Indiana Housing And Community Development Authority Lender Training First Home, First Home Plus Mort

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Indiana Housing And Community Development
Authority Lender TrainingFirst Home, First Home
PlusMortgage Credit Certificate Programs
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Agenda

• Overview
• Fees
• Glance at First Home/First Home Plus and MCC
• Lender Online (LOL)/Forms
• How to contact IHCDA SF staff
• Master Servicer Presentation

3
History of IHCDA

• Created in 1978 to address affordable housing
  needs in the State of Indiana
• Quasi-state agency
• Lieutenant Governor, Becky Skillman is chairman
  of the board

4
Contd

• IHCDA receives no state funds or state tax
  revenues
• First Home and Mortgage Credit Certificate
  programs are funded through the sale of
  tax-exempt mortgage revenue bonds to investors.
• First Home Plus is funded with HUDs Home funds.
• Continuous lending

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Contd

• Single Family provides resources and technical
  assistance in a responsible manner to stimulate
  affordable housing in Indiana. Single Family
  along with our partners, you the lenders, Fannie
  Mae, Freddie and US Home Loan Bank strive to
  build stable housing communities for the
  residents of Indiana.

6
Contd

• Please note that our rate and our down payment
  assistance acts as an enhancement tool to your
  product in order that the borrower might receive
  the best end result.

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Interest rate and Fees

• IHCDA adjusts the interest rate in response to
  market changes and/or demand but it is generally
  below the market rate.
• Current rate is 5.90
• One rate for all MRB loans, rate is locked at
  time of reservation

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How to check the Interest Rate

• Click on http//lenderonline.in.gov
• or by calling the information and rate line at
• 317-232-3556 or 888-227-4452
• As a courtesy a rate sheet is emailed to the main
  contact person prior to any rate changes

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Fees Contd

• Reservation fee for MRB 0.125
• Reservation fee for MCC 1
• (Reservation fees are administrative fees
  charged to the borrower to cover the cost of
  administering and securing the funds)

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Reinstatement Fees

• Cancellation Reason
• - Reservation Fee Late 150
• - Application Package Late 150
• (MCC only)
• - Closing Package Late 150
• - Reservation cancelled 150
• (MCC only)

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Fees Contd

• Closing Package Late Submission Fee .25 of loan
  amount
• Extension Fees
• Application 50 (MCC only)
• Commitment .25 of the loan amount
• Also please note that Reinstatement and
  Extension Fees cannot be paid by the borrower,
  but by the seller, builder or lender

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Fees Contd

• IHCDA Training fees
• Webinar Trainings No charge
• On site at IHCDA office No charge
• Offsite at lender location 150
• Program guide in binder 25

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Fees Contd

• The full reservation fee will be refunded upon
  the Lenders request for cancellation of the
  reservation if the application package has not
  been reviewed by IHCDA. However if the
  application package has been reviewed IHCDA will
  retain .25 of the first mortgage amount. All
  fees are returned directly to the lender

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Participating Lender Fee Structure

• Lender participation fees will be collected from
  participating lenders at the opening of the
  program. Any lenders choosing to sign up later in
  the year will be required to pay fees at that
  time. All participating lenders are required to
  execute the Mortgage Origination and Sales
  Agreement and Program Registration Form.

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Participating Lender Compensation

• 1.60 of the First Mortgage Amount
• (Upon sale of loan to Master Servicer)
• 60 processing fee paid for each DPA loan
• 1 origination fee paid to originator
• 450 allowable lender fees

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SECTION II FIRST HOME/PLUS AND MORTGAGE CREDIT
CERTIFICATE
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First time Homebuyers

• All of our programs are designed for first-time
  homebuyers unless you are purchasing a home in a
  targeted area. A first-time homebuyer is someone
  who has not had an ownership interest in a
  primary residence for the past three years.

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Targeted Area Explanation

• Targeted Areas are either
• 1. A qualified census tract 70 or more of
• families have a income of 80 or less of
• the statewide median family income
• 2. A area of Chronic Economic Distress
• designated by the State and approved by
• Secretary of the Treasury and the Secretary
  of
• HUD
• For questions regarding a property being in a
  Targeted area go to wwwffiec.gov/geocode/def
  ault htm

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Benefits of First Home

• IHCDAs First Home program offers first-time
  homebuyers an interest rate on their mortgage
  that is below the market rate.
• Current rate is 5.90

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Benefit of First Home Plus

• One of the biggest obstacles for first time
  homebuyers is saving enough for a down payment.
  This is where First Home Plus (DPA) comes in.
  IHCDA developed the First Home/Plus program which
  offers down payment assistance in conjunction
  with the First Home program.

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Income and Acquisition Limits

• Qualified borrowers must be below the designated
  income guidelines for whichever program they will
  participate in
• Eligible properties must be at or below the
  allowable acquisition limit for whichever county
  the borrower will reside in
• You may access the limits at
• http//lenderonline.gov

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Basics for First Home and MCC

• IRS tax compliance regulations must be followed
  due to the tax-exempt status of funds
• An applicant must be a first time home buyer in
  non-target areas (not owned principal residence
  in past three years
• Must be income eligible
• Total home price must be under acquisition limit
  for applicable county

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Basics Contd

• Borrowers could be subject to recapture tax if
  they sell home within first nine years
• The home must be the borrowers principal
  residence
• Non occupant co borrowers are not allowed
• The income calculation for borrower eligibility
  is different than that used for mortgage
  qualification

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More Basics

• Land Contracts are considered prior homeownership
  (if recorded)
• Ownership of a mobile home that is taxed as
  personal property is not homeownership
• Property must be a single family residence
• The borrowers must occupy the home within sixty
  days of closing or completion

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Common guidelines for IHCDA programs

• If a borrower is separated, a legal separation
  agreement or a petition for dissolution is
  required prior to preliminary approval
• IHCDA documents should never be dated prior to
  the date of reservation
• All loans must have preliminary approval prior to
  closing

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Common guidelines contd

• The closing package must be received within 30
  days of closing
• The final approval or issuance of the Mortgage
  Credit Certificate must occur prior to the
  expiration date of the commitment
• Payment of reservation fees must be in the form
  of cashier check, certified check, money order or
  lender check

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Common guidelines contd

• IHCDA does not allow transfers of a reservation
  from one borrower to another
• IHCDA does allow the transfer of a reservation
  from one lender to another
• Property changes are allowed if no fault of the
  borrower, with IHCDA approval

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Mortgage Revenue Bond (MRB/FIRST HOME)

• IHCDAs below market interest rate loan program
• Lenders are allowed to charge a 1 origination
  fee in addition to 450 in fees paid directly to
  your company
• All loans must be underwritten to FHA,VA, Fannie
  Mae, Freddie Mac, Rural Development credit and
  property standards
• Buy Downs are not allowed

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Contd

• All mortgages must be at a fixed rate/30 yr term
• Borrowers must successfully complete a
  homeownership training program

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Underwriting First Home/First Home Plus

• The gross annual income is used for each occupant
• All types of income is counted
• W-2 wages, including all part time jobs
• Seasonal or sporadic income, shift differentials,
  overtime pay and bonuses
• Child support or alimony
• Interest and Dividends

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Determining Household Income

• Income is calculated as current income annualized
  
• The amount of income used to qualify the borrower
  for a mortgage must be the same or lower than
  that used for IHCDA
• If you have trouble determining your borrowers
  income Indiana Housing will do a income opinion.
  Just send a current VOE, Pay stub and most recent
  tax returns. INCOME OPINIONS ARE GOOD FOR 30 DAYS

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Tax Returns

• IRS Tax Compliance Laws require that each loan
  funded with proceeds from a tax-exempt mortgage
  revenue bond be documented with the tax returns.
• Review of the tax returns tell us if the borrower
  has had prior home ownership and gives a income
  history for the last three years.
• Tax returns are a good source of information on
  others that will possibly reside in the home

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Federal Tax Returns Contd

• Tax returns for the past three years for all
  borrowers must be submitted in the application
  file
• If a borrower does not have all three years they
  may obtain transcripts from the IRS or complete a
  MRB/MCC-5 whichever is applicable, also if a
  borrower did not file a return this form may be
  used
• The Electronic Filing Form by itself does not
  constitute a tax return, schedules must accompany
  

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Tax Returns Contd

• IHCDA accepts many types of Federal returns for a
  complete listing see program guide
• The top of the tax return must be completed with
  the borrower(s) name, address and social security
  number
• Each return must be signed by the borrower who
  actually filed the return
• Transcripts must also be signed
• W-2s are not required

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Calculating Acquisition Cost

• Generally the amount of the sales price
• If borrower pays for repairs or next tax due it
  must be added to the sales price to arrive at
  total acquisition cost
• Normal and usual closing cost should not be added

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First Home Plus/DPA

• Funded through HUDs HOME Program
• Qualified applicants receive 5 of sales price up
  to 3500
• Assistance can be used as down payment ONLY.
  Additional down payment is allowed
• Assistance can be forgiven if the borrower
  resides in the home for five years and does not
  refinance

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DPA Contd

• Assistance is in the form of a no payment, no
  interest second mortgage
• Refinancing or selling will result in full or
  partial repayment
• IHCDA does not subordinate to any loan but the
  original first mortgage
• Appraisal completed by a licensed appraiser is
  necessary on DPA loans
• Third Party Inspection by IHCDA approved
  inspector. See website for complete listing
• http//lenderonline.in.gov

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DPA Contd

• Because the DPA program is funded with HUDs HOME
  dollars, therefore HUD requires the additional
  forms be completed
• - MRB-11 (Lead form) prior to 1978
• - MRB-12 (Ethnicity form)
• - Flood Zone information must be completed
• - Property cannot be tenant occupied in
• previous three months to closing
• - Occupancy type must be completed

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DPA Contd

• The 3rd Party Inspector is required to complete
  HUDs visual assessment web training and a copy
  of the completion certificate must accompany
  every DPA upon submission
• (Please see Lender Online for link)

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DPA Contd

• Borrowers cannot get back more money than what
  they pay into the loan. Only earnest money and
  prepaids can be refunded to the borrower at
  closing. Property taxes can NO longer be
  included. The Borrowers section of the
  Settlement Statement can show money coming from
  the borrower into the transaction, or prepaids
  and earnest money ONLY being refunded to the
  borrower, or 0 due to the borrower at closing.
  Principal Reductions are allowed.

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First Home /Plus Second Mortgage Documentation

• The second mortgage is as important to IHCDA as
  your first mortgage is to you
• Second Mortgage and Promissory Note must be fully
  completed, this includes property address with
  city, date of execution and legal description

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Why is the Uniform Mortgage Rider attached to the
First Mortgage?

• The Uniform Mortgage Rider amends the First
  Mortgage
• To state that the borrower must live in the
  property or sell
• Cannot rent, sell on contract, cause the mortgage
  to be assumed or transfer any interest in the
  property
• The Rider has nothing to do with 2nd mortgage
• When the 2nd mortgage is released the rider will
  no longer be valid

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DPA/Funding Request

• THE FUNDING REQUEST MUST BE FAXED ONCE YOUR DPA
  HAS BEEN APPROVED
• If incomplete information is on the Mortgage
  Funding Request IHCDA will call your contact
  person-funding request is not considered received
  until all information is complete
• Prompt response on your part is required for the
  funds to be wired timely
• If funds are requested less than 10 business day
  prior to closing IHCDA cannot be responsible for
  funds not being wired in time for closing

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DPA Specialty programsHome Choice

• Home Choice borrowers must be within the 5
  income guideline (see income limits) to qualify
  for down payment and closing cost assistance. The
  borrower automatically receives 10 of the
  purchase price or appraised value, whichever is
  less. Up to a maximum of 14,999
• (FOR CONVENTIONAL PRODUCTS)

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ContdFirst Home Disability/FHA,VA AND USDA

• First Home Disability borrowers must be within
  the 5 income guideline to qualify(see income
  limits) for down payment and closing cost
  assistance. The borrower automatically receives
  10 of the purchase price or appraised value,
  whichever is less. Up to a maximum of 14,999

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Reserving First Home Specials

• Please use the following Loan type choices when
  reserving
• -FHA Disability
• -VA Disability
• - USDA Disability
• - HomeChoice

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First Home Plus/Lead Based Paint

• On homes built prior to 1978 check the VC12
  carefully for any answers to chipping and peeling
  paint
• If deteriorated paint is found, safe work
  practices and/or lead clearance test per the HOME
  guidelines must be followed

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Benefits of MCC

• A MCC operates as a federal income tax credit,
  reducing an eligible borrowers federal income
  tax. This credit in effect, creates additional
  income to be used for monthly mortgage payment.
  Also a borrower may legally change his W-4
  (withholding statement) by the amount of the
  credit to increase his bring home pay.

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Underwriting/MCC

• Cannot be combined with any other IHCDA program
• Acts as a Federal tax credit
• Reduces an eligible borrowers federal income tax
  liability
• Annual amount is equal to a percentage of the
  annual interest paid on the mortgage up to 2000

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Underwriting/MCC

• The amount of the tax credit cannot exceed the
  borrowers annual federal income tax liability
• If the borrower can itemize they can take the
  remaining percentage of interest as a deduction
• Example Eligible for 25 credit rate can take
  75 as a deduction

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Underwriting/MCC

• Credit rate is based on the original loan amount
• Original Mortgage Amount Credit Rate
• 50,000 and under 35
• 50,001- 70,000 30
• 70,001- 90,000 25
• 90,001 and above 20
• Maximum tax credit per year is 2000

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MCC

• The reservation fee for MCC is 1 of the total
  loan amount
• Reservation fee is due within 10 days of
  reservation date/or with application package if
  sent in within 10 days. Reference the reservation
  number on the check

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MCC-Notable Differences

• Lender retains loan
• IHCDA doesnt limit the type of fees or amount
  charged to borrower
• Buy-downs are allowed
• Type of financing and term are at the lender and
  borrower option
• Certificate must be issued within one year of
  reservation

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Recapture Tax

• Recapture tax applies when the following happens
• - Sell/dispose of the home within the first
  9 years
• - Sell at a gain
• - Income exceeds adjusted qualifying
• income
• IRS regulation
• Form 8828
• Publication 523
• IHCDA will reimburse the buyer

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Forms/Program Guide

• All forms can be obtained on Lender Online
• http/lenderonline.in.gov
• Choose appropriate program guide, all forms are
  denoted by MCC or MRB and then a number, two
  exceptions
• -Reservation Checklist
• -Mortgage Funding Request

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Submitting Application Packages MRB or MCC

• File should be submitted in legal size folder
• Follow Document Order Checklist(MRB/MCC-1)
• Include reservation fee (if not already sent)
• Double check loan amount, interest rate against
  reservation. Note any changes in the comment
  section of the MRB/MCC-1
• Make sure all forms are appropriately signed

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Submitting Closing Packages MRB or MCC

• Submit documents in order of Closing Transmittal
  Letter (MRB/MCC-7)
• Review documents to check that all are signed by
  the borrower and lender in the appropriate places
• Check your Settlement Statement for fees

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Submission

• If the package is received by noon on a business
  day it will be date stamped that day, after noon
  it will be the next business day
• 72 Hour Turnaround (Application packages) -check
  Lender Online for status)Closing packages are
  reviewed in the order received

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Contd

• If all documents are in order check Lender Online
  for approval. A notice will be issued to the
  Master Servicer (US Bank)
• If file is not in order you will need to check
  Lender Online for missing document information
  and fax or mail

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What if I get a missing document letter?

• You will have 30 days from the date shown in
  Lender Online to send us the corrected missing
  items
• All items must be sent in or faxed and approval
  obtained within the 30 day period
• If you are having difficulty obtaining items
  please contact IHCDA staff with an approximate
  delivery date of items
• IHCDA FAX [phone]

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What if my loan amount increases?

• Send a letter explaining why the loan amount
  increased along with the difference in
  reservation fees prior to loan closing
• This is especially important on MCC loans as when
  non target window closes increases are often
  limited or not allowed

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File Complete

• Once you have checked Lender Online and it shows
  the closing package state is Approved, your file
  is complete with IHCDA
• For MCC, once Lender Online shows approved in the
  closing package stage, your file is complete and
  a copy of the certificate will be mailed to the
  lender

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Contacting Single Family Staff

• Karen Gatewood-Manager
• kgatewood_at_ihcda.in.gov
• Lee McClendon-Assistant Manager/Lender Trainings
• lmcclendon_at_ihcda.in.gov
• Liann Doyle- Lead Underwriter
• ldoyle_at_ihcda.in.gov
• Marquet Smith-System Specialist, condition
  underwriter
• msmith_at_ihcda.in.gov

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Contd

• Marianne Frapps-Closing Underwriter
• mfrapps_at_ihcda.in.gov
• Melanie McNair-Closing Underwriter
• mmcnair_at_ihcda.in.gov