Lender Training

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Oklahoma Housing Finance Agency

• Lender Training
• February 8, 2007

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UNDERWRITING Loan Products Secondary Financing
U.S. Bank Home Mortgage MRBP Division Master
Servicer
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ELIGIBLE LOAN PRODUCTS

• FHA 203b, 203k, 203h
• HUD 184 Native American
• VA
• USDA/RD
• 502 Guaranteed Rural Housing Loan Product
  Mortgages
• Freddie Mac Conventional Products
• Home Possible 97 100
• Home Possible Neighborhood Solutions 97
  100
• Standard Freddie Mac 5, 10, 15 and 20 down
• Fannie Mae Conventional Products
• MyCommunityMortgage 97 100,
• Community Solutions
• Home Choice
• Standard Fannie Mae 5, 10, 15 and 20 down
  product

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UNACCEPTABLE PRODUCTS

• Fannie Mae FLEX This is absolutely not
  permitted in the bond program.
• Split products 80/20, 80/15/5, etc

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UNDERWRITING REFERENCES

• Fannie Mae References
• Fannie Mae Selling Guide, Chapter X Section 304
  Community Lending
• Fannie Mae Guide to Desktop Underwriting
• Fannie Mae website www.efanniemae.com
• FHA References
• Guide 4155.1 rev 5
• FHA website www.hud.gov
• Other References
• VA www.homeloans.va.gov
• USDA-RD www.rurdev.usda.gov

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UNDERWRITING REFERENCES

• Freddie Mac References
• Seller/Servicer Guide, Chapter A34 (HP only)
• Learning Center www.FreddieMac.com
• Website www.FreddieMac.com
• Seller/Servicer Guide, Chapter 37
• Underwriting the Borrower

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Underwriting Tips

• Credit Underwriting is the responsibility of the
  originating lender. U.S. Bank Home Mortgage
  (Master Servicer) does not re-underwrite your
  loans.
• All loans are subject to internal and agency
  audits.

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UNDERWRITING GUIDELINES

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

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AUTOMATED UNDERWRITING SYSTEMS

• The following automated systems are approved for
  use with conventional loans in the bond programs
• Fannie Mae loans (DU)
• Freddie Mac loans (LP)
• FHA VA loans (DU or LP)
• If manual underwriting is necessary, full
  documentation is required
• Other lender customized automated underwriting
  systems
• are not acceptable at this time

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APPRAISALS- Fannie Mae

• Full appraisal reports are required when a manual
  underwrite has been performed.
• Correspondent Lenders, sponsored by the U.S. Bank
  Home Mortgage, MRBP Division, are required to
  submit full appraisals.
• Form 2055 or 2075 are permitted with a DU
  Approve/Eligible recommendation only. Value must
  be indicated.

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APPRAISALS- Freddie Mac

• Full appraisal reports are required for Freddie
  Mac Home Possible loans

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CONDO REQUIREMENTS

• Lenders are responsible to follow the guidelines
  of Fannie Mae,
• Freddie Mac, FHA, VA and RD. Please note U.S.
  Bank Home Mortgage does not provide condo
  guidelines.
• All Fannie Mae loans must follow the Condominium
  Project Acceptance guidelines as outlined in
  Fannie Mae Announcements 05-03 and 06-12 and
  Fannie Mae Seller/Servicer guide.
• Underwriters must indicate on the 1008, the
  proper Project Acceptance Review Type Codes
• Lenders having access to Fannie Maes Condo
  Project Manager, have the ability to verify if
  the project is already Fannie Mae, FHA or VA
  approved
• Lenders having access to Fannie Maes CPM have
  the ability to enter information on the project
  to see if it will get approved
• Lenders can contact their Fannie Mae
  representative to obtain CPM

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CONDO REQUIREMENTS - Freddie Mac

• Lenders must follow all current Freddie Mac
  Condominium Underwriting guidelines as posted in
  the Seller/Servicer guide (see next slide)
• Underwriters must indicate on the 1077 the
  Project Classification codes
• Lenders may access Fannie Maes CPM to assess
  condo eligibility
• (Freddie Mac does not have a specific
  assessment too).

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MANUFACTURED HOUSING

• Manufactured Homes are permitted in the bond
  program under the FHA, VA and Rural Housing
  products ONLY. (ONLY Doublewides permitted)
• Manufactured homes must meet specific size and
  structural requirements, remain permanently
  affixed to a foundation, and be taxed as real
  estate.
• Manufactured homes are not currently eligible for
• Fannie Mae products or Freddie Mac products.

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Freddie Mac Standard HP Products
www.freddiemac.com
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CASH BACK

• Generally Cash Back is not allowed but may be
  granted under the following exceptions
• Borrowers may receive cash back for up-front
  fees, i.e. earnest money deposits, appraisal,
  credit report and code compliance fees, as long
  as the cash back does not eliminate the borrowers
  required contribution per the specific product.

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CASH BACK
Contd

• Lenders are to verify that the fees were paid by
  the borrower with their own funds.
• Documentation should include copies of cancelled
  checks or copies of check and bank statements to
  support that the funds cleared the borrowers
  account.

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DOWN PAYMENT ASSISTANCE (DPA)

• Funding source for the DPA program must be stated
  in the source of funds section of the
  1003(application) and the HUD-1.
• Example Oklahoma Housing Finance Agency
• Write the loan product, down payment source, and
  amount on the 1008 (loan transmittal), or
  mortgage credit analysis worksheet (MCAW)

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• MyCommunityMortgage
• Enhancements
• and
• Community Solutions
• Home Choice

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MCM Special Program Features

• For one-unit properties
• Per Fannie Mae announcement 06-07 lenders may
  enter certain Community Seconds in DU as a gift
  rather than a subordinate mortgage lien. To
  qualify for such treatment, the Community Second
  must meet Fannie Mae eligibility per the Selling
  Guide and provide for deferred payments for at
  least five years (with no repayment required from
  the borrower during that time).
• FannieNeighbors definition for MCM loans
  extended to many hurricane-impacted areas

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Community Seconds Treatment in DU
Delivery Requirements

• Underwriters are required to reflect the CLTV on
  the Fannie Mae Transmittal Summary (1008)
  (cannot be more then 105)
• Enter Special Feature Code 118 at delivery
• (Does not show on DU but must be entered)
• MCM loan file must be documented with all
  information relating to the Community Seconds
  transaction

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Cash-on-Hand

• Borrowers may use cash-on-hand for the down
  payment and closing costs, subject to specific
  criteria.
• Limited to one-unit, principal residences
• Cash-on-hand funds will not be used to calculate
  reserves (if reserves are required).
• DU will use the Cash-on-Hand amount to
  calculate the available funds to close.

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Cash-on-Hand
(continued)

• The lender must verify/document the following
• Borrower customarily uses cash for expenses
  usage is consistent with previous payment
  practices.
• Borrower's credit report indicates limited (or
  no) use of credit, and no depository
  relationship.
• Borrower must provide signed statement disclosing
  the source of funds (and that they were not
  borrowed).
• The borrower must deposit with a financial
  institution at the time of application, or no
  less than 30 days before closing, funds
  sufficient for the down payment and closing
  costs.

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Fannie Mae Collections Policyfor MCM

• No payoff required for collection items of 5,000
  or less.
• Collections MUST be paid off only if the
  aggregate of the collections exceed 5,000
• Must be submitted through DU
• manually underwritten loans are ineligible

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Entering MCM Loans into DU

• All lenders are required to understand the entry
  of information into DU. If you are not familiar
  with this, Fannie Mae offers on-line training
  courses.
• The next few slides will show you the area
  where most of the incorrect information is
  typically entered.

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When entering an MCM loan in DU, complete the DU
online application normally. Then, on the
Additional Data screen, indicate that the loan is
a Community Lending loan.
1) Select Yes for Community Lending Click Next
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Select the county or MSA in which the property is
located

• Choose MCM as the Community Lending Product.
• Only answer YES to Community Second if your 2nd
  does not get entered into DU as a gift,

Adjust Community Lending income limit as needed
up to OHFAs maximum income limit
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DU will do the rest
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UNDERWRITING REQUIREMENTS

• Enter the appropriate Special Feature Code for
• Fannie Mae loans on the Transmittal Summary -
  1008 (processors and underwriters to verify) and
  on the USBHM Loan Submission Delivery checklist
• (closers /shippers to verify)

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SPECIAL FEATURE CODES
Special Feature Codes must be listed on the
Fannie Mae 1008 and the USBHM Loan Submission
Delivery Checklist
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COMMUNITY LAND TRUST

• Originating lenders need to be familiar with the
  terms and conditions for the Fannie Mae Community
  Land Trust Mortgages. Originating lenders will
  represent and warrant that the loan file meets
  the Fannie Mae CLT terms and conditions.
• This Fannie Mae product option may be used in
  conjunction with the following
• MyCommunityMortgage (1 unit only)

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COMMUNITY LAND TRUST

• Eligible Properties Owner-occupied, principal
  residence, one unit, condo and PUDs
• The CLT must be affiliated with an organization
  with, a minimum of 2 years experience in
  successfully developing/managing low-and/or
  moderate income housing.
• Executed Fannie Mae Uniform Community Land Trust
  Ground Lease
• Any Resale Restrictions must terminate upon
  foreclosure
• Appraisal must follow Fannie Mae Selling Guide,
  Part XI, Sec. 312
• Down Payment requirement based on the borrowers
  minimum contribution of the loan product
• Title Insurance is required per the Fannie Mae
  Selling Guide
• Underwriters should use the SFC of 054 on the
  1008

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• Home Possible Mortgages
• (HP)
• Product Training for
• Housing Finance Agency
• Lenders

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Home Possible Product Features

• 0 contribution needed from the borrower!
• Loan Prospector first
• (all HP loans must be run through LP first)
• Area Median Income qualifications assessed
• automatically via Loan Prospector
• Already licensed LP users have immediate
• access to originate Home Possible loans!

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Home Possible Headlines - Flexibilities

• Four simple products, available with no special
  contracts, designed to meet your borrowers needs
• Flexible credit terms, including expanded ratios
  and options for borrowers with less-than-perfect
  credit
• Secondary Financing including Affordable Seconds
• Low Mortgage Insurance coverage levels
• Maximum financing with up to 100 percent LTV and
  up to 105 TLTV

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Home Possible Headlines - Flexibilities

• Can use HP on all risk classes
• Cash-on-Hand can be acceptable
• Qualify with rental income from a non-relative
• Co-borrower with no credit can now be submitted
  to LP

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Teachers/Teachers Aides
Healthcare workers
0 borrower contribution for 1-unit properties
Professional and volunteer firefighters
Law enforcement officers
1 months reserves required may be a gift

• 1-unit properties for Neighborhood Solution 100
• 1- to 2-unit properties for Neighborhood Solution
  97

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SPECIAL CHARACTERISTIC CODES (SCC's) - Freddie
Mac Loans
Other SCCs may apply as noted on LP Findings
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Mortgage Insurance
LTVs 80.01 - 85 6 85.01 - 90 12 90.01 -
95 16 95.01 - 97 18 Greater than 97 20
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Freddie Mac-HOMEBUYER EDUCATION-Requirements

• Homebuyer Counseling Certificate must be included
  in the file
• Freddie Mac
• Only one borrower required for Home Possible
• All borrowers preferred
• Training must take place in one of the following
  forums
• Face-to-face home-buyer education
• Classroom or workshop sessions
• Telephone education/counseling program by an
  approved mortgage
• insurer sponsored by the lender
• Internet training permitted by Fannie Mae and
  Freddie Mac through Recognized MI companies
• Freddie Mac also offers online homebuyer
  education at their website www.FreddieMac.com/hrc
  

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Home Possible Details for Underwriters
http//www.freddiemac.com/singlefamily/pdf/pub579.
pdf
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Questions!!! ASK

• For questions contact our Help Desk at
• 1-800-562-5165
• Rita M. Connelly, Underwriting Manager
• Rita.connelly_at_usbank.com