FHA 203(k) Product Offering 8/12/14

Transcription

1 FHA 203(k) Product Offering 8/12/14

2 Overview of 203(k) Offering Define the 203(k) product and features Discuss benefits of the 203(k) products Learn how to determine eligibility Review guideline specifics Tips for calculating 203(k) loan amounts Tips for preparing a 203(k) GFE Learn what to expect from HomeBridge s 203(k) process Provide 203(k) helpful resources 2

3 What is a 203(k) Loan? Offers a solution to help Borrowers obtain financing that covers both the acquisition and/or rehabilitation of the property Streamlined & Full Consultant option offered for both Purchases and Refinances: Option will depend on amount of required repairs Full Consultant= major renovation Streamlined=limited repairs Streamlined option still requires appraisal unlike a traditional streamlined loan 203(k) Full Consultant and Streamlined refinances do not permit any cash back to Borrower 3

4 Why Choose the 203(k)? Key program highlights include: Allows for repairs and improvements to be completed after closing for purchases and refinances via the establishment of an interest bearing escrow account Can borrow against the property value after improvements Avoid construction loans Increases property value and builds equity Combines the cost of the home and renovation into one low cost mortgage 4

5 Program Eligibility/Guidelines Loans will be underwritten to HomeBridge s 203(k) Guidelines Purpose Max LTV Max CLTV Loan Amount Minimum FICO Purchase 96.50% % FHA Limit 620 Rate/Term 97.75% 97.75% FHA Limit 620 Cash-Out N/A N/A N/A N/A Owner Occupied only Conforming and High Balance loan amounts Fixed 30 and 15 year term Credit/Ratio/Reserve requirements follow HomeBridge FHA guidelines HomeBridge will require Approve/Eligible AUS Findings Manual underwriting not permitted on 203(k) 5

6 Property Eligibility Property Type Full Consultant Streamlined Primary Residence Yes Yes SFR Yes Yes 2-4 Units Yes* No PUD Yes Yes Condo** Yes Yes New Construction No No Mixed Use No No Co-operatives No No Manufactured Housing No No *Full Consultant Reminders: Conversion of single family to multi-units and vice versa is acceptable See matrix for restrictions on multi-units in IL, NJ & NY ** Condo Restriction: Max Mortgage cannot exceed 100% of the After -Improved value 6

7 Property Eligibility (continued) Applies to Full Consultant and Streamlined options New construction not eligible Properties must be considered existing and completed for at least 1 year (CO required for 1 year) Demolished homes or homes that will be torn down during the rehab process are eligible provided a portion of the original foundation is in place Properties that are currently boarded up, condemned and uninhabitable are generally not eligible Boarded up, condemned and uninhabitable properties in disaster areas will be considered on a case by case basis All health and safety issues must be addressed through the renovation loan 7

8 Property Eligibility: REOs Bank owned REO eligible Agency owned REO eligible for Fannie Mae, FHLMC, VA, USDA Restriction: HUD REO not eligible 8

9 Condo Eligibility Condos are eligible for Full Consultant and Streamlined options Project must be approved by HUD at time of case number assignment Work limited to interior of unit Lesser of 5 units per HOA, or 25% of total number of units, can be undergoing rehabilitation at any time Max mortgage cannot exceed 100% of the After- Improved value Rehabilitation limited to subject unit in buildings with 1-4 total units See next slide for additional details See matrix for additional condo specifics 9

10 Condo Building/Structure Eligibility Subject unit must be in a building/structure that has a maximum of 4 units The Condo project may have multiple buildings with no limit to the total number of units Eligible Building/Structure Scenario Project consists of 10 buildings, each with 4 units, for a total of 40 units Ineligible Building/Structure Scenario Project consists of 10 buildings, each with 6 units, for a total of 60 units This property is ineligible because it is in a building/structure with more than 4 units More than 4 units in a building allowed when the renovation reduces the number of units in the building to 4 or less Ex: Borrower purchases 2 units and converts to 1 unit 10

11 Full Consultant 203(k) 11

12 Full Consultant 203(k) Features Requires an FHA HUD Consultant For complicated projects and cosmetic updates Minimum cost of repairs is $5,000; no max repair amount Contingency Reserve 10-20% (determined by HUD Consultant) Work to start within 30 days of closing Work must be completed within 5 months of closing Max 5 draws permitted One (1) General Contractor allowed Subcontractors permitted under General Contractor Additional specialized contractor(s) allowed for technical items Can finance up to 6 months PITI if home deemed uninhabitable by HUD Consultant 12

13 HUD Consultant Role Approved HUD Consultant required on Full Consultant transactions Consultant fee ranges depending on cost of work HUD Consultant manages the entire project Works directly with Borrowers & contractors Provides initial Work Write-Up or Specification of Repairs report Provides draw schedule Performs draw inspections to approve disbursements to General Contractor Provides Contingency Reserve amount to be established HUD Approved Consultant Search: Find a HUD Consultant 13

14 HUD Consultant Work Write- Up Details of HUD Consultant s Work Write- Up Report, AKA Specification of Repairs Report Signed by Consultant, Borrower and Contractor Original plan/specifications for project Describes quantity/quality of materials required Lists market costs of materials, labor, overhead, profit Includes adequacy of existing structural, heating, plumbing, electrical and roofing Must demonstrate that property will meet HUD s minimum property standards, after repairs Contractor(s) can reference the Write-Up to prepare bid(s) Provides required Contingency Reserve amount 14

15 Sample Work Write-Up 15

16 Sample Work Write-Up (continued) 16

17 Sample Work Write-Up (continued) 17

18 Sample Work Write-Up (continued) 18

19 Consultant/Contractor Disputes The Consultant Work Write-Up and Contractor Bid(s) should match on a Full Consultant loan In the event of discrepancy: 19

20 Full Consultant Eligible Repairs The Full Consultant option is used for more complicated projects. Eligible repairs include: Major structural alterations and additions Major landscaping and site improvements Repair swimming pool (up to $1,500) Remodeling of rooms, including kitchens & bathrooms Relocation of load bearing walls Construction or rehab of detached garage Converting multi-unit to a single unit or a single unit to a multi-unit Basement finishing or waterproofing Appliances used in remodel 20

21 Full Consultant Eligible Repairs (continued) Well/septic work Well/septic work must be completed prior to beginning of other repair work Properties with either a separate septic or well require a minimum property size of.50 acre Properties with both well and septic require a minimum property size of 1 acre Handicapped retrofitting 21

22 Full Consultant Ineligible Repairs Luxury items are not eligible: Barbeque pits, outdoor fireplaces Exterior hot tubs/saunas Swimming pool installation Television antennas and satellite dishes Tennis courts Alterations to provide for commercial use Any improvement that does not become a permanent part of the real property Improvements for business or commercial purpose Generator 22

23 Full Consultant What is Included in Rehabilitation Costs Total cost of rehabilitation (labor and materials) HUD Consultant Fee Contingency Reserve Established by HUD Consultant Inspection Fees Permit Fees Architectural/Engineering Fees (as applicable) Final Title Update Fee Up to 6 months PITI if property uninhabitable with HUD Consultant approval Discount Points 23

24 Full Consultant Contingency Reserve A Contingency Reserve is held from the loan proceeds to cover health, safety and unplanned costs that arise during construction Ranges from 10 20% of the rehab cost as established by HUD Consultant 15% required if utilities not on or are not in good working order Deposited to an escrow account Typically only soft costs are released within 2-3 business days of receipt of final signed document package by HomeBridge Post- Closing (i.e. Consultant, permit fees) Invoices are required Up to 50% of custom ordered material costs can be released Requires consultant authorization Disbursed to the manufacturer directly No funds are disbursed to Contractor or Borrower at closing 24

25 Contingency Reserve Options The contingency reserve may be financed or funded by the Borrower from their own funds Financed Contingency Reserve: any funds remaining at the end of the renovation process must be applied as a principal reduction Borrower Funded Contingency Reserve: any funds remaining at the end of the renovation process are returned to the Borrower 25

26 Full Consultant Disbursement Process HomeBridge Renovation Concierge Department will manage the renovation process Prior to Closing: A call is placed to the Borrower to confirm details of the transaction Post Closing: Status check in calls and s occur with the Borrower Within 2-3 business days of receipt of complete signed doc package by HomeBridge Post Closing, soft costs are released (must have invoices) As repairs/renovation work is completed and draws are requested: 10% holdback is withheld from each draw Draws released when acceptable Consultant inspection(s) received 26

27 Full Consultant Disbursement Process (continued) Once final repairs/renovation work is complete: HomeBridge Renovation Concierge Department to be notified by the HUD Consultant Final Title Update performed to evidence no liens Final draw is released to Borrower and Contractor All checks are two party Checks are sent via 2 nd day UPS Holdback funds are released after issuance of the Final Release Notice Unused funds remaining in the escrow account will be applied to the remaining loan balance 27

28 Super Storm Sandy: ML Specific requirements for property identified in declared disaster area impacted by Sandy: See matrix for specifics Eligible on Full Consultant only Additional requirements vary and include but are not limited to: Flood Elevation Certificate, Structural Engineer Report, HUD Consultant Feasibility Study Effective for case numbers 9/27/13-3/27/15 Restriction: max base loan amount cannot exceed 100% of After- Improved Value of property See ML for additional details 28

29 Full Consultant Reminders/Scenarios Used to CONSTRUCT, REPLACE, or for ADDITION Full Consultant additions are large scale add-ons and typically add to GLA Borrower cannot pay for or supply materials SCENARIO: Structure as Streamlined: Existing deck repair Structure as Full Consultant: Replacement of deck Addition of deck 29

30 Full Consultant Reminders/Scenarios (continued) Contingency Reserve allows for unplanned costs to be added that were not part of the initial Write-Up SCENARIO: Borrower decides to replace appliances not included in initial Work-Write Up. This is acceptable with a Full Consultant as the Contingency Reserve allows for addition of unplanned costs SCENARIO: Borrower decides to tear down a non-bearing wall to open up a room not included in initial Work-Write Up. This is acceptable with a Full Consultant as the Contingency Reserve allows for the addition of unplanned costs 30

31 Streamlined 203(k) 31

32 Streamlined 203(k) Features Streamlined option is intended to help facilitate uncomplicated improvements/repairs No minimum rehabilitation amount Maximum $35,000 in total rehabilitation costs Does not require an FHA HUD Consultant Work to start within 30 days of closing Work to be completed within 4 months Up to 2 draws permitted Up to 3 Licensed Contractors allowed Cannot finance up to 6 mo PITI 32

33 Streamlined Eligible Repairs Eligible repair examples: Repair/replacement/upgrade of mechanical items such as: Roof, gutters/down spouts HVAC systems Plumbing/Electrical systems Flooring Minor remodeling (i.e. kitchen/bath without structural changes) Painting (exterior and interior) or lead paint stabilization Weatherization (i.e. storm windows and doors) Purchase and installation of appliances Mold remediation Well/septic minor repairs 33

34 Streamlined Ineligible Repairs Luxury items are not eligible: Barbeque pits, outdoor fireplaces Exterior hot tubs Photo murals Swimming pool installation Television antennas and satellite dishes Tennis courts Alterations to provide for commercial use Any improvement that does not become a permanent part of the real property Generator Landscaping 34

35 Streamlined Ineligible Repairs (continued) Major rehabilitation work not eligible: New construction Relocation of load bearing walls Room additions Repairs of structural damage Repairs identified in appraisal as requiring a: Consultant Work Write-Up Plans or architectural exhibits Installation of well/septic not eligible (minor repair is ok) 35

36 Streamlined What is Included in Rehabilitation Costs Total cost of rehabilitation (labor and material) Contingency Reserve Inspection Fees Permit Fees (if applicable) Final Title Update Fee Discount Points *Total cannot exceed $35,000 36

37 Streamlined Contingency Reserve A Contingency Reserve is held from the loan proceeds to cover health and safety costs that arise during construction (i.e. mold/termite) Unpermitted costs as a result of construction that are not health or safety related cannot be added (unlike Full Consultant) Ranges from 10 15% of the rehab cost as established by HomeBridge Renovation Concierge Department 15% required if utilities are not on or are not in good working order Deposited to an escrow account 37

38 Contingency Reserve Options The contingency reserve may be financed or funded by the Borrower from their own funds Financed Contingency Reserve: any funds remaining at the end of the renovation process must be applied as a principal reduction Borrower Funded Contingency Reserve: any funds remaining at the end of the renovation process are returned to the Borrower Borrower Funded Contingency Reserve is included in the total cost of rehabilitation not to exceed $35,000 38

39 Streamlined Disbursement Process HomeBridge Renovation Concierge Department will manage the renovation process Prior to Closing: A call is placed to the Borrower to confirm details of the transaction Post Closing: Status check in calls and s occur with the Borrower 39

40 Streamlined Disbursement Process Typically 50% of labor/materials from Contractor Bid(s) disbursed within 2-3 business days of receipt of final signed doc package by HomeBridge Post-Closing Remaining 50% will be disbursed when all of the following are complete: Work/Repairs Final Title Update (to evidence no liens) Final inspection by appraiser Checks made payable jointly to Homeowner and Contractor Checks are two party and sent via 2 nd day UPS Funds remaining in escrow account will be applied to remaining loan balance 40

41 Streamlined Reminders/Scenarios Used to REPAIR, MODIFY, or UPGRADE Borrower cannot pay for or supply materials SCENARIO: Structure as Streamlined: Existing deck repair Structure as Full Consultant: Replacement of existing deck Addition of deck 41

42 Streamlined Reminders/Scenarios (continued) Streamlined Contingency Reserve does not allow for unplanned additions, unless they are to address health/safety issues SCENARIO: Cabinets being upgraded through project and mold is discovered in demolition Mold correction is OK as it will address a health/safety issue In same project Borrower wants to replace dishwasher (not part of original Contractor Bid) Addition of dishwasher not permitted as was not part of original Contractor Bid and is not a health/safety issue 42

43 Streamlined Tips Total rehabilitation cost (labor/materials) should not exceed the following amounts to allow for Contingency Reserve: 10% contingency: approx. $31,000 total rehab cost 15% contingency: approx. $29,650 total rehab cost 43

44 Streamlined Tips Fees cannot be waived or altered to adjust below the maximum repairs of $35,000 This includes Borrower Financed Contingency Reserve Borrower cannot pay for any portion of the project outside of closing Ex: Cannot pay for materials not covered in bid Ex: Borrower cannot do demo work 44

45 Identity/Conflict of Interest 45

46 Identity of Interest There can be no identity-of-interest issues between any parties participating in the 203(k) transaction Borrower must certify there is not a conflict of interest with any party to the transaction by executing an Identity of Interest Certification. The certification verifies no conflict of interest with any of the following: Seller Appraiser Realtor Lender Contractor Consultant 46

47 Identity of Interest Disclosures Identity of Interest Disclosures are required to confirm there is no relationship with any parties to the transaction as follows: Full Consultant: 203(k) Borrower/Contractor Identity of Interest /Conflict of Interest Certification and Consultant Identity of Interest Certification Streamlined: 203(k) Borrower/Contractor Identity of Interest /Conflict of Interest Certification 47

48 Closing Agents Broker owned-escrow or title are not permitted on Full Consultant or Streamlined 203(k) transactions There are no exceptions to this policy as it is a conflict of interest Identity of Interest closing agents are prohibited Identity of interest exists if lender can control or influence decisions/policies of closing agent or vice versa 48

49 Additional Reminders Borrower cannot have a familial or business relationship or business affiliation with the contractor (s) There are no exceptions to this policy There can be no conflict of interest with a Broker or inspector being affiliated with any parties to the transaction There are no exceptions to this policy 49

50 Feasibility Study 50

51 Feasibility Study A Feasibility Analysis (AKA Feasibility Study or Feasibility Site Report) serves to help Borrowers make a quick decision regarding the cost involved to renovate a property to meet HUD minimum property standards Completed at discretion of Borrower on a Full Consultant or Streamlined 203(k) loan Not required; obtained at Borrower discretion Typical fee $ Reviews property for compliance for Minimum Property Standards (MPS) per HUD Used to determine if Full Consultant or Streamlined should be utilized If progresses to Full Consultant, cost of study typically credited towards Consultant Fee Often used for purchase transactions and/or determine scope of repairs 51

52 Sample Feasibility Study 52

53 Sample Feasibility Study (continued) 53

54 Sample Feasibility Study (continued) 54

55 Sample Feasibility Study (continued) 55

56 Sample Feasibility Study (continued) 56

57 Contractor Information 57

58 Contractor Acceptance Process Contractors are accepted by HomeBridge HomeBridge Renovation Concierge Department dedicated to contractor acceptance and review Contractor acceptance process includes: Review of bids: examined for usual and customary range Contractor to meet jurisdictional licensing and bonding requirements HomeBridge maintains a list of current accepted contractors on website HomeBridge must have a loan submission in house to review a contractor for acceptance Contractors can have no relation to any party to the transaction 58

59 Contractor Acceptance Requirements Requirements for Contractors Seeking Acceptance: Completed Contractor Profile Applicable licenses and proof of insurance as required by the local, state, county and city jurisdiction Completed Federal W 9 Signed bid(s) Homeowner/Contractor Agreement Contractor Acknowledgment Additional items may be required at the discretion of HomeBridge Items are sent to HomeBridge via normal process; Underwriter coordinates review process with HomeBridge Renovation Concierge Department 59

60 Accepted Contractor Requirements Requirements for Contractors Currently Accepted: Homeowner/Contractor Agreement Contractor Acknowledgement Use Full Consultant or Streamlined version If license/insurance expired, proof of current documentation required Additional items may be required at the discretion of HomeBridge 60

61 Contractor Insurance Requirements Insurance specific requirements are determined by HomeBridge based upon state and local laws If insurance includes Workman Compensation in General Liability a separate policy is typically not required Builder Risk required only if Master insurance does not cover construction Often seen in 203(k) Full Consultant transactions Builder Risk can be paid by the homeowner or contractor 61

62 Contractor W-9 Completion Tips If Limited Liability Corporation selected, W-9 must indicate classification of corporation Taxpayer Identification Number must be completed correctly Must enter SS # or EIN # (Employee Identification Number) number (not both) 62

63 Contractor Bid Tips All Contractor Bids must include Borrower(s) name and property address Borrower(s) and Contractor signatures Clearly state the nature of the repair/renovation Cost for completion of each work item performed Expiration dates on cost estimates not permitted Detail itemization required for: Material costs of each item Labor costs of each item Make/model and description of material item used Borrower cannot supply or pay for materials If permits required should be noted on bid 63

64 Sample Contractor Bid 64

65 Sample Contractor Bid (continued) 65

66 Sample Contractor Bid (continued) 66

67 Sample Homeowner/Contractor Agreement 67

68 Self Help Self Help, or work completed by the Borrower, is not eligible under any circumstances Also known as DIY Restriction applies to 203(k) Streamlined and Full Consultant 68

69 Appraisal/Property Inspection Specifics 69

70 Appraisal Ordering Requirements HomeBridge will accept appraisals on 203(k) loans from any approved HomeBridge AMC: ACT AMC Axis MMC Nationwide Streetlinks Valuation Management Group Ordering Tips: 203(k) Full Consultant: order with copy of either all Contractor Bids OR copy of Work Write-Up 203(k) Streamlined: order with copy of all Contractor Bids 70

71 203(k) Appraisal Requirements Appraisals must include the following four items unique to a 203(k) appraisal: Remarks regarding the scope of work being completed Located in Improvements Section of report Be completed subject to in Reconciliation Section of report Include Copies of Bid(s) and Work Write-Up in report Full Consultant: Bid(s) and/or Write-Up required; cost of repairs must match Streamlined: Bid(s) required Required values differ; see following slides for details 71

72 Required Appraisal Values: Purchases Purchase Transactions: One required value An After-Improved value aka As-Completed value is always required This value is indicated in the Reconciliation section of the appraisal report The After-Improved value is the only value required by HUD on 203(k) loans The Purchase Price is used as the As-Is value HUD does not require an As-Is value; HUD assumes the purchase price is the As-Is value 72

73 Required Appraisal Values: Refinances Refinance Transactions: Two values required An After-Improved value AKA As-Completed is required This value is indicated in the Reconciliation section of the appraisal report An As-Is value is required Commonly completed as an addendum to the appraisal report 73

74 Appraisal Examples Improvements Section: Remarks on Proposed Work Required Reconciliation Section: Subject To **The value in the Reconciliation section is the After- Improved value 74

75 Unique Appraisal Situations For Full Consultant loans where a property is being converted from SFR to multi-units or from multi-units to SFR, the appraisal will be completed on the form for what the property will be after renovations (not the current property type) 75

76 Property Inspections/ Certifications Where required by the Appraiser, the following inspections, reports and clearances may be needed Termite Well or septic cert HVAC or other system certifications Architectural exhibits as required Full Consultant: all inspections Consultant and/or Appraiser require must be completed 76

77 Utilities Requirements 77

78 Utility Overview Utility requirements vary on a case-by-case basis for 203(k) Full Consultant and Streamlined HomeBridge Renovation Concierge Department and Underwriter will set requirements 78

79 Utility Requirements Utilities must be inspected to ensure they are in good working order If utilities are not on or are not in good working order, a 15% Contingency Reserve will be required for Full Consultant and Streamlined This includes winterized properties This includes vacant eligible REO s with winterized utilities 79

80 Utilities On At Time Of Inspection Utilities on at time of inspection and in good working order Appraiser or other licensed professional* must confirm in writing the following: Utilities visually inspected Utilities appear to be in good working order * Acceptable licensed professionals: Consultant, Inspector, Contractor, Plumber or Electrician 80

81 Utilities Not On At Time of Inspection Utilities not on at time of inspection and Work-Write Up does not require repairs, the following alternative documentation to validate condition of utilities may be provided: Winterized Property: winterization certification Certification from acceptable licensed professional confirming utilities in good working order Bank or acceptable agency owned property: home inspection from listing report * Acceptable licensed professionals: Consultant, Inspector, Contractor, Plumber or Electrician 81

82 Utilities Not In Good Working Order If utility inspection reveals utilities are not in good working order, Contractor Bid(s) must specify required repairs Full Consultant only: Work Write-Up utility repair must match Contractor Bid(s) 82

83 Utility Guidance REO Property Acceptable REO property (agency or bank owned) typically has winterized utilities since the property is vacant Proof of winterization required via: Winterization certification OR Home inspection from listing report Reminder: HUD REO ineligible Winterized properties always require a 15% Contingency Reserve 83

84 Loan Amount Calculations 84

85 Maximum Mortgage Amount Maximum mortgage amounts vary by loan purpose Purchase: 96.50% Refinance: 97.75% The maximum mortgage (total loan amount) cannot exceed FHA county limits Important reminder: Condos and Super Storm Sandy cannot exceed 100% of After-Improved Value. Condos and Super Storm Sandy still use the same max mortgage calculations for purchase and refinance transactions 85

86 What Is Included in Maximum Mortgage Calculation Included in Total Rehabilitation Costs Full Consultant Streamlined Repairs Materials and Labor Materials and Labor 10-20% of Rehab Cost; 15% If 10-15% of the Rehab Cost; Contingency Reserve utilities are not on or not in good 15% If utilities are not on or working order not in good working order Established by HUD Consultant Established by HomeBridge Inspection Fee(s) Up to 5 Inspection Fees Allowed Per Draw 1 Final Inspection Fee Allowed Completed by HUD Consultant Completed by Appraiser Refer to Work Write-Up 1 Final Title Update Fee 1 Final Title Update Fee Final Title Update Fee Refer to Final Title Update Fees by State Matrix Refer to Final Title Update Fees by State Matrix Escrowed Mortgage Payments Up to 6 months PITI if property is uninhabitable and approved by HUD N/A Consultant Architectural/Engineering Fees (as required) Included N/A Consultant Fees Included N/A Permit Fees (If Applicable) Included Included Discount Points Calculated from Repair Costs and Fees Calculated Repair Costs and Fees 86

87 Maximum Mortgage Amount: Purchase Calculations Step 1: Identify the lesser of the below calculations: Purchase Price + Renovation Costs OR 110% of After- OR Improved Value* As-is Value + Renovation Costs** * For Condos and Super Storm Sandy use 100% of After-Improved Value **HUD does not require an As-Is value; HUD assumes the purchase price is the As-Is value Step 2: Multiply the lesser calculation by 96.5% to obtain Base Loan Amount: 96.5% of the lesser above calculation = Base Loan Amount Step 3: Add UFMIP to Base Loan Amount to obtain Total Loan Amount: Base Loan = Total Loan Amount + UFMIP Amount 87

88 Maximum Mortgage Amount: Full Consultant Purchase Example Full Consultant 203(k) Purchase Purchase Price and Renovation Costs Dollar Amount Purchase Price $120,000 Total Cost of Repairs (labor & materials) $24,500 Contingency Reserve (15%) $3,675 Allowable Fees/Costs $1,500 Total Purchase Price and Renovation Costs $149, % of After-Improved Value After-Improved Value (Located in Reconciliation section of Appraisal) $176,000 Maximum Base Loan Amount $144,436 UFMIP $2,528 Total Loan Amount $146,964 LTV Calculation Step 1: Identify the lesser of the below calculations - Purchase Price + Renovation Costs - As-is Value + Renovation Costs (HUD does not require an As-Is value; HUD assumes the purchase price is the As-Is value) - 110% of After-Improved Value Step 2: Multiply the lesser calculation by 96.5% to obtain Base Loan Amount Step 3: Add UFMIP to Base Loan Amount to obtain Total Loan Amount In this example the Purchase Price plus Renovation Costs is less than 110% of After-Improved Value. Therefore, $149,675 is used to calculate the base loan amount. 88

89 Max Mortgage Worksheet Examples Full Consultant 203(k), Purchase: Section A 1. Purchase Price 2. HUD does not require an As-Is value; HUD assumes the purchase price is the As-Is value 3. After-Improved Value from Appraisal (Reconciliation section) % of After-Improved Value 5. N/A - only applicable for refinances 6. N/A HomeBridge does not offer EEM s 89

90 Max Mortgage Worksheet Examples Full Consultant 203(k), Purchase: Section B, Lines Cost of Repairs (labor & material) 2. Cost of Repairs X Contingency Reserve % (10-20% of Rehab Cost; 15% If utilities are not on OR not in good working order; Established by HUD Consultant) 3. Inspections Fee(s) (Number of inspections determined by HUD Consultant) + Title Update Fee (Refer to Final Title Update Fees by State Matrix) 4. Up to 6 Months PITI (If property is uninhabitable and approved by HUD Consultant) 5. Subtotal of B1-B4 90

91 Max Mortgage Worksheet Examples Full Consultant 203(k), Purchase: Section B, Lines Architectural and Engineering Fees (if applicable) 7. HUD Consultant Fee (from Work Write-Up) 8. Permits (if applicable) 9. Other Fees (describe in Remarks Section on Page 2) 10. Subtotal of Lines B5-B9 11. N/A HomeBridge does not charge Supplemental Origination Fee 12. Discount Points (Discount % x Line B10 = Discount on Repair Costs and Fees) 13. Lines B6-B9 + B11 (N/A) + B Total Rehabilitation Cost (must be at least $5,000, with no maximum) 91

92 Max Mortgage Worksheet Examples Full Consultant 203(k), Purchase: Section C 1. Purchase Price 2. Total Rehabilitation Cost (Line B14) 3. Lesser of Line C1 + Line C2 OR 110% of the After-Improved Value (Line A4) % of Line C3 Sales Price: $120,000 As Is Value: $120,000 Rehab Cost: $29,675 After-Improved Value: $160,000 Line C1 + C2: $149, % of After-Improved Value: $176,000 Lesser Of: $149, % of $149,675 = $144,436 Base Ln Amt 92

93 Maximum Mortgage Amount: Streamlined Purchase Example Streamlined 203(k) Purchase Purchase and Renovation Costs Dollar Amount Purchase Price $120,000 Total Cost of Repairs (labor & material) $24,500 Contingency Reserve (10%) $2,450 Allowable Fees/Costs $650 Total Purchase and Renovation Costs $147, % of After-Improved Value After-Improved Value (Located in Reconciliation section of Appraisal) $176,000 Maximum Base Loan Amount $142,434 UFMIP $2,492 Total Loan Amount $144,926 LTV Calculation Step 1: Identify the lesser of the below calculations - Purchase Price + Renovation Costs - As-is Value + Renovation Costs (HUD does not require an As-Is value; HUD assumes the purchase price is the As-Is value) - 110% of After-Improved Value Step 2: Multiply the lesser calculation by 96.5% to obtain Base Loan Amount Step 3: Add UFMIP to Base Loan Amount to obtain Total Loan Amount In this example the Purchase Price plus Renovation Costs is less than 110% of After-Improved Value. Therefore, $147,600 is used to calculate the base loan amount. 93

94 Max Mortgage Worksheet Examples Streamlined 203(k), Purchase: Section A 1. Purchase Price 2. HUD does not require an As-Is value; HUD assumes the purchase price is the As-Is value 3. After-Improved Value from Appraisal (Reconciliation section) % of After-Improved Value 5. N/A - only applicable for refinances 6. N/A HomeBridge does not offer EEM s 94

95 Max Mortgage Worksheet Examples Streamlined 203(k), Purchase: Section B, Lines Cost of Repairs (labor & material) 2. Cost of Repairs X Contingency Reserve % (10-15% of Rehab Cost; 15% If utilities are not on OR not in good working order; Established by HomeBridge) 3. Inspections Fee + Title Update Fee (Refer to Final Title Update Fees by State Matrix) 4. N/A on Streamlined Transactions 5. Subtotal of B1-B4 95

96 Max Mortgage Worksheet Examples Streamlined 203(k), Purchase: Section B, Lines N/A on Streamlined Transactions 7. N/A on Streamlined Transactions 8. Permits (if applicable) 9. Other Fees (describe in Remarks Section on Page 2) 10. Subtotal of Lines B5-B9 11. N/A HomeBridge does not charge a Supplemental Origination Fee 12. Discount Points (Discount % x Line B10 = Discount on Repair Costs and Fees) 13. Lines B6-B9 + B11 (N/A) + B Total Rehabilitation Cost (Cannot Exceed $35,000) 96

97 Max Mortgage Worksheet Examples Streamlined 203(k), Purchase: Section C 1. Purchase Price 2. Total Rehabilitation Cost (Line B14) 3. Lesser of Line C1 + Line C2 OR 110% of the After-Improved Value (Line A4) % of Line C3 Sales Price: $120,000 As Is Value: $120,000 Rehab Cost: $27,600 After-Improved Value: $160,000 Line C1 + C2: $147, % of After-Improved Value: $176,000 Lesser Of: $147, % of $147,600 = $144,926 Base Ln Amt 97

98 Purchase Max Mortgage Calculation Reminders HUD requires the lower of the following to be used when determining Max Mortgage Amount: Purchase Price + Renovation Costs, or 110% of After Improved Value, or As-Is Value + Renovation Costs* *HUD does not require an As-Is value; HUD assumes the purchase price is the As-Is Value 98

99 Purchase Examples: Why Not Requiring an As-Is Value is a Benefit Example #1: Purchase Price + Renovation Costs Purchase Price is $150,000 Total Renovation cost is $50,000 Appraisal does not show an As-Is Value only a $225,000 After-Improved Value Max Base Loan Amount is $193,000 ($150,000 +$50,000=$200,000 X 96.5%) Example #2: 110% Of Value Purchase Price is $150,000 Total Renovation cost is $50,000 Appraisal does not show an As-Is Value only a $180,000 After-Improved Value 110% of $180,000 is $198,000 Max Base Loan Amount is $191,070 ($198,000 X 96.5%) Example #3: As-Is Value + Renovation Costs Purchase Price is $150,000 Total Renovation cost is $50,000 Appraisal shows an As-Is Value of $140,000 and an After-Improved Value of $225,000 Max Base Loan Amount is $188,350 ($140,000 + $50,000=$190,000 X 96.5%) 99

100 Maximum Mortgage Amount: Refinance Calculations Step 1: Identify the lesser of the below calculations: Existing Debt + Renovation Costs + Closing Costs & Prepaids OR (As-is Value + Renovation Costs) X 97.75% OR (110% of After- Improved Value) X 97.75%* * For Condos and Super Storm Sandy use 100% of After-Improved Value Step 2: The lesser of the above calculations equals the Base Loan Amount: Lesser of the above = Base Loan Amount calculations Step 3: Add UFMIP to Base Loan Amount to obtain Total Loan Amount: Base Loan Amount + = Total Loan Amount UFMIP 100

101 Maximum Mortgage Amount: Full Consultant Refinance Example Full Consultant 203(k) Refinance Existing Debt, Renovation, Closing Costs, and Prepaids Dollar Amount Existing Debt $120,000 Total Cost of Repairs (labor and material) $40,000 Contingency Reserve (15%) $6,000 Allowable Fees/Costs $1,600 Closing Costs/Prepaids $3,500 Total Existing Debt, Renovation, Closing Costs, and Prepaids $171,100 As-is Value + Renovations Costs As-Is Value from Appraisal (Typically noted within Addendum to report) $177, % of After-Improved Value After-Improved Value (Located in Reconciliation section of Appraisal) $176,000 Maximum Base Loan Amount $171,100 UFMIP $2,994 Total Loan Amount $174,094 LTV Calculation Step 1: Identify the lesser of the below calculations - Existing Debt + Renovation Costs + Closing Costs and Prepaid - (As-is Value + Renovation Costs) X 97.75% - (110% of After-Improved Value) X 97.75% Step 2: The lesser of the above calculations equals the Base Loan Amount Step 3: Add UFMIP to Base Loan Amount to obtain Total Loan Amount In this example the Existing Debt + Renovation Costs + Closing Costs & Prepaids is the lesser calculation. Therefore, $171,100 is the base loan amount. 101

102 Max Mortgage Worksheet Examples Full Consultant 203(k), Refinance: Section A 1. Existing Debt-Principal and Interest (If subject owned for less than 12 months, use lesser of existing debt or original purchase price) 2. As-Is Value (Typically noted within addendum to report) 3. After-Improved Value from Appraisal (Reconciliation section) % of After-Improved Value 5. Closing Costs and Prepaids 6. N/A HomeBridge does not offer EEM s 102

103 Max Mortgage Worksheet Examples Full Consultant 203(k), Refinance: Section B, Lines Cost of Repairs (labor & material) 2. Cost of Repairs X Contingency Reserve % (10-20% of rehab cost;15% if utilities are not on OR not in good working order; Established by HUD Consultant) 3. Inspection Fee(s) (Number of inspections determined by HUD Consultant) + Title Update Fee (Refer to Final Title Update Fees by State Matrix) 4. Up to 6 months PITI (If property is uninhabitable and approved by HUD Consultant) 5. Sub-total B1 thru B4 103

104 Max Mortgage Worksheet Examples Full Consultant 203(k), Refinance: Section B, Lines Architectural and Engineering Fees (if applicable) 7. Consultant Fee (from Work Write-Up) 8. Permit(s) (if applicable) 9. Other Fees (describe in Remarks Section on Page 2) 10. Sub-total B5 thru B9 11. N/A HomeBridge does not charge Supplemental Origination Fee 12. Discount Points (Discount % x Line B10 = Discount on Repair Costs and Fees) 13. Lines B6-B9, B11 (N/A) + B Total Rehabilitation Cost (must be at least $5,000, with no maximum) 104

105 Max Mortgage Worksheet Examples Full Consultant 203(k), Refinance: Section D 1. Existing Debt + Renovation Costs + Closing Costs & Prepaids 2. Lesser of: As-Is Value + Renovation Costs OR 110% of After-Improved Value 3. Line D2 x 97.75% 4. Base Mortgage Amount is lesser of Lines D1 and D3 Existing Debt + Renovation Costs + Closing Costs & Prepaids: $171,100 As Is Value & Renovation Costs : $177,600 After-Improved Value: $160, % of After-Improved Value: $176,000 Line D2: $176,000 Line D3: $176,000 X 97.75% Lesser of = $171,100 Base Loan Amount 105

106 Maximum Mortgage Amount: Streamlined Refinance Example Streamlined 203(k) Refinance Existing Debt, Renovation, Closing Costs and Prepaids Dollar Amount Existing Debt $120,000 Total Cost of Repairs (labor and material) $24,500 Contingency Reserve (10%) $2,450 Allowable Fees/Costs $650 Closing Costs/Prepaids $3,500 Total Existing Debt, Renovation, Closing Costs, and Prepaids $151,100 As-is Value + Renovations Costs As-Is Value from Appraisal (Typically noted within Addendum to report) $157, % of After-Improved Value After-Improved Value (Located in Reconciliation section of Appraisal) $176,000 Maximum Base Loan Amount $151,100 UPMIP $2,644 Total Loan Amount $153,744 LTV Calculation Step 1: Identify the lesser of the below calculations - Existing Debt + Renovation Costs + Closing Costs and Prepaid - (As-is Value + Renovation Costs) X 97.75% - (110% of After-Improved Value) X 97.75% Step 2: The lesser of the above calculations equals the Base Loan Amount Step 3: Add UFMIP to Base Loan Amount to obtain Total Loan Amount In this example the Existing Debt + Renovation Costs + Closing Costs & Prepaids is the lesser calculation. Therefore, $151,100 is the base loan amount. 106

107 Max Mortgage Worksheet Examples Streamlined 203(k), Refinance: Section A 1. Existing Debt (If subject owned for less than 12 months, use lesser of existing debt or original purchase price) 2. As-Is Value (Typically noted within addendum to report) 3. After-Improved Value from Appraisal (Reconciliation section) % of After-Improved Value 5. Closing Costs and Prepaids 6. N/A HomeBridge does not offer EEM s 107

108 Max Mortgage Worksheet Examples Streamlined 203(k), Refinance: Section B, Lines Cost of Repairs (labor & material) 2. Cost of Repairs X Contingency Reserve % (10-15% of rehab cost;15% if utilities are not on OR not in good working order; Established by HomeBridge) 3. Inspection Fee + Title Update Fee (Refer to Final Title Update Fees by State Matrix) 4. N/A on Streamlined Transactions 5. Sub-total B1 thru B4 108

109 Max Mortgage Worksheet Examples Streamlined 203(k), Refinance: Section B, Lines N/A on Streamlined Transactions 7. N/A on Streamlined Transactions 8. Permit(s) (if applicable) 9. Other Fees (describe in Remarks Section on Page 2) 10. Sub-total B5 thru B9 11. N/A HomeBridge does not charge Supplemental Origination Fee 12. Discount Points (Discount % x Line B10 = Discount on Repair Costs and Fees) 13. Lines B6-B9, B11 (N/A) + B Total Rehabilitation Cost (Cannot exceed $35,000) 109

110 Max Mortgage Worksheet Examples Streamlined 203(k), Refinance: Section D 1. Existing Debt + Renovation Costs + Closing Costs & Prepaids 2. Lesser of: As-Is Value + Renovation Costs OR 110% of After-Improved Value 3. Line D2 x 97.75% 4. Base Mortgage Amount is lesser of Lines D1 and D3 Existing Debt + Renovation Costs + Closing Costs & Prepaids: $151,100 As Is Value & Renovation Costs : $157,600 After-Improved Value: $160, % of After-Improved Value: $176,000 Line D2: $157,600 Line D3: $157,600 X 97.75% Lesser of = $151,100 Base Loan Amount 110

111 DU Variances 111

112 203(k) DU Variances For Purchase Transactions, DU has a variance in how the Purchase Price is represented: Sales Price on page 1 of DU will reflect a total figure of Purchase Price + Total Rehabilitation Cost as Purchase Price Sales Price on LT will reflect the true Purchase Price In this example: The Purchase Price is $169,900 Total Renovation Costs are $8,964 Purchase Price + Renovation Costs is $178,864 DU: Purchase Price + Renovation Costs LT: True Purchase Price Refinances do not have any DU Variances 112

113 Fee/GFE Specifics and Submission Requirements 113

114 203(k) GFE Fees GFE Fees specific to the 203(k) program vary depending upon Full Consultant or Streamlined option Block 3 Final Inspection Fees (if required) Block 4 Final Title Update Fee Block 6 Other Fees (as required) Permit fee(s) HUD Consultant fee Feasibility study fee Architectural or engineering fees 114

115 203(k) GFE Fee Placement 203(k) Good Faith Estimate Fee Placement Fee Full Consultant Streamlined Where To Confirm Fee GFE Block/HUD-1 Line Draw Inspections Final Inspection Full: Work Write-Up Inspection Fee(s) Completed by HUD Consultant Completed by Appraiser Final Title Update Fee Final Title Update Final Title Update Permits If Applicable If Applicable Streamlined: Estimate $ Full & Streamlined: Per HomeBridge Final Title Update Fees by State Matrix Full: Work Write-Up Streamlined: Typically part of Contractor Bid Block 3, Line 811 Block 4, Line 1114 Block 6, Line 1304 Architectural/Engineering Fees If Applicable N/A Full: Work Write-Up Block 6, Line 1304/1305 Consultant Fee Fee Varies Based on Cost of Repairs N/A Full: Work Write-Up Block 6, Line 1304/ rd party fees are not included in QM 3% Points and Fees Test 115

116 Submission Requirements 203 (k) Full Consultant and Streamlined option require specific disclosures and other documents at time of submission See 203(k) Full Consultant and Streamlined Quick Reference Guides for specific details on: Disclosure/form requirements: which require HomeBridge website version versus HUD version Submission requirements specific to 203(k) Appraisal tips: ordering and report requirements GFE tips and fee placement 116

117 203(k) Submissions-Required Documents 203(k) loans always require the following at submission (no exceptions): Full Consultant: 203(k) specific disclosures/forms, Work Write-Up and Contractor Bid(s) Streamlined: 203(k) specific disclosures/forms and Contractor Bid(s) Suggested Documents (recommended but not required): Appraisals Contractor License, Insurance, W9, Profile Report (as needed) 117

118 Full Consultant Submission Form There are required data entry fields on the Submission Form: 118

119 Full Consultant Submission Requirements 119

120 Streamlined Submission Form There are required data entry fields on the Submission Form: 120

121 Streamlined Submission Requirements 121

122 203(k) Process 122

123 Process Overview Borrower Action Steps Full Consultant: Borrower selects HUD Consultant & Contractor(s) HUD Consultant completes Work Write-Up before Contractor Bid(s) Streamlined: Borrower selects Contractor(s) Bids/Work Write-Ups completed Broker Action Steps Gathers Work Write-Up and Contractor Bid(s) as required Gathers required Contractor documentation Can order appraisal at this point if Broker paying for appraisal 123

124 Process Overview (Continued) Broker Action Steps (continued) Requests FHA case number from HomeBridge Portal Choose 203(k) Indicate if Full Consultant or Streamlined If Full Consultant add HUD Consultant ID # Collects necessary loan documentation Submits loan to HomeBridge using 203(k) Form Must use loan type 203K in Blitz Once HomeBridge initial lender disclosures are sent, Broker can order appraisal (if Borrower paying for appraisal) 124

125 Process Overview (continued) Underwriting Approvals Approvals are subject to HomeBridge Renovation Concierge Department review and acceptance of the following: Work Write-Up (Full Consultant) Contractor(s) and Bids Confirmation of final Maximum Mortgage Amount Streamlined only: set Contingency Reserve 2 nd review of appraisal Review/approval of any changes to scope of work/bids/etc. 125

126 Process Overview (continued) When file is ready for Closing, the Account Manager will work with the Renovation Concierge Department to coordinate an informational call with the Borrowers Typically occurs before docs but can be after The Renovation Concierge Department will work with the Borrower, HUD Consultant (if applicable), and Contractor(s) through final funds disbursement and project completion 126

127 Closing Reminders Escrows and MI are required Insurance Requirements After-Improved value of property (from Reconciliation Section of appraisal) must be covered POAs will be accepted on an exception basis only All applicants must sign initial disclosures and application 127

128 Closing Reminders (continued) Cash back to the borrower is not allowed: Borrowers must provide receipts/invoices to be reimbursed for fees Remaining funds after completion of all repairs will be applied to the loan balance 128

129 203(k) Resources 129

130 203(k) Resources Available 203(k) resources online: HUD Approved Consultant Search: Find a HUD Consultant Program Information & the HUD Consultant Fee Structure: 203(k) Information HUD FAQs 203(k) Page: 203(k) FAQs 130

131 Renovation Concierge Contact Information HomeBridge Renovation Concierge Department contact information : renovationconciergeservice@homebridge.com This address is to be used by Borrowers, HUD Consultants and Contractors for questions and status inquiries 131

132 203(k) HomeBridge Training Tools Working With Us section of website: This presentation Quick Reference Guides: 203(k) Full Consultant (disclosure, submission, appraisal and GFE tips) 203(k) Streamlined (disclosure, submission, appraisal and GFE tips) Max Mortgage Worksheet Contractor Acceptance 203(k) Full Consultant/Streamlined Comparison Guide Sample Contractor Bid, Sample Work Write-Up, Sample Feasibility Study 132