CalHome ProgramOperations Handbook

Workshop

California Department of Housing and Community DevelopmentGuerdon Stuckey – Acting Deputy Director

Nicole Carr – Assistant Deputy Director

CalHome Program StaffProgram ManagerRaymond Victor 916.327.8255 rvictor@hcd.ca.gov

Program RepresentativesRikki Bradley 916.445.8335 rbradley@hcd.ca.gov

Rick Gadberry 916.327.3647 rgadberry@hcd.ca.gov

Andrea Kenedy 916.327.3611 akenedy@hcd.ca.gov

Gary Pettigrew 916.327.3586 gpettigrew@hcd.ca.gov

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Standard AgreementStandard Agreement

Standard Agreement (STD 213)

First Page:

• Standard Agreement Number• Standard Agreement Amount• Recipient Authorized Signature• Important Dates

Term of the AgreementEffective date stamped in bottom right corner

NO FUNDS MAY BE OBLIGATED BEFORE THE HCD DATE STAMP

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Standard Agreement (STD 213) continued

Exhibit A:

• Contract Deadline – April 5, 2015 • 100% expenditure deadline AND • Termination of Grant Agreement

• Special Conditions or Restrictions• Federally-qualified census tract(s)• Redevelopment area(s)

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Standard Agreement (STD 213) continued

Exhibit B: • One Time Submissions

Program Guidelines to include each activity Loan Servicing Plan Reuse Account Plan Homebuyer Education Plan

• Mortgage Assistance Program only Loan Document Templates for each activity

• Should be only for CalHome funds Executed Monitoring Agreement

All items must be submitted, reviewed and approved PRIOR to release of funds

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Program Guidelines

The Local Look of Your CalHome Program

Program Guidelines

Program Guidelines

Blueprint of Your Program Operation: • Designed to meet your local needs

• Developed by you• comprehensive • clearly written

• Must comply with CalHome Regulations

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Program Guidelines continued

Includes:

• Types of housing allowed SFR, 2-4 units, Condo, Manufactured housing

• Interest rate on loans Consistent throughout program

• Maximums for: CalHome subsidy amounts per loan CLTV Sales price/value

• Data source for setting maximum sales price/value

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Program Guidelines continued

• Underwriting policies Methodology for determining eligibility Methodology for determining income Benchmarks for credit worthiness

• Allowable terms of senior and junior liens

• Subordination of the CalHome loan to a new senior lien Restrictions - avoid jeopardizing CalHome lien

• CLTV• Rate and term

• Methodology for handling Defaults Foreclosures Short sales 10

Program Guidelines continued

• CalHome Core Requirements

Low to very low income per HCD chart

Owner-occupancy

Not assumable

Limited permissible transfers

Interest rate up to 3% or shared net equity

Deferred payments for term of the loan

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Program Guidelines continued

• Activity Specific requirements – Mortgage Assistance

• Gap financing

• First-time Homebuyer

• Home Buyer Education

• 30 year term (except with USDA 502)

• Purchase with rehabilitation12

Program Guidelines continued

• Activity Specific requirements – Rehabilitation

Development of scope of work and costs for: Correction of Health or Safety issues Correction of Code violations Compliance with a local ordinance

Processes for bidding by licensed contractors

Management of construction progress

Agreement between Borrower and Recipient

Agreement between Borrower and Contractor

Dispute resolution13

Loan ServicingLoan Servicing

Loan Servicing Requirements

• You are responsible for loan servicing for the term of the loan

• May be done by Recipient or contracted to a third party

• If a third party provides this service you must submit a copy of the contract

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Loan Servicing continued

Loan Servicing Plan Elements:

• Procedure for verifying: Owner-occupancy Current status of insurance Property taxes are current and paid

• Methodology to: Track loan repayments Calculate pay-offs and process demands Reconvey Deeds of Trust

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Loan Servicing continued

Additional concerns:

• Identify eligible transfers

• Describe accelerating events

• Set out processes for Collections and Defaults Foreclosure of CalHome loan Foreclosure of a senior lien Short-sale

• Define refinancing requirements Rate and term only

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Reuse Account PlanReuse Account Plan

Reuse Account Plan Requirements

• Must be a designated account Separate from active grant account Can contain funds from more than one CalHome grant No co-mingling of funds

• Describe tracking system

• Describe funds contained in it Repayments of Principal and Interest Allowable excess from OOR projects Interest earned on Active Account Interest earned on Reuse Account

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Reuse Account Plan continued

• Describe eligible use of account funds May be used for any CalHome eligible activity

• Mortgage Assistance• Mortgage Assistance with rehabilitation• Owner-Occupied Rehabilitation

May be used for ADF reimbursement• Restricted to loans made entirely from the Reuse Account• Must be for actual costs, reasonable and normal for the area• Includes $350 for Homebuyer Education

May be used for loan servicing• Up to 5% of funds deposited

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Homebuyer EducationHomebuyer Education

Homebuyer Education Requirements

• For Mortgage Assistance activities only

• You are responsible for the contents and delivery of the Homebuyer education

• May be done by Recipient or contracted to a third party

• If a third party provides this service you must submit a copy of the contract or MOU

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Homebuyer Education Plan Elements: • Establish the amount of reimbursement per CalHome loan

closed ($350 maximum)

• Identify who is to provide training Recipient Third Party

• Must be in business of providing homebuyer education• Lenders, Realtors, and on-line are usually not acceptable

• Identify who must receive training All borrowers must complete a 5-8 hour live course Each borrower must receive a certificate

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Homebuyer Education Plan continued

• Set out the required curriculum:

Preparing for homeownership/shopping for a home

Available financing, credit analysis and making an offer

Loan closing

Homeownership responsibilities • home maintenance• Avoiding foreclosure

Loan payments and servicing

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Homebuyer Education Plan continued

Disbursement ProceduresDisbursement Procedures

Disbursement of Funds

• After all predisbursement requirements have been met

• What amount may be requested? Promissory Note amount Activity Delivery Fee Reimbursement (cost recovery)

• Normal and Customary for market• Reasonable and justifiable• Actual

Combined amounts may not exceed $60,000 cap

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Disbursement of Funds continued

• Draw Request on appropriate form Must be signed by Authorized Signatory

• Request for funds as Reimbursement Submit Borrower Summary and ADF Reimbursement forms Attach all documentation identified on Borrower Summary

• Request for funds as an Advance Up to 25% of the award amount each time 2/3 of the advanced funds must be documented before next request

will be processed To document usage:

• Submit Borrower Summary and ADF Reimbursement forms• Attach all documentation identified on Borrower Summary

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Income QualifyingIncome Qualifying

Income Qualifying Requirements

Two factors to consider:• Household size

Count all persons living in the property regardless of age

Exceptions: • Foster children• Unborn children• Children subject to shared custody if less than 50% of time• Non-related live-in caretakers if paid by outside agency

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Income Qualifying continued

• Gross Income of all adult household members

Income inclusions and exclusions per 25 CCR, Section 6914• Exclude income from non-related live-in caretaker if paid outside

Verified by use of:• Source documents• Third Party verifications• Credit Report• EDD verifications of UI or DI benefits

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Income Qualifying continued

• Project 12 months into the future

• Complete the CalHome Gross Income Worksheet “Forms” tab in CalHome Operations Handbook

Guides you through treatment of assets• Asset liquidation not required• Show but do not include amounts to be used for transaction• Asset value if being retained is market value - NOT cash value• Income from assets only if asset value is $5,000 or more

• Compare to State Income Limits for County 80% or less (low or very low income) Adjusted for household size

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Underwriting RequirementsUnderwriting Requirements

Underwriting RequirementsFor each CalHome Program Loan: • Have a loan application signed and dated by Borrower

Recipient’s own form To be analyzed and confirmed by Underwriter (sign and date)

• Determine eligibility: Property

• Requirements for an appraisal• Sales price or value limits• If Mortgage Assistance only, must be ready for occupancy

First time homebuyer or confirm presently on title

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Underwriting continued

• Determine eligibility (continued):

Income

• Amount of gross income• Income for household does not exceed income limits

Risk level

• Credit worthiness• Debt Ratios• Compensating factors• CLTV does not exceed 100% plus 5% for closing costs

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Underwriting continued

• Confirm Subsidy amount plus ADF does not exceed CalHome cap

CalHome loan term is consistent within program:• 30 years for Mortgage Assistance (either stick built or manufactured

home on non-permanent foundation)• Up to -30 years for Owner-Occupied Rehabilitation • 10-30 years for manufactured home on a non-permanent foundation• 20 years for a forgivable loan on a manufactured home on a non-

permanent foundation• 33-38 years if behind USDA-RHS 502 loan

If CalHome is only subsidy, Borrower may sell at fair market value at any time regardless of restrictions

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Underwriting continued

• Confirm continued:

Terms of senior liens meet CalHome Requirements

• No ARMs or negative amortization loans• No temporary buydowns• No balloon payments or deferred interest• Maturity date must be same as CalHome loan

Terms of subordinate liens meet CalHome Requirements

• Fees reasonable and consistent with those charged for first liens• No balloon payment before the maturity date of the CalHome loan• Must defer principal and interest for the term of the CalHome loan

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Loan Closing ProceduresLoan Closing Procedures

Loan Closing ProceduresPre-Closing

• Update income if data is older than 6 months

• Review for compatibility with CalHome requirements: First mortgage lender’s instructions to Escrow First mortgage lender’s exceptions and exclusions to title First mortgage lender’s loan documents

• Provide Instructions to Escrow No cash out Recording sequence – CalHome first subsidy Exceptions and endorsements to title policy Insurance requirements – Recipient is Loss Payee Request for recording information/document numbers 38

Loan Closing Procedures continued

• Provide documents to Escrow CalHome Deed of Trust Request for Notice of Default Request for Notice of Completion Disclosure forms required by law

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Loan Closing Procedures continued

Post-Closing

• Review for Completeness and Compliance: Signed and certified loan documents and disclosures Certified FINAL Settlement Statement Evidence of Insurance with Recipient as additional Loss Payee

• Confirm Title policy has: Correct borrower Correct address Liens in appropriate position and amounts Exceptions as allowed Requested endorsements attached

• Confirm all required documents have been recorded

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Performance ReportingPerformance Reporting

Performance ReportingTwo Reports – “a snapshot in time”• Quarterly reports for active grants

March 30th June 30th September 30th December 31st

• Annual Reports July 1st through June 30th During Active grant phase

• Covers only the one grant • Also reports the amounts in the Reuse Account

Reuse Account Annual Report after first Active grant has closed• Covers more than one grant

Reports are due 30 days after end of reporting period 42

Performance Reporting continued

Reports include:

• Narrative summary Operational successes Operational difficulties Number and type of units assisted

• Financial summary Includes funds in Reuse Account as a separate line item Reuse Annual Account should reconcile to other reports

• Signature and title of Authorized Signatory

• Signature date

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Recipient MonitoringRecipient Monitoring

MonitoringPurposes for Monitoring• To ensure compliance with CalHome Regulations• To provide technical assistance• To suggest best practices

Major Methods of Monitoring• Desk Reviews

Borrower Summaries and attached documentation Quarterly and Annual Reports

• Correspondence and phone calls• Site visits during active grant phase • Site visits during remainder of 20-year Agreement

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Monitoring continued

Monitoring Highlights

• During the term of the Standard Agreement and three years beyond: Program Activity is monitored and subject to audit

• Individual Borrower files• All financial records associated with the CalHome Program• All other records as provided for in the Standard Agreement• All other program operations

• During the term of the Monitoring Agreement 20 years term from date of stamp on Standard Agreement

• Loan Servicing• Reuse Account

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Questions or Comments?Questions or Comments?

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Thank you!