Rural Housing Refinances

Transcription

1 Rural Housing Refinances Rev. 11/16/2016 Presented by J.J. Sawicki, CMP/ AVP of Training and Development at Merrimack Mortgage

2 Rural Housing Refinance Programs If you have originated an RD loan in the past, you know the benefits of the program. But did you know RD offers 3 different refinance programs? We will be discussing the 3 programs within this presentation today!

3 Basics of Rural Housing Refinances 100% financing. May finance the 1% guarantee fee to a max LTV of 101% Income limits = 115% of HUD median income Ratios 29%/41% (may be exceeded up to 44% with compensating factors or GUS approval) 30 year fixed purchase of a 1 unit primary The interest rate of the new loan must be fixed and not exceed the interest rate of the loan refinanced The loan security must include the same property as the original loan Min: 80% LTV Max LTV 101%, except on the Streamline Assist where the LTV will exceed the 101% when rolling in closing costs The existing loan must have closed 12 months prior to request for a refinance and must be current for the past 12 months prior to the request for a refinance. Cannot pay ahead more than a typical month to meet seasoning requirements

4 Eligible Borrowers US citizens and Permanent Resident Aliens Borrowers may not own other real estate at time of closing (exceptions on a case by case basis) Borrowers must be income eligible Non-occupant co-borrowers are not allowed

5 Eligible Properties Properties located in areas since determined by the Agency to be non-rural are eligible Single family, primary residence without in-law apartments. FHA or VA approved and FNMA/FHLMC warrantable condo and PUDS are located in eligible rural areas. Properties must be modest and located in communities of less than 20,000 population or in unincorporated county areas Acreages are limited to area necessary to support only the home No other real estate owned allowed (exceptions case by case) In-ground swimming pools acceptable Septic Inspection required and may be completed by FHA Appraiser Private Well: Water test required Shared Well: Water test required, recorded shared well agreement, no more than 4 homes may be on a shared well Community: Local water authority must provide most current water test and operating agreement Private roads require deeded easement for ingress and egress Pest Inspection: If required by appraiser, inspector or State Law, a pest inspection must be obtained to confirm property is free of active termite infestation

6 Eligibility Eligibility based on "Annual" income and property location. Annual income is determined based on household income Annual income can be calculated differently than qualifying income Go to the following link to determine eligibility Properties located in areas since determined by the Agency to be non-rural are eligible Borrower must be employed The borrower must currently occupy the property as his/her primary residence.

7 Owning another dwelling An applicant who owns a dwelling to which they will retain ownership is eligible if all of the criteria below are met: The current dwelling is not financed by RD or active grant (the grant agreement has not expired); The borrower can qualify with both payments The existing property is a 1 unit dwelling The existing home owned no longer adequately meets the applicant s needs

8 Subordinate Financing Subordinate financing such as home equity seconds and down payment assistance silent seconds cannot be included in the new loan amount. The SFHGLP may not be used to refinance a leveraged loan from a non-rural Development source that was closed simultaneously with a Section 502 Direct Loan. Any existing secondary financing must be subordinate to the new first lien.

9 The Guarantee Fee & Annual Fee The guarantee fee may be rolled into the loan amount or paid upfront. The amount is 1.0% The guarantee fee may be tax deductible (consult tax advisor) The borrower is charged an annual fee of.35% The annual fee is for the life of the loan and cannot be cancelled Guarantee Fee 1.0% (financed) Guarantee Fee 1.0% (not financed) (Based on $100,000 Purchase Price) (Based on $100,000 Purchase Price) Calculation: Calculation: Example: $100,000 x.01 /.99 = $1, Example: $100,000 x.01 = $1,000 Annual Fee.35%: Annual Fee.35%: Calculation: Calculation: Example : $101, x.0035 / 12 = $29.46 Example: $100,000 x.0035 / 12 = $29.17

10 Prohibited Loan Purposes Discount points, other than to reduce the effective interest rate, cannot be financed as part of the loan. Discount points must be reasonable and customary for the area and cannot be more than those charged other applicants for comparable transactions. Permissible discount points financed may not exceed two percentage points of the loan amount for a non-streamlined refinance. Loan discount points and loan origination fees must be itemized separately on the settlement statement so that the Agency can accurately identify the amount of the loan used for loan discount points. Loan discount points representing fees other than to reduce the effective interest rate, such as to compensate for a low credit score or low loan amount are ineligible. The lender must begin with an eligible interest rate prior to reducing the effective interest rate Income Producing Property: Purchase or improvement of income-producing land or buildings that will be used principally for income producing purposes is not allowed. Vacant land or properties used primarily for agricultural, farming or commercial enterprise are ineligible. A minimal income-producing activity, such as maintaining a garden that generates a small amount of additional income, does not violate this requirement. A qualified property must be predominantly residential in use, character and appearance Lease Payments: Payment on any lease agreement associated with the proposed real estate transaction is prohibited Closing costs exceed 3%: Closing costs, including lender fees, may not exceed three percent of the total loan amount, unless flexibility is provided through guidance published by the CFPB s Ability to Repay and Qualified Mortgage (ATR/QM) standards. The SFHGLP up-front guarantee fee and annual fee is not included in the three percent lender fee calculation

11 Min/Max Loan Amount Non-Streamline Refinance Min loan amount $30,000 The max loan amount may not exceed the new appraised value, with the exception of the upfront guarantee fee. The following items are eligible to be financed up to the new appraised value: the principal and interest balance of the existing loan reasonable and customary closing costs funds necessary to establish a new tax and insurance escrow account Unpaid fees, past-due interest, and late fees/penalties due the servicer cannot be included in the new loan amount Streamline Min loan amount $30,000 The max loan amount may not exceed the original loan amount at the time of purchase. The following items are eligible to be financed up to the original purchase price: the principal and interest balance of the existing loan and a reasonable fee for re conveyance of the existing USDA mortgage the upfront guarantee fee may be financed above the original purchase price Unpaid fees, past-due interest, and late fees/penalties due the servicer cannot be included in the new loan amount Streamline Assist Min loan amount $30,000 The maximum loan amount may include: the principal and interest balance of the existing loan eligible loan closing costs funds necessary to establish a new tax and insurance escrow account and the upfront guarantee fee Unpaid fees, past-due interest, and late fees/penalties due the servicer cannot be included in the new loan amount

12 Income Non-Streamline Refinance Streamline Streamline Assist Total adjusted annual income for the household cannot exceed the moderate level for the area Maximum adjusted household income limited to 115% of HUD Median Income for property county Income of all occupants of the home 18 years of age (unless a full time student) or older must be considered in calculating adjusted income. Certain deductions are allowed for dependents less than 18 years of age, elderly or disabled borrowers, and child care when calculating adjusted household income For payment/debt qualifying purposes, only income of those who are party to the Note will be considered All sources of stable monthly income may be used. (Qualifying income is not necessarily the same as household income) 4506-T required for all household members age 18 and up. Validation (actual transcripts) for past two years from IRS must be received prior to request for conditional commitment Qualifying income not used. However, income must meet eligibility requirements Documentation required is limited DTI must still be calculated!

13 GUS Non-Streamline Refinance Streamline Streamline Assist GUS must be utilized. Accept or Refer GUS is not be utilized

14 Credit Non-Streamline Refinance Streamline Streamline Assist The borrower must meet credit requirements as outlined in Chapter 10 of the USDA Handbook At least one applicant whose income and assets are used for qualifying must have 2 historical trade line payment references that have existed for 12 months If GUS findings are Accept but minimum tradelines cannot be met, GUS findings must be downgraded and the loan must be manually underwritten No revolving or installment lates in the last 6 months No mortgage lates in the past 12 months All installment debt with 10+ payments remaining must be included Collections: capacity analysis must be completed if total of non-medical, non-charge-off collection balances are $2,000 or more. They must be paid off, in repayment plan or use 5% of the balance when calculating DTI. Judgments must be paid off or in a repayment plan for at least 3 months prior to application No bankruptcy in the past 3 years, unless approved by GUS. No foreclosure in the past 3 years. No deed-in-lieu, pre-foreclosure or short sales in the past 3 years The borrower is not required to meet all of the credit requirements as outlined in Chapter 10 of the USDA Handbook. However, the existing mortgage must be paid as agreed for the 12 months prior to application for a streamlined-assist refinance. No mortgage lates in the past 12 months. Lenders may verify mortgage payment history through a credit report. A credit report is ordered to determine timely mortgage payments, other credit accounts will not be reviewed.

15 Appraisals Non-Streamline Refinance Streamline Streamline Assist A new appraisal is required A new appraisal is not required for existing guaranteed loan borrowers A direct loan borrower will be required to obtain a new appraisal if they have received payment subsidy to determine the amount of subsidy recapture due. If subsidy recapture is due, the amount cannot be included in the newly refinanced loan. Subsidy recapture must be paid with other funds or subordinated to the new guaranteed loan

16 Adding/Removing Borrowers Non-Streamline Refinance Streamline Streamline Assist Additional borrowers may be added to the new guaranteed loan. Existing borrowers on the current mortgage note may be removed, however, at least one of the original borrowers must be an applicant for the new refinance loan Borrowers may be added but not removed from the current loan

17 Net Tangible Benefit Non-Streamline Refinance Streamline Streamline Assist None required The borrower must receive a tangible benefit to refinance under this option. A tangible benefit is defined as a $50 or greater reduction in their principal, interest, taxes and insurance (PITI) which includes the annual fee payment on the new guaranteed loan when compared to the existing PITI including the annual fee payment

18 Funds to Close Funds to close, when applicable, must be documented in accordance with standard documentation requirements Non-Streamline Refinance Streamline Streamline Assist Applicants are not eligible to receive cash out from the refinance transaction Applicants may receive reimbursement from loan proceeds at settlement for their personal funds advanced for eligible loan purposes that are part of the refinance transaction, such as an appraisal fee or credit report fee. At loan closing, a nominal amount of cash out to the applicants may occasionally result due to final escrow and interest calculations

19 Pricing *Pricing as of 11/2/16 11:00 am

20 FAQ What do I need to include on the 1003 for Streamline Assist Loans? Complete all fields of the 1003 the same way you would any other file. Bottom line, the differences for Streamline Assist are that DTI is disregarded and no appraisal is required Can I cover the borrower s refinance costs? Yes. Lender credit can be used to cover the borrower s closing costs/prepaids What are the main differences between the Streamline Assist product and the other refinance products offered for RD loans? Calculation of max loan amount is more liberal on Assist. Manual underwriting only on Assist. Cannot remove borrowers from loan even in the event of death or divorce. Closing costs may be financed which is not allowed on the Streamline. Do I need to check CAIVRS, LDP and GSA? Yes

21 FAQ What minimum documentation do I need to verify the household income for Streamline Assist Loans? Verification of applicant s current employment and income is required. Documentation is used to ensure area income limits are met. MMC will perform a verification of employment and pull 2 years tax transcripts. Do I need to list income on the 1003 for Streamline Assist loans? Yes, document the income as you would on any other file. DTI will be calculated but not considered in loan decision. What if my payoff doesn t reflect the most recent mortgage payment made? How will this affect my conditional commitment? If the loan amount needs to be reduced, RD will not need to issue a new conditional commitment until after closing. If the loan needs to be increased, RD will need to re-issue a new commitment.

22 FAQ What do I need to verify the current payment of the existing mortgage on the Streamline Assist? A full credit report will be pulled. However, only the mortgage trade line will be reviewed. How do I determine the minimum seasoning period? The seasoning requirement starts when the existing loan closed and ends on the date the application for the new loan is taken. Do I need to list assets on the 1003? Only when funds to close are required. Do I need to verify assets? Only when funds to close are required. Funds to close, when applicable, must be documented in accordance with standard documentation requirements. What if I need to remove a borrower on a Streamline Assist due to divorce or death? Borrowers may not be removed from the current loan even due to death or divorce. If you have a loan situation where a borrower is being removed for any reason whatsoever, the loan isn t eligible for Streamline Assist and must instead be done under one of the other available USDA refinance products.

23 FAQ When doing a Streamline Assist, what should I indicate as the property value? You will list the previous appraised value from current loan. Some RD offices may permit to list the new loan amount as the appraised value, check your local office to see if this practice is permitted. If the borrower does not recall what the value was, you may do your own research or we can contact RD for them. Do I need a flood cert? Yes. we must have a flood cert on every file in order to determine the flood zone status and flood insurance requirement as applicable. Do I need any property inspections on a Streamline Assist (ie. pest, water, etc)? No. How do I complete my application on the RD Refi products? A fully executed URLA is required on all refinance types. You will show all debts.

24 Let s Test Your Knowledge 1. The following terms are offered on the RD Refinance Products: A. 30, 25, 20, 15 year fixed B. 30 year fixed and 5/1, 7/1, 10/1 ARM C. All of the above D. None of the above. We allow for a 30 year fixed rate only. 2. Typically, the maximum DTI on the RD Products is : A. 39% B. 41% The max DTI is typically 41% but may be exceeded with compensating factors or GUS approval C. 43% D. None of the above

25 Let s Test Your Knowledge 3. The minimum mortgage seasoning requirement on the Streamline Assist is: A. 3 months / 3 timely payments B. 6 months / 6 timely payments C. 12 months / 12 timely payments D. There is no minimum seasoning requirement 4. When comparing the borrower s current total monthly payment (PITI + guarantee fee) to the new Streamline Assist refinance mortgage payment, the borrower must be lowering their total monthly payment (PITI + guarantee fee) by at least: A. $100 B. $75 C. $50 D. None of the above

26 Let s Test Your Knowledge - True or False 1. The maximum LTV is 100% 2. Borrowers can be added to the mortgage on the Streamline Assist but cannot be removed even due to divorce or death. 3. Streamline Assist loans can be submitted through GUS. 4. It s acceptable to use the Streamline Assist Refinance product if the borrower no longer occupies the USDA-guaranteed home as a primary residence but now rents it out as investment property. 5. Borrowers may be added or removed from the new mortgage under the Streamline Assist Program. 6. The borrower must be employed. 7. DTI is calculated on the Streamline Assist.

27 Links Property and Income Eligibility: HB SFH Guaranteed Loan Program Technical Handbook: HB SFH Guaranteed Loan Program Technical Handbook Chapter 6: Loan Purposes DISCLAIMER: Presentation for Industry Professionals only, not intended to be distributed to consumers. information accurate as of date published Terms and conditions subject to change without notice. Rhode Island Licensed Lender, and Licensed by the New Jersey Department of Banking and Insurance