UNDERWRITING Secondary Financing. U.S. Bank Home Mortgage MRBP Division Master Servicer

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1 UNDERWRITING Secondary Financing U.S. Bank Home Mortgage MRBP Division Master Servicer

2 FHA 203b, 221 (d) (2) 203k VA USDA/RD Fannie Mae MyCommunityMortgage Suite of Products (97/100/Community Solutions/HomeChoice) Fannie Mae Community Homebuyers Fannie 97 Fannie 3/2 HFA Home

3 Section 8 Prior to Closing a Section 8 loan Lenders should treat the monthly subsidy as income in determining the homebuyer s qualifying ratios and program income The Lender must show the Section 8 Voucher Assistance Program on the 1008

4 Section 8 Post Closing a Section 8 loan We recommend that the Lender work with a Public Housing Agency and subsidy provider. The Lender must submit a contact sheet, including the Agency information, with every Section 8 loan file. The Lender must have on file with the Master Servicer, an executed copy of a specific agreement for the purchase of Section 8 servicing rights. The Subsidy Agent must execute the Section 8 Homeownership Subsidy Program Agreement with the Master Servicer. Contact: Sheryl Krocek Production Coordinator (216) Sheryl.Krocek@usbank.com

5 Manufactured Housing Manufactured Homes(MH) are permitted in the program subject to FHA, VA and Program Guidelines. M.H. Housing Dealers who buy and sell manufactured homes, must observe the property flipping rules established by HUD. Manufactured homes must meet specific size and structural requirements, remain permanently affixed to a foundation, and be taxed as real estate. Fannie Mae s financing for manufactured homes is not currently eligible for the FHFC s program.

6 Fannie Mae References Fannie Mae Selling Guide, Chapter X section 304 Community Lending Fannie Mae Guide to Desktop Underwriting Fannie Mae website FHA References Guide rev 5 FHA website Other References Allregs VA USDA-RD

7 Credit Underwriting is the responsibility of the originating lender. U.S. Bank Home Mortgage (Master Servicer) does not reunderwrite your loans. All loans are subject to internal and agency audits. Underwriters should make sound credit decisions, assure data integrity, and include all necessary documents in support of the underwriting decision.

8 All loans should be underwritten in compliance with the most current underwriting guidelines for FHA, VA, Rural Housing and Fannie Mae, Freddie Mac. The loan file must comply with the Bond program guidelines for income limits, sales price limits, property types, locations and program parameters.

9 The following automated systems are approved for use with conventional loans in the bond programs -Fannie Mae loans (DU) -FHA loans (DU or LP) If manual underwriting is necessary, full documentation is required Other customized systems are not acceptable for loan approval

10 APPRAISALS Full appraisal reports are preferred. Correspondent Lenders, sponsored by the Master Servicer, are required to submit full appraisals. Form 2055 or 2075: is acceptable as long as the appraiser has completed an interior, and exterior inspection for DU approved loans.

11 Down Payment Assistance Programs (DPA) Make sure the funding source for the DPA program is stated in the source of funds section of the 1003 Example: Florida Housing Finance Corporation Dade County Community Dev. Corp. Make sure the DPA program meets FHA and Fannie Mae requirements and is approved by the Master Servicer Write the loan product, down payment source, and amount on the 1008 (loan transmittal), or mortgage credit analysis worksheet (MCAW)

12 Make sure DU recommendations are documented in the loan file Remember to follow the Bond Program guidelines Make sure the Fannie Mae DU loans are evaluated through the Community Lending Modular (free submission) Make sure the Homebuyer Counseling Certificate is included in the file (Note: Everyone who signs the note is required to attend counseling)

13 Fannie Mae Community Homebuyers 95% Fannie Fannie 3/2 074 HFA Home (Manual Underwrite) 359 Section 8MCM Community Community Second Mortgages Bond Loans

14 MCM 97 Loans with LTVs of 97% and below 460 MCM100 Loan with LTVs above 97%, up to 100% 480 MCM Community Solutions (Manual Underwrite) 481 MCM Community HomeChoice Option ( DU Approval) 325 MCM Community HomeChoiceOption(ManualUnderwrite) 222

15 Quicker Approval Wavier of Reps and Warrants Reduced documentation Possible higher ratio Possible lower credit scores EA I & EA II approve/eligible Nontraditional credit, require only three lines of nontraditional credit 30% qualifying income from occupying co-borrower with no credit history Boarder income permitted per Fannie Mae s guidelines

16 Loans sold to the Master Servicer will go against the Master Servicer s MCM commitment and not the originating lender. Loans entered into DU under Community Lending is a free submission. This will apply only for the first entry into Community Lending..

17 Borrower must contribute a minimum of $500 of their own funds into the loan transaction, remaining may come from other Fannie Mae approved sources) One Unit Single Family Owner-Occupied property DU will select the appropriate MCM loan type DU is preferred because if you get an approval the lenders receive Fannie Mae s reps and warrants

18 Manual underwriting must be approved by US Bank Home Mortgage, MRBP Division, Underwriting Manager. For Information on how to originate Fannie Mae Loans in the Bond Program if you are not currently an approved Fannie Mae lender or if you are approved, but do not have all the products in DU. Please Contact US Bank Home Mortgage, MRBP Division, Production Coordinator, Sheryl Krocek. Lenders must attend the US Bank Home Mortgage, MRBP Division web training on the MCM products prior to originating MCM loans.

19 Amortized Silent Soft Deed Restrictions Deferred

20 Definition Any financing that creates a lien against the property is considered secondary financing and not a gift,, even if it is a "soft" or "silent" second (i.e., has no monthly repayment provisions), or has other features forgiving the debt.

21 Documents Required for Approval Copy of the second mortgage (DPA) program description Copy of any applicable promissory notes, deeds, riders and other legal documentation Complete the Fannie Mae second mortgage loan checklist Note: Catastrophic language is required for CLTVs greater than 100%!

22 If non-profit, provide copy of the letter of designation from IRS and the federal tax I.D. number. Must have a document that discloses the loan amount, and describes the terms of repayment. This document must be given to the borrower at application and a signed copy included in the loan file. Originating Lenders are responsible for the review per agency guidelines prior to closing. Submit the information to: US Bank Home Mortgage MRBP Division, Product Development Manager

23 Q -Can we use the down payment assistance for the entire amount of the borrower s down payment? A - Fannie Mae will allow the entire down payment to come from an approved down payment source as long as the borrower makes their minimum contribution. FHA will only allow the funding to cover all of the down payment when the funds come from a Federal, State and local agencies or non- profits considered instrumentalities of the government and the lien l must be in the name of the governmental entity. Approved non-profits will be listed on HUD s approved list check regional HUD Homeownership Center (HOC)

24 Q - If the second is provided by a non-profit that is not a governmental entity and the borrower is getting an FHA loan is the borrower required to make a cash investment from their own funds? A - Yes, FHA requires the borrower to make a cash investment of at least 3 % of the acquisition cost. (see mortgagee letter 98-29)

25 Q - May we use more than one source of assistance financing? A Yes, as long as the use of multiple liens is approved by the Housing Agency and Master Servicer. The other funding entities must also give approval to move into 3rd or 4th position. (All program documentation must be submitted to the Master Servicer)

26 Q -Is a gift letter required if the funds have been gifted by a non profit or instrumentality of government? A - Yes, When gifts are provided by a nonprofit or municipality through a down payment assistance program (DAP), the same basic rules regarding documentation of gifts apply. The lender must obtain evidence from the donor (agency) of the amount of funds being provided, as well as evidence that no repayment by the borrower is required. Evidence of the actual transfer of funds can be shown as a transaction on the HUD-1. (see mortgagee letter 00-28)

27 Any questions related to Underwriting please contact: USBHM-MRBP Division s Underwriting Manager Rita Connelly Phone: Address: rita.connelly@usbank.com

28 Presenter: Shermaine Weathersby Product Development Manager U S Bank Home Mortgage MRBP Division shermaine.weathersby@usbank.com