HomeStyle Renovation & Energy Mortgages. Finance renovation or energy efficient costs into a single-close home purchase or refinance loan

Transcription

1 HomeStyle Renovation & Energy Mortgages Finance renovation or energy efficient costs into a single-close home purchase or refinance loan 1

2 An important note about the seminar content While every effort has been made to ensure the reliability of the session content, Fannie Mae s Selling and Servicing Guides and their updates, including Guide Announcements and Release Notes, are the official statements of Fannie Mae s policies and procedures and control in the event of discrepancies between the information in this seminar and the Guides Fannie Mae. Trademarks of Fannie Mae.

3 How we ll spend our time together today: Housing market trends HomeStyle Renovation Mortgage and HomeStyle Energy (HSE) Mortgage Homebuyer Benefits Eligibility Parameters HomeStyle Renovation Process Determining Loan Amount HSE -Eligible Project Types and Parameters HomeStyle Resources Duty To Serve - overview 3

4 Issues Facing Today s Housing Market Homes are aging Housing stock is aging into disrepair; average age of a home is ~40 years* Homeowners bear the burden of costly utility expenses from inefficient energy and water systems Lack of new affordable inventory New affordable home production not keeping pace with demand Builder costs are up and builder economics restrict new affordable home production Conversion to rental (investor) removed inventory for purchase Turnover at a 30-year low Americans are not moving at the same rate as in the past, reducing available housing supply Rising rate environment makes trading up less economically viable 4 *Source: American Housing Survey

5 What is HomeStyle Renovation? HomeStyle Renovation Mortgage provides borrowers a simple, flexible and frequently less costly way to purchase and renovate homes, or make home repairs, by using a conventional first mortgage, versus more traditional methods of financing, such as home equity lines of credit, a second mortgage or credit cards. 5

6 Did you know. Renovators who bought their first home in 2016 spent $33,800 on home renovations, on average, a 22% increase relative to U.S. Houzz & Home Renovation Trends Study 6

7 Benefits of HomeStyle Renovation Flexible Affordable Simple Helps fixer uppers be more attractive to potential borrowers because funds can be used on any renovation project to update an existing home Funds are bundled into your client s purchase mortgage under one application Allows upfront draws to begin their renovations and improvements without having to spend out-of-pocket 7

8 Befits of HomeStyle Renovation for Homebuyers Cost-effective way to renovate or repair a home, available at the time of purchase, without using a home equity line of credit or costly credit cards Upfront draws help borrowers start projects without spending outof-pocket Borrowers can qualify for a CLTV of up to 105% with eligible Community Seconds subordinate financing 8

9 Bonus! HomeStyle Renovation may be combined with a HomeReady Mortgage, so your low- to moderate-income clients may take advantage of features such as better interest rates, lower down payment and cancellable mortgage insurance.* *HomeReady income limits and other restrictions apply. 9

10 New and Improved.We ve Simplified and Expanded Eligibility Maximum LTV ratio has been increased to 97%* Eligible renovation funds has been increased to 75% of the lesser of 1. As-completed appraised value or 2. Purchase price plus renovation cost Manufactured housing is now eligible for HomeStyle Renovation** Please note that lenders must be approved to deliver HomeStyle Renovation loans to Fannie Mae prior to completion. *For LTVs > 95%, on purchase transactions, at least one borrower must be a first-time home buyer unless combined with HomeReady; for LCOR transactions, the loan must be owned or securitized by Fannie Mae. See Fannie Mae s Eligibility Matrix for additional details. **Eligible renovation funds capped at the lesser of $50,000 or 50% of the as-completed appraised value. 10

11 HS Renovation Eligibility Parameters Borrowers Individual home buyers or homeowners Occupancy and Property Types Occupancy Type 1- to 4-unit owner-occupied properties 1-unit second homes 1-unit investor properties Property Type New or existing properties Condos, co-ops, and PUDs NEW! Manufactured Homes (refer to the Selling Guide for MH requirements) Loan Type/Term FRM: 15-, and 30-year terms ARM: 3/1, 5/1, 7/1, 10/1, 5/5 Note: This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern. 11

12 HS Renovation Eligibility Parameters (cont.) Loan Purpose Purchase and limited cash-out refinance Cash-out refinance not permitted Mortgage Insurance Standard MI coverage applies Must cover as-completed value Must be in effect at closing Subordinate Financing With eligible Community Seconds, CLTV can be 105% Subject to pricing adjustment Note: This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern. 12

13 HS Renovation Eligibility Parameters (LTV/CLTV) Applies to loans processed through Desktop Underwriter Principal Residence Purchase or Limited Cash- Out Refinance Second Homes Purchase or Limited Cash-Out Refinance Investment Property 1 Unit FRM: 97%* ARM: 95% 2 Units FRM/ARM: 85% 3-4 Units FRM/ARM: 75% 1 Unit FRM/ARM: 90% Purchase 1 Unit FRM/ARM: 85% Limited Cash-Out Refinance 1 Unit FRM/ARM: 75% *For LTVs > 95%, on purchase transactions, at least one borrower must be a first-time home buyer unless combined with HomeReady; for LCOR transactions, the loan must be owned or securitized by Fannie Mae. Note: This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern. 13

14 HomeStyle Renovation vs. 203(k) Max LTV (1-unit owner-occupied) Minimum/Maximum Renovation Costs Can be used on ANY project Can finance Accessory Units FHA 203(k) 96.5% x Up to 110% of the ascompleted value Standard 203(k) Minimum cost = $5,000 Limited 203(k) Maximum cost = $35,000 X Eligible projects are explicitly listed; prohibited projects are explicitly listed Eligibility varies based on 203(k) Standard or Limited Standard 203(k) X Limited 203(k) New HomeStyle Renovation 97% for first-time home buyer (requirement waived when combined with HomeReady Mortgage) For LCOR transactions with LTVs > 95%, the existing loan must be owned or securitized by Fannie Mae For Purchase: Limited to 75% of the lesser of the purchase price plus renovation costs, or the ascompleted appraised value For Refinance: Limited to 75% of the as-completed appraised value 14

15 HomeStyle Renovation vs. 203(k) cont. Applicable to Manufactured Housing Allows upfront draws Includes contingency reserve/allowance Can use ANY contractor/ subcontractor for project Must use bonded contractors FHA 203(k) Up to 50% of material costs Up to 20% X Contactors must be licensed per state/local requirement 203(k) approved consultants must be used Per state/local requirement New HomeStyle Renovation Up to 50% of material costs Up to 15% Licensure only required where required by state law X Requires proof of completion Letter of Completion and Final Release Notice Form 1004D only 15

16 Eligible Renovations Renovations must: Be permanently affixed to the property, but do not have to connect to the dwelling Be compliant with state and local laws and building codes Examples: Kitchen Renovation Bathroom Renovation Room Addition Detached garage Pool 16

17 Contractor Requirements Renovation must be completed by a general contractor who is authorized, registered and/or licensed where required by law General contractor must submit itemized plans and specifications Itemized plans and specifications should describe the work, time frame, and a detailed cost breakdown Appraiser should estimate ascompleted value of the home after renovations, based on a review of the plans and specifications 17

18 Do-It-Yourself (DIY) Work Has Special Requirements If borrower does DIY work, financing is limited to 10% of as-completed value of the home 1-unit, owner-occupied homes only Material costs are reimbursed-- labor costs are not Borrower must provide itemized bills or receipts for materials The lender must inspect the completion of all repair items that cost more than $5,000 18

19 HomeStyle Renovation Process Phase 1 Phase 2 Phase 3 Phase 4 Select a Property Loan Prep Renovation Completion Borrower works with real estate agent to find a property Real estate agent may assist borrower to determine list of repairs / improvements Real estate agent works with borrowers to complete contract for sale of the selected property Bid(s) for work to be done Lender approves plans/specs Appraisal done to determine ascompleted value of the home Underwrite loan Approve & close loan Close home purchase Lender can sell loan to Fannie Mae Contractor begins work and requests funds Lender manages project draws & inspects work on ongoing basis Final appraisal performed (Form 1004D) Check lien waivers/title endorsements Update title policy Certify completion 19

20 Determining Your Customers Buying Power Add Reno Costs and Sale Price Compare Total Purchase Price with Renovation Costs Sale Price As- Completed Home Value Smaller Amount x LTV = Max Loan Amount Renovation costs: Labor (except sweat equity), materials, soft costs, PITI up to 6 months if home is vacated due to renovations, and 10% contingency fee* *Contingency fee optional on 1-unit properties 20

21 Let s Look at a Purchase Example 1 Determine total purchase price Purchase Price $190,000 + Renovation Costs* $ 45,870 = Total Purchase Price $235,870 Labor/Material $39,500 Soft Costs $ 2,200 (Architect + License + Permit Fees) 10% Contingency $4,170 (10% x (Labor + Material + Soft Costs)) Monthly PITI $ 0 (Borrower stayed in home during renovation 2 Costs must be =<75% of the lesser of: a) as-completed appraised value; or b) purchase price plus renovation costs, =<10% for DIY l Required for 2-4 unit properties, optional for 1-unit properties Compare total purchase price vs. as-completed appraisal valuation and note the smaller amount Scenario 1 As-completed Valuation = $245,000 3 Smaller amount from #2 x LTV = Max Loan Amount Scenario 1 $235,870 x 97% = $228,794 21

22 HomeStyle Renovation Summary Open up new possibilities for your clients to get that move-in ready home they want. Flexible Can be used on any home renovation project Now allowed for use with Manufactured Homes Affordable Renovation funds are bundled into your client s purchase mortgage under one application Borrowers can take advantage of today s rates which may be better than HELOC, a second mortgage or other more-costly methods of financing Can be combined with a HomeReady mortgage Simple Allows for upfront draws to begin renovations and improvements without having to spend out-of-pocket Cost-effective way to renovate or repair a home, available at the time of purchase 22

23 HomeStyle Energy

24 What is HomeStyle Energy? With today s existing median home age approaching 40 years and with many areas prone to natural disasters, HomeStyle Energy makes it easy for buyers to invest in energy, water and resiliency improvements at the time of purchase 24

25 Benefits of HomeStyle Energy Flexible Affordable Simple Includes a wide variety of energy-related improvements and property types to help you market and sell more homes Offers the benefits of mortgage financing and possible tax credits and rebates Basic weatherization, water, renewable energy and resiliency improvements do not require an energy report No special approvals needed! HomeStyle Energy mortgages can be originated by any Fannie Mae lender. 25

26 Consider HomeStyle Energy for Your Clients By being able to finance up to 15% of the as completed appraised value of a home for improvements, homebuyers can Add new cost-effective energy upgrades Easily include up to $3,500 in basic weatherization or water-efficient improvements with no energy report needed Make resiliency and repairs to improve the home s ability to withstand or recover from natural disasters Pay off higher-interest energy-related improvement debt including PACE and other consumer loans Combine with HomeStyle Renovation & HomeReady Mortgages! 26

27 Eligible Energy-Related Improvements Energy and water efficiency Basic weatherization Water-savings devices Heating and cooling and more Solar and other renewables Pay-off existing energy improvement debt Resiliency, repair & remediation Home resiliency to improve the home s ability to withstand environmental disasters Repairs for environmental disaster damage Radon remediation systems No specific list home buyers and homeowners should work with their lenders and leverage an energy report to determine the most cost-effective upgrades to meet their needs and goals. 27

28 HomeStyle Energy Eligibility Parameters Borrowers Individual home buyers or homeowners Occupancy and Property Types Occupancy All 1- to 4-unit existing properties Property All types, including manufactured homes (NEW!) Loan Type/Term FRM: 15-, and 30-year terms ARM: 3/1, 5/1, 7/1, 10/1, 5/5 Loan Purpose Purchase and limited cash-out refinance Mortgage Insurance Standard MI coverage applies; must be in effect at closing Must cover as-completed value Subordinate Financing With eligible Community Seconds, CLTV can be 105% Subject to applicable terms and requirements Note: This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern. 28

29 HomeStyle Energy Eligibility Parameters (LTV/CLTV) Applies to loans processed through Desktop Underwriter Principal Residence Purchase or Limited Cash- Out Refinance 1 Unit FRM: 97%* ARM: 95% 2 Units FRM/ARM: 85% 3-4 Units FRM/ARM: 75% Second Homes Purchase or 1 Unit FRM/ARM: 90% Limited Cash-Out Refinance Investment Property Purchase 1 Unit FRM/ARM: 85% Limited Cash-Out Refinance 1 Unit FRM/ARM: 75% *For LTVs > 95%, on purchase transactions, at least one borrower must be a first-time home buyer unless combined with HomeReady; for LCOR transactions, the loan must be owned or securitized by Fannie Mae. Note: This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern. 29

30 Combining all 3 loans together can help convert your clients dreams into reality HomeReady Mortgage Simple HomeStyle Renovation HomeStyle Energy Affordable Flexible 30

31 HomeStyle Resources All resources for HomeStyle Renovation and HomeStyle Energy can be found on Fannie Mae s website Fanniemae.com/hsrenovation Fanniemae.com/hsenergy 31

32 Responding to Changing Market Needs

33 Final Duty to Serve Plan Now Available Fannie Mae's Duty to Serve Underserved Markets Plan is focused on improving the availability of home financing for very low- to moderateincome families in three underserved markets: Manufactured Housing Exploring financing options for one of the largest affordable housing opportunities Affordable Housing Preservation Helping keep established affordable properties available as low-cost housing alternatives Rural Housing Supporting the financing of housing for targeted high-needs rural regions and populations For more information visit:

34 Why is Duty To Serve (DTS) important? Helps homeowners and communities Targets families of modest means Focuses on underserved market segments Sets the stage for broader economic benefits Creates growth opportunities for the industry Explores unrealized market opportunities Encourages innovation to address market challenges and reduce costs Aligns with Fannie Mae s mission Builds on what we do best tackling tough housing challenges Promotes access to safe, sustainable, and affordable housing options Manages risk to protect lenders, homeowners, and taxpayers Low Down Payment Options for Today s Home Buyers

35 Who and where are we trying to help? Nationwide We re serving very low- to moderate-income families (earning Area Median Income) in each of the three underserved housing markets Rural Housing Market We re targeting specific high-needs populations and regions, including: Middle-Appalachia, Lower Mississippi Delta, and Colonias Rural tracts in persistent poverty counties Native Americans and agricultural workers

36 Duty to Serve: How can you help? Look for opportunities to help us implement our plan in 2018 and beyond: Engage and innovate with Fannie Mae representatives and industry partners Support future research, outreach, and pilots. We welcome your ideas and creativity!

37 Where can you get more information on DTS? fanniemae.com/dutytoserve

38 Thank you for attending We value your opinion. Please reach out to me with any feedback or questions. 38