Neighborhood Housing Services of OC NSP I Program …
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NEIGHBORHOOD STABILIZATION PROGRAM
(NSP-1 and NSP-2)
LOAN PROGRAM ADMINSTRATION HANDBOOK
November 10, 2010
Neighborhood Housing Services of Orange County
NSP Loan Program Administration Handbook - 2010
Table of Contents
Chapter 1 - Program Introduction
Implementation Dates
Consortium Members and Funding Award Amounts
Program Administrative Staff
Participating Realtors, Lenders, Title & Escrow Companies
Participating Appraisers & Contractors
Outside Vendors & Consultants
Chapter 2 - Single-Family Home Purchase Program
Affirmative Marketing
Process Flow
NSP Loan Summary
Chapter 3 – Income and Household Definitions
Gross Projected Income
Household Size
Chapter 4 – Homebuyer Eligibility
Citizenship
Income/Household Eligibility Limits
Minimum Age
Homebuyer Education Class
First Mortgage Qualifying
Income/Asset Verification Ability
Credit Requirement
Ownership of Other Real Estate
Chapter 5 – Property Eligibility
Type of Properties
Properties Offered for Sale
County of Orange (FARS) Map
Census Tracts
Chapter 6 – Financing
Determination of Sales Price
Minimum Homebuyer Investment
First Mortgage Financing
Loan Type Restrictions
First Mortgage Loan-to-Value Limits
Lender Origination Fees
Prepayment Penalties
Chapter 6 (cont’d.)
NSP Financing
NSP I & II Secondary Loan Amounts
Interest Rate
Security Instrument
Use of NSP Funds
Interest Rate Buy-Downs
Owner Occupancy
Period of Affordability
Resale/Recapture Restrictions
Repayment
Gap Funding Sources – Cal Home, WISH
Borrower Liquid Assets after Close
Chapter 7 - Understanding NSP Eligibility Underwriting & Loan Origination
Loan Origination
Determining Annual Income
Evaluating Credit
Evaluating Collateral
Evaluating Ability to Pay
Automated Underwriting
& How Credit Scoring Affects HOME Applicants
Fees for Loan Origination & Closing Costs
Overcoming Qualification Hurdles
Downpayment & Closing Cost Assistance
GAP Financing
Credit-Related Hurdles
Loan Closing
Chapter 8 - NSP Eligibility Underwriting Guidelines
General Requirements
Income/Debt Ratios
Combined LTV Allowed
Income Eligibility
Calculation Method – Census Long Form
Verification
Inclusions (What to Count)
Exclusions (What Not to Count)
Income from Assets
How to Count It
Sample Format for Computing Census Long Form Income
Credit Guidelines
Credit Report
Liabilities
Adverse Credit
Citizenship Verification
US Citizen Documentation
Permanent Resident Alien Documentation
Chapter 9 - Escrow Instructions & Title
Impounds
Prepaid Items
Standard Flood Hazard Determination
Title ALTA Policy
Request for Notice
Chapter 10 - Homebuyer Inspections & Home Warranty
Chapter 11 – State and Federal Compliance
RESPA Overview
Required Disclosures
Timeframes
Good Faith Estimate (GFE)
Settlement Cost Booklet
Mortgage Servicing Disclosure Statement
Affiliated Business Arrangement Disclosure
HUD -1 Settlement Statement
Record Retention Requirements
RESPA Contact Information
ECOA
Truth-in-Lending (Regulation Z)
Fair Credit Reporting
Gramm-Leach-Billey Act
FACTA
FTC Red Flag Rules
Chapter 12 - NSP Loan Documents
Deed(s) of Trust
Promissory Note(s)
Sample Forms & Disclosure Notices
Chapter 13 – Closing and Disbursement Procedures
Chapter 14 - After Close Monitoring, Licensing and Auditing
Monitoring Plan
Partial Payments
Transfer of Services
NSP Program Processing Forms
NSP Eligibility Intake Form (5 pages)
NSP Eligibility Documentation Checklist
NSP Credit Authorization and Consent
4506 –T Request for Transcript of Tax Return
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NSP Loan Program Administration Handbook - 2010
Chapter 1
Program Introduction
The Neighborhood Stabilization Program (NSP) is funded from the Housing & Economic Recovery Act (HERA) of 2008, commonly known as “Stimulus Funds” & was enacted for the purpose of revitalizing the economy. The primary mission of NSP is to stabilize communities that have suffered from high numbers of vacant or foreclosed homes.
NSP has 5 eligible uses:
• Financing mechanisms for purchase & redevelopment of foreclosed upon residential properties
• Purchase & rehabilitate residential properties that have been abandoned or foreclosed upon, in order to sell, rent, or re-develop such properties
• Establish land banks for residential properties that have been foreclosed upon
• Demolish blighted structures
• Redevelop demolished or vacant residential properties
Neighborhood Housing Services of Orange County (NHS OC) will provide assistance, in the form of a “silent second” mortgage loan, to qualified borrowers in order to purchase residential properties selected, acquired & rehabilitated by NHS OC, or a member of the NHS OC Consortium in accordance with NSP guidelines. The second mortgage may not exceed 30% of the purchase price or appraisal value whichever is less, with a minimum of $3,000 up to a maximum of $80,000 for NSP1 or $50,000 for NSP2.
A. NSP1 - Project Implementation Date - Jan. 21, 2009 to July 15, 2010. All funding must be expended by August 15, 2010.
Amount of NSP 1 Funds awarded to NHS OC: $2,786,553
B. NSP2 - Project Implementation Date – Jan. 14, 2010. Funding requirements, including program income, must equal or exceed 50% by February 11, 2012, and 100% by February 11, 2013. NHS OC as grantee on behalf of the Home Again Consortium received $7,500,000 of NSP funds for distribution in accordance with a grant agreement. As the lead agency, NHS OC will draw the funds and make loans to consortium members in accordance with the terms of their funding agreements and the Home Again Consortium Action Plan. The agreement allows NHS OC to draw up to $750,000 for administration and monitoring for the purpose of setting up and maintaining the fund.
C. Although the Home Again Consortium is committed to funding a minimum of 100-units of housing, individual goals have been set slightly higher as indicated in the below table.
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Amount of NSP2 Funds Awarded: SFR/Rehab No. Multifamily No.
• NHSOC $2,150,000 35 $ 550,000 7
• Habitat for Humanity of OC 675,000 12 0 0
• Affordable Housing Clearing House 675,000 12 0 0
• Orange County Community Housing 675,000 12 0 0
• Irvine Community Land Trust 675,000 12 0 0
• Community Housing Resources 0 0 675,000 9
• Mary Erickson Community Housing 0 0 675,000 9
Total Funding Goal $4,850,000 83 $1,900,000 25
D. Conflict of Interest Statement
In accordance to title 24, Section 570.611 of the Code of the Federal Regulations, no member of the governing body & no official, employee or agent of the local government, nor any other person who exercises policy or decision-making responsibilities (including members of the loan committee & officers, employees & agents of the loan committee, the administrative agent, contractors & similar agencies) in connection with the planning & implementation of the program shall directly or indirectly be eligible for this program.
E. NSP Program Administration
NHS OC Executive Director Glenn Hayes
NHS OC Chief Operations Manager Ken Mutter
NHS OC Home Ownership Center Director Clemente Mojica
NHS OC Broker of Record (Lending) Pablo Velasquez
NHS OC Lending Manager Letty Plascencia
NSP Procurement Officer & Monitor Ken Mutter
NSP Program Accounting Amita Mehta
NSP Director of Property Development Ronald W. Rohrer
NSP Project Construction Manager Paul Jaramillo
NSP Transaction Manager Blair Schaeffer
NSP Sales Manager Sylvia Badillo
NSP Administrative Assistant/Monitoring Rose Ramirez
F. NSP Participating Realtors
NHS OC published a Request for Qualifications to select Realtors that are in good standing and have the necessary qualifications to represent buyers seeking NSP loans, and to also represent NHS OC when preparing contracts for purchase of bank owned and abandoned properties. A current list of approved Realtors is maintained on the NSP web site nhsoc..
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G. NSP Participating Lenders
NSP Loans are “soft seconds” sometimes referred to as gap loans because they are intended to close the gap between the maximum amount of the first mortgage offered to the buyer and the sales price of the property. These loans are unique and different from mortgages commonly offered by banks and mortgage companies and require prior approval of the loan documents by the participating bank. NHS OC has selected a group of direct lenders that have familiarity with these programs and recommends that each buyer choose a lender from the list on the NHS OC web site nhsoc..
H. Escrow and Title Companies
The state of California allows the buyer to choose escrow and title. However, sellers of bank owned properties often pay additional closing costs if the buyer will choose their recommended title company and escrow company. NHS OC makes a practice of negotiating fees to obtain the best net price so long as the company is based in Orange County and is willing to fund & record in the same day.
I. Appraisers & Contractors
NHS OC through a published request for qualifications (“RFQ”) obtained a list of qualified state licensed independent appraisers. This list is recommended for acquisition purposes and may also apply for lending purposes. First mortgage lenders also use state licensed appraisers and may offer their appraisal for use in originating the NSP loan. The list of appraisers may be found on the NHS OC web site nhsoc..
J. Outside Vendors & Consultants
NHS OC also published an RFQ for outside vendors & consultants and maintains this list on the NHS OC web site nhsoc.. Buyers may use these vendors for home inspections, environmental inspections, etc.
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Chapter 2
Single-Family Home Purchase Program
A. Affirmative Marketing
• Flyers, signs, mailers, email & website
• Newspaper advertisements
• City circulations, notices, brochure racks
• Open houses & community meetings
• English, Spanish & other minority languages
• Advertising through other community agencies
B. NSP Program Process Flow
• Affirmative marketing campaign directs applicants to NSP Program website: for information regarding program parameters, eligibility requirements, properties for sale, dates for NSP Orientation Classes, Self-Evaluation Questionnaire, NSP Buyers Guide, Eligibility Documentation Checklist, 5-page Eligibility Intake Form, Credit Authorization & Consent Form & 4506-T form. Or, interested buyers can call Home Again office.
• Interested applicants may attend NSP Orientation Class and obtain Eligibility “Package” to complete and return to Home Again Office.
• Interested applicants complete Self-Evaluation Questionnaire for Program Eligibility and 5-page Eligibility Intake Form with Information Required on Eligibility Documentation Checklist and return complete package to NHS OC.
• Eligibility Underwriter reviews & documents file for Household/Income Eligibility, Citizenship status and perform “mortgage ready” assessment.
• Home Again Office will send out Letter of NSP Program eligibility or denial.
• If applicant is not eligible or mortgage ready, Home Again office will refer to NHS OC Staff for additional counseling or discuss other options.
• NHS Loan staff will receive package from Eligibility Underwriter and pre-qualify for first mortgage & NSP downpayment.
• Applicant will be placed in “Home Shopping Pool” ready to make an offer on properties when they become available.
• If Applicant wishes to make an offer on an NSP-listed property, offer must include Program Eligibility Letter and NHS Staff Prequalification Notice before offer to purchase is presented to NSP Staff.
• Qualified offers will be reviewed by NSP Staff for acceptance, turn-down or counter-offer.
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• If eligible applicant does not have a realtor to represent them, they may select a realtor from the NHS OC approved list.
• Upon acceptance, NHS OC receives purchase contract, takes loan application (1003), issues disclosures & directs buyer to approved first mortgage lenders.
• NHS loan staff works directly with buyer and first mortgage lender, confirms HomeBuyer Education Certification, processes and verifies loan information, coordinates with escrow to close.
• Escrow Process - appraisal & home inspections are completed
- first and second mortgages processed and approved - prior to loan docs conditions are met for all loans - requested repair work completed, if needed - final walk thru with buyer - loan documents drawn and sent to escrow - borrower signs loan docs at escrow and brings in cash to close - loan docs reviewed by all lenders - prior to funding conditions are met - loans for first and second mortgages (Gap funds if needed) fund and wired - deeds are recorded and escrow closes - homebuyers are given keys to their new home
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C. NSP Loan Program Summary
The NSP loan program is targeted to households whose income is below 120% of Adjusted Median Income (“AMI”) for Orange County, or 50% of AMI, depending on the specific property, and are processed in accordance with the guidelines published by HUD each year. Borrowers need not be first time homebuyers to qualify for the program. However, if other down-payment assistance loans are being requested, those programs generally require that the borrower be a first time homebuyer, and are underwritten in accordance with different lender requirements.
NSP loans may vary in accordance with current HUD requirements but are generally soft seconds mortgage loans with “0” interest and contain a covenant that preserves the affordability. If other Federal funds are also used for down payment assistance the term may be extended to as long as 55-years.
The NSP loan underwriting guidelines generally follow one of three HUD approved methods which tend to focus on projected household income rather than past documented income as practiced by banks. These underwriting standards are explained in more detail in the following chapters.
Non-Discrimination – It is the policy of NHS OC to provide services without regard to race, color, religion, national origin, ancestry, age, sex, familial status, physical handicap or disability. Borrower covenants for themselves and assigns that there shall be no discrimination or segregation of a person or group of persons as further defined in the promissory note and deed of trust.
Note: The maximum combined loan amount established for a buyer under the NSP program is almost always different from that set by a bank and may be a lower number to the forward looking underwriting requirements and the method of qualification.
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Chapter 3
Income and Household Definitions
A. Gross Projected Income or Anticipated Earnings
• When estimating annual income for household income eligibility purposes, projected earnings for the following 12 month period are to be used rather than past earnings
• Amount earned before any deductions have been taken.
• Income received from all adult household members over the age of 15 years, including adult children & non-applicant spouses who will occupy the affordable home.
B. Household Size
• All persons (i.e. adults, children & others), including adult children & non-applicant spouses, who will occupy the affordable housing unit as their primary residence. Household members are not restricted to immediate family. A child who is subject to a shared-custody agreement, in which the child resides with the household at least 50% of the time, can be counted.
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Chapter 4
Homebuyer Eligibility
Homebuyer(s) will be accepted with no discrimination as to race, color, religion, creed, national origin, sex, marital status, physical or mental disability or sexual orientation.
A. Citizenship
• Homebuyer(s) must be a US Citizen or Permanent Resident Alien. Spouse and/or other household members who are NOT US citizens or Permanent Resident Aliens can be included as household members & must provide income documentation, but may not be on the loans or on title. Homebuyer(s) must provide documentation of citizenship or permanent resident alien status.
B. Income and Household Eligibility Limits
Total household income must not exceed 120% of the county median income. (25% of NSP program must address households at or below 50% AMI.)
2010 - Income Limits for 120% of HUD Area Median Income – Orange County
|1 person |2 person |3 person |4 person |5 person |6 person |
|household |household |household |household |household |household |
|$78,120 |$89,280 |$100,440 |$111,480 |$120,480 |$129,360 |
2010 – Income Limits for 80% of HUD Area Median Income – Orange County
|1 person |2 person |3 person |4 person |5 person |6 person |
|household |household |household |household |household |household |
|$52,050 |$59,450 |$66,900 |$74,300 |$80,250 |$86,200 |
2010 - Income Limits for 50% of HUD Area Median Income - Orange County
|1 person |2 person |3 person |4 person |5 person |6 person |
|household |household |household |household |household |household |
|$32,550 |$37,200 |$41,850 |$46,450 |$50,200 |$53,900 |
1. Homebuyer(s) must have reached the age of 18 years prior to application for NSP financing.
2. Homebuyer(s) MUST ATTEND & COMPLETE an 8-hour HUD-approved homebuyer education workshop. A copy of the Homebuyer Education Certificate of Completion must be provided or verification of scheduled class date with application package. Those who have not completed the class prior to opening escrow will not be eligible.
3. Homebuyer(s) must be able to qualify for a first mortgage through a Participating Lender, in order to purchase the home.
4. NHSOC does not accept co-signers as guarantors for any part of the purchase transaction.
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5. Homebuyer(s) must be able to verify income & assets per NSP underwriting guidelines. “Stated income” or “stated assets” are not acceptable.
6. No minimum credit score. However, homebuyer(s) must have an acceptable credit history subject to first mortgage lender. No credit amounts past due at time of recording. No outstanding unpaid judgments or involuntary liens. Bankruptcies, foreclosures & short sales are not allowed – unless further defined by HUD guidelines.
7. Homebuyer(s) may hold title to another residential property, However property being purchased must remain as owner-occupied, primary residence at all times for a minimum of 15 years and 30 days for NSP 1 and 30-years plus 30 days for NSP 2, or as otherwise stipulated in the loan documents.
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Chapter 5
Property Eligibility
A. Property Types
• SFR’s, condos, townhomes & PUD’s allowed.
• Residential properties foreclosed, abandoned and/or vacant for at least 90 days.
• Located within targeted County of Orange census tracts with a Foreclosure Abandonment Risk Score (FARS) of 15 or greater for NSP 1 (17 or greater for NSP 2)
• Homes built prior to 1978 require additional environmental testing (i.e. Lead-based Paint (LBP) Visual Assessment.
B. Properties Offered for Sale
• Properties will be offered for sale after acquisition and prior to or after completion of repairs. The sale of the homes will be in accordance with the affirmative marketing policy.
C. County of Orange (FARS) Map
D. Eligible Census Tracts or Other Sub-Target Areas or Projects May Apply
• Refer to NHS OC
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Chapter 6
Financing
A. Sales Price
• Sales price is determined by the lesser of HVCC appraised value from selected first mortgage lender or purchase contract sales price.
B. Minimum Homebuyer(s) Investment
• Minimum homebuyer(s) investment is 3% of sales price, of which $1,000 is to accompany purchase contract as Good Faith Deposit to be deposited upon opening escrow. Minimum 3% funds must be borrower’s own funds, seasoned a minimum of 60 days. Gift funds from family are allowed above initial 3% & may be applied towards downpayment and/or closing costs. First mortgage lender will establish their minimum downpayment which may be different - the strictest rule shall apply.
• Homebuyer(s) initial 3% investment can be used towards downpayment and/or recurring & non-recurring closing costs including loan origination & lender fees, buyers escrow, title, recording, tax & insurance impounds, HOA dues, transfer tax, credit report, appraisal, home inspection & pre-paid interest & reserves.
• The first mortgage lender may require a larger down payment in accordance with their Government Sponsored Entity (“GSE”) underwriting requirements.
C. First Mortgage Financing
• Loan must be a fully-amortized, fixed rate loan for 30 years at market rate.
• Loan amount up to 80% LTV determined by borrower qualifying guidelines of lender selected by homebuyer(s) from participating list.
• Lender’s origination fees may not exceed 1% of the loan amount. All other fees, charges & costs are to be within industry standards.
• No prepayment penalties.
D. NSP Financing
• NSP Loan amount to be determined on an “as needed” basis.
• Minimum loan amount is $3,000 or the actual amount of the non-recurring closing costs based on need in accordance with NHSOC’s underwriting guidelines.
• NSP Loan not to exceed 30% of the purchase price or appraisal value whichever is less, up to a maximum of $80,000 for NSP 1 or maximum of $50,000 for NSP 2.
• Interest rate to be 0%, i.e. the Annual Percentage Rate (APR) is 0%, unless a borrower violates any of the provisions of the NSP Document and is considered in default under the NSP Documents.
• No monthly principal payments are required all due on sale, refinance or rental.
• NSP2 term and repayment - 30-years and 30 days
• NSP 1 term and repayment – 15 years and 30 days
• If other Federal Funds are used, the terms must comply with the terms of that program.
• Security Instrument – The NSP loan will be secured by a second deed of trust together with a covenant that is recorded against the property.
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• In all purchase transactions, NSP funds must be utilized to pay for borrower’s non-recurring closing costs except – appraisal, credit report and inspection fees. NSP funds may not be used for recurring closing costs including: prepaid taxes, interest, homeowners dues and insurance. NSP funds may be utilized to pay for all and/or a portion of the downpayment in the form of a “silent second”.
• NSP funds may be used to “buy-down” the interest rate of the first mortgage loan if needed to qualify. Buy-downs allowed under the program are: 1) one-year to three-year rate buydowns under the FHA or CalHFA program; 2) interest rate buydowns that offer a permanent rate reduction for the life of the first mortgage loan. Buydown may used only if needed for borrower to qualify for first mortgage loan. Lender must submit a copy of buydown agreement & calculation showing the actual cost of the interest rate buydown.
• Loan Fees & Charges: A processing fee of $350 and document fee of $175 will be included with other third party fees. An estimate of the fees will be disclosed after a potential borrower’s loan application is submitted.
E. Owner-Occupancy
• Borrower must reside in the purchased property as their primary residence. The loan will be become due at sale, transfer of property or if property ceases to be primary residence of borrower.
• The NSP-assisted home must be owner-occupied (i.e. the borrower must live in the home as the borrower’s principal place of residence within 60 days of purchase and for at least 10 months out of each year) and remain owner-occupied during the entire Term.
F. Period of Affordability
• The required period of affordability compliance is fifteen (15) years and 30 days for NSP 1 and thirty (30) years and 30 days for NSP 2. An affordable housing restrictive covenant will be placed on the property, restricting the future sales price of the property & the income limits of future buyers.
• If other Federal funds are used, affordability period may be up to 45 to 50 years.
G. Resale/Recapture Restrictions
If the owner sells and/or transfers the unit before the end of the NSP mortgage term, the following provisions will apply:
• The sale of the property must be approved by NHS OC and the new buyers must meet the program’s income limits in effect at the time AND the sales price must not exceed the maximum affordable sales price in effect at that time.
• For an early sale or transfer, NHSOC may recapture the funds for reinvestment or assign the funds to a new, qualified homebuyer for the remaining term.
• In the event of foreclosure, NHSOC will act as trustor to take appropriate action.
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H. Repayment
There is no prepayment penalty. All NSP loans will be secured with a second deed of trust recorded in the public records & a promissory note.
Repayment of the full loan amount will be immediately due to NHS OC if any of the
following events occur prior to the expiration of the note:
• Sale of unit
• Transfer of title
• Property ceases to be owner’s primary, principal residence or first lien is paid off
• Unit is refinanced without prior authorization of NHS OC.
• Cash out refinances are not allowed.
• Owner fails to maintain required insurance.
I. Default – As further defined in the promissory note and deed of trust, a borrower will be in default under the NSP Documents for, including, but not limited to the following: misrepresentation, failure to occupy the NSP-assisted home as a principal place of residence, renting or leasing the home, failure to provide requested lender information, foreclosure proceedings, deed in lieu of foreclosure, and/or other violations of the NSP Documents. If a borrower does not correct the violation, NHS OC could also go to court and get a court order to enforce the provisions of the NSP Documents. In addition, if a borrower fails to meet the requirements of the NSP Documents, NHS OC has the right to foreclose and take the NSP-assisted property.
J. Gap Funding Sources – Cal Home, WISH
If primary lender‘s loan amount is less than 80% LTV & borrower needs additional down-payment funds, it may be necessary to utilize monies from additional “gap” funding sources. To qualify for Cal Home & WISH funding, borrower must be a first time homebuyer (must not have owned a home or on title within the past 3 years). However, it is expected that borrowers use their own funds first. (See Borrower Liquid Asset Limits below.)
• Cal Home or WISH – (refer to Cal Home or WISH Operations Handbook.)
K. Borrower Liquid Asset Limits
NSP 1 or NSP 2 Programs have no liquid asset reserve requirements, limitations or restrictions. Participating first mortgage lenders may have their own cash reserve requirements in this matter.
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Chapter 7
Understanding NSP Eligibility Underwriting & Loan Origination
Loan Origination
The loan origination process determines whether the assisted borrower qualifies for mortgage credit. This section discusses how lenders weigh the different elements of mortgage risk. The key to profitable mortgage lending is pricing loans according to their risk of default. Default risk is tied to three things 1) willingness to pay (evidenced by credit history), 2) ability to pay (income vs. expenses); and 3) collateral (downpayment amount, home value). Each of these is reviewed carefully during the process of loan underwriting.
Determining Annual Income
Annual income is defined as the “gross” amount of income of all adult household members, which are anticipated to be received during the coming 12-month period. The following are key to understanding the requirements for calculating annual income:
• Gross amount: For those types of income counted, gross amounts (before any deductions have been taken) are used.
• Income of all adult household members: Annual income contains “inclusions” – types of income to be counted - & income “exclusions” - types of income that are not considered (e.g. income from minors); and
• Anticipated to be received: Annual income is used to determine eligibility & a household’s expected ability to pay, rather than past earnings, & to estimate housing assistance needs.
Evaluating Credit
Methods for determining a borrower’s willingness to honor credit obligations have changed over the past 10 years. In the past, mortgage lenders collected basic credit information & then decided for themselves whether there were too many unexplained late payments in a given period of time. To assist first-time homebuyers with little credit history of any kind, lenders would sometimes consider the timeliness of utility or rent payments.
During the 1990’s, credit scores became the dominant way of assessing an applicant’s willingness to pay. Credit scores predict the borrower’s likelihood of default. The use of credit scores has grown rapidly over the past 10 years as their contribution to lender profitability has become clear.
A credit score is calculated by a mathematical equation that evaluates information from the borrower’s credit report. Independent analytical firms developed the equations used to generate the scores by comparing actual performance of past loans with actual borrower credit records. The accuracy of credit scores has been verified using a similar approach, by scoring large portfolios of existing loans & then comparing score predictions to actual loan performance.
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Credit scores are assigned to assess the probability of loan default. Scores can range from 300 to 850, worst to best. Approximately 75 % of all scored borrowers have a credit score of 650 or better. There is no single score that serves as a cutoff for a borrower’s eligibility for favorable interest rates because each lender determines how to use the score in combination with other factors in its evaluation of a borrower. Generally borrowers with credit scores of 650 or higher are typically able to qualify to favorable interest rates, if all other aspects of the loan application meet standard guidelines.
Credit scores are based solely on credit information, not employment, income, or other factors. Heaviest weight is given to the applicant’s previous credit performance & total indebtedness. Scores change monthly based on new information from credit bureaus.
Evaluating Collateral
Lenders need to know the true market value of the home they will accept as collateral. Appraisers rely heavily on the “comparable sales” method to determine market value of single-family residential properties. Recent sales of similar homes in nearby locations indicate what the subject property would be worth on the open market. Sales prices for comparable properties are adjusted to reflect specific differences from the subject property.
Because an appraisal is such a central part of the lending process & because it necessarily involves a number of judgment calls by the appraiser, appraiser certification & qualification are hot topics for mortgage lenders, secondary market investors & housing finance regulators. (Note: An appraisal does not replace the need for home inspection to verify compliance with HOME property standards.)
Just as information technology has transformed the lender’s evaluation of borrower credit, automated appraisal is doing the same for collateral review. Large databases of comparable sales are compiled for a given market area. Statistical analysis & geographic information systems then process the data & estimate a value for the subject property. Automated appraisal is particularly well-suited for suburban markets where there are large numbers of relatively uniform properties. Its estimates are not as reliable in rural markets or diverse in-city locations.
The size of the borrower’s downpayment is related to collateral evaluation. It represents the financial stake the borrower has invested in the property. Lenders have traditionally relied on downpayments as an incentive for borrowers to persevere during lean times & save their investment rather than default. The reliability of automated credit scoring has reduced lender reliance on collateral & downpayment. Special mortgage programs with 96.5% loan-to-value ratios are commonplace (FHA). These were almost unheard of 15 years ago.
However, a counter-trend is in the making to restore some of the importance of downpayment & collateral. Recent research shows that borrowers had much higher default rates in markets where home prices were volatile than did borrowers with identical credit scores in stable real estate markets. This suggests that home value & downpayment are still critical parts of mortgage loan risk.
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Evaluating Ability to Pay
Lenders review a household’s income & expenses to understand an applicant’s ability to pay the proposed loan payment. Two ratios are calculated. The first or “front-end” ratio compares the loan payment (which includes principal, interest, taxes, & insurance) to gross income. The second or “back-end” ratio compares the loan payment plus installment & revolving debt to gross income. Common rules-of-thumb say that households should spend no more than 28% to 33% of their income on housing & no more than 36% to 38% on total debt. Special programs sometimes enable the ratios to rise substantially. For example: FHA loans permit higher ratios.
Automated Underwriting
The analysis of willingness to pay, ability to pay & collateral is usually facilitated by loan underwriting software & the resulting process is called “automated underwriting”. The substitution of computer-assisted judgment for the human element has been estimated to save as much as $650 per loan. Still, even automated systems refer some loans for human judgment.
Automated Underwriting & How Credit Scoring Affects HOME Applicants
There is both good & bad news for low and moderate income homebuyers in the trend toward automated mortgage loan decisions. On the positive side, credit scores have been found not to correlate with borrower income. Confidence in sophisticated technology can enable lenders to push the envelope further on risk elements like borrower expense-to-income ratios.
On the down side, HOME-assisted buyers may be disproportionately affected by technical problems in the process used to develop credit scores. The very poor, the less educated & those living in central cities may be under-represented in credit bureau data. This under-sampling could cause less valid credit scores for these groups of borrowers, according to some researchers. Borrowers should be counseled well in advance about the importance of their credit score & applicants should be advised that even the act of applying for credit may reduce credit scores. Anyone can get a copy of his or her credit report & credit score online at . There is a fee for this service.
Some HOME-assisted borrowers will need the benefit of traditional application review. Elimination of automated underwriting & credit scoring is a selling point for some new mortgage programs for affordable home ownership sponsored by major secondary market enterprises. Partner lending institutions should have skills in traditional, hands-on loan underwriting. Participation in affordable housing programs & active portfolio lending programs may be good indicators of such skills.
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Fees for Loan Origination & Closing Costs
Lenders charge borrowers an origination fee (sometimes called a “transaction fee”) to cover the costs of the transaction, including preparing documents, making credit checks & analyzing the loan file. Fees can range from as little as .5% to as much as 2%, but are typically between 1 to 1.25% of the loan amount. Borrowers who provide complete documentation & have solid credit may be able to negotiate a lower fee, especially with larger loan sizes. On the other hand, when lenders commit to make special, hands-on efforts to qualify borrowers, origination fees may be somewhat higher.
Negotiating lower origination fees for HOME-assisted borrowers may be possible. Some lenders might offer lower fees as a public-purpose concession. Other lenders might be willing to provide optimal terms if the PJ can reduce some of the lender’s work to facilitate the transaction, such as pre-screening borrowers & collecting necessary documentation before meeting with the lender. Without such bargaining points, you may encounter lenders who argue for higher origination fees due to smaller loans & more demanding underwriting requirements of some HOME borrowers.
Borrower costs typically range from 2% to 5% of the loan. Closing costs include home inspection, appraisal, advance payment of homeowner’s insurance, property taxes, real estate transfer taxes, title insurance, escrow fees, lender fees & recording fees. Closing costs may range from $3,000 to $4,000, in addition to the loan origination fee & points. Sellers also have closing costs. These include the real estate agent’s commission, transfer taxes, title insurance costs & home warranty.
“Points” are cash payments up front that buy reductions in the loan interest rate. They are called points because they are expressed as percentage points of the loan amount. Comparison shopping is important, as lenders may not charge uniformly for rate reductions. For buyers who have cash & who plan to remain in the house for at least 4 years, paying points can save money in the long run by reducing interest costs, while also lightening the load the mortgage places on the family’s monthly budget. However, for many HOME-assisted buyers, cash is short. For them, a higher interest rate is the price of completing the home purchase sooner.
It may be possible to negotiate with sellers to get assistance with closing costs, including points. Lenders usually permit at least 3 points to be paid by the seller to the borrower at closing. Borrowers may see such assistance reflected in a higher sale price, which in turn MUST be justified by the appraisal.
All of the costs that are likely to be incurred in the purchase of a home must be summarized & presented to the homebuyer as early in the loan origination process as possible. A standard form, the “Good Faith Estimate of Settlement Costs” (GFE), also known as “HUD 1” presents the complete estimate of cash requirements. It is required by law to be prepared & provided to the homebuyer so that he or she is aware of all the likely costs that will be incurred in the transaction.
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Using HOME-Assistance to Overcome Qualification Hurdles Responsibly
Potential low & moderate-income borrowers may have trouble passing one or more of the 3 underwriting hurdles described earlier, credit, collateral & ability to pay. The HOME regulation allows a great deal of flexibility, enabling them to structure assistance to best fit the needs of the borrowers they are trying to serve.
The type of HOME subsidy provided to the prospective purchaser depends on the type of underwriting hurdle(s) that the prospective borrower faces: 1) assisting with the homebuyer’s downpayment & closing costs; 2) reducing the mortgage amount to reduce monthly payments; and/or 3) Overcoming credit-related hurdles
The subsidy choice depends on the characteristics & needs of potential borrowers, interests & requirements of participating lenders & capabilities & resources of the participating jurisdiction.
Downpayment & Closing Costs Assistance
For many potential homebuyers, the biggest barrier to homeownership is raising cash for downpayment & closing costs. While households may have a steady income that would support monthly payments, they do not have enough savings to cover the upfront costs of buying a home. The HUD 1 is very useful for evaluating the borrower’s cash needs.
Downpayment & closing cost assistance is usually structured as a grant or a deferred payment loan. If the only assistance is for downpayment or closing costs, then a deferred payment loan, rather than a grant, may be advisable. If all the terms of the loan are met, the loan may be forgiven. A deferred payment loan is repaid (in whole or in part) at a stated point in the future, often in stages over time, or at the end of some specified period, such as the sale of the home or upon violation of any conditions attached to the loan. A deferred payment loan provides a means of enforcing the principal residency & resale/recapture requirements of the HOME program & also potentially recycles HOME funds.
Gap Financing
Other potential homebuyers lack the income to cover the monthly cost of principal, interest, property taxes & insurance (PITI). The difference between the loan amount their maximum affordable payment would cover & the actual mortgage amount required is called the “gap”. HOME funds structured as “gap financing” can reduce monthly loan payments & eliminate the gap. Probably the most efficient way to reduce the size of a borrower’s monthly payment is to provide the homebuyer with a grant, or more likely, a second or third loan on favorable terms, to reduce the mortgage principal they must borrow. Another option, less common & usually more expensive, is an interest rate buy-down. With a rate buy-down, the PJ provides funds directly to the lender, who then reduces the interest rate on the borrower’s loan.
PJs can structure gap financing in a number of ways. For example, HOME loans can be deferred payment, interest only or fully amortizing at a low interest rate. Gap financing reduces the first mortgage lender’s risk by reducing the loan-to-value (LTV) ratio. If the first mortgage LTV is reduced to 80%, the lender will not require mortgage insurance. This has the benefit of eliminating both the borrower’s monthly premium & the need to qualify under mortgage insurance guidelines. In addition, gap financing can overcome “appraisal gaps” when the costs of purchasing & rehabilitating exceed a home’s post rehabilitation value.
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When structuring gap financing, PJs will encounter the concept of “lien priority”. A lien is a claim on the property, such as a mortgage. A lender with a first lien on the property (also known as “first position”) has first claim on foreclosure sale proceeds, a lender with a second lien has second claim & so on. If nothing remains after superior liens are paid, subordinate lien holders must pursue other, more uncertain legal remedies to collect from the borrower. Generally, HOME gap financing is structures as a secondary loan to the privately financed loan. Often the HOME loan is structured as a “soft second” or “silent second”, meaning that it is forgiven at some point in time.
Credit-Related Hurdles
For many potential homebuyers, credit-related hurdles can be the most difficult barrier to address. When lenders are unwilling to make loans due to the applicant’s credit profile, PJs can pledge HOME funds to guarantee a single loan or a pool of loans. A loan guarantee is a written promise to pay the lender some percentage of the outstanding principal balance in the event the borrower defaults. HOME funds can be deposited into a guarantee account held by the lender. HOME funds in the guarantee account may not exceed 20% of the total outstanding principal balance guaranteed.
Education & counseling provide applicants with information, tools & support to repair credit records. Providing financial support & credit education courses can ensure that applicants who are approved are truly ready for homeownership.
Loan Closing
Loan closing is the legal process that transfers the home’s title to the buyer, transfers loan funds & downpayment to the seller & makes the home legally enforceable collateral to the lender. The buyer receives the deed to the property & executes a mortgage note pledging to repay the loan with the home as collateral. The HUD 1 Statement of Settlement Costs list all payments & credits due from the buyer & the seller at closing.
At loan closing, HOME financing is also legally executed. Liens, deed restrictions, recapture agreements, repayment provisions & any other formal agreements related to the HOME funds must be included in the loan closing documents. Upon completion of closing, all executed legal documents must be publicly recorded. These documents will provide the primary, if not sole, legal mechanism for enforcing long term affordability restrictions. Without recording the documents, these enforcement tools will be ineffective. Further, given the importance of the loan closing process, a process for auditing closed loan files to ensure quality control of these essential documents should be established. Loan closing is a good opportunity to reconfirm that borrowers understand their obligations & are made aware of the availability of post-purchase counseling.
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Chapter 8
NSP Eligibility Underwriting Guidelines
General Requirements
• All borrowers must provide evidence of a social security number & drivers license or other form of personal ID.
• All borrowers must have reached the age of 18 prior to application for NSP financing
Income/Debt Ratios
Participating jurisdictions (PJ’s) that pre-screen potential borrowers may find their assessment of borrower qualifications is more liberal than the one eventually applied by lenders. This can be especially true for lenders who are unfamiliar with typical household budget profiles in the particular market a HOME-financed program is designed to serve.
Housing Ratio (Front-End Ratio): a percentage comparing a participant(s) total monthly cost to buy a home to monthly income before deductions (mortgage principal & interest, real estate taxes, hazard insurance, mortgage insurance & Homeowners Association Dues (HOA).
• The standard guideline is not to exceed 28%.
Full Debt-to-Income (Back-end ratio): a ratio that compares the total of all monthly debt payments (mortgage, real estate taxes, hazard insurance, mortgage insurance, HOA dues, installment loans(such as car loans, appliance loans or student loans), revolving loans (such as credit cards) to gross monthly income.
• The standard “back” debt ratio not to exceed 36%.
• Note: Front and back ratio guidelines may be exceeded upon review of mitigating circumstances by NSP Loan Committee.
Total Combined LTV
• Up to 100% CLTV is allowed.
Income Eligibility Calculation Method – Census Long Form
Income eligibility calculation method selected is based on the Census Long Form Definition. Every 10 years, the Bureau of the Census conducts a complete enumeration of all residents in the United States. This process involves gathering extensive information about people & where they live through the use of a detailed questionnaire – referred to as the Long Form.
An entire section of the Long Form includes questions concerning household income. NHSOC has chosen to use this definition of “annual income” when determining the eligibility of NSP applicants. The types of income included & excluded in the current Census Long Form definition is based upon the Long Form used in the 1990 census. The following lists the income inclusions & exclusions set forth in the 1990 Census Long Form.
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Verifying Income
This program requires verification of income for eligibility purposes be determined by examining source documents (i.e. paycheck stubs, tax returns, interest statements, etc.) evidencing gross income. Undocumented or “stated income” will not be considered.
Documents provided by the borrower (i.e. pay stubs, tax returns, bank statements) may be the most appropriate manner to obtain income documentation, however a written third-party verification may be used provided written authorization from household borrowers is obtained.
The first mortgage lender calculates income to determine how much they will lend the borrower. The purpose of this program is to assure that the household income does not
exceed Orange County Median Income Limits & the borrower is eligible to receive NSP funds.
Income Inclusions (What to Count)
As defined by this program, the combined gross income of all household residents eighteen years or older who will be living in the unit must be included in the determination of income for eligibility purposes.
For the purposes of determining eligibility, the borrower must project the household’s annual income. To do so, a “snapshot” of the current circumstances is used to project future income. This method should be used even when it is not clear that the type of income received currently will continue in the coming year. The exception to this rule is when documentation is provided that current circumstances are about to change.
In the case of self-employed borrowers, the primary lender may use an average of the previous 3 years, but for the purposes of NSP qualifying, the projected earnings for the next year are used.
• Wages, salary, commissions, bonuses & tips from all jobs before deductions for taxes, bonds, dues or other items.
• Self-employment net income (after business expenses) including proprietorship & partnership
• Interest received or credited to checking & savings accounts, money market funds, certificates of deposit, individual retirement accounts (IRAs), KEOGH retirement plans & gov’t. bonds.
• Dividend received, credited or reinvested from ownership of stocks or mutual funds.
• Profit (or loss) from royalties or rental of land, buildings or real estate or roomers or boarders.
• Income from regular payments from an estate or trust fund.
• Social Security retirement
• Supplemental Security Income (SSI), Aid to Families with Dependent Children (AFDC) or other public assistance or public welfare payments
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• Retirement, survivor or disability pensions from companies & unions; Federal, State & local governments; & the US military. Includes regular income from annuities, IRAs or KEOGH retirement plans.
• Other sources of income received regularly, including Veterans Administration (VA) payments, unemployment compensation, child support or alimony & all other regular payments.
Income Exclusions (What Not to Count)
• In-kind pay such as food, free rent, etc.
• Profit (or loss) of incorporated businesses owned by the applicant
• Refunds or rebates of any kind, withdrawals from savings of any kind, capital gains (or losses) from the sale of homes, shares of stock, etc.
• Inheritances or insurance settlements
• Assistance to pay for heating or cooling costs
Income from Assets
Income from certain assets must be carefully considered when calculating income under the Census Long Form definition of annual income. The current Census Long Form includes the following types of income from assets in the income calculation:
• Interest, dividends, profit from royalties or real estate & income from payments from an estate or trust fund
Types of income from assets NOT to be included in the income calculation are:
• Withdrawals of savings, capital gains (or losses) from the sale of homes, stock, & other property, insurance settlements & assets disposed of for less than fair market value within two years prior to the income determination
Income – How to Count It
Salaried or Hourly Wages
• Salaried or hourly income must be verified by one month’s worth of paystubs & 3 years W-2’s; a minimum work history of three years must be verified for full-time or part-time employment.
Calculation of Wages
• Paid weekly: hourly rate x number of hours x 52/12 = monthly income
• Paid bi-weekly: hourly rate x number of hours x 26/12 = monthly income
• Paid bi-monthly: hourly rate x number of hours x 24/12 = monthly income
• Part-time wages must be averaged for 24 months
Self-Employed Borrowers
• Self-employed borrowers must have been in the same line of work for 3 years immediately prior to application & provide 3 years federal tax returns with all schedules.
• Schedule C - Borrowers must provide last 3 years federal taxes including Schedule C & current, year-to-date Profit & Loss (unaudited),
• Profit (or loss) of incorporated businesses owned by the applicant are excluded from Census-Long Form definition of income.
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Overtime
• Overtime may be considered only if it customary for the type of employment & likelihood to continue is verified by employer, 24 month average to be used
Seasonal Employment
• Must be verified & borrower must have at least a two-year history prior to application
Part-Time Employment
• A two year history prior to application must be verified
Salaried Borrowers
• Must have been employed in the same line of work for a minimum of two years immediately prior to application.
Employment Paid in Cash
• Cash payments must have been declared on income tax returns for two years immediately prior to application.
Retirement/Pension
• Income must be verified by a third party source & must continue for a minimum of 3 years.
Social Security/Disability
• Award must be verified by current award letter. In cases that the homebuyer has payments directly deposited, copies of bank statements may be provided for verification.
Interest Dividend or Annuity Income
• Income must be verified with bank statements from the most recent two months or a verification of deposit (VOD) to verify the assets which generate this income. The income must represent a reasonable rate of return on the asset.
Alimony, Child Support
• A copy of the Divorce Decree, indicating the borrower is eligible to receive maintenance/child support and/or alimony for at least 3 years must be provided. Supporting data must be obtained including bank statements, court correspondence, or copies of money orders to evidence receipt of ordered payments. Evidence of receipt of the last 6 months of payments to be provided.
Notes Receivable & Installment Sales
• A copy of the Note must be provided indicating the borrower is eligible to receive the Note income, along with proof of receipt of payment for the last 6 months.
Trust Income
• Obtain a letter from the trustee of the trust to verify continuance & proof of income for the last 6 months. If the borrower is the trustee, a copy of the trust must be obtained.
Estate Income
• Obtain a letter from the executor of the estate to verify proof of the amount of income and/or assets to be received
• If the borrower is the executor or administrator a copy of the trust must be obtained
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Rental Income
• If borrower owns income property, they must provide 2 years federal tax returns including Schedule E.
• Depreciation allowance must be added back to income, unless further defined by HUD Guidelines.
Boarder Income
• The rental payments that a borrower receives from one or more individuals who reside with the borrower (but not obligated on the mortgage debt & may or may not be related to the borrower) may be considered as acceptable stable income provided the borrower can provide appropriate documentation to demonstrate a history of shared residency for the last 12 months (such as a bill or bank statement showing address) & proof of 12 months consecutive monthly payments.
Non-Occupying Co-Borrowers or Co-Signers
• Not allowed
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SAMPLE FORMAT FOR COMPUTING CENSUS LONG FORM ANNUAL INCOME
| | |
|Name: |Identification No.: |
| |
|ANTICIPATED ANNUAL INCOME |
|Family |a.Wages/ |b.Business |c.Interest |d.Benefits/ |e. Public |f.Other Income |
|Member |Salaries |Income |Dividends |Pensions |Assistance | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|1. Totals |a. |b. |c. |d. |e. |f. |
|2. Enter total of items from 1a. through 1f. This is Annual Income……… 2. |
Signature
For Office Use Only
_________________ HUD Income Limit
_________________Household Income
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Credit Guidelines
Credit Report
• No minimum credit score (subject to first mortgage lender approval).
• Age of credit report not to exceed 60 days
Liabilities
• All revolving credit reported on Tri-Merge credit report will be considered in debt-to-income ratio.
• All installment monthly payments reported on Tri-merge credit report will be included in income-to-debt ratio if there are more than 10 or more payments remaining until the account is paid off.
• All co-signed liability listed on the Tri-Merge credit report must be included on debt-to-income ratio unless documentation is provided to support that someone else is making the payments; supporting documentation may included 12 consecutive months of bank statements, cancelled checks, etc.
Collection account(s)
• Explanation letters required for each collection account.
• No outstanding unpaid collection accounts prior to closing.
Bankruptcy
• No bankruptcies allowed. Unless further determined by HUD Guidelines.
Foreclosure
• No foreclosures allowed. Unless further determined by HUD Guidelines.
Short sale
• No short sales allowed. Unless further determined by HUD Guidelines.
Judgments, Lawsuits & Liens
• Must be paid in full prior to closing.
• Borrowers who have received a lien for non-payment of HOA fees are not eligible.
Federal, State & Local Debt
• Borrowers who are delinquent on any federal, state or local government debt, such as Federal Tax liens, are not eligible for NSP funding.
Verification of Rent
• Borrower to provide name, address & phone number of landlord for verification.
Non-Traditional Credit Qualifications
• If borrower(s) have no credit history of credit report, secondary sources of alternative credit references may be used (i.e. utilities, phone, etc.)
Exceptions
• NHSOC reserves the right to consider an exception to the above policies when there is a reasonable conclusion to the borrower’s request & it is not in conflict with HUD underwriting guidelines.
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Citizenship Verification
US Citizenship Documentation Verification Requirements
• Drivers License or other valid public ID, i.e. passport or birth certificate
• Social Security Card
Permanent Resident Alien Documentation Verification Requirements
• Drivers License or other valid public ID, passport or birth certificate
• Social Security Card
• Permanent Resident Alien “Green Card”
Chapter 9
Escrow Instructions & Title
Escrow
Impounds
• Impound account for property (real estate) taxes, hazard/homeowners insurance and, if applicable, flood insurance will be required (collected by first mortgage lender). Escrow to collect at closing appropriate number of months including reserves for property taxes & hazard insurance as required by first mortgage lender; however, insurance payments may be included with payment of Homeowners Association dues (HOA) if purchasing a condominium.
Prepaid items
• Prepaid items (interest, per diem, due on closing date, hazard & flood insurance for first year, if applicable) are to be collected through escrow at closing.
Standard Flood Hazard Determination
• Flood determination certification as required by first mortgage lender. If property is determined to be in a flood zone, flood insurance is required.
Title
• An ALTA Title report shall be obtained
Request for Notice
• A Request for Notice shall be submitted to the first mortgage lender for ongoing monitoring purposes.
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Chapter 10
Inspections & Home Warranty
• Buyer has right to any inspections at buyers cost, including home inspection.
• Termite report provided by NHS of OC.
• Natural Hazards Disclosure to be ordered & paid by seller (NHSOC).
• NHSOC (Seller) will provide buyer a one-year home-warranty at seller’s expense
• A Lead-based Paint Report & Booklet will be provided to buyer for homes built prior to 1978 or where existing lead hazards have been identified.
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Chapter 11
State and Federal Compliance
RESPA Overview
Congress enacted RESPA in 1974 for 2 purposes: 1) to allow consumers to obtain information on the costs of closing so that they can shop for settlement services;
2) to protect consumers from excessive settlement costs & unearned fees. The Dept.
of Housing & Urban Development (HUD) is the federal regulatory agency that is responsible for enforcement of RESPA & for issuing implementing regulations. The regulations that HUD has promulgated under RESPA are known as Regulation X.
Covered Loans
RESPA applies to “federally related mortgage loans” which are defined as loans secured by a first or subordinate lien on residential property which are: 1) made with funds insured by the federal government (FHA loans), or 2) made with funds from a lender regulated by the federal government (FDIC), or 3) intended for sale to Fannie Mae or Freddie Mac, or 4) made by a creditor regulated under the Truth-in-Lending Act.
Closing Cost Disclosures Required by RESPA
There are several mandatory disclosures that are intended to provide consumers with the information that they need to shop for settlement services. These include the Good Faith Estimate, the HUD Settlement Cost Information Booklet, the Mortgage Servicing Disclosure Statement, the Affiliated Business Arrangement Disclosure & HUD-1 Settlement Statement.
Disclosures at Time of Loan Application: When a potential homebuyer applies for a mortgage loan, the lender must give the buyer 1) Special Information Booklet entitled,
“Shopping for Your Home Loan” (HUD Settlement Cost Booklet.) For a copy, go to HUD’s website: under Real Estate Settle Procedures Act. This booklet contains consumer information on various real estate settlement services; 2) Good Faith Estimate of Settlement Costs (GFE), which lists the charges the buyer is likely to pay at settlement & states whether the lender requires the buyer to use a particular settlement service; 3) Mortgage Servicing Disclosure Statement, which tells the buyer whether the lender intends to keep the loan or to transfer it to another lender for servicing & also gives information about how the buyer can resolve complaints
Disclosures Before Settlement (Closing) Occurs: 1) Affiliated Business Arrangement Disclosure is required whenever a settlement service refers a buyer to a firm with which the service has any kind of business connection, such as common ownership. The service usually cannot require the buyer to use a connected firm. 2) Preliminary Copy of a HUD-1 Settlement Statement is required if the borrower requests it 24 hours before closing. This form gives estimates of all settlement charges that will need to be paid, both by buyer & seller.
Disclosures at Settlement: 1) HUD-1 Settlement Statement is required to show the actual charges at settlement; 2) Initial Escrow Statement is required at closing or within 45 days of closing. This itemizes the estimated taxes, insurance premiums & other charges that will need to be paid from the escrow account during the first year of the loan.
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Disclosures After Settlement: 1) Annual Escrow Loan Statement must be delivered by the servicer to the borrower. This statement summarizes all escrow account deposits & payments during the past year. It also notifies the borrower of any shortages or surpluses in the account & tells the borrower of any shortages or surpluses in the account & tells the borrower how these can be paid or refunded; 2) Servicing Transfer Statement is required if the servicer transfers the servicing rights for a loan to another servicer.
Good Faith Estimate - GFE (Does not need signatures.)
A loan originator must issue a GFE no later than 3 business days after the loan originator receives an application or information sufficient t complete an application. Application is defined as the submission of a borrower’s financial information in anticipation of a credit decision relating to a federally regulated mortgage loan, which shall include the following: 1) borrower’s name, 2) borrower’s monthly income, 3) borrower’s social security number to obtain a credit report, 4) property address, 5) estimate of value of the property, 6) loan amount & 7) any other information deemed necessary by the loan originator.
Mortgage brokers & lenders must provide the Good Faith Estimate (GFE) at the time of application or mail it within 3 business days after receipt of a loan application. Business days do not include federal holidays, Sundays or Saturdays (unless Saturday is a regular business day for the lender).
The GFE includes a reasonable & as accurate as possible, estimate of the charges that are due at the time of closing. The estimated fees listed in the GFE include charges to the borrower for loan origination, property appraisal, credit reporting, title insurance & recording the mortgage. The GFE also includes indirect fees, such as yield spread premiums which are not paid directly by the borrower, but are received by mortgage brokers from lenders. The only fees excluded from the GFE are the costs paid by the seller.
Estimated fees found on the GFE can be consolidated into 4 key areas: lender charges, title charges, government charges & prepaid items & deposits.
Lender Charges: Lender charges include fees for loan origination, appraisals, credit reports, inspections, mortgage broker services, underwriting & processing.
Title Charges: Title charges include the cost of the title search, title insurance & notary fees. Title insurance insurers extend coverage after researching land records to determine if a piece of real estate is free of encumbrances such as mortgages, liens, easements or other claims.
Government Charges: Municipal & government charges vary between states & municipalities. Generally they include the cost of recording the mortgage transaction in the public land records. If property is changing hands, the charges may also include a tax for the transfer of real estate from one person to another.
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Prepaid Items & Deposits: Prepaid items are paid by the borrower at the time of closing, even though the payments are not due until a point in the future. Pre-rated real estate taxes, homeowner’s & flood insurance, private mortgage insurance, & interim interest are among the most common prepaid items.
The key to understanding prepaid items is the idea the interest on a mortgage is always paid in arrears - after it has had a chance to accrue on the balance. This is why the first payment date on a mortgage is typically at least one month after the closing date.
Settlement Cost Booklet or Information Booklet
The Settlement Cost Information Booklet is due 3 business days after completion of a loan application for a purchase transaction. Loan originators can use their own booklet or use the HUD booklet entitled, “Buying Your Home: Settlement Costs & Information.” The HUD booklet: 1) explains the settlement process 2) tells borrowers that they have the right to negotiate the terms of the loan 3) reviews the protections that RESPA creates for borrowers 4) warns borrowers that their use of false information on a loan application can lead to loss of their home, a poor credit rating & even criminal prosecution for fraud.
HUD’s version of the booklet is available online. The Settlement Cost Information Booklet is for home purchase transactions. Consumers who are shopping for an open ended loan, such as a Home Equity Line of Credit, must receive an information brochure entitled, “When Your Home Is On The Line: What You Should Know About Home Equity Lines of Credit.”
Mortgage Servicing Disclosure Statement (Must be signed by all applicants.)
This disclosure requirement applies only to first-lien mortgages. It is due 3 business days after completion of the loan application. The disclosure states whether the loan servicing can be sold, assigned or transferred during the life of the Loan Servicing Transfer Statement. More specifically, the disclosure must include:
1) applicant’s acknowledgement of receipt of the disclosure.
2) a statement indicating that the lender or table-funding mortgage broker does not service loans & intends to sell the servicing or, for those lenders who service loans after funding them, a statement indicating whether there is a possibility that the lender may sell, assign, or transfer the servicing at any time during the loan term
3) a statement that the lender or table-funding mortgage broker has not services mortgage loans in the past 3 years & will not service the loan or, for those lenders who service loans after funding them, an indication of the percentage of loans (rounded to the nearest 25%) originated within the past 3 years for which servicing was sold, assigned, or transferred, and
4) a statement of the borrower’s rights with regard to complaint resolution.
Servicing rights are bought & sold regularly. A borrower may see the servicing sold several times over the life of the loan. Servicing transfer statements ensure that borrowers know that a new loan servicer has their loan.
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Affiliated Business Arrangement Disclosure
If a settlement service provider refers a loan applicant to an affiliated business for settlement services, he or she must disclose the affiliated business arrangement at the time of making the referral. For example, if a loan originator refers a client to a title insurance company in which the loan originator has an ownership interest, disclosure of the ownership interest is required at the same time as the referral. When referrals are made by phone, borrowers must receive written disclosures 3 days after the call. The disclosure must: 1) describe the business arrangement, including the percentage of ownership of the interest of the referring party & service provide, 2) estimate the costs that will be charged by the provider to whom the loan applicant is referred, 3) advise the borrower that he/she is not required to use the service provider to whom he/she was referred. (Note: lenders can require the use of a particular attorney, appraiser and credit reporting agency)
HUD-1 Settlement Statement (HUD-1)
The HUD-1 is a statement that shows the actual costs of settlement in a mortgage lending transaction. The HUD-1 Settlement Statement is the form used for the itemization of actual costs in a transaction that involves a borrower & a seller. The HUD-1A Settlement Statement discloses the costs of settlement in lending transactions, such as refinancing or closings on second mortgages, which do not involve a seller. Both are subject to the same rules for proper disclosure.
The HUD-1 or the HUD-1A Settlement Statement is due at the time of closing, but the borrower may request a copy one day prior to settlement. If the borrower or his agent is not at the closing, the settlement statement must be mailed as soon as practicable after closing.
Often, borrowers do not see the HUD-1 Settlement Statement until they arrive at the closing & discover that they must pay more than anticipated for settlement services. Confused by discrepancies between closing costs listed on the GFE & the HUD-1 Settlement Statement & too frustrated to do anything other than assume the unanticipated costs, few consumers are willing to back away from the closing table to shop for better fees.
One of the goals of the reform effort is to create a new form for the GFE that will make it easier for consumers to compare the estimated costs with the actual costs listed on the HUD-1/HUD-1A forms. The reform also proposes the use of a “closing script” that will compare the estimated & actual cost of closing.
Record Retention Requirements for RESPA Disclosures
RESPA imposes a 5 year record retention requirement on lenders for the following disclosures: 1) Mortgage Servicing Disclosure Statement, 2) HUD-1/HUD-1A Settlement Statement, 3) Affiliated Business Arrangement Disclosures
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RESPA Reform
The mortgage industry will be required to use the updated forms beginning January 1, 2010. The new GFE is a 3-page document that features an instructional page aimed at helping borrowers understand their loan offer. A new page on the HUD-1 Settlement Statement corresponds with the GFE. Yield spreads must be clearly disclosed. Verification of information on the loan application cannot proceed until the applicant has given the loan originator the go-ahead. Lenders & settlement providers will have 30 days from the date of closing to correct any errors or violation of RESPA’s disclosure & tolerance requirements.
For More Information: There is a special RESPA section on HUD’s website: or by calling 1-800-767-7468.
Equal Credit Opportunity Act (ECOA/Regulation B)
Purpose
In 1974 Congress enacted the Equal Credit Opportunity Act to eliminate discriminatory treatment of credit applicants. ECOA & its regulations are intended to promote the availability of credit to all creditworthy applicants regardless of race, color, religion, national origin, sex, marital status or age. The law also prohibits credit decisions being based on the fact that the applicant has income from a public assistance program or that the applicant has exercised his or her rights under the Consumer Credit Protection Act (consumer credit counseling program).
Covered Loans
ECOA applies to transactions for the extension of credit by any person who regularly extends, renews, or continues credit. The law also applies to a person who regularly refers applicants to creditors, or selects or offers to select creditors to whom requests for credit can be made. Therefore, the definition of creditor applies to mortgage brokers as well, and is not limited to lenders or mortgage bankers who actually extend credit.
Exemptions
Two notable exceptions to ECOA’s prohibitions against unlawful inquiries include: 1) inquiries regarding race, ethnicity, sex, marital status & age are permitted for purposes of federal programs that monitor compliance with fair lending laws, such as Home Mortgage Disclosure Act, 2) creditors may obtain information about an applicant’s protected characteristics in order to determine the applicant’s eligibility for special-purpose credit such as credit assistance program offered by a non-profit organization or for a federal or state program to assist the economically disadvantaged.
Disclosures & Notifications Required by ECOA
Notice of Action Taken: Within 30 days of receipt of a loan or credit application, lenders must notify consumers in writing of action taken. If the creditor takes adverse action on the application, the notice must provide a statement of the reasons for the unfavorable decision & must include a statement that ECOA prohibits discrimination against credit applicants.
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Notice of Incomplete Application: Within 30 days of receipt of an application that lacks information that the applicant can provide, the creditor must provide a Notice of Action or a Notice of Incompleteness that states the information needed, set a reasonable time for submission & advise the applicant that failure to provide the information will result in no further consideration of the application.
Notice of Right to Receive Appraisal Report: If credit is secured by a lien on a dwelling, the creditor must notify the loan applicant in writing of the right to receive a copy of the appraisal report. The notice must advise the applicant to make a written request for the report. It must give the creditor’s mailing address & specify time limitations for making the request. Creditors are not required to respond to requests received more than 90 days after providing a Notice of Action Taken. Notices of the Right to Receive Appraisal Reports are due at the same time as the Notice of Action Taken.
Disclosures Regarding Monitoring Programs: When obtaining information on race, ethnicity, sex, marital status & age for monitoring purposes, creditors must advise applicants that the information is requested by the federal government for monitoring purposes & that the creditor must provide this information. If the applicant refuses to provide it, the creditor must provide the information based on visual observation.
Lending Practices Prohibited by ECOA:
Unlawful inquiries: 1) marital status (permissible inquiries for government monitoring may only use the categories: “married”, “unmarried” or “separated”) 2) Sex of the applicant, 3) Bearing & rearing of children, 4) race, color, religion or national origin, 5) age.
Unlawful statements: Lenders may not make oral or written statements that would discourage prospective credit applicants from applying for a loan. Lenders may not:
1) refuse to consider public assistance as income, 2) assume a woman of childbearing age will stop work to raise children, 3) refuse to consider income from a pension, annuity, or retirement benefit, 4) refuse to consider regular alimony or child support (although borrowers are not required to disclose unless it is used as qualifying income).
Truth in Lending Act (TILA/Regulation Z)
Purpose
Congress enacted the Truth in Lending Act in 1968 as Title 1 of the Consumer Credit Protection Act. TILA was the first law in which the federal government adopted disclosure requirements as a means of protecting consumers from unfair treatment by creditors. The primary goals of TILA are: 1) protect consumers by disclosing the costs & terms of credit, 2) create uniform standards for stating the cost of credit, thereby encouraging consumers to compare the costs of loans offered by different creditors,
3) ensure advertising for credit is truthful & not misleading, 4) provide borrowers with the right to rescind certain types of mortgage transactions
Covered Loans
TILA regulates transactions that involve the extension of credit to individuals for personal, family or household purposes. Mortgages are a form of credit & subject to TILKA when both of the following are true: 1) the borrower’s dwelling secures the mortgage debt, 2) the homeowner uses the proceeds of the loan for personal, family or household purposes
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Lenders
TILA applies to all businesses, individuals & lenders that offer or extend credit which meets all of the following 4 conditions: 1) the credit is offered to consumers, 2) the offer or extension of credit is made regularly, 3) the credit includes a finance charge or a written agreement stating that the loan may be repaid in more than 4 installments, 4) the credit is primarily for personal, family or household purposes
Truth-in-Lending Disclosure Statement (TIL)
TILA currently requires loan originators to provide the Truth-in-Lending (TIL) Disclosure Statement to loan applicants within 3 business days of application & again at closing. No fees may be charged to the loan applicant before the initial disclosures are provided. The law does provide an exception for credit reporting fees. The TIL Disclosure Statement must be re-disclosed to the loan applicant at least 7 days prior to settlement.
The TIL Disclosure Statement is presented along with the Good Faith Estimate (GFE) & provides the costs of obtaining the loan. TILA mandates that the TIL Disclosure Statement must be re-disclosed if the APR varies by more than 1/8 of 1% at any time prior to closing. There must be a 3 day waiting period prior to closing if an inaccurate APR must be re-disclosed. (This is assuming the APR inaccuracy occurs after the 7 day prior-to-close disclosure requirement.)
Right of Rescission Under TILA
The right to rescind does not apply to all types of lending transactions. It is only available for loans that are secured by the borrower’s principal dwelling. Generally, no right to rescind exists for: 1) residential mortgages to purchase or construct a home, 2) refinancing of credit already secured by the borrower’s principal dwelling with the same creditor that made the first loan, 3) a lending transaction with a state agency.
New home equity credit lines, refinances & home improvement loans secured by the borrower’s principal dwelling are examples of the types of loans that are subject to a right of recession.
Fair Credit Reporting Act (FCRA)
Purpose
Congress enacted FCRA in 1970 to ensure the accuracy, fairness & privacy of consumers’ personal information that is assembled & used by credit reporting agencies & for furnishers & users of consumers’ personal information. FRCA prohibits the release of a consumer report without the written permission of the consumer.
Gramm-Leach-Billey Act
Purpose
The purpose of the privacy provisions of the GLB Act is to ensure that financial institutions, including mortgage lenders, protect nonpublic personal information of consumers by: 1) advising consumers of the financial institution’s policies with regard to the use & exchange of personal information, 2) offering consumers the opportunity to limit the use & exchange of their personal information, 3) creating a security program to protect personal information from unauthorized release & disclosure.
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The GLB Act requires financial institutions to always notify customers of their policies & practices regarding the collection of non-public personal information & the sharing of it with third parties. If financial institutions plan to share consumer information, they must also provide notice of the right to “opt-out” of the sharing of information.
A company’s security program designed to meet the requirements of the Safeguards Rule must include the following elements: 1) a designated company representative to coordinate the program, 2) identification of internal & external risks which effect the security of customer information, 3) regular testing, monitoring & adjustment of the security program, 4) oversight of service providers who have access to customer information
Fair & Accurate Credit Transactions Act of 2003 (FACTA)
Purpose
In 2003, Congress added additional provisions to FCRA with the enactment of FACTA.
Disclosure of Credit Score
In mortgage lending transactions, the “person who makes or arranges loans” must provide mortgage loan applicants with information about the credit score used to evaluate their creditworthiness & must provide this information with a notice that advises them of the importance of reviewing their credit scores & of their right to contact the Credit Reporting Agency or the lender that generated the credit score.
FTC Red Flag Rules
Purpose
The Red Flag Rules are another measure to address identity theft. The Red Flag Rules require lenders to establish an Identity Theft Prevention Program.
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Chapter 12
NSP Loan Documents
• Deed(s) of Trust with Restrictive Covenants
• Promissory Note(s)
Forms & Disclosure Notices –
• 1003 FNMA Loan Application
• Borrower Signature Authorization
• Notice to the Home Loan Applicant Credit Score Information Disclosure
• Affidavit of Occupancy
• Anti-Coercion Statement
• Fair Credit Reporting Act
• Equal Credit Opportunity Act (ECOA)
• Notice to Applicant of Right to Receive Copy of Appraisal Report
• The Housing Financial Discrimination Act of 1977
• Fair Lending Notice, Borrower’s Certification and Authorization
• Flood Disaster Protection Act of 1973
• Patriot Act Information Disclosure
• GFE, HUD-1 Settlement Statement
• TILA Disclosure
• HUD Booklet, “Shopping for Your Home Loan” is available to print online.
Go to HUD website for copy of 48-page booklet
• Note: Loan documents must have been approved by the first mortgage lender & the lender must have been approved by NHSOC for participation in the program.
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Chapter 13
Closing & Disbursement Procedures
Closing Checklist
• Document Closing Checklist attached.
Good Funds Law
• Escrow deposits to comply with DRE requirements, the Terms of the Contract & the Good Funds Law
• Closing funds to be wired to escrow in accordance with the title company or escrow wiring instructions
Approved Title & Escrow Companies
• California State Law allows buyer to choose their title & escrow company. NHS OC has established a policy for buyer & seller paying usual fees (breakdown attached) but will provide a $1,000 closing cost credit if buyer accepts seller’s choice of title & escrow.
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Chapter 14
After Close Monitoring, Licensing & Auditing
Monitoring will include, but is not limited to:
• Owner occupancy
• Home Maintenance
• First Mortgage Payment History Review
Monitoring Plan
NHS OC (or its designee) will monitor the NSP-assisted home at least annually and may enter the home for inspection following two (2) business days advance notice. This requirement for access will be included within the borrower’s promissory note and deed of trust.
Partial Payments by Buyer
NSP loan have no payment requirement until the maturity date. The note & deed of trust may allow partial payments by borrower as described in the documents.
Loan Servicing
NHS OC will retain the right to servicing of the NSP loan but reserves the right to transfer servicing to a qualified third party.
Licensing & Auditing
NHSOC & its staff will comply with all DRE licensing requirements when originating, processing & funding NSP loans. The Broker of Record shall have responsibility for auditing files & ensuring compliance with regulations.
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[pic]
NSP Eligibility Intake Form
ALL APPLICANTS: PLEASE COMPLETE ITEMS 1 – 12, PAGES 1-5 AND
PROVIDE REQUIRED INFORMATION LISTED ON THE APPLICANT DOCUMENTATION CHECKLIST
1. APPLICANT INFORMATION
|Applicant’s Name (First, Middle Initial, Last Name) |Co-Applicant’s Name (First, Middle Initial, Last Name) |
| | |
|Applicant’s Address (Street, City, State, Zip) |Co-Applicant’s Address (Street, City, State, Zip) |
| | |
|Home Phone (include area code) |Home Phone (include area code) |
| | |
|Work Phone (include area code) |Work Phone (include area code) |
| | |
|E-mail address: |E-mail address: |
| | |
|Date of Birth (month/day/year) |Date of Birth (month/day/year) |
| | |
|US Citizen: Yes or No |US Citizen: Yes or No |
| | |
|Permanent Resident Alien: Yes or No |Permanent Resident Alien: Yes or No |
| | |
|Do you hold title on a real estate property at this time? |Do you hold title on a real estate property at this time? |
|Yes or No |Yes or No |
| | |
2. EMPLOYMENT INFORMATION
|Applicant’s Employer |Co-Applicant’s Employer |
| | |
|Employer Address (Number, Street, City, Zip) |Employer Address (Number, Street, City, Zip) |
| | |
|Monthly Income |Monthly Income |
| | |
|Dates (from – to) |Dates (from – to) |
| | |
|If Current Employer less than 3 years: |If Current Employer less than 3 years: |
|Previous Employer: |Previous Employer: |
| | |
|Previous Employer Address (Street, City, State, Zip) |Previous Employer Address (Street, City, State, Zip) |
| | |
|Previous Monthly Income |Previous Monthly Income |
| | |
|Dates (from – to) |Dates (from – to) |
| | |
Page 1 of 5 NSP Eligibility
3. OTHER INFORMATION
|Have you ever declared bankruptcy, foreclosure or |Have you ever declared bankruptcy, foreclosure or |
|shortsale? Yes or No |shortsale? Yes or No |
| | |
| | |
4. HOUSEHOLD SIZE
List ALL household members, REGARDLESS OF AGE,
who will occupy the affordable home.
| |Name |Date of Birth |Relationship |Social Security # |US Citizen or Resident |
| | | | | |Alien? Yes or No |
| | | | | | |
|1 | | | | | |
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|2 | | | | | |
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|3 | | | | | |
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|6 | | | | | |
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|7 | | | | | |
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|8 | | | | | |
5. ANNUAL HOUSEHOLD INCOME
List annual gross income, before deductions, received
by ALL household members (including applicants) over the age of 15
who will occupy the affordable home.
| |Name |Wages/Salary |Self-employed or |Interest or dividend |Other Income |
| | | |business income |income |(all sources) |
| | | | | | |
|1 | | | | | |
| | | | | | |
|2 | | | | | |
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|3 | | | | | |
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|4 | | | | | |
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|5 | | | | | |
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|6 | | | | | |
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|7 | | | | | |
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|8 | | | | | |
Page 2 of 5 - NSP Eligibility
6. ASSET INFORMATION
(List all assets from Applicant, Co-Applicant & All Household Members)
|Source |Name of Bank |Balance |
| | | |
|Savings Account(s) | | |
| | | |
|Checking Account(s) | | |
| | | |
|Money Market/CD’s | | |
| | | |
|IRA/Retirement Accounts | | |
| | | |
|Stocks/Bonds | | |
| | | |
|Other (Family Gift Funds) | | |
| | | |
| |Total Assets | |
How much money do you have ready to contribute towards this home purchase?
$______________
7. APPLICANT & CO-APPLICANT DEBT INFORMATION
| | |
|Current Rental Payment Per Month |$ |
| |
|Landlord Name: |
| |
|Landlord Address: |
| |
|Landlord Phone: ( ) |
|Monthly Debt Obligations: |Minimum Payment: |Balance Owed: |
| | | |
|Auto: Year/Make |$ |$ |
|Auto: Year/Make |$ |$ |
|Credit Card: |$ |$ |
|Credit Card: |$ |$ |
|Credit Card: |$ |$ |
|Credit Card: |$ |$ |
|Credit Card: |$ |$ |
|Total Other: |$ |$ |
|Total (excluding rent) |$ |$ |
| | | |
Page 3 of 5 – NSP Eligibility
8. APPLICANT & CO-APPLICANT AUTHORIZATION TO RELEASE INFORMATION
I (We) hereby authorize NHS OC & designated third parties to review & verify my (our) past & present income, employment records, bank statements, asset balances, credit report & past & present landlord references that are needed to process this application. It is understood that a copy of this form will also serve as my (our) authorization. The information obtained here is only to be used to ascertain my (our) eligibility to receive Neighborhood Stabilization Program (NSP) Funds.
________________________________ ________________________________ ____________
Name of Applicant (Print) Signature of Applicant Date
______________________________ ________________________________ ____________
Name of Co-Applicant (Print) Signature of Applicant Date
9. HOUSEHOLD MEMBER(S) AUTHORIZATION TO RELEASE INFORMATION
I (we) hereby certify that I (we) are over the age of 18 yrs. & are household members who will occupy the affordable home with the above applicant(s). I (we) authorize NHS OC to review & verify (our) present income as needed to process the above applicant(s) eligibility to receive Neighborhood Stabilization Program (NSP) Funds.
_________________________ ________________________ __________
Name of Household Member (Print) Signature of Household Member Date
_________________________ ________________________ __________
Name of Household Member (Print) Signature of Household Member Date
_________________________ ________________________ __________
Name of Household Member (Print) Signature of Household Member Date
_________________________ ________________________ __________
Name of Household Member (Print) Signature of Household Member Date
_________________________ ________________________ __________
Name of Household Member (Print) Signature of Household Member Date
_________________________ ________________________ __________
Name of Household Member (Print) Signature of Household Member Date
Page 4 of 5 – NSP Eligibility
10. AFFIRMATIVE ACTION INFORMATION
Applicants are considered for assistance under the Neighborhood Stabilization Program without regard to race, color, religion, sex, or national origin. To comply with Federal record keeping, reporting & other legal requirements, please provide the information below:
A. Size of household (circle one): 1 2 3 4 5 6 7 8 or more ___
B. Race of Head of Household (check):
( ) White ( ) Black or African American ( ) Asian ( ) American Indian or Alaskan Native
( ) Native Hawaiian or other/Pacific Islander
C. Ethnicity of Head of Household (check):
( ) Hispanic or Latino ( ) Not Hispanic or Latino
D. Gender: (check) ( ) Male ( ) Female ( ) Female Head of Household
11. REAL ESTATE AGENT INFORMATION
We are represented by the following Real Estate Agent:
( ) Check here if you are not represented by any real estate agent
| | | | |
|Real Estate Agent: | |Company Name: | |
| | | | |
|Agent Phone #: | |Address: | |
| | | | |
|Email: | |City, State, Zip | |
| | | | |
|Fax Number: | | | |
12. APPLICANT(S) ACKNOWLEDGEMENT
I (We) certify that the information provided in this application is true, correct & complete to the best of my (our) knowledge & belief, under full penalty of perjury punishable by fine or imprisonment. I (We) am/are aware of the Neighborhood Stabilization Program eligibility requirements & certify to the best of my (our) knowledge & belief that I (we) am/are eligible for assistance under this program. I (We) understand that perjury will result in disqualification from further consideration.
___________________________________________ Date: ___________
Applicant Signature
___________________________________________ Date: ___________
Co-Applicant Signature
Page 5 of 5 – NSP Eligibility
[pic] NSP Eligibility Documentation Checklist
Applicant(s)_________________________________________ Date: _________
__________________________________________
For NSP Eligibility, Applicant(s) must provide all of the following:
o Initial NSP 5-Page Application Form (Sections 1-12 completed and signed)
o Signed Credit Authorization and Consent Form
o Signed 4506-T forms
EVERY PERSON IN HOUSEHOLD OVER 15 YEARS OLD who will occupy the affordable home must provide ALL sources of income.
Salaried or Hourly Wages:
o Last 3 years W-2’s & 3 years Personal Federal Tax Returns with all schedules
o Original paystubs for the last month, including applicant’s name, employer’s name & address & year-to-date income.
Self-employed:
o 3 years Personal Federal Tax returns complete with all schedules
o Year-to-Date Profit & Loss Statement (unaudited)
Asset Verification (Savings, Checking, Stock, CD’s, IRA’s, Mutual Funds, etc.)
o Original bank statements for last 3 months or most recent quarterly statements, COMPLETE WITH ALL PAGES - not computer or internet generated.
o Gift Funds - Letter stating $ amount & relationship to borrower & original bank statement showing proof of funds
HUD-Approved Homebuyer Class:
o Copy of Certificate of Completion (within last 6 months) or
o Date Class Scheduled to be Completed: ____________________
APPLICANTS MUST PROVIDE: Proof of US Citizenship or Permanent Resident Alien
o US Citizen - Drivers License or Passport or Birth Certificate
o Permanent Resident Alien(s) – Drivers License & “Green Card”
o US Citizen and Permanent Resident Alien(s) – Social Security Card(s)
----------------------------------------------------------------------------------------------------------------
Eligibility Package Reviewed for Completeness by: _____________________________
NHS OC
Date package received: ______________ Date package reviewed: ______________
( ) Eligibility Package is Complete ( ) Eligibility Package is Not Complete
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198 W. Lincoln Ave. 2nd Floor, Anaheim, CA 92805 / Phone 714-490-1250 / Fax 714-490-1263 /
CREDIT AUTHORIZATION AND CONSENT FORM
I/We authorize NEIGHBORHOOD HOUSING SERVICES OF ORANGE COUNTY, INC. to obtain my/our credit report or any other information necessary for the purpose of determining NSP program eligibility. I/We understand this is not a loan application or a guarantee of a mortgage loan.
I/We authorize NEIGHBORHOOD HOUSING SERVICES OF ORANGE COUNTY, INC. to release my/our financial and credit information to any potential investor or lender in connection with a mortgage loan.
Print Name: _________________________________ Date: ____________
Applicant Signature: ___________________________
Print Name: _________________________________ Date: ____________
Co-Applicant Signature: ________________________
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