Eem 203 K Hq


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FHA Presentation from FHA - adapted for myEnergyLoan realtor training in Venice, FL in April, 2010.

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  • Stretch ratios of 33/45 apply only if the property meets International Energy Conservation Code (IECC) - Source: ML 2005-21
  • Bullet #2 - The median area price is the same as the maximum loan limit for the county (go to for maximum loan limit by county) and Bullet #3 - the current conforming Freddie Mac limit is $417,000
  • In this example, $19,000 is the lesser of the three calculations and may be added to the base loan amount
  • Source: ML 2005-21 and HUD Handbook 4155.1 Chapter 2-19
  • The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.HUD's 203(k) program can help overcome this obstacle by enabling the purchase or refinance a property plus the cost of making the repairs and improvements in one mortgage.
  • Eem 203 K Hq

    1. 1. Energy Efficient Mortgages 203K & Streamline 203K<br />
    2. 2. Energy Efficient Mortgages 203K & Streamline 203K<br />TOPICS of DISCUSSION<br />Energy Efficient Mortgage (EEM)<br />203k Standard<br />203k Streamline<br />203k Underwriting<br />
    3. 3. Energy Efficient Mortgage (EEM)<br /> Energy Efficient Mortgage Benefits<br /><ul><li>An energy-efficient home is more affordable due to the reduced operating costs. Cost-effective energy improvements result in
    4. 4. lower utility bills,
    5. 5. conserve energy and, thus,
    6. 6. make more income available for the mortgage payment. </li></li></ul><li>Energy Efficient Mortgage (EEM)<br />Energy Rating<br /><ul><li>A Home Energy Rating System (HERS) summary is required to determine the cost benefit of the energy items
    7. 7. Contact a HERS rating official to obtain a rating report</li></li></ul><li>Energy Efficient Mortgage (EEM)<br />Energy Efficient Mortgage Challenges<br /><ul><li>Access to a HERS or RESNET Energy Rating Services can be problematic as some states have very few raters. 
    8. 8. Delays in providing an energy audit on a residential property - urban & suburban areas. Rural areas will take longer due to a lack of raters in the area.
    9. 9. Training of certified raters & certified retrofit contractors (approximately $1200 for a one day course)</li></li></ul><li>Energy Efficient Mortgage (EEM)<br />Energy Rating<br />The home energy rating<br /> is a standard measurement of the home's energy efficiency<br /> involves an on-site inspection by a home energy rater <br />is determined by insulation levels, window efficiency, wall-to-window ratios, the heating and cooling system efficiency, and the solar orientation of the home<br />
    10. 10. Energy Efficient Mortgage (EEM)<br />
    11. 11. Energy Efficient Mortgage (EEM)<br />Underwriting <br /><ul><li>Standard underwriting procedures apply</li></ul> 3.5 percent down payment (max 96.5% loan-to-value for a refinance) <br />Closing costs are not included in the 3.5% down payment <br />Financeable upfront mortgage insurance premium<br />1-4 unit, existing and new construction properties are eligible <br />
    12. 12. Energy Efficient Mortgage (EEM)<br />Maximum Loan Amount<br /><ul><li>The maximum amount for the portion of the EEM for energy improvements is the lesser of 5% of:</li></ul>The value of the property, or <br />115% of the median area price of a single family dwelling, or <br />150% of the conforming Freddie Mac limit<br />
    13. 13. Energy Efficient Mortgage (EEM)<br />Example<br />$380,000 (value) x 5% = 19,000<br />488,750 (max loan limit for Stockton county for 1-unit) x 5% =24,437<br />417,000 (Freddie Mac cap) x150% = 625,500 x 5% = 31,275<br />
    14. 14. Energy Efficient Mortgage (EEM)<br /><ul><li>The FHA maximum loan limit for the area may be exceeded by the cost of the energy efficient improvements.
    15. 15. Maximum loan limit for a 1-unit property in Stockton, CA is $488,750</li></li></ul><li>Energy Efficient Mortgage (EEM)<br />EEM & 203k Combination<br />The EEM may be used in conjunction with the FHA’s Rehabilitation “203(k) and Streamline K” loan programs<br />
    16. 16. 203(k) – Rehabilitation Loan Program<br />What is a 203k? <br />One loan to finance both acquisition & rehabilitation of a property (or refinance and rehabilitation)<br />
    17. 17. 203(k) – Rehabilitation Loan Program<br />Purpose of the 203k<br />Restore and preserve the nation’s housing stock<br />Expand homeownership opportunities<br />Help community revitalization <br />
    18. 18. 203(k) – Rehabilitation Loan Program<br />Loan Amount<br />The loan amount is based on projected value after the work is completed<br />
    19. 19. 203(k) – Rehabilitation Loan Program<br />FHA has two types of rehabilitation loans <br />Standard 203k Rehabiliation – includes more complex repairs (i.e.structural) and requires a minimum of $5,000 in repairs<br />Streamline 203k Rehabilitation – covers uncomplicated repairs up to $35,000 with no minimum dollar threshold– no structural repairs allowed <br />
    20. 20. 203(k) – Standard Rehabilitation Loan Program<br /><ul><li>Eligibility
    21. 21. Property must be at least one year old
    22. 22. 1-4 units
    23. 23. Condos (interior only)
    24. 24. Manufactured Homes
    25. 25. New construction on part of the original foundation</li></li></ul><li>203(k) – Standard Rehabilitation Loan Program<br />Eligible Properties Continued<br />Existing house moved to a new foundation<br />Mixed use residential properties (rehab residential portion only)<br />25% commercial – 1 story<br />49% commercial – 2 story <br />33% commercial – 3 story <br />
    26. 26. 203(k) – Standard Rehabilitation Loan Program<br />Improvements<br />Minimum $5,000 rehab costs<br />Must increase the marketability and value of the property (“must have” repairs not “wish list” repairs)<br />Repairs & Improvements must comply with HUD HB 4910.1 <br />Meet local building & zoning codes<br />Corrections of code violations<br />Energy improvements<br />
    27. 27. 203(k) – Standard Rehabilitation Loan Program<br />Continued…<br /><ul><li>structural alterations and reconstruction
    28. 28. modernization and improvements to the home's function
    29. 29. elimination of health and safety hazards
    30. 30. changes that improve appearance and eliminate obsolescence</li></li></ul><li>203(k) – Standard Rehabilitation Loan Program<br />Continued…<br /><ul><li>reconditioning or replacing plumbing; installing a well and/or septic system
    31. 31. adding or replacing roofing, gutters, and downspouts
    32. 32. adding or replacing floors and/or floor treatments
    33. 33. major landscape work and site improvements
    34. 34. enhancing accessibility for a disabled person
    35. 35. making energy conservation improvements </li></li></ul><li>203(k) – Standard Rehabilitation Loan Program<br />Ineligible Improvements<br />Luxury items are not eligible<br />Swimming pools, saunas, barbecue pits, satellite dishes, etc.) <br />
    36. 36. 203(k) – Standard Rehabilitation Loan Program<br />Preliminary Feasibility Analysis<br />Purpose <br />Prevent wasted time & finances<br />$100 financeable fee<br />Optional<br />
    37. 37. 203(k) – Standard Rehabilitation Loan Program<br />Participants & Responsibilities<br />Borrower<br />Lender<br />203k Consultant<br />Contractor<br /><ul><li>Real Estate Appraiser</li></ul>Best practice: borrower, consultant & appraiser all meet at the property to discuss repairs <br />
    38. 38. 203(k) – Standard Rehabilitation Loan Program<br />203k Consultant<br />HUD Approved <br />3 years experience as general contractor, remodeling contractor, or home inspector<br />State licensed architect or engineer<br />On FHA 203k Consultant Roster<br />Selected by lender (ML 00-25)<br />
    39. 39. 203(k) – Standard Rehabilitation Loan Program<br />Consultant Responsibilities<br />Complete a home inspection<br />Obtain & review Architectural Exhibits<br />Prepare Write Up & Cost Estimate<br />Provide line item unit-cost breakdown<br />Duties listed in ML 95-40<br />
    40. 40. 203(k) – Standard Rehabilitation Loan Program<br />Consultant<br />Can’t be the contractor or appraiser, but can be the energy rater<br />Work write up clearly indicate the required items vs. “wish list” items <br />If using EEM, the work write-up must include Energy Package <br />
    41. 41. 203(k) – Standard Rehabilitation Loan Program<br />Work Write Up<br />Specifications of Repairs Form<br />35 categories (HUD HB 4240.4 Rev-2, Appendix 1) <br />Detail work to be completed<br />Break down labor & materials<br />All health & safety issues must be addressed first (and part of the first $5,000 minimum threshold) <br />Consultant & Buyer agreement signed by both parties <br />(ML 95-40)<br />
    42. 42. 203(k) – Standard Rehabilitation Loan Program<br />Forms & Exhibits <br />Property report (existing)<br />Termite/Well/Septic Report(s)<br />EEM Rating or Analysis<br />Proposed Plot Plan (new additions)<br />Proposed Floor Plan (wall changes) <br />Other reports as necessary<br />Work write up – description of work <br />Cost estimates - detailed<br />
    43. 43. 203(k) – Standard Rehabilitation Loan Program<br />Contractor Selection<br />Lender must ensure <br />acceptable contractor is hired<br />Contractor credentials, <br />work experience, <br />licensing information/bonding or insuring, <br />type of work performed and client references<br />execution of Homeowner/Contractor Agreement<br />ML 00-25, 98-11, 94-11<br />
    44. 44. 203(k) – Standard Rehabilitation Loan Program<br />Who Does the Work? <br />Experienced general or specialized contractor<br />No self-help<br />
    45. 45. 203(k) – Standard Rehabilitation Loan Program<br />Appraiser Responsibilities<br />Appraisal made “subject to completion per plans & specifications”<br />Appraisal must contain copy of plans, specs, work write up and other conditions upon which value is based <br />4150.2 & HOC Reference Guide <br />
    46. 46. 203(k) – Standard Rehabilitation Loan Program<br />203k mortgage must be based on the lowest sales price in the last year<br />ML 00-25<br />
    47. 47. 203(k) – Standard Rehabilitation Loan Program<br />Release of Funds <br />Consultant performs inspection on behalf of lender <br />Maximum 4 draws plus final draw <br />10% holdback on every intermediate draw<br />Funds cannot be released for incomplete work<br />
    48. 48. 203(k) – Streamline Loan Program<br />
    49. 49. 203(k) – Streamline Loan ProgramAcquisition and up to $35,000 <br /><ul><li>The Streamlined (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home.
    50. 50. The Streamlined (k) program includes the discretionary improvements and/or repairs shown below:</li></ul> <br /><ul><li>Repair/Replacement of roofs, gutters and downspouts
    51. 51. Repair/Replacement/upgrade of existing HVAC systems
    52. 52. Repair/Replacement/upgrade of plumbing and electrical systems
    53. 53. Repair/Replacement of flooring </li></ul>36<br />
    54. 54. 203(K) Streamline Continued <br /><ul><li>Minor remodeling, such as kitchens, which does not involve structural repairs
    55. 55. Painting, both exterior and interior
    56. 56. Weatherization, including storm windows and doors, insulation, weather stripping, etc.
    57. 57. Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens.
    58. 58. Accessibility improvements for persons with disabilities </li></li></ul><li>203(k) – Streamline Continued<br /><ul><li>Lead-based paint stabilization or abatement of lead- based paint hazards
    59. 59. Repair/replace/add exterior decks, patios, porches
    60. 60. Basement finishing and remodeling, which does not involve structural repairs
    61. 61. Basement waterproofing
    62. 62. Window and door replacements and exterior wall re-siding
    63. 63. Septic system and/or well repair or replacement</li></li></ul><li>203(k) – Streamline Continued<br />Ineligible Work Items <br />Major Rehab<br />New Construction (including room additions)<br />Repair of structural damage<br />Repairs requiring detailed architectural exhibits, drawings, etc. <br />
    64. 64. 203(k) – Streamline Continued<br />Ineligible Work Continued…<br />Landscaping or similar site improvements<br />Repairs requiring a work schedule longer than 6 months<br />Repairs arising form the appraisal not on the list of eligible work items<br />Repairs causing borrower to be displaced more than 30 days <br />
    65. 65. 203(k) – Streamline Continued<br />Required Exhibits for Eligible Work<br />Pre-purchase home inspection (if performed)<br />Borrower’s planned repairs<br />Appraisal report indicating list of proposed repairs and costs<br />
    66. 66. 203(k) – Streamline Continued<br />Who Does the Work<br />Specialized Contractor/Contractors<br />Self-help<br />
    67. 67. 203(k) – Streamline Continued<br />Underwriting <br />Considerations<br />Supplemental Origination Fee<br />Customary Charges<br />
    68. 68. 203(k) – Streamline Continued<br />203k Worksheet (HUD92700)<br />Mortgage Amount<br />Maximum – statutory limit for the area or 110% of “after-improved” value<br />Case Number<br />ADP Code<br />Repair Escrow Amount <br />203k Consultant ID Field<br />
    69. 69. 203(k) – Streamline Continued<br />Documentation <br />Drawings & Specifications<br />Rehabilitation Cost Estimate<br />Contractor’s Cost Estimate(s)<br />Homeowner/Consultant Agreement(s)<br />203k Loan Agreement<br />203k Rider<br />Borrower Acknowledgement<br />
    70. 70. 203(k) – Streamline Continued<br />Process Overview <br />Borrower’s application <br />Consultant<br />Order Case Number<br />Order Appraisal<br />Processor Responsibilities<br />Property & Credit Package<br />
    71. 71. 203(k) – Streamline Continued<br />Process Overview <br />Direct endorsement underwriter’s responsibilities<br />Conditions<br />Loan Closes<br />Repair Escrow Account <br />Repairs/Inspections/Draws<br />
    72. 72. 203(k) – Streamline Continued<br />Completion & Payments <br />Number of payments<br />First Payment<br />Permit Fees<br />Final Payment<br />Payment Schedule<br />Issuance of Payments<br />Lender’s Compensation<br />Inspections<br />Final Release<br />
    73. 73. Information source:, ml 2005-21, ML 2009-18<br />Roxanne Campanella, Account Liaison <br />Federal Housing Administration<br />Sacramento, CA <br />
    74. 74. Questions<br />