Purchase and rate/terms only. Streamline Standard (aka full consultant) Cash out to borrowers is not allowed

Transcription

1 February 2014

2 The FHA 203K program is HUD s primary program for the rehabilitation and repair of residential properties There are 2 different 203(k) programs offered: Streamline Standard (aka full consultant) Purchase and rate/terms only Cash out to borrowers is not allowed

3 Standard REMN FHA credit guidelines and normal overlays apply Credit score overlays Minimum credit score year term only All loans must be submitted through DU and receive approve/eligible findings Currently REMN is not offering manual underwrites

4 Eligible properties - 1 to 4 unit detached and attached primary residences REMN does not allow for condo s, mixed use or manufactured housing New construction is not eligible; all properties must be considered existing and completed for at least 1 year Conversion of single family to multi and vice versa is acceptable All health and safety issues must be addressed

5 Demolished homes or homes that will be tore down during the rehab process are eligible provided some of the existing(i.e. corner square or side wall) REMN requires a second level review by Noel if a home is currently boarded up, condemned and uninhabitable

6 The Full/Consultant Option is designed for complicated projects as well as cosmetic updates Requires a FHA HUD Consultant The minimum cost of repairs is $5,000 and there is no maximum amount Borrowers can finance up to 6 months of PITI if home is uninhabitable as determined by the Consultant (not by AE, Broker or Borrower) Work to start within 30 days of closing and completed within 6 months Up to 5 draws permitted Only one (1) General Contractor allowed

7 HUD Consultant Approved by HUD Manages the entire project Works directly with borrowers & contractors Inspects property for health & safety issues Provides work write up or Specification of Repairs report that includes the adequacy of the existing structural, heating, plumbing, electrical and roofing systems Provides draw schedule Performs draw inspections

8 One (1) GC is allowed on Full Consultant loans Contractors are not approved by HUD or REMN REMN Wholesale does not collect bids from Contractor however: Contractor must sign consultants specification of repair report Contractor s Acknowledgement form must have the same amount of repairs as consultant report Appraisal must match both the consultant report and the contractors acknowledgment form

9 All contractors must provide the following information on every file: Applicable licenses and proof of insurance as required by the local, state, county and city jurisdiction Contractor application (same as contractor profile) with two (2) business references for completing similar jobs Homeowner / contractor agreement Contractors acknowledgement Completed Federal W-9

10 The Standard 203(k) is used for more complicated projects such as: Major structural alterations and additions Major landscaping and site improvements Repair swimming pool (up to $1,500) Remodeling of rooms, including kitchens & bathrooms (including appliances) Relocation of load bearing walls Converting multi-unit to a single unit or a single unit to a multi-unit

11 An identity of interest certification is required to be signed by all Borrowers Borrower s Identity-of-Interest Certification: I hereby certify to the Department of Housing and Urban Development (HUD) and REMN, that I/We do not have an identity-of-interest with the seller of the property. I also Certify that I/We do not have a conflict-of-interest with any other party to the transaction, including the realtor, lender, contractor, consultant and/or the appraiser..

12 The Standard 203(k) is used for more complicated projects such as: Construction or rehab of detached garage Other major improvements permanently fixed to the existing foundation or structure Converting multi-unit to a single unit or a single unit to a multi-unit Improvements for disable persons allowed for certain therapeutic items, such as special baths and tubs Install well and/or septic additional requirement apply, see next slide

13 When installing or repairing a well or septic, this work must be completed prior to the beginning of any other repair to the property If a property needs: Both well & septic- at least 1 acre is required If only well OR septic- at least ½ acre is required Exceptions are considered on a case by case basis with prior approval from the local health authority & the local HUD field office Evidence must be provided that the new well will produce a sufficient amount of portable water for the number of property occupants

14 1. Borrower finds home or decides to refinance Purchase- Borrower and Seller sign a standard sales contract Sales price does not reflect repairs 2. Borrower works with HUD Consultant and GC Contractor HUD Consultant prepares a Specification of Repairs report 3. Broker takes Borrower s application and gathers all pertinent documentation such as bids and specification of repair report

15 4. Broker completes the 203(k) GFE Worksheet in REMN s Broker Portal, completes a 203(k) Coversheet and submit a REMN lite file 5. Appraisal is ordered with consultant report and sales contract, if applicable As is value and After-Improved value On purchase transactions, the as is value can be assumed to be the sales price; refinances require an as-is value Repairs listed on appraisal must match consultant report 6. Broker full submission requires the Consultant report & appraisal

16 7. Underwriter reviews loan determines acceptable repairs and maximum loan amount 8. Encompass is updated accordingly PTC- Soft cost invoices are required New ATC condition being programed- Escrow Reserve holdback: An escrow in the amount of $(B10) will be held until the rehab repairs are complete. The escrow holdback is to be show on the HUD-1, line 105. Disbursements of these funds will be conducted by Real Estate Mortgage Network, Inc., as draw disbursements are approved. Please note, REMN s supplemental origination fee of $(B11) will be deducted from funds sent to closing. REMN will disburse the soft costs (consultant fee, engineering fee, permit, etc.) within 2-3 business days after closing. Soft costs will reflect POC in the 1300 line series of the HUD-1.

17 9. REMN Concierge team will conduct a call with Borrower, Contractor & Consultant to explain post-closing and disbursement steps 10. Work needs to begin within 30 days of closing and must be completed within 6 months 11. After repair work is completed, Sandra Baptista is notified by either Borrower or Consultant Inspection is ordered, title is updated Borrower must sign letter of repair completion Funds are released to borrower and contractor 10% holdback on each draw 12. Any unused funds must be used to pay down the original principal balance Cash back to borrower is not allowed No change in terms

18 Maximum loan amount determined by HUD s County Limits Purchase= 96.5% LTV Refinance= 97.75% LTV 203(k) Max Mortgage Worksheet Detailed instructions on determining the allowable loan amount

19 Borrower required to meet FHA s minimum cash investment Whichever is lesser: Purchase price or as-is appraised value plus rehabilitation costs 110% of after-improved appraised value Multiply by 96.5%= Total Base Loan Amount

20 Lesser of: Sales Price= $200,000 Total rehab costs= $ 15,000 Total= $215,000 OR After-improved value= $220, % of after-improved value= $242,000 $215,000 X 96.5%= $207,475 Total Base Loan Amount Add UFMIP

21 Labor & Materials (from specification of repair report) Contingency Reserve 10%-20%- Full Consultant (will reflect in report) 15% required on HUD REO and properties where utilities are not in proper working order) Inspection & Title update fees Financed mortgage payments (if applicable) Architectural & Engineering Fees (if applicable) Consultant Fees Permit fees (if applicable) Discount Points on Repair Costs and Fees

22 Example: Purchase with 96.5% LTV/CLTV Purchase and Renovation Costs Sales Price $200, Labor/Material $24, Contingency (10%) $2, Soft Costs (Inspection, title update, Consultant fee, Permits) $220 Supplemental Origination Fee (Greater of $350 or 1.5% of renovation costs) 0 Total for Purchase and Renovation $227,170 As-Completed value (Determined by appraiser) $240,000 Value to use for determination of LTV must be the lesser of the total cost of renovation or the as-completed value. In this example, $227,170 is less than $240,000, therefore the value you must use when determining the maximum loan amount is $227,170 Maximum Loan amount at 96.5% $219,219.05

23 Lesser of following 3 calculations: 1. Existing debt + total rehab costs + closing costs & prepaids If subject is owned less than 1 year, use the lesser of existing debt or sales price 2. As-is value + rehab costs X 97.75% % of the After-Improved value X 97.75% = Total Base Loan Amount Add UFMIP

24 HUD Foreclosures must include: Sales contract (bid) must have the 203K box checked on line #4 15% contingency Copy of the Original HUD Appraisal must be in loan file If this appraisal is current (dated within 120 days of the ratified contract) the lower of the Purchase price or the As Is value from the HUD Appraisal must be used to determine the max mortgage amount If the HUD Appraisal expired, a new appraisal should be obtained to support the As Is value and after improved value based upon the renovation being completed. **Even if the appraisal expired, you need to keep a copy of the original HUD appraisal & PCR report in the file**

25 If the borrower overbids resulting in a higher purchase price, the borrower will need to come up with the difference between the As Is value and the new Purchase price After improved appraisal must be ordered If HUD disposition appraisal will be acceptable and after improved appraisal not required if: Appraisal is less than 12 mos old and the sales contract plus cost of rehab does not exceed 110% of the as repaired value If this HUD appraisal is insufficient, a 2 nd appraisal may be ordered to establish the after approved value

26 1. Purchase = Sales Price Refinance = Existing Debt or if owed less than 1 year the original acquisition cost must be used 2. As- Is Value from appraisal on refinances, purchases will be sales price 3. After improved value from appraisal 110% of after improved value 4. Borrower paid closing cost and prepaids are only applicable to refinance transactions 5. Allowable energy improvements (not allowed at this time)

27 1. Total cost of all repairs 2. Contingency Reserve - 10% - 20% of repair costs (15% for HUD REO s) 3. Inspection fees + title update (1X$75) 4. Mortgage payment escrowed if applicable 5. Subtotal of B1, B2 and B3 6. Architectural and engineering fees if applicable 7. Consultant fees 8. Permits when required by a local government 9. Other fees 10.Subtotal of B5 + B8 11.Supplemental origination REMN does not charge 12.Discount points on repair cost line B10 times the appraisal discount points. This is only the portion based on repair cost 13.Subtotal for release at closing 14.Total rehabilitation cost

28 1. Lesser of sales price line A1 or as is value Line A2 2. Total rehabilitation cost line B14 3. Lesser of sum of lines C1 + C2 or 110% of after improved value line A4 4. Maximum base mortgage amount: Line C3 less any excess sales concessions X 96.5% Example: Sales Price = $190,000 As Is Value = $190,000 Rehab Cost = $30,000 After Improved Value = $210,000 Line C3 lesser of $190,000 + $30,000 = $220,000 or $210 X 110% = $231,000 Line C4 = $220,000 X 96.5% or $212,300

29 1. Same as a standard FHA 203 (b) plus the rehabilitation cost line B14 2. Lesser of as is value Line A2 plus the rehabilitation cost Line B14 or 110% of after improved value line A4 3. Line D2 X 97.75% 4. Base mortgage amount is lesser of D1 or D3 Section E: Calculation for EEM is not applicable Section F: Summary is standard FHA MIP factor

30 Block 3- Re-Inspection Fees (up to 5) Block 4- Title Update Fee Block 6 Consultant Fee Architectural & Engineering Fees Permit fees If fees are not included on the GFE, these fees cannot be included in calculating the max loan amount (do not include on MMW)

31 1. 203K maximum mortgage worksheet- must be signed by DE UW (cannot use ZFHA) K borrowers acknowledgement 3. Mortgage payment disclosure 4. Borrowers identity of interest certification 5. Homeowner / Contractor agreement** 6. Contractor acknowledgement*** 7. Self help agreement (if applicable) 8. Contractor license, insurance, contractor application, and W-9 9. Consultant Identity of Interest ***The repair amount on the Homeowner/Contractor agreement, contractor acknowledgment & consultant report all must match

32 Borrower must complete the highlighted section LO MUST sign and date at least 3 days prior to closing

33 All highlighted fields to be completed Red arrow indicates- sum of repairs from contracting estimate (must match Consultant report & Contractor Acknowledgement)

34 If Limited Liability Company is checked: Classification must be completed Can only be Social Security Number or Employer Identification Number Can not be both

35 Construction Code-Substantial Rehabilitation ADP Code- 702 Housing Program- Improvement (203k) 203K Consultant ID

36 DU findings contain some differences in how certain data is reflected for 203K loans; PURCHASE Transactions Sales Price on page 1 of DU will reflect a total figure of Purchase Price + Total Rehabilitation Cost (LINE B14) as sales price. Example: PP $125,000 Total Rehab Cost $24,756 (line B14) DU will reflect Purchase price as $149,756 Validation worksheet will reflect actual PP of $125,000

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