HYANNIS HOMEBUYER ASSISTANCE PROGRAM POLICY MANUAL

Transcription

1 HYANNIS HOMEBUYER ASSISTANCE PROGRAM POLICY MANUAL Helping to make home ownership affordable Town of Barnstable Planning and Development Department 367 Main Street, 3 rd Floor Hyannis, MA Phone: , TDD# kathleen.girouard@town.barnstable.ma.us Page 1 of 8

2 TABLE OF CONTENTS Program Overview:...3 Applicant Eligibility...3 First Time HomeBuyer...3 Homebuyer Education:...3 Income Eligibility:...3 Current (2017) Income Limits...4 Asset Limit:...4 Principal Residence:...4 Citizenship Status:...4 Minimum Applicant Contribution:...4 Eligible Properties...5 Location:...5 Maximum Value of the property:...5 Deed Restricted Units:...5 Property Standards:...5 Lead Paint Compliance:...5 Airport Protection Zones:...5 Flood Insurance:...5 Voluntary Acquisition:...5 Loan Terms:...5 Maximum Loan Amount:...5 Maximum Purchase Price:...5 Deferred Payment Loan Terms:...5 First Mortgage Requirements:...6 Repayment Requirements:...6 Permission to Refinance/ Encumber the Property:...6 Repayment of Shared Net Proceeds...6 Co-Signer/ Guarantor:...6 Underwriting Criteria for Borrowers:...6 Minimum down payment borrowers own funds:...6 Housing Cost and Debt Ratio:...6 Loan to Value (LTV):...7 Underwriting Criteria for First Mortgage(s) ahead of the CDBG Loan...7 SELECTION PROCESS:...7 Contact:...7 Exhibit A - Refinancing Policy...8 Page 2 of 8

3 Town of Barnstable Planning & Development Department Community Development Block Grant (CDBG) Program Homebuyer Assistance Program Policy Manual Last update 9/26/2017 PROGRAM OVERVIEW: The program is designed to stabilize neighborhoods by assisting low income, first time homebuyers in purchasing a modest single family home within the municipal boundaries of the Town of Barnstable for their primary residence. The Targeted program area is the village of Hyannis with a preference to those purchasing within the established Downtown Hyannis Neighborhood Revitalization Strategy Area (NRSA). The program has been developed by the Town of Barnstable Planning & Development Department (the Lender ) and funded by the U.S. Department of Housing and Urban Development Department Community Development Block Grant (CDBG) program. Funds are made available to eligible households as a zero percent interest deferred payment second mortgage loan. Homebuyers are required to invest a minimum of 1.5% of the purchase price of the home and would repay the loan upon sale, transfer, otherwise encumber or no longer using as their primary residence. The maximum amount available to eligible households is up to $75,000 based on need calculated by Program Coordinator. Funds are not reserved until the applicant has been certified eligible and the appropriate paperwork has been received by the Town. This program is contingent on availability of CDBG funds. APPLICANT ELIGIBILITY FIRST TIME HOMEBUYER: A first-time homebuyer is an individual who meets any of the following criteria: An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers). A single parent who has only owned with a former spouse while married. An individual who is a displaced homemaker and has only owned with a spouse. An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations. An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure. HOMEBUYER EDUCATION: Program participants are required to complete a homebuyer education class conducted by a HUD approved housing counseling agency. INCOME ELIGIBILITY: All applicants must meet household eligibility requirements and have their income certified by the Town of Barnstable. Income eligibility it based on the gross income of all adult household members that is anticipated to be received in the coming 12-month period. Income limits at time of income certification apply when determining applicant income eligibility. The Town uses HUD s IRS 1040 Adjusted Gross Income definition to qualify household income eligibility. Page 3 of 8

4 CURRENT ( 2017) INCOM E LIMITS* provided below: Family Size 1 person 2 persons 3 persons 4 persons 5 persons 6 persons 7 persons 8 persons Maximum Income $47,600 $54,400 $61,200 $68,000 $73,450 $78,900 $84,350 $89,800 *HOME Income Limits at time of assistance apply and are updated by HUD annually Applicants are required to submit current documentation of income including but not limited to the 2 most recent Tax returns, six (6) most recent paystubs, and documentation social security or disability award letters for the current year and preceding year, and documentation of any other income sources. Copies of bank statements, retirement accounts, etc. are also required. ASSET LIMIT: For the purpose of determining eligibility for the Program, applicants cannot currently own nor have assets exceeding $75,000. The value of equity in real estate is included in this calculation. Assets held in foreign countries must be included in this calculation. All assets held by each member of the household must be verified. PRINCIPAL RESIDENCE: Assisted households are required to occupy the home acquired as their principal residence until they sell or transfer the property, and this requirement will be monitored annually by the Town. CITIZENSHIP STATUS: HUD requires documentation to verify U.S. Citizenship or eligible Immigration status. Applicants are required to complete a Declaration of Citizenship or Eligible Immigration Status form and provide copies of valid identification as amended by HUD. Valid identification to document U.S. Citizenship includes a valid U.S. Passport or a Birth Certificate plus a Picture ID. Non-Citizens need to provide documentation they meet the criteria included in the Personal Responsibility and Work Act of 1996 Section 431. Section 431 Definitions. (b) Qualified Alien. For purposes of this title, the term qualified alien means an alien who, at the time the alien applies for, receives, or attempts to receive a Federal public benefit, is 1) an alien who is lawfully admitted for permanent residence under the Immigration and Nationality Act, 2) an alien who is granted asylum under section 208 of such Act, 3) a refugee who is admitted to the United States under section 207 of such Act, 4) an alien who is paroled into the United States under section 212(d)(5) of such Act for a period of at least 1 year, 5) an alien whose deportation is being withheld under section 243(h) of such Act, or 6) an alien who is granted conditional entry pursuant to section 203(a)(7) of such Act as in effect prior to April 1, The applicant will be required to provide adequate documentation to show how they meet one of these categories. MINIMUM APPLICANT CONTRIBUTION: Applicants must contribute a minimum cash investment of 1.5% or of the total purchase price as a down payment. Page 4 of 8

5 ELIGIBLE PROPERTIES LOCATION: The housing unit to be purchased must be located within the municipal boundaries of the village of Hyannis, MA, and be a single family home or townhome. Condominiums are not eligible under this program. Map of the targeted program area is attached hereto. MAXIMUM VALUE OF THE PROPERTY: Program requires the housing assisted under this program be modest. The purchase price cannot exceed $325,000 and CDBG funds cannot be used to finance properties in excess of this amount. DEED RESTRICTED UNITS: Properties that have an Affordable Housing or other Deed Restriction limiting the use and/or resale of the property are NOT ELIGIBLE under this program. PROPERTY STANDARDS: Housing units must be compliant with State and local building and health codes and ordinances must meet federal Section 8 Housing Quality Standards (HQS) on the date of purchase and be inspected by a licensed home inspector of the applicant s choice and at the applicant s expense. LEAD PAINT COMPLIANCE: Properties built prior to 1978 will require a valid letter of Lead Compliance or a Lead Inspection by a licensed lead inspector and then evidence of compliance with federal and state requirements. Property must be free from lead paint hazards before occupancy. AIRPORT PROTECTION ZONES: Houses located within Airport Protection Zones are not eligible under this program. FLOOD INSURANCE: Borrowers are required to obtain flood insurance for the life of the loan if they purchase a home within a 100-year flood zone and provide a copy of the certificate of insurance to the Town CDBG Administrator. VOLUNTARY ACQUISITION: Sales between sellers and buyers are strictly voluntary and, therefore, the seller is not entitled to relocation assistance from the Town of Barnstable pursuant to the Uniform Relocation Act. The Seller is required to provide the Town or its representatives an executed Voluntary Acquisition Letter to document understanding of this requirement. LOAN TERMS: MAXIMUM LOAN AMOUNT: The maximum loan amount is based on financial need determined by the Town s evaluation of household income and shall not exceed $75,000. MAXIMUM PURCHASE PRICE: The maximum purchase price, including the first mortgage and the CDBG Second Mortgage, cannot exceed the Appraised Value of the property and cannot exceed $325,000. DEFERRED PAYMENT LOAN TERMS: The program loan is a zero (0%) percent deferred payment loan i.e. the Borrower will not be required to pay interest or make monthly payments on the loan. However, all of the principal must be repaid if the home is sold, transferred, otherwise encumbered, no longer used as the borrowers primary residence, or if there are any violations of the restrictions or conditions of the program. Borrower shall keep the Property in good order, repair and condition, and will not permit, commit or suffer any waste, impairment, deterioration or environmental contamination of the Property or any part thereof. In the event of a default, interest shall thereafter accrue on the outstanding principal balance at the rate of eighteen (18%) percent. Page 5 of 8

6 FIRST MORTGAGE REQUIREMENTS: Prior to submitting application for assistance, applicants must be approved for a first mortgage acceptable to the Town for the purchase of the property. Loans are obtained through a financial institution of the applicants choosing. The first mortgage must meet the following requirements: Be a fixed rate mortgage with term not to exceed 30 years. Loan terms other than 30 years will be considered on case by case basis, provided sufficient justification exists and the alternate loan term is in the best interest of the applicant; Housing debt to income (front end) ratio should be at least 25% but cannot exceed 35% of gross monthly income and cumulative debt to income (back end) ratio cannot exceed 45% of monthly gross income, as calculated by the Town; The interest rate cannot exceed current market rates for conventional or FHA loans; Lenders will be required to establish an escrow account for property taxes homeowner insurance (if applicable), and include monthly contributions for said escrows in the homebuyers monthly mortgage payment and housing debt ratio calculation; Nonrecurring closing costs, such as credit report fees, recording fees, appraisal fee, title fees or lender application fee may be included in the loan amount in the first mortgage if permitted under the lender s loan program; The cumulative loan to value (CLTV) for the purchase cannot exceed 105% of the purchase price of the property or the total acquisition costs as defined by FHA; and Interest only, balloon, adjustable rate mortgages (ARMS) and subprime loans are not eligible. REPAYMENT REQUIREMENTS: Borrowers are required to repay the full amount borrowed upon sale, transfer, or otherwise encumber the property or if no longer using as their primary residence. This obligation will be secured with a Mortgage recorded at the Barnstable Registry of Deeds and Promissory Note. Borrowers shall notify the Town s Planning & Development Dept. and arrange to make the repayments to the Town of Barnstable and reference the CDBG project number on the check. PERMISSION TO REFINANCE/ ENCUMBER THE PROPERTY: In the event of a re-finance of the first mortgage or other encumbrance of the property, e.g. a home equity loan or line of credit, the owner is required to notify the Town Planning and Development Dept. (lender) to obtain approval. The Lender will evaluate the request in accordance with its Refinance Policy (Exhibit A) and may require the Borrower to repay the loan. REPAYMENT OF SHARED NET PROCEEDS: Should the net proceeds (i.e. the sales price minus the repayment of loan(s) superior to the Program Loan minus any reasonable and customary closing costs) not be sufficient to repay the full principal amount of the program loan, then the repayment amount will be determined according to the following approach: the amount of the Program repayment will be proportional to the CDBG Program Investment and the owner s initial investment of their own funds, i.e. The CDBG Program loan divided by the CDBG Program Loan plus the owner s investment times the net proceeds will equal the CDBG repayment amount. CO-SIGNER/ GUARANTOR: The program does not allow for a Co-Signer/ Guarantee. UNDERWRITING CRITERIA FOR BORROWERS: MINIMUM DOWN PAYMENT BORROWERS OWN FUNDS: The Borrower must invest at least 1.5% of the acquisition price from their own seasoned funds (in an account for at least 2 months prior to the CDBG Application) in the transaction. The Borrower s funds may be applied to the down payment and/or closing costs and/or prepaid expenses related to the transaction, e.g. home inspection. In those cases of 100% financing, e.g. USDA loan, the Borrower s funds will be applied to closing costs and/or prepaid transaction expenses. HOUSING COST AND DEBT RATIO: Borrower s total obligations (housing costs plus other debts) to income ratio shall not exceed forty-five (45%) percent. Page 6 of 8

7 LOAN TO VALUE (LTV): not exceed 103%. The maximum LTV of all loans (including the CDBG loan) to the appraised value shall UNDERWRITING CRITERIA FOR FIRST MORTGAGE(S) AHEAD OF THE CDBG LOAN. The following underwriting criteria are required for any mortgage(s) ahead of the CDBG loan. 1. The mortgage shall be from an institutional lender, i.e. state or national bank, state or federal savings and loan association or credit unit, cooperative bank, Mortgage Company, trust company, insurance company, or other governmental lender. 2. Term of loan for various property types: a. Single Family Homes: Fixed rate loan with a term not to exceed 30 years. b. Deed restricted properties are not eligible. 3. First mortgage rate of no more than 2 percentage points above the current 0 point Mass Housing interest rate for households at or below 80% of the area median income for Barnstable Town, MA, MSA. 4. The mortgage has a maximum of 2 points. 5. Interest only, balloon, adjustable rate mortgages (ARMS) and subprime loans are not eligible. 6. Housing cost and debt/income ration of no more than 45% 7. Pre-payment penalties are not allowed. In exceptional circumstances and upon request from the CDBG program administrator, Town staff may grant a waiver to any of these criteria upon receipt of satisfactory evidence that such a waiver will not place an undue burden on the borrower and will not result in an undue risk to the recapture of the CDBG loan upon sale or refinancing. SELECTION PROCESS: Awards will be made on a first come first serve basis until the funds are no longer available or May 1, 2018 whichever comes first. Funds are not committed until owner receives Final Eligibility Certification from Town and signed a purchase and sales agreement. The amount committed shall not exceed the total amount available. If the purchase falls through for any reason after the purchase and sales agreement the buyer loses the commitment until re-certified. If exceptional circumstances exist the Town may grant a waiver to recapturing the commitment provided the waiver will not result in undue risk to the Town to return funds to HUD. In the event the committed funds are released, the Town will provide notification of availability on the Town website or in a press release. CONTACT: Planning & Development Department (PDD) 367 Main Street, 3 rd Floor Hyannis, MA Phone: TDD#: kathleen.girouard@town.barnstable.ma.us Office is handicap accessible and reasonable accommodations can be made by request. Page 7 of 8

8 EXHIBIT A - REFINANCING POLICY CDBG Assisted Units without a Deed Restriction or Affordable Housing Rider: Primary purpose of the Town s review and permission serves is to determine whether the owner had the ability to repay the original loan. While ability to repay is the primary factor in the Town s decision, the Town s policy also provides incentives for owners to refinance into standard and safer mortgage products. Deed restricted units are not eligible under this program. The following criteria shall be met in order to secure permission for the Town to subordinate our loan to a refinancing of a first mortgage: The value of the two (2) loans (first mortgage and CDBG 2 nd mortgage) combined cannot exceed 90% of the appraised value. Term of loan for single family home shall be fixed rate with a term not more than 30 years. The mortgage rate must not be more than 2 percentage points above the current 0 point Mass Housing interest rate for households at or below 80% of the area median income. Housing costs and debt/income ratio does not exceed 45%. The mortgage has a maximum of 2 points. Taking out additional money in excess of what is due on the first mortgage requires CDBG approval and may require repaying the CDBG 2 nd Mortgage before approval is granted. In exceptional circumstances the Town may grant a waiver from no more than two of these criteria upon receipt of satisfactory evidence that such a waiver will not result in an undue risk to the recapture of CDBG loan upon sale or refinancing and that the new mortgage will not place undue burden on the borrower. Page 8 of 8