FANNIE MAE HOMESTYLE RENOVATION MORTGAGE

Transcription

2 DISCLAIMER These materials are intended for informational use only. This is neither legal advice nor a substitute for Agency Guidelines. Please do not reproduce, display, or distribute without the express written permission of AFR. This information is subject to change in AFR s sole discretion. Updated AFR guidelines may be accessed on AFR s website, All rights reserved. The AFR underwriter has the right to decline or suspend a file at their sole discretion for any reason allowed by law. AFR is an equal housing lender. NMLS American Financial Resources, Inc., 9 Sylvan Way, Parsippany, NJ,

3 HOMESTYLE QUESTIONS HOMESTYLE EXPLAINED What is the Fannie Mae HomeStyle Loan Program? What are the program guidelines? What types of improvements are allowed? What are the general contractor guidelines? What is the role of the HUD Consultant/Granite Inc. Inspections? How is a HomeStyle appraisal different from a regular appraisal? How to fill out the 1035 HomeStyle Maximum Mortgage Worksheet? What is the underwriting process? What happens after closing? COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

4 HOMESTYLE LOAN PROGRAM HOMESTYLE EXPLAINED The Fannie Mae HomeStyle program, enables borrowers to either purchase or refinance their home while including rehabilitation costs in the same loan. This program offers the borrower the ability to finance the cost of a rehab project ranging from a simple remodel through structural improvements and upgrades including luxury items. 4

5 INCREASED MARKET OPPORTUNITY WHY HOMESTYLE? 1. Purchases: Homes in need of major rehabilitation or are outdated and not desirable 1. Perfect for HUD REOs, foreclosures, and short sales 2. Improvements to outdated homes, kitchens, bathrooms, etc. 3. Structural deficiencies 4. Additions and expansions 5. Addition of decks, pools, and improved landscaping. 2. Refinances: Make improvements 1. Improve instead of move 2. Necessary or optional major/structural repairs 3. Both Purchases and Refinances: Save loans where the appraisal uncovers unexpected property damage 5

6 FANNIE MAE HOMESTYLE LOAN PROGRAM AFR HOMESTYLE BASICS At AFR, the same Fannie Mae credit and underwriting standards apply to the HomeStyle program as the ordinary Fannie Mae program. For both Purchases and Refinances the ratios are as determined by AUS (Must receive DU Approve/Eligible). 95% LTV on a one-unit principal residence as a Purchase or Limited Cash Out Refinance 85% LTV on a two-unit principal residence as a Purchase or Limited Cash Out Refinance 90% LTV on a one-unit second home as a Purchase or Limited Cash Out Refinance 85% LTV on a one-unit investment property as a Purchase 75% LTV on a one-unit investment property as a Limited Cash Out Refinance Only 15 or 30 year amortization allowed Cash back to the borrower is NOT allowed 6

7 ELIGIBLE PROPERTY TYPES HOMESTYLE EXPLAINED Existing homes with C of O for minimum of 1 year, attached or detached ELIGIBLE 1-2 Unit Owner Occupied Properties 1 Unit Second Homes 1 Unit Investment Properties Warrantable Condo s PUD s REO s, Short Sales, Foreclosures are OKAY! COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 7

8 INELIGIBLE PROPERTY TYPES HOMESTYLE EXPLAINED INELIGIBLE Mixed-use properties Co-ops or non-warrantable condos Manufactured Homes Mobile homes 3-4 Unit Properties COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 8

9 IMPROVEMENTS ALLOWED HOMESTYLE EXPLAINED Structural alterations and additions Upgrade or modernization of central air/heat, plumbing, and electrical systems Minor repairs to existing septic systems Repair termite or moisture damage Remodeling of kitchen and baths Energy conservation improvements New permanently affixed appliances Addition or replacement of exterior decks, patios, and porches Major landscaping and permanent hardscape such as driveways, walkways, retaining walls and fences 9

10 IMPROVEMENTS NOT ALLOWED HOMESTYLE EXPLAINED Improvements that are not permanently attached to the property Improvements for business or commercial purposes Items that will not increase the value of the subject property Energy Efficiency repairs which would require additional inspections per Fannie Mae 10

11 HOMESTYLE HOMESTYLE EXPLAINED Eligible for the following types of clients: Brokered Lending Brokered Lending with the On-Demand Processing Enhancement Correspondent Table Funded Correspondent Non-Delegated Correspondent Delegated not eligible Please use the following program codes to identify HomeStyle Loans: CF15-REHAB CF30-REHAB 11

12 AFR, INC. HOMESTYLE OVERLAYS HOMESTYLE EXPLAINED 620 Minimum FICO score required No razing of homes. No demolition of a home down to its foundation No physically relocating a home from one location to another No Self-Help. The borrower/owner may not be involved whatsoever in any aspect of the construction his or herself Adjustable Rate Mortgages are not allowed All applicable AFR Standard Fannie Mae Program overlays apply Certified HUD Consultants or Granite Inc. Inspections will be required for Standard HomeStyle 12

13 CERTIFIED HUD CONSULTANT ROLE IN STANDARD HOMESTYLE All HomeStyle loans with construction budgets greater than $35,000, or the repairs are structural, a HUD Consultant is required Provides the Specification of Repairs Report which determines the scope of work, number of draws required, total estimated costs The Consultant assists in determining both the required and desired repairs and provides a comprehensive Consultant s Report The Consultant is responsible for interim and final inspection reports in order to approve disbursements to the General Contractor 13

14 CERTIFIED HUD CONSULTANT ROLE IN STANDARD HOMESTYLE Adds an extra layer of protection for both the lender and borrower by evaluating the merit of the offers submitted by GC s, assists through the construction process, and verifies all work is satisfactorily completed Consultant fees range from $400-$1,000 depending on the dollar amount of the estimated work A list of acceptable HUD Consultants can be found on our website or by visiting 14

15 CERTIFIED HUD CONSULTANT ROLE IN STANDARD HOMESTYLE Consultants Fee Schedule (Est.) 15

16 HOMESTYLE CONTRACTORS HOMESTYLE EXPLAINED AFR permits for one General Contractor only Although obtaining more than one bid is recommended, it is not required In situations where more than one contractor is needed, one must be named as the general contractor. The others will become subcontractors under the GC s supervision The general contractor will carry over all of the subcontractors bids onto his/ her bid. The general contractor will be responsible for overseeing all repairs are done in a workmanlike and timely manner The general contractor will also be responsible for disbursing all funds to the subcontractors when funds are released from escrow 16

17 HOMESTYLE CONTRACTOR (CONT.) HOMESTYLE EXPLAINED The general contractor must carry sufficient insurance equal to the amount of the total amount escrowed for repairs through a valid and current general liability insurance policy The contractor must provide a detailed estimate/bid itemizing all the repairs that are to be completed with cost and note if permits are going to be required Licensing requirements vary in each state/municipality for contractors. If a repair calls for a specialized contractor, such as electrical or plumbing repairs, the contractor must be licensed to do the work 17

18 CONTRACTOR S ESTIMATE (SAMPLE) 18

19 HOMESTYLE APPRAISAL WHAT MAKES IT DIFFERENT? The GC Estimate is forwarded to the appraisal company upon the order (for both purchases/refinances) Appraiser does the appraisal subject to the completion repairs/improvements and will give an after improved value based upon the list of repairs The scope of the appraisal is the future value! 19

20 HOMESTYLE APPRAISAL The required AMC to be used for all Renovation Loans is Land Gorilla: Land Gorilla 1241 Johnson Avenue Suite 154 San Luis Obispo, CA For Broker Registration, set up and support please refer to: (855)

21 TOTAL REHAB COST ESCROWED HOW IS IT DETERMINED? Total rehabilitation cost escrowed may include all of the following: Estimated cost of Repairs/Improvements Contingency Reserve Consultant s recommendation) Draw Inspection Fees (Consultant s recommendation number & cost per) Up to 6 months mortgage payments (if home uninhabitable during rehab) Title update for each draw ($60 held per draw) Consultant, Architectural, and Engineering fees (if applicable) Permits (if applicable) Maximum cost of repairs is limited to 50% of the subject property s after improvements value 21

22 MAXIMUM MORTGAGE WORKSHEET 1035 HOMESTYLE The HomeStyle Maximum Mortgage worksheet must be completed in calculating the max loan amount The worksheet will determine your highest allowable loan amount and LTV, based upon your scenario The maximum loan amount for a purchase will be based on the following: Purchase: Lesser of (Purchase Price + Renovation Cost) or After Improvements Value of Appraisal Refinance: The After Improvement Value of the Appraisal 22

23 COMPLETING THE WORKSHEET 1035 MAXIMUM MORTGAGE WORKSHEET On all HomeStyle purchases, there are calculations that must be completed in order to determine the maximum loan amount: Begin in Section C, fill in the improvements costs on lines 1a 1i, and the total cost of improvements in C2 Next complete section B Now complete section A. To complete A2 divide C2 by B3. To complete A1 divide the Loan Amount by the As Completed value Next complete section E 23

24 COMPLETING THE WORKSHEET 1035 MMW Example: Estimate/Bid 24

25 COMPLETING THE WORKSHEET 1035 MMW Example: HUD Consultant s Summary 25

26 COMPLETING THE WORKSHEET MAXIMUM MORTGAGE WORKSHEET

27 COMPLETING THE WORKSHEET 1035 MMW Example: 1003/Details of Transaction 27

28 POTENTIAL PITFALLS HOMESTYLE EXPLAINED Unsupported after-improved or to be completed value: There are times when the after improved value is not supported with all of the repairs that are completed. Deferred maintenance, such as peeling paint, or over improvements for the area, may not add value! 28

29 UNDERWRITING/APPROVAL HOMESTYLE EXPLAINED Files registered and uploaded to Encompass Loans approved by AFR underwriter as typical conventional file After approval, the file is reviewed by the Renovation Department for a cursory review 29

30 AFTER CLOSING/RENOVATION PERIOD HOMESTYLE Prior to closing the Renovation Department reviews the HUD and renovation plan Once the loan funds, the mortgage proceeds will either payoff the existing liens or the seller, and the Escrow Account will be established for construction funds 30

31 STANDARD HOMESTYLE At closing/funding only the Consultant Fee, Permits, Engineering, or Architectural Fees may be disbursed to the appropriate party with an invoice. The borrower can only be reimbursed any costs if proof fees were POC by the borrower No funds are ever given in advance to the General Contractor Draws to the contractor are made as work progresses and phases are completed based upon the Consultant s write-up and verified through draw inspections by the Consultant A maximum of 5 disbursements/draws are allowed Construction can commence immediately and should within 30 days of the closing and the homeowner has up to 6 months to complete the work Borrowers will make their regular mortgage payments throughout the course of construction unless they are escrowing them due to the home being uninhabitable 31

32 LIMITED HOMESTYLE Contractor may receive first draw (up to 50% of repair costs) at closing/funding in order to buy materials and start the renovations The renovations should begin within 30 days of closing Borrowers will make their regular mortgage payments throughout the course of construction 32

33 DRAW REQUESTS & COMPLETION HOMESTYLE EXPLAINED All correspondence and questions should be directed to AFR s Renovation Department as they are the administrators of the borrower s rehabilitation escrow account Consultants are to forward their draw requests directly to Renovation@afrwholesale.com for processing All draws checks will be mailed, payable directly to the contractor The Consultant confirms all work completed with final inspection Upon the receipt of the acceptable final inspection, a final disbursement will be made to the contractor All remaining unused funds in escrow will be made as a principal reduction to the mortgage 33

34 AFR S FANNIE MAE HOMESTYLE FORMS FOUND ON Consumer Information Consumer Renovation Information Contractor Profile Homeowner Contractor Agreement Homeowner/Contractor Agreement Rehab Limited HomeStyle Broker Correspondent Submission Checklist HomeStyle Renovation Consumer Tips HomeStyle Renovation Maximum Mortgage Worksheet IRS Form W9 (website) Renovation Identity of Interest Renovation Loan Borrower Disclosure Limited HomeStyle Lien Release Texas Disclosure Statement When the work is 100% complete, please have the following forms completed and executed.. Conditional Waiver & Release Borrower s Letter of Completion 34

35 HOMESTYLE RECAP 35

36 AMERICAN FINANCIAL RESOURCES BECOME A APPROVED LENDER: The HomeStyle program is available to the following: Brokered Lending Brokered Lending with the On-Demand Processing Enhancement Correspondent Table Funded Correspondent Non-Delegated Correspondent Delegated not eligible 36

37 AFR UNIVERSITY ARE YOU AFR CERTIFIED? Thank you for participating in today s webinar on Fannie Mae HomeStyle Renovation Mortgages! TAKE THE NEXT STEP! We hope that you now have a better understanding of this exciting opportunity to expand your product portfolio. We now offer online testing for you to measure your understanding of this program through AFR University. Upon completion of our online testing for this program, you will be provided feedback on how well you did, and any areas you may need to review. Also with a passing grade, receive your AFR University Certificate for Fannie Mae HomeStyle Renovation Mortgages. Take the next step and become AFR Certified! Visit our test portal to take your test and learn more about the benefits of our AFR University certification program. Take me there now! COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 37

38 ABOUT US AMERICAN FINANCIAL RESOURCES, INC. American Financial Resources, Inc. (AFR) is a national residential mortgage lender dedicated to helping homeowners, home buyers, and mortgage professionals achieve their financing goals by delivering innovative mortgage solutions and an unparalleled customer experience. Based in Parsippany, NJ and established in 1997, we are a Ginnie Mae, Fannie Mae and Freddie Mac Seller/Servicer, FHA Mortgagee, USDA National Lender and VA Automatic Lender. We provide Wholesale and Correspondent mortgage solutions by offering an extensive product catalog with competitive pricing, unique partnership opportunities, and flexible business relationships. We strive to exceed the expectations of our lending partners and nurture healthy, profitable relationships, ultimately providing a simplified mortgage process with the highest levels of customer service. COMPANY HIGHLIGHTS FULL SERVICE MORTGAGE LENDER NATIONWIDE SERVICING WHOLESALE AND CORRESPONDENT CHANNELS DIVERSE DELIVERY OPTIONS INCLUDING FHA, VA, USDA, FANNIE MAE AND FREDDIE MAC RANKED #1 IN 203(k) LENDING FOR SPONSORED ORIGINATIONS* ONE OF THE NATION S LEADING RENOVATION AND MANUFACTURED HOME LENDERS DEDICATED SALES AND OPERATIONS SUPPORT *Neighborhood Watch, US Department of Housing and Urban Development, January 31, 2016 COPYRIGHT 2016 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED 38

40 THANK YOU AFRWHOLESALE.COM