Fha Loans Ppt

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Fha Loans Ppt

  1. 1. Offered through Affinity Lending Group Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. Contact your ALG AE for complete program guidelines. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 04 /24/2008
  2. 2. <ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Highlights of the Program </li></ul></ul><ul><ul><li>Program Guidelines </li></ul></ul><ul><ul><ul><li>Standard FHA </li></ul></ul></ul><ul><ul><ul><li>Jumbo FHA </li></ul></ul></ul><ul><ul><ul><li>FHA Streamline </li></ul></ul></ul><ul><ul><ul><li>FHA Secure </li></ul></ul></ul><ul><ul><li>Eligibility Guidelines </li></ul></ul><ul><ul><li>Underwriting Guidelines </li></ul></ul><ul><ul><li>Other Standard Guidelines </li></ul></ul><ul><ul><li>Down Payment Assistance Programs </li></ul></ul><ul><ul><li>Interest Rate, Fees, Closing Costs </li></ul></ul><ul><ul><li>How to become an FHA-Approved Lender </li></ul></ul><ul><ul><li>FMC Support </li></ul></ul>
  3. 3. Introduction to Affinity Lending Group Who is FHA? Why choose an FHA loan? Highlights of the Program Targeted Borrowers Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  4. 4. <ul><li>Affinity Lending Group is an independent residential Mortgage Banking firm. </li></ul><ul><li>Founded in 2003, ALG is a direct-lending mortgage banker approved as a lender by the Federal Housing Administration (FHA); the Veterans Administration (VA); the Federal National Mortgage Association (Fannie Mae); the Federal Home Loan Mortgage Corporation (Freddie Mac); the Government National Mortgage Association (Ginnie Mae); the California Housing Finance Agency (CalHFA); the Nevada Housing Division (NHD); the California Public Employees’ Retirement System (CalPERS); the California Teachers’ Retirement System (CalSTRS); National Homebuyers Fund (NHF); and many other major secondary market institutions. </li></ul><ul><li>Having funded in excess of $1 billion in residential real estate loans, ALG has assisted more than two thousand families with their mortgage needs.  ALG enables families to enjoy the American Dream of Homeownership…“it’s the only thing we do.” </li></ul><ul><li>ALG has a longstanding tradition of providing unparalleled customer service and a reputation built on adding value to the home loan process.  That’s why ALG should be considered…“ YOUR FIRST LENDING RESOURCE ”. </li></ul>
  5. 5. <ul><li>Who is Federal Housing Administration? </li></ul><ul><ul><li>The Federal Housing Administration generally known as “FHA” was established in 1934 as a division of the U.S. Department of Housing and Urban Development. They provide mortgage insurance on loans made by FHA-approved lenders throughout the US and its territories. It is the largest insurer of mortgages in the world insuring over 34 million properties since its inception . </li></ul></ul><ul><ul><li>FHA’s mission is to expand homeownership opportunities, make the home buying process inexpensive and less complicated, increase homeownership to minorities, and keep homeowners from losing their homes. </li></ul></ul><ul><li>Eligible FHA Programs </li></ul><ul><ul><li>Section 203(b) – Standard FHA Program: MI for One to Four Family Homes Program </li></ul></ul><ul><ul><li>Section 234(c) – Subsection of 203(b): Condominium Housing Program </li></ul></ul><ul><ul><li>Section 251 – Subsection of 203(b): Adjustable Rate Mortgage Program (ARM) </li></ul></ul><ul><ul><li>Section 203(k) – Rehabilitation Mortgage Insurance Program </li></ul></ul><ul><ul><li>Section 203(h) – MI for Disaster Victims Program </li></ul></ul><ul><li>What is FHA Mortgage Insurance? </li></ul><ul><ul><li>FHA MI protects lenders against loss if homeowner defaults on loan. The lender bears less risk because FHA will pay the lender should a homeowner defaults on their loan. The cost of the insurance is passed along to the borrower and is typically included in the monthly payment. </li></ul></ul><ul><li>How is FHA funded? </li></ul><ul><ul><li>FHA operates from self-generated income and costs the taxpayers nothing. The proceeds from the MI paid by the homeowners is used to operate the program entirely. </li></ul></ul>
  6. 6. Basic Eligibility Requirements 1. Valid Social Security # <ul><li>Borrower must have a valid Social Security Number: </li></ul><ul><li>U.S. Citizen </li></ul><ul><li>Permanent & Non Permanent Resident Aliens </li></ul><ul><li>Non-Occupant Co-Borrowers (Co-Signers) </li></ul>2. Lawful US Residency Borrower must be a lawful residency in the United States 3. Legal Age Borrower(s) must be 18 years old, or age which state permits a person to sign on a Mortgage/Deed of Trust Other eligibility factors: Income Requirements No Maximum Income Limits. Must have sufficient income to qualify for the mortgage payment and other debts. Credit Score Requirements No Minimum Credit Score Requirements. Past credit performance serves as the guide to determine a borrower’s attitude toward credit obligations.
  7. 7. Easier Qualifying With FHA insuring the mortgage, lenders are more willing to give terms making it easier to qualify. Since FHA will pay a claim to the lender in the event of homeownership default Smaller Down Payment 3% down payment which can come from a family member, employer, charitable organization as a gift Lower Cost FHA loans have competitive interest rates because the Federal Government insures the loans Less than perfect credit Even if borrower(s) had credit problems in the past such as a BK, it’s easier to qualify for an FHA than a conventional loan More protection to keep home <ul><li>FHA has many options to help keep borrower’s in their homes and avoid foreclosure. </li></ul><ul><li>Increased opportunity with the Stimulus Act of 2008 </li></ul>Get to closing faster: <ul><li>Why? It’s easier to qualify: </li></ul><ul><ul><li>No minimum credit score is required </li></ul></ul><ul><ul><li>Non-traditional credit is acceptable </li></ul></ul><ul><ul><li>Low down payment </li></ul></ul><ul><ul><li>Non-occupant co-borrower is permitted </li></ul></ul><ul><ul><ul><li>Can use up to 100% of income for qualifying </li></ul></ul></ul><ul><ul><li>Expanded qualifying ratios </li></ul></ul><ul><ul><ul><li>FMC can manually UW up to 47% possibly to 55% DTI with comp factors </li></ul></ul></ul><ul><ul><li>Financed closing costs </li></ul></ul><ul><ul><ul><li>Many closing costs can be financed with an FHA loan </li></ul></ul></ul>Protections & Advantages <ul><ul><li>No Prepayment Penalties </li></ul></ul><ul><ul><li>Fully Assumable </li></ul></ul><ul><ul><li>Default Assistance </li></ul></ul><ul><ul><li>Competitive interest rates and Lower Premiums </li></ul></ul>
  8. 8. Borrowers who fit one or more of the following criteria's: First Time Home Buyers who may not be eligible for traditional financing Borrower’s who don’t have a lot of money to put down on a house – they may have limited cash for down payment or closing costs Borrowers who need flexibility in their housing income and payment ratios Borrowers who have low to moderate incomes Borrowers who are worried about qualifying for a loan and may not qualify for a conventional loan Borrowers who don’t have perfect credit – have credit blemishes Borrower’s who live in a disadvantage neighborhood or who are interested in purchasing a property that needs repairs
  9. 9. Standard FHA Program FHA Jumbo Program FHA Streamline FHA Secure Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  10. 10. <ul><li>Standard FHA Programs: </li></ul><ul><ul><li>Fixed Rate Programs </li></ul></ul><ul><ul><ul><li>FHA 30 Year Fixed </li></ul></ul></ul><ul><ul><ul><li>FHA 15 Year Fixed </li></ul></ul></ul><ul><ul><li>ARM Programs </li></ul></ul><ul><ul><ul><li>1 Year T-Bill ARM </li></ul></ul></ul><ul><ul><ul><li>3/1 T-Bill ARM </li></ul></ul></ul><ul><li>FHA Jumbo </li></ul><ul><ul><li>Fixed Rate Programs </li></ul></ul><ul><ul><ul><li>FHA 30 Year Fixed </li></ul></ul></ul><ul><ul><ul><li>FHA 15 Year Fixed </li></ul></ul></ul><ul><ul><li>FHA Secure </li></ul></ul><ul><li>FHA Streamline </li></ul><ul><li>FHASecure </li></ul>
  11. 11. Topic Description Program Types FHA 30 Year Fixed FHA 15 Year Fixed Interest Rate <ul><li>Interest rate is fixed and the payment is fully amortized over the entire term of the loan. Available through: </li></ul><ul><ul><li>Account Executive </li></ul></ul>Term 30 & 15 Years respectively Max LTV 97.15% for properties with values/sales price > $125k 97.65% for properties with values/sales price $50k - $125k 98.75% for properties with values/sales price < $50k Max CLTV 103% (100% of lesser of sales price or appraised value plus normal closing costs, prepaid expenses and discount points) Max Loan Amount <ul><ul><li>Loan amount is determined by the County in which the property is located by going online to: https:// entp.hud.gov/idapp/html/hicostlook.cfm </li></ul></ul>Max Origination Fee Up to 1.00% Discount Fee Allowed
  12. 12. Topic Description Program Types FHA 1 Year T-Bill ARM FHA 3/1 T-Bill ARM Interest Rate <ul><li>Initial Interest rate and monthly payment are low, but these may change during the life of the loan based on the fluctuation of the 1-year T-bill Index, margin and caps. Rates can be obtained through: </li></ul><ul><ul><li>Account Executive </li></ul></ul>Qualifying Rate FHA 1 Year ARM – Qualify at 1% over Note Rate for LTV’s 95% or higher FHA 3/1 ARM – Qualify at the Note Rate Term 30 years Max LTV 97.15% for properties with values/sales price > $125k 97.65% for properties with values/sales price $50k - $125k 98.75% for properties with values/sales price < $50k Max CLTV 103% (100% of lesser of sales price or appraised value plus normal closing costs, prepaid expenses and discount points) Max Loan Amount <ul><ul><li>Loan amount is determined by the County in which the property is located by going online to: https:// entp.hud.gov/idapp/html/hicostlook.cfm </li></ul></ul>Max Origination Fee Up to 1.00% Discount Fee Allowed
  13. 13. Topic Description Occupancy Owner Occupied Loan Purpose <ul><li>Purchase </li></ul><ul><li>Rate & Term Refinance </li></ul><ul><li>Cash Out Refinance </li></ul>Purchase or R&T Refinance Max Loan Amount Max LTV Minimum Fico Score FHA Maximum Loan Limit 97.15% for AV > $125,000 None 97.65% for AV > $50k 98.75% for AV < $50,001 <ul><li>NOTE : </li></ul><ul><li>$500 cash back is allowed for minor adjustments in estimated versus final closing costs </li></ul>Cash Out Refinance Max Loan Amount Max LTV Minimum Fico Score FHA Maximum Loan Limit 85% < 12 mos. own None 95% 12+ mos. own <ul><li>NOTE for 95% LTV : </li></ul><ul><li>Property owned by borrower at least 12 months prior to date of application </li></ul><ul><li>0 x 30 x 12 Mortgage Payments </li></ul><ul><li>1-2 Units only </li></ul><ul><li>Non occupant co-Borrower or Co-Signer cannot be added to meet credit guidelines </li></ul>
  14. 14. Eligible Programs Maximum Loan Amounts General Guidelines Matrix Appraisal Requirements Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  15. 15. Good with credit approvals through 12/31/08 Topic Description Eligible Programs <ul><li>FHA 203(b) 1-4 Family Mortgage Insurance Program </li></ul><ul><li>FHA 234(c) Condominium Unit Mortgage Insurance Program </li></ul><ul><li>FHA 203(h) Mortgages for Disaster Victims </li></ul>Program Types <ul><li>FHA 30 and 15 Year Fixed </li></ul><ul><li>FHA Secure </li></ul>Interest Rate Interest rate is fixed and the payment is fully amortized over the entire term of the loan. Max Loan Amount <ul><ul><li>Loan amounts range from $271,050 to $729,750 and is determined by the County in which the property is located: https:// entp.hud.gov/idapp/html/hicostlook.cfm </li></ul></ul><ul><ul><li>Loan limits are calculated at 125% of the area median home price as determined by HUD </li></ul></ul><ul><ul><ul><li>New FHA floor is $271,050 </li></ul></ul></ul><ul><ul><ul><ul><li>FHA floor calculated at 65% (was 48%) of the Conforming limit </li></ul></ul></ul></ul><ul><ul><ul><li>New FHA Ceiling is $729,050 </li></ul></ul></ul><ul><ul><ul><ul><li>FHA ceiling at 175% (was 87%) of the Conforming limit </li></ul></ul></ul></ul>Minimum Fico Score <ul><ul><li>580 Minimum Fico Score required </li></ul></ul>Maximum DTI <ul><ul><li>31/43% </li></ul></ul>Underwriting Method Manual Underwrite Only
  16. 16. Good with credit approvals through 12/31/08 FHA Loans Exceeding $417,000 – Additional Credit Parameters Cash Out Refinance limited to 85% LTV <ul><li>Any LTV => 95% in one of the Chase defined declining markets listed below must comply with these </li></ul><ul><li>additional requirements: </li></ul><ul><li>A 2 nd appraisal (1004) from an FHA fee panel appraiser must be obtained and underwritten to support the value. </li></ul><ul><li>If there is a variance between the two appraisals that is greater than 3%, the lower of the two values must be used. </li></ul><ul><li>The additional appraisal fee can be charged to the borrower and included in the borrower’s financed closing costs. </li></ul><ul><li>See also Chase’s revised FHA Declining Market Policy update CB08-23 for more details. </li></ul>All other guidelines with the exception of the above follow standard FHA eligibility requirements . Refer also to Mortgagee Letter 2008-06. Purchase or R&T Refinance Max Loan Amount Max LTV Minimum Fico Score FHA Maximum Loan Limit 97% 580 Cash Out Refinance Max Loan Amount Max LTV Minimum Fico Score $417,000 95% 580 > $417,000 85%
  17. 17. Good with credit approvals through 12/31/08 Topic Description When is a 2 nd appraisal required? <ul><li>The loan amount excluding UFMIP will exceed $417,000, AND </li></ul><ul><li>The LTV excluding UFMIP equals or exceed 95%, AND </li></ul><ul><li>The property is determined to be in a declining market area. </li></ul>How is a declining market determined? <ul><li>By the appraiser: In the neighborhood section of the appropriate appraisal form, as well as in the housing trend section, or if its determined there’s an oversupply of properties </li></ul><ul><li>By the lender: through services such as the S&P/Case-Schiller Index, Office of Federal Housing Enterprise Oversight (OFHEO) Index, or National Association of Realtors (NAR) statistics </li></ul><ul><li>Automated Underwriting System: Fannie DU or Freddie LP </li></ul>Who can perform the 2 nd appraisal? <ul><li>The 2 nd appraisal must be performed by an FHA roster appraiser selected by the Direct Endorsement Lender that is underwriting the mortgage. </li></ul><ul><li>Lender independently engages the appraiser and is not to request a 2 nd case number through FHA Connection. </li></ul><ul><li>Fee may be passed to the borrower as part of their closing costs. </li></ul>When must the mortgage amount be reduced? <ul><li>If the 2 nd appraiser has an estimated value more than 5% lower than the original appraisal, the maximum mortgage must be predicated upon the lower of the two appraised values. </li></ul>*** FHA DECLINING MARKET RULE *** A reduction in maximum allowable LTV/CLV is not required for regular FHA loans in declining market areas; FHA Loans exceeding $417,000 with an LTV of 95% or greater in a declining market area requires a 2 nd appraisal.
  18. 18. Basic Eligibility Requirements Appraisal Requirements Credit Qualification General Guidelines Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  19. 19. Topic Description FHA Streamline Refinance Streamline Refinance refers ONLY to the amount of documentation and underwriting that needs to be performed by the lender and does not mean that there are no costs involved in the transaction. Basic Requirements of the program? <ul><li>Mortgage to be refinanced must already be an FHA loan </li></ul><ul><li>Mortgage to be refinanced must be current (not delinquent) </li></ul><ul><li>Refinance is to result in a lowering of the borrower’s monthly P&I payments </li></ul><ul><li>No cash may be taken out on mortgages refinanced using the streamline process </li></ul>Possible structures <ul><li>Streamline refinances are offered in several ways: </li></ul><ul><li>May be offered as a “no cost” refinance (actually no out-of-pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash; lender pays any closing costs incurred on the transaction </li></ul><ul><li>May be offered to include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property as determined by appraisal. </li></ul>Without Appraisal Loan amount will be lower of original loan amount plus new upfront premium OR the sum of the existing lien plus closing costs, discount points, prepaid items , etc. With Appraisal Loan Amount is the lower of the LTV using the appraiser’s value OR the sum of the existing lien plus related closing costs and prepaid items .
  20. 20. Topic Description Credit Qualification There is NO CREDIT QUALIFICATION if using “With Appraisal” or “Without Appraisal”. However, if the new loan terms will increase the borrower’s payment, OR when the deletion of an existing borrower will trigger the due-on-sale clause OR following an assumption (certain terms) then we use the Credit Qualifying Streamline Refinance which has the same loan amounts as stated PLUS will require credit documentation and qualifying Credit Qualifying versus NO Credit Qualifying? <ul><li>Credit Qualifying Streamline Refinance : </li></ul><ul><ul><li>Need verification of income, a credit report, compute the debt-to-income ratios and determine that the borrower will continue to make mortgage payments </li></ul></ul><ul><li>No Credit Qualifying Streamline Refinance : </li></ul><ul><ul><li>Does not need any of the above documentation </li></ul></ul><ul><ul><li>Sections regarding income, assets, debts and obligations need not be completed </li></ul></ul>Max LTV/CLTV Follow standard FHA guideline maximum LTV/CLTV UW Guides All other guidelines follow standard FHA guidelines Additional Information <ul><li>Cash-to-Close . Borrowers are not required to provide evidence of cash-to-close. </li></ul><ul><li>Subordinate Financing . Subordinate financing may remain in place regardless of the total indebtedness against the property with or without appraisals. Borrower is not required to satisfy any outstanding subordinate liens as long as they will clearly be subordinate to the new FHA-insured refinance mortgage. </li></ul>
  21. 21. Introduction to FHA Secure Eligibility Guidelines General Guidelines Underwriting Guidelines Frequently Asked Questions Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  22. 22. You worked hard for homeownership! FHA has helped millions of Americans secure their dream of homeownership. Now we want to keep those dreams alive! Topic Description What is the FHA Secure Program? <ul><ul><li>FHA Secure is the refinancing option that gives credit-worthy borrowers, who were making timely mortgage payments before their loans reset but are now in default, a 2 nd chance with a FHA insured loan. i.e., This will allow homeowners to refinance various types of adjustable rate mortgages (ARMS) that have recently “reset”. </li></ul></ul>Impact of FHA Secure **FHASecure is expected to help 500,000 families by 12/31/08** From 2007-2009, 2.3 million ARMS are expected to reset (1/4 of which are at risk of foreclosure). Since September 2007, FHA has pumped $68 billion into the housing market; $28 billion of it is in the FHASecure program helping more than 150,000 homeowners. How can FHA Secure help homeowners stay in their homes? FHASecure gives homeowners with non-FHA adjustable rate mortgages (ARMS) the ability to refinance into an FHA insured mortgage and the borrower will not be disqualified just because they’re delinquent. FHA Secure isn’t going to help all borrowers so why is FHA making it available? FHA recognizes that foreclosures and vacant properties affect home values, contribute to neighborhood decline and cost local government additional services and lost revenue. FHA is hoping this program will help prevent that type of negative impact on communities.
  23. 23. Who is Eligible? <ul><li>Eligible homeowners must meet the following requirements : </li></ul><ul><ul><li>Have a NON-FHA insured ARM loan that has reset </li></ul></ul><ul><ul><li>Sufficient income to make the mortgage payment; AND </li></ul></ul><ul><ul><li>A history of on-time mortgage payments before the loan reset. </li></ul></ul>Eligibility Highlights of the FHA Secure Initiative <ul><ul><li>The mortgage being refinanced must be a non-FHA ARM that has reset </li></ul></ul><ul><ul><li>Borrower’s payment history must show that prior to the reset the borrower was current in making their monthly payments during 6 months prior to the reset (by due date). They can have late payments outside the most recent six months and still be eligible. </li></ul></ul><ul><ul><li>The UW must determine that the reset of the non-FHA ARM caused the borrower’s inability to make the monthly payments, AND the borrower has sufficient income and resources to make the new monthly payments under the new FHA loan. </li></ul></ul><ul><li>Secondary Financing </li></ul><ul><li>Not available through FMC at this time </li></ul><ul><ul><li>Under FHASecure, there is no CLTV limit or seasoning requirement for purchase money 2nds but must follow existing FHA policies. ie., any line of credit > $1,000 advanced within the last 12 months not used for repairs or home improvement is not eligible for inclusion in new FHA mortgage. </li></ul></ul><ul><ul><li>Any Lender may execute a 2 nd to pay off the excess 1 st lien balance, closing costs, and any arrearages. </li></ul></ul><ul><ul><li>No Cap on CLTV or dollar amount of subordinate financing </li></ul></ul><ul><ul><li>Combined amount of FHASecure 1 st and any 2 nd may exceed the applicable FHA limits </li></ul></ul><ul><ul><li>If payments on the 2 nd are required, include it in DTI calculation </li></ul></ul><ul><ul><li>Do not include in DTI if payments on 2 nd are deferred for no more than 36 months </li></ul></ul>
  24. 24. Topic Description Maximum LTV **NEW** <ul><li>CURRENT: Follows Standard FHA guidelines. </li></ul><ul><li>NEW: Press Release 4/9 – ALG waiting for investor approval to give green light!!! </li></ul><ul><li>Borrowers with ARMS with 2 x 30 consecutive lates or at 2 different times over the last 12 months qualify for LTV up to 97% </li></ul><ul><li>Borrowers with ARMS with 3 x 30 consecutive lates or at 3 different times over the last 12 months qualify for LTV up to 90% </li></ul>Maximum Loan Amount <ul><ul><li>Follows standard FHA loan limits including the FHA Jumbo loan limits. </li></ul></ul><ul><ul><li>You can include the existing 1 st lien, any purchase money 2 nd , closing costs, prepaid expenses, discount points, prepayment penalties, late charges and any arrearages (PITI if arose after reset) into the new loan amount. </li></ul></ul>Loan Purpose <ul><ul><li>Rate & Term refinances only. Cash Out is limited to no more than $500. </li></ul></ul>UW Method FHA encourages the use of FHA’s TOTAL Mortgage Scorecard to obtain risk classifications on each loan under the FHASecure initiative. TOTAL is already built into DU & LP **Must indicate on the MCAW that the loan is an FHA Secure Mortgage!** Accept/Approve <ul><ul><li>It TOTAL renders an “accept/approve”, the UW will not perform a personal review of the borrower’s credit history and capacity to repay. </li></ul></ul>Refer <ul><ul><li>In the more likely even that TOTAL renders a “refer”, then UW must manually UW file following standard FHA guidelines in addition to qualifying requirements of the FHASecure program. </li></ul></ul>
  25. 25. Good on applications through 12/31/08 Topic Description How does FHA define reset? Does the definition include ARMS that re-set at different intervals (Eg., 6 mos, annual, etc.)? <ul><ul><li>FHA has purposely not defined reset because it understands there are various reset periods associated with a Non-FHA ARM. In the case of payment option ARMS, the ultimate “reset” or “recasting” of the loan to fully amortizing is an acceptable cause of default to qualify a borrower for FHASecure. </li></ul></ul>Is there a Maximum number of delinquent months that can be rolled into the new mortgage? <ul><ul><li>No. Borrower’s with sufficient equity may include the entire delinquency into the 1 st as long as it doesn’t exceed the max loan amount and LTV for their area. </li></ul></ul>How far behind can a borrower be on a mortgage to qualify? No limit. Whether you’re current, 1 month behind or multiple months behind, the amount to be refinanced will depend on the value of property, amount owed, and if lender or another eligible source is willing to take back a 2 nd to bridge the cap Between what is owed and the home’s value. Can a borrower be delinquent and for a certain time to be eligible? FHA Secure is no longer limited to borrowers who are delinquent. FHA encourages borrowers facing reset to refinance before they fall behind. On properties owned less than 1 yr, what value is used to determine LTV? Due to declining values, we will rely on current appraisal without the need to look at original sales price or acquisition cost.
  26. 26. Good on applications through 12/31/08 Topic Description Can a non-owner occupant be added to the loan for the benefit of qualifying occupants for FHA Secure ? (Will contradict FHA’s refinance guidelines) <ul><ul><li>With the exception of cash out refinances, adding a non-occupant co-borrower does not contradict FHA requirements. When FHA allowed for cash out up to 95% LTV, the lender and borrower could not add additional borrowers to make the transaction qualify. </li></ul></ul><ul><ul><li>However, for FHA Secure which is a lifeline to save the home, and rate & term refinances, a non-occupant co-borrower can be added. </li></ul></ul>What if the value of the home is now less than what is owed? <ul><ul><li>It doesn’t matter to FHA but the lender considering the refinance would have to be willing to accept a short payoff on the existing loan OR to hold a 2 nd to make up the difference. </li></ul></ul><ul><ul><li>Not available at ALG at this time but we will accept other Secondary financing if available. </li></ul></ul>What about people in foreclosure? The program can be used even if the borrower is in foreclosure. It’ll depend on the value of the home, how much is owed and the lenders willingness to take out a 2 nd . Borrowers are encouraged to talk to the lender possibly with a HUD rep to determine the best course of action. When Note holder writes off a portion of 1 st loan amount <ul><ul><li>Borrower should consult with their tax accountant on any tax consequences that arise due to the note holder writing off a portion to pay off their 1 st mortgage </li></ul></ul>IMPORTANT NOTE: <ul><ul><li>Do not solicit homeowners to cease making timely mortgage payments! </li></ul></ul>
  27. 27. General Eligibility Guidelines General Underwriting Guidelines Other Standard Guidelines Mortgage Insurance Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  28. 28. Topic Description Eligible Borrowers <ul><li>U.S. Citizen </li></ul><ul><li>Permanent Resident Alien </li></ul><ul><ul><li>Subject to same terms as U.S. Citizen </li></ul></ul><ul><li>Non Permanent Residents </li></ul><ul><ul><li>Occupies property as a principal residence </li></ul></ul><ul><ul><li>Have a valid SSN & Eligible to work in the U.S. </li></ul></ul><ul><li>Military Personnel </li></ul><ul><ul><li>Considered owner occupant as long as an immediate family member occupies property even if Military person is stationed elsewhere </li></ul></ul>Eligible Properties <ul><li>SFR’s attached and detached </li></ul><ul><li>PUDs </li></ul><ul><li>FHA approved Condominiums </li></ul><ul><li>https:// entp.hud.gov/idapp/html/condlook.cfm </li></ul><ul><li>2-4 family properties </li></ul><ul><li>Manufactured Housing (on permanent foundation) </li></ul>Non-Occupant Co-Borrower 100% of income to qualify can come from a non-occupant co-borrower Co-Signer Co-Signer’s income or credit cannot be used as the application primary source of income or credit.
  29. 29. Topic Description Title II (Mortgage Program Insurance Type Lender) FMC is a Title II Insured Lender <ul><li>A Title II loan requires all of the following: </li></ul><ul><ul><li>A certification label or label verification letter. </li></ul></ul><ul><ul><li>The placement of the home on a permanent foundation that complies with the Permanent Foundations Guide for Manufactured Housing (PFGMH). </li></ul></ul><ul><ul><li>A certification from a licensed professional engineer verifying compliance with the PFGMH. </li></ul></ul><ul><li>The manufactured home must meet certain additional requirements, including the following: * have a floor area of not less than 400 square feet; * be constructed after June 15, 1976, in conformance with the Federal manufactured home construction and safety standards (manufactured homes produced prior to that date are ineligible for insured financing); * be classified and subject to taxation as real estate; * be built and remain on a permanent chassis; * be designed to be used as a dwelling with a permanent foundation built to FHA criteria; and * the finished grade elevation beneath the manufactured home or, if a basement is used, the lowest finished exterior grade adjacent to the perimeter enclosure, shall be at or above the 100-year flood elevation. In addition, the mortgage must cover both the manufactured unit and its site and shall have a term of not more than 30 years. </li></ul>
  30. 30. Automated UW Manual UW Underwriting Methods <ul><li>Fannie Mae DU/DO </li></ul><ul><li>LP Total Scorecard </li></ul>Manual Underwriting Qualifying Ratios Follow AUS Approval <ul><li>Fixed/ARM: 31% / 43% </li></ul><ul><li>Documented Energy Efficient Home: 33% / 45% </li></ul><ul><li>Up to 47% DTI at ALG . May stretch it to 55% on a case by case with 3 strong documented comp factors </li></ul><ul><li>( See next page for samples of strong compensating factors ) </li></ul>Important Reminder for Manual UW loans: <ul><li>Landlord rating or 12 mos. Cancelled checks or 12 mos. rent receipts or 12 mos. Bank statements to indicate rental/ payment history and document amount of rent paid. </li></ul><ul><li>Letter of explanation (LOE) regarding any derogatory credit on credit report, etc. </li></ul><ul><li>Note 3 very strong compensating factors to justify the credit or ratios etc. for manual UW (especially when ratios are stretched the allowable ratios. </li></ul>Cash Reserves <ul><li>1-2 Units – NONE </li></ul><ul><li>3-4 Units – 3 Months PITI after closing </li></ul>Down Payment <ul><li>3% Minimum Down Payment Required </li></ul><ul><li>Checking, Savings or other depository account </li></ul><ul><li>Proceeds from a 401k </li></ul><ul><li>Gift from a relative, fiance/fiancee or domestic partner </li></ul><ul><li>Cash on Hand (cannot be used as source of gift funds and must be documented) </li></ul>
  31. 31. Samples of strong compensating factors to compensate for a 55% DTI: <ul><ul><li>Large down payment towards purchase of the property (eg., 10% or more) </li></ul></ul><ul><ul><li>Borrower has successfully demonstrated the ability to pay housing expenses (past 12-24 months) equal to or greater than the proposed monthly housing expense for the new mortgage </li></ul></ul><ul><ul><li>Borrower has demonstrated the ability to accumulate savings and a conservative attitude towards the use of credit </li></ul></ul><ul><ul><li>Previous credit history shows that the borrower has the ability to devote a greater portion of income to housing expenses </li></ul></ul><ul><ul><li>Borrower receives documented compensation or income not reflected in effective income, but directly affecting the ability to pay the mortgage – includes food stamp and similar public benefits </li></ul></ul><ul><ul><li>There is a minimal increase in the borrower’s housing expense </li></ul></ul><ul><ul><li>Borrower has substantial documented cash reserves (Eg., 3 mos) after closing. Asset must be liquid or readily convertible to cash to be considered as cash reserves </li></ul></ul><ul><ul><li>Borrower has a potential for increased earnings, as indicated by job training or education in the borrower’s profession </li></ul></ul><ul><ul><li>Home is being purchased as a result of relocation of the primary wage earner, and the secondary wage-earner has an established history of employment </li></ul></ul>
  32. 32. Topic Description Credit Score Requirements <ul><li>NO MINIMUM FICO SCORE </li></ul><ul><li>Overall credit quality must meet FHA guidelines for acceptable credit history </li></ul>Collections & Judgments <ul><li>FHA does not require that collection accounts be paid off as a condition for mortgage approval </li></ul><ul><li>Court-ordered judgments must be paid off before the loan is eligible for FHA endorsement. Tax liens may be included in the refinance in some cases. </li></ul><ul><li>Explain all collections & judgments in writing </li></ul>Bankruptcy (Chapter 7) <ul><li>2 year seasoning with re-established credit or with no new credit opened after BK </li></ul><ul><li>1 to < 2yr seasoning if extenuating circumstances beyond borrower’s control and has demonstrated ability to responsibly manage affairs </li></ul><ul><ul><li>Lender to document that current situation indicates that events that led up to BK will not likely to occur again </li></ul></ul>Bankruptcy (Chapter 13) 1 year seasoning from file date with all payments “As agreed” Foreclosure 3 years seasoning with re-established credit Consumer Credit Counseling <ul><li>1 year seasoning with satisfactory payment performance </li></ul><ul><li>Written permission from Counseling Agency to enter into mortgage transaction </li></ul>
  33. 33. Topic Description Income Documentation Must be fully documented Miscellaneous Income Types <ul><li>Miscellaneous Income types allowed including child support, </li></ul><ul><li>alimony or maintenance payments, </li></ul><ul><li>passive income </li></ul><ul><li>Must show a 12-month history and evidence that the income will continue for 3 years </li></ul>Self-Employed Income <ul><li>Self Employed Income must be stable </li></ul><ul><li>2 Year history required </li></ul>Rental Income Rental Income is acceptable with a 2 year history Retirement Income Acceptable and unless documented to the contrary, retirement income may not be grossed up Non Taxable Income Disability, Public Assistance, Military Allowances, etc. may be added to the applicant’s gross income using a 1.25% factor. Overtime Income Not considered “effective” income unless verified as being received for 2 years with no statement from employer of the likelihood of continuance Projected Income Generally not allowed; exceptions OK with restrictions
  34. 34. Topic Description Temporary Buydowns <ul><li>2/1 and 1/1 Temporary Buydowns available </li></ul><ul><ul><li>30 Year Fixed Terms only </li></ul></ul><ul><ul><li>Qualify borrower(s) at the Note Rate regardless of LTV </li></ul></ul><ul><ul><li>Owner Occupied </li></ul></ul><ul><ul><li>Purchase Only </li></ul></ul><ul><ul><li>Funds may be provided by the Seller (up to 6%) or via premium pricing </li></ul></ul>Permanent B/D Allowed Seller Paid Closing Costs Seller, Real Estate Agent, Builder, Developer, etc., or a combination may contribute up to 6% of the property’s sales price toward the buyer’s actual closing costs, prepaid expenses, discount points, and other financing concessions Gift Funds Allowed for cash down payment from borrower’s relative, employer, labor union, charitable organization, governmental agency or public entity that has a program to provide homeownership assistance to low-to-moderate income FTHB, or a close friend with a clearly defined and documented interest in the borrower. “ Cash on Hand” is not an acceptable source of the donor’s gift funds Gift funds cannot come from a person or entity with an interest in the property such as seller, RE agent, broker, builder, etc except if seller is parent or RE agent is relative Impounds Impounds are Mandatory and MAY NOT BE WAIVED Assumability Government loans are assumable Prepayment Penalty No Prepayment Penalty
  35. 35. In most FHA programs, HUD collects an UFMIP and an Annual Mortgage Insurance Premium ( collected on a monthly Basis ) Up Front Mortgage Insurance Premium (UFMIP) Annual Mortgage Insurance Premium (AMIP) <ul><li>1.50% of the loan amount </li></ul><ul><li>This is added to the loan amount and financed over the term of the loan ie. 30 yrs </li></ul><ul><li>If financed, it does not subject to loan amount limit or LTV limit </li></ul><ul><li>30 Years : </li></ul><ul><li>.50% of the loan amount </li></ul><ul><li>15 Years: </li></ul><ul><ul><li>.25% of the loan amount </li></ul></ul>SAMPLE CALCULATION $100,000 Loan amount, FHA 30 Year Fixed @ 6.50% Interest Rate Up Front Mortgage Insurance Premium (UFMIP) Annual Mortgage Insurance Premium (AMIP) $100,000 x 1.50% = $1,500 @ 6.50% for 30 years (fully amortized) = $9.48 per month $100,000 x .50% = $500 / 12 (mos) = $41.67 per month (Simple Int.) Total Mortgage Insurance Premium = $51.15 per month (9.48 + 41.67)
  36. 36. 1. Can a Seller pay the UFMIP? Yes; it can be paid as cash at closing instead of having it financed through the loan. However, the 1.50% will be included in the 6% max seller concession for FHA loans if paid this way. 2. When can I stop paying Annual FHA Mortgage Insurance? <ul><ul><li>Loans closed prior to 1/1/01 are not eligible for termination of MIP </li></ul></ul><ul><ul><li>Loans closed after 1/1/01 will have their FHA MIP automatically terminated under the following conditions: </li></ul></ul><ul><ul><ul><li>FHA 30 Year (> 15 year terms) – MIP will be terminated at 78% LTV or after 5 years since borrower has been paying MIP whichever is longer. </li></ul></ul></ul><ul><ul><ul><li>FHA 15 year terms or less & LTV 90% or greater – MIP will be terminated at 78% irrespective of the length of time the borrower has paid MIP </li></ul></ul></ul><ul><ul><ul><li>FHA 15 year terms or less & LTV < 90% LTV will not be charged a MIP </li></ul></ul></ul><ul><ul><li>78% LTV will be based on lesser of sales price or appraised value at loan origination </li></ul></ul><ul><ul><li>No new appraisal is required </li></ul></ul>
  37. 37. Topic Description By Family Members <ul><li>Family members may lend 100% of the borrower’s required cash investment (secured or unsecured) to include: </li></ul><ul><ul><ul><li>Down Payment </li></ul></ul></ul><ul><ul><ul><li>Closing Costs </li></ul></ul></ul><ul><ul><ul><li>Prepaid Expenses </li></ul></ul></ul><ul><ul><ul><li>Discount Points </li></ul></ul></ul><ul><li>Donor cannot borrower from an interested party </li></ul><ul><li>Receiver cannot be co-obligor on the note used to secure the funds </li></ul>By Government Agencies <ul><ul><li>HUD doesn’t have any grants or programs to help with Down Payment or Closing Cost assistance. However, HUD does provide funding to state and local governments for this purpose. Here’s a link to find out local housing programs in your area: </li></ul></ul><ul><ul><li>http:// www.hud.gov /local/ca/community/home/ </li></ul></ul>
  38. 38. FHA Interest Rates Origination Points & Fees Closing Costs Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  39. 39. <ul><li>Interest Rates for the FHA </li></ul><ul><li>programs are available from your </li></ul><ul><li>Affinity Lending Group Representative </li></ul>
  40. 40. Topic Description How much can you charge on an FHA loan? <ul><li>FHA does not regulate or set the interest rate or discount points a lender can charge a borrower. These are negotiated between the borrower and the lender. </li></ul><ul><li>Additionally, the lender can charge the borrower those customary and reasonable closing costs necessary to close the mortgage. </li></ul><ul><li>However, borrower’s may not pay : </li></ul><ul><ul><li>Tax Service Fee </li></ul></ul><ul><ul><li>More than 1% loan origination fee </li></ul></ul>Aggregate Charges <ul><li>Aggregate charges may not violate FHA’s tiered pricing rules. Eg., </li></ul><ul><ul><li>Lender is prohibited from charging higher prices (discount points) for low balance loans vs. high balance loans. </li></ul></ul><ul><ul><li>Lender may not provide a variation of more than 2 discount points charged on its FHA mortgages within a geographic area. </li></ul></ul>What are considered Closing Costs? <ul><li>Includes appraisal fee, inspection fees, actual cost of credit reports, LOAN ORIGINATION FEE , settlement fee, deposit verification fees, home inspection service fees up to $300, title exam and title insurance, document preparation fees (if performed by 3 rd party and not controlled by lender), property survey fees, attorney fees, recording fees, transfer stamps and taxes, test and certification fees, flood-zone determination fees, water tests, and other costs determined to be appropriate non-recurring costs </li></ul><ul><li>Counts towards minimum cash investment </li></ul><ul><li>Discount points or prepaid items are not included in Closing Costs and are not eligible for meeting the minimum cash investment requirement </li></ul>Mortgage Broker Fee <ul><ul><li>Borrower independently engages a broker to seek financing and pays broker directly – fee may not come from lending institution and must appear on the HUD-1 </li></ul></ul>Real Estate Buyer Broker Fee <ul><ul><li>Borrower is represented by a real estate buyer-broker and pay a fee directly to the broker – must appear on HUD-1 </li></ul></ul>
  41. 41. Topic Description Origination Points Up to a maximum 1.00% Origination Fee Discount Points <ul><ul><li>Allowed and negotiated between Borrower and Broker </li></ul></ul>Premium Pricing <ul><li>May be used to pay normal closing costs and/or prepaid expenses including accrued interest on refinance transactions </li></ul><ul><ul><li>Closing costs paid in this manner need not be included as part of the 6% seller contribution </li></ul></ul><ul><li>May be used to pay lender funded buydowns </li></ul><ul><li>May be used as additional broker compensation </li></ul><ul><li>Must be disclosed on HUD and GFE </li></ul>
  42. 42. Recap Affinity Lending Group has been around since 2003. Since then, ALG has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why Affinity Lending Group is your First Time Home Buyer and Down Payment Assistance Headquarters!
  43. 43. Highlights of the Program? <ul><li>No minimum credit score required </li></ul><ul><li>Non-traditional credit acceptable </li></ul><ul><li>Low down payments – as low as 3% </li></ul><ul><li>Financed closing costs – financed into the loan </li></ul><ul><li>Non-occupant co-borrowers – 100% of income used for qualifying </li></ul><ul><li>Expanded ratios – ALG goes up to 47% possibly 55% max DTI </li></ul><ul><li>No prepayment penalties </li></ul><ul><li>Fully assumable </li></ul><ul><li>Competitive interest rates & Lower premiums </li></ul><ul><li>Default Assistance </li></ul><ul><li>NEW – FHASecure </li></ul>
  44. 44. <ul><li>On behalf of Affinity Lending Group, we thank you for joining our training today and hope the information provided was informative and will help you… </li></ul><ul><li>Building This Together ! </li></ul>

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