Freddie Mac s HFA Advantage Mortgage Master Servicer: US Bank

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1 HFA Advantage Mortgage: Maximum 97% LTV / 105% TLTV HFA income limits All delivery fees waived Charter-level mortgage insurance available available exclusively through participating State or Local Housing Finance Agencies Freddie Mac s HFA Advantage Mortgage Master Servicer: US Bank Presenter: Tom Ward March 2017 NOTE: This document is not a replacement or substitute for the information found in the Single-Family Seller/Servicer Guide, and/or terms of your Master Agreement and/or Master Commitment. This document is wholly-owned by Freddie Mac -- US Bank is not responsible for any of the content.

2 Objective / Agenda Objective: Familiarize you with the benefits, key features and requirements for Freddie Mac s low down payment mortgage offering: HFA Advantage General Requirements Features and Benefits Underwriting and Processing Tips Resources HFA Advantage is available exclusively to Housing Finance Agencies Master Servicer: US Bank 2017 Freddie Mac 2

3 Key Features: HFA Advantage HOME POSSIBLE & HOME POSSIBLE ADVANTAGE HFA ADVANTAGE Loan Product Advisor SM (no manual underwriting if LTV > 95%) Use of alternative automated underwriting system is permitted Income Limits Established by HFA 97% LTV / 105% TLTV (Affordable Seconds only) No Minimum LTV No Minimum Borrower Contribution Purchase/No Cash-out Refinance First-time homebuyers, repeat buyers 1- unit primary residence* (Detached / attached, PUDs) All borrowers must occupy the mortgaged premises as their primary residence, and *Manufactured homes are not eligible; Condominiums are eligible if LTV 95% No reserves required (for Loan Product Advisor evaluated loans) Fixed rate Temporary subsidy buydown (2/1 or 1/1) Master Servicer: US Bank 2017 Freddie Mac 3

4 Features and Benefits Mortgage Insurance: LTV Ratio HFA Advantage Mortgage Insurance Coverage* (Fixed rate only) Standard Mortgage Insurance Coverage (Fixed rate, term > 20 years) Greater than 80% up to 85% 6% 12% Greater than 85% up to 90% 12% 25% Greater than 90% up to 95% 16% 30% Greater than 95% up to 97% 18% * HFA Advantage Mortgage Insurance: Premiums may not be financed Lender-paid mortgage insurance option may not be used Master Servicer: US Bank 2017 Freddie Mac 4

5 Check-In Are the HFA Advantage Mortgage offerings available only to first-time homebuyers? No, the borrower does not have to be a first-time homebuyer Master Servicer: US Bank Guide Chapter Freddie Mac 5

6 Check-In As of the note date*, can a borrower have ownership interest in any other residential properties? Yes, there are circumstances in which a borrower may hold ownership interest in a property that are compatible with the intent of the program. To allow for these situations, we are permitting ownership in other residential property provided the borrower does not occupy the other property, and: The borrower inherited their ownership interest in the property and shares ownership with another party, OR The borrower owns the property with another party and the debt associated with the property was assigned to the other party by a court order (e.g., a divorce decree), OR The borrower is a cosigner/guarantor on the related Mortgage debt and someone other than the borrower has made payments on the debt associated with the property for the most recent 12 months, as documented with copies of canceled checks or a statement from the lender. *Or as of the effective date of permanent financing for Construction Conversion and Renovation Mortgages Master Servicer: US Bank 2017 Freddie Mac 6

7 Qualifying Income / Income Limits Qualifying Income must include all stable monthly income for all borrowers. Mortgage Credit Certificates (MCCs) may be considered as qualifying income with HFA Advantage mortgages provided the requirements of the Guide are met. HFA will determine income eligibility based upon their own income limits. Master Servicer: US Bank 2017 Freddie Mac 7

8 Temporary Subsidy Buydown Plans Must meet Guide requirements Limited buydown plan available (no more than two percentage points) Borrower must be qualified using monthly payments calculated at the Note rate. Master Servicer: US Bank 2017 Freddie Mac 8

9 Closing costs and Escrows Flexible Down-payment & Closing-cost Sources Flexible Sources of Funds Financing Concessions» 3% LTV/TLTV ratio > 90%» 6% LTV/TLTV ratio > 75% < 90%» 9% LTV/TLTV ratio < 75% Lender Credit Unsecured Loan: Originating Lender (Refer to Guide Section ) Borrower Personal Funds (Borrower Minimum Contribution, if applicable) Depository accounts Cash on hand Securities Retirement accounts Government bonds Loan secured by borrower s assets Sale of borrower s real property Sale of borrower s assets Borrower s real estate commission Funds from a trust Pooled funds Individual Development Account (IDA): include matching funds only if not subject to recapture tax Community Savings-Borrower contribution Cash value of life insurance policy Trade equity Rent Credits Credit card charges, cash advances or unsecured line of credit: to pay fees associated with the mortgage application process Other Eligible Sources of Funds Gift funds or gift of equity: Related Person Gift funds: wedding gift** Gift/Grant: Agency Gift/Grant: Seller as the originating lender Affordable Seconds Secondary Financing (Home Possible Only) Employer-Assisted Homeownership Benefit IDA: matching funds subject to recapture tax Unsecured loan: Agency/Related Person, or Community Savings Systems (For Community Savings funds in excess of Borrower s contribution) Sweat equity (once 5% downpayment from personal funds has been met) **Refer to Guide Bulletin for requirements and implementation Master Servicer: US Bank 2017 Freddie Mac 9

10 Features and Eligibility: Homeownership Education Purchase Transactions Require: When all borrowers are first-time homebuyers, at least one qualifying borrower must participate in a homeownership education program before the Note Date*» A copy of a Homeownership Education Certification, or another document with comparable information, to be retained in the mortgage file prior to closing! This requirement stresses the importance of utilizing a curriculum that contains the minimum core content specified by the National Industry Standards for Homeownership Education and Counseling. These standards help ensure quality education and counseling is delivered with fairness and respect to homebuyers and homeowners HFA Advantage Program participants can leverage their own HFA borrower education programs in lieu of the homebuyer education requirements per Guide Section * or the Effective Date of Permanent Financing for Construction Conversion and Renovation Mortgages Master Servicer: US Bank 2017 Freddie Mac 10

11 Underwriting & Processing Tips Master Servicer: US Bank 2017 Freddie Mac 11

12 Underwriting Path: LTV % HFA Advantage LTV ratio of %: Must be submitted to Loan Product Advisor» Only Accept Risk Class permitted no exceptions» Maximum debt-payment to income ratio (DTI) is 45% No Manually Underwritten Mortgages Minimum FICO score: 640 Maximum term: 30 years Offering Identifier Offering Identifier: 251 Home Possible Advantage for HFAs Master Servicer: US Bank 2017 Freddie Mac 12

13 Underwriting Path: LTV < 95% HFA Advantage LTV ratio of 95% or less: May be submitted to Loan Product Advisor Maximum debt-payment to income ratio (DTI) is 45% A Manually Underwritten Mortgage* At least one borrower must have a usable Credit Score and an Indicator Score must be established and must meet the required limits. An HFA Advantage Mortgage where none of the borrowers have a usable Credit Score is not eligible Maximum debt-payment to income ratio (DTI) is 36% Minimum reserves requirement: two months PITIA Offering Identifier Minimum FICO score: 640 Maximum term: 30 years *Manually Underwritten Mortgages must meet the requirements of Chapter 4501 and Chapters 5100 through 5500, including but not limited to, the requirement that each borrower individually, and all borrowers collectively, have an acceptable credit reputation. Master Servicer: US Bank 2017 Freddie Mac 13

14 Loan Product Advisor Feedback Certificate Master Servicer: US Bank 2017 Freddie Mac 14

15 Loan Product Advisor Feedback Certificate Master Servicer: US Bank 2017 Freddie Mac 15

16 Check-In Does the Homeownership Education Certificate need to be placed in the mortgage file pre-closing? Yes! Master Servicer: US Bank Guide Chapter Freddie Mac 16

17 Sources of Funds: Cash on Hand Cash on Hand Credit report shows no more than 3 tradelines» Copies of 3 months statements for any open revolving account that reveal cash advances are not the source of Borrower Funds» Any cash advances must be explained and documented Updated credit report approximately one week prior to closing to show no new accounts or increase in current accounts 6 months cash receipts or other alternative documentation (refer to Section (b)) Complete Monthly Budget and Residual Income Analysis (Exhibit 23), or another document containing the same information Evidence that funds for the down payment, Closing Costs, Financing Costs, Prepaids/Escrows and reserves are deposited in a financial institution or are held in an institutional escrow account prior to closing The mortgage file must have no indication that the borrower typically uses checking, savings or similar accounts Master Servicer: US Bank 2017 Freddie Mac 17

18 Sources of Funds: Affordable Seconds Subsidized secondary financing or other financial assistance, evidenced in land records, that is provided by an Agency and that meets the requirements of Section *Home Possible Advantage secondary financing source must be an Affordable Second, and it may not be a home equity-line-of-credit Note: RHS Leveraged Seconds are not permitted with Home Possible Advantage Master Servicer: US Bank 2017 Freddie Mac 18

19 Wrap Up How can HFA Advantage be YOUR affordable lending solution? Who does it serve? What are its key features? How does it benefit borrowers? Master Servicer: US Bank 2017 Freddie Mac 19

20 Resources Master Servicer: US Bank 2017 Freddie Mac 20

21 Freddie Mac Affordable Lending Manager Regions WA OR CA NV UT AZ AK Master Servicer: US Bank 2017 Freddie Mac 21

22 Single Family Affordable Lending Manager Contact Information Patricia Claproth Tamela Hartsfield Dennis Smith Jason Jefferies Nadja Vital Director: Sam Luna Master Servicer: US Bank 2017 Freddie Mac 22

23 Please complete the online evaluation before exiting today s session Thank you for your participation! Master Servicer: US Bank 2017 Freddie Mac 23