FHA 203K Rehabilitation



FHA 203K Rehabilitation

Eligible Loan Channels

To be eligible, a Wholesale account must be HUD Approved or and sponsored by an Agent.

Product Type

30 Year Fixed Rate Mortgages

Sales Focus

This program is designed by the United States Department of Housing and Urban Development (HUD) for the rehabilitation of a primary residence. Section 203(k) insurance enables homebuyers and homeowners to finance either the purchase or a refinance of a house and the cost of its rehabilitation through a single mortgage.

Geographic Restrictions

• Available in CT, DC, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT and WV.

• For CT “Nonprime” loans, restrictions apply; please see CT State law for specific requirements.

• NY “Subprime” loans are not permitted

Eligible Borrowers

The following borrower types are eligible:

• U.S. Citizens residing within the U.S

• Permanent Resident Aliens

• Non-Permanent Resident Aliens

• Non-Occupant Co-Borrowers (Maximum LTV is 75% for unrelated borrowers. If borrowers are related by blood, the LTV can exceed 75% for one-unit properties only)

Ineligible Borrowers

The following borrower types are ineligible:

• Foreign Nationals

• ITIN Borrowers

Eligible Properties

The following property types are eligible and must conform to HUD guidelines:

• 1-4 unit and PUD primary residences

• Condo’s

o 1-unit primary

o Attached and detached permitted

o Must be FHA approved via HRAP or DELRAP. To search for HRAP and DELRAP approved condos, refer to

o Wemust re-certify all HRAP and DELRAP approved projects

o Appraisal must be completed on URAR 1004

▪ The ‘Project Information Section’ of the Individual Condominium Appraisal Report must be completed and included as an addendum to the FNMA 1073 appraisal report

o Interior rehabilitation only (no common areas)

o The structure should not contain more than 4 units

o Standard homeowners hazard insurance is required

o Additional required documentation:

▪ Condo appraisal

▪ Condo questionnaire

▪ Master insurance policy

• Modular / prefabricated homes

• Leaseholds

Ineligible Properties

• Second Homes

• Investment Property

• Co-ops

• Mobile homes

• Condo / PUD Hotel

• Spec Homes

• Properties subject to HUD restrictions on “Flipping” per Mortgagee letter per Mortgagee Letter 03-07 and as updated in ML 05-05, ML 06-14.

• Properties eligible under section 223(e)

• Sub-Leaseholds

• Conversions

• Mixed-use properties under 203(k) Streamline program

• Properties with Oil or Gas leases

Minimum Loan Amount

None

Maximum Loan Amount

FHA Maximum Mortgage Limits vary per county. County limits may be found at the HUD Website .

The maximum mortgage amounts for any county under this program are:

• 1 Unit - $417,000

• 2 Unit - $533,850

• 3 Unit - $645,300

• 4 Unit - $801,950

For loan amounts higher than the above maximums, please refer to the FHA High-Cost Program and Exhibit 03-035 for eligible states and counties.

Maximum Loan to Value

|Property Type |Purchase |Rate and Term Refinance |

| |Max LTV |Max CLTV |Max |Max |

| | | |LTV |CLTV |

|1-4 Unit Primary |96.50% |96.50% |97.75% |97.75% |

Maximum Mortgage Calculation –

The value is defined as the lesser of:

• The as-is value of the property before rehabilitation plus the cost of rehabilitation; OR

• 110% of the expected market value of the property upon completion of the work.

o PLEASE NOTE: To calculate the maximum mortgage amount on purchase transactions where the sales price was re-negotiated and subsequently increased after the original appraisal was completed, We will use the lower of:

▪ The original price on the original sales contract (or binder);

▪ 110% of the after-improved appraised value; or

▪ The price on a renegotiated sales contract

The maximum mortgage amount is to be based upon 96.50% (Purchase) or 97.75% (Refinance) of the HUD estimate of value in the lower of the above. In addition, the following applies:

• For Refinances, cash back at closing not to exceed $500.

• If the property has been owned for less than 1 year, the calculation would be the same as above, except the original purchase price plus the cost of any documented improvements must be substituted for the “as-is” value, if it is lower.

• A subordinate lien(s) may be paid off subject to the following: (1) if it is a HELOC and seasoned at least 12 months, or (2) as long as it was used to acquire the property.

o A nonprofit organization not approved by FHA is permissible to provide a secondary mortgage. The nonprofit organization is underwritten as an “Other Organization” as outlined in Handbook 4155.1 5.C.5:

▪ The borrower must provide the minimum 3.5% down payment;

▪ The CLTV may not exceed the LTV;

▪ The combined indebtedness for the 1st and 2nd may not exceed FHA’s statutory loan limit;

▪ The second mortgage may not have a balloon provision within the first 10 years and there may be no prepayment penalty.

|Criteria |Government Agency |Nonprofit – |Nonprofit – NON |Other Organizations |

| | |Instrumentality of |Instrumentality of |(Includin Nonprofits Not |

| | |Government |Government |FHA Approved) |

|Need FHA Approval? |No |No |Yes |No |

|Max.C LTV |Can > 100% |Can > 100% |Can > 100% |Can’t Exceed Max. LTV |

|Borrower To Provide 3.5% |No |No |Yes |Yes |

|Downpayment? | | | | |

|CLTV Exceeds Statutory |Yes |Yes |No |No |

|Loan Limit? | | | | |

|Other 2nd Mortgage |N/A |N/A |N/A |No Balloon Provision w/in|

|Restrictions | | | |1st 10 Years; No Prepay |

Notes: (1) Private individuals may provide secondary financing under the same terms as Other Organizations; (2) Additional terms and conditions apply for family member secondary financing and borrowers 60 years of age of older. Refer to the HUD Handbook 4155.1

As indicated on the back of HUD Form 92900-LT (Transmittal Summary), lenders must indicate the source type of secondary financing. If indicating a nonprofit (NP) or government agency (Gov’t), the Employer Identification Number (EIN) for the entity must also be input. When indicating “Other,” the type(s), e.g. employer, labor union must be entered in with the EIN (if applicable).

Underwriting Considerations

All loans must conform to HUD 203K underwriting guidelines.

• 203K Basics:

o The cost of rehabilitation must be at least $5,000 and the total mortgage amount on the property, including cost of repairs must fall within the Federal Housing Administration (FHA) mortgage limit for the area. The extent of the rehabilitation covered by section 203(k) insurance may range from relatively minor (though exceeding $5000 in cost) to virtual reconstruction provided the existing foundation systems remain in place.

o Refinance transactions including those where the property is owned free-and clear. Only credit-qualifying "no cash out" refinance transactions with an appraisal are eligible. The form HUD-92700 provides instructions for calculating the maximum mortgage permitted for Streamlined (k) loans for purchase and refinance transactions.

o All rehab funds are placed in escrow.

o Unused funds must be applied to reduce the balance of the mortgage OR the borrower may elect to pay for any additional elective repairs or improvements to the property.

o All rehab work must be performed by a qualified and experienced contractor chosen by the borrower and completed in a workmanlike manner.

▪ Borrowers may not use relatives as their contactors; review Identity of Interest disclosure for details on other restrictions.

o Types of improvements the borrower may make using Section 203(k) financing include:

▪ Structural alterations and reconstruction.

▪ Modernization and improvements to the home’s function.

▪ Elimination of health and safety hazards.

▪ Changes that improve appearance and eliminate obsolescence.

▪ Reconditioning or replacing plumbing.

▪ Installing well and / or septic system.

▪ Adding or replacing floors and/or floor treatments.

▪ Major landscape work and site improvements.

▪ Enhancing accessibility for a disabled person.

▪ Making energy conservation improvements.

✓ HUD requires that properties financed under this program meet certain basic energy efficiency and structural standards. However, luxury items and improvements that do not become a permanent part of the property are not eligible for the use of a 203(k) loan.

✓ Subordinate Financing – HUD allowable non-profit down payment assistance grants are permitted.

• 203(k) Streamline - The “Streamline (K)” Limited Repair Program permits homebuyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before moving-in.

o Ineligible Property - Multi family HUD REO and Mixed-use properties are ineligible.

▪ Allows for a 3/2/1 buy down plan. P&I payments may not increase more than 7 ½% per year.

▪ If the borrower has owned the property less than one year, the acquisition cost must be used to determine the maximum mortgage amount.

o The maximum loan amount includes any financed rehabilitation amount.

o The minimum repair cost threshold is not applicable.

o The maximum rehab amount is $35,000.

o NO Contingency reserve requirement. (May be added at underwriter’s discretion.)

o Eligible Work Items:

▪ Repair/Replacement of roofs, gutters and downspouts.

▪ Repair/Replacement/upgrade of existing HVAC systems.

▪ Repair/Replacement/upgrade of plumbing and electrical systems.

▪ Repair/Replacement of existing flooring.

▪ Minor remodeling, such as kitchens, which does not involve structural repairs.

▪ Weatherization: including storm windows and doors, insulation, weather stripping etc.

▪ Purchase and installation of appliances, including freestanding ranges, refrigerators, washers/dryers, dishwashers and microwave ovens.

▪ Accessibility improvements for accessibility for persons with disabilities.

▪ Painting, both exterior and interior.

▪ Repair/replace/add exterior decks, patios, porches.

▪ Basement finishing and remodeling, which does not involve structural repairs.

▪ Basement waterproofing.

▪ Window and door replacements and exterior wall re-siding.

▪ Septic system and/or well repair or replacement.

▪ Lead-based paint stabilization or abatement of lead-based paint hazards.

o Ineligible Work Items

▪ Major rehabilitation or major remodeling such as the relocation of a load-bearing wall.

▪ New construction (including room additions).

▪ Repair of structural damage.

▪ Repairs requiring detailed drawings of architectural exhibits.

▪ Landscaping or similar site amenity improvements.

▪ Any repair or improvement requiring a work schedule longer than six (6) months.

▪ Rehabilitation activities that require more than two (2) payments per specialized contractor.

▪ Required repairs arising from the appraisal that do not appear on the list of eligible repairs.

o Rehab requirements:

▪ Final inspection required.

▪ “Self-help” is strongly discouraged unless the applicant’s ability to completely perform the work in a timely and workmanlike manner is self-evident and easily documented.

▪ Cost estimates from contractor & Homeowner-Contactor agreement required.

▪ All work must be completed within 6 months. (HUD will not grant extensions).

▪ No consultant, plan reviewer or specification of repairs/work write-up required.

▪ No more than 2 payments per specialized contractor:

▪ 1st payment for material costs (not to exceed 50% of repair costs; M&T will accept receipts)

▪ 2nd payments upon completion of all work.

• Anti-Flipping Requirements -

o The list of EXEMPT entities (Sellers who do not have to comply with anti-flipping, regardless of length of ownership) can be located in ML 2006-14.

o Anti-flipping requirements for properties owned by sellers for 180-360 days can be located in ML 2006-14.

▪ Properties owned by sellers for less than 180 days are not permitted, except for above-mentioned EXEMPT entities.

• Appraisal Requirements:

o Appraisal must be assigned to a state certified FHA approved appraiser.

o Appraisals are good for 120 days. If a borrower signs a valid contract or is approved for a loan prior to the expiration date of the appraisal, the term of the appraisal may be extended for 30 days to allow for the approval of the borrower and the closing of the loan.

o Second appraisals:

▪ A second appraisal will be required when:

✓ The loan amount (excluding the UFMIP) will exceed $417,000, and

✓ The LTV (excluding the UFMIP) is equal to or greater than 95%, and

✓ The property is determined as being in a declining market.

▪ The second appraisal must be completed by an FHA approved appraiser, selected by the DE Lender underwriting the loan. The Lender is not to request a second case number through FHA Connection, but to independently engage the appraiser. The second appraisal should be on the following forms:

✓ One unit detached house – can be an exterior-only appraisal using form 2055

✓ All other property types must use the appropriate full appraisal form.

▪ If the second appraisal has an estimated value more than 5% lower than the original appraisal, the maximum mortgage must be calculated using the lower of the two appraised values.

▪ The second appraisal must be included in the FHA insurance binder.

▪ If the second appraisal is used to recalculate the maximum mortgage amount, the appropriate information from that appraisal must be entered into the appraisal logging screen in FHA Connection.

o Declining Markets policy – a property is determined to be in a declining market, if:

▪ The appraiser indicates that the property is located in a declining area in both the neighborhood section as well as in the housing trend section, and/or determine if there is an “over-supply” of properties, or

▪ The property is identified by Desktop Underwriter (DU) or Loan Prospector (LP) through Total Score Card as being located in an area of concern.

▪ If deemed in Declining Market – the appraisal must include:

✓ Two (2) comparables (as similar as possible to subject) closed within 90 days prior to the effective date of the appraisal, and

✓ Two (2) active listings or pending sales in comp position 4-6 or higher (in addition to the three settled sales comps in position 1-3). The listing/pending sales MUST

← include the original list price, any revised list prices, and total DOM (days on market)

← adjust active LISTINGS to reflect list-to-sale price ratios for the market

← adjust PENDING sales to reflect the contract purchase price or reflect list-to-sale price ratios for the market

✓ Absorption rate analysis on the 1004 MC.

• Condominiums:

o FHA Condominium Questionnaire is REQUIRED, regardless of warranty type

o Projects should be submitted for review and include:

▪ FHA Condo Submission Checklist

▪ M&T FHA Condo Questionnaire

▪ Appraisal

▪ Insurance Coverage

▪ Project Financials

▪ Project By-Laws/Declarations

o FHA HRAP/DELRAP Warranty will be completed by the Underwriter when affirming an existing HUD Approved project (HRAP) or Other-Lender Approved Project (DELRAP).

▪ NOTE: FHA HRAP and Other-Lender DELRAPs do NOT need to be submitted to Project Review if the staff DE Underwriter is comfortable with the warranty.

o DELRAP FHA Condominium Warranty will be completed by Risk Management when a project is endorsed.

• Documentation:

o Full/Alternative

o A fully executed 4506-T is required for all borrowers at application and at closing.  We must obtain and use at least one year's transcripts during the underwriting process.  Two (2) years are required for self-employed, commissioned and 1099 borrowers.  Standard documentation or AUS requirements (and/or waivers) must still be adhered to.  The information received back from the IRS must be reasonable, supported by documentation in the file and be consistent with the borrower's declarations.

o All borrowers require a valid Social Security Number. In lieu of obtaining the actual Social Security Card,

Social Security numbers may be verified by documentation such as paystub, W-2, tax returns, etc.

o We will perform a Verbal Verification of Employment for all borrowers within 7 days of closing.

• Gifts

o Gifts may be from a blood relative or a close friend with a clearly defined interest in the borrower.

o Full down payment and closing costs may be gifted.

o The donor must sign an FHA - Certified Gift Letter (Form 2421), unless otherwise determined by FHA’s Total Score Card.

o Gift funds may not be used a cash reserves for 3 and 4 unit properties.

• HPML - Further restrictions apply for loans classified as a Higher Priced Mortgage Loan:

o The DTI ratio must include the expected property taxes and insurance

▪ It must also include the largest payment of principal and interest scheduled in the first 7 years following closing.

o The following must be verified via a third-party:

▪ Current or reasonably expected income

▪ Current or reasonably expected employment

▪ Assets (other than the subject property)

▪ Liabilities

For further details, please refer to the FHA Underwriting & Eligibility Standards.

• Identity of Interest transactions - are not permitted on 203K programs.

• Leaseholds

o A term extending at least ten (10) years beyond the mortgage maturity is required along with a copy of the lease.

o Sublease hold estates, when the mortgage or holds an interest in the property only through a sublease from a lessee, rather than through a lease or deed from a fee owner or an assignment of lease from a lessee, are ineligible.

o For additional details, refer to HUD Manual 4150.1, Chapter 6.

• Loan Decisioning

o All loans must be run through FHA Total Score Card (TSC) for approval. If TSC returns a “refer” risk score, then the loan must be manually underwritten by a DE Underwriter.

o MI Contract Underwriting is not permitted for any FHA program.

o The minimum FICO Score, for both manual underwriting and TSC is 620:

|Acceptable Credit |

|Borrower |Co-Borrower |Eligible |

|> 620 |> 620 |Yes |

|> 620 |< 620 |No |

|> 620 |No Score / No Derogatory References |Yes |

|> 620 |No Score / With Derogatory References |No |

o Landlord Verifications – When required, rental history may be verified in one of the following manners:

▪ Direct written verification of rental history (VOR) if the landlord is a professional management firm (The professional management firm must be independently verified, i.e. Yellow Pages listing), or

▪ Satisfactory 12 month rental payment history, as certified by a credit reporting agency, or

▪ Twelve (12) months cancelled checks, front and back, if the landlord is not a professional management firm.

▪ A copy of the front and back of each check is required when cancelled checks are provided as documentation. The print must be legible, the date of the bank endorsement for deposit must be clearly evident on the back of each check, and the check must clearly identify the servicer, landlord, or management company.

▪ Underwriters may accept a handwritten landlord letter on a case-by-case basis (for strong loans with compensating factors) as long as a verbal verification with the landlord is documented prior to closing.

• Maximum Number of Financed Properties: The maximum number of financed properties is limited to four (4).

• Minimum borrower contribution -Borrowers must provide a minimum contribution of 3.5%. Gift funds may be considered part of the 3.5%.

• Non-Profit Gift Programs – Not Permitted

Properties Listed for Sale – FHA/VA Refinances

o Properties currently listed for sale are NOT eligible for FHA refinances, whether fully qualifying, rate/term or , streamline.

o Properties previously listed and then canceled, are eligible for refinance subject to the following:

▪ Limited Cash Out/No Cash Out/Streamline:

✓ We require that the file contain conclusive evidence, from a third party source, that the listing was canceled at least one full day prior to the application date.

✓ Any property currently listed for sale upon or after the date of application will be ineligible for a refinance transaction.

• Purchase and Hold Requirements – guidelines for a buyer acquiring a new primary residence and renting the current primary residence. The following apply:

o Borrowers may only have one FHA mortgage, so the property they are vacating may not have an FHA mortgage.

o The new primary residence occupancy must make sense, i.e.: buying bigger/more expensive primary or moving from a 2 unit to a one unit.

o Borrowers must qualify including the PITI for both properties.

o Rental income for the property being vacated may ONLY be used if one of the following applies:

▪ The borrower is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance, OR

▪ The borrower has a 75% LTV or less as determined by a current residential appraisal. An exterior only appraisal may be obtained to determine the current value of the property.

o If rental income can be used based on one of the above, reduce the rental income by the appropriate vacancy factor as determined by the appropriate FHA HOC. The following documentation will be required to verify the rental income:

▪ A fully executed lease agreement of at least one year’s duration commencing after the loan is closed, and

▪ A copy of the canceled check for the security deposit and/or first month’s rent.

• Qualifying Ratios

o 31/43%

o These ratios may be exceeded with compensating factors as discussed in Chapter 4, Section F of the HUD Handbook. These compensating factors must be recorded on the MCAW or FHA Loan Underwriting & Transmittal Summary.

• Reserves - Three months PITI are required for 3 and 4 unit properties. In addition, the property must be able to support itself based on the market rents less a 15% (10% for California, Nevada, Oregon and Washington) vacancy factor as opposed to the PITI.

• Seller Concessions - Contributions up to 6% of the sales price are allowed towards the borrowers’ actual closing costs, prepaids and discount points. Contributions exceeding 6% must be subtracted from the sales price (or value, if less) before calculating the loan-to-value.

• Short Sales and Short Payoffs:

o Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on their principal residence simply to:

▪ Take advantage of declining market conditions, and

▪ Purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.

o Borrowers are considered eligible for a new FHA-insured mortgage if:

▪ They were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and

▪ The proceeds from the short sale serve as payment in full.

o Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.  Borrowers who sold their property under FHA's pre-foreclosure sale program are not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale.  Lenders may make exception to this rule for borrowers in default on their mortgage at the time of the short sale if:

▪ The default was due to circumstances beyond the borrower's control (such as death of a primary wage earner, long term un-insured illness, etc.), and

▪ The review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower's control that caused the default.

Special Program Option

This special program still follows standard FHA Underwriting guidelines unless otherwise noted. Refer to the respective mortgagee letters on AllRegs for more information on this option.

• Good Neighbor Next Door (GNND) – Enables a full-time law enforcement officer, teacher, firefighter/emergency medical technician or active duty military personnel to purchase a specifically designated HUD acquired home located in a HUD-designated revitalization area at 50% discount and may apply for an FHA-insured mortgage with a down payment of only $100.

• Presidential Declaration of Disaster 203(h) - Through the Federal Housing Administration (FHA), HUD will insure 100% LTV mortgages for 1 family properties, primary or investment, in a Presidential-declared disaster area whose residences were destroyed or damaged to such an extent that reconstruction or replacement is necessary. Check with the Federal Emergency Management Agency (FEMA) to obtain the specific affected counties and corresponding declaration dates. This information can be found on the Internet at .

• Property Disposition Program - Upon closing of a HUD-owned single-family property (PD Sale), FHA will allow purchaser financing and closing costs to be deducted from its proceeds. The costs must be reasonable and customary in the jurisdiction where the property is located.

o The Sales Contract shall be used to reflect the total dollar amount HUD is expected to pay toward the purchaser’s financing and closing costs. In no event may the costs exceed three percent (3%) of the properties gross purchase price.

o If the total closing costs reflected on the HUD-1 settlement statement are less than the amount indicated on the sales contract, HUD will reimburse only the actual costs charged and will not credit the purchaser with any difference either in cash or through a reduced purchase price.

o Within the three percent (3%) allowance, HUD will reimburse loan origination fees up to one percent (1%) of the mortgage.

o On a FHA 203(k) Rehabilitation Loan, HUD will reimburse one and a half percent (1.5%) of the mortgage.

Application / Disclosure Requirements

• FHA Assumption for HUD-FHA Insured Mortgages (Form 2407)

• FHA Amendatory Clause – Real Estate Certification (Form 2408)

• FHA Mortgagor’s Letter of Completion (Form 2413)

• FHA Overnight Fee Authorization (Form 2414)

• FHA/VA Non-Allowable Fee Disclosure (Form 2416)

• FHA Borrower’s Acknowledgement (HUD 92700-A)

• FHA Subsidy Approval Checklist (Exh 02-400)

• FHA Condo Questionnaire (Exh 02-402)

• FHA 203(k) Maximum Mortgage Worksheet (HUD 92700)

• FHA 203k (not for Streamline K) - Initial Draw Request and Rehabilitation Inspection Form or FHA 203(k) Draw Request - HUD 9746-A.

• Specification of Repairs (not for Streamline K; or similar work write up documentation) and all required architectural exhibits.

• 203k Contractors Resume or similar contract with license and insurance information on contractor. Exhibit 02-410.

• Identity of Interest Certification (Form 2473).

• Self-Help Agreement (Form 2494) (if applicable).

Assumability

Subject to full credit review, receipt of any FHA allowable assumption fees and subject to services guidelines.

Escrow Requirements

Refer to Section 400 - Secondary Policy and Procedures.

Mortgage Insurance Premium

Amount paid by the borrower for HUD to provide insurance on the loan. Similar to private mortgage insurance, there is an upfront premium, which can be financed, and an annual premium based on term and LTV.

• Purchase Transactions –

| |Mortgage terms of more than 15 years |

|LTV | |

| |Upfront Premium ( |Annual Premium |Duration in |

| | | |Years |

|89.99% & Less |2.25% |.50% |( |

|90.00 - 95.00% |2.25% |.50% |( |

|95.01% & over |2.25% |.55% |( |

◆ Years will be determined when the loan balance equals 78%, provided the mortgagor has paid the annual mortgage insurance premium for

at least 5 years (scheduled or actual).

❖ Upfront MIP Premium does not apply to homes located in Military Impact Zones.

• Refinance transactions -

o FHA to FHA Refinance - On any refinance, where the MIP refund exceeds the new Up-front MIP (based on 2.25%), HUD will refund the overage directly to the borrower. The less of the MIP refund or the new Up-front MIP (based on 2.25%) should be subtracted from the unpaid principal balance before calculating the new mortgage amount. Use the Purchase Transactions chart above to determine the annual premium.

o Non-FHA to FHA Refinance – use the Purchase Transactions chart above to determine the UFMIP and the annual premiums.

NY Consolidation Extension and Modification Agreement (CEMA)

Permitted for fixed rate transactions only. The parties have to be the same from the original loan to the new CEMA, unless a documented death or documented divorce with new deed is provided.

Operational Addenda and Exhibits

• 203(k) Maximum Mortgage Worksheet – HUD 92700

• Streamline 203(k) Limited repair program – Mortgagee Letter 05-50

Prepayment Penalty

If loan is paid off on any date other than a scheduled payment date, interest may be charged through the last day for the month the payoff is made.

Pricing and Rate Locks

Refer to daily rate sheets

• For 203(k): Supplemental Origination Fee: Greater of $350 or 1.5% of the cost of repairs.

Settlement Instruments

We require the use of the standard FHA Note and Mortgage/Deed of Trust form for the state in which the property is located as well as the standard multi-state applicable riders for, condominiums, PUDs or multi-unit properties, if applicable.

• Buy down agreement is required at closing for loans with a buydown.

• For 203(k) Rehabilitation and Streamline:

o Riders: Rehabilitation Loan Rider

o Miscellaneous: FHA 203k Borrower’s Acknowledgement – Form 2417

o NYS ONLY: Section 22 Affidavit and Notice of Lending

Temporary Buydowns

• Purchases only – 2-1 buy down only

• 203(k) Streamline only – 3-2-1 Buy down

• Qualify at note rate.

• The buy down may not result in a reduction of more then 2% below the interest rate on the note.

• The buy down must not result in more than 1% annual decrease in the interest rate. The borrower’s payment may change only once a year.

Product Description and Product Codes

Product Description Product Code

|203(k) Renovation 30 Year Fixed |613 |

|203(k) Renovation Buydown |618 |

| |

|203(k) Streamline 30 Year Fixed |1613 |

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download