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1.C Conventional Chenoa Fund Programs Overview
This document provides an overview and summary of a training on Chenoa Fund programs offered by CBC Mortgage Agency. The training covers all aspects of originating and processing loans through the Chenoa Fund programs, including: an overview of conventional and FHA programs; how to calculate AMI; how to complete the 1003; underwriting; locking loans; securing down payment assistance; document drawing; purchase clearing; final documents; servicing; and why to use Chenoa Fund programs. It also includes a matrix comparing the conventional standard 97% LTV and HomeReady products and program guidelines.
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1.C Conventional Chenoa Fund Programs Overview
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- 2. This Training Includes… 1 – All Chenoa Fund Programs Overview Conventional / FHA 2 – How to Calculate AMI 3 – Pre-Registration: The 1003 Conventional / FHA 4 – Underwriting 5 – Lock Desk 6 – How to Lock a Loan 7 – How to Secure DPA Approvals 8 – How to Draw Documents 9 – Purchase Clearing: Uploading 10 – Purchase Clearing: Conditions and Escalations 11 – Final Documents 12 – Servicing 13 – Why Use Chenoa Fund Conventional / FHA
- 3. Chenoa Fund byCBC Mortgage Agency: General Overview • Chenoa Fund is the program name for CBC Mortgage Agency’s suite of DPA products, offered to borrowers in the form of second mortgages. • The programs are allowed in all states except New York. • All programs offer 3.5% for the second mortgage. Up- front fees are limited only by the QM 3% points and fees rule. • The first mortgage must be sold to CBC Mortgage Agency; the down payment funds you advanced are reimbursed at the time of sale. • Your underwriter underwrites the file. • Approved property types include SFR, PUD, Townhome, Condo, Attached, Detached, and Modular Homes. Manufactured Homes are not allowed. • HPML (Rebuttable Presumption) is allowed, but no High Cost Mortgages.
- 4. Conventional Standard 97% LTVLoans a.) 3.5% is offered to cover the down payment, closing costs, and prepaid items b.) 2nd mortgage repayable c.) 10-year term with an interest rate 2% higher than the first mortgage d.) 640 minimum FICO score e.) No income limits f.) FICO 640–659: 50% DTI or less FICO 660+: DTI restrictions per AUS guidelines g.) First-time homebuyer required h.) MI Coverage 35% i.) Homebuyer education may be required by Fannie Mae HomeReady®️ (Conventional) a.) 3.5% is offered to cover the down payment, closing costs, and prepaid items b.) 2nd mortgage repayable c.) 10-year term with an interest rate 2% higher than the first mortgage d.) 640 minimum FICO score e.) Follow FNMA guidelines on income limits. f.) FICO 640–659: 50% DTI or less FICO 660+: DTI restrictions per AUS guidelines g.) First-time homebuyer not required h.) MI coverage 25% i.) Homebuyer education required Quick Comparison Matrix: Conventional Products
- 5. Check out ourProduct Matrix! A more detailed version of our product matrix can be found on chenoafund.org.
- 6. • Required inthe closed loan package for all programs • The letter states: • Where the down payment is coming from • CBCMA’s promise to reimburse your company for the secondary financing • When we purchase the first mortgage, CBCMA reimburses the funds you advanced for the borrower’s down payment Funding Obligation Letter 600 N 100 E Cedar City, UT 84721 Lender: ABC Lender Loan Application Number: 151110001 FHA Case Number 123-230598230-704 Borrower(s): John Doe Jane Doe Purchase Price of Property: $200,000.00 Property Address: 123 Main Street Anywhere, TN 34222 Form of Assistance: Soft Second Amount of Assistance: $7,000.00 Interest Rate (If Applicable): 0 Term (If Applicable): 360 Monthly Payment Amount (If Applicable): $0.00 Commitment Date: 11/10/15 As of the commitment date, CBC Mortgage Agency has incurred a legally enforceable obligation to provide the funds towards the Borrower(s)’ Minimum Required Investment. Lender should deliver funds for the MRI to the closing entity prior to or at the time of loan closing. CBCMA will reimburse Lender from funds legally belonging to CBCMA at or before closing under this obligation once the following conditions are met: • The first mortgage associated with this assistance must be closed and delivered to CBCMA for purchase. • All purchase conditions for the first mortgage associated with this assistance must be satisfied. If these items are not delivered to CBCMA, this obligation will be void. WARNING: Failure of CBCMA to satisfy the obligation may result in a determination that the funds for the Borrower(s)’ MRI were provided by a prohibited source and the first mortgage obligation may not be insurable under the FHA insurance program. Sincerely, MRI Funding Obligation Image: Soft Second FOL
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- 8. *Note: to offerconventional products, you must be FNMA approved. Neither CBC Mortgage Agency (CBCMA), nor any Chenoa Fund products, are approved by or affiliated with Fannie Mae. Originating lenders are responsible for ensuring that their use of CBCMA second mortgages and conventional first mortgages are compliant with Fannie Mae requirements. CBCMA’s Correspondent Lending Guide (CLG) include overlays to the HomeReady®️ program. HomeReady®️ is a registered trademark of Fannie Mae. DU®️ is also a registered trademark of Fannie Mae.
- 9. • No borrowerinvestment required • Income limits per FNMA guidelines • Minimum FICO score of 640 • 30-year fixed rate first mortgage • Second lien is a 10-year fixed rate mortgage with an interest rate 2% higher than the first mortgage • Concurrent homeownership not allowed • DU®️ only—see Correspondent Lending Guide for more information on LTV/CLTV limitations • Single family only HomeReady®️ • Purchase only • MI coverage 25% • First-time homebuyer not required • Requires borrower to take homebuyer education class
- 10. Conventional Standard 97%LTV Loans • No borrower investment required • No income limits • Minimum FICO score of 640 • 30-year fixed rate first mortgage • Second lien is a 10-year fixed rate mortgage with an interest rate 2% higher than the first mortgage • Concurrent homeownership not allowed • DU®️ only—see Correspondent Lending Guide for more information on LTV/CLTV limitations • Single family only • Purchase only • MI coverage 35% • One borrower must be a first-time homebuyer • Homebuyer education class required if LTV is 97% or higher (per Fannie Mae guidelines)
- 11. Is my borrowerin the 640–659 range? CBCMA requires DTI of 50% or less The borrower has… • Two (2) years employed with the current employer OR two (2) months PITI reserves. Not to exceed 55% DTI. The borrower has… • A maximum DTI 31% front- end OR met VA Residual Income Tests Not to exceed 55% DTI. Start Here! Choose one alternative qualification requirement from both boxes that best fits your borrower’s situation: But my borrower exceeds those DTI requirements, has DTI 55% or lower, and AUS approves above 50%… Choice 1 AND Choice 2
- 12. • Borrowers inthe 620–639 FICO range making a present housing payment must either: • Provide a 12-month verification of housing payment (if renting from an LLC or management) • Provide 12 months of cancelled checks or bank statements (if rending from family or an individual) Verification of Housing Expense • All borrowers in the 640–659 FICO must provide a verification of current housing expense, but a payment history is not required. Acceptable documentation includes: • A copy of the rent/lease agreement • Bank statements tracking payments for the amount of reported rent • A letter from the landlord • A filled our VOR (if a VOR is provided, the rental history will be used in credit qualification) • All borrowers making no present housing payment in the 620–650 FICO range must provide verification of housing payment documenting that no rent is required to be paid.
- 13. • All borrowersmust have one credit score. • CBCMA requires either a soft pull credit report OR UDM within ten days of close. • CBCMA prefers UDM; if you do a soft pull, you must pull from all three bureaus, even if the borrower only has one credit score. • If you use UDM, you may choose to pull from only one bureau. • Our primary goal behind this requirement is to verify that there are no new material inquiries, which may require the file to be rerun through AUS. • If a new material inquiry is discovered, then CBCMA will require that an LOE explaining the new material inquiry be provided to determine if new debt was incurred. • If new debt was incurred prior to closing, then Agency guidelines may require that the file be re-run through AUS and the debt added to the borrower’s final application. Undisclosed Debt Monitoring and Soft Pull of the Credit Report
- 14. Admin Fee Clarifications •$399 Admin Fee on first mortgage • Charged to the correspondent • Reflected on the PA as a deduction from total loan sale proceeds • No lender fees on secondary financing • Additions to the lender fees to offset the Admin Fee: • NEVER reflect as a charge payable to CBCMA • List fee must always be listed in Section A, in Origination Charges or as a separate line item Admin charge • If passed to the borrower, this fee is subject to the QM 3% points & fees test
- 15. • No lenderfees should be charged on the second. • The only fees allowed to be charged on the second: • Prepaid interest • Recording fees for the Deed of Trust • Reasonable settlement fees • A courier fee to return the signed documents to the lender • At no time will CBCMA purchase a loan that exceeds the QM 3% points and fees test. Displaying 2nd Lien Loan Fees on the 2nd CD
- 16. • Review theBuckley Sandler memo on converting points and fees between borrower and seller: https://chenoafund.org/lender/cbc- documents-and-tools/ • Converting seller credits can pay this fee if the following is done before closing: • Borrower has signed an addendum to the note (found at the above link) • The fee is itemized in the seller’s column on the CD • This allows the charges to not be counted for the 3% points and fees rule. Rate Sheet Clarification • CBCMA: • Offers one rate for each product and its FICO band • Does not charge discount points • Cannot, in the current market, offer the alternative par rate necessary for discount points to be bona fide • Our rate sheets refer to fees from specific FICO bands as “Fee Paid by Lender.” • Any fees paid by the lender to CBCMA are a reduction in the YSP/SRP. • If this fee is passed on to the borrower, the QM 3% points and fees rule applies. • Fees from corporate margins (from lower rates) belong in section A of the CD, “points and fees.”
- 17. Maximum Origination Fee •CBCMA will allow a maximum origination fee of 1.5%. • Additionally, the lender may charge for any CBCMA loan level pricing adjustments (LLPAs); this charge may be seller-paid. • Lenders will be required to refund borrowers for any origination fees (including non-bona-fide discount points) exceeding 1.5% plus CBCMA LLPAs. • Reasonable lender underwriting, administrative, or program fees are not considered in this calculation; however, they are considered in the QM 3% points and fees test.