LOAN PROCESSING PROCEDURES AND PROGRAM ADMINISTRATION

Transcription

1 LOAN PROCESSING PROCEDURES AND PROGRAM ADMINISTRATION The Idaho Housing and Finance Association ( IHFA ) is the Program administrator for the Tax- Credit Mortgage Credit Certificate Program in Idaho ( The Program ) will delegate part of its administrative role to participating Idaho Lenders through a Lender Participation Agreement. Eligible home buyers will apply for the Tax Credit in the form of Mortgage Credit Certificates (MCCs) in conjunction with a standard mortgage loan application. The processing is designed to coincide with the lender s regular credit and underwriting procedures. Since the Program is not part of the decision making process on credit, no formal notice of rejection of the Tax Credit Mortgage Credit Certificate is required under the Equal Credit Opportunity Act. The Program recognizes that there will be procedural variations among participating lenders; consequently, the procedures outlined here are meant to be suggestive with respect to the sequence of events. However, all the elements of the processing sequence noted below must at some point be completed by the responsible party. The following steps are for loan processing and program administration of the Program: A. LENDER PARTICIPATION AND PROMOTION; PRELIMINARY ACTIVITIES PRIOR TO LOAN ORIGINATION A1. IHFA files 90-day public notice of its intent to implement the Program. A2. The Program is designed and promoted through IHFA working with lenders and housing industry trade associations. A3. Interested lenders are requested to sign a Lender Participation Agreement defining the lender and IHFA responsibilities. The Lender Participation Agreement should be consulted for specifics. A4. Participating lenders, with assistance, are encouraged to advertise the Program to the general public. A5. All participating lenders can do the Program will develop and maintain a list of participating lenders. A6. Lenders continue to promote and advertise the Program with assistance. B. LOAN ORIGINATION AND PROGRAM APPLICATION B1. Borrower applies for mortgage financing from a participating lender. B2. Lender generally determines if a loan borrower is eligible for the Tax Credit (MCC) based on preliminary information for income, selling price, prior home ownership, tax liability, and other factors. The borrower need not have a Federal Tax liability, either present or projected, in order to qualify for the Program. MCC 1 Current 10/2010

2 B3. Lender provides borrower with a letter that explains the Program and contains guidelines for potential borrowers; lender advises the borrower to consult his own tax advisor to determine the benefit of The Program. B4. As part of the loan application process the borrower signs the Borrower Affidavit and Lender Certificate Affidavit. This contains all the certifications and affidavits required by State and Federal regulations: a. Certification that the residence will be used as the borrower s principal residence, and that the certificate holder must notify IHFA when the home ceases to be the principal residence of the holder. b. Certification that the borrower has not owned a principal residence during the preceding 3-year period (not required for a purchase in a Targeted County). c. Certification that the acquisition cost does not exceed the acquisition and sale price limits. The seller s signature is required on the Seller Affidavit. d. Certification that this is a new mortgage loan (not refinancing), as defined in Internal Revenue Service (IRS) regulations. e. Certification that the loan applied for does not constitute a Prohibited Mortgage as provided in IRS Regulations. f. Certification that the borrower was not forced to apply through a particular lender. g. Certification that borrower s gross annual household income does not exceed permitted income limits. h. Certification that no interest is being paid to a related person. i. Certification that the Tax Credit (MCC) cannot be transferred/assumed without the prior written approval of IHFA in accordance with Program requirements. j. Acknowledgement that any material misstatement or fraud is made under penalty of perjury. B5. To reserve a Tax Credit (MCC), the lender so indicates at the time lender locks the loan in idamortgage.com, and provides the following information: Borrower(s) name, property address, county, social security number(s), estimated loan amount, whether the residence is new or existing, estimated date of closing and other required information. Reservations will expire 60 days after the date of reservation. MCC 2 Current 10/2010

3 B6. IHFA will maintain a cumulative-to-date total of Tax Credit (MCC) amounts reserved to monitor the aggregate certified indebtedness amount, and control the aggregate amount of Tax Credits (MCCs) to be issued. These aggregates cannot exceed the amounts available for the Program. This system will also ensure that at least 20% of the amounts of Tax Credits (MCCs) available are provided to Targeted County residences. B7. Lender requests that the borrower supply Federal tax returns for the previous three years, for cases not involving Targeted Counties, to be included in the Program submission package. B8. Lender completes the remainder of the normal mortgage application process. C. LENDER UNDERWRITING AND VERIFICATION C1. Lender performs normal mortgage underwriting procedures. C2. Lender evaluates the Tax Credit (MCC) when determining that amount of income available for the monthly housing payment in order to determine the borrower s qualifications. Lender determines general acceptability in accordance with applicable FNMA, FHLMC, FHA, VA, USDA-RD and private mortgage insurance standards and underwriting guidelines. C3. Lender performs the customary verifications for loan underwriting, in conjunction with the lender s regular verification process, and as required by the Lender Participation Agreement. The lender performs a reasonable investigation as to whether the Program requirements have been met. Lenders may verify facts at different times and in various ways, depending upon the lender s procedures for processing loans. C4. Lender verifies that income limits, purchase price limits, and other requirements are met. C5. Lender completes all other mortgage underwriting and verification steps. D. LOAN CLOSING AND ISSUANCE OF TAX CREDIT (MCC) D1. The lender closes the loan in the normal procedure with the borrower. D2. The lender sends the completed Tax Credit documentation. See Section I for Program forms. D3. Confirms the completion of the case, that the Tax Credit (MCC) can be issued, and that the loan was closed; IHFA forwards to the new homeowner an executed Mortgage Credit (Tax Credit) Certificate. MCC 3 Current 10/2010

4 D4. A fee of $300 will be collected for the Tax Credit (MCC) at the time the completed documentation is received from lender by IHFA. E. RECORD KEEPING AND FEDERAL REPORT FILING E1. The lender must file an annual report using I.R.S. Form The report is required to be filed only once for each MCC-assisted mortgage. E2. For 6 years the lender must retain: a. Name, address, TIN (social security number or tax identification number) of the MCC holder. b. Name, address, TIN of the Issuer (i.e. IHFA). c. Date of loan, certified indebtedness amount, and credit rate. E3. IHFA must make quarterly reports on I.R.S. Form 8330 within 30 days following the end of each calendar quarter. The within reports must include: a. Name, address, TIN of the Issuer (i.e. IHFA). b. Date of the Issuer s election not to issue mortgage revenue bonds. c. The sum of the products for each certified indebtedness amount (mortgage amount) multiplied by each rate. d. Name, address, TIN of each holder where an (MCC) was revoked. E4. IHFA must also make annual reports by January 31 st of the following calendar year on the applicable I.R.S. Form, including: a. Annually the number of Mortgage Credit (Tax Credit) Certificates by borrower income and acquisition cost, as required by Federal regulations. b. Annually the volume of Mortgage Credit (Tax Credit) Certificates by borrower income and acquisition cost, as required by Federal regulations. F. REVOCATIONS F1. Automatic revocation occurs when the residence for which the Tax Credit (MCC) was used ceases to be the holder s principal residence. F2. The Tax Credit (MCC) will be revoked if the borrower does not meet the requirements for a qualified Tax Credit (MCC). MCC 4 Current 10/2010

5 F3. Revocation will occur on the discovery of any material misstatement, whether negligent or fraudulent. G. TRANSFER PROCESS FOR MORTAGE ASSUMPTIONS G1. The transferee (mortgage loan assumptor) shall request an MCC transfer package from the lender. The transfer package will contain the following MCC (Tax Credit) documents: MCC Program Brochure MCC-002 Borrower Affidavit MCC-003 Seller s Affidavit G2. The transferee will review, execute and return to the lender upon loan closing the above MCC (Tax Credit) documents, including the following: a. $500 transfer fee payable to IHFA b. Last three (3) Federal Income tax returns, when required c. Copy of the earnest money agreement G3. IHFA reviews the transfer package documents for completeness. G4. If IHFA declines the transfer, a letter of explanation will be sent to the transferee. H. BORROWER, PURCHASE PRICE AND MORTGAGE UNDERWRITING H1. For loans involving the Program s conventional underwriting standards for housing expense and debt ratios will be modified to recognize the benefit of the Federal Income Tax Credit (MCC). The secondary mortgage market and the mortgage insurance industry have established underwriting policies for loans involving the Program. These are available separately as policy statements from the mortgage lending industry. The borrower, purchase price, and loan underwriting requirements described in this Section are incorporated in the documents which are in this Operating Manual. It will be necessary for all borrowers and program participants to complete and sign the appropriate documents and attest to their validity. The lender will be required to submit certifications in which the lender will certify that to the best of its knowledge no material misstatements appear in the application and program documents. If the lender becomes aware of misstatements, whether negligently or intentionally made, it must notify IHFA immediately. IHFA will take all appropriate actions including, if necessary, denial or cancellation of the Tax Credit. The lender should also be aware, and inform the borrower, that Federal law provides for fines and criminal penalties for misrepresentations made in connection with participation in the MCC 5 Current 10/2010

6 Program. In an attempt to assure that requirements are clarified, a Program Application Affidavit is required from each borrower, and must be included in the submission package. Under the Program, there are no restrictions with regard to the type of financing the lender uses. The Program allows the use of any financing instrument being used in the financial marketplace, and does not place restrictions on loan term or amortization methods. H2. The Program requirements for borrower eligibility residence purchase price limitations and mortgage loan underwriting provisions are the same as for IHFA s Mortgage Revenue Bond Program except for the following provisions: a. REVOCATION: a borrower will have their Tax Credit (MCC) revoked if the borrower does not meet the Program s requirements. Revocation will occur upon the discovery of any material misstatement, whether negligent or fraudulent. Revocation will occur if the residence to which the Tax Credit (MCC) relates ceases to be the borrower s principal residence. b. PENALTIES FOR MISSTATEMENT: If any person makes a material misstatement in any affidavit or certification made in connection with the application for, or the issuance of, a person, that person may be subject to a fine of $1, for each Tax Credit (MCC) with respect to which a misstatement was made. The criminal penalty provided by law. If any person makes a material misstatement in any affidavit or certification made in connection with an application for, or issuance of, a Tax Credit (MCC) and such misstatement is due to fraud, then any Tax Credit (MCC) issued shall be automatically null and void without the need for any further action on behalf of Idaho Housing and Finance Association. In addition, that person may be prosecuted under Federal Law and fined up to $10,000 for each Tax Credit (MCC) with respect to which the fraudulent misstatement was made. The above-described penalty shall be imposed in addition to any criminal penalty provided by law. H3. PROHIBITED MORTGAGES: A Tax Credit (MCC) cannot be used in conjunction with a qualified mortgage bond (e.i. IHFA loan) or a qualified veterans mortgage bond. The lender must obtain from the borrower, via the Program Affidavits, a statement that no portion of the financing for acquisition of the residence in connection with which the Tax Credit Certificate (MCC) is issued is provided from a qualified mortgage revenue bond or Veterans mortgage revenue bond. H4. NO INTEREST PAID TO RELATED PERSONS: None of the interest on the certified indebtedness amount can be paid to a person who is a related person (see definition) to the Tax Credit (MCC) Certificate holder, as the term related person is defined in Section 103(b) (6) (c) (i) of the Internal Revenue Code and C.F.R. MCC 6 Current 10/2010

7 Section (e) (1). The lender must obtain from the borrower, through the Program Affidavits, a statement that a related person does not have, and is not expected to have, an interest as a creditor in the certified indebtedness amount. H5. TRANSFERABILITY: If the financing or certified indebtedness is assumed by a new purchaser, the potential benefit derived from the Tax Credit (MCC) may be transferable under certain circumstances: a. The transferee mortgage loan assumptor must demonstrate to IHFA that they have assumed the liability for the remaining balance of the certified indebtedness. b. The new Tax Credit (MCC) must meet all the conditions of the original Certificate, and must comply with any changes in Federal, State or IHFA policy that amended the requirements of the original Certificate since the time the original Tax Credit (MCC) was issued. c. IHFA must issue a new Tax Credit (MCC). d. The transferees acquisition cost must not exceed the acquisition cost limit in effect at the time of the loan assumption for an existing, previously occupied residence. The acquisition cost limit shall be the I.R.S. Safe Harbor Limits in effect at the time of the particular loan assumption. I. PROGRAM FORMS I1. The Program forms, attached, include the following: a. Lender Participation Agreement (MCC-001) b. Borrower Application Affidavit and Lender Certification (MCC-002) c. Seller Affidavit (MRB-002) d. Mortgage Credit Certificate (MCC-003) MCC 7 Current 10/2010