FHA Product Overview. Product and Underwriting Guidelines. U.S. Bank Home Mortgage Wholesale Division CAT CR U.S.

Transcription

1 FHA Product Overview Product and Underwriting Guidelines U.S. Bank Home Mortgage Wholesale Division CAT CR Not for consumer distribution. This document is not a Consumer Credit Advertisement and is intended for wholesale broker use only. The information above is provided to assist lenders and is not a consumer credit advertisement as defined by Regulation Z. Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Mortgage products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association, Member FDIC U.S. Bank U.S. BANK 1

2 Topics Topic Page Topic Page Benefits of FHA 3 Upfront Mortgage Insurance 20 Occupancy 4 Annual Renewal Premium 21 Borrower Eligibility 5 Underwriting 22 Property Eligibility 6 Credit Appraisal 7 Borrower Investment 26 Minimum Property Standards 8 Funds to Close 27 Anti-Flipping Regulations 9-10 Seller Contributions & Inducements 28 USBHM FHA Products 11 Employment 29 Loan Limits 12 Compensating Factors 30 Purchase Transactions 13 FHA Exhibits 31 Refinance Transactions 14 Homeownership Websites 32 Refinance Cash Out 15 Thank you 33 Streamline Refinance For internal use only Not for Public Distributions 2

3 Benefits of FHA Low down payment 3.5% minimum down payment required Non-occupant co-borrowers allowed 100% gift funds allowed Credit Leniency Non-traditional credit (can be used to strengthen file) Two years Bankruptcy discharge One year into Chapter 13 pay out Foreclosure and Short Sale: 3 years from completion date the date of title transfer to the date of case number assignment FHA non-credit qualifying streamline refinances do not require submission to TOTAL Scorecard For internal use only Not for Public Distributions 3

4 Occupancy Purchase and Rate/Term Refinance: Primary 1-4 Unit Cash Out Refinance: Primary 1-2 Unit Streamlined Refinance (U.S. Bank to U.S. Bank only): Primary 1-4 Unit Investment 1-4 Unit Non-occupant co-mortgagors allowed on purchase and rate/term refinance Must be on the note, a blood relative and one (1) unit properties only Non occupant co-borrowers may not be added to a newly originated cashout refinance transaction For internal use only Not for Public Distributions 4

5 Borrower Eligibility U.S. Citizens Permanent Resident Alien Typically require Green Card Non-Permanent Resident Alien Various types of visa classification will apply. For internal use only Not for Public Distributions 5

6 Property Eligibility Existing Properties Resale properties must be owned by current seller more than 90 days New Construction Properties appraised as Proposed or Subject to completion or any property less than 12 months old which has not been occupied, must have new construction documentation Condominiums and Planned Unit Developments (PUDs) Must have the Homeowners in control of the association Must be at least 50% owner occupied Condos must be FHA approved Find FHA Project eligibility availability: For internal use only Not for Public Distributions 6

7 Appraisal Appraiser must be provided a copy of the sales contact prior to delivering the appraisal All appraisals must: Comply with the OCC Interagency Appraisal and Evaluation Guidelines (OCC AL ) Meet all FHA appraiser independence Guidelines as defined in the FHA Single Family Housing Policy Handbook (4000.1) Be developed consistent with FHA Valuations Standards in the Property Valuation Appraisals Appraiser must re-inspect the property when defects are noted in the appraisal Appraisal ordering instructions are available in the Wholesale Seller Guide; Section 900: Appraisals FHA appraisal orders must include FHA Case Number The Appraisal and the FHA Doc File must be included with the credit package For internal use only Not for Public Distributions 7

8 Minimum Property Standards Properties should be free of defects or existing problems: Utilities: must be inspected and tested by the appraiser during If disconnected: utilities will need to be connected and re-inspected Each unit must contain it s own hot water, sanitary facilities, and a safe method of sewage disposal Connection to public systems is required whenever feasible and available at a reasonable cost Heating systems must be adequate for healthful and comfortable living conditions All required repairs must be completed prior to closing Original appraisal must inspect and provide inspection report indicating all repairs are complete For internal use only Not for Public Distributions 8

9 Anti-Flipping Regulations 90-Day seller seasoning required Exceptions: o Sales by HUD of its Real Estate Owned o Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies o Sales of properties that are acquired by the sellers by inheritance or other court ordered devise o Sales of properties by nonprofits approved to purchase HUD-owned single family properties at a discount with resale restrictions o Sales of properties purchased by employers or relocation agencies in connection with relocation of employees o Sales of properties by state and federally chartered financial institutions, such as U.S. Bank or other banks and Government Sponsored Enterprises (such as Fannie and Freddie) o Sales of properties by local and state government agencies For internal use only Not for Public Distributions 9

10 Anti-Flipping Regulations (continued) Property flipping between days of acquisition: A second appraisal must be obtained if the resale price is 100% or more over the price paid by the seller when the property was acquired If the second appraisal supports a value that is more than 5% lower than the value of the first appraisal, the lower value must be used The cost of the second appraisal may not be charged to the borrower Property flipping between 91 days 12 months of acquisition: Resale price 5% or more over the acquisition price may require additional documentation, including but not limited to another appraisal Refer to the FHA Single Family Housing Policy Handbook (4000.1) for additional information and requirements for property flipping For internal use only Not for Public Distributions 10

11 U.S. Bank Home Mortgage Wholesale FHA Products 1001: FHA 30 Year Fixed 1002: FHA 15 Year Fixed 1105: FHA Jumbo 30 Year Fixed 1024: FHA 5/1 ARM (2.0 margin) qualifies at note rate 1025: FHA Jumbo 5/1 ARM (2.0 margin) ARM programs must have an ARM Disclosure signed by the borrower at application Upfront MIP and Annual Renewal MI required For internal use only Not for Public Distributions 11

12 FHA Loan Limits The maximum base loan amount is the lower of the applicable FNMA / FHLMC conventional conforming loan limits or FHA Count Limits To determine maximum base loan amounts go to the following HUD website: The current FNMA / FHLMC conforming limits by number of units are: 1 Unit 2 Unit 3 Unit 4 Unit $424,100 $543,000 $656,350 $815,650 The loan limit may only be exceeded by the up front mortgage insurance premium, if financed FHA loans in high cost areas exceeding the above limits may be eligible for higher loan amounts under USBHM Product 1105 (FHA Fixed Jumbo) or 1025 (FHA Jumbo 5/1 ARM) For internal use only Not for Public Distributions 12

13 FHA Purchase Primary 1 4 unit LTV 96.5% Secondary financing provided by Housing Finance Agencies or FHA approved Non-Profit organizations not allowed For internal use only Not for Public Distributions 13

14 FHA Rate and Term Refinance Primary 1 4 unit 97.75% LTV/TLTV/HTLTV 85% LTV/TLTV/HTLTV if owner occupied less than 12 months Rate and Term refinances allow for the payoff of: The existing first lien (FHA, VA, or Conventional) Any purchase money second mortgage or junior lien over 12 months old Closing costs, pre-paid expenses, late charges, escrow shortages, borrower paid repairs required by the appraisal, points, and other fees Borrower may not receive cash back in excess of $500 at closing For internal use only Not for Public Distributions 14

15 FHA Cash Out Refinance Primary 1 2 unit 85% LTV/HTLTV/TLTV Cash out refinance allows for the payoff of: the existing first lien Any junior liens Any other debt to be paid off Cash to borrower 12 months owner occupancy required Exceptions allowed for inheritance if the property has not been treated as an investment since becoming inherited Current first lien must be paid within the month due for the previous 12 months For internal use only Not for Public Distributions 15

16 Streamline Refinance Streamline Refinance: U.S. Bank to U.S. Bank only Maximum mortgage loan amount: Outstanding Principal Balance - UFMIP Refund + New UFMIP Maximum Loan Amount Use the applicable FHA Streamline Worksheet to calculate the maximum mortgage amount The worksheets are available in the Wholesale Seller Guide o Section 1200: Exhibits and Forms For internal use only Not for Public Distributions 16

17 Streamline Refinance (continued) Net Tangible Benefits: Lender must determine there is a net tangible benefit as a result of the streamline refinance transaction From To Fixed Rate One-Year ARM Hybrid ARM Fixed At least 0.5 percentage points below the prior Combined Rate At least 2 percentage points below the prior Combined Rate At least 2 percentage points below the prior Combined Rate ARM (with less than 15 months to next payment change date) No more than 2 percentage points above the prior Combined Rate At least 1 percentage point below the prior Combined Rate At least 1 percentage point below the prior Combined Rate ARM (with 15 or more months to the next payment change date) No more than 2 percentage points above the prior Combined Rate At least 2 percentage point below the prior Combined Rate At least 2 percentage point below the prior Combined Rate For reductions in loan term, the following criteria must be met: The mortgage term is reduced The new interest rate does not exceed the current interest rate, and The combined principal, interest and MIP payment of the new mortgage does not exceed the combined principal, interest and MIP of the refinanced mortgage by more than $50 For internal use only Not for Public Distributions 17

18 Streamline Refinance (continued) Seasoning: at least six payments must be made on the FHA mortgage being refinanced Payment History: at the date of application, the borrower must have an acceptable payment history: 0x30 required for mortgages with six to12 month payment history 1x30 required for most recent 12 months and 0x30 for most recent 3 months Credit Scores: if credit score is available, it must be entered into FHA Connection. If more than one score is available, all available credit scores must be entered For internal use only Not for Public Distributions 18

19 Streamline Refinances (continued) Verifications: verify the borrower is employed and has income at the time of loan application Debt ratio criteria will not apply if the loan otherwise qualifies for a Streamline Refinance Cash to close must be verified Maximum CLTV if subordinate financing is remaining is 125% For Streamline without an appraisal, the CLTV/HCLTV is based on the original appraised value of the property TOTAL Scorecard: not required on non-credit qualifying Streamline Refinances Loans submitted to TOTAL Scorecard that are otherwise eligible as a non-credit qualifying streamline may be approved without regard to the documentation required by TOTAL Scorecard (findings may be ignored), per HUD guidelines For internal use only Not for Public Distributions 19

20 Upfront Mortgage Insurance Upfront Premium Collected on all loans at close, in cash or financed into the loan May be financed, gifted, paid by seller or paid in full at closing 100% of the upfront MIP may be financed as long as the loan amount does not exceed 100% of the appraised value UPMIP premiums may not be split The cost is a percentage of the base loan amount on the transaction type (see mortgage insurance chart) Upfront Premium Costs Purchase and full credit qualifying refinances = 1.75% Streamline Refinances = 1.75% o Streamline refinances endorsed on or before 5/31/2009 =.01% For internal use only Not for Public Distributions 20

21 Annual Renewal Mortgage Insurance Annual Renewal Premium Collected with the monthly mortgage payment The cost is a percentage of the base loan amount based on the term and LTV (see mortgage insurance chart) Monthly MIP for all loan types For internal use only Not for Public Distributions 21

22 Underwriting All credit qualifying loans must be submitted through FHA s TOTAL Scorecard via LP or DU. Loans receiving REFER response may be manually underwritten. All borrowers must meet minimum FICO score requirements: LP Accept/DU Approve and Streamline Refinance: o Use the tri-merged credit score regardless of the number of trade lines evaluated (middle of three, lower of two or single FICO if only one is issued) Manually underwritten: o The minimum credit score must be based upon a tri-bureau merged credit report and be considered a valid score. For internal use only Not for Public Distributions 22

23 Credit History Most recent months is scrutinized more closely than older credit Payment history on housing obligation is very important Delinquent credit must be paid off at or prior to closing: Includes: taxes, judgments, collections, charged off accounts, tax liens, mechanics liens and liens that have potential to affect the lien position (See Bulletin for collection account exceptions) Generally, more lenient on severe derogatory items: Chapter 7 Bankruptcy: 2 years since discharge, credit reestablished with no late payments Chapter 13: 12 payments made with approval from Trustee and no late payments Foreclosure/Short Sale/Deed in Lieu: 3 years seasoning and reestablished credit Consumer Credit Counseling: one year payments made with no lates For internal use only Not for Public Distributions 23

24 Credit History (continued) Non-traditional credit may be used but never to offset the bad debt Must pull non-borrower spouse credit in all community property states Debts must be considered in the ratios of the borrower Collections are not necessarily required to be paid off Derogatory credit rating is not held against our borrower Borrower cannot be late, delinquent, or in default of any federal debt CAIVRS (Credit Alert Verification Response System) LDP (Limited Denial of Participation) / GSA (General Services Administration): must clear ALL parties in the transaction For internal use only Not for Public Distributions 24

25 Credit History (continued) Credit Scores: minimum FICO score requirements for all borrowers 660 minimum credit score on all credit qualifying and streamline refinance transactions 680 if > $424,100 on a Streamline refinance DTI maximum is 50% regardless of AUS approval All manual underwriting ratios are capped at 31/43 Liabilities Student loans: deferred debt must be counted as recurring liability Contingent Liability: any debt the borrower would be held liable in the event of default by the primary obligor must be counted o o Contingent liability applies unless documented proof of primary obligor making payments on time in the past 12 months with no history of late payments Additional documentation needed if the liability is a mortgage For internal use only Not for Public Distributions 25

26 Borrowers Investment Minimum Cash Investment = 3.5% Borrowers may pay: Reasonable, customary closing costs Bona fide discount points Borrowers cannot pay: Origination fee greater than 1% Tax Service Fee For internal use only Not for Public Distributions 26

27 Acceptable Sources of Funds to Close Gift funds: from relative or closely defined friend are acceptable Seller Contribution: up to 6% allowed Can cover pre-paids but never down payment Loans from family member: standard FHA guidelines Borrower s own funds: standard FHA guidelines Standard documentation or per TOTAL Scorecard Buyers cannot receive any cash back on a purchase transaction For internal use only Not for Public Distributions 27

28 Seller Contributions and Inducements to Purchase 6% Maximum contributions from interested parties Interested parties: the seller, real estate agents, builders, developers, etc. Contributions can go toward paying: actual closing costs, pre-paid expenses, points and other concessions Any amount over the 6% will be considered an Inducement to Purchase Result in dollar for dollar reduction to the sales price before applying the appropriate LTV ratio o Inducements may include decorating allowances, repair allowances, moving costs, any personal property, and any amount paid over the 6% seller contribution allowed (See the FHA Single Family Housing Policy Handbook for additional information) Before calculating the loan amount make sure you do not have to reduce the sales price due to an inducement to purchase For internal use only Not for Public Distributions 28

29 Employment Wages: require two year work history Consistent overtime and bonus with two year history Commissions averaged 24 months, two year 1040s required Self-employment averaged 24 months, 1040s, business returns and P&L required Projected income may not be used for qualifying purposes for borrower s starting a new job post-closing Non-employment income needs to be document 3 years forward and one back Seasonal jobs and unemployment may be averaged with 24 month history of both Gross up non taxable income (non taxable part of SSI, child support) 25% as a general rule For internal use only Not for Public Distributions 29

30 Compensating Factors Ratios may be exceeded with valid compensating factors, including but not limited to: No or minimal payment shock based for housing expense Large down payment (i.e. 10% or more from borrower s own funds) Savings ability Conservative use of credit Income not used to qualify ratios but can be proven or documented Previous credit history shows that the borrower has the ability to devote a greater portion of income to housing expense The borrower has substantial documented liquid cash reserves (at lease 3 months worth) after closing. Cannot be gift funds The borrower has substantial non taxable income (if no adjustment was made previously in the ratio computations) The borrower has a potential for increased earnings, as indicated by job training or education in the borrower s profession For internal use only Not for Public Distributions 30

31 FHA Exhibits HUD/VA Addendum to URLA (92900-a) Important Notice to Homebuyer (92900B) FHA purchase contract and all addendums MI Consumer Choices Notification For Your Protection: Get a Home Inspection (92564-CN) Amendatory Clause, if not located in the purchase contract then it will be a separate document Real Estate Certification, if not located in the purchase contract then it will be a separate document Clear CAIVRS LDP/GSA Consent Form (Notice & Consent for Release of Information (HUD form 9887) Notice to Homebuyer Summary from Appraisal ARM Disclosure, if applicable All of the above documents are to be executed by borrower, seller, and loan officer (as applicable) and in the loan file prior to underwriting submission For internal use only Not for Public Distributions 31

32 Homeownership Websites Atlanta Regional HUD office: Denver Regional HUD office: Philadelphia Regional HUD office: Santa Ana Regional HUD office: HUD Washington: HUD Clips: Note: from time to time HUD may change their web pages For internal use only Not for Public Distributions 32

33 Thank you for viewing the FHA Overview for U.S. Bank Home Mortgage Wholesale. We appreciate your business. For internal use only Not for Public Distributions 33