Administrator s Guidelines Southern California Home Financing Authority (SCHFA) 2013 First Home Mortgage Program

Transcription

1 Administrator s Guidelines Southern California Home Financing Authority (SCHFA) 2013 First Home Mortgage Program Revision Dated Revisions are shown on Page 3

2 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 2 TABLE OF CONTENTS TOPIC!!!!!!!!!!!!! See Page Table of Contents 2 Revisions Table!!! 3 The Authority Team!!!!!!! 4 PROGRAM PRODUCTS 5 PROGRAM REQUIREMENTS Eligible Borrowers, Cosignors, Homebuyer Education, Minimum 6 Credit Score, Maximum Debt to Income Ratio, Family Income Limits Maximum Family Income Limits, Eligible Area, Maximum Acquisition (Sales Price) Limits, Targeted Areas 7 ABOUT THE PROPERTY 8 ABOUT THE FINANCING 9 ABOUT THE PROCESS SUMMARY 10 Process Guidelines for Requesting Down Payment Assistance Funds PROGRAM TIMELINE Loan Processing, Delivery and Purchase Timetable, Program Dates 14 PROGRAM WEB BASED SYSTEM 15 PROGRAM FEES 16 COMPLIANCE UNDERWRITING PROGRAM FORMS 21 OTHER DOCUMENTS REQUIRED FOR COMPLIANCE FILE 22

3 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 3 REVISIONS TABLE Date Items Page 22, added Homebuyer Education certificate Deleted references to Home Inspection; Added allowance of Cosigners Page 12, Updated addresses for Bessie Yip Page 13, Clarified number of days for return of unused closing cost assistance Page 11, #5 moved language regarding including Underwriter Certification with request for funds; Page 22, Revised language to reflect requirement for tax transcripts rather than tax returns effective for loans that close May 1, 2013 or after Page 10, 13, 21, updated verbiage to meet FHA requirements per Mortgagee Letter Page 7, Sales Prices/Maximum Loan Amounts clarified Page 17, Clarification of processing timetable Page 17, Revised lender fees, revised lender compensation

4 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 4 THE SOUTHERN CALIFORNIA HOME FINANCING AUTHORITY ( the Authority) Authority Creates and sponsors a first mortgage and down payment assistance program, funds down payment/closing cost assistance, solicits lender participation, sets the rate, term and points and markets the program. Participating Lenders Take applications, process, underwrite, approve, fund, close and sell qualified loans to the program. Lenders are responsible for servicing first mortgage program loans in accordance with Agency guidelines until they re purchased by the Master Servicer. US Bank Master Servicer Conducts training, provides information on acceptable loan products and delivery and funding, receives all mortgage files, reviews mortgage files, notifies lenders of mortgage file exceptions, approves mortgage files, purchases first mortgage loans, services loans. US Bank National Association Escrow Agent This is a different US Bank division that is providing the service of wiring the Authority s funds for down payment/closing cost assistance to each closing. Please do not contact US Bank in Ohio regarding the wiring of these funds. The Requisition form is located on the ehousingplus system SCHFA page behind security. ehousingplus Program Administration Maintains the program reservation system, website, and posts Administrator s guide, forms, training materials, provides program and system training, answers program and system questions, receives compliance files, reviews, posts and notifies of exceptions and approves compliance file.

5 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 5 PROGRAM PRODUCTS FIRST MORTGAGE PLEASE NOTE THAT RATES AND ASSISTANCE GRANT AMOUNTS ARE SUBJECT TO CHANGE AT ANY TIME. With respect to reserved loans, the rate and assistance will not change as long as loans are delivered according to the timetable included in this Guide. All loans in this program are Assisted Rate Loans. Funds are available in a first-come, first-served revolving pool that provides continuous funding. The following mortgage products are offered in this program: FHA, VA, USDA: RD. At this time, no conventional loans. US Bank provides the types of government loans permitted. These loans may be paired with the County s MCC program. Borrowers must then qualify using the requirements of both programs. The stricter requirements will prevail. DOWN PAYMENT ASSISTANCE The Assistance is calculated on the Note amount. This amount is funded at closing by the Custodian on behalf of the Authority. The Assistance is provided in the form of a non-repayable grant. It is not repayable with only one exception -- fraud. When the first mortgage is reserved, the Assistance is automatically reserved. When loans close, there are not second mortgages, second notes, deed restrictions or liens. The Assistance may be used for the following: 1. To pay closing costs described as prepaid taxes and insurance premiums, origination points, a buy down reserve, guaranty fees, credit report fees, survey fees, appraisal fees, inspection fees, title insurance premium, abstract and attorneys fees, escrow and courier fees, recording fees, discount fees and similar fees, but only if the fees and premiums do not exceed the reasonable and customary amounts charged by the Lender for other mortgage loans. 2. To pay for any portion of the purchase price of the Single Family Residence due and payable at closing which is not funded by the Mortgage Loan (i.e. any portion of the down payment for the Single Family Residence). Down Payment Assistance shall not be applied by the Mortgagor for any other purpose without the consent of the Authority. The Down Payment Assistance with respect to a Mortgage Loan originated by the Lender shall be repaid by the Lender to the Authority in full if the Mortgage Loan is not closed, if the Mortgage Loan is not purchased by the Servicer within 70 days of the Mortgage Loan reservation and, if an extension is granted, 100 days of the Mortgage Loan reservation date or if the Mortgage Loan is to be repurchased by the Lender prior to being pooled into a GNMA Certificate. SUBORDINATE FINANCING The program permits the use of subordinate financing/second mortgage loan products. Neither the Authority or US Bank needs to approve the use of these products. Lenders are responsible for determining if the subordinate financing/second mortgage loan product will meet FHA, VA, RD guidelines.

6 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 6 PROGRAM REQUIREMENTS Eligible Borrowers: Buyers and their spouses must be first-time buyers (someone who has not owned and occupied their principal residence in the last 3 years) except in Targeted Areas. With respect to non-permanent residents, follow FHA, VA, RD guidelines. Buyers must live in the property they purchase as their principal residence. All applicants must be considered irrespective of age, race, color, religion, national origin, sex, marital status, military status or physical handicap. Buyers must occupy the property purchased within 60 days of closing and intend to occupy the property for two (2) years. Contact ehousingplus Compliance with questions regarding eligibility. The past three years federal income tax transcripts are NOT required for Targeted Area buyers. Additional requirements are set forth in the Lender Agreement. Cosigners and Guarantors are permitted under the following conditions: Must be FHA loans Follow FHA guidelines Homebuyer Education is REQUIRED. Homebuyer education counseling certificates will be accepted from courses completed online, in person or by telephone. Each certificate must be dated within 12 months prior to the close of escrow. Providers of such programs will include, but not be limited to: Community Development Commission of the County of Los Angeles; Freddie Mac Homebuyer Counseling; HUD-approved Housing Counselors; NeighborWorks America; and private mortgage insurers approved by Fannie Mae. Here are some examples of providers: Freddie Mac Homebuyer Counseling Counselors/Administrators Search home_possible_education_requirements_748.pdf HUD-Approved Housing Counselors NeighborWorks America Minimum Credit Score The Authority requires a minimum credit score of 640 for conventional loans. If Agency guidelines (FHA etc) or a participating lender s own requirements, are higher than 640, the highest requirement must be used. Manual underwrites are permitted for borrowers with no FICO score but only in those circumstances. Maximum Debt to Income Ratio Maximum Debt to Income Ratio (DTI) is 45%.

7 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 7 FAMILY INCOME LIMITS Include income of borrower(s) and spouse whether or not spouse is liable on the loan or is on the title. Also include any adult (over 18 yrs of age) who will live in the household and be secondarily liable on the note or on the title. Program income is not averaged. It is annualized. That s different from income used for credit underwriting. More detailed guidelines for calculating program income are in the Compliance Underwriting section included in this Guide. Please note that with regard to maximum FHA mortgage amounts for the Authority s program, you must use the basic standard mortgage limits. You cannot use the High Cost Area limits. Maximum Family Income Limits Los Angeles County: 1-2 person household = $99, person household = $111,515 Orange County: 1-2 person household =$109, person household = $128,100 State law requires that not less than one half of funds allocated for Mortgage Loans from the proceeds of the program funds used for existing housing will be allocated to households for families with incomes which do not exceed 90% of median household income, which is currently $83,636 in Los Angeles County and $109,011 in Orange County. ehousingplus tracks this requirement. Eligible Area: All of Los Angeles County (excluding the City of Los Angeles) and all of Orange County. Please note: If a property is located in Los Angeles County and has a Census Tract Number of or lower, that property is located in the City of Los Angeles and does not qualify in this program. Clarified SALES PRICES AND MAXIMUM LOAN AMOUNTS There is a difference. While the program has very high sales price limits, the driving force is sall the maximum loan amount of $417,000. If the buyer has another source of funds or subsidy that brings the loan down to the $417,000, then the sales price can be an amount above $417,000. While the program permits 100% financing, the maximum mortgage can sall be only $417,000. SCHFA sells their loans in to the secondary market. The Maximum loan amount is the lesser of the current conforming loan limit of $417, or maximum loan amount for the county as permi3ed by the loan product (FHA, VA or RHS/ RD).

8 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 8 Targeted Areas: The Targeted Areas are currently the following census tracts -- Los Angeles County: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Orange County: , , , , , , ,

9 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 9 ABOUT THE PROPERTY Properties purchased in the program must be residential units. Permitted: New or existing, one unit only, detached or attached, condos, manufactured homes that meet servicer/insurer/guarantor requirements. Not Permitted: 2-4 unit dwellings Homes are considered new if never previously occupied. Mobile, recreational, seasonal or other types of vacation or non-permanent homes are not permitted. Land may not exceed the size required to maintain basic livability. No more than 15% of the square footage of the home being purchased may be used in connection with a trade or business including Child Care services (other than incidental rental from eligible multi-unit structures).

10 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 10 ABOUT THE FINANCING U S Bank provides the types of government loans permitted. Appraisal must indicate that the home has at least a 30 year remaining useful life. Asset tests and imputed income calculations are not required in this program Buyer/seller buydowns are permitted and must follow agency (i.e., FHA, VA) requirements. Cash Back to the borrower is not permitted. However, borrowers are permitted a reimbursement of prepaids and overage of earnest money deposit to the extent any minimum contribution has been satisfied and permitted by agency (i.e., FHA, VA) guidelines Cosigners/Guarantors are permitted FHA loans. Cosigners cannot occupy the property or have an ownership interest. Follow FHA guidelines for credit purposes. Construction to perm is not permitted. Manufactured Housing - See U S BANK bulletin on their web page Minimum Credit Score is 660 for Manufactured Housing. Minimum Loan Amount - There is no minimum loan amount in this program. Prepayments - Program mortgages may be prepaid at any time without penalty. Recapture Tax - There is no recapture tax requirement in this program. Refinances are not permitted. However, temporary, construction or bridge financing with a term of 2 years or less may be taken out with a program loan. Remaining reserves are not established by the program. If any, these are determined by the type of financing used (i.e. FHA, VA).

11 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 11 THE PROCESS TRAIN Lender training provided by the Administrator and Servicer. For new personnel or personnel who need a refresher. Click here and then the Training tab on the Authority s page. APPLY Lenders apply for Access (username and password) QUALIFY Lenders qualify applicants for the program. Lenders may pre-qualify and complete application process in their own internal systems using their internal codes. For the program, buyers must present an executed sales agreement before being entered into the program reservation system RESERVE To reserve funds in program s online system Reserve only when sure loan will meet timelines. PROCESS LOAN NORMALLY Lenders process the loan normally, consider requirements and secure past three years federal income tax returns (complete with schedules) for borrowers and spouses. UNDERWRITE AND CERTIFY Lenders underwrite & are responsible for credit decisions of the loans in the program. Servicer does not re-underwrite loans. Following credit approval, Underwriter completes the online Underwriter Certification form. Access system REQUEST DPA FUNDS SEE NEXT (3) THREE PAGES FOR EXPLANATION OF PROCESS CLOSE It s important to provide accurate closing instructions to closing agents. All program docs must be returned to you. AT CLOSING, BORROWERS MUST SIGN THE LETTER. Original remains with Lender, copy to borrower, US Bank (with USB002) and in FHA Case Binder. THE LETTER MUST BE USED FOR ALL LOANS THAT CLOSE ON OR AFTER JULY 1, Find all forms behind security at the ehousingplus web site. SHIP Use the Compliance Checklist to assemble the compliance file. Use the correct Mortgage File Checklist to assemble the mortgage file. Ship Compliance File to ehousingplus and the Mortgage File to US Bank. Lender services loans until purchased by US Bank. Directions on accessing the US Bank website will be posted in these Guidelines when the available.

12 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 12 PROCESS GUIDELINES FOR REQUESTING DOWN PAYMENT ASSISTANCE FUNDS Based on NEW HUD-mandated regulations, SCHFA MUST provide DPA funds directly to the Closing Agent. The Lender may no longer advance these funds. In order to expedite the delivery of the funds: 1. Lender will reserve the first mortgage and any assistance as is being done today on the online system at 2. Lender will process the loan(s) and update the information in the system as the loan moves through the pipeline. 3. Once the loan has been approved internally, the Lender s Underwriter will execute the Underwriter s Certification online. 4. After the Underwriter Certification has been completed, and with a scheduled closing date, the Lender s authorized representative must fill out and execute the DOWN PAYMENT ASSISTANCE GRANT WIRE REQUISITION available in the system, under FORMS. 5. The Request Form must be printed, signed, and scanned in pdf, jpg, tiff or png format. UNDERWRITER CERTIFICATION FROM EHOUSING SHALL BE ATTACHED TO REQUISITION. 6. No later than 10:00 a.m. Pacific Time Two (2) business days prior to Mortgage Loan Closing, the Lender sends a complete, executed.pdf or scanned version of the DPA Funds Request Form to U. S. Bank National Association, as Escrow Agent for the Authority. Please the DPA Grant Requisition (with a subject line reference to SCHFA DPA Grant Requisition ) to: U.S. Bank National Association Global Corporate Trust Services 60 Livingston Avenue EP-MN-WS3T St. Paul, MN Attention: Scott Bielke Telephone: (651) Facsimile: (651) scott.bielke@usbank.com

13 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 13 With a copy ed to (and with a subject line reference to SCHFA DPA Grant Requisition ): U.S. Bank National Association Global Corporate Trust Services 633 West Fifth Street, 24th Floor Los Angeles, CA Attention: Bertha Mares Telephone: (213) Facsimile: (213) bertha.mares@usbank.com And with a copy ed to the Authority (and with a subject line reference to SCHFA DPA Grant Requisition ): Southern California Home Financing Authority c/o Economic & Housing Development Division Community Development Commission County of Los Angeles 700 West Main Street Alhambra, CA Attention: Jewel Warren-Reed and Bessie Yip Telephone: (626) Facsimile: (626) s: jewel.warren-reed@lacdc.org and bessie.yip@lacdc.org 7. A confirmation of the receipt of Request for Down Payment Assistance Requisition will be sent by within four hours of receipt by the Escrow Agent. A representative of the Authority then will Reply to All on the Requisition Authorized & Confirmed after a representative of the Authority has confirmed the Mortgage Loan number and amount on the website of the Compliance Administrator for the Program, ehousingplus. The Escrow Agent is entitled to rely exclusively and conclusively on an received from jewel.warren-reed@lacdc.org or bessie.yip@lacdc.org for the purposes of such Authority confirmation. 8. Escrow Agent wires funds directly to the Closing Agent/Title Company and NOT the Lender or Borrower. 9. Please make sure that instructions are provided to internal Processor/Closer and to the Title Company/Closing Agent.

14 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 14 Revised If the Mortgage Loan closing does not occur, or if the DPA Grant funds otherwise must be returned to the Authority, if not utilized within 2 business days of the original proposed closing date, please return funds no later than the third business day following the original proposed closing date. Please instruct the receiving institution to DK the wire, or have such funds returned to the Escrow Agent using the following wire instructions: For: U.S. Bank National Association ABA #: Acct #: BNF: U.S. Bank Trust N.A. Attn: Scott Bielke (651) REF: Southern California HFA First Home Mortgage Escrow Account IRev IT S IMPORTANT that lenders (1) have the borrower(s) sign the letter that meets requirements of (appears in the auto-fill Forms available for closing labeled as ) and retain original with copies to borrower, US Bank and a copy in the FHA Case Binder; AND (2) have a copy of the wire or proof of the wire delivered to the Closing Agent. Lenders retain proof, place a copy of the proof in their FHA Case Binder and FOLLOW US BANK requirements per USB002.

15 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 15 PROGRAM WEB BASED MANAGEMENT SYSTEM HOW TO RESERVE A LOAN IN THE ehousingplus LENDER PORTAL (Reserve, View Your Pipeline, View or Run Reports, Review Exceptions) Lenders must be approved by US Bank and the Authority. This represents a brief presentation of information available to lenders. The ehousingplus website is located at The online help feature is the easiest way to receive answers for your questions about the use of the system. You do not need a username and password to access the program guidelines or training materials as links are available at You do need a username and password to log in and reserve money for a borrower and to print forms that are auto-filled and printed ready for execution or to run a variety of reports. These reports offer an opportunity to truly manage your pipeline. To apply for a username and password, make a reservation, check your pipeline, view allocation, information is behind security at The system is live and available 24/7 with the exception of scheduled and unscheduled maintenance. When you reserve a loan, it is immediately reflected in the remaining available funds. When you cancel a loan, funds are immediately reflected and available. First mortgage funds are locked for a buyer when a reservation is submitted on and accepted by the system and a loan number is obtained. All loans must be registered through the ehousingplus Website -- Complete the reservation screens online and submit. Reservations submitted correctly receive a loan number that becomes the loan number for the life of the loan. If submitted incorrectly, there is instant online feedback identifying non-compliance and/or missing information issues. Again, system provides instant online feedback identifying non-compliance and/or missing information issues. Lenders may choose to print confirmation from Loan Detail screen. The security features control the information each user can access. For example, only Underwriters may access the Underwriter Certification. The Underwriter Certification serves as the pre-approval process and is implemented by the lender s underwriter.

16 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 16 PROGRAM TIMELINE Rev Red bolded paragraph below Buyers MUST HAVE A FULLY- EXECUTED SALES CONTRACT FOR A SPECIFIC PROPERTY in order to have funds reserved or be on a waiting list. The contract may be dated prior to the date of the loan application. Buyers may be pre-qualified. However, if the buyer does not have a contract on a property, program funds cannot be reserved for the buyer until such time as the buyer presents a valid contract. To assure that loans are purchased, please follow the Processing, Delivery and Purchase Timetable below. Please DO NOT reserve loans that cannot meet the timetable. If the loan is not underwriter certified within 15 days of loan reservation, the loan is subject to cancellation. ehousingplus via notifies lenders that the loan may be canceled if the underwriter certification is not completed. Should the loan reservation be canceled at any point during the reservation, the issuer may allow the loan to be reinstated at the higher of the mortgage rate originally reserved or the then current program mortgage rate. Please wait until 45 days before closing to reserve funds for new construction, short sales and foreclosures. Loans not purchased within the timeframe below cannot be purchased. The revolving pool of funds assures continuous funding. Fund availability makes it unnecessary to rush to reserve funds. Loan Processing, Delivery and Purchase Timetable Once a loan is reserved in the ehousingplus system and is provided the Servicer s Loan number, the loan must be (1)underwriter certified within 15 days of loan reservation (2)closed and delivered to the Servicer within 45 days of loan reservation and (3)purchased within 70 days of loan reservation. Extension Request Any Mortgage Loan not purchased within the 70-day period referenced above is ineligible for purchase unless the Lender elects a one time only 30 day extension. The cost of the extension is $375. The $375 extension fee is due whether or not a Mortgage Loan is ultimately delivered and/or purchased. The extension fee will be netted from the loan purchase price by the Servicer when the Mortgage Loan is purchased from the Lender. If an extension is elected, but the related Mortgage Loan is not purchased by the required purchase date, the Lender will be billed by the Authority for the extension fee and the Down Payment Assistance, as defined below. The Authority may make any Lender with outstanding extension fees or with Down Payment Assistance amounts required to be repaid which are unpaid, ineligible to participate in the Program until the unpaid balance of extension fees, or Down Payment Assistance amounts required to be repaid, are paid in full. An extension request is available online at Remember that the form must be submitted BEFORE the 70th day. If any Lender consistently cancels reservations for Mortgage Loans, or consistently fails to close Mortgage Loans or timely sell such Mortgage Loans to the Servicer, then the Authority may suspend or terminate such Lender from further participation in the Program.

17 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 17 PROGRAM FEES FIRST MORTGAGE FEES There is a 1.00% origination fee and 0% discount fee. Lenders cannot charge any additional points. ADMINISTRATOR FEE The program includes a non-refundable first mortgage Processing Compliance Fee initially of $225. The fee is payable at closing. The fee must be disclosed on the HUD-1 as being paid to ehousingplus. A penalty for chronically deficient files initially will be $100. SERVICER FEES On the first mortgage, the program includes a Tax Service Fee of $85 and a Transfer Fee of $150 that will be netted by the Servicer at loan purchase. The fees must be disclosed on the HUD-1 as being paid to U S Bank. LENDER FEES Effective with new loan reservations on 10/28/13 and after, lenders are permitted to charge reasonable and customary charges for out of pocket expenses and costs. Other financing costs such as legal fees and underwriting fees may be charged and courier fees may be charged if such fees are normally charged. Lenders may charge the usual and reasonable settlement costs. Settlement costs include titling and transfer costs, title insurance, survey fees or other similar costs. Other allowable fees include doc prep fees, notary fees, hazard, mortgage and life insurance premiums, recording or registration charges, prepaid escrow deposits and other similar charges allowable by the insurer/guarantor. "Junk" fees are not a defined term and may not be charged. Excessive fees are not permitted in the program. Loans reserved prior to 10/28/13, In addition to the allowed origination fee, Lenders are permitted to charge THE BORROWER OR SELLER processing fees, such as application, packaging or processing, document preparation and/or underwriting fees, etc., to a maximum of $550 ($350 for processing, underwriting and other miscellaneous fees plus $200 for document preparation). Any pre-qualification fee charged up front to a Borrower whose loan ultimately closes as an Authority loan, must be netted out of the allowed processing fee. All fees are subject to FHA, VA restrictions and requirements. Junk fees are not a defined term and may not be charged. Lender Compensation Effective with new loan reservations on 10/28/13 and after, on each loan the lender collects and retains the 1.00% origination as explained above from buyer or seller (follow Agency guidelines). Lender will receive 1.25% SRP for FHA loans and.75% SRP for VA loans by US Bank at loan purchase. So lenders receive a total of 2.25% for FHA loans and 1.75% for VA loans. Loans reserved prior to 10/28/13, on each loan the lender collects and retains the 1.00% origination as explained above from buyer or seller (follow Agency guidelines). Lender will receive 1.00% SRP for FHA loans and.50% SRP for VA loans by US Bank at loan purchase. So lenders receive a total of 2.00% for FHA loans and 1.50% for VA loans.

18 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 18 COMPLIANCE UNDERWRITING Underwriters should remember that CALCULATION OF PROGRAM (COMPLIANCE) INCOME IS DIFFERENT THAN CALCULATION OF INCOME FOR CREDIT PURPOSES. The program requires that underwriters consider the income of borrowers and their spouses (regardless of their address) and all household members 18 years of age or older(related or unrelated) who are secondarily liable on the note or on the title and expected to live in the residence. Use the information below as a general guide. Because each case is different, please contact ehousingplus Compliance if you have questions. Unlike income that is averaged for credit underwriting, the program is concerned with actual current income. You should be reviewing the YTD income, the income of the last 4 months and the income shown on previous tax returns for consistency. You should not be averaging income. If there are not inconsistencies in earnings, use the guidelines for each loan type to determine current gross monthly income. Current gross monthly income is multiplied by remaining months in the year to determine "total current annualized income". For the tax year in which the closing occurs, consider YTD income. Then establish current base income for the balance of the year using the guidelines for each type of income. Then consider any additional income. For assistance, contact the Compliance Office. Gross monthly income is the sum of monthly gross pay; any additional income from overtime, part-time employment, bonuses, income from self-employment, dividends, interest, royalties, pensions, VA compensation and net rental income, other income (such as alimony, child support, public assistance, sick pay, social security benefits, unemployment compensation, income received from trusts, and income received from business activities or investments, continuation of which is probable based on foreseeable economic circumstances based upon the Mortgagor's Certification (to such effect), all as computed at the time of application for a mortgage loan and confirmed at the time of closing. We will check information with respect to gross monthly income obtained from the reservation form, Underwriter s Certification and applicable certificates and affidavits executed the date of the Closing of the Mortgage Loan, provided that any gross monthly income not included for credit underwriting purposes must be included in determining gross monthly income. The limit is the limit and any amount over the limit is not acceptable. Include the income of non-borrower co-habitants who will reside in the property. However, do not include dependents that are claimed on tax returns but who will not permanently reside in the home the majority of the time. The Certification, executed by the borrower(s), and certified by the lender, must include the total verified annual household income. Questions regarding the calculation of income for program purposes should be directed to the Compliance office There are many variables, and the Compliance office will be pleased to assist. Alternate Documentation (Alt Docs) as defined by FHA is acceptable. Lender verification for compliance purposes, provided that such documentation includes the necessary, acceptable income tax returns. The Servicer requires a credit package as indicated on the various loan delivery checklists. However, the Servicer does not re-underwrite the loans for credit purposes. See bolded paragraph below. Although reference is made to VOE s and VOD s in the guidelines below, they are not required if acceptable alternate documentation is in the file. This documentation includes, but may not be limited to, current pay stubs which delineate current period, W-2's, for all borrowers and all employers, and bank statements to verify assets. If W-2's are present in the loan file, lending personnel should verify that the total of W-2's presented equals the total income shown on

19 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 19 borrower s tax returns. If a VOE is in the file, the borrower does not have to provide W-2's unless the underwriter deems this necessary for prudent underwriting. Figures shown on all documents should be consistent. See bolded paragraph below. Because a program qualifier is income, even if not required for credit purposes (i.e. automated underwriting), you should be seeking the two most current paystubs with YTD. Do not include in the compliance file, keep copies for your records. Although reference is made to the last 4 to 6 weeks income, Underwriters should be reviewing the income tax returns submitted to verify that there are no unexplained and/or unacceptable differences current income to past income. Examples below not intended to serve as exclusive methodology. Please contact the Compliance office with questions regarding individual cases. Please note that the income reported for program income calculation CAN NEVER BE LOWER THAN THE INCOME USED TO QUALIFY FOR CREDIT PURPOSES. Hourly Employees For the tax year in which the loan is closing, use the Year to Date base income. If consistent, utilize the base to determine the balance of the year as follows: 1.Using last 4 to 6 weeks' pay stubs, identify hourly rate of pay and average number of regular hours worked per week. Multiply hourly rate times regular weekly hours. Multiply result times number of weeks for balance of year and add to YTD for an annualized base salary. 2. If the person has no other sources of income (for example: overtime, bonus, commissions, second jobs, interest, dividends, child support, alimony, public assistance), this will be the Current Total Annual Income. 3. Compare the total annual income in #2 above to Paystubs, VOE s, previous year s income per W2's and tax returns. You should not find significant differences. In some cases, the Current Total Annual Income will be higher than the previous year's income. Variances should be attributable to increases/decreases in pay or number of hours worked. Salaried Employees 1. Using last 4 to 6 weeks' pay stubs, identify weekly (or other frequency) rate of pay. Multiply rate times the number of regular pay periods in the year (52 weeks, 26 bi-weekly, 12 months, 24 semi-months) 2. If the person has no other sources of income (for example: overtime, bonus, commissions, second jobs, interest, dividends, child support, alimony, public assistance), this will be the Current Total Annual Income. 3. Compare the total annual income in #2 above to Paystubs, VOE s, previous year s income per W2's and tax returns. You should not find significant differences. In some cases, the Current Total Annual Income will be higher than the previous year's income. Variances should be attributable to increases/decreases in pay or number of hours worked

20 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 20 Business, Self Employment 1. Use the quarterly tax returns and financial statements to identify the current NET year to date income. 2. Divide the year to date income by the number of months during which it was earned and multiply times remaining number of months in year. Add to actual YTD. ADD DEPRECIATION. 3. If the person has no other sources of income (for example: overtime, bonus, commissions, second jobs, interest, dividends, child support, alimony, public assistance), this will be the Current Total Annual Income. 4. Compare the total annual income in #2 above to the previous year's income per W2's and tax returns. You should not find significant differences. Verified Termination of Overtime, Commission, Bonus, Seasonal, Periodic, One Time Overtime, Bonus, Commissions Using last 4 to 6 weeks' pay stubs, identify the year to date total earnings of the borrower. Subtract the Current Total Base Income (see above) to arrive at the total year to date extraordinary income. If verification of termination of overtime, commission or bonus is provided in writing (i.e. a letter from an employer) or such termination is due to a change of employment, use the current YTD overtime, commission or bonus, do not annualize and add as a lump sum to the Current Total Annual Income. Regular Overtime, Bonus, Commissions 1. Using last 4 to 6 weeks' pay stubs, identify the year to date total earnings of the borrower. Subtract the Current Total Base Income (see above) to arrive at the total year to date extraordinary income. 2. Divide the year to date extraordinary income by the number of pay periods during which it was earned (to obtain an average). Multiply times the appropriate factor (Balance of year weeks, months, semi-months, etc.) for balance of year figure and add to actual YTD extraordinary income for annual income. 3. If the person has no other sources of income (for example: second jobs, interest, dividends, child support, alimony, public assistance), this will be the Current Total Annual Income. 4. Compare the total annual income in #2 above to Paystubs, VOE s, previous year s income per W2's and tax returns. You should not find significant differences. In most cases, the Current Total Annual Income will be higher than the previous year's income. It will also generally be higher than the annualized year to date income. The variances should be attributable to increases/decreases in pay. Interest, Dividends 1. Use current earnings statements issued by the bank, investment broker or agent. Identify the year to date interest or dividend earnings. Divide by the investment term year to date (for an average) and multiply times appropriate factor to annualize the earnings. 2. If statements are not available, and the terms of the investment agreement are available, multiply the principal amount of the asset times the annual interest yield factor for a projected interest earnings amount. 3. If neither are available, use the previous year's earnings statements or tax returns to identify total annual interest and dividend income. If the assets are still invested in the same instruments, use the previous year's figure. 4. Add the result of the computation in either #1, #2 or #3 above to the Current Total Annual Income.

21 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 21 Alimony, Child Support 1. Use the monthly amount appearing in the divorce decree, separation agreement or other support document. 2. If the borrower receives more than the amount stipulated in the agreements, use the monthly figure that the borrower declares and can be verified. 3. If the borrower receives less than the amount stipulated in the agreements and there is a verifiable history of the underpayments for at least 2 years (as evidenced by Court records), then use the past 2 years' historical monthly earnings. If there is no such history that can be verified, use the amount stipulated in #1 above. 4. Multiply the monthly amount of alimony or child support times 12. Add to the Current Total Annual Income (plus any other income sources). Pensions, Temporary Payments 1. Use the benefits statement issued by the benefits provider (pensions, workers compensation, disability compensation, social security, AFDC, etc.) to identify the amount of the benefit, payment frequency and expected term of the benefit. 2. Multiply the amount of the benefit times the payment frequency for the balance of year and add to actual YTD for an annualized amount. Add to the Current Total Annual Income (plus any other income sources). 3. If the benefit is absolutely not payable to the recipient beyond a given date (that means a complete and permanent stop of benefits without extensions, exceptions, waivers or other conditions) and such date is within 12 calendar months of the anticipated closing date, then calculate the benefits expected through the end of the benefits term. That will be the total annual income amount from the specific benefits source. Add to the Current Total Annual Income (plus any other income sources).

22 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 22 PROGRAM FORMS This topic addresses the specific forms required for the program for originating, processing, closing and loan delivery. All forms are in an interactive format. You may download these forms onto your PC or laptop in their interactive format. You simply place your cursor on the first blank, complete and then tab to the next blank. A complete Mortgage package must include all standard conventional, FHA, RD or VA forms. While forms may be downloaded on your PC or laptop, going to the Website for forms each time you need them assures that the most current version is being used. The simple rule of who signs program forms if the person is named on the Mortgage/ Deed, they sign the program forms. If they are not on the Mortgage/Deed, they do not sign the program forms. Also, remember cosigners cannot live in property, do not sign program documents or take title. Having people sign documents who should not sign is as incorrect as not having all sign who should. Only those on credit sign the 1003 and HUD-1. (Rev Deleted sentence that referenced cosignor.) Original, personal signatures of all borrowers and sellers are required and must match on all documents associated with the transaction. Whenever a party is known in any of the documents by more than a single name, a Name Affidavit Will Be Required. Powers of Attorney and/or Personal Representatives for the Borrower Are Not Acceptable. Exception: Active Duty Military Personnel may provide an Alive and Well letter. ORIGINATING COMPLIANCE FORMS Extension Request Form - Available online at Down Payment Assistance Grant Wire Requisition CLOSING FORMS REV * Certifications Form * DPA Acknowledgment Form RECREATED TO respond to (find under Forms on program s ehousing Plus page behind security under heading Auto-fills when printed for closing. ORIGINAL RETAINED BY LENDER, copy to borrower, US Bank (with USB002) and in FHA Case Binder. POST CLOSING FORMS Rev * Compliance File Checklist is available online. * New US Bank Verification Form for (see Bulletins) and mortgage file Delivery Checklists are on their website. The Servicer provides checklists on their site for submission of the Mortgage File. US Bank is posting the Verification Form to AllRegs. It may be found in the Exhibits folder. Attach documentation indicated. Include with US Bank mortgage file delivery as per the delivery checklist.

23 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 23 OTHER DOCUMENTS REQUIRED FOR COMPLIANCE FILE

24 SCHFA 2013 First Home Mortgage Program Administrator s Guidelines Page 24 REV (effective for loans closing on or after May 1, 2013) Tax Transcripts (Tax transcripts for the preceding year are due April 15 of the current year.) The past three years tax transcripts are required for borrowers and spouses. Not required for those buying in Targeted Areas. Requests for Extensions are not acceptable in lieu of tax transcripts. Real Estate Purchase Contract The full address of the property, full names of all sellers and buyers, total purchase price of the property must be included. If there is not an address for new construction, a lot number and subdivision name are required. All named persons must sign. Include the name and title whenever a representative is signing for a corporation. Final Typed Loan Application (1003) The typed application signed and dated by all parties is required. Loan interviewer must complete and sign page 3 of 4 of the If this is not possible, then an Officer must sign in place of the interviewer. All persons taking title to the property must execute all program documents. The income disclosed on the Certification must be the same or more than that shown on the The purchase price, loan amount, and other financial details must be the same as shown on all other documents. HUD-1 Settlement Statement Buyer, seller and closing agent must fully execute the HUD-1. Borrowers on the HUD-1 must be all persons taking title to the property and match the Certification and application. Persons not taking title to the property may not appear or sign the HUD-1. The Application Fee must be shown as being payable to Servicer. Please do not bundle charges. Itemize all charges to the transaction. Payoffs of other debt must appear on Page 1 under Section 100 of the HUD-1 as part of "Settlement Costs". Warranty Deed A copy of the Warranty Deed is required. Homebuyer Education Certificate (Added ) Each certificate must be dated within 12 months prior to the close of escrow.