Hecm for purchase

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Hecm for purchase

  1. 1. Company Confidential ©2011 Genworth Financial, Inc. All rights reserved. HECM For Purchase Genworth Financial Home Equity Access, Inc January 2012 Company Confidential ©2011 Genworth Financial, Inc. All rights reserved.
  2. 2. 1HECM for Purchase 1 Agenda Effective States Program Overview Operation/Underwriting Overview Calculator Tools Available
  3. 3. 2HECM for Purchase Effective States The HECM for Purchase Program is a popular way for seniors to acquire a new primary residence. The program is available in nearly every state where we are authorized to do business. Listed below are the only states the HECM Purchase can not be originated in at this time. • North Carolina • Texas • Hawaii
  4. 4. 3HECM for Purchase 3 Program Overview • The HECM For Purchase Product was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction by eliminating the need for a second closing • FHA defines “HECM For Purchase” as a real estate purchase where title to the property is transferred to the HECM borrower, which the borrower will occupy as a principal residence, and, at the time of closing, the HECM first and second liens will be the only liens against the property
  5. 5. 4HECM for Purchase 4 Program Overview ‫‏‬Owner Occupancy Requirement: • The Borrower Must Occupy The Property Within 60 Days Of Closing. • An Occupancy Affidavit Must Be Signed By The Borrower(s) And Included In The • Closing Package To Acknowledge They Will Occupy The Property Within The • Required Time Frame • The Borrower May Not Participate In A Rent-Back Agreement With The Seller
  6. 6. 5HECM for Purchase Program Overview Program Guidelines • Same Products, Rates, And Servicing Fees As A Traditional HECM Loan – Use Daily Rate Sheet For Pricing Information • Works Similar To A Short To Close HECM – Source And Seasoning Requirements Apply • Lesser Of Purchase Price, National Lending Limit, Or Appraised Home Value Is Used To Calculate The Maximum Claim Amount Refer To Full Program Guides For Complete Program Details
  7. 7. 6HECM for Purchase Program Overview Eligible Properties • Owner Occupied SFR Principal Residences • FHA Approved Condos • PUD’s • Newly Constructed Properties Must Have Certificate Of Occupancy – Application Cannot Be Taken Before A Certificate Of Occupancy, Or Its Equivalent Is Issued And The Property Is Habitable Ineligible Properties • Cooperative Units • Manufactured Homes • Log Homes • Berm Homes • Bed & Breakfast Properties • Boarding Houses • Multi-unit properties • Newly constructed homes where a certificate of occupancy has not been issued •All ineligible properties under the HECM program (4150.2 Appendix D, 4905.1m 4910.1, ML 2005-48)
  8. 8. 7HECM for Purchase Program Overview Allowable Funding Sources • Borrower May Only Use Their Own Money Or Money Obtained From Sale Of Assets • Withdrawal From Borrower’s Savings Or Retirement Account Is Acceptable • Gift Funds From Acceptable Sources (Sourcing Of Funds Required) Lenders Are Required To Verify Source Of Funds Unallowable Funding Sources • Credit Card Advances • Sweat Equity • Trade Equity • Rent Credit • Business Checking or Savings Accounts • Cash or it’s equivalent, in whole or in part, from the following parties, before, during or after loan closing: - The seller or any other person or entity that financially benefits from the transactions, or - Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in the previous bullet • FHA prohibits seller contributions (also known as “seller concessions”), the use of loan discount points, interest rate buy downs, closing cost down payment assistance, builder incentives, gifts or personal property given by the seller or any other party involved in the transaction. This includes customary charges that are normally paid on behalf of the borrower by the seller.
  9. 9. 8HECM for Purchase Program Overview Required Repairs • Health And Safety Or Structural Integrity Issues • Must Be Completed Prior To Closing By Seller • Buyer Cannot Put Any Money Into Repairs Before They Own The Home • Repair Set-Asides Are Not Allowed
  10. 10. 9HECM for Purchase Operations/Underwriting Overview ‫‏‬File Submission • Additional Minimum Submission Requirements will apply: – Fully executed copy of purchase contract (signed by all parties) – Verification of purchase money funds – Certificate of occupancy (if new construction) Additional Up-Front Documents: – Amendatory Clause (if not included in Purchase Contract language) – Real Estate Certification Form (if not included in Purchase Contract language) – For Your Protection, Get a Home Inspection – Election and Acknowledgment of Source of Funds Received from Closing Agent – Important Terms, Sample Loan Agreement & Sample Security Instruments (updated with Purchase Specific Information) – Verification of Income (if applicable, see additional notes regarding rental properties)
  11. 11. 10HECM for Purchase Operations/Underwriting Overview Additional Data Entry For FHA Connection • Several Changes Have Been Made To FHA Connection To Accommodate HECM For Purchase Mortgages • To Ensure A HECM Purchase Transaction Is Successfully Entered Into FHA Connection, Please Refer To Our Program Guidelines For Detailed Data Entry Instructions Suspensions and Debarments (LDP/EPLS): • GFHEA Must Examine HUD’s Limited Denial Of Participation List (LDP) And The General Services Administration’s (GSA) Excluded Parties List System To Determine If The Name Of Any Party To The Transaction Including, But Not Limited To The Buyer, Seller, Real Estate Agent, Or Builder, Appears On Either List • The Reverse Mortgage Will Not Be Eligible For Mortgage Insurance If The Name Of Any Party To The Transaction Appears On Either List
  12. 12. 11HECM for Purchase Operations/Underwriting Overview ‫‏‬Previous Mortgage Delinquency: A Foreclosure Within The Last 3 Years, Whether An FHA Loan Or Not, Is Ineligible For HECM For Purchase. This Includes The Following: • A filed NOD (Notice of Default) • A deed in lieu of foreclosure • A mortgage delinquency of 120 days or greater will be considered the equivalent of a NOD, regardless of whether foreclosure action has been commenced • Short Sales (A short sale payoff or a settled mortgage account is considered a foreclosure event) Real Estate investments and multi-property landlords are not eligible
  13. 13. 12HECM for Purchase Operations/Underwriting Overview First Time Home Buyer (FTHB) - is defined as an individual who has had no home ownership within the last 3 years • The borrower’s payment history for all existing rental payments must be verified. The payment history must consist of the most recent 12 months’ payment • Evidence of rental history must be documented with copies of cancelled checks or bank statements covering the most recent 12 month period for rental payments in conjunction with a verification of rent (VOR). Both documentation sources must be provided • Copies of the canceled checks must be: • Legible • Show the bank endorsement for deposit • Show the date of bank endorsement • Identify the landlord as payee • Front and back copies of the check is required
  14. 14. 13HECM for Purchase Operations/Underwriting Overview •Financial Assessment Details: • Financial assessment: Gross Debt to Income Ratio not to exceed 43%. Any additional properties owned are subject to an evaluation that includes, but is not limited to, borrower’s ability to maintain costs associated with both existing & new RM property. Income verification will be applicable in conjunction with overall debt. Obligations that are reviewed in all scenarios are: PITI, HOA dues on any existing residences, taxes, insurance, revolving/installment debt accounts with more than 10 months remaining are factored and repayment of terms for collections accts (excluding medical) and any other outstanding debt
  15. 15. 14HECM for Purchase Operations/Underwriting Overview ‫‏‬The HECM Purchase Guidelines Have Been Enhanced To Include Updates To The Existing Guidelines Effective 11/28/2011 ‫‏‬Current Ownership Of An Existing Property Which Is Being Retained: • Gift funds are not an acceptable source of down payment • Maximum number of properties owned cannot exceed 2 (which includes the current residence being purchased) • Principal residency of the HECM purchase property must be demonstrated • If rental property is owned, a copy of the rental agreement is required. The borrow must also provide a 2 year rental history verified by 2 years tax returns including Schedule E and an executed 4506-T. (Stable rental history over the previous 24 months must be documented and be free of any unexplained gaps greater than three months is required) • A separate schedule of real estate is required • Must have minimum of 2 months PITI in reserves if retaining current residence, including any rental properties. (Source of funds required to close.)
  16. 16. 15HECM for Purchase Operations/Underwriting Overview ‫‏‬No Affiliated Relationships On The Loan Transaction Including Familial Relationships On The Purchase Transaction. (Non-arms Length Transactions Are Prohibited.) Non-arm’s Length Transactions Include But Are Not Limited To: • Seller is real estate broker. Borrower or a relative of the borrower is a licensed real estate broker or agent. This includes a borrower or relative of the borrower acting in the capacity of the property seller’s agent under a listing, selling agent for a real estate broker and/or both listing/selling agent (dual representation) • Relatives include, but are not limited to, individuals related by blood, marriage, adoption, or legal guardianship. • Home builders: Purchase transaction where the borrower is the owner of/or is employed by the homebuilder who has constructed the subject property • Third party service vendors: A transaction where the borrower is also a principal (ownership) of a third party vendor but are not limited to: settlement/closing agent, escrow company, title company, notary, borrower(s) acting as real estate broker & title attorney
  17. 17. 16HECM for Purchase Operations/Underwriting Overview Key Underwriting Points - Seasoning • Property Flipping Is Not Permitted And Therefore, We Must Take Steps To Ensure That: – Only current owners of record may sell properties that will be financed using FHA-insured mortgages; – Any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and – For resale's that occur between 91 and 180 days where the new sales prices exceeds 100% of the previous sales price, FHA will require additional documentation validating the property’s value
  18. 18. 17HECM for Purchase Operations/Underwriting Overview Key Points - Monetary Investment And Subordinate Financing • At Closing, Borrowers Provide Monetary Investment Which Is Applied To Satisfy The Difference Between The Principal Limit And The Sales Price, Plus Any Loan Related Fees That Are Not Financed Into The Loan, Minus The Amount Of The Earnest Money Deposit • HECM Mortgagors May Choose To Provide A Larger Investment Amount In Order To Retain A Portion Of The Available HECM Proceeds For Future Draws (Non Purchase Money Funds) • The Same Payment Plan Options Are Available For Both The HECM For Purchase And The Standard HECM Products • If The HECM Proceeds Do Not Cover The Sales Price, The Property’s Indebtedness Is Not Permitted To Be Subordinated Even If The Existing Lien Holder Is Willing To Subordinate • All Existing Liens Must Be Satisfied At Closing
  19. 19. 18HECM for Purchase Operations/Underwriting Overview Key Points - Closing Process • All Conditions Must Be Met Prior To Requesting Closing Documents • In Addition To The Occupancy Affidavit, A Notice Of Right To Cancel Will Be Included In All Closing Packages When Non Purchase Money Funds Are To Be Disbursed • GFHEA Will Issue A Special Instruction For Two Funding Dates When Non- Purchase Money Funds Are Involved ‫‏‬
  20. 20. 19HECM for Purchase Calculator ‫‏‬Changes to the Calculator • Checkbox To Select “HECM For Purchase” • Field To Capture “Contract Sales Price” Will Appear • Field To Capture “Down Payment” Amount – Any Earnest Money Amounts Should Be Input Into Down Payment Field, Additional Documents Will Generate With The Application Package – Amendatory Clause – Real Estate Certification (To Be Used If Language Not In Purchase Contract) – For Your Protection, Get A Home Inspection – Election And Acknowledgement Of Source Of Funds Received From Closing Agent – Important Terms, Loan Agreement & Security Instruments (Updated With Purchase Specific Information)
  21. 21. 20HECM for Purchase Tools Available Program Guidelines ‫‏‬Contact Your Account Manager Or Broker Care Manager With Any Additional Questions ‫‏‬Broker Care 866-871-1353 or brokerprogram@genworth.com

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