dpa advantage program - … · © copyright 2018 american financial resources, inc. all rights...

© COPYRIGHT 2018 AMERICAN FINANCIAL RESOURCES, INC. ALL RIGHTS RESERVED

DPA ADVANTAGE PROGRAM

Revised 06/22/2018



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These materials are intended for informational use only. This is neither legal advice nor a substitute for Agency Guidelines. Please do not reproduce, display, or distribute without the express written permission of AFR. This information is subject to change in AFR’s sole discretion. Updated AFR guidelines may be accessed on AFR’s website, www.afrwholesale.com. All rights reserved ©. The AFR underwriter has the right to decline or suspend a file at their sole discretion for any reason allowed by law. AFR is an equal housing lender. NMLS 2826. American Financial Resources, Inc., 9 Sylvan Way, Parsippany, NJ, 07054.

DISCLAIMER

http://www.afrwholesale.com/



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AFR empowers you with our ever-expanding array of programs to find the perfect fit for your borrower. We are pleased to announce our latest offering – a nationwide down payment assistance program, offered by an approved governmental entity which you may use with either the FHA 203(b) program or any of our FHA renovation programs. Have a borrower who has found the perfect location, but the house needs some TLC? This program may be just the thing!

Now you have ONE down payment assistance program that you may use nearly nationwide (not yet available in WA or HI).

• One program used for all types of borrowers, with the same qualifications

• Completely forgivable grant, equals 2% of purchase price

• May be combined with up to 6% seller concession for closing costs

• No resale or borrower repayment restrictions

• No underwriting fee

PROGRAM SUMMARY



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• Broker

• Correspondent

• Table Fund

• Non-Delegated Underwriting

• AFR must prepare closing docs on all transactions

• An Alternate Lender Form must be completed and executed for clients that are not currently set up for AFR to prepare documents – (Client Services will handle this if needed.)

• Correspondent must provide the settlement agent’s wire instructions.

• See Homebuyer Education Requirements and Geographic Restrictions for additional Non-Delegated Correspondent requirements.

PROGRAM SPECIFICATIONS

• FICO:

• 580 Minimum Qualifying Credit Scores

• UW METHOD:

• TOTAL Scorecard

• Desktop Underwriter (DU)

• Loan Prospector (LP)

• AUS RECOMMENDATIONS:

• Approve/Eligible – DU

• Accept – LP

CHANNELS PARAMETERS

Note: Delegated Correspondent transactions are NOTpermitted

Important: Broker and Table Fund 203(k) transactions must have Borrower Paid Compensation; Lender Paid Compensation not permitted.

Note: Refer recommendations and Manual underwrites NOT permitted



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• ELIGIBLE TERMS:

• 20Yr., 25Yr., 30Yr., Fixed

• TRANSACTION TYPES:

• Purchase Only

• LTV/CLTV/HCLTV:

• The maximum limit is 96.50%

• DTI:

• Maximum DTI limit is 48.99%

• PROGRAM OVERLAYS:

• Follow all overlays outlined in the FHA 203(b) Program Matrix.


• 1-2 Unit Primary Residence

• Manufactured Housing

• Single-width, Multi-width, MH Condo Projects

• FHA HRAP Approved Condos

• PUDs

PARAMETERS PROPERTY TYPES



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The DPA Advantage Program can be used in conjunction with:

• FHA 203(b)

• FHA Limited 203(k)

• FHA Standard 203(k)

• FHA Repair Escrow


Program cannot be used in conjunction with:

• FHA 100 Down Program

• FHA 203(h) Program

• FHA GNND Program

• FHA OTC

• Any other DPA Program

ELIGIBLE PROGRAMS INELIGIBLE PROGRAMS



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BORROWER ELIGIBILITY

Note: Borrower(s) must complete and execute the Down Payment Assistance Application based on eligibility.



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To be eligible for the program, the borrower(s) must meet one of the three following categories outlined. (First -Time Home Buyer, Current/Retired Employment or Volunteer/Non-Paid Member or Income)

• Any Borrower on the loan application is a First -Time Home Buyer who meets the following criteria:

✓ Is purchasing the Subject Property;

✓Will reside in the Subject Property as their principal residence;

✓Has had no ownership interest (sole or joint) in a residential property during the three -year period preceding the date of the application.

✓Or is an individual who is a homemaker or single parent that has no ownership interest in a principal residence (other than a joint ownership interest with a (former) spouse) during the three -year period preceding the date of the application.

ELIGIBLE BORROWERS

FIRST-TIME HOME BUYER



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• The Borrower’s income (or, in the event of multiple Borrowers on a loan application, their income collectively) is equal to o r less than 140% of the state or county median income regardless of family size based upon the state or county where the Security Property is located.

• State/County Median Income Tool: https://homeready-eligibility.fanniemae.com/homeready/

ELIGIBLE BORROWERS

INCOME

What if the Borrower’s paystub reflects over-time income? Is this required to

be counted towards the 140%?

• If the over-time income is not used to qualify the borrower, then the over -time income does not have to count towards the 140%.

• The income that the underwriter will use to qualify the borrower is what will be compared to the 140%.

https://homeready-eligibility.fanniemae.com/homeready/



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• Any Borrower on the loan application is a current, retired, volunteer or non -paid:

• First responder (police officer, firefighter, public safety officer, paramedic, emergency medical technician (EMT) or similar

• Educator (Sunday school teacher, tutor, day care provider)

• Medical personnel (nurse, doctor, phlebotomists, health ambassador, or hospital, American Red Cross worker, or similar)

• Civil servant in a Federal, state or local municipality

• Military personnel

ELIGIBLE BORROWERS

CURRENT/RETIRED EMPLOYMENT OR VOLUNTEER/NON-PAID MEMBER



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• One Borrower must complete homeownership counseling (Homebuyer education course or Pre-purchase counseling course) offered by an entity of the Borrower’s choice which is approved by HUD/FHA, either online or in person.

✓The cost of the course shall initially be paid by the Borrower (by credit card if they so choose), which the Lender shall credit back towards closing costs (up to $100) at the closing of the loan.


• https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

• Non-Delegated Correspondent clients must:

✓Provide the certificate and receipt for the course along with the initial Loan Estimate showing the fee disclosed to the Borrower.

✓Provide the Closing Disclosure showing the amount of the course (up to $100) being credited back to the closing costs.

HOMEOWNERSHIP EDUCATION HUD CREDIT COUNSELING

https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm



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GEOGRAPHIC RESTRICTIONS

This program is not permitted in the State of Hawaii.

This program is not permitted in

the State of Washington.

• Up to $700 of the appraisal fee must be credited back to the borrower towards closing costs.

• Broker and Table Funded transactions will have the fee credited back towards the closing costs on the Closing Disclosure.

• Non-Delegated Correspondent clientsmust reflect as credit towards closing costs on the Closing Disclosure.

• Note: AFR to add the amount of the appraisal fee on the purchase advice.



RESOURCE CENTER: PROGRAM MATRIX

• NOTE: No flipping allowed, NEW submissions only.



RESOURCE CENTER: DPA SECTION

• The “Step by Step” guide for selling the Advantage product to your borrower can be found in the DPA Section of the Resource Center.



RESOURCE CENTER: FORMS

• Wholesale clients (Broker and Table Funded): these documents will be included in the package.

• Correspondent clients (Non-Delegated): the DPA Program Disclosure and the Down Payment Assistance Application will be available in the Forms section of the Resource Center.

• Your Account Manager will generate and send you the Assistance Grant Letter.



DOWN PAYMENT ASSISTANCE APPLICATION

• This program application will certify how the borrower is eligible for the program.



ASSISTANCE GRANT LETTER

• This letter will indicate the amount of the grant.



DPA PROGRAM DISCLOSURE

• This disclosure outlines how the program works, including the expense to participate.

• The borrower will have a higher interest rate as a result of receiving the grant, this is not “free” money.



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A higher interest rate on your loan will mean that your monthly mortgage payments will be higher than they would be if you donot participate in the program, and you will pay more in interest over the life of the loan.

• For example, if you participate in the program the interest rate on your loan of $150,000 may be 4.5%. If you do not participate in the program and instead pay the full down payment amount yourself or from a gift to you from a relative, the interest rate on your loan may only be 4.0%. As a result, if you participate in the program your monthly mortgage payment in this example would be $760.00 plus taxes and insurance, while it would only be $716.00 plus taxes and insurance if you do not participate in this program. This would mean you would be paying $44.00 more each month by participating in the program.

CLOSER LOOK AT THE DPA PROGRAM DISCLOSURE

Although participating in the program can bring benefits, it also can be relatively expensive to do so. Because of the increased potential overall cost to you in participating in the program, we urge you to consider other potentially less costly options for receiving down payment assistance that also may also be available to you before you choose to participate in this program. For example, if you can receive funds as a gift from a relative that you can use towards the required down payment amount, you should use those gift funds instead of participating in this program.

IT IS IMPORTANT TO UNDERSTAND THAT BY RECEIVING DOWN PAYMENT ASSISTANCE UNDER THE PROGRAM, YOU WILL HAVE A HIGHER INTEREST RATE ON YOUR LOAN THAN YOU WOULD HAVE IF YOU DO NOT PARTICIPATE IN THE PROGRAM, AND WILL PAY MORE EACH MONTH.



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If you qualify for the program, you will be eligible to receive funds to cover a portion of your required down payment amount . The maximum amount of funds you can receive under the program is 2% of the purchase price of the home being purchased; you will still be required to pay any remaining amount of the required down payment yourself or with a gift from a family member.

• For example, if you are purchasing a home with a purchase price of $150,000, the maximum amount of down payment assistance you can receive under the program is 2% of $150,000, or $3,000. If the required down payment amount is $5,250 (3.5% of $150,000), you would still be required to fund $2,250 yourself, or from a gift from a family member.

CLOSER LOOK AT THE DPA PROGRAM DISCLOSURE

If you do choose to participate in this program, you also should consider refinancing your loan into a lower interest rate as soon as you are eligible to do so. HOWEVER, PLEASE ALSO BE AWARE THAT YOU MAY NOT BE ABLE TO LOWER YOUR LOAN INTEREST RATE IN THE FUTURE THROUGH REFINANCING IF, FOR EXAMPLE, MARKET INTEREST RATES RISE.



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PROCESS FLOW

HOW TO SELL THE DPA ADVANTAGE PROGRAM



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DPA Advantage Program is a program used in conjunction with a nationwide down payment assistance grant offered by a Governmental Entity. The grant will provide eligible Borrowers 2% of the 3.5% required minimum borrower contribution on FHA 203(b), FHA 203(k) and FHA Repair Escrow transactions.

Getting Started:

When taking the application with the borrower and understanding their needs the Mortgage Loan Officer (“MLO”) should be discussing all options available (all loans must meet RESPA requirements by showing the borrower their options). Avoid steeri ng the borrower or making a program decision for them. “We have a great program that you may be interested in…”

Determining Options:

In the review of the information gathered and/or the borrower states they do not have much money saved for a down payment, the MLO, if knowing with this information the borrower still fits into a FHA 203(b), FHA 203(k) or FHA Repair Escrow loan, sh ould include the DPA Advantage Program as an option. (Reminder: This program is not permitted in the states of HI and WA).

___ Is this a purchase?

___ Is this a refinance?

___ Is the borrower eligible for any of the following: FHA 203(b), FHA 203(k) or FHA Repair Escrow

___ Is the subject property in the states of HI and WA?

STEP BY STEP

See the sign, save your time! The sign indicates ineligibility for this program.



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Presenting the Program:

MLO must explain to the borrower that this grant of 2% of the purchase price is a completely forgivable grant and no paymentsare required. The remaining 1.5% of the required minimum borrower contribution can be given to them as a gift that adheres toFHA/AFR gift policies or from their own funds.

___ Is the borrower able to contribute the remaining 1.5%?

___ Does the borrower not want to use all of their savings?

___ Is the borrower using another DPA?

Interested Borrower:

If the borrower shows interest in this program, the MLO must go over the eligibility factor for the DPA, the highlights of th e program and the requirements needed. MLO must remind the borrower that the loan still must meet all FHA guidelines.

___ Does the borrower seem interested in the program?

___ Did the borrower indicate that they are not interested in the program?

Determining Borrower Eligibility:

The MLO should understand the 3 eligibility factors of the borrower qualifying for the DPA. (income less than or equal to 140 % of the AMI, current/retired/volunteer/non-paid member of a specific employment type, or a FTHB that meets certain criteria. (Borrower only needs to qualify for 1 of the 3 eligibility factors.)

___ (1) Does the borrower meet the FTHB criteria?

If yes, proceed to the next section “Borrower is likely Eligible”.

If no, proceed to next question below.

STEP BY STEP



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___ (2) Does the borrower meet the criteria for current/retired/volunteer/non -paid member of a specific

employment type?


If no, proceed to next question below.

If the borrower does not hold one of the qualifying employment types or is not a FTHB that meets all of the required criteria , they should run the AMI for the borrower’s subject property address to determine if their income meets the requirement needed. AFR requires the use of the FNMA HomeReady AMI calculator to determine this.

___ (3) Does the borrower meet the income requirement?


___ If the borrower does not meet any of the 3 factors above then they are not eligible for this DPA.

Borrower is likely Eligible:

If determined that the borrower may qualify for the DPA, the MLO must discuss that the loan must be fully submitted and reviewed by a FHA Underwriter for a full decision to be made. The MLO must also discuss the requirements needed to move forward.

___ Have you expressed that the Eligibility decision will be made by the Underwriter?

STEP BY STEP




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Program Requirements:

• Homebuyer Counseling Certificate is required for these loans – MLO to communicate to the borrow that the Homeownership Counseling disclosure will identify HUD Approved Housing Counseling Agencies that offer Pre-purchase counseling. Inform the borrower that the fee for this can range. Discuss how the Lender will credit up to a maximum of $100 back towards the closingcosts once the invoice and certificate have been received by AFR. The LE will show a $100 fee to be able to apply this credit tothe closing costs at closing. (NOTE: If not disclosed on INITIAL LE, CANNOT be credited back.)

• Be very careful NOT to say REFUND when speaking about this because the borrower may interpret this as a check. Explain the reasoning why we require this $100 to be disclosed to them which is because we don’t know what the actual cost will be, and they range from free to who knows. If the cost exceeds $100, then they will be out of pocket for difference.

___ Did you inform the borrower that Homebuyer Counseling is required?

___ Did you inform the borrower the Approved Counseling Agencies will be listed on their Homeownership

Counseling disclosure?

___ Did you inform the borrower that there could be a cost for the course?

___ Did you inform the borrower that there will be a lender credit, up to a maximum of $100 towards their closing costs

for this expense once we receive the invoice and certificate of completion?

• Broker and TF transactions: AFR will apply the lender credit.

• Non-delegated Correspondent transactions: Correspondent is responsible.

STEP BY STEP




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• Borrower must execute all initial disclosures with the addition of the following: DPA Program Disclosure, Down Payment Assistance Application and the Assistance Grant Letter.

• Wholesale clients: these documents will be included in the package.

• Correspondent clients: the DPA Program Disclosure and the Down Payment Assistance Application will be available in the Forms section of the Resource Center. Your Account Manager will generate and send you the Assistance Grant Letter.

• Wisconsin Subject Property: Inform the borrower that for subject property in the state of WI, the lender will credit back theappraisal cost towards closing costs up to the amount of $700 but no more than the amount of the invoice for the cost of the appraisal.

• Broker and Table Funded transactions will have the fee credited back as a lender credit towards closing costs on the Closing Disclosure.

• Non-Delegated Correspondent clients must reflect the fee as a lender credit towards closing costs on the Closing Disclosure. Note: AFR to add the amount of the appraisal fee on the purchase advice.

Reminders:

✓Initial Disclosures must show the Loan Estimate completed with Options to Shop and the $100 Counseling Fee.

✓File will follow normal process but AFR has a 3 day turn time on closing docs for this program.

✓AFR must prepare the closing documents on Non-Delegated Correspondent transactions.

***All loans are subject to a full AFR FHA underwrite and subject to underwriter’s discretion.***

STEP BY STEP



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PROCESS FLOW

HOMEOWNERSHIP EDUCATION OPTIONS



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The Homeownership Counseling Organization List is a disclosure that is currently provided on all FHA files. This disclosure l ists the 10 closest Housing Counselors near the subject property zip code OR you can visit HUD.gov. For this program, you will need to ensure the course completed is either the “Pre -purchase Homebuyer Education Workshop” or the “Pre -purchase Counseling“.


HOMEOWNERSHIP COUNSELING LIST HUD.GOV




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You can narrow the search down using the dropdown and selecting either “Pre -purchase Homebuyer Education Workshop” or “Pre-purchase Counseling“.


HUD.GOV HUD.GOV



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PROCESS FLOW

DETERMINING ELIGIBILITY BASED ON INCOME



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• STEP 1

• Select hyperlink “Look up county median income”

• https://homeready-eligibility.fanniemae.com/homeready/

DETERMINING INCOME ELIGIBILITY

• STEP 2

• Select “OK”




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• STEP 3

• Enter the Subject Property Address




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• Income Limit will populate.

• Borrower’s income (or, in the event of multiple Borrowers on a loan application, their income collectively) must be equal to or less than 140% of the state or county median income regardless of family size based upon the state or county where the Security Property is located to be eligible based on income.



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PROCESS FLOW

ENTERING THE DPA IN ENCOMPASS & THE AUS



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• Encompass: Enter the Source of Down Payment as “FHA -Gift-Source Government Assistance”

ENCOMPASS: 1003 PAGE 1 & AUS

• AUS: Reflects the DPA as a Gift and will follow all FHA/AFR gift policies.



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• Select the Source of Down Payment as “FHA-Gift-Source Government Assistance”

DESKTOP VIEW



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• In the Assets section, select “Gift” from the dropdown.

DESKTOP VIEW



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The Account Type description will vary based on the AUS type.

✓ When running DU, use “Gifts Not Deposited”.

✓ When running LP, use “Gifts Total”.

ENCOMPASS: 1003 PAGE 2

DU: GIFTS NOT DEPOSITED LP: GIFTS TOTAL



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What if the Borrower is also receiving a personal gift in

addition to the DPA? How is this handled on the AUS?

ENCOMPASS: 1003 PAGE 2

• The 1003 Page 1, Source of Down Payment will be the same: “FHA-Gift-Source Government Assistance”

• The VOD section of the 1003 will list them individually, which will carry over to the AUS.

EXAMPLE: • Account Type description, “Gifts Not Deposited” is based on running DU. • For LP, the Account Type description would be “Gifts Total”.



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PROCESS FLOW

PROGRAM FEES



HOMEBUYER COUNSELING FEE

• The program requires Homebuyer Counseling and the fee of $100 should be disclosed on the LE.

• The only exceptions to disclosing less than $100 are outlined below:

1. Borrower(s) has completed the course and has provided an invoice evidencing the actual cost.

2. The borrower is able to provide documentation of what the cost will be.

✓ The cost of the course shall initially be paid by the Borrower (by credit card if they so choose), which the Lender shall credit back towards closing costs (up to $100) at the closing of the loan.



WI APPRAISAL FEE

• Up to $700 of the appraisal fee must be credited back to the borrower towards closing costs.

• Broker and Table Funded transactions will have the fee credited back towards the closing costs on the Closing Disclosure.

• Non-Delegated Correspondent clients must reflect as credit towards closing costs on the Closing Disclosure.

• Note: AFR to add the amount of the appraisal fee on the purchase advice.



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Q: Can the DPA Advantage program be used on Agency High Balance loans?

A: Yes, as long as all other requirements are met.

Q: Can a 3rd party processing fee be charged?

A: Yes, as long as the 3 rd party processor is not affiliated with the Broker.

Q: Do we need Agent Approval on correspondent files?

A: Yes, AFR will require to perform an Agent Approval on Correspondent transactions. AFR requires the Correspondent to

provide the settlement agent’s wiring instructions. Once they are provided the CPS will escalate to the Agent Approval

desk to complete.

Q: Does the program allow for non-occupant co-borrower? If so, do they need to meet 1 of the 3 areas too? (First time

homebuyer, Income or Employment?)

A: Yes, the program will allow for a non-occupant co-borrower. Only one borrower is required to meet 1 of the 3 areas to be

eligible.

FREQUENTLY ASKED QUESTIONS



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Q: If a borrower has previously completed a Homebuyer Counseling course, will AFR accept it?

A: If the Borrower has completed the course prior to our application date, AFR will accept it as long as it is the correct

course and the expiration of the course is prior to our Note Date.

Q: Do all borrowers need to take the home counseling or just one?

A: Only one borrower is required to complete the course.

Q: Can the borrower use the MGIC free home counseling course to fulfill the requirement?

A: No, the MGIC course is not backed by HUD.

Q: Can the borrower use the NO-FEE homebuyer education program offered via FNMA?

A: No, the no-fee online course does not meet the DPA Advantage program requirements.




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Q: Can I use FNMA Framework as the Home Counseling?

A: Yes, this course is led by a HUD Counselor.

https://www.fanniemae.com/content/guide/selling/b2/2/06.html

https://www.fanniemae.com/content/fact_sheet/homeready-education-requirement.pdf

Q: Does the FHLMC CreditSmart course meet the requirements for the Home Counseling?

A: No, this course is not led by a HUD Counselor.

Q: Are we going to take the AMI and multiply it by 140% to come up with our income limit for this program regardless of the areas being underserved? Are underserved areas exempt from the income limits?

A: No, use 140% of the AMI in all areas.

Q: Is anyone else struggling with the AUS recommendation when the credit score is under 630?

A: There is a high probability that you will receive a “Refer” once the gift is entered into DU.


https://www.fanniemae.com/content/guide/selling/b2/2/06.html

https://www.fanniemae.com/content/fact_sheet/homeready-education-requirement.pdf



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Q: Is TBD permitted?

A: TBD is not permitted because it must be an Approve/Eligible and without the actual numbers, there is no way to know.

Q: Can a borrower contribute more than 3.5% for their down payment?

A: Yes, the borrower is permitted to contribute more than the minimum required investment of 3.5%.

Q: In Wisconsin, if the borrower pays the appraisal with a debit card and we are crediting the cost of the appraisal back, ca n that go towards the borrower's 1.5% down?

A: Yes, as long as we can source the funds used to pay for the appraisal (borrowers own funds). On the final CD the appraisalfee would be refunded to the borrower by the lender under adjustments in section L. and can be used towards the borrowers MRI.

Q: How do dry funding (escrow) states impact the 3-day waiting period?

A: The DPA Advantage program requires 3 business days between CTC and closing. In Dry Funding States, the Seller manages the funding date. This means if the Seller is able to wait the 3-days for the funding, the loan documents are permitted to be dated and signed in advance of the funding. If the Seller is expecting funds the same day as the closing docs are signed –the closing date and funding date must match and comply with the 3-day rule. The AFR Closer is responsible for confirming the funding date with the title/escrow company. In either case, the DPA funds will not be wired until the 3rd business days after the CTC date.


AFR TRAINING TEAM

THANK YOU

dpa advantage program - … · © copyright 2018 american financial resources, inc. all rights...

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