CONSTRUCTING DEAMS NIFA LENDER TRAINING

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1 CONSTRUCTING DEAMS NIFA LENDER TRAINING Presented by: Kim Reif, Single Family Housing Specialist, North Platte, April 24, 2018 Krista Mettscher, Senior Single Family Housing Specialist, Omaha, April 25,

2 THE FACES OF LENDING 1

3 Combination Construction & Permanent Loan AKA Single Family Housing Guaranteed Loan Program 2

4 Need For Dilapidated Housing Stock Lack of Affordable Housing Workforce Housing Initiative Target Housing 80% - 120% AMI Provide Housing in $155,000 - $241,500 Price Range 3

5 100% Financing Single Family Housing Guaranteed Loan Program Eligible families up to 115% AMI No Mortgage Limits Over 80 approved lenders participate Expand access to affordable housing and increase financing opportunities 4

6 5

7 3555 HB Chapter 12, Section 7 of HB (7 CFR ) outlines the requirements of the combination construction to permanent loan option or single-close loan.

8 Single Close Loan Combines features of construction loan (short term construction financing) with traditional long term permanent mortgage (30 yr) ONE Closing prior to start of construction At closing, funds disbursed to cover cost of land & applicable closing costs Lender responsible: Managing disbursement to contractor for balance of mortgage proceeds as construction progresses Interest rate established at closing LNG may be issued once the interim construction loan is closed without waiting for completion of subject property 7

9 Benefits The guarantee is issued before construction begins

10 Lender Benefit: Immediately eligible for mortgage-backed securities Benefits

11 S.C. Investors Investor Name Phone Number The Money Source, Inc / Freedom Mortgage Corporation / FirstBank First Guaranty Mortgage Corporation

12 Benefits Builder Benefit: No need to invest capital because lender already funded the loan

13 Benefits Borrower Benefits: Construction project is fully funded no worries about funding the construction Interest reserve account can fund monthly construction loan payments, won t have to pay both rent and loan during construction Contingency reserve can be established to cover cost overruns. Reduced maintenance versus existing homes: won t need to replace roof, appliances, etc. for many years

14 Benefits Community Benefits: Replace aging housing stock in rural areas Local utilities experience new business Local hardware stores experience new business Landscapers, carpet layers, cabinet makers, etc.

15 LENDER REQUIREMENTS Two years experience in construction lending Approve builders for the program Distribute escrow funds for eligible construction purposes Obtain documentation of complete construction 14

16 Participating builders approved by lender to meet the requirements including: CONTRACTOR/ BUILDER REQUIREMENTS Two years of experience in SFH construction Acceptable State licensing and liability insurance Acceptable credit & no criminal history Contractors may NOT build their own residence 15

17 Land Finance construction of new residence All costs subject to maximum loan to value = established by an appraisal ELIGIBLE COSTS Construction Hard Costs = based on construction contract & costs outside contract to subcontractors (well, septic, utility hook-ups, landscaping, etc) Construction Soft Costs = Appraisal fees, survey, permits, etc. 16

18 Appraisal Fair market value of the proposed subject property will be utilized to establish the maximum loan amount. Land value is based on the value as reported in the Appraisal Report, with no seasoning requirement.

19 CLOSING Date of Closing = Date interim construction loan is closed Industry standard docs used. Construction rider to note & construction loan agreement Term = 30 years. Amortization (via a modification) follows 60 days from final inspection. Excess funds will be applied as principal curtailment 18

20 CLOSING Borrower begins making regular (amortized) P&I on loan after construction is complete. Only interest payments on the advanced construction loan will be due and payable during the construction phase. 19

21 INTEREST DURING CONSTRUCTION Interest is payable monthly either directly from the borrower or the established interest reserve. Interest during construction must be fixed.

22 CASH BACK Excess construction funds applied to the unpaid principal balance. Excess prepaid funds can be returned to the borrower IF they were paid from personal funds.

23 NE SINGLE Thursday, May 3 11:00 CST Presented by: Joaquin Tremols National GRH Program Director CLOSE WEBINAR If you would like to participate, krista.mettscher@ne.usda.gov 22

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25 The Auxiliary Processing Unit (APU) Team. Currently made up of 10 field staff members detailed to Headquarters, began processing loans under the APU parameters on February 26th. Currently processing 100% of all new loans for 2 states & assisted 8 other states with application backlog. 24

26 CREDIT SCORE VALIDATION: Should the Program discontinue the credit score validation of GUS Accept UW Recommendations? 25

27 Refocus review time from counting # months of tradeline to job history, income, etc. Remove confusion of eligible tradelines = promote nationwide consistency! Current validation is unevenly matched Update Chapter 10, 10.5 and remove GUS Credit Validation message for Accept loan files. 26

28 4506-T: Should we end the suspension of the 4506-T & transcripts? 27

29 WILL be required for all adult household members (exception = full time students) Revised language will provide flexibility for IRS rejection/no record responses, lenders document attempts Requirement to obtain will be moved prior to loan closing & transcripts must be retained in lender s file Update GUS messages /update guidance in Chapter 9, currently in the clearance process 28

30 Complete Loan Application: Can we remove the requirement for USDA to receive a signed 1003 and the final GUS Underwriting Findings Report as part of a complete loan application per Attachment 15-A? 29

31 Loan files being released/placed in pending status due to missing signatures on 1003 or final GUS Underwriting Findings Report. Signed 1003 provides little purpose for RD during the initial origination review. The lender collects and retains the final 1003 at closing. GUS Underwriting Findings are available in GUS. The lender does not need to upload a separate pdf of the GUS Findings into the system. Determination: No need for signed 1003 or copy of final GUS findings Revise & prepare for clearance, Update Chapter 15, 15.3, 15.8C, Attachment 15-A, and Attachment 15-B. GUS Findings Message 2001 must be revised to remove findings report, GOV Delivery Notice to be sent once updates are complete. 30

32 Refinances: Can we remove a deceased borrower from a refinance transaction? 31

33 Yes, we should be allowed to remove a deceased borrower in a refinance transaction including streamline assist refinances and HB do not prohibit the removal of a deceased borrower. Update Chapter 6, which is currently in the clearance process. 32

34 Data Tolerance in GUS at Loan Closing: Is there a certain dollar amount in allowable data tolerance in GUS at loan closing? 33

35 Recently received several calls on this subject where the caller is referencing an allowable data tolerance of $250 or $300 dollars. At this time the only allowable data tolerance is the 2% tolerance for escrowed taxes and insurance accounts discussed in Handbook 5.3 F. There is not an acceptable dollar value or any other allowable data tolerance other than the escrowed taxes and insurance. 34

36 Lender Self Reports: USDA offices are contacted by approved lenders after a loan has closed, the Loan Note Guarantee has been issued, and the lender s post-loan closing or QC department has identified an error. This is typically referred to as a lender self-report. 35

37 The Loan Note Guarantee has already been issued and USDA cannot rescind it for correction. Compose an to include: 1. Borrower Name(s), 2. Borrower ID and/or GUS Application ID 3. A detailed review of the issue(s) identified. Self-report will be reviewed by National Headquarters. Response will be sent to approved lender. 36

38 When reviewing credit trade lines for credit score validation purposes should we consider trending analytics vs. credit report/trade line data? 37

39 When validating the credit score the HB states that eligible tradelines consist of credit accounts with at least 12 months of repayment history on the credit report. Credit reports now contain trending analytics that may provide additional information. Typically, consider repayment to begin when the credit is extended. The date the account is opened will start the 12-month time frame. It is considered prudent practice to review all information on the credit report including trended data. 38

40 Remember the old Underwriting Matrix? We have heard that there will be a new one published in the near future! 39

41 COMMUNITY TARGETED COMMUNITIES WE ARE LOOKING AT: Hickman, Waverly, Friend Fairbury, David City, Louisville, Eagle, Auburn, Superior, Falls City, Wahoo Milford, Wayne, Schuyler, Central City, Ainsworth, West Point, Minden, Kimball, Imperial MEETINGS 40

42 Contact Information: Kim Reif, Single Family Housing Specialist Ph Krista Mettscher, Single Family Housing Specialist Ph Mike Buethe, Single Family Housing Program Director Ph

43 USDA is an equal opportunity provider, employer, and lender. To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD 3027, found online at and at any USDA office or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) Submit your completed form or letter to USDA by mail at: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C ; by fax (202) ; or at program.intake@usda.gov. Copyright 2015 Accenture All Rights Reserved.