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Ihda illinois smart move

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  • 1. The Illinois Smart Move Program
  • 2. Objectives: After completion of this presentation participants will be able to:  Explain to homebuyers the benefits of the Smart Move Loan and Smart Move assistance programs  Explain the Smart Move Down Payment assistance  Explain the three compliance qualifications of the Smart Move program  Explain why targeted areas are beneficial and where a list of targeted areas can be found.  Explain the three recapture triggers  Explain the five steps of the IHDA loan process  Find guides to assist in submitting IHDA loans The Illinois Smart Move Program
  • 3. Illinois Housing Development Authority “To finance the creation and the preservation of affordable housing throughout the State to increase the supply of decent and safe places for people of low or moderate means to live.”
  • 4. Illinois Housing Development Authority Housing Finance Agency Bank with a public mission Advocate for affordable housing Affordable housing expert Partner
  • 5. Advantages to IHDA’s Programs The Illinois Smart Move Program Safe and reliable products Reach a different consumer Affordable interest rates Easy process
  • 6. First Mortgage: 30-year; Fixed rate; Affordable interest rate program Highlights:  Either FHA, Conventional ,USDA and VA insured  Maximum LTV: 96.5 (FHA) ; 97(Conventional) 100 (USDA & VA)  First-time homebuyer or exempt  Minimum credit score of 620  Maximum total debt (back end) ratio of 45 percent  Must contribute 1 percent or $1,000 from buyer’s own funds, whichever is greater  Homeownership counseling required The Illinois Smart Move Program Current Rates 4.00% FHA, USDA, VA 4.25% Conventional Subject to change
  • 7. First Mortgage plus Down Payment Assistance (DPA): Characteristics of Down Payment Assistance:  Provides 3 percent of the purchase price, up to $6,000 for households  0 percent, 10-year forgivable loan, recorded as a second mortgage  Mortgage balance is repaid if home is sold or 1st mortgage refinanced within 1st 10 years  The interest rate on the First Mortgage under this package will be slightly higher than the interest rate on the First Mortgage under package one The Illinois Smart Move Program Consists of a Smart Move First Mortgage plus a Smart Move Down Payment Assistance Loan Current Rates 4.50% FHA, USDA, VA 4.75% Conventional Subject to change
  • 8. Conventional Program:  Job Lost Protection available with MI companies  No Adverse Market Fees  No Pricing Adjustments  Reduced PMI Coverage: • 18% for LTVs greater than 95% and less than or equal to 97% • 16% for the LTVs greater than 90% and less than or equal to 95% • 12% for the LTVs greater than 85% and less than or equal to 90% • 6% for the LTVs greater than 80% and less than or equal to 85% Delivery Requirements • Special Feature Code (“SFC”) Bond Loans– 88 • Special feature code (“SFC”) 460 for my community mortgage code The Illinois Smart Move Program
  • 9. Tax Code Compliance The Illinois Smart Move Program
  • 10. Smart Move has three basic compliance qualifications The Illinois Smart Move Program 1. Borrower(s) must be a first time home buyer or exempt 2. The borrower(s) and relevant parties must have a total household income that does not exceed the applicable limit 3. The residence being financed must be a qualified dwelling and the acquisition cost must be within the applicable limit.
  • 11. Tax Code Compliance Underwriting: Qualification #1: First-time homebuyer or exempt The Illinois Smart Move Program First-time homebuyer:  A person who “has not” had an ownership interest in a principal residence at any time during the three-year period prior to the date the mortgage is executed. Exemptions:  If the residence to be purchased is within a target area.  If the borrower is a veteran, this requirement is waived.
  • 12. What are targeted areas and why are they beneficial for you? Targeted Area benefits  Higher income and purchase price limits  Do not have to be a first time home buyer  Good selling point for both originators and realtors The Illinois Smart Move Program Targeted Areas: Areas of the state where seventy percent (70%) or more of the families have an income which is eighty percent (80%) or less of the median family income, as established by HUD. There are thousands of targeted areas within Illinois. For a list by zip code within each County, visit www.ihda.org.
  • 13. The Illinois Smart Move Program This is where you find, targeted area look-up guide, procedural guides and forms. <
  • 14. Qualification #2: The borrower(s) and relevant parties must have a total household income that does not exceed the applicable limit. The Illinois Smart Move Program The term “borrower” includes:  The borrower and co-borrower(s).  Relevant parties- includes a spouse even if they are not going on title or are waiving homestead rights. Any adult (over 18) who will live in the home and their income must also be included.
  • 15. How to calculate total household income: The Illinois Smart Move Program Calculation: Total household income is the borrower’s and co-borrower’s and relevant parties’ annualized gross income. Example: Check Stub dated 2/28/2011* Gross base Income is $2,000 $2,000 divided by 2 months, result multiplied by 12 = $12,000 Base income Overtime, Bonuses Commissions generally average with last year and YTD totals 2010 OT $5,000 2011 OT $3,000 Total $8,000 divided by 14, result multiplied by 12= $6,857 Grand Totals: $12,000 base plus OT $6,857 equals $18,857 * The above is a general example, individual files may require different calculations
  • 16. Gross Monthly Income Includes: The Illinois Smart Move Program Income from all sources!  Gross base pay  Overtime  Part-time employment  Bonuses  Commissions  Child support  Alimony  Investment income  Dividends and interest  Social security  Pension income  Unemployment
  • 17. Qualification #3: The residence being financed must be a qualified dwelling and the acquisition cost must be within the applicable limit. The Illinois Smart Move Program To be a qualified dwelling, a) The borrower must acquire a fee simple interest in the real estate. b) The home must become the principal place of residence of the borrower within 60 days after closing on the loan. c) The residence must be located in Illinois and be designated for residential use.
  • 18. The following residences can be Qualified Dwellings: The Illinois Smart Move Program 1. Single family detached home 2. Townhome 3. Condominium unit 4. Two-unit residential structure Co-op apartment units are not eligible under the Program
  • 19. Federal Recapture The Illinois Smart Move Program
  • 20. Federal Recapture Tax The Illinois Smart Move Program The Smart Move Program uses the proceeds of tax-exempt bonds to provide financing benefits for first-time homebuyers. If the home, financed through a Smart Move product, is sold or otherwise disposed of within nine (9) years of purchase, this benefit may be "recaptured".
  • 21. Federal Recapture Tax The Illinois Smart Move Program The tax is triggered if all three of the following conditions apply: 1. The home is sold or disposed of within nine (9) years of being purchased, for reasons other than death; and 2. There is a capital gain on the sale of the home, and 3. The household income for the year in which the home is sold exceeds federal recapture tax limits. For an example of a recapture scenario please see the recapture addendum of this presentation or go to ihda.org
  • 22. Federal Recapture Tax The Illinois Smart Move Program IHDA’s Reimbursement Policy: IHDA will reimburse buyers for the recapture tax as long as they can provide documentation showing that the recapture tax was paid (IRS tax transcripts). The Reimbursement Policy does not apply to borrowers accessing a Mortgage Credit Certificate (MCC).
  • 23. The Illinois Smart Move Program Smart Move Process
  • 24. Smart Move Process 1. RESERVATION 2. COMPLIANCE REVIEW 3. CREDIT UNDERWRITING (#’s 2 and 3 can occur simultaneously) 4. CLOSING 5. LOAN SALE & POST CLOSING The Illinois Smart Move Program
  • 25. Smart Move Process Step One: Reservation  Reservations are made online at https://ilrss.ihda.org/ilrss/ IHDA provides a reservation manual to assist you. A copy is provided as part of this presentation. It is also located at ihda.org  In order to make a reservation you must have an user id and password  To obtain an user id and password you must contact your system administrator 1. Every lender has an internal administrator at their institution 2. Do you know who’s your administrator?  Once a reservation is made it must close within 60 days. If it doesn’t close within that time frame, IHDA’s worst case pricing will apply  Rates are subject to change without notice The Illinois Smart Move Program
  • 26. Smart Move Process Step Two: Compliance Review  A compliance file is sent by the lender to IHDA, where we determine if the buyer meets compliance guidelines (first time homebuyer, income and purchase price limits)  Compliance files can be uploaded through the Mitas system to IHDA for review  IHDA provides compliance checklists to assist you. They are mandatory forms and must be submitted with every compliance file  It take on average 48-72 business hours to complete the initial review  Lender is notified of review by email The Illinois Smart Move Program
  • 27. Smart Move Process Step Two: Compliance Review Continued Smart Move compliance files consists of the same forms that lenders use on a daily basis. There are documents that are unique to IHDA and are listed below:  Smart Move Buyer and Seller Affidavits  Smart Move Certificate of Income  Recapture notice  Three years of tax returns.  IHDA provides guides on how to complete the above forms. They are included as part of this presentation and are available at ihda.org.  All IHDA forms are available at ihda.org All compliance files are sent to the following address Homeownership Programs Illinois Housing Development Authority 401 N. Michigan Avenue, Suite 700 Chicago, IL 60611 The Illinois Smart Move Program
  • 28. Smart Move Process Step Three: Credit Underwriting When underwriting Smart Move Loans, you will underwrite according to the program that you are using (FHA, Conventional, USDA, VA). Please note that IHDA does have two caveats up and beyond typical underwriting guidelines  Buyers must have a minimum middle fico score of 620  Back end ratio cannot exceed 45%  If you do not have the ability to underwrite loans at your organization, contact US Bank Help Desk at 1-800-562-5165 for available options The Illinois Smart Move Program
  • 29. Smart Move Process Step Four: Closing Once you have IHDA and credit approval you can close. Please be aware of the following.  IHDA offers an optional pre-closing review. Within 24 hours of closing fax to (312) 832-2195  Copy of the Hud-1  Face pages of the first and second mortgages The Illinois Smart Move Program
  • 30. Smart Move Process Step Five: Loan Sale and Post Closing  Smart Move Loans are sold to US Bank who also acts as the servicer  Purchase files are submitted to both IHDA and US Bank, which largely mirror each other.  Lender has 10 days from the loan closing date to send the post closing documents to IHDA.  Loan must have approval from US Bank and IHDA before it is purchased.  For details on US Bank’s purchase process call their help desk at 1-800-562-5165 or www.mrbp.usbank.com The Illinois Smart Move Program
  • 31. Smart Move Process Step Five: Loan Sale and Post Closing The Illinois Smart Move Program Smart Move purchase files consist of the same forms that lenders use on a daily basis. There are documents that are unique to IHDA and are listed below:  Smart Move Buyer and Seller Affidavits  IHDA Mortgage Rider  IHDA Second Note and welcome letter  IHDA Second Mortgage  IHDA provides checklists for to assist you. They are mandatory forms and must be submitted with every compliance file  IHDA provides guides and checklists on how to complete the above forms. They are included as part of this presentation and is available at ihda.org. All purchase files are sent to the following address Homeownership Programs Illinois Housing Development Authority 401 N. Michigan Avenue, Suite 700 Chicago, IL 60611
  • 32. Step Five: Loan Sale and Post Closing Cont’d The Illinois Smart Move Program Below are common errors that occur on IHDA closing submissions  IHDA closing conditions are not met.  Errors on IHDA Mortgage Rider  Rider is recorded with the first mortgage only  Marital Status missing on either the first or second mortgage By following the IHDA post closing checklist you should eliminate most if not all errors. Use of the checklist is mandatory.
  • 33. The Illinois HOME START Program Closing a Down Payment Assistance Loan (DPA)  DPA loan closes in name of “Illinois Housing Development Authority”  No Truth in Lending (T-I-L) required  Loan can be reflected as subordinate financing on HUD-1 generated for first mortgage or can have it’s own HUD-1 It is not required to execute an Assignment in order to sell the second mortgage to U.S. Bank Home Mortgage.
  • 34. Lender Compensation: The Illinois HOME START Program Origination Fee: Lender can charge 0.5% origination fee to the borrower(s) Allowable Fees: Lender can charge fair and reasonable fees (up to $1,200) for services allowed Service Release Fee: Lender will receive 2.25% of the 1st mortgage amount as a service release fee for FHA, USDA, & VA loans For Conventional loans lender will receive 2.25% of the 1st mortgage amount
  • 35. Resources: The Illinois Smart Move Program IHDA Compliance Officers: Linda Benson 312-836-5249 Allison Crane 312-836-8561 IHDA Account Managers: Scott Bush 312-898-3317 ScottBush@IHDA.org Greg Faulkner 312-914-5023 GFaulkner@IHDA.org IHDA Toll Free Hotline: 1-877-456-2656 IHDA website: www.ihda.org U.S. Bank Help Desk: 1-800-562-5165
  • 36. Objectives Recap: After completion of this presentation participants will be able to:  Explain to homebuyers the benefits of the Smart Move Loan and Smart Move assistance programs  Distinguish whether a buyer qualifies for 3% or 5% Smart Move assistance  Explain the three compliance qualifications of the Smart Move program  Explain why targeted areas are beneficial and where a list of targeted areas can be found.  Explain the three recapture triggers  Explain the five steps of the IHDA loan process  Find guides to assist in submitting IHDA loans The Illinois Smart Move Program
  • 37. The Illinois Smart Move Program Questions?
  • 38. The Illinois Smart Move Program