FIRST TIME HOMEBUYER PROGRAM. ADMINISTR ATOR GUIDELINES Published Updated Updates on Page 4

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1 FIRST TIME HOMEBUYER PROGRAM ADMINISTR ATOR GUIDELINES Published Updated Updates on Page 4

2 Dakota County CDA First Time Homebuyer Programs Page 2! TABLE OF CONTENTS THE DAKOTA COUNTY CDA TEAM 7 WHO TO CONTACT 8 THE PRODUCTS 9 FIRST MORTGAGE 9 DOWN PAYMENT ASSISTANCE LOAN GUIDELINES 9 DPA LOAN HOUSEHOLD INCOME 9 DPA LOAN AMOUNTS MINIMUM AND MAXIMUM 10 DPA LOAN PURCHASE PRICE LIMIT 10 DPA LOAN ELIGIBLE PROPERTIES 10 DPA LOAN ELIGIBLE BUYERS 10 DPA LOAN MINIMUM INVESTMENT 10 DPA LOAN HOMEBUYER EDUCATION 10 DPA LOAN REPAYMENT OF ASSISTANCE 10 DPA LOAN APPLICATION AND APPROVAL 11 DPA LOAN CASH BACK 11 DPA LOAN GSE REQUIREMENTS 11 DEFECTIVE DPA LOANS AND REPURCHASE 11 MORTGAGE CREDIT CERTIFICATE TAX DISCLAIMER 13 What is a Mortgage Credit Certificate? 13 What is the lender involvement? 14 MCC Homebuyer Benefit 14 Special Rules 15 Eligible Borrowers 16 Veterans Exception 16 Homebuyer Education 16 Minimum Credit Score 16 HOUSEHOLD INCOME LIMITS 17 ACQUISITION LIMITS (SALES PRICE LIMITS) 17 Property Qualifications 17 FINANCING FACTS 18 Appraisal 18 Assets 18 Assumptions 18 Buydowns 18 Cash Back 18 Construction to perm 18 Cosigners 18 Prepayments 19 Recapture Tax 19 Refinances 19 Reissuance of MCC s 19 SUMMARY OF THE COMPLIANCE ORIGINATION PROCESS 21 REQUEST DAKOTA COUNTY CDA DPA FUNDS 22 MORTGAGE CREDIT CERTIFICATE PROCESS 23 ehp Digital Docs 23 PROGRAM TIMELINE 29 Special Low-income Mortgage Loans 29

3 Dakota County CDA First Time Homebuyer Programs Page 3! DPA Reservations 29 Loan Processing, Delivery and Purchase Timetable: 29 Term of MCC Program 30 PROGRAM FEES 31 ADDITIONAL FEES 32 COMPLIANCE INCOME CALCULATION 33 PROGRAM FORMS 37 ORIGINATING COMPLIANCE FORMS 37 CLOSING COMPLIANCE FORMS 37 POST CLOSING COMPLIANCE FORMS 37 For Loans With MCC s 37 DOCUMENTS REQUIRED FOR THE COMPLIANCE FILE 38

4 Dakota County CDA First Time Homebuyer Programs Page 4! UPDATES Date Updates - Effective immediately unless otherwise noted Page 12/20/12 First Mortgage & DPA Income and Acquisition Limits Revised; Special Low Income Mortgage Income Limits Revised 01/28/13 Down Payment Assistance Loan Guidelines; Added DPA Funds Request Process 2/4/13 Clarifying verbiage added regarding the use of proposed MCC benefit when qualifying the borrower 2/11/13 SHIP/SUBMIT verbiage changed; US Bank DPA Funding Verification Form and /1/13 Corrected Recapture Tax form verbiage 28 3/8/13 Origination and discount fees and SRP information added 23 3/21/13 Removed USDA;RD from Minimum Credit Score 13 5/1/13 Tax Transcripts are required for all loans closing on or after May 1, /1/13 ADDED INFORMATION REGARDING DPA AWARD LETTER RE: ,28,38 7/1/13 Further Clarification on distribution of DPA Award Letter 18 4/1/14 Revised HH income and income calculation method. Revised DPA loan amount and purchase price limit CDA documentation revision. Maximum DTI ratios revised. Revised underwriter certification. Program timetable revised. MCC Issuer fee added and Origination fee added. 6,7, 14 7 & /1/14 Revised income limits 7 5/20/14 Revised income and purchase price limits FOR ALL LOANS THAT HAVE NOT CLOSED ON OR BEFORE 5/20/14 7 & US Bank Funding Fee increased to $ & Added HFA Preferred overlays on several pages 5, 6, 8, 13 15, 16, Revised language concerning DPA Award Letter (highlighted in green) No proof of wire is needed HFA Preferred Language updated Cover, changed Guideline and Updates dates; Basis of DPA Loan amount; cash back policy change; on page 15, see changes to Assets, Cash Back, Cosigners, Minimum loan amount; clarified income calculation and deleted some conflicting income information to assure consistency throughout; deleted boarder s income verbiage 1, 7 8,

5 Dakota County CDA First Time Homebuyer Programs Page 5! Date Updates - Effective immediately unless otherwise noted Page Income and purchase price limits revised. Effective for all loans reserved and after. 5, Updates to addresses and web site links throughout 6, 17, Added Contact Directory Changed HUD-1 reference to Closing Disclosure 10 & Reformatted, About the Fianncing 17 & Revised Summary of Compliance Process 19 & Removed How to Reserve a Loan in the ehp Lender Portal Old Reformatted Programs Fees Reformatted Documents required for compliance checklist Added ehp fee information & revised US Bank fees Added disclaimer regarding not reproducing program forms Added TRID requirements for second mortgage Removed TRID requirements for second mortgage and replaced with DPA Disclosure Form 11 & Revised addresses for CDA Revised minimum FICO and Manual Underwriting Manufactured housing no longer an eligible property Added Language added regarding credit documentation for the Master Servicer DTI corrected to be 45% for all loans Revised program name to: First Time Homebuyer Program Revised page header through to reflect: Dakota County CDA Added Shari Larson on Who To Contact directory for question regarding CDA DPA Revised DPA Income Limits Chart Added first mortgage before closing disclosure in Cash Back area and revised link to find the DPA program forms Added first mortgage before closing disclosure in Cash Back area Added Shari Larson s contact information in Request Dakota County CDA Funds area Revised Term of MCC Program to Dec. 31, Revised minimum FCO for conventional loans Clarified ehousingplus Fee Revised Reservation to Underwriter Certification timeline to 45 days, effective for all loans on Cover All pages

6 Dakota County CDA First Time Homebuyer Programs Page 6! Date Updates - Effective immediately unless otherwise noted Page Updated Contact Directory Update Eligible Borrower requirements for Non-Citizens Removed Fannie Mae overlay regarding ownership of other property Revised Minimum Credit Score DTI Ratio remains the same, added text Added US Bank condominium guideline expansion language Updated language under Financing Facts Added Fannie Mae HFA Preferred Fact Sheet Link Revised Reissuance of MCC s - deleted ehousingplus and added Dakota County CDA ehousingplus fees revised effective 05/15/17 US Bank Fees Revised effective 04/17/17 Updated US Bank HFA Division Web Site Address , 23, Corrected Reservation to Underwriter Certification timeline to 45 days Changed Credit Underwriting Questions section Added information regarding appraisals and purchase price Correct DPA income limits - effective with new loans reservations 06/01/17 Revised Household Income Limits Changed title of Compliance Income Calculation section Added US Bank lender help desk number Revised DPA Loan amount to $8500 & Changed income limits Revised DPA Loan Disclosure information Revised MCC Rate to 30% Updated MCC Example Revised termination date of MCC to 12/31/19 Deleted US Bank funding fee , Revised US Bank Tax Service Fee Revised income limits Clarified fee breakout for MCC combo loans 10, Clarified MCC Issuer Fee Revised Purchase price limit and 3 or more person income effective 07/18/ Changed ehousingplus Lender Portal to: ehportal Added Mortgage Insurance language under DTI requirement Added ehp Digital Docs Throughout , 31, 38

7 Dakota County CDA First Time Homebuyer Programs Page 7! THE DAKOTA COUNTY CDA TEAM Dakota County CDA Establishes the financing for the TBA program, which includes the first mortgage product, Mortgage Credit Certificates and down payment assistance, sets the rate, term, points, and general guidelines, and markets program. Participating Lenders Take applications, reserve in their own systems, process, underwrite, approve, fund, close and sell qualified loans to the program. Lenders are responsible for servicing loans in accordance with applicable FHA, VA, Fannie Mae and GNMA requirements until they re purchased by the Master Servicer. U S Bank Master Servicer Provides information on acceptable loan products and delivery and funding, receives all mortgage files, reviews mortgage files, notifies lenders of mortgage file exceptions, approves mortgage files, purchases first mortgage loans. Provides avenue for correspondent lenders who can close loans in their own name. ehousingplus Program Administration Maintains the program reservation system, websites, and posts guides, forms, training materials, provides training on compliance issues and system, answers compliance questions, receives compliance files, reviews, posts and notifies of exceptions and approves compliance file.

8 Dakota County CDA First Time Homebuyer Programs Page 8! Question General Program Compliance Questions Assistance with ehportal Assistance with User Credentials for ehportal Update an Underwriter Certified Loan Direct Questions to: ehousingplus (ehp) ehousingplus (ehp) ehousingplus (ehp) WHO TO CONTACT (Rev. 12/12/18) Contact Information (954) Ashlynn Mosher (954) ext 261 Anyone at ehp Compliance Office Program Training ehousingplus (ehp) Click on this link to attend Program training. Program Training Issues ehousingplus (ehp) System Software Training for ehp Lender Portal ehousingplus (ehp) Click on this link for the once weekly Live Webinar: System Software Issues ehousingplus (ehp) Program Rates ehousingplus (ehp) Click on this link: to view the RATES/OFFERINGS tab. Credit Underwriting questions Questions regarding the shipping of closing loan files Questions regarding exceptions Participating Lenders need to refer to internal Underwriting Department or Manager ehousingplus (ehp) for questions regarding the program compliance file US Bank for questions regarding the first mortgage closed loan file ehousingplus (ehp) for questions regarding exceptions on the program compliance file US Bank for questions regarding exceptions on the first mortgage closed loan file US Bank does not re-underwriter loans. For general questions, contact US Bank at or Option 2 (for general questions) Please note: US Bank answers underwriting questions from the underwriter of a lender for whom US Bank provides underwriting services ONLY. services@ehousingplus.com hfa.programs@usbank.com Debbie Kerr debbie.kerr@ehousingplus.com X216 hfa.communications@usbank.com

9 Dakota County CDA First Time Homebuyer Programs Page 9! THE PRODUCTS FIRST MORTGAGE DOWN PAYMENT ASSISTANCE MORTGAGE CREDIT CERTIFICATE FIRST MORTGAGE (Rates are subject to change, for current rate please visit ehousingplus.com) Revolving first mortgage funds (first-come, first -served pool to be replenished as loans are pooled and delivered. The borrower receives a 30-year, fixed rate, fully amortizing first mortgage loan with 360 level monthly payments. Available first mortgage products include FHA, VA, and HFA Preferred conventional loans. DOWN PAYMENT ASSISTANCE LOAN GUIDELINES OVERVIEW The Dakota County Community Development Agency (CDA) is committed to assisting low and moderate income households throughout Dakota County achieve the goal of homeownership. The CDA is also committed to helping to rebuild the housing market in Dakota County, which has been impacted by increased foreclosure rates. The Dakota County CDA offers down payment assistance (DPA) loans to help first time buyers purchase a home within Dakota County. The CDA provides DPA loans to bridge the affordability gap experienced by many low and moderate income buyers for the down payment and closing costs associated with the purchase of a home located in Dakota County. DPA loan funds may be used for down payment and closing costs. The funding process for DPA loans is the same regardless of the first mortgage product. ELIGIBLE LENDERS DPA loans may only be used in conjunction with a first mortgage loan to be made by a lender approved to participate in the Dakota County CDA s 2012 Give Yourself Credit first time homebuyer program. A list of approved lenders is available at homebuyers.htm. DPA LOAN FUNDING DPA loans will be closed in the name of the Dakota County Community Development Agency. The CDA will fund each DPA loan directly at closing, following the submission of a request for DPA funds by the first mortgage lender at least 3 business days prior to closing. DPA LOAN HOUSEHOLD INCOME Household income shall include the income of: (1) the mortgagor(s), (2) any person expected to both live in the residence and sign the note, and (3) any person who is both the legal spouse of a mortgagor and is expected to live in the residence. Income documentation, as indicated on the DPA File Checklist, shall be submitted to CDA staff for review and approval. CDA staff will verify household income and confirm the amount of DPA funds the household is eligible to receive. Once household income has been verified and the DPA loan file documentation is complete, CDA staff will provide an approval to close form to the Participating Lender. (Rev 04/01/14)

10 Dakota County CDA First Time Homebuyer Programs Page 10! DPA LOAN AMOUNTS MINIMUM AND MAXIMUM The minimum DPA loan amount is $1,000. Households may receive a maximum loan amount of $8,500. In the event an appraisal comes in lower than the purchase price and the purchase price is not renegotiated to meet the appraised value, the DPA loan proceeds cannot be applied toward the difference between the appraised value and the purchase price. See the chart below for the current household income limits. (Rev 01/18/18) 1-2 person household 3 or more person household $94,300 $108,400 (Rev. 10/01/18 effective for reservations 07/18/18 and after) DPA LOAN PURCHASE PRICE LIMIT The purchase price of the home cannot exceed $304,050. The purchase price limit is subject to change and will be updated by the CDA as necessary. (Rev. 10/01/18 effective for reservations 07/18/18 and after). DPA LOAN ELIGIBLE PROPERTIES Down Payment Assistance loan funds may only be used for the purchase of a single family home which will be used as the buyer s principal residence. DPA loan funds may not be used for the purchase of duplexes. DPA LOAN ELIGIBLE BUYERS The homebuyer must qualify as a first time homebuyer. The homebuyer cannot have had an ownership interest in a property within three (3) years prior to the buyer s application for a Down Payment Assistance Loan. DPA LOAN MINIMUM INVESTMENT The homebuyer must provide at least $1,000 for the purchase of the eligible property. DPA LOAN HOMEBUYER EDUCATION All homebuyers and their spouses must complete homebuyer education prior to closing on the purchase. Homebuyer education may be completed through the in person Homestretch Homebuyer Education course or through the Framework online homebuyer education course. Homebuyers using the Framework online course must also complete a free one-on-one prepurchase counseling session with a CDA Homeownership Specialist. The homebuyer education certificate and confirmation of pre-purchase counseling attendance, if applicable, must be provided prior to CDA staff approving the DPA loan for closing. Registration information for homebuyer education courses and pre-purchase counseling sessions is available on the CDA s website. DPA LOAN REPAYMENT OF ASSISTANCE CDA Down Payment Assistance funds are provided as a zero (0%) interest, deferred loan with no monthly payments. However, the full principal amount of the loan must be repaid at the time the homebuyer sells the property, refinances, or pays off the corresponding first mortgage loan. The

11 Dakota County CDA First Time Homebuyer Programs Page 11! term of the DPA loan will be the same as that of the related first mortgage loan. The DPA loan will be evidenced by a DPA Note and Mortgage, in the form available on the Program Website. The DPA Note and Mortgage will be held by the Dakota County Community Development Agency. There is no forgiveness period for the DPA loan. The full principal loan amount is due upon maturity or other repayment triggering event regardless of the length of time the homebuyer lives in the property. The CDA currently does not subordinate DPA loans at refinance. Partial or full repayment of the loan may be made at any time without a penalty for prepayment. DPA LOAN APPLICATION AND APPROVAL DPA Loan funds must be reserved directly with CDA staff. The DPA loan must also be listed as an Additional Mortgage in the homebuyer s first mortgage reservation on the ehousing reservation system. A DPA File Checklist is available by clicking on this link: dakota15.html. The checklist outlines the documentation necessary for loan reservation and loan approval prior to closing. All forms referenced on the DPA File Checklist are available by clicking on this link: CDA staff verifies DPA loan documentation and provides approval of the DPA loan amount prior to closing. DPA LOAN CASH BACK Homebuyers using Down Payment Assistance loan funds may receive cash back for prepaids at closing, as long as a $1,000 minimum borrower investment is also reflected on the First Mortgage Closing Disclosure (TRID form). (Rev 9/26/15) DPA LOAN GSE REQUIREMENTS Down Payment Assistance loans shall meet the requirements for second mortgage loans imposed by Fannie Mae, GNMA and FHA or VA, as applicable. DEFECTIVE DPA LOANS AND REPURCHASE In the event a related first mortgage loan is not accepted for purchase by the program Servicer, or if the Participating Lender is required to repurchase a first mortgage loan as outlined in the Participation Agreement, the Participating Lender will also be required to purchase the related Down Payment Assistance loan at its principal amount. Such repurchase shall occur within ten (10) days after the date on which the corresponding first mortgage loan is rejected by the Servicer or shall occur on the date of repurchase of the corresponding first mortgage loan, as appropriate. In the event the Servicer, Program Administrator, or CDA discovers that 1) any DPA loan does not comply with the requirements of these Guidelines, or 2) the Participating Lender has not complied with the originating, closing, or post-closing requirements of these Guidelines, the Participating Lender shall either correct the defect or non-compliance within sixty (60) days or shall purchase the DPA loan from the Servicer or CDA, as applicable. Such purchase shall take place ten (10) days after the expiration of the 60 day cure period. Upon repurchase of a DPA loan by a Participating Lender, the CDA shall assign the DPA Mortgage to the Participating Lender and shall endorse the related promissory note to the Participating Lender, without recourse.

12 Dakota County CDA First Time Homebuyer Programs Page 12! DPA LOAN PROGRAM FORMS The Down Payment Assistance loan program forms are not located in the ehousingplus.com lender portal. To access the various DPA Loan Program forms, please click on this link: For the CDA s Down Payment Assistance Loan File, the following documentation requirements are changed (added ) (requirements for US Bank s 1 st Mortgage Loan File and ehousing Plus s Compliance File remain the same): Original signatures are now only required on the DPA mortgage and DPA note. Two months of bank statements for each account are now required rather than three months. Letters of explanation for deposits made to bank accounts will be requested by CDA staff when they may impact program eligibility or the amount of DPA funds available to the borrower. DPA LOAN DISCLOSURE FORM Effective with all loan applications dated Oct. 3, 2015 and after, the CDA requires the DPA Loan Disclosure form available within the Loan Forms section of the ehousingplus Lender Portal. This form must be submitted to the CDA prior to receiving loan approval to close the DPA second mortgage. (Rev 01/18/18)

13 Dakota County CDA First Time Homebuyer Programs Page 13! MORTGAGE CREDIT CERTIFICATE TAX DISCLAIMER The following material is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer but may be used to support the promotion or marketing of the matter discussed herein. The taxpayer should seek advice from an independent tax advisor regarding the matter set forth herein based on the taxpayer s particular circumstances. What is a Mortgage Credit Certificate? A mortgage credit certificate ( MCC ) is an instrument designed to assist persons of low and moderate income to better afford individual ownership of housing. The procedures for issuing MCCs were established as an alternative to the issuance of single family mortgage revenue bonds. As distinguished from a bond program, in a MCC program the mortgagor may take a tax credit in an amount equal to the annual amount of interest paid on the mortgage loan multiplied by the Mortgage Credit Certificate Rate. Currently, the Mortgage Credit Certificate Rate for the Program is 30%. Because the MCC rate exceeds 20%, the amount of the credit is limited to $2,000. (Rev ) As an example, an Applicant with a $200, year, fixed rate mortgage (monthly payment has equal monthly installments of principal and interest) and a 4.25% interest rate could realize the following federal income tax savings (numbers are rounded): Example Mortgage Amount $200,000 Interest Rate 4.25% Total Interest Paid First 12 mos $8, Mortgage Credit Rate 30% Maximum First Year Credit Amount $2,000 During the first year of the Program, the Applicant in this example would be eligible for a tax credit of up to $2,000 if not limited by tax liability. IT IS IMPORTANT TO NOTE that while FHA, VA, etc. may allow a consideration of the MCC benefit when underwriting the loan, the CDA program does not. The CDA program prohibits the use of the proposed MCC benefit from being used in the underwriting process. In the example, 100% of the mortgage interest paid is $8,435 so 30% of the mortgage interest paid is $2, Because the credit rate is 30%, the amount that may be claimed as a credit is capped at $2,000. According to IRS instructions on Form 8396, the amount of allowable mortgage interest deduction on Schedule A is determined by reducing by the amount on Line 3

14 Dakota County CDA First Time Homebuyer Programs Page 14! of Form 8396 ($2,000). So the total mortgage interest paid in the first 12 months was $8,435, subtract $2,000 and the remaining $6,435 may continue to be used as a deduction. The tax credit amount of $2,000 may be used as a tax credit after all other deductions and credits have been applied and to the extent there is tax liability. If not all of the $2,000 can be used because there is not enough tax liability, it may be carried forward for up to three years. However, it cannot be added to the allowable mortgage interest deduction. For a smaller loan amount, if 30% of the mortgage interest paid was $1,000, then $1,000 would be shown on Line 3 on Form Borrowers who receive a MCC and who continue to own and occupy the financed home will be eligible for a tax credit each year for the term of the loan. The amount of the credit actually claimed on the MCC holder s federal income tax return cannot exceed the amount of federal income taxes due after other credits and deductions have been taken into account. For example, if after taking into account other tax credits and deductions, a borrower only owes $1,100, he or she cannot use the MCC tax credits in an amount in excess of $1,100. In this example, the unused $900 MCC related tax credit can be carried forward up to three years to be applied against future income tax liability. A purchaser of a new or existing single family home may apply for a MCC through any participating mortgage lender at the time he or she applies for a mortgage from the lender. A MCC cannot be issued to a homebuyer who is refinancing an existing mortgage or in connection with a mortgage from a relative. Also, a MCC cannot be used in connection with a bond program. It s important to note that all or a portion of the MCC related tax credit may be subject to recapture if the Residence is sold within the first full nine years of purchase. This tax credit recapture is further explained in the Notice of Potential Recapture Tax and in the Recapture Tax brochure provided to an applicant. It is important that borrowers understand the MCC and consider getting more information from their tax professional or the IRS. What is the lender involvement? Simply follow the guidelines for the first mortgage. The Lender is responsible for filing a form with the IRS in each year in which they originate loans for which MCCs are issued, and for keeping certain records regarding the MCCs. For participating lenders, the annual form will be forwarded via by the Program Administrator for execution and filing by the Lender. MCC Homebuyer Benefit The MCC can reduce the amount of federal income taxes; however, the tax benefit cannot exceed the amount of federal taxes owed for the year after other credits and deductions have been taken. But unused credit may be carried forward for up to three years.

15 Dakota County CDA First Time Homebuyer Programs Page 15! Borrowers will have to adjust federal income tax withholding in order to receive the MCC benefit on a monthly basis. This adjustment is accomplished by the borrower speaking to their payroll department at their place of work. By reducing monthly withholding, they will have more disposable (after tax) income with which to make mortgage payments. The benefit of the MCC program continues for the term of the mortgage as long as the holder of the MCC continues to own and occupy the home under the mortgage for which the MCC was issued. What does the Homeowner have to do to claim the benefit with the IRS? Each year the homeowner files Form 8396 with their federal income tax return. The form is available on the IRS website. Special Rules There are special rules regarding refinancing of the loan for which a MCC was issued. The borrower should contact the Program Administrator when and if refinancing the loan for which this MCC is issued.

16 Dakota County CDA First Time Homebuyer Programs Page 16! FIRST MORTGAGE PROGRAM AND MCC REQUIREMENT Eligible Borrowers All buyers and their spouses (purchasing and non-purchasing) must be first-time buyers and must be able to permanently reside in the US. Please contact the Compliance office with questions regarding permanent residency. Follow Agency (FHA, VA, USDA-RD, Fannie Mae) and U.S. Bank guidelines for non-citizens. U.S. Bank guidelines are located in their Lending Manual at Buyers must live in the property they purchase as their principal residence. All applicants must be considered irrespective of age, race, color, religion, national origin, sex, marital status, military status or physical handicap. Buyers must occupy the property purchased within 60 days of closing. Contact ehousingplus Compliance with questions regarding eligibility. The past three years federal income tax returns are NOT required for Targeted Area buyers or those meeting Veteran s Exception. Veterans Exception For the Veterans Exception, veteran is defined as "a person who served in the active military, naval, or air service, and who was discharged or released therefrom under conditions other than dishonorable." The Mortgagor Affidavit has a checkbox that states: Mortgagor(Comortgagor) meets the requirements to qualify as a veteran as defined in 38 U.S.C. Section 101 and has not previously obtained a loan financed by single family mortgage revenue bonds or assisted by an MCC utilizing the veteran exception to the first-time homebuyer requirement set forth in Section 416 of the Tax Relief and Health Care Act of Attached hereto are true and correct copies of my discharge or release papers, which demonstrate that such discharge or release was other than dishonorable. Homebuyer Education Home Stretch Homebuyer Education certificate or Framework online homebuyer education certificate required prior to loan closing. For households using the Framework education program, a free pre-purchase counseling with a CDA Home ownership specialist is also required. Minimum Credit Score Buyers must have a minimum FICO credit score of 650 on FHA (mid score must be the minimum or above); Buyers must have a minimum FICO credit score of 640 on HFA Preferred loans, (Rev. 04/17/17) DTI Requirement The program maximum DTI ratio is 45% for Government loan products and the Freddie Mac HFA Advantage loan product. Contact US Bank HFA Division with any questions regarding acceptable AUS, Lenders must comply with Mortgage Insurance DTI requirements which may limit the maximum DTI for borrowers with a FICO under 700. (Rev 12/12/18)

17 Dakota County CDA First Time Homebuyer Programs Page 17! HOUSEHOLD INCOME LIMITS Household income shall include the income of: (1) the mortgagor(s), (2) any person expected to both live in the residence and sign the note, and (3) any person who is both the legal spouse of a mortgagor and is expected to live in the residence. Program income is not averaged. It is annualized. That s different from income used for credit underwriting. More detailed guidelines for calculating program income are in the Compliance Underwriting section included in this Guide. (Rev 07/27/17) Income Limits for Loan reserved 05/15/18 and AFTER 1 or 2 person households: $94,300 (Rev 05/21/18) 3 or more person households: $103,900 ACQUISITION LIMITS (SALES PRICE LIMITS) Program refers to Acquisition Limits - in most cases this is the Sales Price and is never FHA Acquisition limits. Has to include everything paid by the buyer or on the buyer s behalf. Rev for all loans reserved on or after ) $285,780 for single family homes, townhomes or condominiums $398,935 for duplexes (not eligible for additional Down payment Assistance) Property Qualifications Eligible properties include existing single family homes, townhomes, FHA or Fannie Mae approved condominiums (no kiddie condos) or duplexes in Dakota County (Duplexes can be no more than 5% of the program. Contact the Administrator to verify availability. Duplexes are limited to existing homes that are at least 5 years old.) Condos with LTVs from 95.01% to 97% are allowable provided the project is approved by USBHM, in addition to meeting Fannie Mae or Freddie Mac guidelines, as applicable. Review US Bank bulletin Condominium Guideline Expansion for complete details.(rev 04/17/17) New construction is eligible in Apple Valley, Burnsville, Eagan, Empire Township, Farmington, Hastings, Inver Grove Heights, Lakeville, Mendota Heights, Rosemount, South St. Paul, Sunfish Lake and West St. Paul. Homes are considered new if never previously occupied. Manufactured Homes - As of December 1, 2015, U. S. Bank will not purchase loans for manufactured housing. U.S. Bank considers manufactured housing: A manufactured home is a mobile home built entirely offsite on a permanent chassis that is pulled on the highway to a permanent location. Modular, panelized or prefabricated homes are not considered manufactured housing. (Rev 12/1/2015) Mobile, recreational, seasonal or other types of vacation or non-permanent homes are not permitted. Land may not exceed the size required to maintain basic livability Properties purchased in the program must be residential units. No more than 15% of the square footage of the home being purchased may be used in connection with a trade or business including Child Care services (other than incidental rental from eligible multi-unit structures).

18 Dakota County CDA First Time Homebuyer Programs Page 18! Industry changes apply to program loans. There are no variances for loans in this program. The Internal Revenue Service and the Dakota County CDA have requirements that are reviewed for compliance. It s the responsibility of lenders to review program documents and to originate loans that meet the requirements. The Master Servicer is not obligated to purchase loans that do not comply with program terms. FINANCING FACTS It s expected that lenders have reviewed some preliminary documentation and believe that applicants will also qualify for credit. Excessive cancellations will be reviewed to assure that program funds are not being utilized inappropriately. It is the responsibility of the lender to follow all program, Agency (FHA, VA, USDA:RD, FannieMae) and master servicer guidelines. Check with your underwriter for updates to information for HFA Preferred. Such information is provided by third parties (i.e.fannie Mae, U.S. Bank, etc) who do not provide updated information to ehousingplus. (Added 04/17/17) Fannie Mae HFA Preferred Fact Sheet: preferred-fact-sheet.pdf Appraisal The appraisal must indicate that the home has at least a 30 year remaining useful life. Assets Retirement assets are not required to be included in first mortgage or MCC program calculation of income. Assumptions FHA first mortgage loans may be assumed, with the prior approval of the Servicer, by a qualified borrower meeting qualifying requirements, first-time homebuyer, income and sales price restrictions in place at the time of the assumption. Such loans must continue to fully comply and be insured or guaranteed by the insurer/ guarantor or the mortgage insurer. Down payment assistance loans cannot be assumed. Buydowns Not permitted. Cash Back Homebuyers using Down Payment Assistance loan funds may receive cash back for prepaids at closing, as long as a $1,000 minimum borrower investment is also reflected on the First Mortgage Closing Disclosure (TRID form). (Rev 9/26/15) Construction to perm Construction to perm loan type is not permitted for any loans in the program. Cosigners Cosigner/guarantor is acting in such capacity solely for purposes of providing additional

19 Dakota County CDA First Time Homebuyer Programs Page 19! security for the Mortgage Loan Cosigner/guarantor may not have a Present Ownership Interest or other financial interest in the Residence Cosigner/guarantor has no intention to and will not occupy the Residence as a permanent residence, and Cosigner s income is not included in income calculation for program purposes, tax returns are not required and cosigners do not sign any program documents other than the cosigner affidavit. Cosigner s are not allowed for borrowers using Down Payment Assistance. Final Typed Loan Application (1003) The typed application signed and dated by all parties is required. Loan interviewer must complete and sign page 3 of 4 of the If this is not possible, then an Officer must sign in place of the interviewer. All persons taking title to the property must execute all program documents. The income disclosed on the Affidavit must be the same or more than that shown on the The purchase price, loan amount, and other financial details must be the same as shown on all other documents. Minimum Loan Amount There is no minimum first mortgage loan amount in this program. The minimum down payment assistance loan amount is $1,000. Prepayments The first and second mortgage may be prepaid at any time without penalty. Recapture Tax (APPLIES ONLY TO LOANS WITH MCC S) The conditions of repayment of the federal subsidy of these loans is explained in a separate brochure provided on the Website. Basically, if the property is disposed of in the first full nine years AND a net profit is made AND the borrowers income exceeds the income limits allowed at time of sale, recapture tax may have to be paid with the federal income tax return for the year in which the home is sold. Real Estate Purchase Contract The full address of the property, full names of all sellers and buyers, total purchase price of the property must be included. If there is not an address for new construction, a lot number and subdivision name are required. All named persons must sign. Include the name and title whenever a representative is signing for a corporation. Refinances This program is for new mortgage loans. Refinances are not permitted. However, temporary, construction or bridge financing with a term of 2 years or less may be taken out with a program loan. Reissuance of MCC s If the first mortgage loan is refinanced, the MCC may be reissued for a fee of $250. the Dakota County CDA for all details regarding a reissue. (Rev 04/17/17) Contact Remaining Reserves Remaining reserves are not established by the program. If any, these are determined by the

20 Dakota County CDA First Time Homebuyer Programs Page 20! type of financing used (i.e. FHA, VA, HFA Preferred). Tax Returns or Tax Transcripts or any combination Tax returns or tax transcripts or any combination of returns or transcripts for the preceding year are due April 15 of the current year. The past three years tax returns/transcripts are required for borrowers and spouses. Not required for those buying in Targeted Areas or those purchasing under the Veteran s Exception. Requests for Extensions are not acceptable in lieu of tax returns/transcripts. Underwriting Considerations for MCC s IT IS IMPORTANT TO NOTE that while FHA, VA, etc. may allow a consideration of the MCC benefit when underwriting the loan, the CDA program does not. The CDA program prohibits the use of the proposed MCC benefit from being used in the underwriting process.

21 Dakota County CDA First Time Homebuyer Programs Page 21! SUMMARY OF THE COMPLIANCE ORIGINATION PROCESS (Revised 12/12/18) MANDATORY PROGRAM TRAINING Lender training is mandatory for anyone working with this program. ehousingplus and US Bank provide program training online 24/7. To attend click on this link. ehousingplus ehportal and ehp Digital Docs Training We highly encourage anyone who will reserve funds, complete an underwriter certification, print forms or clear exceptions to attend this additional training. (Rev 12/12/18) Click here for ehportal Training Click here for ehp Digital Docs Training ehportal USER CREDENTIALS Following completion of Program training at ehp University training, an will be sent to lenders giving directions on how to apply for User Credentials for the ehportal. These instructions are for both new users of system and existing users looking to add programs to their profile. QUALIFY Lenders use program requirements to qualify applicants for the program. Buyers must present an executed sales agreement before being entered into the program reservation system. RESERVE FIRST MORTGAGE FUNDS To reserve funds, use the ehousingplus ehportal. Log in and reserve the first mortgage. To reserve funds in the program the borrower is required to have a signed real estate purchase contract for a specific address. You will need a 1003 and the Real Estate Purchase contract in order to make a reservation. If the reservation is successful, you will receive a loan number and a message that you ve completed the reservation successfully. Have the buyer sign the Notices to Buyers and DPA Loan Disclosure. IMPORTANT - A reservation is for a borrower with a real estate purchase contract for a specific property. If the property needs to change, the loan must be cancelled and re-reserved. The lender is responsible for cancelling the loan within the ehousingplus Lender Portal. And then, the lender must (services@ehousingplus.com) or call the ehousingplus Compliance office at to have the borrower permanently removed from the ehousingplus Lender Portal. Until this process is complete, the lender will not be able to re-reserve funds for the borrower. (Added 12/12/18) RESERVE SECOND MORTGAGE ASSISTANCE Immediately following reservation of the first mortgage click on the Add Additional button found on the main menu to reserve the second mortgage funds. All fields will populate except for the second mortgage loan amount. Enter the loan amount and then click on the Update button to add the second mortgage assistance to the first mortgage loan reservation. (Added 12/12/18)

22 Dakota County CDA First Time Homebuyer Programs Page 22! RESERVE MORTGAGE CREDIT CERTIFICATE (if applicable) Immediately following reservation of the Second mortgage click on the Add Additional button found on the main menu to reserve the Mortgage Credit Certificate funds. Have the buyers sign the MCC Notices to Buyers and give the borrower the Recapture Tax Notice. (Added 12/12/18) PROCESS Lenders process the loan as they would normally keeping in mind the program timelines. UNDERWRITE AND CERTIFY Lenders underwrite & are responsible for credit decisions of the loans in the program. Servicer does not re-underwrite loans. Following credit approval AND WITHIN 45 DAYS OF LOAN RESERVATION, the Underwriter completes the online Underwriter Certification within the ehportal. Once a loan is Underwriter Certified no further changes can be made. If a change needs to occur after the certification is complete, please (services@ehousingplus.com) or call the ehousingplus Compliance office at to request to have the certification removed. REQUEST DAKOTA COUNTY CDA DPA FUNDS The assistance is funded by the Dakota County CDA at closing. With a minimum of three (3) business days prior to closing AND AFTER the Underwriter Certification is submitted: AFTER the underwriter certification has been submitted, print the Down Payment Assistance Request Form located in the secure area of the ehousingplus web page for the Dakota County CDA program. 1) Complete the form, sign, scan and the Down Payment Assistance Request Form for each mortgage loan to the following addresses: kschoeman@dakotacda.state.mn.us AND slarson@dakotacda.state.mn.us Following verification of the information contained on the Down Payment Assistance Request Form, the Dakota County CDA will initiate the wire transfer. CLOSE It s important to provide accurate closing instructions to closing agents. All program documents must be returned to the lender. The following forms are located within the ehportal and must be signed by the borrower at closing: Mortgagor Affidavit DPA Loan Disclosure DPA Award Letter DPA Mortgage DPA Note MCC Mortgagor Affidavit (if applicable)

23 Dakota County CDA First Time Homebuyer Programs Page 23! MORTGAGE CREDIT CERTIFICATE PROCESS There are requirements imposed by the IRS and the Issuer that are reviewed for compliance with the program guidelines. If the loan complies with the requirements of the first mortgage loan as detailed in the Administrator s Guidelines for the first mortgage, it qualifies for the MCC. It is the responsibility of lenders to review program documents and to originate loans that meet the requirements. The Administrator reviews the Compliance File. It s easy to give borrowers the MCC Tax Credit. You must reserve the MCC separately. It must be done as a complete reservation due to IRS reporting requirements. Complete the reservation screens online and submit. Reservations submitted correctly receive a MCC number. If submitted incorrectly, there is instant online feedback identifying non-compliance and/or missing information issues. After closing, simply follow the compliance file checklist. The same information will be submitted whether the buyer is using a program first mortgage loan only, program first mortgage with MCC, or MCC only. Only the fee submitted will differ, as indicated on the Compliance File Checklist. MCC S in this program qualify for re-issuance if the first mortgage loan is refinanced. The charge for re-issuance is $250. There is a separate re-issuance checklist. Contact the Dakota County CDA for more information. A Replacement MCC, in the event the certificate is lost, may be obtained by the homebuyer from the Administrator for a fee of $75. Mortgage Credit Certificates provided to borrowers using a first mortgage not associated with the CDA s program are required to pay an Issuer Fee to the CDA in any amount equal to 1% of the purchase price amount. (rev ) COMPLIANCE FILE DELIVERY INSTRUCTIONS All compliance files are uploaded directly to ehousingplus via ehp Digital Docs. All exceptions / file deficiencies will be communicated to the Lender via and will be posted in the ehportal. Exceptions may be viewed online at the loan level and in an exceptions report. Documentation requested to clear file deficiencies are uploaded directly in ehp Digital Docs. (Added 12/12/18) ehp Digital Docs See pages of this guide for detailed information about ehp Digital Docs. (Added 12/12/18)

24 24 NEW INSTRUCTIONS FOR THE DELIVERY OF COMPLIANCE FILES, FEES AND CORRECTED DEFI S. Effective December 10, 2018 Compliance Files and Corrections to previously submitted files with erroneous or missing required documents will be managed through the NEW ehousingplus Digital Docs Portal. This NEW Portal provides lenders with all the tools necessary to deliver the required documents for the approval of the originated loan(s) in their respective affordable homebuyer programs. This Portal is a secure, easy to use and efficient way for lenders to deliver the Compliance File, Correct DEFI s and pay the required Compliance Review Fees via our new ehpay on line fee approval, and related tools. Who needs Access to ehp Digital Docs? Closers, Post-closers, Shippers, Defi/Exceptions and Accounting personnel. FIRST STEPS HELPFUL TIPS FOR UPLOADING THE COMPLIANCE FILE The site works best with the Google Chrome browser. All other browsers may encounter problems. If you cannot remember your password, you can reset from the ehp Digital Docs log in screen. You will need a Username and Password to access ehp Digital Docs a. If you are already an existing Active User of the ehportal Lender Portal, you will automatically be set up to use ehp Digital Docs. Your Username and Password will be the same, but you may be prompted to change the password if it does not meet security guidelines. b. If you are NEW to any of the ehousingplus Portals, you will need to request User Credentials at NEXT, ACCESS THE NEW EHP DIGITAL DOCS PORTAL As a participating lender to various programs, you already know that our website at is where you access both Program Info and the Systems. Click on the PROGRAM Tab and select the desired Agency s available Program(s). New Digital Delivery Instructions ehp Digital Docs ehousingplus

25 25 There are two icons you will immediately see: o This is the existing Lender Origination Portal o This is the NEW ehp Digital Docs Portal. NOW YOU ARE READY TO DELIVER YOUR COMPLIANCE FILE The Compliance File should be a PDF file composed of all required documents on the Checklist. Ø By clicking NEW UPLOAD on the Digital Docs Menu, you will be able to upload the file easily. Ø Currently, there are three file types you will upload into the new DD Portal: Compliance Files, DEFI s, and/or pre-closing documents as required. Additional uploads after the Compliance File are identified as Defis. Ø There is a NOTES Feature in case there is any pertinent information you want to add to the compliance documents. Ø Once Submitted, the System will confirm that the document was uploaded successfully, or it will present an error. Ø All Files Uploaded, can be seen immediately in UPLOADED DOCS. Ø All documents must be a PDF format and must not be locked or encrypted. Ø Documents must be uploaded upright and in a clear legible format. Ø Use the Checklist to make sure you are delivering al required documents. AND SUBMIT THE REQUIRED COMPLIANCE REVIEW FEE Ø Compliance Review Fees may now be submitted separately from the Compliance File. Ø The NEW ehpay is a secure, efficient method for lenders to pay the fees ON- LINE by enrolling in this FREE Program. Loans managed through ehpay are processed faster, without fee errors or other unnecessary delays. Accounting Staff can access ehp Digital Docs and process the compliance fees payment easily via ehpay. New Digital Delivery Instructions ehp Digital Docs ehousingplus

26 26 TIPS Not sure of the required fee for your loan? Use the FIND MY FEE feature under PAYMENT CENTRAL and get the instant answer. Ø Compliance Files Uploaded are NOT ready for review until the Compliance Review Fee Payment has been received by ehp. Ø FILES PENDING PAYMENT lists Compliance Files that have been uploaded successfully, but whose fee payment is still pending. Lenders can monitor this area to ensure their fees have been delivered in a timely manner. Ø UNIDENTIFIED PAYMENTS are payments received from your company without the proper identification to apply it to the intended loan. Lenders can monitor this area to ensure that payments made are being properly identified with OUR LOAN NUMBER. Ø SHORT PAYMENTS If an incomplete payment is submitted, it will be displayed indicating the amount paid and the correct fee amount. Ø Sign up for ehpay. This is a secure solution for the payment of fees. Talk to one of our ehousingplus Business Representatives about how you can sign up, and to answer any questions related to this new service Ø Make sure that every payment made is properly identified with OUR LOAN NUMBER. This is particularly a problem with Wires and ACH payments, as well as bundled payments. ACH/Wires do not properly identify loans in most cases and hold up the processing of your loans! Ø If submitting a paper check, print the INVOICE/RECEIPT. You can submit the fee for one or several loans at one time by attaching this receipt to your check. NOT QUITE READY TO UPLOAD YOUR COMPLIANCE FILES? During this initial transition of delivering Compliance Files Digitally on our NEW ehp Digital Docs portal, ehousingplus will continue to accept paper Compliance Files from those lenders that need a little extra time. If you are sending the paper files, please continue to ship them as you currently do to: ehousingplus 3050 Universal Boulevard, Suite 190 Weston, FL WE trust that you will soon be utilizing all the new features that have been developed to make the delivery of Compliance Files easier and less costly via our NEW ehp Digital Docs portal available for you, the participating lenders. New Digital Delivery Instructions ehp Digital Docs ehousingplus