Underwriting Guidelines (FHA Loans)

Transcription

1 L Underwriting Guidelines (FHA Lans)

2 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 OVERVIEW Purpse The fllwing dcument describes the respnsibilities and requirements f the Carringtn Mrtgage Services, LLC (CMS) Mrtgage Lending Divisin Underwriter (Underwriter) when reviewing and underwriting Federal Husing Administratin (FHA) mrtgage lan applicatins. Table f Cntents FHA Underwriting Overview FHA Lan Prgrams and Cmpliance Overview Mrtgage Insurance Prgrams Overview FHA Prgrams Sectin 203(b) Hme Mrtgage Insurance Sectin 203(b) Repair Escrw Hme Mrtgage Insurance Sectin 203(k) Streamline Rehab Prgram Sectin 234(c) Mrtgage Insurance fr Cndminium Units Sectin 251 Adjustable Rate Mrtgages Descriptin FHA Insured Mrtgages fr HUD Emplyees Overview Underwriting HUD Emplyee Lans Prperty Dispsitin (Sale f HUD Owned Prperties) Overview Existing HUD Appraisal Requirements HUD REO Appraisal Requirements HUD REO Appraisal Requirements Utility Issues HUD REO Appraisal Requirements Ordering Updated Appraisals Safe Harbr Act fr Appraisals Requirements FHA Case Numbers Assigning the FHA Case Numbers / Sectins f the ACT / ADP Cdes Case Numbers fr HUD REO Prperties FHA Cnnectin Overview Originatin Functins in FHA Cnnectin Case Number Assignment, Cancellatin, and Reinstatement Case Prcessing Menu Case Number Assignment Manual Case Number Cancellatin Autmatic Case Number Cancellatin by the Systems Case Number Reinstatement Case Number Cancellatin fr Lans Eligible fr Higher Cunty Lan Limits FHA Hme Ownership Center (HOC) Hme Ownership Centers FHA Lan Eligibility Overview LDP and GSA Prcurement/Nn-Prcurement CMS Plicies & Prcedures Page 2 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

3 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Requirements Unifrm Residential Lan Applicatin Lan Applicatin Requirements Face-T-Face Interview Overview Identity and Scial Security Number Validatins Identity Verificatin Scial Security Number Validatin Occupancy Types Overview Primary Residence Occupancy f Frmer Investment Prperty r Secnd Hme Brrwers, C-Brrwers, C-Signers, and Nn-Purchasing Spuses Brrwers, C-Brrwers and C-Signers Resident Aliens Nn-Purchasing Spuse Cmmunity Prperty States Ineligible Brrwer and Vesting Types Ineligible Brrwers Ineligible Vesting Types Transactin Types Overview Purchase Mrtgage k Identity f Interest Refinance Mrtgages Cnstructin Permanent Mrtgages (Single-Clse Mdificatin f Nte) Financing Limit When Paying Off Land Cntracts LTV Rati When Paying Off Land Cntracts Equity as Cash Investment When Paying Off Land Cntracts Rent Credits Principal Curtailment Refinance Transactins with Escrw Credits Leasehld Estates Overview Leasehld Estate Requirements Lease Requirements Grund Rents Maximum Mrtgage Limits Requirements Lan-t-Values Calculating Lan-t-Value Calculating Cmbined Lan-t-Value Cmbined Lan Amunt Definitin Minimum Brrwer Investment Overview Acquisitin Cst Secndary r Subrdinate Financing Overview Secndary Financing (Dwn Payment Assistance) Lender Respnsibility fr Ensuring the Dwn Payment Assistance Prvider Is a CMS Plicies & Prcedures Page 3 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

4 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Charitable Organizatin Virginia Autmatic Subrdinatin Seller Cntributin Limitatins Cntributins/ Cntributrs Inducements t Purchase Premium Pricing Allwable Brrwer Paid Clsing Csts Requirements Building n Own Land Requirements Mrtgage Insurance Premiums Overview Up-Frnt Mrtgage Insurance Premiums Mnthly/Annual Premium FHA MIP Rates Unearned MIP Refund Calculatins Requirements Refinance Authrizatin Requests UFMIP Refund When Greater Than New UFMIP (Streamline Refinances) Mrtgage Insurance Premium (MIP) Refund Charts Refund Schedules Upfrnt Mrtgage Insurance Premium Refund Schedule 5 Years FHA Upfrnt Mrtgage Insurance Premium Refund Schedule 7 Years FHA Risk Management Overview Lan Status Apprved Status Insuring an FHA Lan Requirements Risk Cntrls Verificatins Sent t Pst Office Bxes Fraud/Red Flags Appraisal Transfer Appraisal Transfer (Case Number Assignment After Cmpletin f Appraisal) Appraisal Assignment Rejected Applicatin Assignments Case Number Assignment After Cmpletin f Appraisal Fair Lending Denying Credit FHA Dcumentatin Overview Minimum Dcumentatin Requirements Dcumentatin Requirements t Clse an FHA Lan Dcumentatin Requirements t be Eligible fr Underwriting Clsing Dcument Signing Requirement Signing Requirement Electrnic Signatures Requirements CMS Plicies & Prcedures Page 4 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

5 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 FHA Autmated Underwriting Overview Eligibility Requirements FHA TOTAL Mrtgage Screcard Eligible Lan Types Eligible Lan Types Ineligible Lan Types Autmated Underwriting Decisins Overview Apprve/ Eligible Underwriting Findings Reprt Overview Risk/Eligibility Ptential Red Flags Verificatin Messages/ Apprval Cnditins Observatins Underwriting Analysis Reprt Submissin/Resubmissin Requirements Requirements Credit Prcessing Requirements Credit-Related Waivers and Verificatin Dcumentatin Incme/Emplyment Overview Incme/ Emplyment Waivers and Verificatin Dcumentatin Asset Dcumentatin Overview Retirement Accunts Gifts Appraisal and Dcumentatin Requirements Requirements FHA Credit Overview Credit Reprt Requirements Requirements Credit Reprt Red Flags Age f Credit Reprt Three Repsitry Merged In-File Credit Reprt (Trimerge) Residential Mrtgage Credit Reprt (RMCR) Nn-Traditinal Credit Insufficient Credit Undisclsed Debt Credit Scres Overview Credit Scre Risk Factrs Credit Scre Requirements Selecting Credit Scre Credit Histry Evaluatin Overview Number and Age f Accunts CMS Plicies & Prcedures Page 5 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

6 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Payment Histries Credit Utilizatin Inquiries Credit Cmpnents Verificatin f Credit Requirements Husing Payment Histry Bankruptcy/ Freclsure/ Deed-in-Lieu Shrt Sales Shrt Payffs Cnsumer Credit Cunseling Services (CCCS) Extenuating Circumstances Majr Adverse Credit AUS Apprve AUS Refer r Manual Underwrite Capacity Analysis AUS Apprve/ Eligible Manual Underwrite Ecnmic Event FHA Back t Wrk Only Ecnmic Event Credit Incme Lss f Emplyment Lss f Incme Pst Ecnmic Event Incme Husing Cunseling Husing Cunseling Fees Husing Cunseling Dcumentatin Waiver r Reslutin f CAIVRS Indicatr Delinquent Federal Debt Judgments and Tax Liens FHA Emplyment and Incme Evaluatin and Dcumentatin Overview Dcumentatin Age Requirements Stability f Incme and Emplyment Requirements Tax Infrmatin Authrizatin IRS Frm 4506-T/2907 Tax Transcripts Requirements Puert Ric Tax Returns Requirements Dcumentatin Requirements and Standards Dcumentatin Requirements Dcumentatin Standards Incme Types Overview Wage Earner Bnus r Overtime Cmmissin Emplyment by a Relative Self-Emplyed Incme Overview Incme Dcumentatin and Evaluatin by Tax Returns Meal Deductins CMS Plicies & Prcedures Page 6 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

7 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcumentatin Requirements Rental Incme Overview Calculatin f Rental Incme Net Rental Incme fr Three t Fur Unit Prperties Unacceptable Surces f Rent Other Incme Overview Alimny, Child Supprt and Maintenance Payments Aut Allwances and Expense Accunt Payments Disability Incme Emplyer Differential Payments Emplyment Gaps Fster Care Incme Future Emplyment Interest and Dividend Incme Leave f Absence Military Incme Nn-Taxable Incme Nte Incme Public Assistance Prgrams Retirement, Pensin, Annuity Incme and IRA Distributins Seasnal Incme Scial Security Incme Teachers Trust Incme Unin Members VA Benefits Unacceptable Surces f Incme Surces f Unacceptable Incme FHA Liabilities and Debt Ratis Overview Mnthly Husing Expenses Ttal Qualifying Primary Husing Expense-t-Incme Rati Mnthly Debt Obligatins IRS Repayment Plans Debt Pay Off/Pay Dwn Prjected Obligatins Ttal Qualifying Debt-t-Incme Ratis Cntingent Liabilities Other Cnsideratins Maximum Ratis fr Manually Underwritten Lans Dcumenting Acceptable Cmpensating Factrs Calculating Residual Incme Calculating Grss Mnthly Incme Calculating Mnthly Expenses Calculating Payment Shck Using Residual Incme as Cmpensating Factr States Included in Regins Nn-Occupant C-Brrwers FHA Assets Overview Dcumentatin Age CMS Plicies & Prcedures Page 7 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

8 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Requirements Minimum Dwn Payment and Cash t Clse Requirements Asset Surces Overview Bank Accunts Earnest Mney Depsits Emplyer Assistance Plans Equity frm Other Assets Freign Assets Gifts Lan Frm A Relative Real Estate Cmmissin frm Sale f Subject Prperty Rent Credits Repayment Of A Persnal Lan Retirement Accunts Secndary Financing Stcks / Bnds Sweat Equity Trade Equity Trade In f Manufactured Hme Cash Reserves Requirements Unacceptable Surces f Assets Requirements FHA Prperty Types and Appraisal Dcumentatin and Review Overview FHA Appraisal and Prperty Cnditins Assessment Requirements Changes in Purchase Price Appraisal Independence Overview Appraisal and Appraisal Management Cmpany (AMC) Third Party Organizatin Fees Appraisal Selectin in FHA Cnnectin Appraisal Dcumentatin Age f Appraisal Updated Appraisal and/r Cmpletin Reprt (Fannie Mae frm 1004D/Freddie Mac frm 442 with update) Required Appraisal Frms Fr Yur Prtectin Get a Hme Inspectin Selecting an Appraiser Overview Prvisins f the Lender Selectin Prcess Appraisal Transfer (Case Number Assignment after Cmpletin f Appraisal)205 Overview Secnd Appraisal Case Number Assignment after Appraisal Cmpletin Appraisal Fees Overview Inspectin Fees CMS Plicies & Prcedures Page 8 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

9 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Setting Prperty Related Cnditins Cnditinal Cmmitment/Direct Endrsement Statement f Appraised Value 207 Requirements Unifrm Appraisal Dataset (UAD) Overview Cnditin Quality Unacceptable Appraisal Practices Requirements Prperty and Prject Types Prperty Type Classificatins Eligible Prperty/ Prject Types Ineligible Prperty/ Prject Types Eligible Prperty Types Single Family Residence Manufactured Hmes Mdular Hme, Pre-cut Hme, Panelized Hme Multi-Family Cndminium Planned Unit Develpment (PUD) Deed Restrictins Leasehld Estates Appraisal Prcedures Fr Leasehld Estates Envirnmental Hazards Requirements Lcatins Near High-Pressure Gas and Liquid Petrleum Transprtatin Lines. 220 Overhead High-Vltage Transmissin Lines Overhead Lw-Vltage Transmissin Lines Operating and Abandned Oil and Gas Wells Operating and Abandned Statinary Fuel Strage Tanks Grund Subsidence Prperties Affected by Lead Base Paint Asbests Insulatin Chinese Drywall Heavy Traffic Railrad Tracks and Other High Nise Surces Prperties Affected By Airprt Nise and Hazards Water and Sewage Systems Private Water Systems Cisterns Hauled Water Cmmunity Water and Sewer Systems Shared Wells Individual Sewage Systems Prperties with Slar Energy Requirements Private Rads Requirements Prperties with a Crawl Space Requirements Certificatins CMS Plicies & Prcedures Page 9 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

10 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Overview Utilities Carbn Mnxide (CO) Detectrs Prperty Inspectin Termite Inspectin New Cnstructin Prperty Requirements Prpsed Cnstructin Under Cnstructin Existing Cnstructin (less than ne year ld) New Cnstructin Exhibits and Inspectin Checklist Stages f Cnstructin Prcessing Prcedures fr New Cnstructin Lan-t-Value Rati HUD Apprved Ten Year Warranty Cmpanies Site Built Using Building Permits and Certificates f Occupancy Municipalities That D Nt issue Building Permits and/r Certificates f Occupancy Affirmative Fair Husing Marketing Plan Mve-On (k) Full Imprvements Eligible Imprvements Ineligible Imprvements (k) Streamline Imprvements Eligible Imprvements Ineligible Imprvements (b) Repair Escrw Imprvements Eligible Imprvements Ineligible Imprvements Manufactured Hmes Manufactured Hmes Certificatin Label and Data Plate Manufactured Hme Prperty Eligibility Requirements Manufactured Hme Ineligible Prperty Fundatin Systems Engineer s Certificatin n Fundatin Cmpliance New Cnstructin Engineer s Certificatin n Fundatin Cmpliance Existing Cnstructin Fld Zne Inspectins fr Manufactured Hmes Termite Cntrl fr Manufactured Hmes Perimeter Enclsures Cndminium Prjects PUD Prjects Title Case Number Assignment/Prgram Cde Maximum Mrtgage Amunt - Purchase Maximum Mrtgage Amunt CP Transactins Cndminium Prjects Overview Maximum FHA Cncentratin Within A Prject Cntinuing Prject Eligibility Investr must Review Cnd Prjects t Determine their Eligibility Prir t Clsing Ineligible Cndminium Prjects Cndminium Prject Apprvals CMS Plicies & Prcedures Page 10 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

11 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Warranty Prcess fr Units in Apprved Cndminium Prjects Htel and Transient Use (Tw-t Fur-Family) Requirements Cmpliance Inspectins Overview Initial Inspectin Framing Inspectin Final Inspectin (b) Repair Escrw Inspectin Requirements New Cnstructin Exhibits Builder's Certificatin f Plans, Specificatins, and Site (HUD Frm ) Warranty f Cmpletin f Cnstructin / Builders Warranty (HUD Frm 92544)268 Termite Cntrl Carpet Identificatin Manufacturer's Warranties and Insulatin Certificate Cmpliance Inspectin Reprt (HUD Frm 92051) Ten Year Insured Prtectin Plan Warranty Certificate Of Occupancy Appraisal Review Overview The Subject Prperty Neighbrhd Analysis Site Analysis Imprvement Analysis Sales Cmparisn Apprach Cst Apprach Incme Apprach Recnciliatin Natural Disasters Overview Inspectin Requirements (b) Repair Escrw Prgram Requirements Required Cmpletin Time fr Repairs Disbursement made t the Cntactr / Brrwer(s) Cntingency Reserve Minimum and Maximum Amunts fr Repair Csts Cntractr Bid/Invice Requirements Lead-Based Paint Appraisal Requirements (k) Streamline Prgram Requirements Required Cmpletin Time fr Repairs Disbursement made t the Cntactr / Brrwer(s) Cntingency Reserve Minimum and Maximum Amunts fr Repair Csts Partial Claim Minimum Cash Investment Calculatin Lead-Based Paint Appraisal Requirements (k) Full Prgram Requirements Required Cmpletin Time fr Repairs Release f Funds (Draw) frm the Rehabilitatin Escrw Accunt Intermediate Draws frm the Rehabilitatin Escrw Accunt Final Inspectin Cntingency Reserve Minimum and Maximum Amunts fr Repair Csts CMS Plicies & Prcedures Page 11 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

12 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 HUD Cnsultant Plan Review Partial Claim Minimum Cash Investment Calculatin Lead-Based Paint Appraisal Requirements Lead-Based Paint Appraisal Requirements Nn HUD REO Prperties FHA Cndminium Prject Matrix FHA New Cnstructin Required Exhibits and Inspectins Checklist CMS Plicies & Prcedures Page 12 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

13 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry Date Versin Descriptin f Change 04/10/ In the FHA Lan Eligibility sectin, updated the fllwing subsectins: Scial Security Number Validatin Refinance Mrtgages In the FHA Credit sectin, updated the Judgments and Tax Liens sub-sectin. In the FHA Emplyment and Incme Evaluatin and Dcumentatin sectin, updated the Dcumentatin Requirements and Standards sub-sectin. In the FHA Assets sectin, added the Freign Assets subsectin. In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, added the fllwing sub-sectins: Changes in Purchase Price Lead-Based Paint Appraisal Requirements Nn HUD REO Prperties 03/24/ In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, mdified the fllwing: Added the fllwing sub-sectins: 203(k) Full Imprvements 203(k) Full Prgram Requirements Updated the 203(k) Streamline Prgram Requirements (Lead-Based Paint Appraisal Requirements) sub-sectin. 03/06/ In the FHA Lan Prgrams and Cmpliance sectin, updated the HUD REO Appraisal Requirements Ordering Updated Appraisals sub-sectin. In the FHA Lan Eligibility sectin, mdified the fllwing: Remved the fllwing sub-sectins: Additinal Requirements fr Cmmunity Prperty States Additinal State-Specific Requirements Updated the Principal Curtailment sub-sectin. In the FHA Credit sectin, updated the Nn-Traditinal Credit sub-sectin. In the FHA Liabilities and Debt Ratis sectin, updated the Debt Pay Off/Pay Dwn sub-sectin. In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, mdified the fllwing: Updated the fllwing sub-sectins: Age f Appraisal Updated Appraisal and/r Cmpletin Reprt (Fannie Mae frm 1004D/Freddie Mac frm 442 with update) Cndminium Prject Apprvals Added the fllwing sub-sectins: Prperties with Slar Energy Partial Claim CMS Plicies & Prcedures Page 13 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

14 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 02/10/ In the FHA Lan Eligibility sectin, updated the fllwing subsectins: Brrwers, C-Brrwers and C-Signers Purchase Mrtgage Minimum Brrwer Investment In the FHA Credit sectin, mdified the fllwing: Updated the Nn-Traditinal Credit sub-sectin. Renamed the Ecnmic Event sub-sectin t Ecnmic Event FHA Back t Wrk Only. In the FHA Liabilities and Debt Ratis sectin, added the Calculating Payment Shck sub-sectin. In the FHA Assets sectin, updated the Minimum Dwn Payment and Cash t Clse sub-sectin. In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, updated the 203(k) Streamline Prgram Requirements sub-sectin. 01/28/ In the FHA Lan Eligibility sectin, added the Resident Aliens subsectin. 01/22/ In the FHA Lan Eligibility sectin, updated the fllwing subsectins: Refinance Mrtgages FHA MIP Rates In the FHA Autmated Underwriting sectin, updated the Ineligible Lan Types sub-sectin. In the FHA Emplyment and Incme Evaluatin and Dcumentatin sectin, updated the fllwing sub-sectins: Unacceptable Surces f Rent Disability Incme In the FHA Liabilities and Debt Ratis sectin, updated the IRS Repayment Plans sub-sectin. In the FHA Assets sectin, mdified the fllwing: Updated the fllwing sub-sectins: Overview Bank Accunts Gifts Unacceptable Surces f Assets Remved the Systematic Savings sub-sectin. In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, mdified the fllwing: Updated the fllwing sub-sectins: Eligible Prperty/Prject Types Ineligible Prperty/Prject Types Prperties with a Crawl Space Engineer s Certificatin n Fundatin Cmpliance Existing Cnstructin Remved the Mixed Use Prperty sub-sectin. 12/22/ In the Risk Cntrls sectin, remved the FHA Anti Flipping Waiver cntent. CMS Plicies & Prcedures Page 14 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

15 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 12/18/ In the Prperty Dispsitin sectin, mdified the fllwing: Updated the fllwing sub-sectins: Existing HUD Appraisal Requirements HUD REO Appraisal Requirements HUD REO Appraisal Requirements Utility Issues HUD REO Appraisal Requirements Ordering Updated Appraisals Remved the fllwing sub-sectins: 203(b) Repair Escrw Appraisal Requirements Appraisal Type Ordering a New Appraisal Added the fllwing sub-sectins: HUD REO Appraisal Requirements If Original HUD REO Appraisal is nt Available HUD REO 203K Appraisal Requirements In the 203(b) Repair Escrw Prgram Requirements sectin, mdified the fllwing: Added the fllwing sub-sectins: Cntractr Bid/Invice Requirements Lead-Based Paint Appraisal Requirements Updated the Minimum and Maximum Amunts fr Repair Csts sub-sectin. 12/15/ In the FHA Autmated Underwriting sectin, updated the Gifts sub-sectin. In the Asset Surces sectin, updated the fllwing sub-sectins: Gifts Dcumenting the Transfer f Gift Funds 12/09/ In the FHA Lan Eligibility sectin, added the Ineligible Brrwer and Vesting Types sub-sectin. In the FHA Dcumentatin sectin, added the Clsing Dcument Signing Requirement sub-sectin. In the FHA Autmated Underwriting sectin, updated the fllwing sub-sectins: Underwriting Analysis Reprt Gifts In the FHA Credit sectin, updated the Capacity Analysis subsectin. In the FHA Emplyment and Incme Evaluatin and Dcumentatin sectin, updated the Retirement, Pensin, Annuity Incme and IRA Distributins sub-sectin. In the FHA Assets sectin, updated the Gifts sub-sectin. In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, updated the Ineligible Prperty/Prject Types sub-sectin and added the Hauled Water sub-sectin. CMS Plicies & Prcedures Page 15 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

16 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 11/05/ In the FHA Lan Eligibility sectin, mdified the fllwing: Added the fllwing sub-sectins: 203k Identity f Interest Lender Respnsibility fr Ensuring the Dwn Payment Assistance Prvider Is a Charitable Organizatin Lender Respnsibility fr Ensuring the Dwn Payment Assistance Prvider Is a Charitable Organizatin - Cntinued Updated the fllwing FHA MIP Rates sub-sectin. In the FHA Credit sectin, updated the Bankruptcy/Freclsure/Deed-in-Lieu sub-sectin. In the FHA Emplyment and Incme Evaluatin and Dcumentatin sectin, updated the Disability Incme subsectin. In the FHA Liabilities and Debt Ratis sectin, updated the IRS Repayment Plans sub-sectin. In the FHA Assets sectin, mdified the fllwing: Updated the fllwing sub-sectins: Gifts Unacceptable Surces f Assets Added the Trade In f Manufactured Hme sub-sectin. In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, updated the Manufactured Hme Prperty Eligibility Requirements sub-sectin. 10/08/ In the FHA Lan Eligibility sectin, updated the fllwing subsectins: Brrwers, C-Brrwers, and C-Signers Nn-Purchasing Spuse FHA MIP Rates In the FHA Credit sectin, updated the fllwing sub-sectins: Bankruptcy/Freclsure/Deed-in-Lieu Shrt Sales 09/18/ In the FHA Lan Eligibility sectin, updated the fllwing: Mdified the Occupancy f Frmer Investment Prperty r Secnd Hme sub-sectin. Added the Streamline Refinance Investment Prperties sub-sectin. In the FHA Lan Eligibility sectin, updated the fllwing subsectins: Nn-Purchasing Spuse Refinance Mrtgages In the FHA Credit sectin, updated the AUS Refer r Manual Underwrite sub-sectin. In the FHA Assets sectin, updated the Dcumenting the Transfer f Gift Funds sub-sectin. In the FHA Prperty Types and Appraisal Dcumentatin and Review sectin, updated the Cisterns sub-sectin. CMS Plicies & Prcedures Page 16 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

17 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 07/22/ In the Envirnmental Hazards sectin, updated the Prperties Affected by Lead Base Paint sub-sectin. 06/16/ Crrected 203(k) Streamline Prgram Requirements sectin Well Lcatin Requirements added Appliance Requirements Sectin added Unpermitted Additins requirements added Minimum Cash Investment Calculatin added 05/13/ In Mrtgage Insurance Prgrams, cmpleted the fllwing: Updated the FHA Prgrams sectin with 203(b) Repair Escrw. Added the Sectin 203(b) Repair Escrw Hme Mrtgage Insurance sectin. Updated the Autmated Data Prcessing (ADP) Cde sectin with 203(b) Repair Escrw. In Prperty Dispsitin (Sale f HUD Owned Prperties), cmpleted the fllwing: Updated the Overview sectin. Added the fllwing sectins: 203(b) Repair Escrw Appraisal Requirements 203(b) Repair Escrw Appraisal Requirements Appraisal Type 203(b) Repair Escrw Appraisal Requirements Utility Issues\ 203(b) Repair Escrw Appraisal Requirements Ordering Updated Appraisals In FHA Case Numbers, added the Case Numbers fr HUD REO Prperties sectin. In FHA Autmated Underwriting, added 203(b) t the Eligibility Requirements sectin. In Prperty and Prject Types, added HUD Owned Prperties t the Eligible Prperty/Prject Types sectin. Added the fllwing sectins: 203(k) Streamline Imprvements 203(b) Repair Escrw Imprvements In Cmpliance Inspectins, added the 203(b) Repair Escrw Inspectin Requirements sectin. 05/05/ In the Majr Adverse Credit sectin, updated the Judgments and Tax Liens sub-sectin. In the Self-Emplyed Incme sectin, added the Meal Deductins sub-sectin. CMS Plicies & Prcedures Page 17 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

18 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 04/18/ In the Credit Reprt Requirements sectin, updated the Insufficient Credit (Reserve requirements with Insufficient Credit) sub-sectin. In the Majr Adverse Credit sectin, updated the fllwing subsectins: AUS Apprve/Eligible Manual Underwrite In the FHA Liabilities & Debt Rati sectin, updated the fllwing: Updated the Overview sub-sectin Added the fllwing sub-sectins: Maximum Ratis fr Manually Underwritten Lans Dcumenting Acceptable Cmpensating Factrs Calculating Residual Incme Calculating Grss Mnthly Incme Calculating Mnthly Expenses Using Residual Incme as Cmpensating Factr States Included in Regins 04/04/ In the Ineligible Prperty/Prject Types sectin, added Single-wide manufactured hmes. 03/17/ In the FHA Credit sectin, updated the Credit Cmpnents subsectin. In the FHA Emplyment and Incme Evaluatin and Dcumentatin sectin, updated the Incme Types sub-sectin, updated the Bnus r Overtime sub-sectin. In the FHA Liabilities and Debt Ratis sectin, updated the IRS Repayment Plans sub-sectin. In the FHA Assets sectin, updated Gifts updated the Asset Surces sub-sectin. 02/18/ In the Secndary r Subrdinate Financing sectin, added the Secndary Financing (Dwn Payment Assistance) sub-sectin. 02/05/ In the Mrtgage Insurance Premiums sectin, updated the FHA MIP Rates. In the FHA Liabilities and Debt Ratis sectin, added the IRS Repayment Plans sub-sectin. In the Minimum Dwn Payment and Cash t Clse sectin, updated the Requirements sub-sectin t state that CMS des nt permit POC items t be cunted as part f the brrwer s minimum dwn payment requirement. CMS Plicies & Prcedures Page 18 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

19 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 10/29/ Updated the Land Cntract and Rent Credit sectins. Deleted Lan Transactins Paying Off Land Cntracts frm Transactin Types sectin. Added the fllwing t the Transactin Types sectin: Financing Limit When Paying ff Land Cntracts, LTV Rati When Paying Off Land Cntracts, Equity as Cash Investment When Paying Off Land Cntracts, Rent Credits. Update Manufactured Hmes, Certificatin Label and Date Plate, and Manufactured Hme Prperty Eligibility Requirements in the Manufactured Hmes sectin. Deleted the fllwing frm the Manufactured Hmes sectin: Maximum Mrtgage Amunt - Ttal Cst r Itemized Value, Maximum Mrtgage Amunt Allwable Lan t Value Percentages, Refinance Existing Cnstructin. 08/27/ Added Ecnmic Event sectin. Added Extenuating Circumstance sectin. 05/31/ Added Manufactured Hme infrmatin. 03/29/13 (05/07/13) 1.6 Added CMS t Prduct Matrices in Overview. Updated FHA MIP Rates in table t reflect current guidelines in chapter titled Mrtgage Insurance Premiums. Added EMIP t the Requirements blck in chapter titled Unearned MIP Refund Calculatins. Added Reference t prduct matrices in the FHA Ttal Mrtgage Screcard blck in chapter FHA Autmated Underwriting. Updated Overview Blck t reflect current guidelines in chapter titled Credit Histry Evaluatins. Added Reference t the CMS Prgram Matrices in blck titled, Husing Payment Histry in chapter titled Credit Cmpnents. Updated IRS Frm 4506 T Table in blck titled, Requirements in chapter titled, Tax Infrmatin Authrizatin IRS Frm 4506-T/Tax Transcripts. CMS Plicies & Prcedures Page 19 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

20 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 01/10/ Made changes t cmply with CFPB rules effective 01/10/14: Safe Harbr Act fr Appraisals HPML and Nn-HPML Prperty Flipping Rule Added verbiage t Refinance Sectin that fr Nn-Credit Qualifying Refinance f existing FHA insured mrtgages, the lan cannt be clsed as an HPML 12/27/ In the Majr Adverse Credit sectin, added the fllwing subsectins: Capacity Analysis AUS Apprve/Eligible Manual Underwrite In the Manufactured Hmes sectin, updated the fllwing subsectin: Termite Cntrl fr Manufactured Hmes 12/10/ In the FHA Dcumentatin sectin, added references t Mdel SC 2907 transcripts in the fllwing sub-sectins: Minimum Dcumentatin Requirements Dcumentatin Requirements t Clse an FHA Lan Minimum Dcumentatin Requirements Dcumentatin Requirements t be Eligible fr Underwriting In the FHA Credit sectin, added references t Mdel SC 2907 transcripts in the fllwing sub-sectin: Credit Reprt Requirements Nn-Traditinal Credit In the FHA Emplyment and Incme Evaluatin and Dcumentatin sectin, made the fllwing updates: Added the Puert Ric Tax Returns Requirements subsectin. Added references t Mdel SC 2907 transcripts in the fllwing sub-sectins: Dcumentatin Requirements and Standards Dcumentatin Requirements Dcumentatin Requirements and Standards Dcumentatin Standards Self-Emplyed Incme Incme Dcumentatin and Evaluatin by Tax Returns 12/03/ In the Credit Reprt Requirements sectin, mdified the Max LTV sub-sectin. In the Credit Cmpnents sectin, mdified the Bankruptcy subsectin. In the Eligible Prperty Types sectin, updated the Mdular Hme, Pre-cut Hme, Panelized Hme sub-sectin. In the Water and Sewage Systems sectin, updated the Shared Wells sub-sectin. CMS Plicies & Prcedures Page 20 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

21 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Dcument Overview (cntinued) Revisin Histry (cntinued) Date Versin Descriptin f Change 03/08/ Updated blck titled, Dcumentatin Standards t reflect current guidelines in chapter titled, Dcumentatin Requirements and Standards. Added Cmpensatin Factr and Guidelines Table in blck titled, Cmpensating Factrs, in chapter titled, FHA Liabilities and Debt Ratis. Updated blck titled Equity frm Other Assets t reflect current guidelines in chapter titled, Asset Surces. Re-branded dcument with new lg (05/07/13). Frm Nn-Purchasing Spuse in the Brrwers, C- Brrwers, C-Signers sectin, remved last sentence frm secnd t last bullet under Cmmunity Prperty state regarding disputed assets. Remved Disputed Accunts and Public Recrds frm Credit Prcessing sectin. Remved Disputed and Cllectin Accunts frm Majr Adverse Credit sectin. Added paragraph t Judgments and Tax Liens in Majr Adverse Credit sectin. Deleted verbiage regarding Updated Appraisals frm Age f Appraisal in the Appraisal Dcumentatin sectin. 01/31/ Added ADP cdes and descriptins fr the FHA Negative Equity Prgram. (p ) 01/15/ Added 203(k) t the FHA prgrams list under the MI Prgrams sectin. (p. 11) Added details abut the Sectin 203k Streamline Rehab Prgram. (p. 13) Added ADP Cdes fr 203k lans. (pp ) Added 203(k) t the list f eligibility requirements under the FHA Autmated Underwriting sectin (p. 87) The Credit Cmpnents, Freclsure r Deeds in Lieu list was updated t clarify that the seasning time is measured frm the recrding date finalizing the freclsure r the date the FHA claim was paid t the applicatin date f the transactin. (p. 110) The 4506T must be prcessed by a CMS apprved vendr. CMS des nt accept tax returns stamped by the IRS. (p. 117) 11/30/ Clarified that requirements that vary frm ne prduct t anther are described in the prduct matrices. (p. 11) 10/11/ Added Trailing spuse incme t the list f Unacceptable Surces f Incme. (p. 136) 05/03/ New dcument. CMS Plicies & Prcedures Page 21 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

22 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 FHA UNDERWRITING Overview This dcument describes hw t review and underwrite Federal Husing Administratin (FHA) mrtgage lan applicatins. FHA LOAN PROGRAMS AND COMPLIANCE Overview This sectin describes the eligible lan prgrams and cmpliance requirements necessary t btain case endrsement and Federal Husing Administratin (FHA) insurance. CMS must ascertain whether the specific prvisins f the lan prgram are permissible under all applicable laws and regulatins. CMS must als take the necessary steps t verify the cntinued validity f the lan prgram prvisins under applicable laws and regulatins, and must ntify any investrs in the event it believes that any prvisins might be restricted r impermissible under such laws r regulatins. The requirements utlined in this sectin represent FHA cre requirements fr manually underwritten lans. The FHA TOTAL Mrtgage Screcard decisin and recmmendatins fr reduced dcumentatin may be fllwed, unless therwise nted in this dcument. Requirements that vary frm ne lan prgram t anther are described in the CMS Prduct Matrices. Waivers d nt apply t state specific cmpliance restrictins. See the HUD Rev. 5 Handbk fr additinal infrmatin. Mrtgage Insurance Prgrams Overview This sectin describes the different lan prgrams available fr FHA financing. Ntes: The lan prgrams are limited t primary residences nly. The sectin numbers thrughut this sectin are references t the sectin f the Natinal Husing Act authrizing the prgram. FHA Prgrams Sectins f the Act 203(b) 203(b) Repair Escrw 203(k) 234(c) Descriptin Basic 1 4 Family Hme Mrtgage Insurance Mrtgage Insurance fr uncmplicated rehabilitatin Rehab Mrtgage Insurance Mrtgage Insurance fr Cndminium Units 251 Adjustable Rate Mrtgages CMS Plicies & Prcedures Page 22 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

23 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Mrtgage Insurance Prgrams (cntinued) Sectin 203(b) Hme Mrtgage Insurance Sectin 203(b) is used t finance the fllwing transactins: Existing ne t fur- units Prpsed husing New cnstructin husing - See the FHA Prperty Types and Appraisal Dcumentatin and Review sectin fr restrictins n maximum financing fr new cnstructin. Requirements fr Sectin 203(b) Prgram Up-Frnt MIP and Mnthly/Annual MIP apply. The Up-Frnt MIP premium may be financed in the mrtgage. The Mnthly/Annual premium is paid as part f the mnthly mrtgage payment. The mnthly MIP will be canceled when the lan is amrtized dwn t 78% LTV prvided the brrwer has been paying the mnthly mrtgage insurance premium fr at least five years. A refund is based n a three-year schedule and nly applies when the lan refinances t anther FHA lan. If the lan is refinanced t a cnventinal r VA lan r if the lan is paid ff thrugh the sale f the prperty, the brrwer is nt eligible t a refund. The mrtgage amunt may be runded dwn t the nearest $1.00. Sectin 203(b) Repair Escrw Hme Mrtgage Insurance Sectin 203(b) Repair Escrw prvides insurance t hmes purchased by HUD with uncmplicated rehabilitatin. Requirements Up-Frnt MIP and Mnthly/Annual MIP apply. The Up-Frnt MIP premium may be financed int the mrtgage. The Mnthly/Annual premium is paid by the brrwer as part f the mnthly mrtgage payment Up-Frnt MIP and mnthly premium is calculated the same as Sectin 203(b) lans. The terminatin guidelines are the same as Sectin 203(b) lans. The mnthly MIP will be canceled when the lan is amrtized dwn t 78% LTV prvided the brrwer has been paying the mnthly mrtgage insurance premium fr at least five years. Refund f the Up-Frnt MIP paid at clsing will be the same as Sectin 203(b) lans. The refund is based n a three-year schedule and nly applies when the lan refinances t anther FHA lan. If the lan is refinanced t a cnventinal r VA lan r if the lan is paid ff thrugh the sale f the prperty, the brrwer is nt eligible t a refund. Calculatins t determine maximum mrtgage are the same thse fr Sectin 203(b). The mrtgage amunt may be runded dwn t the nearest $1.00. CMS Plicies & Prcedures Page 23 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

24 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Mrtgage Insurance Prgrams (cntinued) Sectin 203(k) Streamline Rehab Prgram Sectin 234(c) Mrtgage Insurance fr Cndminium Units Sectin 203(k) prvides insurance fr lans that are subject t prperty repairs. Althugh HUD ffers tw versins f the 203(k) prgram, the full 203(k) and the 203(k) Streamline, CMS nly ffers the Streamline prgram. Requirements Up-Frnt MIP and Mnthly/Annual MIP apply. The Up-Frnt MIP premium may be financed int the mrtgage. The Mnthly/Annual premium is paid by the brrwer as part f the mnthly mrtgage payment Up-Frnt MIP and mnthly premium is calculated the same as Sectin 203(b) lans. The terminatin guidelines are the same as Sectin 203(b) lans. The mnthly MIP will be canceled when the lan is amrtized dwn t 78% LTV prvided the brrwer has been paying the mnthly mrtgage insurance premium fr at least five years. Refund f the Up-Frnt MIP paid at clsing will be the same as Sectin 203(b) lans. The refund is based n a three-year schedule and nly applies when the lan refinances t anther FHA lan. If the lan is refinanced t a cnventinal r VA lan r if the lan is paid ff thrugh the sale f the prperty, the brrwer is nt eligible t a refund. Calculatins t determine maximum mrtgage are the same thse fr Sectin 203(b). The mrtgage amunt may be runded dwn t the nearest $1.00. Sectin 234(c) prvides insurance fr lan transactins in cndminium prjects. Requirements Up-Frnt MIP and Mnthly/Annual MIP apply. The Up-Frnt MIP premium may be financed int the mrtgage. The Mnthly/Annual premium is paid by the brrwer as part f the mnthly mrtgage payment Up-Frnt MIP and mnthly premium is calculated the same as Sectin 203(b) lans. The terminatin guidelines are the same as Sectin 203(b) lans. The mnthly MIP will be canceled when the lan is amrtized dwn t 78% LTV prvided the brrwer has been paying the mnthly mrtgage insurance premium fr at least five years. Refund f the Up-Frnt MIP paid at clsing will be the same as Sectin 203(b) lans. The refund is based n a three-year schedule and nly applies when the lan refinances t anther FHA lan. If the lan is refinanced t a cnventinal r VA lan r if the lan is paid ff thrugh the sale f the prperty, the brrwer is nt eligible t a refund. Calculatins t determine maximum mrtgage are the same thse fr Sectin 203(b). The mrtgage amunt may be runded dwn t the nearest $1.00. CMS Plicies & Prcedures Page 24 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

25 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Mrtgage Insurance Prgrams (cntinued) Sectin 251 Adjustable Rate Mrtgages Sectin 251 prvides insurance fr lans that are subject t variable rates. The brrwers are required t sign and acknwledge the infrmatin n the ARM disclsure frm at the time f applicatin. Requirements Up-Frnt MIP and Mnthly/Annual MIP apply. The Up-Frnt MIP premium may be financed int the mrtgage. The Mnthly/Annual premium is paid by the brrwer as part f the mnthly mrtgage payment. Sectin 251 is used in cnjunctin with Sectin 203(b). (i.e., 203(b)/251 r 234(c)/ 251). Calculatins t determine maximum mrtgage are the same as thse fr Sectin 203(b). The mrtgage amunt may be runded dwn t the nearest $1.00. CMS Plicies & Prcedures Page 25 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

26 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Autmated Data Prcessing (ADP) Cde Descriptin The Suffix/ADP Cde identifies a specific sectin f the Husing Act that applies t a lan insurance prgram. This cde breaks dwn a prgram by its features, such as, financing type, lan amunt, prperty type, r whether HUD r the lender wh will perfrm the underwriting review will issue a final decisin. FHA uses this cde when an apprpriate insurance fund needs a case number assigned. The ADP Cde is placed after the case number n all required frms. ADP Cdes beginning with the number 7 indicate that CMS will underwrite and issue final apprval n the lan. FHA Sectin f the Act Chart Suffix/ADP Cde Prgram Descriptin ADP Cde Sectin f the Act Standard FHA prgram Buydwn (b) 203(b) FHA Negative Equity (b) FHA Negative Equity With Cndminium (b) Standard FHA prgram (k) Standard FHA prgram (b) Repair Escrw Standard FHA prgram with Cndminium Cndminium With Buydwn Adjustable Rate Mrtgage With Cndminium (k) (c) 203(b) / (c) / 251 CMS Plicies & Prcedures Page 26 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

27 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Autmated Data Prcessing (ADP) Cde (cntinued) Descriptin (cntinued) Determining the ADP Cde Direct Endrsement ADP Cde When t Use Fixed Rate Mrtgage prcessed under Sectin 203(k) A CMS Direct Endrsement Underwriter will issue Final Apprval Fixed Rate Mrtgage prcessed under regular FHA prgram Sectin 203(b) CMS will issue Final Apprval Adjustable Rate Mrtgage CMS will issue Final Apprval Adjustable Rate Mrtgage prcessed under Sectin 234(c) The subject prperty is a unit in a cndminium CMS will issue Final Apprval Fixed Rate Mrtgage prcessed under Sectin 234(c) The subject prperty is a unit in a cndminium CMS will issue Final Apprval 796 Fixed Rate Mrtgage prcessed with an Interest Rate Buydwn Fixed Rate Mrtgage prcessed under Sectin 203(k) The subject prperty is a unit in a cndminium CMS will issue Final Apprval. Fixed Rate Mrtgage prcessed under Sectin 203(b) Refinance f brrwers in negative equity psitin. CMS will issue final apprval. Fixed Rate Mrtgage prcessed under Sectin 203(b) Refinance f brrwers in negative equity psitin. The subject prperty is a unit in a cndminium. CMS will issue final apprval. Fixed Rate Mrtgage prcessed under Sectin 203(b) The brrwer is a HUD emplyee HUD must underwrite and issue Final Apprval befre clsing Adjustable Rate Mrtgage The brrwer is a HUD emplyee HUD must underwrite and issue Final Apprval befre clsing Adjustable Rate Mrtgage prcessed under Sectin 234(c) The subject prperty is a unit in a cndminium The brrwer is a HUD emplyee HUD must underwrite and issue Final Apprval befre clsing Fixed Rate Mrtgage prcessed under Sectin 234(c) The subject prperty is a unit in a cndminium The brrwer is a HUD emplyee HUD must underwrite and issue Final Apprval befre clsing CMS Plicies & Prcedures Page 27 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

28 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 FHA Insured Mrtgages fr HUD Emplyees Overview The jurisdictinal Hme Ownership Center (HOC) must prcess all applicatins made by HUD emplyees r by a member f a HUD emplyee husehld. Underwriting HUD Emplyee Lans CMS can underwrite the lan but cannt issue a decisin. The lan must be submitted t the Hme Ownership Center (HOC) fr prir apprval prcessing. May fllw the autmated underwriting decisin and dcumentatin requirements. The case number must be rdered via the FHA Cnnectin as "HUD Prcessed" by entering "203" as the Sectin f the Act. CMS must submit a cpy package f the credit file including the appraisal t the apprpriate Hme Ownership Center in a brightly clred binder clearly marked HUD EMPLOYEE LOAN t the attentin f the prcessing and Underwriting Divisin Directr. D nt send the riginal underwriting lan file. HUD will nt return the package. Cpies must be stamped as "true and certified" cpies f the riginals. CMS is the nly party that may cntact the Hme Ownership Center t discuss. CMS Plicies & Prcedures Page 28 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.

29 (FHA Lans) Mrtgage Lending Divisin Versin /10/15 Prperty Dispsitin (Sale f HUD Owned Prperties) Overview Financing f a HUD wned prperty is permitted fr primary residences. The sales cntract fr HUD wned prperties must be cmpleted n Frm HUD The first blck in item 4 f the sales cntract, as well as the blck fr the apprpriate FHA prgram will be checked by HUD. The infrmatin in Blck 4 must be cmpleted fr the prperty t be eligible fr FHA insured financing. A new FHA case number must be issued. The sales cntract will indicate the specific number f days the brrwer has until clsing (usually between 30 and 60). If any sale incentives such as $100 Dwn and financed cst are allwed they must be included in the REO cntract. The sales cntract must be signed by the M&M cntractr. If the sales cntract has nt been signed by the M&M cntractr, mrtgage lenders shuld nt prcess a mrtgage applicatin. In rder t qualify fr FHA-insured financing, the first blck n Line 4 f the sales cntract, as well as the applicable blck fr the FHA prgram - 203(b), 203(b) repair escrw, r 203(k) - must be checked. REO prperties that are cndminiums which are ffered fr sale with FHA mrtgage insurance, shuld be prcessed under Sectin 234, In the event the hme inspectin r the systems check reveals that repairs are needed which n lnger makes the prperty eligible fr an FHA-insured 203(b) mrtgage, the mrtgage lender shuld cntact the M&M cntractr t discuss alternatives t allw the sale t cntinue. The M&M cntractr may allw the mdificatin f the sales cntract, as needed, t reflect either an Insured with Repair Escrw sale r t an FHA 203(k) sale in thse instances where the mrtgage lender prvides them with sufficient dcumentatin t supprt the change in financing. The sales cntract must be revised t include this revisin and initialed by bth the purchaser and the M&M cntractr. In the event the purchaser(s) wishes t finance eligible rehabilitatin in the purchase mrtgage thrugh a 203(k) mrtgage but the prperty was listed as "insurable", the mrtgage lender shuld prvide the M&M cntractr with sufficient dcumentatin t supprt the change in financing terms and btain a mdificatin t the sales cntract. The amunt n Line 5 f the Sales Cntract represents actual brrwer financing and clsing csts t be paid n their behalf by HUD (the seller) ut f the sales prceeds. It des nt represent an amunt which the brrwer may finance in the mrtgage. If n clsing csts r pre-paids are indicated t be paid by FHA; then the brrwer must pay with their wn funds and csts cannt be added t the lan amunt. See the Instructins fr Sales Cntract dcument n the HUD website fr instructins fr cmpletin f HUD frm 9548 Sales Cntract. CMS Plicies & Prcedures Page 29 f 305 Prprietary and cnfidential. Fr Internal use nly. D nt distribute externally.