Prince William County Home Help Plus Program

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1 Prince William County Home Help Plus Program Prince William County Office of Housing & Community Development Elijah T. Johnson, Director Donald Curtis Drive, Suite 112 Woodbridge, Virginia Policies & Procedures Revised

2 Program Background On December 16, 2008, the Prince William Board of County Supervisors endorsed the Home Help Program and amended the County s banking contract to initiate the Home Help Program which will provide interest rate reduction and/or closing cost credit for County employees who desire to purchase a home in the County. The Office of Housing and Community Development (OHCD) staff developed Home Help Plus Program guidelines to provide loans for down payment and closing cost for County employees purchasing through the Home Help Program which were endorsed by the Housing Board on January 22, 2009 The County Foreclosure Task Force believed that the lack of purchaser down payment funds would be a barrier to the success of the Home Help Program and identified a potential funding source in Housing Proffers which had been collected from developers proffer cash contributions in lieu of providing affordable housing units. The Prince William Board of County Supervisors transferred and budgeted $210,000 from the Affordable Housing Proffer Funds to the Housing Preservation and Development Fund (HPDF) to support local housing initiatives to directly assist eligible County employees. (Res. No ) General Program Description Prince William County (PWC) wishes to assist income qualified County employee Home Help purchasers with downpayment and closing cost assistance. The Home Help Program is a live near your work program that will assist those borrowers who work for PWC County to purchase a home in the County by using the services of Home Help participating banks to provide a closing cost credit or rate reduction for mortgage interest rate. Home Help Plus would provide a second loan for down payment and/or closing cost assistance for income qualified Home Help purchasers with household income below 80% Area Median Income. Funding Source Currently there is no dedicated funding source identified for providing employee Home Help Plus loans for down payment and closing costs. The County could allocate general funds, or other resources that may become available. The Housing Preservation and Development Fund (HPDF) is the instrument identified as a funding source. HPDF revenue is realized through developer cash proffers in lieu of building affordable units. Monetary housing proffers to the HPDF can not be anticipated, and therefore the HPDF should not be solely relied upon to fund an employee down payment and closing cost loan program. Additional funding for Home Help Plus using HPDF will depend on balances available from housing proffers, or other financial resources that may be identified.

3 Program Administration The Office of Housing and Community Development in cooperation with the Home Help participating bank will administer the program which includes receipt of program applications, review of income verification documents, determination of household income eligibility, issuing fund reservation, processing a check for settlement, fielding questions from applicants, realtors, loan officers, coordinating the settlement process, and delivery of check and settlement documents to the settlement company, obtaining post closing documents and loan servicing. Staff costs incurred in the administration from application through post closing of the Home Help Plus loan would be paid through an administrative fee paid from HPDF. An additional administrative fee will be charged to the borrower when the property is sold, title is transferred, or the first loan is refinanced to cover costs for processing and filing the Certificate of Satisfaction. SAFE Act The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the S.A.F.E. Act) which became effective on October 1, 2010, was designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators and for the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) to establish and maintain a nationwide mortgage licensing system and registry for the residential mortgage industry. The SAFE Act sets a minimum standard for licensing and registering mortgage loan originators. The SAFE Act essentially has two primary goals: 1. Establish common requirements for the licensing or registration of mortgage loan originators 2. Develop a standard platform and methodology that allows regulators and consumers to more easily track loan originator credentials, history and performance In order to accomplish these goals Congress inserted a number of specific provisions within the law. The centerpiece of the SAFE Act is the creation of the standardized system for the licensing and registration of mortgage loan originators. The law mandates that the Nationwide Mortgage Licensing System and Registry address ten objectives: 1. Provide uniform license applications and reporting requirements for State licensed loan originators 2. Provide a comprehensive licensing and supervisory database 3. Aggregate and improve the flow of information to and between regulators 4. Provide increased accountability and tracking of loan originators 5. Streamline the licensing process and reduce the regulatory burden 6. Enhance consumer protections and support anti fraud measures 7. Provide consumers with easily accessible information, offered at no charge, utilizing electronic media, including the Internet, regarding the employment history of, and publicly adjudicated disciplinary and enforcement actions against loan originators

4 8. Establish a means by which residential mortgage loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer 9. Facilitate responsible behavior in the subprime mortgage market place and provide comprehensive training and examination requirements related to subprime mortgage lending 10. Facilitate the collection and disbursement of consumer complaints on behalf of State and Federal mortgage regulators The Act defines the general functional activities that comprise an individual Acting As A Loan Officer and therefore subject to licensing or registration as well as the general clerical functional activities that comprise and individual Acting As A Loan Originator and therefore subject to licensing or registration. At the same time it has not been clear enough as to coverage requirements, organizational and individual exemptions and key concept definitions. HUD has provided some additional guidance but significant interpretive gaps remain. One of the key elements of the SAFE Act is its definition of a loan originator. IN GENERAL. The term loan originator means an individual who takes a residential mortgage loan application; and offers or negotiates terms of a residential mortgage loan for compensation or gain. The Model Law offered a slight twist on the definition of a loan originator IN GENERAL The term mortgage loan originator means an individual who for compensation or gain or in the expectation of compensation or gain takes a residential mortgage loan application; or offers or negotiates terms of a residential mortgage loan; The inclusion of the word OR rather than AND in the Model Law has potentially broadened the interpretation of SAFE Act coverage. The lack of clarity regarding what constitutes compensation or gain has also created considerable confusion especially for nonprofits and governmental entities. The SAFE Act adds a little more guidance regarding loan originator functions. The Model Law does not. Other definitions relating to loan originator as an individual assists a consumer in obtaining or applying to obtain a residential mortgage loan by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan. In order to be in compliance with the SAFE Act to following changes to the Home Help Plus loans guidelines and procedures will be changed. 1. Removal of the $250 processing fee paid by employee and incorporated into the loan 2. Removal of 3% simple accrued interest per annum on the original principal balance due upon voluntary or involuntary sale of any part of the property, refinance of the first loan for any reason, interest charge on loan from the borrower to any other party, or thirty years from the date of the Note expire, whichever occurs first.

5 Home Help Plus Loans Prior to March 2011 PWC has the legislative authority to provide grants or loans to County employees. For Round One (1) $210,000 was made available through the HPDF to provide a $5,250 ($5,000 down payment/closing and $250 processing fee).home Help Plus loan per qualified employee for down payment and/or closing costs to assist approximately forty employees qualified to participate in the Home Help Program. Income eligible Home Help purchasers will be referred by the Home Help lender to OHCD on a first come first served basis for Home Help Plus loan qualification. Changes effective March 2011 The HPDR will provide $5,000 for down payment and closing cost. The $250 processing fee will not be paid by the purchaser but paid from HPDF. General Loan Terms Loans will be secured as a lien in second position and recorded in the land records of Prince William County. Home Help Plus loans will not be subordinated at anytime during the term of the loan to a Home Equity Loan, other loan, or refinances of the first loan that result in removal of equity from the property for any reason (i.e. cash, loan consolidation, debt repayment, home improvements, education expenses, etc.). The following actions would trigger repayment of the Home Help Plus loan: Sale of the property Transfer of Title Refinance of the first loan Thirty years from the date of the Note expires Loan Terms Prior to March 2011 Home Help Plus loan maximum $5,250 for Round One (1). The principal along with 3% simple accrued interest per annum on the original principal balance due upon voluntary or involuntary sale of any part of the property, refinance of the first loan for any reason, transfer of the property from the borrower to any other party, or thirty years from the date of the Note expire, whichever occurs first. The Home Help Plus loan will be deferred, with no payment or accrued interest due until the property is sold, title is transferred, the first loan is refinanced, or thirty years from the date of the Note expire. Changes effective March 2011 The maximum Home Help Plus loan is $5,000. (1). The principal along with 0% simple accrued interest per annum on the original principal balance due upon voluntary or involuntary sale of any part of the property, refinance of the first loan for any reason, transfer of the property from the borrower to any other party, or thirty years from the date of the Note expire, whichever occurs first. The Home Help Plus loan will be deferred, with no payment or accrued interest due until the property is sold, title is transferred, the first loan is refinanced, or thirty years from the date of the Note expire.

6 Home Help Plus Borrower Eligibility Borrower may not at the time of application through settlement own any real estate (residential, commercial, investment property or land) Borrower must be eligible and qualified to participate in the Home Help Program according to program guidelines Borrower must qualify for a first loan product through a PWC Home Help participating lender. Borrower must have a fully ratified contract and be in loan process with the Home Help lender Borrower will be referred for a Home Help Plus loan by the Home Help participating lender on a first come, first served basis Home Help Plus Income Limits and Sales Price Limits Earned and unearned Income of all adult household members must be verified by providing two months consecutive pay stubs and Home Help Plus Employment Verification form completed by the respective Human Resources department, along with source documentation of other unearned income. The gross household income must be at or below the uncapped 80% of the Metropolitan Service Area Median Income level base upon household size published by the U.S. Department of Housing and Urban Development (HUD) annually. Contract Sales Price limit $300,000 (Single Family, Duplex, Townhome or Condo Unit) Program Details and Terms Borrower cannot own a home, second vacation home, or rental property from the time of application through settlement on the Home Help Plus loan Property purchased must be located in Prince William County (excludes the Cities of Manassas and Manassas Park). The Home Help Plus loan of up to $5,000 along with 0% simple accrued interest per annum on the original principal balance will be due and payable immediately upon sale, transfer of title, refinance of the first loan or thirty years from the date of the Note expire. Home Help Plus loans will not be subordinated at anytime during the term of the loan to a Home Equity Loan, other loan, or refinances of the first loan that result in removal of equity from the property for any reason (i.e. cash, loan consolidation, debt repayment, home improvements, education expenses, etc.) Home Help Plus Loan processing fee of $250 will be paid from HPDF Home Help Plus loan will have a $100 processing fee at loan payoff to process and record a Certificate of Satisfaction Application Process 1. Applicant must meet all qualifications and eligible requirements to participate in the County s Home Help program 2. Applications for Home Help Plus will be referred on a first come, first served basis by the Home Help loan officer

7 3. The Home Help loan officer will submit a copy of the completed first Loan Application form (Lender Form 1003 or 65). Home Help Application package to OHCD and provide copies of the following verifications: VHDA Homeownership Training Certificate of Course Completion, not more than one year old Verification of income and assets Home Help Plus Pre-Approval Lender Form (this is a Home Help Plus form) for a Home Help first loan and Home Help Plus second loan. Ratified Sales Contract 4. Application packets will be screened using eligibility guidelines established for Home Help Plus 5. Upon approval of the Home Help Plus application the Program Administrator will issue a Home Help Plus Reservation and FAX the Reservation Form to the Home Help loan officer. 6. Prior to settlement, the Program Administrator must review and approve a draft HUD 1 and prepare the Home Help Plus Deed and Note for settlement. 7. Program Administrator will request Home Help Plus payment to Settlement Company with supervisor approval 7. After settlement, the settlement agent must submit to the Program Administrator a copy of the Certified True HUD 1 Settlement Statement, the Original Home Help Plus Deed and Note More Information Contact the Home Help Plus Program staff at (703) or (703)