Plaza Home Mortgage. 203(K) Streamline Certification Program

Transcription

1 1 Plaza Home Mortgage 203(K) Streamline Certification Program 1

2 Welcome Trainer: Lynda Nolan National Underwriting Manager Plaza Home Mortgage DE/VA Underwriter 2

3 203(k) Streamline Certification Program As a Certified 203K Mortgage Broker Specialist you will be able to participate in Plaza s Initial Draw at Closing Program The Program allows Certified 203K Mortgage Broker Specialists Borrowers to receive their 50% initial draw at closing 3

4 Certified 203(k) Streamline Mortgage Broker Specialist Requirements 1. Must be in good standing with Plaza 2. Must maintain a 50% or better pull thru ratio 3. Must be an approved FHA Plaza Broker 4. Must complete the Plaza 203(k) Streamline Certified Mortgage Broker Training 5. Must successfully pass the 203(k) Streamline Certified Mortgage Broker Test with a minimum 75% score 6. Must continue to provide quality files 4

5 Certified 203(k) Streamline Mortgage Broker Specialist Requirements Upon meeting the requirements to become a Certified 203(k) Streamline Mortgage Broker Specialist each participant will receive a certificate of completion and the ability to participate in Plaza s Initial Draw at Closing Program. 5

6 Agenda FHA 203(k) Streamline Overview Advantages and Opportunities Process Flow Guidelines Working with Plaza Home Mortgage, Inc Resources 6

7 The 203(K) Streamline Loan Provides borrowers with an affordable, stable financing solution that combines the purchase or refinance of the home along with the costs of the improvements into a single loan FHA guidelines apply Opportunity to borrow against the value of the home after improvements Owner-occupied 1-4 unit properties, PUDs and Condo s Properties must be at least one year old Can be used with HUD REO programs, EEM Mortgages, Good Neighbor Next Door programs. Work can be completed by contractor or borrower 7

8 Opportunity for Borrowers who: 1. Are interested in purchasing a property that needs repairs 2. Are existing homeowners who need funds to rehabilitate their property 3. Want to save time and money by financing the purchase or refinance with the cost of the repairs 4. May not qualify for a conventional loan 5. Are first-time homebuyers (not a requirement) 6. Live in disadvantaged neighborhoods 7. Have limited cash for down payment or closing costs 8. Want to improve their home and neighborhood 9. Wish to improve the energy efficiency of their home 8

9 Target Markets Borrowers purchasing a home in need of rehabilitation REOs, foreclosures, and short sales Incomplete renovations Out-dated kitchen, bathrooms, etc. Borrowers refinancing existing home and making improvements Improve instead of move Out-dated kitchen, bathrooms, etc. 9

10 10 Guidelines General Qualifications 10

11 General Guidelines Standard FHA investment = 96.50% LTV for purchases, 97.75% for rate/term Loan-to-Value is based on the lesser of: The sales price or as is appraised value + repairs OR 110% of as completed appraised value NO minimum cost of the rehabilitation Initial draw is disbursed at closing Final draw is disbursed by the loan servicer Allows borrowers to finance up to an additional $35,000, including fees and contingency reserve into their mortgage to make improvements. 30 year fixed-rate mortgages only purchase or refinance Interested party/seller contributions allowed up to 6% Owner Occupied Properties only Attached and detached single family residences, condos and PUDs 2-4 unit properties 11

12 Additional Opportunities Energy Efficient Mortgage May add additional $8,000 for EEM improvements HUD REO Can be combined with 203(k) if approved by HUD May be used with HUD $100 Down Programs If HUD already has provided appraisal subject to 203(k) can use Good Neighbor Next Door Law Enforcement Officers, Teachers, Fire Fighters, etc. High Balance Loans 12

13 13 Guidelines Borrower Qualifications 1/26/

14 Credit and Income FHA guidelines apply All loans must be run through Desktop Underwriter (DU ) or Loan Prospector (LP). Manual underwriting is not allowed. Nontraditional tradelines are not allowed. See Plaza Standard FHA guidelines. Minimum 620 credit score required on all government loan transactions. Full documentation only Standard DTI Guidelines are 31%/43% may be exceeded with AUS approval. See Plaza Standard FHA guidelines. Cash reserves are not required on 1-2 unit properties 3-4 unit purchase transactions require 3-month reserves 14

15 15 Guidelines Property Improvements 15

16 Eligible Improvements Roofs, gutters, and downspouts Upgrade or Replace existing heating, ventilation, and air conditioning systems Upgrade or Replace Plumbing and Electrical systems Flooring (non structural, repair or replacement) Painting - Interior/Exterior Lead-based paint stabilization or abatement of lead-based paint hazards Minor remodeling that does not involve structural repairs. Bathrooms and kitchens New Appliances (Range and/or Oven, Range hood, Microwave, Refrigerator, Trash Compactor and Washer/Dryer - built in or Free Standing)

17 Eligible Improvements Continued Improvements for accessibility for persons with disabilities - remodeling kitchens and baths for wheelchair access, lowering kitchen cabinets, or installing wider doors (non load bearing walls only) and exterior ramps Energy Efficient Improvements Appliances Windows and Doors Weatherization (weather stripping, etc) up to $2,000 over the 203k Exterior decks, patios, porches and fences Basement finishing and remodeling that does not involve structural repairs including waterproofing Replacement of windows and doors and exterior wall re-siding Mold Abatement or Termite Active Infestation repairs (tenting, etc) Connection to Public Water or Sewer Repair or replacement of septic tank

18 Ineligible Improvements Pool repair or construction Adding or repairing a driveway or sidewalk Subfloors this refers to the structural elements under the flooring not the plywood base that the finish flooring is resting on. Replacing posts in crawl spaces Landscaping or similar site amenities Repair of structural damage New construction including room additions

19 Ineligible Improvements Continued Major rehabilitation or remodeling such as the relocation of load bearing walls Any repair or improvement that will require more than 6 months to complete or will displace the borrower for more than 30 days. Work that will not begin within 30 days of closing Rehab activities that will require more than 2 draws Repairs that require detailed drawings or architectural exhibits.

20 Appraisal Requirements Order the Appraisal as a 203k rehabilitation loan Provide appraiser with a copy of the borrower requested repairs and improvements (contractors bids or self help itemized improvements) Appraiser provides a completed report with an After Improved value (for refinances the appraiser also provides an As Is value) Appraiser may require additional items not included in the contractors bids if needed to meet FHA minimum property standards (In this case the borrower will have to provide additional contractors bids covering all appraiser required repairs) Interior Photos required if there is any construction work being done on the property (Interior Photos not required if the only rehabilitation done to the property are items such as Appliances, Carpet, Paint, Roof Repairs) If the appraiser recommends a pest inspection one will be required by Plaza Home Mortgage and any repair items on the pest inspection report must be completed in the 203k streamline All Appraiser repair items MUST be within the $35,000 limit (up to $45,000 with EEM improvements and weatherization items) or the loan will be ineligible for streamline 203k financing. No items listed on the appraisal can be left out of the bids Utilities must be on at the time of the appraisal inspection to confirm that all mechanical systems are operational if not, the repair of the mechanical systems must be included in the 203k streamline improvements

21 Occupancy Construction must BEGIN within 30 days of closing. Borrower may not be DISPLACED for more than 30 days during the Rehabilitation period. Examples of conditions that may displace a borrower for more than 30 days. Properties that do not have running water plumbing repairs that would require the water to be shut off for long periods of time. No electricity electrical repairs that would require the electricity to be shut off for long periods of time. Missing doors or windows Leaking or missing roof Repairs to the only bathroom in the property Missing stove no place to cook No heat source 21

22 203(k) Process Borrower locates property Loan closes and 50% of total draws are issued Borrower selects contractors 1/26/2010 Appraiser inspects property with contractor bid in hand Contractor prepares bids 22

23 Loan flow prior to submission to Plaza 1. Borrower makes application with lender and provides the standard credit documentation 2. Lender pulls CAIVR s. LDP, GSA and condo approval (if applicable) Any issues are resolved prior to continuing the process. 3. Case # is ordered by the broker for 203(k) rehab loan 4. Appraisal is ordered and a copy of the contractors bid and other pertinent information is provided to the appraiser. 5. The appraiser is to indicate the after improved value subject to completion of the proposed repairs and or improvements 6. Processor orders the credit report. VOD, VOE, VOR, etc and prepares the loan for submission to Plaza Home Mortgage

24 Loan flow after submission to Plaza 1. Loan is submitted for Underwriting with complete credit and property information (we can not underwrite the 203k loan on a property to be determined) 2. Loan is approved and conditions are cleared 3. Loan closes first draw is disbursed to the homeowner/contractor by the title company 4. Rehabilitation of the property begins within 30 days of closing 5. Loan is submitted to and purchased by the servicing lender 6. Repairs are completed 7. Servicer orders inspection of the property and issues a Compliance Inspection Report (CIR) A title update is ordered to establish no liens on title 8. Final funds are disbursed to the homeowner/contractor by the servicing lender upon approval of final inspection

25 203(k) Process after Funding Work begins within 30 days of closing Final draw is disbursed Work is completed within 6 months of closing 1/26/2010 Servicer notifies Appraiser to inspect property and issue CIR Borrower notifies servicer that work is complete 25

26 Requirements for submission 92700a 203(k) Borrower Acknowledgment - Signed and completed Self Help agreement if applicable- Signed and completed Signed and completed Homeowner/Contractor agreement from each contractor Contractor W-9 signed and completed Completed and signed contractor bids, license and proof of bond and E & O Insurance Rehabilitation loan agreement signed with loan documents

27 Signed and completed 92700a -203(k) Borrower s Acknowledgement CHOOSE ONE 1. PAY THE NET INTEREST INCOME DIRECTLY TO ME/US 2. APPLY THE NET INTEREST INCOME DIECTLY TO THE MORTGAGE PRINCIPAL BALANCE FOR AN EQUAL AMOUNT OF PRINCIPAL REDUCTION. 3. OTHER

28 Signed and completed 92700a -203(k) Borrower s Acknowledgement BORROWER S SIGNATURE AND DATE CO-BORROWER S SIGNATURE AND DATE LENDER S SIGNATURE, TITLE AND DATE PLAZA UNDERWRITER WILL SIGN 28

29 Signed and completed Self-Help Agreement Must complete Borrower s Name, Property Address, Telephone Number, Work Number and FHA Case No.

30 Signed and completed Self-Help Agreement ALL BORROWERS SIGNATURES WITNESS CAN BE BROKER 30

31 Signed and completed Homeowner/Contractor agreement Must be provided for each contractor Owner s Name(s) Contractor s Name Address Telephone Numbers Contractor Tax ID No and Address Telephone Numbers FHA Case Number

32 Signed and completed Homeowner/Contractor agreement from each contractor DATE PROPERTY ADDRESS Total from bid DATE OF COMPLETION 32

33 Signed Homeowner/Contractor agreement SIGNED AND DATED SIGNED AND DATED 33

34 Signed Homeowner/Contractor agreement NEED A SEPERATE AGREEMENT FOR EACH CONTRACTOR!!! 34

35 Contractor Documentation Contractor signed and completed W9 Completed and signed contractor bids License Proof of bond and E & O Insurance Three references

36 Rehabilitation loan agreement Signed with loan documents

37 37 Guidelines Contractor/Self-Help Guidelines 1/26/

38 38 Who Can Do the Work? Borrower can do their own work only if they can document their qualifications Must demonstrate ability to perform work and provide proof with previous experience relating to work to be performed Borrower can select their own contractor Must be licensed and insured if required by state (electrical & plumbing repairs must be completed by a contractor licensed in that field) Must be able to document qualifications Must provide 3 references 1/26/

39 Borrower Self-Help Requirements THERE ARE 3 TYPES OF SELF HELP.. 1. Borrowers who are purchasing materials or appliances outside of a standard contractors bid. Borrower must provide a bid or cost breakdown for those materials include those costs in the 203k loan and complete a Self-Help Agreement. 2. Borrowers who are having their work done by Home Depot or Lowes. Even though a contractor is doing the work the specific contractor is not usually identified until the work begins. Because we can not provide the required contractor information prior to close, these borrowers are considered self help borrowers and must sign a Self-Help Agreement 39

40 Borrower Self-Help Requirements Continued 3. Borrowers doing their own work must sign a Self-Help Agreement and fully understand that construction must be completed within six months of loan closing AND Maintain records documenting actual costs and lien waivers in the same way that a general contractor would. Provide cash reserves/credit sufficient to fund rehab costs until draw requests are processed. Note: Option #3 is not allowed, unless the borrower is a licensed contractor and has documented experience within the specific field. 40

41 Contractor Requirements Borrower selects a contractor Contractor provides proof of credentials (resume, contractors license, insurance or bond, 3 references) Any electrical or plumbing repairs REQUIRE the contractor to be licensed no exceptions (if an unlicensed general contractor is using licensed sub contractors for electrical or plumbing repairs the Sub Contractor is required to provide a valid license) Contractors must be able to provide proof of qualifications Resume, and 3 references (not required for sub contractors working under a general contractors license) All contractors must provide adequate insurance and/or bond coverage (not required for sub contractors working under a general contractors license) Contractors who have employees must provide proof of workman s comp insurance for all sub contractors doing work on the job site 41

42 Contractor Requirements Contractors must sign a fully completed Homeowner/Contractor agreement along with the borrower. The rehab amount listed on the Homeowner/Contractor agreement must exactly match the total of all bids from that contractor - it must also indicate the work will begin within 30 days of closing and be completed by a date no longer than 6 months from closing (best practice is to pick a date that is the full 6 months from the estimated close date indicating an earlier date may require the form to be re-executed if there is a delay in closing) All contractors must complete and sign a W9 form and include their SS# (for individuals) or an employer ID# (for corporations) Contractors who are an LLC must indicate the type of LLC on the W9 42

43 The Contractors Bids Contractor provides a work estimate for the repairs/improvements being done. The contractors bid or cost estimate must clearly state the nature and type of all repairs and the cost itemization for each repair. The cost estimates must be reasonable based on the nature of the repair and the size of the home. Plaza Home Mortgage will review the contractors bids carefully to ensure that all required repairs are included, and the costs estimates are reasonable, and may require the contractor to provide additional cost estimates if necessary

44 SAMPLE OF AN UN-ACCEPTABLE COST BREAKDOWN **Un-Acceptable Cost Breakdown Kitchen Remodel: Demo and Disposal, New cabinets, countertops, floors, appliances and fixtures. Price includes all material and labor $ 15,244 Flooring $ 5,599 Energy Efficient Windows $ 6,700 TOTAL $ 27,543 **This bid does not provide enough detail about the work being done. 44

45 Kitchen Remodel / Bid #1 of 3 Demolition and Disposal $ 500 New Cabinets Maple $ 4,500 Labor $ 2,700 Granite Countertops $ 2,200 Labor $ 1,200 New Sink/Faucet/Disposal $ 800 Labor $ 200 New Tile Flooring 170 square 3.20/per SAMPLE OF AN ACCEPTABLE COST BREAKDOWN $ 544 Labor $ 400 GE Appliances - Dishwasher/Range- Oven/Range Hood/Microwave $ 2,200 TOTAL $ 15,244 45

46 SAMPLE OF AN ACCEPTABLE COST BREAKDOWN Flooring Contract / Bid # 2 of 3 Remove and replace carpet in Living Room, Dining Room 3 Bedrooms. 100 Square $28/per $ 2,800 Labor $ 500 Hardwood Flooring in entry and family room 260 square $6.15/per $ 1,599 Labor $ 700 TOTAL $ 5,599 46

47 SAMPLE OF AN ACCEPTABLE COST BREAKDOWN Replace Windows / Bid # 3 of 3 10 Energy Efficient Vinyl Windows Materials and Labor 2 Energy Efficient French Doors to replace Existing sliders - Materials and Labor $ 3,200 $ 3,500 TOTAL $ 6,700 Total of all 3 Bids / Combined total Kitchen Remodel $ 15,244 Replace Windows $ 6,700 Flooring Contract $ 5,599 TOTAL $ 27,543 47

48 Maximum Mortgage Worksheet 48

49 49

50 Important New GFE Information!!! (k) fees cannot exceed the statutory requirement so cannot be over-disclosed 2. The Supplemental Origination Fee belongs in Block 1 3. Inspection fees are Included in Block 1 4. The Title Update Fee belongs in Block 4 5. Purchase should include Transfer Taxes in Block 8 6. Must complete the left hand column of the tradeoff table 50

51 Box 1 Box 4 51

52 Important New GFE Information!!! Supplemental Origination Fee, Line 11 of Maximum Mortgage Worksheet is Included in Box 1, Page 2 of New GFE Our origination charge 52

53 Purchase 53

54 Refinance 54

55 Energy Efficient Mortgage 55

56 Maximum Mortgage Amount 56

57 Total of all bids goes in line b1 57

58 Energy Efficient Mortgages with the Streamline 203k Up to $8,000 in energy efficient improvements can be added on top of the $35, k streamline limit. The EEM improvements will be based on the lesser of 5% of the property value (after improved) or $8, % of the EEM improvements may be financed. The LTV calculations apply only on the 203k streamline loan before adding the EEM amount An energy rating report (HERS) is required for all EEM items included In addition to up to $8,000 in EEM items the borrower may finance an additional $2,000 for weatherization repairs Total additional financed improvements can be as high as $45,000 on the streamline 203k loan including the $8,000 EEM and $2,000 weatherization items. Must be cost effective: The monthly energy savings must be greater than the payment increase based on a CEC approved Certified HERS (Home Energy Rating System) Rater

59 How HERS Works Home energy ratings involve an on-site inspection by a residential energy efficiency professional - a home energy rater. Home energy raters are trained and certified by a RESNET accredited home energy rating system. Find a Professional Home Energy Rater at: 59

60 HERS Consultants Utility Companies Local, state or federal agency Local, state or federal agency designated for the purpose of providing HERS for residential properties A non-profit organization experienced in home energy ratings on residential properties Great resource at 60

61 Potential Energy Improvements Central Heating/ Cooling (addition or replacement) Dual Pane Low E Windows & Sliding Glass Door Attic & Wall Insulation Whole House Fan House Leakage Diagnostic Testing Replace Wall Heating unit(s) Water Heater Replacement Exterior Doors & Sun Screen Solar DHW (Domestic Hot Water) Test & Seal Ductwork for Leaks PV pending

62 Tips The $35,000 Maximum Rehabilitation includes the cost of the repairs, plus all fees There is no minimum rehabilitation amount on the Streamline 203k A 10% contingency reserve will be required on all Streamline 203k loans that have any repair or construction Supplemental Origination Fee is based on the greater of 1.5% of the rehab amount or $350. Additional Title Fees for disbursements of the initial draw should be disclosed to the borrower upfront on the TIL Appraised Value: Estimates the value After Improved the purchase price (or true Asis appraised value for refinances) is used as the As Is value. All Appraisal required repair items must be included in the 203k rehabilitation loan and be within the $35,000 maximum otherwise the loan will not be eligible for the streamline 203k No Appraisal required repair (subject to) items can be done outside of the 203k streamline loan

63 Tips BORROWER AND CONTRACTOR MUST BE AWARE The initial draw (which equals 50% of each bid) will be disbursed at closing to allow for the rehabilitation to begin immediately. Rehabilitation MUST begin within 30 days of closing. (weather related delays considered case by case) The 203k streamline only has 2 draws The final draw (2 nd draw) will be disbursed by the servicing lender. The final draw will not be disbursed to any contractors until ALL contractors have completed the work on the property and a final inspection has been provided. Title must be clear before final payment is made The most common causes for a delay in draw are: Missing or incomplete W-9 Missing or incomplete Homeowner s Contractor and/or Self Help Agreement 63

64 64 Guidelines Post Closing 1/26/

65 65 What Happens After Closing? 1/26/ First draw is disbursed - 50% of each bid included in the 203k streamline loan will be disbursed at closing by the title company 2. Work begins within 30 days 3. Loan is purchased by the servicing lender and borrower will receive instructions on how to request the final draw (disbursement) once all the work is completed on the property 4. Borrower notifies the servicing lender that all work is completed 5. The Servicing Lender will contact the Appraiser 6. Appraiser inspects the property and issues a Compliance Inspection Report (CIR) confirming all work is completed as required 7. Title update is ordered to determine no mechanics liens 8. Final draw is disbursed 65

66 Resources 66

67 Accessing Forms on Plaza Website 67

68 Accessing Forms on Plaza Website 68

69 Contractor Bid/Proposal Requirements 69

70 Homeowner Self/Help Checklist 70

71 FHA 203(K) Streamline Resources For details on Plaza s standard FHA guidelines, refer to the broker website. For area median home prices: To transfer the loan, access FHA Connection located on the HUD website at: Under Single Family Servicing, select Mortgage Record Changes and then Servicing/Holder Transfer. Then input the new servicer s lender ID under New Holding Mortgagee and New Servicer Mortgagee For information on U.S. Department of Housing and Urban Development, visit: For information on FHA mortgage program questions, info@fhaoutreach.com 71

72 Test Available online at end of webinar Must pass with 75% Will be ed if you cannot take now Must be completed within 48 hours Each person must take the test individually Will communicate results to YOUR PLAZA BRANCH 72

73 Questions? 73

74 Legal Disclosure Equal Housing Lender Provided to mortgage professionals only and not intended or authorized for public distribution. Prices/guidelines subject to change without notice. All rights reserved. Fannie Mae, Community Seconds, Desktop Underwriter, DU and HomeStyle are registered trademarks of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. Home Depot is a registered trademark of Homer TLC, Inc. Lowe s is a registered trademark of LF, LLC. 74