops Appliances-stove, refrigerator, washer & dryer Plumbing (cannot add plumbing, i.e. for a new bathroom, etc. Flooring Bid cannot mention repair or replacement of sub-floors Bathrooms Interior/Exterior Paint Roofing Energy efficient and electrical upgrades/weatherization Windows and doors, exterior wall re-siding Repairing existing exterior decks, patios, porches Lead-base paint stabilization Basement finishing that does not involve structural improvements Swimming pool repairs: up to $1,500 Health & Safety items that can be completed within 30 days and initial draw will cover entire cost

11 Eligible Improvements Repair Examples Update Cabinets Replace Appliances New Countertops

12 Repair Examples Eligible Improvements Water pipes in place

13 Ineligible Repairs Non-Financeable Items Exposed Studs Exposed Pipes Structural (Room Additions, Removing Walls, etc.) Foundation Repairs Relocation of well and septic systems Health and Safety items that cannot be completed within 30 days after close and initial draw cannot cover entire cost Utilities must be ON at time of close

14 Ineligible Repairs Unfinished Remodel Exposed Studs Exposed Beams Exposed Wiring

15 Disbursements 1st Disbursement At the time of closing 50% of the total repair costs (not including fees) Title/escrow to cut dual party checks to Contractor AND Borrower If repairs are for lead based paint or mold remedy then 50% will NOT be disbursed upfront 2nd Disbursement - Only after repairs, by ALL contractors, have been completed Follow the instructions on the welcome letter that will be sent to the borrower Borrower must call M & T when work is completed Repair costs up to $15,000-Borrower will be sent a completion to sign and fax back with all documentation to M & T, for check release Repair costs exceeding$15,001-m & T will order a re-inspection prior to releasing checks, may take up to a week. M & T will order the title update to ensure no mechanics liens have been place on property Advise your borrowers the final disbursement check may take 6 to 8 weeks from closing The contractor may not be fully paid for up to 2 months

16 Forms Fillable forms are located in MyKey Loan Forms Loan Application when program selected is a 203(k)

17 Forms- Homeowner/Contractor Fillable forms are located in MyKey s LoanForms Acceptable Unacceptable All fields filled out Empty fields Cannot be signed in counterpart

18 Forms- Contractor W9 & Disclosure Both must be completed fully executed Prior to Docs

19 FormsForms- Borrower Disclosure

20 Forms- FHA 203(K) Worksheet Use information from purchaser contract and contractors bid NOTE: Point does not have the correct form, use the form in MyKey Section A: Property Info Section B: Rehab Fees Section C: Calculate Loan Amount* *C1: Lesser of Sales Price or As-Is Value C4: Use 96.5 % not 97%

21 Point- FHA 203(K) Worksheet Must be in Borrower Forms>FHA>FHA 203k Worksheet Form auto-calculates and is saved to the file Line A3 is manually entered from data in C3

22 Point- FHA 203(K) Worksheet Loan Officers will manually calculate the base loan amount Point reflects 3%, not 3.5%, as the required investment Click the lock on line C4 to open the field to manual entry Calculate the base loan amount by multiplying line C3 by 96.5% Manually enter result in C4 If C5 is not accurate, your Processor will make corrections in MyKey

23 Point-Borrower orrower Information Screen Point requires a number of work arounds Loan Program Codes: 496-FHA 203(k) Streamline 30 Year FHA 203(k) High Balance Streamline 30 Year Enter line C3 from the worksheet for Sales Price and Appraised Value Line C3 from worksheet From Worksheet

24 Point- Details of Transaction Purchase Price (Line A) should reflect final acquisition cost from line C3 on the worksheet. Alterations (Line B), leave blank For the correct amount in Cash to/from Borrower (Line P), manually enter on Line L, as a credit, the amount listed on CC Adjustments for FHA/VA as 203(k) Adjustments Enter amount as a credit in Line L

25 203(k) Separator Sheet Processing-Documents FHA 203(k) Mortgagee Worksheet must be fully completed All 203(k) repairs require contractor bids Provide evidence contractors hold any state or local government required licensing Rehabilitation Loan Permit Certification Form is to be completed by Local Municipality and provided to Underwriting Prior to Docs. Any required permits will be required by the Investor prior to final disbursement. Contractors must provide detailed list of the repairs to be made Cannot include commission, net profit, mgmt fees, etc. Contractors must sign and complete the following forms: Homeowner s Contractor Agreement Contractor Disclosure W9 Borrower must complete the Homeowner s Contractor Agreement Borrower Disclosure

26 Processing-FHA Connection Construction Code: From the drop down, select Substantial Rehabilitation Processing Type: Select REO with Appraisal only on HUD REO s ADP Code: Manually enter 702 for single family residences and PUD s or 804 for Condo s Housing Program: From the drop down, select Improvements (203k) 203k Consultant: Manually enter 203KS

27 My Key Processing-Mortgage Screen MyKey s Instant Help When field has a different shade of blue and is underlined, mouse over and hints on how to complete the field will appear Immediate access all of the forms and instructions also found in Loan Forms Move mouse over any underlined field for helpful hints As-Is Value is the Sales Price

28 MyKey Processing Review and enter data from LO s 203(k)worksheet Enter the After Improved Value for the Estimated Value in Mortgage Terms/Property & appraised value (in the appraisal order screen) From the worksheet, line C4, enter the base loan amount Review and enter data from LO s worksheet Click 203k Fees to enter the worksheet fees listed on B2 thru B11 Enter worksheet fees

29 MyKey Processing-Fees Entering 203(k) fees Complete using the 203(k) worksheet provided by the loan officer. Update as required and review prior to final submission

30 Investor Suspenses Only aftera loan has been purchased by M & T will the disbursement timeline begin Suspenses=Delays 203 (k) FHA Maximum Mortgage Worksheet Missing signature, title, date or any combination thereof Not legible. Light red ink does not image very well, M & T is having a hard time reading some of the numbers The format of some forms is less than normal size--contributes to the illegibility Figures do not add up Data not entered correctly in FHA Connection Rehabilitation Loan Agreement The figure in Paragraph 4 does not match the figure on line B-14 of the 203(k) Maximum Mortgage Worksheet 203(k) Borrower s Acknowledgment Form incomplete as to options in first Loan Requirement W-9 Tax status must be indicated If the company is a Limited Liability Company, the tax classification must be entered at the end of the line Employer Identification number or Social Security number, whichever applicable, must be indicated Homeowner Contractor Agreement All parties must date their signatures Document must be fully completed

31 Corporate Contacts Training Phyllis Christich Erin Langevin x Underwriting Lynda Yanez x13611 Brian Clottu x12254 Closing Holly Boyle x13652 Debbie McLaughlin X12270