WELCOME TO MHDC LENDER TRAINING

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1 WELCOME TO MHDC LENDER TRAINING

2 AGENDA MHDC Overview First Place Loan Program Mortgage Revenue Bond (MRB) To Be Announced (TBA) Mortgage Credit Certificate (MCC) Benefits/Restrictions of the program Process & Forms ServiSolutions, Master Servicer

3 MISSOURI HOUSING DEVELOPMENT COMMISSION (MHDC) OVERVIEW MHDC is the state s housing finance agency. Our agency focuses on providing affordable housing to lowand moderate income Missourians through: Missouri Low Income Housing Tax Credit Mortgage Credit Certificates MRB/TBA Program Other housing programs

4 HOMEOWNERSHIP DEPARTMENT Provides funding to purchase homes through partnerships Injects gap financing into loans in the form of grants Monitors compliance Assures funds are evenly distributed statewide Provides support to lending partners

5 HOW TO BECOME A CERTIFIED LENDER EFFECTIVE 8/1/13 Forming a Partnership with MHDC

6 LENDER REQUIREMENTS 1. Must be insured by FDIC (banks) 2. Must have a three-year history of continuous operation in the state of Missouri 3. Must have a minimum net worth $1,000, Must have a history of production of not less than one million dollars per year in FHA, VA or USDA loans 5. Must maintain $500,000 in error and omissions coverage 6. Must furnish and maintain evidence of fidelity bond coverage 7. Must be approved for the type of loans originated: FHA, VA, USDA, etc.

7 LENDER REQUIREMENTS 8. Must originate, process, underwrite, close; and fund originated loans in their own name, and using their own funds 9. Must originate mortgages as a primary component of the company s overall operations 10. Must originate and close at least ten MHDC First Place loans annually 11. Financial institutions that have previously participated in MHDC programs must have a satisfactory production and problem resolution record 12. Must recertify annually and meet MHDC s financial requirements 13. Must attend lender training Review First Place Loan Program Manual

8 CERTIFIED LENDERS Must meet the preceding requirements Advertising may include a statement of MHDC certified lender status and the MHDC logo Door decals will be provided for all branches locations offering the program Yearly certification required Must close a minimum of ten loans per year

9 CERTIFIED LENDERS Annually homeownership staff will evaluate to establish a Top Performing lender/loan officer list for our website based on production Annual Lender of the Year award will be given to a lender that demonstrates strong commitment to MHDC programs which will be based on lender grade and production Periodically, lenders will be subject to testing by MHDC staff for adherence to these standards

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11 HOW TO BECOME A CERTIFIED LOAN OFFICER

12 LOAN OFFICER CERTIFICATION REQUIREMENTS 1.Your current employer must be an approved certified lender and meet the lender eligibility requirements 2.Loan officers who have less than five years experience in the First Place Loan Program, must take the lender/loan officer certification training and pass the test with a percentage of 70 percent or higher

13 LOAN OFFICER CERTIFICATION REQUIREMENTS 3.Loan officers who have five or more years experience in the First Place Loan Program, can opt out of taking the lender/loan officer certification training but must pass the test with a percentage of 70 percent or higher 4.A loan officer s certification will never expire as long as the loan officer shows active participation and/or the lender in which you are employed is a certified lender

14 LOAN OFFICER CERTIFICATION REQUIREMENTS 5.Loan officers may achieve Lifetime Achievements: Bronze- Reach 25 bond loans approved Silver- Reach 75 bond loans approved Gold- Reach 125 bond loans approved Platinum- Reach 250 bond loans approved 6. Loan officers level of excellence will carry to any certified lender in which employed

15 Top Producing Loan Officers

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17 WHY ENCOURAGE BUYERS... Lower monthly payments Cash to help with closing costs/down payment Federal tax credit to help lower their tax liability No added credit underwriting/qualifying Use program guidelines you are familiar with Allows you to qualify more borrowers

18 WHAT ARE THE LENDER BENEFITS? Good source of revenue: Foreachloansoldtothe master servicer, lenders will receive a 1.5% servicing release premium plus 1% origination fee and $750 application/processing fee on the front end. For example, on a $125,000 loan, the lender will earn a total of $3,875 Non-recourse sales: All MRB/TBA loans sold servicing released to our Master Servicer, currently ServiSolutions

19 WHAT ARE THE LENDER BENEFITS? No forward placement risk: When these loans are originated, the rate and fees paid are guaranteed, provided delivery takes place within the reservation period CRA (Community Reinvestment Act): Participation in the first-time homebuyer program constitutes a CRA-eligible activity, in most cases

20 WHAT ARE THE RESTRICTIONS? IRS regulations limit the maximum sales price for properties using the program Properties in 100 year flood plains not eligible for financing Applicants must be first-time homebuyers, except in target areas and/or a qualified veteran Some restrictions may apply to the sale of the home IRS regulations limit maximum income of applicants using program

21 WHAT ARE THE RESTRICTIONS? MHDC restricts the amount of fees that may be charged, eliminating junk fees ; underwriting fee, fee, etc. No Manual Underwriting Minimum Credit Score 620, maximum DTI is 45% Secondary financing is only acceptable from other government agencies

22 WHAT PRODUCTS ARE ACCEPTABLE? Lenders can use familiar products such as: FHA, RD (USDA), VA, and Conventional (HFA preferred) Borrower selects the following: Type of loan (FHA, RD, VA, etc.) Type of fund (CAP, Non CAP, or MCC)

23 HFA PREFERRED Housing Finance Agencies Only No LLPAs Adverse Market fee of.25% Deliver loans 97% loan-to value (LTV) Borrower contribution = $0 for one unit prop. Subordinate Financing - Community Seconds only Low mortgage insurance coverage Conventional Loans: FNMA Home Path

24 HFA Preferred Fact Sheet

25 HFA Preferred Fact Sheet

26 Borrower (s) must meet Mortgage Revenue Bond (MRB) requirements 1. Borrower(s) must be first-time homebuyer(s) 2. Property cannot be located in Flood Zone A 3. Household income cannot exceed limits set by MHDC 4. Sales price cannot exceed limits set by MHDC

27 FIRST-TIME HOMEBUYER A First-Time Home Buyer is defined as a person who: Has not had a present ownership interest in their principal residence within the last three years; Has not taken a real estate tax deduction (on schedule A) for any residence within the last three years and; Has not taken a mortgage interest deduction (on schedule A) for any residence in the last three years.

28 FIRST-TIME HOMEBUYER All adult persons who will reside in the home must meet the First-Time Home Buyer qualification The only exception to this requirement is if the applicant is purchasing a home in a federally targeted area or is a qualified veteran

29 FLOOD ZONES No part of the property can lie within a 100-year flood plain Any property lying within flood zone A will not be eligible for any MHDC program Any property lying within flood zone D must have prior approval from MHDC Lender must indicate the flood zone letter on the Lender s Certificate (form #520)

30 MAXIMUM HOUSEHOLD INCOME LIMITS- Effective 3/6/15 Section 9 - Gross Annual Household Income Limits Effective 3/6/15 MHDC First Place Loan Program State of Missouri NON-TARGETED AREAS TARGETED AREAS 1-2 persons 3+ persons 1-2 persons 3+ persons Kansas City MSA $73,300 $84,295 $87,960 $102,620 (Counties of Caldwell, Cass, Clay, Clinton, Jackson, Lafayette, Platte and Ray) Jefferson City MSA $65,100 $74,865 $78,120 $91,140 (Counties of Cole, Osage) Columbia MSA $72,500 $83,375 $87,000 $101,500 (Counties of Boone and Howard) St. Louis MSA $70,300 $80,845 $84,360 $98,420 (Counties of Franklin, Jefferson, Lincoln, St. Charles, St. Louis City, St. Louis County and Warren) All Other Areas $60,300 $69,345 $72,360 $84,420 SUBJECT TO CHANGE PLEASE MAKE CERTAIN YOU ARE ALWAYS USING THE CORRECT CHART

31 LIMITS EFFECTIVE 5/22/15 Single set of Price Limits used state-wide Two Family properties allowed, but must be at least five years old Non-Target 1 Family $258,690 2 Family $331,177 Target 1 Family $316,177 2 Family $404,772

32 Old Program Program Changes New Program CAL Program cash assistance loan Second Mortgage 3% assistance to the borrower No origination fee 1.5% SRP to lender $750 application/processing fee Total to lender 1.5% + $750 CAP Program cash assistance payment No Second Mortgage 4.5% assistance to the borrower 1% origination charged to borrower 1.5% SRP to the lender $750 application/processing fee Total to lender 1% + 1.5% + $750

33 2015 Single Family Programs First Place Program MRB/TBA CAP NON CAP MCC Stand Alone TBA CAP (coming soon) TBA NON CAP (coming soon)

34 MORTGAGE REVENUE BONDS (MRB) Are a type of mortgage loan where the cost of borrowing is partially subsidized by the mortgage revenue bond & are generally designed to lower the cost of homeownership for low to moderate income borrowers The program offers first-time homebuyers 30 year fixed mortgages at or belowmarket rates Due to the nature of these loans, IRS rules apply These loans have to be closed and purchased by the master servicer usually within 60 days

35 CAP provides first-time homebuyers with a 30-year fixed-rate first mortgage at affordable rate In addition, it will offer 4.5% of the total loan amount to go towards down payment and closing cost assistance MRB-CAP (Cash Assistance Payment) 4.5% will come in the form of a grant There are no monthly payments on the CAP TheborrowerwillnothavetopaybacktheCAP At closing the lender will front the 4.5% CAP to the borrower and will be reimbursed by the master servicer when the loan is purchased On all FHA CAP loans lenders must keep in their FHA files Form #593 and #594 to meet FHA compliance

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38 Non CAP provides first-time homebuyers with a 30-year fixedrate first mortgage at an even lower rate MRB-NON CAP (Non Cash Assistance Payment) First-time homebuyers eligible for lower interest rate than those who use CAP Rates result in lower monthly payments Program does not provide down payment and/or closing cost assistance

39 TO BE ANNOUNCED (TBA) Coming Soon This is a forward commitment program where the mortgage interest rate is set usually on a daily basis, sometimes more often, depending on the market conditions These loans have to be closed and purchased by the master servicer usually within 60 days Extensions will be allowed but at a cost to the lender. Under the TBA program the loansdonothavetomeetirsregulations, they only have to meet MHDC regulations

40 CAP provides first-time homebuyers with a 30-year fixedrate first mortgage at affordable rate In addition, it will offer 4.5% of the total loan amount to go towards down payment and closing cost assistance The 4.5% will come in the form of a grant TBA-CAP (Cash Assistance Payment) Coming Soon There are no monthly payments on the CAP The borrower will not have to pay the CAP back At closing lender will front the 4.5% CAP to the borrower and will be reimbursed by the master servicer when the loan is purchased On all FHA CAL loans lenders must keep in their FHA files Form #593 and #594 to meet FHA compliance

41 Non CAP provides first-time homebuyers with a 30-year fixed-rate first mortgage at an even lower rate TBA-Non CAP (Non Cash Assistance Payment) Coming Soon First-time homebuyers eligible for lower interest rate than those who use CAP Rates result in lower monthly payments Program does not provide down payment and/or closing cost assistance

42 MORTGAGE CREDIT CERTIFICATE (MCC) A certificate provided by MHDC to the borrower that directly converts a portion of the mortgage interest paid by the borrower into a non-refundable federal tax credit Mortgage credit certificates can only be issued by MHDC through certified lenders, and are typically available only to low- or moderate- income buyers. MCC s have to meet IRS/MHDC regulations These certificates are designed to help first-time homebuyers qualify for a home loan by reducing their tax liabilities below what they would otherwise have to pay

43 MCC will not be reissued Therefore, if a borrower refinances their home they will lose their MCC MORTGAGE CREDIT CERTIFICATE (MCC) MCC s are assigned to the borrower and the mortgage on the home, so if they refinance or sell their home the MCC will become null and void MCC are non assumable and non transferrable If the borrower fails to occupy their home as their principal residence the MCC will become null and void

44 MORTGAGE CREDIT CERTIFICATE (MCC) FOR MORTGAGE LOANS INVOLVING MCCS, CONVENTIONAL UNDERWRITING STANDARDS FOR HOUSING EXPENSE AND DEBT RATIOS MAY BE MODIFIED TO RECOGNIZE THE BENEFIT OF THE MCC FROM THE FEDERAL INCOME TAX CREDIT. THE SECONDARY MORTGAGE MARKET AND THE MORTGAGE INSURANCE INDUSTRY HAVE ESTABLISHED UNDERWRITING POLICIES FOR LOANS INVOLVING MCCS. THESE ARE AVAILABLE SEPARATELY AS POLICY STATEMENTS FROM THE MORTGAGE LENDING INDUSTRY, BUT GENERALLY ALLOW THE CREDIT AVAILABLE UNDER THE MCC TO BE TREATED AS AN ADJUSTMENT TO THE MONTHLY LOAN PAYMENT AMOUNT.

45 MORTGAGE CREDIT CERTIFICATE TAX CREDIT VS TAX DEDUCTION MCC

46 TAX CREDIT Entitles taxpayers to subtract the amount from their total federal income tax liability, receiving a dollar for dollar savings.

47 TAX DEDUCTION Entitles taxpayers to subtract from the adjusted gross income before federal income taxes are computed. Therefore, with a deduction, only a percentage of the amount deducted is realized in savings.

48 MORTGAGE Without MCC With MCC Mortgage Amount $100,000 $100,000 Mortgage Interest Rate 4.875% 4.875% Monthly Mortgage Payment $ $ MCC Rate Monthly Credit Amount (First Year Average) N/A 25% N/A $ "Effective" Monthly Mortgage Payment $ $428.34

49 TAX RETURNS With a MCC Without a MCC Adjusted Income Gross $65,000 $65,000 Itemized Deduction $6,200 $8,200 1 Exemption $3,900 $3,900 Taxable Income $54,900 $52,900 Tax $9,761 $9,261 Tax Credit for MCC $2,000 0 Total Tax Liability $7,761 $9,261 The borrower can fill out a new W-4 form with their employer to receive more money in each paycheck.

50 Available 25% Not Available Yet 35% Not Available Yet 45% Stand Alone MCC-TBA CAL MCC- TBA Non CAL

51 Stand Alone MCC s are borrowers who purchase the MCC only. The mortgage is through the certified lender using their market interest rate and their loan term. Only term unallowable will be a balloon loan. Stand Alone MCC rate is 25% MCC Stand Alone MCC is good for the Life of the Loan equal to 25% of the mortgage interest paid in a year Maximum allowable credit in a year is $2,000 If your allowable credit is reduced because of the limit basedonyourtax,youcancarryforwardtheunused portion of the credit to the next three years or until used, whichever comes first Claim on yearly tax returns (IRS Form 8396) Borrowers are charged a one-time fee of 1% of the total loan amount for MCC MHDC must prior approve all MCC

52 MCC-CAP borrowers receive 4.5% down payment assistance along with the MCC. MHDC sets the interest rate, all loans are 30 year fixed rate, and must be sold to our Master Servicer The MCC rate is 35% MCC-TBA CAP (Cash Assistance Payment) Coming Soon MCC is good for the Life of the Loan equal to 35% of the mortgage interest paid in a year Maximum allowable credit in a year is $2,000 If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next three years or until used, whichever comes first Claim on yearly tax returns (IRS Form 8396) Borrowers are charged a one-time fee of 1% of the total loan amount for MCC MHDC must prior approve all MCC

53 MCC-TBA Non CAP borrowers will only receive a MCC. MHDC sets the interest rate, all loans are 30 year fixed rate, and must be sold to our master servicer The MCC rate is 45% MCC-TBA Non CAP (Non Cash Assistance Payment) Coming Soon MCC is good for the Life of the Loan equal to 45% of the mortgage interest paid in a year Maximum allowable credit in a year is $2,000 If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next three years or until used, whichever comes first Claim on yearly tax returns (IRS Form 8396) Borrowers are charged a one-time fee of 1% of the total loan amount for MCC MHDC must prior approve all MCC

54 RESERVATIONS OF FUNDS Must have signed application from applicant who has entered into a fully-executed real estate contract before making a reservation Must have made preliminary determination that applicant qualifies per the financial institutions guidelines for the mortgage loan

55 RESERVATIONS OF FUNDS To reserve funds, must use Lender On-Line (LOL), the MHDC on-line reservation system Funds reserved on individual basis by means of a first-come, first-serve reservation system As soon as confirmation received, loan may close. If using the MCC program you must submit your application package to MHDC

56 LENDER ONLINE Using the MHDC Online system to make a reservation

57 UTILIZING LENDER ONLINE Must have access code issued by their administrator MHDC will not provide access codes to individuals Access the system online at Opening screen appears as sign-on field

58 STEP 1: SIGN-IN Enter your user name and password provided by your Administrator. Remember, it is case sensitive

59 STEP 1: SIGN-IN Once logged on, the banner screen opens; displays important announcements for lenders (new income limits, new forms, etc.) At this screen: New Reservation Availability of Funds Pre-Qualifications Loan Status Reports Level of access approved by your administrator will dictate which fields you may access

60 STEP 2: To enter new reservation, click on New Reservation tab

61 STEP 3: Each bond issue is structured as separate series; the most current issue will usually be only issue open to new reservations Make certain to select correct program when reserving a loan

62 STEP 4: Reservation Screen: enter all loan information; the fields with red asterisks* next to them are required fields For your convenience, all cities and counties have been programmed into the system and will auto-fill as you type the name

63 When all information is entered, click the Submit button at the bottom of the screen.

64 If reservation has been accepted, you will see reservation accepted. It also assigns a reservation number and the expiration date of the reservation. Don t forget to print your confirmation.

65 AVAILABILITY OF FUNDS Don t forget to Update

66 CHANGES There will be four different interest rates in the bond issue for example: CAP Government 4.25% NON CAP Government 3.5% CAP Conventional 4.75% Non CAP Conventional 4% Targeted loans will get the best rate we had in the last 12 months

67 RESERVATIONS OF FUNDS Reservation Expiration Dates: 45 days for existing homes 45 days for new construction Prior to last closing date for the bond issue MHDC must receive loan packages prior to expiration date If lender cannot complete the closing and submission to MHDC within this period, an extension will be required

68 RESERVATIONS OF FUNDS If reservation expires and MHDC has not received request for extension, the reservation will be automatically canceled Lenders are required to notify MHDC immediately of any changes Approved reservations may not change property address or be transferred to another participating lender

69 VERY IMPORTANT If you reserve wrong type of funds and they are not available when the loan is closed and shipped, we cannot guarantee that we will be able to approve the loan If you make a mistake, and find it after you have your confirmation, you cannot correct the mistake from the website

70 CHANGES TO A RESERVATION To alert MHDC of change: click Contact Us at the top of screen and send describing the error, and indicate correction being requested We will attempt to correct the error, and notify you by return if we were successful Your confirmation number will not change NOTE: A change of property will require a new reservation.

71 CHANGES TO A RESERVATION Return to the website in the next few hours and view Loan Status This will confirm your reservation has been corrected Print a copy of the screen for a record of the change

72 Forms on Lender Online

73 FORMS ON LOL MHDC documents may be found on LOL and are fillable through Loan Status Select needed documents, and LOL will populate the fields Handwritten forms will be rejected

74 AUTO FILLING DOCUMENTS Once you click on the borrowers reservation number and select documents

75 AUTO FILLING DOCUMENTS Then chose the document you wish to be completed and then click on Generate Document button.

76 AUTO FILLING DOCUMENTS Remember, this will not complete the entire form. Only the information you entered in at the reservation stage will be entered in the appropriate fields You must go through the documents and fill in any blank fields that were not filled in automatically This is also a good time to check to make sure all the data is accurate and make corrections where necessary

77 REMEMBER TO Cancel your own reservations in LOL Modify/extend your reservation by ing any staff member in the homeownership department Documents are only accessible through LOL Files containing forms not printed from the website will be rejected

78 PLEASE REMEMBER THESE IMPORTANT RULES: An expiring reservation will only be extended if the lender has approved the loan Loans that have not been approved after 45 days will be cancelled To extend a reservation, from LOL, click contact us and any person in the Homeownership department

79 PRE-QUALS Potential borrowers have option of pre-qualifying for the program through our website This will only pre-qualify them for our program only (i.e., income, purchase price, FTHB). They will still have to qualify for a mortgage Once the borrowers fill out the pre-qual information they will have the option to send it electronically to a maximum of three lenders Each lender s branch office that is listed on our website could receive pre-qual from a borrower Each branch should have a contact person and that is who will get the pre-qual notification by

80 PRE-QUALS Once you receive the notification from the borrower you will go into LOL and click on your prequal tab and find the borrower and click the view button to retrieve their information This is basically a sophisticated referral system for you the lender Once you have contacted the borrower and have made a determination of whether or not they qualify for a mortgage using the program then you should go back into the system and either remove them from your pipeline or reserve them right from the pre-qual screen This is what the screen will look like:

81 PRE-QUALS

82 LOAN OFFICER TIP: Taking a Loan Application Have MHDC application forms signed Be certain to question who will live in the home Ask about all forms of income-child Support, Social Security, etc.

83 FORMS TO BE SIGNED AT APPLICATION: Form #515(MRB)/#315(MCC) (application affidavit). This document will have to be signed at loan application for all loans

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87 MCC Process Once the reservation has been submitted, the certified lender must then send the conditional submission package to MHDC for review This requires all documentation on the check sheet (form #304) The documents must be submitted in the order that is on the check sheet

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89 Conditional Commitment Once MHDC reviews the conditional commitment package, it will either send a deficiency letter to the lender or a conditional commitment Conditional commitment (form #394) will be ed to the lender Once the lender receives the form #394 they can now close the loan If any major changes happen between conditional commitment and closing, the lender should notify MHDC immediately in order to keep the MCC commitment

90 MCC Final Submission Package After the loan has closed the lender should submit to MHDC the final loan package Documents should be sent in the order of the check sheet (form #305) Lenders are to wire the MCC fee (1% of the total loan amount) to MHDC

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92 MCC Annual Reporting At the end of every year MHDC will send each lender a report of the MCC s that were issued to each borrower for that calendar year Each lender that had their borrower use the MCC program will have to report to the IRS the list of borrowers who received the MCC Lender will do this by filing IRS form 8329

93 IRS (ANNUAL REPORTING)

94 ITEMS REQUIRING PRIOR APPROVAL: 1. Flood Zone D (non-mapped area) 2. Power of Attorney for Active Duty Military borrowers 3. Escrows for repairs A lender may, and should, submit any unusual item to MHDC for prior approval if uncertain of the acceptability of the item. Income close to maximum Tax returns

95 USES OF POWERS OF ATTORNEY Active duty military personnel currently stationed outside the continental United States may present a JAG Power of Attorney in lieu of mailing documents to the buyer This must come from the office of the Judge Advocate General

96 ESCROWING FOR REPAIRS MHDC documents state that all funds that have been dispersed-escrows should be used rarely, if at all Any item escrowed must be weather related or be a foreclosed or REO property The title company must escrow 1.5 times the bid

97 BUYERS PAYING FOR REPAIRS Buyer may not pay more for the property than the appraised value Therefore, if the appraised value and the sales price are the same, the buyer may not pay for any repairs If repairs cannot be completed prior to closing due to weather conditions, prior approval of escrow for repairs is required

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99 CALCULATING BORROWER INCOME

100 WHAT IS HOUSEHOLD INCOME? Household Income W 2 Wages Overtime/Bonus Child Support Social Security Income From All Borrowers In Home or Waived Spouse

101 Form: Income Calculation Worksheet Used to calculate income for occupants of household. Common Mistakes: *Explanation not given on how income was calculated. *Worksheet missing from file.

102 HOW TO CALCULATE INCOME FOR THE FIRST PLACE LOAN PROGRAM Base earnings are projected forward for a full 12- month period All overtime, bonuses and commissions will be calculated based on the most recent 12-month period (not a calendar year) Overtime/bonuses: Last 12-month history may be required

103 HOUSEHOLD INCOME Calculating worst case scenario : VOE states $3,000 in overtime this year, and $4,500 in overtime last year If a 12-month breakdown of overtime is not provided by employer, MHDC will accept totaling overtime for current and previous year, divided by 12: Example: $3,000+$4,500= $7,500/12= $625 monthly overtime

104 EXAMPLE: Hourly rate of $15.00 x 40 hours =$600 x 52 =$31,200 $31,200/12 = =$2,600 month Child support =$400 month Spouse, marital rights waived, =$2,000 month Total income = $5,000x12= $60,000 annually

105 COMMON MISTAKES Lenders fail to obtain a 12-month break-out of overtime for borrowers that are close to the income maximum Lenders fail to include overtime or bonuses Lenders add two years of overtime/bonuses together and average over longer than 12 months; if using worst case, it must average over 12 months

106 VERIFICATION OF EMPLOYMENT Alternative documentation is acceptable, but must follow MHDC guidelines VOE must not be over four months old on the day of closing MHDC will accept The Work Number for Everyone, but requires full version/ytd totals Remember, MHDC uses the last 12 months of income for OT, bonuses and commission. Lender must obtain a breakdown of overtime, commissions, etc. if necessary

107 OTHER FORMS OF INCOME Self-employment Child support Seasonal Unemployment Interest Income

108 DIFFERENCE IN CALCULATION FOR SELF-EMPLOYED PERSON Income listed on line 12 (net earnings) of the 1040 is used MHDC does not average income over several tax years Deductions are allowed, but all depreciation must be straight-line (Schedule C) Be certain to include the borrowers portion of retained earnings for partnerships and S- corporations

109 SEASONAL/IRREGULAR INCOME Use the exact amount received in the previous 12- month period If on the job less than 12-months, divide total income by months worked, then project forward to obtain 12-month income figure Example: $17,653/8 =$2, monthly, $2, x 12 =$26, annually

110 TREATMENT OF ASSETS Liquid Assets over $5,000 must be calculated as income Exception is Retirement Plans/Stocks Example: Bank Acct $10, x 2%--- NEW $ $210/12=$17.50 per month

111 INCOME THAT LENDERS MAY FAIL TO INCLUDE: Child support not received regularly: MHDC will include only the amount actually received. Be certain to obtain documentation if the support is not paid Foster care income and Food Stamp income is not used by MHDC unless underwriting includes it Use Form 522 to verify non-working status of spouse/other occupant Use Form 523 to verify absence of child-support/ public assistance

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114 INCOME EXCEPTION MHDC will always use the greater of either the amount used for credit underwriting or the actual income. If underwriting uses it, MHDC will count it. We may count income not used by underwriting.

115 COMMON MISTAKE Accepting an application from a borrower that is not married; has a child, and who receives no child support or government assistance and they fail to document as such. ANYTIME a minor child is present in a household, you must complete form number 523/323

116 FEDERAL INCOME TAX RETURNS All adults expected to reside in the property must submit copies of the last three years of federal tax returns Do not submit state tax returns Federal income tax returns may not be amended after the date of application to comply with the firsttime homebuyer requirement

117 FEDERAL INCOME TAX RETURNS If the loan closes after April 15, prior years tax return will be required Form 8453 is not acceptable Print-outs from the IRS or IRS Transcripts are acceptable. MHDC only needs either the transcripts or the actual 1040 returns. Please do not send both Applicants who were not required to file must complete a Non-Filing Status form #540

118 Form #540 This form is used in cases where an adult of working age did not file income tax returns Common Mistake: *Reason not given for not filing. *Hand written letter used instead of this form.

119 PROCESSOR & UNDERWITER TIP When reviewing tax returns, pay attention to the borrowers present and past marital status. If a tax deduction was taken for real estate or mortgage interest by any borrower or occupant within the past three years, the loan is not eligible for purchase by MHDC. Watch the homeowner status of non-borrowing occupants, they cannot have owned a home, even if it is free and clear Review the tax liability from previous years to make certain that the MCC will benefit the borrower

120 OTHER PERSONS OCCUPYING THE PROPERTY MHDC requires that all information verified for all borrowers occupying property, even if not taking title or executing note This includes income and tax returns to verify first time buyer status, etc. Enter additional adults name and co-signer name (if applicable) on the Lender Certificate

121 REAL-ESTATE CONTRACT Provide a copy of the real estate contract with all addendums Be certain any adjustments to sales price are included Both buyer and seller must have executed and dated the contract The home may not have a purchase price higher than the appraised value Do not submit the reservation until you have a FINAL contract

122 RESIDENCE ELIGIBILITY REQUIREMENTS The types of properties eligible for First Place program are as follows: single family detached row house town house Duplex 1/2 duplex condo manufactured homes on permanent foundations; peered/ skirted units are not eligible

123 RESIDENCE ELIGIBILITY REQUIREMENTS: Manufactured Housing: NOTE: Effective 10/01/03, Fannie Mae added an additional fee to all loans made for the purchase of manufactured housing The First Place program and MCC program does not allow for this extra fee This means that all loans for Manufactured Homes must be either FHA, RD or VA

124 OWNER OCCUPANCY REQUIREMENTS Mortgagors must occupy the residence within 60 days of loan closing and continue to occupy as long as the bond loan exists Mortgagors may not rent the property as long as the MHDC loan exists

125 PERSONS WHO ARE SEPARATED Any applicant who is separated is still considered a married person If the applicant and their spouse have been separated for more than 12 months, then each must sign the MHDC Marital Waiver Affidavits, (Form #550-1 and #550-2) stating they will not be residing together This also applies for spouses that are incarcerated

126 Form #550-1 page 1 This form is used in cases where the borrower and spouse have separated but are still married and do not intend to reside together. Borrower signs this form.

127 Form #550-2 page 2 This form is used in cases where the borrower and spouse have separated and do not intend to reside together. Non-occupying spouse signs this form.

128 PERSONS WHO ARE SEPARATED If an applicant who is currently separated from their spouse owned a home with that spouse within the last three years, the applicant may not usefirstplaceor MCC programs

129 LEAVING A RESIDING SPOUSE OFF LOAN In a situation where one spouse is being left off the loan but will be residing in the home, the spouse left off must: Execute the deed of trust Will not be on the Note Will not take title Will not sign MHDC forms Must still qualify for the program This will only apply to MRB/TBA loans

130 MOBILE HOME OWNERSHIP IN THE PAST THREE YEARS An applicant may be considered a first-time home buyer if : the mobile home was not on a permanent foundation; and the applicant has not taken a mortgage interest deduction on schedule A in the past three years; and the applicant did not take a real estate tax deduction in the past three years

131 MOBILE HOME OWNERSHIP IN THE PAST 3 YEARS If the applicant qualifies as a first-time home buyer, the lender must certify that the mobile home is indeed mobile A representative from the mortgage company must verify the mobility of the mobile home This may be accomplished by completing Mobile Home Certification-form #385

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133 CLOSING DOCUMENTS After the loan closes the lender is to submit to MHDC a closing package with all necessary forms

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136 CHECKLIST CORRESPONDENCE/PRIOR APPROVALS Supporting information should be included following the Lender s Certificate This will include letters of explanation, prior approvals etc.

137 TOTAL NUMBER IN THE HOUSEHOLD

138 TOTAL NUMBER IN THE HOUSEHOLD This means the total number of persons who will be occupying the property as their full-time principal residence Lender will initially determine household size from Residential Loan Application, and use the household size to determine maximum income allowable At time of closing, borrower will execute a Mortgagor s Affidavit stating the number of persons who will occupy the home, and their combined incomes

139 TOTAL NUMBER IN HOUSEHOLD A dependent may be counted if the parents are divorced and per the divorce decree each parent has custody 50 percent of the time Foster children are NOT counted as members of the household An unborn child may not be included as a dependent

140 FORM #325 Sellers Affidavit Verifies address, buyers name, sellers name, lender, sales price, etc. Must be executed by all persons having an ownership interest in property If executing the Warranty Deed, Form #525 must be executed

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143 FORM #330 Certification of Cost If a borrower constructed a home on a piece of land they owned, then applied for a First Place loan, there would not be a seller, so a Sellers Affidavit would not apply In these cases, the borrower would execute form #330

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145 FORM #335 Mortgagors Affidavit This form is signed by the borrower at the time of closing. By signing, the borrower states that all representations made at application are true, that the income verified is accurate, and who will occupy the property being purchased.

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149 FORM #375 Co-Signor Affidavit Co-Signers must not take title No co-signer information is required or considered Anyone taking title or occupying the property will be considered a co-borrower, and must meet all MHDC qualifications Co-Signer must be typed beneath the signature line on the note & addendum to note Co-Signer Affidavit must be signed

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151 WHAT HAPPENS WHEN THE HOUSE IS SOLD? Title to the home transfers as in any other transaction If the home is sold within the first nine years of homeownership, Recapture Tax may be triggered

152 POTENTIAL RECAPTURE TAX What is it, and how does it affect the borrower? Potential Recapture Tax is not an issue on TBA loans It only applies to MRB and MCC loans RECAPTURE TAX HAS NOTHING TO DO WITH THE CAP FUNDS. Recapture tax applies to all MRB (CAP and NON CAP) and MCC loans.

153 WHAT IS RECAPTURE TAX? If a homebuyer sells his or her home in the first nine years of ownership AND If they make a profit AND If income is over maximum additional tax may be owed

154 HOW IS RECAPTURE TAX CALCULATED Uses IRS Form 8828 as a worksheet Calculated from time of purchase to time of sale Uses purchase price plus improvements as base price Deducts cost of sale Uses sales-year Adjusted Gross Income as determinant if Recapture Tax owed

155 HOW DOES THE BUYER DETERMINE RECAPTURE TAX LIABILITY? Borrower will need: MHDC Form 355,IRS Form 8828, Instructions for IRS Form 8828 and IRS Publication 551, Basis of Assets These forms will allow the borrowers to determine what their adjusted basis is, based on eligible improvements, and if they are subject to Recapture Tax All IRS forms may be found at the IRS Website,

156 FORM #355 Notice of Potential Recapture Tax This form describes to the borrower what the potential impact may be if the home is sold in the first nine years This form provides maximum incomes limits for use in calculating recapture tax These forms change annually; when HUD income limits change, the buyers must use the one they are provided at closing

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160 SHOULD MY BUYER BY CONCERNED, PROBABLY NOT The average income for a First Place buyer is $43,000 annually The current Maximum Income is $60,300 or higher in some areas This means the average buyer is $17,300 under maximum Household income would have to increase this much to reach today s maximum

161 SHOULD THE BUYER BY CONCERNED, PROBABLY NOT Pay increases in the United States averaged less than 5% over the last 10 years The Maximum Income increases 5 percent automatically each year If your buyer qualifies for a First Place loan, it is extremely unlikely that household income will exceed the maximum income in the year of sale

162 THINGS TO CONSIDER: Borrower using CAP loan gets 4.5% assistance Borrower saves on interest rate while the home is owned Borrower has tax advantage while occupying his home Benefits of First Place program will usually outweigh the possibility of Recapture Tax

163 VERY IMPORTANT INFORMATION Convey to the buyer that they must retain this form until they sell their home. They will need to refer to this chart if their home is sold in the first nine years of ownership

164 TARGETED CENSUS TRACTS: WHAT ARE THEY? FEDERALLY DESIGNATED AREAS Seventy-percent of households make less than 80 percent of area median income For an additional list of affected counties, and for maps of targeted areas, refer to the MHDC website, Check census tract on the internet at

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166 HUD-1 SETTLEMENT STATEMENT Carefully review all fees to be sure they are allowed No junk fees are allowed Be certain the buyer is not receiving any of the 4.5% CAP funds (if used)

167 LENDER S FEES AND CHARGES Lender may charge the actual amount expended for credit reports, work number, home inspections($ max), pest inspections or treatments, flood letters, title examination and insurance, required title policy endorsements, mortgage insurance, attorney fees and filing/recording fees As of August 1, 2013, a $65 Tax Service" fee must be collected on each first mortgage. The fee will be netted out by the master servicer upon purchase of the mortgage

168 LENDER S FEES AND CHARGES As of August 1, 2013, originating lenders may charge an "Application/Processing" fee of up to $750 on each first mortgage. If the fee is charged, the originating lender must provide documentation to MHDC verifying that the fee was an "Application/Processing" fee. Only a joint "Application/Processing" fee is allowed, not a separate "Application" and/or "Processing" fee. Lenders may also charge a 1 percent origination fee to the buyer

169 PROHIBITED FEES The following may not be paid by the buyer: Document preparation fee, underwriting fee (except by a third party, then $300 maximum), commitment fee, discounts points, real estate sales commission, Federal Express/overnight delivery fees (unless agreed to in writing prior to closing)

170 FEES REGULATED BY MHDC Lenders may not charge discount points at closing on MRB/TBA loans Lenders will be paid a 1.5% servicing release fee upon purchase of loan on MRB/TBA loans

171 COMMON MISTAKE Lenders pass-through a fee/charge from the realtor. Buyers may not pay any fees to the realtor. Lenders should use every effort to ensure that fees to the seller are kept to a minimum. Lenders allow service providers (title companies etc) to charge more than the MHDC maximum fee allowed. Any amount over the MHDC maximum allowable fee must be refunded to the borrower before the loan will be purchased by MHDC.

172 NON U.S. CITIZENS Each applicant, along with their spouses, must be a U.S. citizen or a lawful resident alien Borrowers must occupy the property as their principal residence Borrowers must be eligible to work in the U.S. Borrowers and their spouses must have a valid social security number When the spouse of the borrower is not in the country legally, marital status may not be waived. Both spouses must be legal U. S. residents

173 FORM #545 The Home Mortgage Interest & Real Estate Tax Deduction Exemption If a buyer owned un-developed property, and deducted the interest or real estate taxes on that property on a Federal Income Tax return within the last three years, Form #545 must be completed

174 Form #545 This form is used to explain why a deduction was taken on tax returns.

175 FORM #560 Notice to Mortgagors Used only with FHA, VA, RD loans Explains restrictions on re-sale of property, renting property, etc. as they pertain to Government insured loans Not recorded with Deed of Trust Send original to MHDC

176 Form #560 Used for FHA, VA and RD loans. Explains restrictions on re-sale of property. Common Mistakes: *Original form not sent. NOTE: For married people in cases were only one spouse applies for the loan, if both plan to reside together the nonborrowing spouse does not sign this form.

177 FORM #570 Addendum to Note Attach to copy of the executed mortgage note Explains the consequences of transferring property to buyer that does not meet the guidelines of the First Place program Original goes to master servicer

178 Form #570 This form explains the consequences of transferring property to a buyer that does not meet the guidelines of the First Place Program Common Mistakes: *Original sent

179 Form #580 Tax Exempt Financing Rider This document explains that there is tax-exempt financing involved in the mortgage This document is signed at closing and recorded with the Deed of Trust Even a non borrowing spouse must sign this form along with the deed of trust. They cannot waive their marital rights

180 Form #580 This document explains that there is tax-exempt financing involved in the mortgage, this document is signed at closing. Common Mistakes: *Missing from file. NOTE: For married people in cases were only one spouse applies for the loan, if both plan to reside together the non-borrowing spouse must still sign this form.

181 CLOSER TIP PRE-CLOSING CHECKLIST

182 PRE-CLOSING CHECKLIST Do I have tax-returns or equivalent for all occupants? Income for all borrowers verified? Is the title company familiar with MHDC rules? Are both income and acquisition cost within guidelines? Are all fees allowed? Flood Zone OK? Rate verified? Are all MHDC forms correctly completed?

183 THE LOAN CLOSES!

184 CLOSING LOANS AT THE TITLE COMPANY Be certain your instructions to the title company are explicit Let the title company know about the maximum closing fees allowed Don t allow tax returns or other documents requiring review to be brought to closing

185 LOAN CLOSING Loan may not be subject to a buy down (only applies to MRB/TBA) Mortgage must be in fee simple title Must be a first mortgage Must be underwritten and documented in accordance with prudent standards, and in compliance with applicable program guidelines (i.e., FHA, VA, FNMA, RD) Must be 30 year term, and have payments due on the first of each month. (only applies to MRB/TBA)

186 SHIPPER TIP: THE LOAN IS CLOSED, NOW WHAT? CAREFULLY review forms for correct execution Review MHDC checklist (Form #505/#305 Lender Checklist) to ensure all required docs are sent with file Call MHDC with any questions before shipping Do not send a file knowing it is incomplete

187 SELLING LOANS TO MHDC Submitting packages to MHDC and Master Servicer Only applies to MRB/TBA loans

188 SALE OF FIRST PLACE LOANS Lenders may not retain servicing on First Place loans All First Place loans are sold to MHDCs master servicer, ServiSolution s

189 SUBMITTING FILES TO THE MASTER SERVICER Lenders are to submit a separate file to master servicer containing all required items All lenders must deliver packages eligible to be sold into the secondary market Any file must be eligible for sale to FHA, FNMA, RD or VA Lenders may use MERS effective 3/1/04

190 MASTER SERVICER Each file will be reviewed for compliance with the appropriate underwriting guidelines Files are not re-underwritten All lenders are required to exercise good judgment when making MHDC loans Master servicer will pay the lender when the loan is approved by both MHDC and master servicer

191 EDOCS ARE HERE! This will make the entire MHDC process paperless for all programs TBA Program could be up and running early next year. This program will be less documentation and more compensation to the lenders (allowing more fees to be charged).

192 What you need to utilize EDocs You must have access to Lender Online (LOL) You must have a username and password You must have Adobe Reader You must be able to scan documents

193 Paperless File Submission EDocs What is edocs? How to get started Step by step procedures Checking your file status What does each stage represent? Helpful Do and Don t reminders

194 What Is EDocs? edocs stands for Electronic Documents edocs is a way that lenders can submit their compliance files to MHDC and the Master Servicer electronically using Lender Online (LOL) edocs will eliminate paper files being sent to MHDC This will help reduce cost of shipping edocs will also eliminate the need for originals and live signatures on MHDC documents. This should cut down on deficiencies on the file.

195 How will submitting files change? The MHDC file itself will not change Form #505 should continue to be used as your guide to file stacking order Prepare your package just as you have in the past with all required forms and signatures Instead of mailing MHDC your package... you can now simply scan your file and upload it onto Lender Online!

196 Step by Step Process Preparing your package: Prepare your package using the form #505 Stacking Sheet as your guide. The file MUST be in order before scanning. NOTE: Electronic signatures are not yet allowed. All MHDC documents must be signed by the appropriate parties. Once the package is complete and ready for submission, scan the entire package as a PDF file and save to your designated folder.

197 Step by Step Process UPLOADING TO LENDER ONLINE STEP ONE: Click on Loan Status tab

198 STEP TWO: Step by Step Process Choose your reservation and click on the edocs icon.

199 Step by Step Process STEP THREE: Upload your pre-scanned file by clicking on Add New Make sure you are on submission package

200 Step by Step Process Name your document and note any special comments Click when you are ready to upload your file Enter what type of package submitted Enter additional comments about the package

201 Step by Step Process Locate the pre-scanned package in your folders. Click when you are ready to upload your file. Save It will indicate if the file was successfully uploaded.

202 Step by Step Process STEP FOUR: Your file is now uploaded onto Lender On Line. Click on Submit when you are ready to submit your completed file to MHDC.

203 Step by Step Process You will be given a confirmation of the date and time the file was submitted to MHDC.

204 Step by Step Process The status section in Loan Status will show your file has now been received by MHDC.

205 Lender Online Status Stages How do I know if it s been approved? What are the different stages in LOL?

206 Lender Online Status Stages Lenders are able to check the status of their files on Lender Online under the Loan Status tab. There are seven stages to each reservation/loan: 1. Reserved You have made your reservation 2. File Rec d MHDC has received the file 3. File Assigned The file has been checked out for review 4. File Review The file is in the process of being reviewed 5. Committed The file has been approved by MHDC 6. Purchased ServiSolutions has purchased the loan 7. Funded MHDC has pooled the loan

207 Lender Online Status Stages

208 Lender Online Status Stages Example: This file has been received by MHDC. It has not been reviewed or approved; however, the status after each stage reflects the status for that stage. Must say Committed/Approved before you can expect to see an approval.

209 Receiving a Deficiency Notice Should the file contain a deficiency, the contact listed for the file will be notified via . The File Review stage will show Pending. The conditions to clear the file will be at the bottom left of the screen.

210 Receiving a Deficiency Notice Submitting a missing document: Scan the missing information and save to folder Upload just as you did your file package Don t forget to Submit the uploaded document to MHDC DO NOT resubmit the entire file package

211 Loan File Approval Your approval will be sent via to the contact noted on the Lender s Certificate Form #520. Be sure to note the person who should be receiving deficiency notices and the final approval.