Ronell D.'s Blog

FHA Secure Changes July 14, 2008

Ronell D. Moore (TM Holdings Group) — Mon, 02 Jun 2008 19:27:03 -0500

Criteria	*FHASecure*	FHA 95% Cash-out Refinance	FHA to FHA Refinance*
Eligible Loan Types	•· Current conventional fixed-rate or ARM loan. •· Delinquent conventional ARM loan. •o Delinquency was caused by rate reset (recast) or extenuating circumstance but does not affect borrower's overall capacity to repay the FHA loan. •· Acceptable loan features include interest only, payment option and negative amortization.	•· FHA or conventional loan that is seasoned at least 12 months with last 12 payments made within the month due. Otherwise, limited to 85% LTV.	•· FHA
Ineligible Loan Types	•· FHA	FHA or conventional loans seasoned less than 12 months. Otherwise limited to 85% LTV.	•· Conventional
LTV	•· Standard LTV on FHA first mortgage. •· In addition to standard rate and term maximum mortgage calculation may include arrearages (PITI) incurred after reset or extenuating circumstance. •· Current appraised value is used to determine maximum loan amount. •· No seasoning requirement for purchase money seconds. •· Equity line in excess of $1000 advanced in last 12 months is not eligible for inclusion (unless documented for repair/renovation of subject property).	•· Up to 95% LTV on FHA first mortgage that does not exceed $417,000. Otherwise limited to 85% LTV. •· Standard cash-out maximum mortgage calculation up to 95%. •· Current appraised value is used in determining maximum loan amount. •· There are no seasoning requirements for subordinate liens.	•· Standard LTV on FHA first mortgage. •· Standard rate and term maximum mortgage calculation. •· Current appraised value is used in determining maximum loan amount. •· No seasoning requirement for purchase money seconds. •· Equity line in excess of $1000 advanced in last 12 months is not eligible for inclusion (unless documented for repairs/renovation of subject property).
CLTV	•· Unlimited CLTV for new subordinate financing. •· Unlimited CLTV for re-subordination or modification of existing subordinate financing.	•· Unlimited CLTV for re-subordination and/or modification of existing subordinate financing. Also applicable for FHA first mortgages limited to 85% LTV.	•· Standard FHA CLTV ratio on new subordinate financing: the combined 1^st and 2^nd liens do not exceed the applicable FHA LTV and maximum mortgage limit for the area. •· Unlimited CLTV for re-subordination or modification of existing subordinate financing.

Criteria	*FHASecure*		FHA 95% Cash-out Refinance	FHA to FHA Refinance*
Underwriting	FHA First Mortgage •· Borrower is delinquent but mortgage payment history shows that: •o during the 6 months prior to reset or extenuating circumstance there are no instances of making mortgage payments outside the month due; or •o during the 12 months prior to reset or extenuating circumstance there are no more than 1x60 late payment or 2x30 late payments; or •o no more than 1x90 or 3x30 during the 12 months prior to reset or extenuating circumstance provided the LTV on the FHA first does not exceed 90%. •·Delinquency was caused by rate reset or extenuating circumstance but does not affect borrower's overall capacity to repay the FHA loan. •·Borrower delinquent on IO and/or payment option ARMs must demonstrate that they were making their monthly mortgage payments within the month due during the 6 months prior to rate reset. •· Standard 31/43 ratios may be exceeded with compensating factor(s), except for loans limited to 90% LTV mortgage payment history. •· Non-occupant co-borrowers may be added.		FHA First Mortgage •· Borrower must have owned property for 12 months AND if encumbered by a mortgage made payments for the last 12 months within the month due. Otherwise limited to 85% LTV. •· Standard 31/43 ratios, may be exceeded with compensating factor(s). •· Non-occupant co-borrowers may not be added for 95% cash-out refinance transactions but are permissible for those limited to 85% LTV.	FHA First Mortgage •· Borrower must be current and have an acceptable mortgage payment history. •· Standard 31/43 ratios, may be exceeded with compensating factor(s). •· Non-occupant co-borrowers may be added.
	Secondary Financing •· If payments on the second are required, they must be included in the qualifying borrower unless deferred for a period of at least 36 months. •· Secondary financing must meet the following requirements: •ü No prepayment penalty •ü No balloon payments less than 10 years •ü Payments on FHA 1^st and subordinate liens, plus other housing expenses, cannot exceed borrower's capacity to repay. •ü Any periodic payments due on the second mortgage are due monthly and are essentially the same in dollar amount.		Secondary Financing •· If payments on the second are required, they must be included in qualifying the borrower. •· Secondary financing must meet the following requirements: •ü No prepayment penalty •ü No balloon payments less than 10 years •ü Payments on FHA 1^st and subordinate liens, plus other housing expenses, cannot exceed borrower's capacity to repay. •ü Any periodic payments due on the second mortgage are due monthly and are essentially the same in dollar amount.	Secondary Financing •· If payments on the second are required, they must be included in qualifying the borrower. •· Secondary financing must meet the following requirements: •ü No prepayment penalty •ü No balloon payments less than 10 years •ü Payments on FHA 1^st and subordinate liens, plus other housing expenses, cannot exceed borrower's capacity to repay. •ü Any periodic payments due on the second mortgage are due monthly and are essentially the same in dollar amount.
FHA Identifier	•· Conventional not delinquent •· Conventional delinquent		Conventional not delinquent	FHA to FHA Refinance, use appropriate identifier
New Mortgage	FHA Fixed, 1-year ARM or hybrid ARM		FHA Fixed, 1-year ARM or hybrid ARM	FHA Fixed, 1-year ARM or hybrid ARM
Mortgage Insurance	Delinquent	Current	1.5% UFMIP and .50% Annual Premium	1.5% UFMIP and .50% Annual Premium
	2.25% UFMIP and .55% Annual Premium when LTV > 95%	1.5% UFMIP and .50% Annual Premium

Criteria	*FHASecure*		FHA 95% Cash-out Refinance	FHA to FHA Refinance*
Expiration	Delinquency and/or > Std FHA CLTV Ratio:	Current and =/< Std FHA CLTV Ratio:	Permanent	Permanent
	Applications on/or before 12/31/08	Permanent
Documentation Requirements	In addition to standard FHA documentation requirements, the following documents are needed for FHASecure: •· Evidence of the current loan type and reset date such as the current ARM Mortgage Note or Rider, if applicable. •· Evidence of occurrence of extenuating circumstance(s), if applicable. •· Explanation letter from borrower for delinquency and/or missed payments. •· Evidence that the payment history for the 6 months prior to reset had no payments outside the month due (credit report, payment history, etc); OR •· Evidence that the payment history has no more than 1x60 late payment or 2x30 late payments in the last 12 months (credit report, payment history, etc); OR •· Evidence that the payment history has no more than 1x90 or 3x30 late payments in the last 12 months. •· Include evidence of partial forbearance, if applicable. •· Evidence of terms and conditions of secondary financing, if applicable. •· MCAW (LT) with comments from the underwriter in the Remarks section to document decision that reset or temporary financial setback caused the loan to become delinquent.		Standard FHA documentation requirements	Standard FHA documentation requirements
Other	All other standard FHA requirements apply		All other standard FHA requirements apply	All other standard FHA requirements apply

I AM WHAT I THINK/ A Life-Changing Procedure

Ronell D. Moore (TM Holdings Group) — Sun, 25 May 2008 17:22:04 -0500

Recession proof your mind. Stop allowing media to control your destiny. We all have read books, new articles, or watched TV/Internet and hear we are in a recession. So say they don't need to watch anything they can feel and see it in the everyday lives. Some say things like: " Gas is to high", "Food is to much", or "The housing market is Bad?". I will have to admit, that from time to time some of the same thoughts have entrained my mind. However I must remind myself not only am I what I eat, I AM WHAT I THINK. If I allow myself to enter into a negative mindset I can't escape the so called recession we are in. How my authors have made it big off of "How to buy and sell Real Estate to make money"? How many of us have read them and acted on the concept. Or at least think that making money in real estate is a good ideal. So what's so different now? Yes gas is higher than it has ever been, but homes are also becoming cheaper again. While the cost of food is increasing, interest rates on home are dropping. Altought many people are loosing there homes, they still need somewhere to live. Every person who is foreclosed on needs to rent a Home, and Apartment or some form of real estate.That's where your mindset comes into play. Either you can allow constants to hinder your mindset, or you can create your own reality. Just think about it for a second. Many Real Esate professionals are retreating, back into the work force. Does that mean that Real Estate Professionals are starving. No, I myself know of several people who are doing well in Real Estate. Yet I do know of several people who are struggling in the work force. You see it does not matter whats going on outside. As long as you control your inside you can win in any market. The law of attraction say we create our reality. We are in total control of where we are in Life. Stop listing to the media for instruction, listen to the voice within.

A Life-Changing Procedure

The eyes are the windows of the soul. So, to the person you are capable of

becoming, each evening, just before you go to bed, stand in front of a mirror

alone and in the first-person, present tense, look yourself in the eye and repeat

with passion and enthusiasm paragraphs A, B, C and D. Repeat this process

every morning and every evening from this day forward. Within one week you

will notice remarkable changes in your life. After thirty days add the procedure

at the bottom of this card.

"I, ___________, am an honest, intelligent, organized, responsible, committed,

teachable person who is sober, loyal, and clearly understands that regardless of

who signs my paycheck I am self-employed. I am an optimistic, punctual,

enthusiastic, goal-setting, smart working self-starter who is a

disciplined, focused, dependable, persistent positive thinker with

great self-control, and am an energetic and diligent team player and

hard worker who appreciates the opportunity my company and the

free enterprise system offer me. I am thrifty with my resources and

apply common sense to my daily tasks. I take honest pride in my competence,

appearance and manners, and am motivated to be and do my best so that my

healthy self-image will remain on solid ground. These are the qualities which

enable me to manage myself and help give me employment security in a nojob-

security world.

"I, ____________, am a compassionate, respectful encourager who is a

considerate, generous, gentle, patient, caring, sensitive, personable, attentive,

fun-loving person. I am a supportive, giving and forgiving, clean, kind,

unselfish, affectionate, loving, family-oriented human being and I am a

sincere and open-minded good listener and a good-finder who is

trustworthy. These are the qualities which enable me to build good

relationships with my associates, neighbors, mate and family.

"I, ____________, am a person of integrity, with the faith and wisdom

to know what I should do and the courage and convictions to follow through.

I have the vision to manage myself and to lead others. I am authoritative,

confident, and humbly grateful for the opportunity life offers me. I am

fair, flexible, resourceful, creative, knowledgeable, decisive and an

extra-miler with a servant's attitude who communicates well with

others. I am a consistent, pragmatic teacher with character and a

finely-tuned sense of humor. I am an honorable person and am

balanced in my personal, family and business life, and have a passion for

being, doing and learning more today so I can be, do and have more tomorrow.

"These are the qualities of the winner I was born to be and I am fully committed

to developing these marvelous qualities with which I have been entrusted.

Tonight I'm going to sleep wonderfully well. I will dream powerful, positive

dreams. I will awaken energized and refreshed; tomorrow's going to be

magnificent and my future is unlimited. Recognizing, claiming and

developing these qualities which I already have gives me a

legitimate chance to be happier, healthier, more prosperous, more

secure, have more friends, greater peace of mind, better family

relationships and legitimate hope that the future will be even better."

Repeat the process the next morning and close by saying

, "These are

the qualities of the winner I was born to be and I will develop and use these

qualities to achieve my worthy objectives. Today is a brand new day and it's

mine to use in a marvelously productive way."

After 30 days, add the next step:

Choose your strongest quality and the one you feel needs the most work.

Example: Strongest-honest. Needs most work-organized. On a separate

3x5 card, print "I, ___________, am a completely honest person and every day

I am getting better and better organized." Keep this 3x5 card handy and read

it out loud at every opportunity for one week. Repeat this process with the

second strongest quality and the second one which needs the most work. Do

this until you've completed the entire list. Use this self-talk procedure as long

as you want to get more of the things money will buy and all of the things

money won't buy.

Note:

Because of some painful experiences in the past (betrayal, abuse, etc.), there might be a word

or two that brings back unpleasant memories (example: discipline). Eliminate the word or

substitute another word. 081898C

Ronell Moore

615-424-7598

www.FHACloser.com

Fha Streamline TN

Ronell D. Moore (TM Holdings Group) — Wed, 21 May 2008 17:32:31 -0500

FHA STREAMLINE REFINANCE

SUBMISSION CHECKLIST

WHAT DOCUMENTS DOES HUD REQUIRE FOR NO-QUALIFYING STREAMLINES???

1. No credit report or VOE

2. Obtain a certified true copy of the mortgage payment record or 12 months of cancelled checks. (Or length of

period mortgage has been held)

3. Borrower is not required to provide evidence of funds to close and no portion of borrower's payment for

escrow items is considered.

4. A form reflecting the lender's calculations for new loan amount and assurance that payments are current at

closing. (FHA streamline refinance Calculation Worksheet.

5. Important information to the Homebuyer (92900-B) is required.

6. Evidence of Social Security number is required.

7. Evidence that current mortgage is FHA insured. A copy of the original note and HUD-I Settlement

Statement which reflect first payment due date, term of mortgage, original mortgage amount and if Upfront

MIP was paid in cash or financed.

8. If Assumption without credit approval, evidence has been held at least six months.

9. NO bank statement or pay stub. NO face-to-face interview. NO Credit Alert Number, LDP List/Debarment

List. NO importance of Home Inspections Form is required.

10. No Appraisal???? Nothing is required/ With Appraisal???? All regular documents.

11. House built before 1978? EPA Pamphlet "Protecting Your Family From Lead In Your Home" is required to

be given to the borrower at application.

12. Credit Analysis Worksheet reflecting:

a. Case Number, Section of the Act and items 1 through 5, excluding 4 (if no appraisal), and 9.

b. Appropriate portions of Section 10a through q.

c. Appropriate portions of Section 13a through e.

d. Loan-to-Value (14a), if with appraisal.

e. Final approval - Section 17, 18, 19 and CHUMS ID#

13. URLA/FNMA 1003 - All of Sections I, II, VII, IX and X. Current information for Section III, Section Vonly

Present and Proposed Housing, and Section VI - Only assets needed for closing.

14. Complete a HUD Addendum form with signatures.

15. Second Lien??? Submit evidence the lien will remain subordinate.

Are you buying properties with Cash? Need money to rehab your current and upcoming projects?

Ronell D. Moore (TM Holdings Group) — Thu, 15 May 2008 21:30:39 -0500

Homebuyers who purchase a property with cash can refinance the property using 203(k) within six (6) months of purchase, the same as if the buyer purchased the property with a 203(k) insured loan to begin with. Evidence of interim financing is not required; the mortgage calculations will be done the same as a purchase transaction. Cash back will be allowed to the borrower in this situation less any down payment and closing cost requirement for the 203(k) loan. A copy of the Sales Contract and the HUD-1 Settlement Statement must be submitted to verify the accepted bid price (as-is value) of the property and the closing date.

For more info please call: 615-731-0515 or email me at info@fhacloser.com

How to rehab or invest in real estate with 203(k).

Ronell D. Moore (TM Holdings Group) — Thu, 15 May 2008 21:23:26 -0500

203(k) - How It Is Different

Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

Eligible Property

To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.

Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.

In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit.

An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.

A 203(k) mortgage may be originated on a "mixed use" residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

Condominium Unit

The Department also permits Section 203(k) mortgages to be used for individual units in condominium projects that have been approved by FHA, the Department of Veterans Affairs, or are acceptable to FNMA under the guidelines listed below.

The 203(k) program was not intended to be a project mortgage insurance program, as large scale development has considerably more risk than individual single-family mortgage insurance. Therefore, condominium rehabilitation is subject to the following conditions:

	Owner/occupant and qualified non-profit borrowers only; no investors;
	Rehabilitation is limited only to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of exteriors or other areas which are the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit;
	Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehabilitation at any one time;
	The maximum mortgage amount cannot exceed 100 percent of after-improved value.

After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached.

Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for Section 203(k). Likewise, a project could contain a row of more than four attached townhouses and be eligible for Section 203(k) because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof).

Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units.

How the Program Can Be Used

This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:

	To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
	To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
	To refinance existing indebtedness and rehabilitate such a dwelling.

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.

To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.

Eligible Improvements

Luxury items and improvements that do not become a permanent part of the real property are not eligible as a cost rehabilitation. However, the homeowner can use the 203(k) program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements. All health, safety and energy conservation items must be addressed prior to completing general home improvements.

Required Improvements

All rehabilitation construction and/or additions financed with Section 203(k) mortgage proceeds must comply with the following:

A. Cost Effective Energy Conservation Standards

(1) Addition to Existing Structure. New construction must conform with local codes and HUD Minimum Property Standards in 24 CFR 200.926d.

(2) Rehabilitation of Existing Structure. To improve the thermal efficiency of the dwelling, the following are required:

a) Weatherstrip all doors and windows to reduce infiltration of air when existing weatherstripping is inadequate or nonexistent.

(3) Replacement Systems.

B. Smoke Detectors. Each sleeping area must be provided with a minimum of one (1) approved, listed and labeled smoke detector installed adjacent to the sleeping area.

Required Appraisals

In order to determine the maximum mortgage amount, the 203(k) valuation analysis consists of two separate determinations of value.

A. As-is Value. A separate appraisal (Uniform Residential Appraisal Report) may be required to determine the as-is value. However, the lender may determine that an as-is appraisal is not feasible or necessary. In this instance, the lender may use the contract sales price on a purchase transaction, or the existing debt on a refinance transaction, as the as-is value, when this does not exceed a reasonable estimate of value.

Further, on a refinance transaction, when a large amount of existing debt (i.e., first and second mortgages) suggests that the borrower has little or no equity in the property, the lender must obtain a current as-is appraisal on which to base the estimated as-is value.

On a refinance, the borrower may have substantial equity in the property to assure that no further down payment is required on the new loan amount. In some cases, the borrower will not have an existing mortgage on the property. In this case, the lender should obtain some comparables from a real estate agent/ broker to estimate an approximate as-is value of the property.

Another way of establishing the as-is value is to obtain a copy of the local jurisdiction tax valuation on the property.

B. Value After Rehabilitation. The expected market value of the property is determined upon completion of the proposed rehabilitation and/or improvements.

For a HUD-owned property an as-is appraisal is not required and a DE lender may request the HUD Field Office to release the outstanding HUD Property Disposition appraisal on the property to the lender to establish the maximum mortgage for the property. The HUD appraisal will be considered acceptable for use by the lender if. (1) it is not over one year old prior to bid acceptance from HUD; and (2) the sales contract price plus the cost of rehabilitation does not exceed 110 percent of the "As Repaired Value" shown on the HUD appraisal. If the HUD appraisal is insufficient, the DE Lender may order another appraisal to assure the market value of the property will be adequate to make the purchase of the property feasible. For a HUD-property, down payment for an owner-occupant or non-profit organization is three percent of the accepted bid price of the property and 100 percent financing on all other costs.

Recently Acquired Properties

Architectural Exhibits

The improvements must comply with HUD's Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1) and all local codes and ordinances. The homebuyer may decide to employ an architect or a consultant to prepare the proposal. The homebuyer must provide the lender with the appro priate architectural exhibits that clearly show the scope of work to be accomplished. The following list of exhibits are recom mended, but may be modified by the local HUD Field Office as required.

A. A Plot Plan of the Site is required only if a new addition is being made to the existing structure. Show the location of the structure(s), walks, drives, streets, and other relevant details. Include finished grade elevations at the property corners and building corners. Show the required flood elevation.

B. Proposed Interior Plan of the Dwelling. Show where structural or planning changes are contemplated, including an addition to the dwelling. (An existing plan is no longer required.)

C. Work Write-up and Cost Estimate. Any format may be used for these documents, however, quantity and the cost of each item must be shown. Also include a complete description of the work for each item (where necessary). The Rehabilitation Checklist in Appendix 1 of Handbook 4240.4 REV-2 should be used to ensure all work items are considered. Transfer the costs to the Draw Request (form HUD-9746-A).

Cost estimates must include labor and materials sufficient to complete the work by a contractor. Homebuyers doing their own work cannot eliminate the cost estimate for labor, because if they cannot complete the work there must be sufficient money in the escrow account to get a subcontractor to do the work. The Work Write-up does not need to reflect the color or specific model numbers of appliances, bathroom fixtures, carpeting, etc., unless they are nonstandard units.

The consultant who prepares the work write-up and cost estimate (or an architect, engineering or home inspection service) needs to inspect the property to assure: (1) there are no rodents, dryrot, termites and other infestation; (2) there are no defects that will affect the health and safety of the occupants; (3) the adequacy of the existing structural, heating, plumbing, electrical and roofing systems; and (4) the upgrading of thermal protection (where necessary).

Definitions for Use in the 203(k) Program

A. Insurance of Advances. This refers to insurance of the 203(k) mortgage prior to the rehabilitation period. A mortgage that is a first lien on the property is eligible to be endorsed for insurance following mortgage loan closing, disbursement of the mortgage proceeds, and establishment of the Rehabilitation Escrow Account.

The mortgage amount may include funds for the purchase of the property or the refinance of existing indebtedness, the costs incidental to closing the transaction, and the completion of the proposed rehabilitation. The mortgage proceeds allocated for the rehabilitation will be escrowed at closing in a Rehabilitation Escrow Account.

B. Rehabilitation Escrow Account. When the loan is closed, the proceeds designated for the rehabilitation or improvement, including the contingency reserve, are to be placed in an interest bearing escrow account insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). This account is not an escrow for the paying of real estate taxes, insurance premiums, delinquent notes, ground rents or assessments, and is not to be treated as such. The net income earned by the Rehabilitation Escrow Account must be paid to the mortgagor. The method of such payment is subject to agreement between mortgagor and mortgagee. The lender (or its agent) will release escrowed funds upon completion of the proposed rehabilitation in accordance with the Work Write-Up and the Draw Request (Form HUD-9746,A).

C. Inspections. Performed by HUD-approved fee inspectors or on the HUD-accepted staff of the DE lender. The fee inspector is to use the architectural exhibits in order to make a determination of compliance or non-compliance. When the inspection is scheduled with a payment, the inspector is to indicate whether or not the work has been completed. Also, the inspector is to use the Draw Request form (Form HUD-9746-A). The first draw must not be scheduled until the lender has determined that the applicable building permits have been issued.

D. Holdback. A ten (10) percent holdback is required on each release from the Rehabilitation Escrow Account. The total of all holdbacks may be released only after a final inspection of the rehabilitation and issuance of the Final Release Notice. The lender (or its agent) may retain the holdback for a maximum of 35 calendar days, or the time period required by law to file a lien, whichever is longer, to ensure that no liens are placed on the property.

E. Contingency Reserve. At the discretion of the HUD Field Office, the cost estimate may include a contingency reserve if the existing construction is less than 30 years old, or the nature of the work is complex or extensive. For properties older than 30 years, the cost estimate must include a contingency reserve of a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If the utilities were not turned on for inspection, a minimum fifteen (15) percent is required. If the scope of work is well defined and uncomplicated, and the rehabilitation cost is less then $7500, the lender may waive the requirement for a contingency reserve.

The contingency reserve account can be used by the borrower to make additional improvements to the dwelling. A Request for Change Letter must be submitted with the applicable cost estimates. However, the change can only be accepted when the lender determines: (1) It is unlikely that any deficiency that may affect the health and safety of the property will be discovered; and (2) the mortgage will not exceed the appraised value of the property less the statutory investment requirement. If the mortgage exceeds the appraised value less the statutory investment, then the contingency reserve must be paid down on the mortgage principal. If a borrower feels that the contingency reserve will not be used and he wishes to avoid having the reserve applied to reduce the mortgage balance after issuance of the Final Release Notice, the borrower may place his own funds into the contingency reserve account. In this case, if monies are remaining in the account after the Final Release Notice is issued, the monies may be released back to the borrower.

If the mortgage is at the maximum mortgage limit for the area or for the particular type of transaction, but a contingency reserve is necessary, the contingency reserve must be placed into an escrow account from other funds of the borrower at closing. Under these circumstances, if the contingency reserve is not used, the remaining funds in the escrow account will be released to the borrower after the Final Release Notice has been issued.

F. Mortgage Payment Reserve. Funds not to exceed the amount of six (6) mortgage payments (including the mortgage insurance premium) can be included in the cost of rehabilitation to assist a mortgagor (whether a principal residence or an investment property) when the property is not occupied during rehabilitation. The number of mortgage payments cannot exceed the completion time frame required in the Rehabilitation Loan Agreement. The lender must make the monthly mortgage payments directly from the interest bearing reserve account. Monies remaining in the reserve account after the Final Release Notice must be applied to the mortgage principal.

G. Approval of Non-Profit Agencies. A non-profit agency, before it can be approved as an eligible mortgagor and obtain the same mortgage amount as available to owner-occupants on Section 203(k) mortgages, must demonstrate its experience as a housing provider to HUD and meet all other requirements described in HUD Handbook 4155.1 REV-4, paragraphs 1-5. It must also be able to provide satisfactory evidence that it has the financial capacity to purchase the properties.

Maximum Mortgage Amount

The mortgage amount, when added to any other existing indebtedness against the property, cannot exceed the applicable loan-to-value ratio and maximum dollar amount limitations prescribed for similar properties under Section 203(b). The Mortgage Payment Reserve is considered a part of the cost of rehabilitation for determining the maximum mortgage amount.

A. Maximum Mortgage Calculation. The value is defined as the lesser of:

Principal Residence (Owner-Occupant) & HUD Approved Non-Profit Organization. For purchases with 203(k) financing: the maximum mortgage amount is to be based upon the HUD estimate of value in 1) or 2) above, less the statutory investment requirement. For refinances under the 203(k) program: the maximum mortgage amount is to be based upon 97/95/90 percent of the HUD estimate of value in 1) or 2) above.

B. Cost of Rehabilitation. Expenses eligible to be included in the cost of rehabilitation are materials, labor, contingency reserve, overhead and construction profit, up to six (6) months of mortgage payments, plus expenses related to the rehabilitation such as permits, fees, inspection fees by a qualified home inspector, licenses and consultant and/or architectural/engineering fees. The cost of rehabilitation may also include the supplemental origination fee which the mortgagor is permitted to pay when the mortgage involves insurance of advances, and the discounts which the mortgagor will pay on that portion of the mortgage proceeds allocated to the rehabilitation.

C. Exemption of the Market Value Limitation. The 203(k) regulations allow for a waiver of the market value limitation, which allows the appraiser to go outside the targeted area to obtain the value of comparable properties. Such requests must be forwarded to the Assistant Secretary of Housing-Federal Housing Commissioner at the HUD Headquarters.

Requests must include documentation that the following conditions are present:

D. Solar Energy Increase. The mortgage is eligible for an increase of up to 20 percent in the maximum insurable mortgage amount if such an increase is necessary for the installation of solar energy equipment.

The solar energy system's contribution to value will be limited by its replacement cost or by its effect on the value of the dwelling.

E. Energy Efficient Mortgage Program. Under the FHA EEM Program, a borrower can finance into the mortgage 100 percent of the cost of eligible energy efficient improvements, subject to certain dollar limitations, without an appraisal of the energy improvements and without further credit qualification of the borrower. To be eligible for inclusion into the mortgage, the energy efficient improvements must be "cost effective," i.e., the total cost of the improvements (including maintenance costs) must be less than the total present value of the energy saved over the useful life of the improvements. The cost of any improvement to the property that will increase the property's energy efficiency and that is determined to be "cost effective" is eligible for financing into the mortgage and its cost may be added to the mortgage amount up to the greater of:

"Cost effective" means that the total cost of the improvements, including any maintenance costs, is less than the total present value of the energy saved over the useful life of the energy improvement. The FHA maximum loan limit for the area may be exceeded by the cost of the energy efficient improvements. However, the entire mortgage cannot exceed 110 percent of the value of the property

The cost of the energy improvements and the estimate of the energy savings must be determined based upon a physical inspection of the property by a home energy rating system (HERS) or energy consultant. For a 203(k) loan, the entire cost of the HERS or the energy consultant can be included in the mortgage.

On new construction (an addition or new building on an existing foundation), the energy improvement must be over and above those required for compliance with the current FHA energy conservation standards for new construction. The estimate of the energy savings in new construction must be based upon a comparison of plans and specification of the house with the additional energy saving improvements to those of the basic house which complies with the current FHA energy conservation standards. Presently, these standards are those of the 1992 CABO Model Energy Code (MEC).

The energy inspection of the property must be performed prior to completion of the work writeup and cost estimate to assure there is no duplication of work items in the mortgage. After the completion of the appraisal, the cost of the energy improvements are calculated by the lender to determine how much can be added to the mortgage amount.

Seven Unit Limitation

HUD regulations and policies state that an investor should not be allowed to rapidly accumulate FHA insured properties that clearly and collectively constitute a multifamily project. In general, a borrower may not have an interest in more than seven rental units (FHA, VA, conventional or owned free and clear of any mortgage) in the same subdivision or contiguous area. For 203(k) purposes, HUD defines a contiguous area as within a two block radius.

The seven unit limitation does not apply if (1) the neighborhood has been targeted by a State or local government for redevelopment or revitalization; and (2) the State or local government has submitted a plan to HUD that defines the area, extent and type of commitment to redevelop the area. A restriction may still be imposed (by HUD) within a redevelopment area (or sub-area) in order to prevent undesirable concentrations of units under a single (or group) ownership. H U D will determine that the seven unit limit is inapplicable only if: (1) the investor will own no more than 10 percent of the housing units (regardless of financing type) in the designated redevelopment area or sub-area; and (2) the investor has no more than eight units on adjacent lots.

Interest Rate and Discount Points

These are not regulated and are negotiable between the borrower and the lender. The amortization of the loan will be for 30 years; however, provisions of the Section 203(k) mortgage (described in Section 203.21 of the Regulations) are the same as prescribed under Section 203(b).

Maximum Charges and Fees

The statutory requirements and administrative policies of Section 203(k) result in deviations from the maximum amount of charges and fees permitted under Section 203(b).

A. Supplemental Origination Fee. When the Section 203(k) mortgage involves insurance of advances, the lender may collect from the mortgagor a supplemental origination fee. This fee is calculated as one and one-half percent (1-1/2%) of the portion of the mortgage allocated to the rehabilitation or $350, whichever is greater. This supplemental origination fee is collected in addition to the one percent origination fee on the total mortgage amount.

B. Independent Consultant Fee. A borrower can have an independent consultant prepare the required architectural exhibits. A borrower can also use a contractor to prepare the construction exhibits or prepare the exhibits themselves. The use of a consultant is not required; however, the borrower should consider using this service in order to expedite the processing of the 203(k) loan. When a consultant is used, HUD does not warrant the competence of the consultant or the quality of the work the consultant may perform for the borrower. The consultant must enter into a written agreement with the borrower that completely explains what services the consultant will perform for the borrower and the fee charged. The fee charged by the consultant can be included in the mortgage. A fee of $400 is acceptable for a property with repairs less than $7,500; $500 for repairs between $7,501 and $15,000; $600 for repairs between $ 15,001 and $ 30,000; and $ 700 for repairs between $30,001 and $50,000; $800 for repairs between $50,001 and $75,000; $900 for repairs between $75,001 and $100,000; and $ 1,000 for repairs over $100,000. An additional fee of $25 can be charged for each additional unit in the property under the same FHA case number. For this fee, the consultant would inspect the property and provide all the required architectural exhibits. State licensed architect or engineer fees are not restricted by this fee schedule. The architect and engineer fees must be customary and reasonable for the type of project.)

C. Plan Review Fee. Prior to the appraisal, a HUD-accepted plan reviewer (or fee consultant) must visit the site to ensure compliance with program requirements. The utilities must be on for this site review to take place. The fee is as follows and may not be changed without HUD Headquarters approval:

D. Appraisal Fee. To process a Section 203(k) mortgage, two appraisals can be performed: (1) As-is value of the property; and (2) Estimated market value of the property assuming completion of the rehabilitation. The maximum fee which a lender may collect for these two appraisals is one and one-half times the amount permitted for a Section 203(b) proposed construction appraisal, as established by the HUD Field Office. If only one appraisal is done, the fee will be the same as a proposed construction appraisal.

E. Inspection Fee (during the rehabilitation construction period). Established by the local HUD Field Office.

F. Title Update Fee. To protect the validity of the mortgage position from mechanic's liens on the property, reasonable fees charged by a title company may be included as an allowable cost of rehabilitation. When the mortgage position is protected and is not in jeopardy, this fee may not apply Borrowers may wish to obtain lien protection, but the fees must be paid by the borrower where such lien protection is not required to ensure the validity of the security instrument. The allowable fee should not exceed $50.00 per draw release. If all draw inspections are not made, monies left in escrow must be applied to reduce the mortgage balance.

Application Process

This describes a typical step-by-step application/mortgage origination process for a transaction involving the purchase and rehabilitation of a property. It explains the role of HUD, the mortgage lender, the contractor, the borrower, consultant, the plan reviewer, appraiser and the inspector.

A. Homebuyer Locates the Property.

B. Preliminary Feasibility Analysis. After the property is located, the homebuyer and their real estate professional should make a marketability analysis prior to signing the sales contract. The following should be determined:

C. Sales Contract is Executed. A provision should be included in the sales contract that the buyer has applied for Section 203(k) financing, and that the contract is contingent upon loan approval and buyer's acceptance of additional required improvements as determined by HUD or the lender.

D. Homebuyer Selects Mortgage Lender. Call HUD Field Office for a list of lenders.

E. Homebuyer Prepares Work Write-up and Cost Estimate. A consultant can help the buyer prepare the exhibits to speed up the loan process. If a plan reviewer is the consultant, item G can be skipped and the exhibits can go directly to the appraisal stage.

F. Lender Requests HUD Case Number. Upon acceptance of the architectural exhibits, the lender requests the assignment of a HUD case number, the plan reviewer, appraiser, and the inspector.

G. Plan Reviewer Visits Property. The homebuyer and contractor (where applicable) meet with the plan reviewer to ensure that the architectural exhibits are acceptable and that all program requirements have been properly shown on the exhibits.

H. Appraiser Performs the Appraisal.

I. Lender Reviews the Application The appraisal is reviewed to determine the maximum insurable mortgage amount for the property

J. Issuance of Conditional Commitment/Statement of Appraised Value. This is issued by the lender and establishes the maximum insurable mortgage amount for the property.

K. Lender Prepares Firm Commitment Application. The borrower provides information for the lender to request a credit report, verifications of employment and deposits, and any other source documents needed to establish the ability of the borrower to repay the mortgage.

L. Lender Issues Firm Commitment. If the application is found acceptable, the firm commitment is issued to the borrower. It states the maximum mortgage amount that HUD will insure for the borrower and the property.

M. Mortgage Loan Closing. After issuance of the firm commitment, the lender prepares for the closing of the mortgage. This includes the preparation of the Rehabilitation Loan Agreement. The Agreement is executed by the borrower and the lender in order to establish the conditions under which the lender will release funds from the Rehabilitation Escrow Account. Following closing, the borrower is required to begin making mortgage payments on the entire principal amount for the mortgage, including the amount in the Rehabilitation Escrow Account that has not yet been disbursed.

N. Mortgage Insurance Endorsement. Following loan closing, the lender submits copies of the mortgage documents to the HUD office for mortgage insurance endorsement. HUD reviews the submission and, if found acceptable, issues a Mortgage Insurance Certificate to the lender.

O. Rehabilitation Construction Begins. At loan closing, the mortgage proceeds will be disbursed to pay off the seller of the existing property and the Rehabilitation Escrow Account will be established. Construction may begin. The homeowner has up to six (6) months to complete the work depending on the extent of work to be completed. (Lenders may require less than six months.)

P. Releases from Rehabilitation Escrow Account. As construction progresses, funds are released after the work is inspected by a HUD-approved inspector. A maximum of four draw inspections plus a final inspection are allowed. The inspector reviews the Draw Request (form HUD-9746-A) that is prepared by the borrower and contractor. If the cost of rehabilitation exceeds $10,000, additional draw inspections are authorized provided the lender and borrower agree in writing and the number of draw inspections is shown on form HUD-92700, 203(k) Maximum Mortgage Worksheet.

Q. Completion of Work/Final Inspection. When all work is complete according to the approved architectural exhibits and change orders, the borrower provides a letter indicating that all work is satisfactorily complete and ready for final inspection. If the HUD-approved inspector agrees, the final draw may be released, minus the required 10 percent holdback. If there is unused contingency funds or mortgage payment reserves in the Account, the lender must apply the funds to prepay the mortgage principal.

For more info please call 615-731-0515

FHA Loans on or after 4/8/2008

Ronell D. Moore (TM Holdings Group) — Thu, 15 May 2008 20:35:12 -0500

Click here for full FHA credit policy manual

FHA LOANS

Effective on all loans Registered and/or Locked on or after 4/8/2008

This information is to be provided exclusively to mortgage professionals/referral sources and is not intended for public use. This is not an advertisement to extend consumer credit as defined in Regulation Z, §226.2. All loans are subject to credit and property approval. Programs, rates, terms and conditions are subject to change without notice. Not all products are available in all states or for all loan amounts. Other restrictions apply.

GUIDELINES

ELIGIBILITY

• US Citizens, Permanent and Non-Permanent Resident Aliens, Non-

Occupant Co-Borrowers

• Owner Occupied Primary Residence only (Investment Property only

allowed on Streamline without an appraisal)

• 15 and 30 Year Fixed Rate Mortgages and 1 Year 3/1 and 5/1

Adjustable Rate Mortgages

DOCUMENTATION

• Refer to automated findings, Credit Policy Manual or the 4155.1 REV-5.

RATIOS

• Manual underwriting on existing properties over one year the maximum

ratio is 31/43%

• With automated underwriting these ratios may be exceeded

PROPERTY FLIPPING

• 90 days or less since property was last sold - Property is NOT eligible

for FHA financing.

• 91 days to 180 days since property was last sold - If the current sales

price is the same or higher than the sales price when the seller acquired

the property, then need a second appraisal completed by a different

appraiser, and the second appraisal cannot be charged to the borrower

(it must be paid by the seller or broker). If the current sales price is less

than the sales price when the seller acquired the property, then do not

need any additional documentation and one appraisal will be sufficient.

203(h) - DISASTER RELIEF

• Up to 100% financing available for qualified borrowers that meet

specific requirements as outlined in Credit Policy Manual.

FHA SECURE INITIATIVE

• All FHASecure mortgages must comply with HUD Mortgagee Letter

2007-11 in it's entirety

FHA JUMBO 2ND APPRAISAL REQUIREMENTS

A second appraisal is required on any FHA loan (where case number is

issued on or after April 1, 2008) when the following exist:

• The Base Loan Amount (excluding UFMIP) will exceed $417,000; AND

• The LTV (Base Loan Amount) equals of exceeds 95%; AND

• The property is determined to be in a declining market based on

appraisal or Declining Market Zip Code Search

• http://www.taylorbeanonline.com/RateSheets/Newsletter/decliningmarkets.xls

• Selected from FHA roster and ordered by Lender's FHA/VA Liaison

Dept

• Underwriter must complete FHA 2nd Appraisal Request Form and

complete as directed

• No second case number is to be requested

• Underwriter is to add the appraisal fee to closing costs to be passed on

to borrower.

• Exterior Only appraisal allowed on 1 Unit Detached only (Form 2055)

• Repairs as noted on original FHA appraisal must be completed

• If second appraisal has an estimated value more than 5% lower than

the original value, then the maximum mortgage is based on the lower of

the two appraisals.

REFINANCE

Refinance (Rate and Term) - the lower of:

• The LTV limitations used for purchases, or

• Principal balance on existing first lien + prepayment penalties + up to

one month monthly MIP + the Mtg. Pmt. (PITI) that was due on the 1st

(if not already paid) + up to 30 days interest for the current month + late

charges + escrow shortages, subtract MIP refund (if applicable) +

borrower pd closing costs + property-related liens for acquisition, repair

or rehab seasoned at least 1 year, + prepaid expenses (per diem

interest to end of month on new loan + hazard ins deposits + real estate

tax deposits + reasonable discount pts.)

• May not receive cash back in excess of $500.00

Refinance (Cash-Out)

• If the Base Loan Amount exceeds $417,000, the maximum LTV on

• 95 percent of the appraised value provided the property has been

owned by the borrower for at least one year. If the property was

purchased less than one year preceding the loan application, the LTV

may not exceed 85% of the original purchase price or appraised value,

whichever is less.

• Any co-borrower or co-signer being added to the note must be an

occupant of the property. Non-occupant owners may not be added in

order to meet FHA's credit underwriting guidelines for the mortgage

• The following restrictions apply to Cash Out Refinance:

transactions above 85 percent allowance

• The subject property must have been owned by the borrower as

their principal residence for at least 12 months preceding the date

of the loan application.

• If subject property is encumbered by a mortgage, the borrower

must have made all mortgage payments within the month due for

the previous 12 months (no payment may be more than 30 days

late and is current for the month due).

• The subject property must be a 1 or 2 unit dwelling.

• Subordinate financing may remain in place, but subordinate to the

FHA insured first mortgage, regardless of the total indebtedness

or combined LTV ratio, provided the homeowner qualifies for

making scheduled payments on all liens.

Refinance (Streamline without an appraisal) - the lower of:

• Original principal balance (from the Refinance Authorization screen in

the FHA Connection), or

• Principal bal on existing first lien + up to one month monthly MIP + the

Mtg pmt. (PITI) that was due on the 1st (if not already paid) + up to 30

days interest for the current month + late charges + escrow shortages,

minus MIP refund(if applicable), + borrower-paid closing costs + prepaid

expenses (per diem interest to end of month on new loan + hazard ins

deposits + real estate tax deposits + reasonable discount pts)

• May not receive cash back in excess of $500.00.

Refinance (Streamline with an appraisal) - the lower of:

• The LTV limitation used for purchases, or

• Principal balance on existing 1st lien + up to one month monthly MIP +

the Mtg Pmt (PITI) that was due on the 1st (if not already paid) in

addition up to 30 days interest for the current month + late charges +

escrow shortages, minus MIP refund (if applicable) + borrower-paid

closing costs, + prepaid expenses (per diem interest to end of month on

new loan + hazard ins deposits + real estate tax deposits + reasonable

discount pts.)

• May not receive cash back in excess of $500.00

STANDARD MORTGAGE LIMITS

Region 1 Unit 2 Units 3 Units 4 Units

Temporary Loan Limit Increase with Credit Approval on or before

December 31, 2008

Low Cost $271,050 $347,000 $419,400 $521,250

High Cost $729,750 $934,200 $1,129,250 $1,403,400

AK,HI,GU,VI $1,094,625 $1,401,300 $1,693,875 $2,105,100

LTV LIMITATIONS

Purchase Transaction only on Proposed and Existing Construction

Value / Sales Price <= 50K > 50K - 125K >125K

Low Closing Cost 98.75 97.65 97.15

High Closing Cost 98.75 97.75 97.75

UPFRONT AND ANNUAL MIP

LTV Ratios Upfront >15 Years <=15 Years Years

90.0=> 1.5% .50% .25% See Note

<90.0 1.5% .50% None NA

• Note: Years will be determined when the loan balance equals 78%,

provided the borrower has paid the annual MIP for at least 5 years

(scheduled or actual).

• Loan Amount multiplied by Annual premium is divided by 12

• FHA 203(b) loans, fixed rate and adjustable will have both the monthly

and upfront premiums.

• The financed UFMIP is not included in the statutory loan limit. When

the UFMIP is financed, the loan amount is to be rounded down to the

next dollar.

• Properties in Military Impact Areas (Georgia counties: Bryan, Camden,

and Liberty) do not have upfront MIP only annual MIP.

HUD CASE NUMBERS / SUFFIX CODES

Program 2-4 Unit/Single Family/PUD Condos

Fixed Rate 203(b) 703 234(c) 734

Buydown 203(b) 796 203(c) 797

ARM 203(b) 729 234(c) 731

months to equal monthly MIP

Cash Out Refinance is 85% (where case number is issued on or

after April 1, 2008).

Second Appraisal and Appraiser Requirements