Renovation Lending Suite

Transcription

1 Renovation Lending Suite M A R C H, /10/2019 1

2 Agenda Renovation Loans FHA 203(k): Limited & Standard FNMA HomeStyle Renovation Need to Knows Processing Renovation Loans Reference Materials Why Renovation Loans? Program Highlights Program Highlights Renovation Consultant Loan Estimate/Fees & Submission Requirements MMWs Renovation Stats Eligibility & Loan Terms Eligibility & Loan Terms Construction Requirements Renovation Specialist & Process Flow Job Aids and Best Practices Why loandepot Wholesale? Maximum Mortgage Calculations Maximum Mortgage Calculations Contractor & Bid Requirements Appraisals, Final Approval, & Post-Close White Label Flyers 4/10/2019 2

3 Renovation Loans Defined Renovation programs are designed for individuals that want to rehabilitate, repair, or update a new or currently owned property Includes funds needed to purchase or refinance funds needed for repairs and related expenses all in one loan Low down payment requirements put renovation projects within reach for borrowers who otherwise could not afford them Purchase Price or Existing Lien Renovation Costs Renovation Loan 4/10/2019 3

4 Why a renovation loan? Renovation loans open up more choices to homebuyers by expanding search parameters Not every home is move-in ready and many buyers don t have the extra funds to upgrade or renovate Home improvements can be personalized - for homebuyers and existing owners Increases property value and builds equity Eliminates need for a construction loan, second mortgage, or use of high interest rate credit cards to fund renovations 4/10/2019 4

5 Renovation Statistics > $350 Billion 2019 Estimated Homeowner Improvements/Repairs U.S. Homes Built Prior to 1989 > 50% > 7.63 Million Average Number of Fixer-Upper Show Viewers from Sources: /10/2019 5

6 Why loandepot Wholesale? With our Renovation Lending Suite we can accommodate the entire renovation spectrum; projects large and small A Renovation Specialist is assigned to each Renovation file and plays an integral role in all Renovation aspects of the loan We provide Marketing Materials, Job Aids, Best Practice documents, easy to use Maximum Mortgage Worksheets, and Training Videos You will have no post-funding responsibilities with our Renovation loans; get paid at closing and you are done with the transaction Your Account Executive has the expertise, tools, and support to help you structure, market, and originate Renovation Loans 4/10/2019 6

7 FHA 203(k)

8 FHA 203(k) Programs The limited program is designed for non-structural repairs up to a maximum of $35,000 in total renovation costs this includes the contingency reserve and any additional fees The standard program is for all projects > $35,000 or homes requiring major renovations, such as structural changes, room additions, or renovations that make the home uninhabitable during construction 4/10/2019 8

9 Program Eligibility Purchase or No Cash-Out Refinance Owner-Occupied only Minimum 620 credit score Conforming and High Balance up to FHA loan limits 4/10/ and 30 Year Fixed Rate terms 5/1 CMT ARM 1/1/5 Caps 1.75% Margin 9

10 FHA 203(k) Limited

11 Limited 203(k) Highlights $5,000-$35,000 repair amount including all other associated costs The property must be occupied within 15 days of close and be habitable throughout the entire construction project Self-help (DIY) not allowed, with the exception of painting and appliance purchases Maximum of 2 draws, initial and final initial draw is the lesser of ½ the bid or full materials cost 4/10/

12 Limited: Maximum Mortgage Calculation Step 1: Establishing Financeable Repair and Improvement Costs, Fees, & Reserves Purchase and Refinance total of contractor bids title update fee from title company inspection fee estimated at $150 10% default city permit fees from contractor bid 4/10/

13 Limited: Maximum Mortgage Calculation Step 2: Establishing Value Purchase Subject To Appraisal with an After Improved Value 4/10/

14 Limited: Maximum Mortgage Calculation Step 3: Calculating Maximum Mortgage Amount Purchase Enter FHA county mortgage limit Maximum Mortgage Amount 4/10/

15 Limited: Maximum Mortgage Calculation Step 2: Establishing Value Refinance 2 appraisals required: a subject to and an as is 4/10/

16 Limited: Maximum Mortgage Calculation Step 3: Calculating Maximum Mortgage Amount Refinance Enter FHA county mortgage limit Maximum Mortgage Amount 4/10/

17 FHA 203(k) Standard

18 Standard 203(k) Highlights $5,000 minimum - no maximum repair amount up to FHA County limits Requires a licensed HUD Consultant that manages the entire project; working directly with the borrower and contractor(s) Up to 5 draws as determined by HUD consultant - no initial draw is allowed Up to 6 months PITI can be included in the loan amount if the property is uninhabitable during renovations also determined by the HUD Consultant 4/10/

19 Standard: Maximum Mortgage Calculation Step 1: Establishing Financeable Repair and Improvement Costs, Fees, & Reserves Purchase and Refinance Total of contractor bids Refer to HUD fee schedule title update fee from title company HUD Consultant s fee per inspection/draw Determined by consultant or appraisal can be as high as 20% city permit fees from contractor bid 4/10/

20 Standard: Maximum Mortgage Calculation Step 2: Establishing Value Purchase Subject To Appraisal with an After Improved Value 4/10/

21 Standard: Maximum Mortgage Calculation Step 3: Calculating Maximum Mortgage Amount Purchase Enter FHA county mortgage limit Maximum Mortgage Amount 4/10/

22 Standard: Maximum Mortgage Calculation Step 2: Establishing Value Refinance Discount points, prepaids, and closing costs 2 appraisals required: a subject to and an as is 4/10/

23 Standard: Maximum Mortgage Calculation Step 3: Calculating Maximum Mortgage Amount Refinance Enter FHA county mortgage limit Maximum Mortgage Amount 4/10/

24 FNMA HomeStyle

25 HomeStyle Programs There are two types of HomeStyle transactions available: Up to $50,000 in total renovation costs including contingency reserve and any additional fees Designed for non-structural repairs and allows for two draws Projects > $50,000 in total renovation cost including contingency reserve and any additional fees Homes requiring major renovations, such as structural changes/room additions and allows up to five draws 4/10/

26 Program Eligibility 4/10/

27 Eligible Loan Terms Conforming and High Balance up to FNMA loan limits 15, 20, 25, and 30 Year Fixed Rate terms 5/1, 7/1, & 10/1 ARM Amortization: 30 Years Index: LIBOR 5/1 ARM Caps: 2/2/5 Qual Rate: Higher of note rate + 2% or fully indexed rate 7/1 & 10/1 ARM: Caps: 5/2/5 Qual Rate: Higher of note rate or fully indexed rate 4/10/

28 Mortgage Insurance Mortgage Insurance is required > 80% LTV MI loans are subject to MI Company guidelines LPMI is not available 4/10/

29 New Home Eligibility HomeStyle Renovation may be used to complete the final work on a new built home, when the home is at least 90% complete The remaining improvements must be related to the completion of nonstructural items the original builder was unable to finish Such as installation of buyer-selected items: flooring, cabinetry, kitchen appliances, fixtures, and trim 4/10/

30 Purchase: Maximum Mortgage Amount 1. Identify the lesser of figure:* Purchase Price + Renovation Costs OR After- Improved Value 2. Multiply lesser figure by the LTV to determine loan amount Lesser Figure X LTV = Loan Amount * Maximum allowable repairs cannot exceed 75% of the lesser figure 4/10/

31 Refinance: Maximum Mortgage Amount After- Improved Value* X LTV = Loan Amount * Maximum allowable repairs cannot exceed 75% of the after-improved value 4/10/

32 Maximum Mortgage Worksheet enter LTV & choose loan purpose choose occupancy type enter purchase price or existing loan balance and will receive a FAIL estimated as message when completed value 4/10/2019 renovations exceed 75% 32

33 Maximum Mortgage Worksheet Defaults to 10% if Consultant is required title update fee from title company actual costs for city permits total of contractor bids architectural and engineering fees if applicable estimated at $150 for each draw; approximately 3-5 Maximum Mortgage Amount 4/10/

34 Renovation Need to Knows

35 Renovation/HUD Consultant Role A licensed Renovation/HUD Consultant is required for: HomeStyle > $50,000 and/or any structural repairs FHA 203(k) Standard Program The Renovation/HUD Consultant: Meets with borrowers and inspects property for required repairs Completes a Work Write Up/Project Review report Works with Contractors to remain within budget and establish draw parameters Performs draw Inspections, authorizing disbursement of funds, throughout renovation HUD maintains a list of Licensed Consultants to choose from 4/10/

36 Purchase Contract/Realtor Tips Purchase contracts must make mention of renovation financing; acceptable on purchase contract or as an addendum Ensure accessibility to property for contractors, HUD consultants, inspectors, architects/engineers, and appraisers Ensure utilities power and water are on at time of appraisal inspection to avoid additional contingency reserves 4/10/

37 Construction Requirements Allowable Construction Period 203(k): repairs must start within 30 days of closing and be completed within 6 months HomeStyle: renovations must be completed within 12 months of closing Minimum renovation amount HomeStyle: no minimum 203(k): $5,000 in repairs minimum Appliance Purchases 203(k): can be the entire project as long as purchases are > $5,000 HomeStyle: must be part of a larger overall project 4/10/

38 Construction Requirements EPA or State Certified painter/contractor required for dwellings built before 1978 Avoid Big Box Contractors Stores like Home Depot, Lowes, and Sears are great for getting appliances but they will not sign any of our required agreements. Not A DIY Loan: the borrower may complete work on HomeStyle and the 203(k) Standard program IF they themselves are licensed and have experience in that scope of repairs. Not intended for the complete tear-down and reconstruction of a dwelling Up to 3 licensed specialized contractors allowed, without a General Contractor 4/10/

39 Contractor Requirements Contractor Approval Package: PTD Condition Contractor Profile Contractor Certification W-9 Licensing required by state and local jurisdictions Liability Insurance Identity of Interest: the contractor cannot be related to anyone involved in the transaction Licensing/Insurance: the contractor must be appropriate licensed and insured in compliance with state and local jurisdiction - through the date of funding 4/10/

40 Contractor Bid Requirements Contractor Bids can be a pain point in Renovation Lending. Following these best practices, will make for a smoother process flow: Must be typed on company letterhead cannot be handwritten Include Borrowers name and property address Improvements must be detailed and broken out by material, labor, and sales tax Include permit fees - if applicable All health and safety issues are addressed; FHA s minimum property requirements Signed by all parties at time of submission to expedite appraisal ordering 4/10/

41 Processing Renovation Loans

42 Loan Estimate/Fees Portal Product/Pricing Screen Renovation/Holdback maps to Section H of LE Consultant fee (if applicable) maps to Section C of LE Appraised Value Purchase: purchase price + renovation/holdback Refinance: as completed appraised value Loan Estimate Appraisal Fees from LDW posted Appraisal Fee Schedule Section B 203(k) Refinance only: 2 appraisal fees +$200 Misc. fee Title Update Fee Section C Other Inspection Fee Section H 4/10/

43 Sample Loan Estimate 203(k) Refi 2 appraisal fees from LDW Appraisal Fee Schedule + $200 misc. fee From Consultant/Inspector Rehab/Holdback will auto-populate from Portal pricing screen 4/10/

44 Sample Loan Estimate Renovation Consultant Fee will auto-populate from Portal pricing Screen From Title Quote 4/10/

45 Minimum Submission Documents In addition to all standard FHA or FNMA submission documents, the following documents are need to accept a Renovation application and issue initial disclosures: Required at Submission Form Prepared By Notes Maximum Mortgage Worksheet (MMW) Contractor Bids and Consultant s Work Write Up/Cost Estimate - if applicable Broker Contractor or Consultant Used to calculate loan amount for submission and initial disclosures Contractor and Consultant must inspect property prior to completion 4/10/

46 Renovation Specialist A designated Renovation Specialist is assigned when the file is sent to Underwriting The Renovation Specialist is there to answer any Renovation questions you may have at any time prior to submission through post-close. Serves as your liaison, not only with our internal Operations staff, such as the Underwriter and Account Manager, but also communicates directly with Contractors, Consultants, Architects, Inspectors, etc. If desired they can work directly with the Borrower to obtain required forms and clarify construction requirements. We will do as much or as little communicating with others involved in the transaction as you prefer. 4/10/

47 Loan Workflow Submit to LDW Loan Set-Up: App Accepted Renovation Desk: Initial Review Initial Underwrite: CLA Submit Conditions to LDW Renovation Desk: Renovation Conditions & Appraisal Underwriting: Final Approval Account Manager: Closing Prep Closing Coordinator: Doc Prep Funding & Closing

48 Appraisal Orders Appraisals are ordered after the file has been sent to Underwriting and the Renovation Specialist has reviewed the Contractor Bids and all other relevant renovation documentation To ensure the appraisal is ordered in a timely manner, make sure the Contractor Bids and/or Consultant Work Write-up are signed by all parties at time of submission Who orders the appraisal(s)? Wholesale appraisals are ordered by the LDW Renovation Desk NDC appraisals can be ordered by LDW or the Lender 203(k) Refinances require 2 appraisals one with a subject to value and one with an as is value Appraisal Fees should be obtain from LDW Appraisal Fee Schedule 4/10/

49 Renovation Final Approval Upon receipt of all renovation conditions and the appraisal, a Renovation Final Approval will be requested. Please allow 24 hours for this review Once the Renovation Final Approval is issued, the file is ready to move to closing as soon as the Underwriter issues the Credit Final Approval 4/10/

50 Post-Close Process days after loan closing, a Draw Coordinator will be assigned and will act as the liaison between loandepot and the Borrower throughout the renovation process. The Draw Coordinator will reach out to the Borrowers directly via a Welcome , advising them of the process moving forward and confirm the mailing address for draw/disbursement checks. Draws are processed upon receipt of a Draw Process Form from the Borrower or Consultant, if applicable All draw checks are issued as dual party to both the Borrower and Contractor The Draw Coordinator will follow up with the Borrower or Consultant every 30 days until project completion A final inspection of the property is ordered by loandepot upon project completion and required for the final disbursement 4/10/

51 White Label Flyers 4/10/

52 Max Mortgage Worksheets 4/10/

53 Forms Packages 4/10/

54 Best Practices Docs 4/10/

55 Disclaimer loandepot Wholesale loandepot Wholesale is a division of loandepot.com, LLC NMLS # / 2600 Michelson Drive, Ste 1400, Irvine, CA Information contained herein is provided to assist real estate professionals and is not an advertisement to extend consumer credit as defined by section of Regulation Z. loandepot Wholesale, a division of loandepot.com, LLC at 2600 Michelson Drive, Ste 1400, Irvine, CA NMLS ID NMLS Consumer Access IN NO EVENT SHALL LDWholesale BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING AND THE MATERIALS.

56 Questions