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SECTION 184 INDIAN HOUSING LOAN GUARANTEE PROGRAM Fargo, North Dakota September 2010 U.S. Department of Housing and Urban Development.

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Presentation on theme: "SECTION 184 INDIAN HOUSING LOAN GUARANTEE PROGRAM Fargo, North Dakota September 2010 U.S. Department of Housing and Urban Development."— Presentation transcript:

1 SECTION 184 INDIAN HOUSING LOAN GUARANTEE PROGRAM Fargo, North Dakota September 2010 U.S. Department of Housing and Urban Development

2 PROGRAM OVERVIEW Section 184 Training, Sponsored by HUD

3 PROGRAM OVERVIEW 1992 Housing and Community Development Act Annual funding by Congress Nationwide Program Section 184 Training, Sponsored by HUD

4 LENDING IN INDIAN COUNTRY IS UNIQUE Unique land status – Tribal Trust Land – Allotted Trust Land – Unrestricted Land Underserved markets – Non-traditional credit – Limited access/exposure to financing – Manual underwriting Section 184 Training, Sponsored by HUD

5 184 PARTNERS HUD 184 Program Staff Lenders Tribes TDHEs (Tribally Designated Housing Entities) BIA (Bureau of Indian Affairs) Section 184 Training, Sponsored by HUD

6 LENDER INCENTIVES/ OPPORTUNITIES 100% guaranteed loan Assign or foreclose Up to 2.5% loan origination fee on construction/rehab loans Community Reinvestment Act (CRA) Section 184 Training, Sponsored by HUD

7 PARTNER ROLES AND RESPONSIBILITES Section 184 Training, Sponsored by HUD

8 WHAT DOES HUD DO? Develops and implements policies Conducts training and marketing Underwrites the loan Issues the Loan Guarantee Certificate Section 184 Training, Sponsored by HUD

9 WHAT DOES THE LENDER DO? Lends the money! Explains the 184 mortgage loan process Processes and prepares the loan package Serves as liaison between borrower and HUD Underwrites the loan (Direct Guarantee approved) Section 184 Training, Sponsored by HUD

10 ELIGIBLE LENDERS Bank, Savings & Loan, Credit Union Mortgage Companies approved through FHA, VA or RD FHA approved Brokers with 184 Program Sponsorship Lenders/Tribe obtain approval through NAHASDA (Chapter 3 of Guidebook) Section 184 Training, Sponsored by HUD

11 3 STEP LENDER APPROVAL PROCESS 1.Submission of a Lender Package HUD OLG in Washington Dc Electronically or mailed 2.Completion of mandatory training for staff. (Lender approval letter issued after completion of steps 1. and 2.) 3.Submission of executed Code of Conduct form. Section 184 Training, Sponsored by HUD

12 Lender Package HUD Form 11701, Application for Lender Approval Sponsor Agreement Funding Evidence of federal approval Financial Statements Fidelity Bond Errors and Omissions Insurance Licenses Credit Reports Resumes Quality Control Plan State Approval of dba Evidence of Acceptable Facilities Sanctions Letters Section 184 Training, Sponsored by HUD

13 RETAINING AN ACTIVE STATUS Submit annual, updated certification package to designated OLG staff. (In the planning stages) Request training for all new/inactive staff. Process at least 2 applications within a 6 months period. Section 184 Training, Sponsored by HUD

14 CONTENTS OF LENDER PACKAGE Statement requesting approval to include: Name and address of applicant, geographic service area EIN number for applicant and date on Incorporation, Companies that are already approved lenders need not resubmit a new Lender package, but training is mandatory for all new staff. Section 184 Training, Sponsored by HUD

15 CONTENTS OF LENDER PACKAGE (CONT.) List of Officers/Directors who supervise staff and persons holding more than 10 percent of stock in the entity including phone numbers, home addresses and social security numbers. List of employees who will participate in the program to include social security numbers, positions and residential credit reports. Section 184 Training, Sponsored by HUD

16 WHAT DOES THE TRIBE DO? Implements foreclosure, eviction, lien & leasing procedures – Model One-Stop Docs Conducts environmental reviews Completes land status form Section 184 Training, Sponsored by HUD

17 WHAT DOES THE TRIBE PROVIDE? Land Homeownership counseling Financial Assistance Infrastructure Section 184 Training, Sponsored by HUD

18 WHAT DOES BIA DO? Serves as a trustee for tribal trust land Approves lease/mortgage Provides/updates title status reports – Records mortgage/lease Underwrites/reviews loan package (if allotted/restricted) Section 184 Training, Sponsored by HUD

19 PROGRAM FEATURES AND REQUIREMENTS Section 184 Training, Sponsored by HUD

20 Who can get a 184 Loan? ELIGIBLE BORROWERS Indian or Alaska Native individual enrolled in a Federally recognized tribe. Copy of enrollment card/enrollment letter required. TDHE/IHA (Indian Housing Authority) Tribe. Tribal federal designation available on Federal Register accessed on Dept. of Agriculture/BIA website Section 184 Training, Sponsored by HUD

21 Who can get a 184 Loan? ELIGIBLE BORROWERS (Cont.) Citizenship/Immigration – Not required for eligibility – Lawful permanent resident aliens – document evidence of permanent residency – Non permanent resident aliens Principal residence SSN Eligible to work in the US Section 184 Training, Sponsored by HUD

22 LOAN FEATURES Term: 30 years or less Fixed interest rate determined by lender 1% guarantee fee Minimal down payment requirement No Adjustable Rate Mortgages No commercial structures Section 184 Training, Sponsored by HUD

23 HOMEOWNERSHIP OPPORTUNITIES Purchase existing house Rehabilitation of existing house Purchase and rehabilitation New construction – Manufactured – Modular/stick built Refinancing Section 184 Training, Sponsored by HUD

24 PROPERTY REQUIREMENTS Trust land or land within an Indian area Meet construction and safety codes Single family (1-4 units) – Examples include: house, duplex, tri-plex, four-plex, town home, manufactured/modular home Manufactured Housing – Affixed to a permanent foundation – Manufactured after 6/15/76 Section 184 Training, Sponsored by HUD

25 LAND OWNERSHIP Tribal trust land Allotted individual trust land Fee simple land in a defined Indian operating area Section 184 Training, Sponsored by HUD

26 LAND OWNERSHIP Program requirements and processing procedures vary depending upon how land is held Land in an Indian Area = area in which a Tribe/TDHE is authorized to provide housing Section 184 Training, Sponsored by HUD

27 LAND CHARACTERISTICS Land or interest in land held in trust by BIA for a Tribe Land may not be encumbered or alienated (leasehold) Section 184 Training, Sponsored by HUD Tribal Trust Land

28 LAND CHARACTERISTICS Land or interest in land held in trust by the BIA for an individual Indian Tribe has no interest in land Subject to restrictions against alienation or encumbrance Section 184 Training, Sponsored by HUD Allotted Individual Trust Land

29 LAND CHARACTERISTICS Estate in land that is absolute or unrestricted Owner can dispose of land – Subsequent sale of home and/or foreclosure; land and home sold together Located on reservation or within Tribe’s operating area for housing Section 184 Training, Sponsored by HUD Fee Simple Land

30 184 LENDING ON TRIBAL TRUST LAND Leasehold interest must be established between borrower and tribe Title Status Report from BIA – preliminary with lease – final with lease/mortgage Parties to lease: BIA, Tribe, and Borrower – HUD approval/review Section 184 Training, Sponsored by HUD

31 184 LENDING ON TRIBAL TRUST LAND (cont.) Section 184 Training, Sponsored by HUD Note: Leasing instrument normally approved when tribe submits documentation to participate in 184 program

32 184 LENDING ON INDIVIDUAL ALLOTTED TRUST LAND Generally no lease BIA approval required BIA issues Title Status Report with recorded mortgage & approval Section 184 Training, Sponsored by HUD

33 184 LENDING ON INDIVIDUAL ALLOTTED TRUST LAND Fractionated ownership Lease (due to fractionated ownership) Foreclosure can result in loss of land Excess land Section 184 Training, Sponsored by HUD

34 184 LENDING ON FEE SIMPLE LAND Lease not required Title policy required Property must be in a designated Indian Operating Area (Tribal certification on Land Status and Jurisdiction Form) Section 184 Training, Sponsored by HUD

35 184 LEASE REQUIREMENTS Not to exceed 50 year term Provision preventing termination without HUD approval Language indicating lessee can mortgage the leasehold, and foreclosure is allowed Language preventing transfer or assignment of leasehold interest without HUD/Tribe approval Section 184 Training, Sponsored by HUD

36 LOAN PROCESS FOR TRUST TRANSACTIONS Section 184 Training, Sponsored by HUD

37 LOAN PROCESS For TRUST TRANSACTIONS Land status verified with tribe and/or BIA: – Title Status Report needed to verify individual allotment ownership – Land Status and Jurisdiction Form Section 184 Training, Sponsored by HUD

38 LOAN PROCESS For TRUST TRANSACTIONS Underwriting the Title Status Report Documentation required from the Bureau of Indian Affairs – Tribal Trust Certified TSR (1 years or less) with/without recorded lease Executed lease Section 184 Training, Sponsored by HUD

39 LOAN PROCESS For TRUST TRANSACTIONS Underwriting the Title Status Report (Cont.) – Individual Allotted Trust land Certified TSR (6 months or less) BIA approval to mortgage – Individual Allotted Trust Land with lease Title Status Report with recorded lease NO BIA approval to mortgage Section 184 Training, Sponsored by HUD

40 LOAN PROCESS For TRUST TRANSACTIONS (Cont.) Borrower works with Tribe/BIA to obtain 184 lease if tribal trust land – Lease is recorded with BIA and TSR issued Borrower works with Tribe/BIA to get environmental review completed. REQUIRED ON ALL LOANS Section 184 Training, Sponsored by HUD

41 LOAN PROCESS For TRUST TRANSACTIONS (Cont.) Lender submits simultaneously: – Complete underwriting package to HUD (fee simple, tribal trust and individual allotment) – Copy of proposed mortgage/DOT to BIA for approval (trust land) – Complete underwriting package to BIA (individual allotted land) Section 184 Training, Sponsored by HUD

42 LOAN PROCESS For TRUST TRANSACTIONS (Cont.) Lender receives commitment for BIA (individual allotment) Lender receives commitment from HUD BIA Issues Certificate of Mortgage Approval (trust land) BIA Title Plant completes certified Title Status Report for lender (trust land) Guarantee Package to HUD for Loan Guarantee Certificate Section 184 Training, Sponsored by HUD

43 SECTION 184 LOAN PROCESSING Section 184 Training, Sponsored by HUD

44 LOAN ORIGINATION Borrower contacts approved lender Lender determines if borrower meets program eligibility – Native American (ID/Enrollment Card) – Tribe on 184 approved list – Indian operating area Lender requests case number from HUD using forms and process as described. Section 184 Training, Sponsored by HUD

45 LOAN ORIGINATION (Cont.) Lender obtains loan documents and construction/purchase documents Lender orders an appraisal – HUD Manual – Cost approach can be utilized if comps not available – FHA approved Appraiser – Appraisal good for 120 days Lender prepares loan package and submits for underwriting Section 184 Training, Sponsored by HUD

46 REQUESTING A CASE NUMBER Files will NOT be accepted for HUD underwriting until a case number has been assigned by OLG staff. Case number assignments represent internal funds management for HUD and reservation of funds for lenders. Section 184 Training, Sponsored by HUD

47 REQUESTING A CASE NUMBER (Cont.) Must be requested prior to submission of underwriting package Electronic (MS Word compatible) form is available and preferred Submit electronically as a Word document (.doc or.docx formats) via to HUD for fastest turnaround Section 184 Training, Sponsored by HUD

48 Underwriting Components Credit Capacity Collateral Section 184 Training, Sponsored by HUD The underwriting review determines the borrower’s ability and willingness to repay the mortgage debt.

49 Underwriting Components The borrower’s ability to repay the debt is assessed by considering: Income history and stability; Employment history and stability Debts The borrower’s willingness to repay the mortgage debt is assessed by considering Credit Pay history Section 184 Training, Sponsored by HUD

50 Underwriting Components The maximum allowable mortgage amount is determined as the lower of these 3 factors: – 150% of FHA Loan limits (03/2008) for the County where the property is located – Loan to Appraised Value Ratio: 97.75% when $50,000 or greater 98.75% when $49,999 or less – Acquisition cost (sales price + closing costs): 97.75% when $50,000 or greater 98.75% when $49,999 or less Section 184 Training, Sponsored by HUD

51 CLOSING COSTS Costs not included when calculating mortgage basis (paid in cash): – Prepaids (hazard/taxes/interest) – Discount points Section 184 Training, Sponsored by HUD Note: 1% guarantee fee is not included in closing costs when calculating mortgage basis. It is added on at 100% after calculating the mortgage basis.

52 PREQUALIFYING BORROWERS Lender responsibility prior to submission to HUD 184 Determine threshold eligibility: 1. Enrollment in Federally recognized tribe. 2.Credit worthiness. (see Chapter 5 of “Draft” Guide of 12/30/09 for detailed Underwriting standards). 3.Acceptability /Cost of property. 4.Evidence of stable employment, sufficient cash availability for transaction, etc. Section 184 Training, Sponsored by HUD

53 URLA Uniform Residential Loan Application – (URLA, Fannie Mae 1003, Freddie Mac 65) This document must be completed in its entirety for all Section 184 loan requests Section 184 Training, Sponsored by HUD

54 INCOME Income - Types: – Salary or Wages – Overtime and Bonus – Commissions – Seasonal and Part Time – Retirement, Alimony, Child Support – Rental – Trust and Non-Taxable – Self Employment – Tribal Distribution Section 184 Training, Sponsored by HUD

55 INCOME (Cont.) Income and Employment- Determination and Documentation Verification of 2 full years of employment – Salaried or hourly: Written or verbal VOE All W-2’s for 2 years Recent paystubs covering a full one month period Section 184 Training, Sponsored by HUD

56 INCOME (Cont.) Income and Employment- Determination and Documentation Verification of 2 full years of employment – Self Employed: Signed/Dated personal tax returns (2yrs) Signed/Dated business tax returns (2yrs) Signed/Dated year to date Profit & Loss Section 184 Training, Sponsored by HUD

57 INCOME (Cont.) Rental Income- Determination and Documentation Rental Income documented on Tax Return – Schedule E and current lease w/6 months remaining Rental Income NOT documented on Tax Return – Comp factor with current lease w/6 months remaining – Full payment (PITI) counted as debt for qualifying Section 184 Training, Sponsored by HUD

58 INCOME (Cont.) Tribal Distribution- Determination and Documentation 1.Two year history (1099’s) Current year distribution Documented 3 year continuation OR 2.Letter from tribe verifying a prior two year distribution to tribal members Current year distribution Documented 3 years continuation Section 184 Training, Sponsored by HUD

59 LIABILITIES Recurring Obligations – Include with 6 months or more remaining (all debts) – Subject to underwriter discretion Projected Obligations – Scheduled to commence within 12 months Section 184 Training, Sponsored by HUD

60 LIABILITIES Contingent liabilities – Co-signed obligations Originator made 12 consecutive payments Divorce Decree/legal separation with designated responsibility to ex-spouse – Current at time of separation/divorce – Copy of separation agreement – Mortgage Obligations (within the last 5 years without a release of liability); unless: Originator made 12 consecutive payments Divorce decree/legal separation with designated responsibility to ex-spouse Transfer by employer and covered by home sale guarantee plan Section 184 Training, Sponsored by HUD

61 What are we looking for? CREDIT HISTORY Show borrower(s) payment pattern Show previous/existing debt Show court order judgments, collections and liens which may affect borrower’s ability to obtain a loan Section 184 Training, Sponsored by HUD Note: Lack of Credit is not basis for denial

62 CREDIT HISTORY Special Notes Non Purchasing Spouse – Not to appear on the security instrument or otherwise take title to the property at loan settlement; unless – Required by state law to perfect a valid and enforceable first lien Community Property States – Debts of non purchasing spouse must be included in the borrower's qualifying ratios – Credit history not to be considered a reason for credit denial – States: AZ, CA, ID, LA, NV, NM, TX, WA, WI Section 184 Training, Sponsored by HUD

63 CREDIT REPORT The credit report must: – Be a RMCR or Tri-Merge Credit Report Credit Scoring – Be the original provided by the credit reporting agency – Contain all credit available in the repositories, be accurate and complete, provide an account of the credit, residence history, and public record information of each applicant. This includes bankruptcies, judgments, lawsuits, foreclosures, and tax liens that have occurred within the last 7 years. – Contain a 24 months employment and 24 months residency history if not verified otherwise. Section 184 Training, Sponsored by HUD

64 CREDIT REPORT (Cont.) The credit report must: – Identify each applicant’s name, social security number, date accounts were opened, credit limit, required payments, unpaid balance and payment history of each account. – Payment history must appear in the "number of times past due" format and be otherwise easy to read and understandable. – Must have no whiteouts, erasures, or alterations. Section 184 Training, Sponsored by HUD

65 CREDIT REVIEW Bankruptcy- general requirements – Chapter 7: Discharge with credit reestablished Two years since discharge months with documented unusual circumstances – Chapter 13: One year payout with good performance Court approval Section 184 Training, Sponsored by HUD

66 CREDIT REVIEW (Cont.) Foreclosure – Extenuating circumstances – Re-established good credit Short Sales – Must have been approved by the lender prior to the becoming delinquent or in default Section 184 Training, Sponsored by HUD

67 CREDIT REVIEW (Cont.) Collections – Paid in full (at or before closing) Resulted in collection 12 months prior or more Written letter of explanation Medical (can remain if documented 3 rd party responsibility) L iens/Judgments – Paid in full 12 months prior to date of application Written letter of explanation Re-established good credit Section 184 Training, Sponsored by HUD Exceptions: Executed repayment agreement with two year history; caution

68 CREDIT REVIEW (Cont.) Recent Debt and Undisclosed Debt Delinquent Federal debts – LDP/GSA: – Borrower not eligible unless account is current, paid or otherwise satisfied Credit Alert Interactive Voice Response System (CAIVRS): – FHA system to verify if borrower is/has been delinquent on Federal debt Section 184 Training, Sponsored by HUD

69 CREDIT REVIEW (Cont.) Credit Requirements: No late payments within 12 months No late mortgage payments within 12 months No bankruptcy, judgments in 24months (special circumstances reviewed on case by case basis) No accounts reverting to collection in 12 months Section 184 Training, Sponsored by HUD Lack of credit not grounds for rejection; alternative credit accepted; 1 to 3 sources.

70 DEBT-TO-INCOME RATIO 41% debt-to-income ratio (guide): – Determines if borrower(s) has/have the ability to repay the mortgage – Compensating factors when ratio exceeds guide Documented in underwriting file Section 184 Training, Sponsored by HUD

71 BORROWER’S INVESTMENT Cash investment — difference between the mortgage loan and the cost to acquire the property Range of investment — 1.25% to 2.25% based on maximum mortgage limit Section 184 Training, Sponsored by HUD

72 FUNDS TO CLOSE Saving/Checking Secured funds Gifts Cash Land equity Section 184 Training, Sponsored by HUD Sale of personal items Sale of home proceeds 401K loan Sale of Investments Borrower can obtain the down payment and closing cost funds from any of the following sources:

73 FUNDS TO CLOSE VERIFICATION Savings/Checking/Deposit Accounts – Verification of Deposit – Two months bank statements (all pages) Secured funds – Copy of signed loan docs showing collateral Gifts – Gift letter – Verification of donors ability – Documented receipt of funds Sale of current home – Certified copy of signed HUD-1 Section 184 Training, Sponsored by HUD

74 TRIBE/TDHE ASSISTANCE Provide a gift or loan to borrower: – Gift letter – 2nd mortgage letter – Recorded documents with the endorsement package Tribal funds: – No restriction on use/amounts Section 184 Training, Sponsored by HUD

75 APPRAISAL Market Approach Using FHA appraiser/guidelines Cost Approach Trust land, rural areas Types of Appraisals – Manufactured – Condominium – Standard 1 – 4 Units Section 184 Training, Sponsored by HUD

76 APPRAISAL Appraisal Issues – Land value > 50% – Declining market loans > $400,000 – Other FHA Approved Certified Appraisers Appraisal valid for 120 days Section 184 Training, Sponsored by HUD

77 SUBMITTING UNDERWRITING PACKAGE TO HUD Section 184 Training, Sponsored by HUD

78 FIRM COMMITMENT CHECKLIST See Handout Section 184 Training, Sponsored by HUD

79 SECTION 184 MCAW See Handout Section 184 Training, Sponsored by HUD

80 HUD FILE PROCESSING OLG staff receives file, conducts preliminary completeness review, logs file and accepts in pipeline. Incomplete, improperly packaged files subject to rejection/return by Program. Files generally processed in date order as received. Section 184 Training, Sponsored by HUD

81 HUD FILE PROCESSING (Cont.) Consideration given when possible for occasional emergencies (expiring contracts, expiring rate locks, delays beyond the control of Lender/Borrowers). Turn time for issuance of Firm Commitment/Conditional Commitment 5-7 days.( Longer response times may occur during peak work load periods) Commitment or declination letter issued by Underwriter, signed and faxed to Lender. Section 184 Training, Sponsored by HUD

82 CLEARING COMMITMENT CONDITIONS Additional submission required for all items referenced in pre-closing section of commitment. Preference is for submission of a complete package of all documentation needed to clear. May be faxed or ed. Section 184 Training, Sponsored by HUD

83 CLEARING COMMITMENT CONDITIONS (Cont.) Underwriter will review (within 24 hours), approve, initial date and return by fax to Lender. Closing not authorized until fully cleared commitment is received from HUD. Loan closing to be scheduled before the commitment expiration date. (Extensions are not automatic). Section 184 Training, Sponsored by HUD

84 THE TRIBE OR TDHE AS BORROWER Section 184 Training, Sponsored by HUD

85 UNDEVELOPED MARKETS Limited Housing Supply – Low turnover, vacancy rate – Limited availability of developed lots – Limited sales Modest homes Tribal developers – Financing generally grant based – Limited exposure/access to financial markets Subsidies – Construction (grants, guarantees, interest rate) – Down payment & closing costs Section 184 Training, Sponsored by HUD

86 TRIBE/TDHE LOANS When the Tribe or TDHE borrowers for the construction/purchase of rental property, they must demonstrate: – Property management skills – Rental and maintenance plan – Renters able to pay Section 184 Training, Sponsored by HUD

87 TRIBE/TDHE LOANS (Cont.) These properties are eligible for assumption by qualified borrowers: – Tribe/TDHE pays cash investment and loan payments during construction – Qualified Borrowers able to assume – After qualifying assumption, Tribe or TDHE is released from liability Section 184 Training, Sponsored by HUD

88 TRIBE/TDHE LOANS(Cont.) Financial Capacity Demonstrated ability to pay mortgage loan: – Credit History (Dunn & Bradstreet) – Sources of funds to close – Income – Liabilities Section 184 Training, Sponsored by HUD

89 TRIBE/TDHE LOANS (Cont.) Coverage of debt service Skills, experience to undertake project Demonstration of need Marketing plan Audited financial statements Section 184 Training, Sponsored by HUD

90 TRIBE/TDHE LOANS (Cont.) Evidence of authority to borrow Evidence of ability to obtain deficiency judgment Plans for projects exceeding 20 homes must be built in phases Section 184 Training, Sponsored by HUD

91 184 SINGLE CLOSE CONSTRUCTION LOANS Section 184 Training, Sponsored by HUD

92 CONSTRUCTION LOAN OPTIONS 2 options available to borrowers: – Lender or Bank carries interim construction loan 184 loan used to payoff construction loan; not closed or guaranteed until after house is complete – 184 single close construction loan Section 184 Training, Sponsored by HUD

93 SINGLE CLOSE CONSTRUCTION LOAN One time Single Close Construction starts within 60 days after closing Mortgage payments begin after closing 6 month construction period Guarantee issued after closing Section 184 Training, Sponsored by HUD

94 SINGLE CLOSE CONSTRUCTION EXPENSES The following expenses can be included in the loan amount, if supported by the appraisal: – Inspections – Up to 2.5% loan origination fee – Contingency Reserve – 0-6 mortgage payments – Title update fees – Permits Section 184 Training, Sponsored by HUD

95 SINGLE CLOSE CONTINGENCY REQUIREMENT $0 - No contingency for manufactured and modular homes 10% requirement for site built, site work, rehabilitation – Included in loan: unused portion used to pay down unpaid principal balance – Excluded from loan: separate escrow; unused portion may be returned to borrower Section 184 Training, Sponsored by HUD

96 SINGLE CLOSE REHAB LOANS Acquisition or existing debt + improvements can’t exceed program LTV requirements $10,000 + of improvements required for eligibility Appraisal requirements or borrower’s wish list allowable. Luxury items and items not a permanent part of the property are not eligible Section 184 Training, Sponsored by HUD

97 SINGLE CLOSE LOAN PROCESSING Borrower/contractor determine cost to construct /rehabilitate Appraisal based on completed or after improved value Lender completes construction/rehab worksheet; to determine mortgage amount Section 184 Training, Sponsored by HUD

98 SINGLE CLOSE LOAN PROCESSING (Cont.) Lender submission package to include all construction documents: – Single Close Max Mortgage Worksheet – Plans & Specs/Description of Materials – Site Map and Plot Plan – Proposed Contractor/Homeowner Agreement and Breakdown of Costs – Proposed Construction Schedule – Builders Certification, HUD Section 184 Training, Sponsored by HUD

99 SINGLE CLOSE LOAN PROCESSING (Cont.) Closing Requirements: – Section 184 applicant acknowledgment – Construction loan rider – Construction loan agreement – Evidence of construction escrow – Notice to Proceed issued to Borrower and included in closing package – Final release of contingency reserve funds approved by the lender; final accounting sent to HUD Section 184 Training, Sponsored by HUD

100 SINGLE CLOSE LOAN PROCESSING (Cont.) Post Endorsement Documents – Sent to HUD after completion of construction Post Endorsement Checklist Section 184 Training, Sponsored by HUD

101 REFINANCES Section 184 Training, Sponsored by HUD

102 REFINANCES Statute and regulations amended to allow refinance under Section 184 No statutory or regulatory authority to refund Loan Guarantee fee Loan Guarantee fee required Loan amounts must be within mortgage limits for area (150% of FHA limit published March 2008) Section 184 Training, Sponsored by HUD

103 TYPES OF REFINANCES Streamline refinances (existing 184 loans) – With or without an appraisal – With or without credit qualifying Cash out with an appraisal and credit qualifying No cash out with an appraisal and credit qualifying Section 184 Training, Sponsored by HUD

104 TRUST LAND REFINANCES Acceptable existing lease: – Sufficient term remaining – Current TSR with recorded lease New lease when existing lease is unacceptable: – Old lease must be canceled – Current TSR with new lease recorded and old lease removed Section 184 Training, Sponsored by HUD

105 TRUST LAND REFINANCES (Cont.) Responsibility of Lender after closing: – Satisfaction of existing mortgage is recorded on TSR – New mortgage and rider approved and recorded on TSR Section 184 Training, Sponsored by HUD

106 TRUST LAND REFINANCES (Cont.) Appraisals: – Follow HUD Handbook – Cost approach usually utilized Section 184 Training, Sponsored by HUD

107 STREAMLINE REFINANCES Limited to existing Section 184 loans Purpose: – Lower borrower’s monthly payment; or – Reduce mortgage term Subordinate financing can remain in place if subordinated to new loan No repairs financed Cash back to borrower cannot exceed $250 Section 184 Training, Sponsored by HUD

108 STREAMLINE REFINANCES (Cont.) Social Security numbers/Tribal enrollment verified Loan must be current prior to refinance Premium pricing allowed for no cost loans Evidence of cash to close not required but at OLG discretion Section 184 Training, Sponsored by HUD

109 CASHOUT REFINANCE Not limited to 184 Credit qualifying No DG approval, HUD underwritten Appraisal All subordinate liens paid off Mortgage payments on time Section 184 Training, Sponsored by HUD

110 CASHOUT REFINANCE (Cont.) Tribal approval when down payment assistance provided on original loan Maximum cash back limited by OLG ($25,000 cash in hand) Section 184 Training, Sponsored by HUD

111 CASHOUT REFINANCE Credit Requirements: No late payments within 24 months No late mortgage payments within 36 months No bankruptcy, judgments in 48 months ( special circumstances reviewed on case by case basis) No accounts reverting to collection in 24 months Section 184 Training, Sponsored by HUD

112 NO CASHOUT REFINANCE Used to refinance mortgage loans other than existing Section 184 No cash back Max mortgage amount may include payoff, closing costs, and prepaids – Not to exceed the appropriate program LTV and FHA loan limits on 03/2008 Section 184 Training, Sponsored by HUD

113 NO CASHOUT REFINANCE Credit Requirements: No late payments within 12 months No late mortgage payments within 12 months No bankruptcy, judgments in 24months (special circumstances reviewed on case by case basis) No accounts reverting to collection in 12 months Section 184 Training, Sponsored by HUD

114 PROCESSING RESOURCES Chapter 5 of the Guidebook Chapter 7 of the Guidebook Chapter 11 of the Guidebook All Forms with HUD number can be obtained on Section 184 Training, Sponsored by HUD

115 LOAN CLOSING Section 184 Training, Sponsored by HUD

116 LOAN CLOSING Lender closes loan – All commitment conditions met – All closing documents including specific to 184 – 1% guarantee fee sent to HUD Lockbox – Lender sends Mortgage/DOT for recording to BIA and/or county/tribe and requests final TSR/Title Policy Section 184 Training, Sponsored by HUD

117 ENDORSEMENT PACKAGE Received within 60 days after closing Reviewed – 184 required documents – Commitment conditions – Closed as underwritten Late endorsement (more than 60 days after closing) – Special processing requirements, fees may apply Section 184 Training, Sponsored by HUD

118 GUARANTEE FEE HUD 53038, Guarantee Fee Transmittal Form Check to lock box in Atlanta, GA – Must be received 15 calendar days after closing – Late charge/interest Section 184 Training, Sponsored by HUD

119 LOAN SERVICING Protecting HUD’s interest File retention (life of mortgage + 3 years) Escrow accounts Notification of servicing change Section 184 Training, Sponsored by HUD

120 DELINQUENT SERVICING Face-to-face interview before 3 payments owed Borrower information packet Delinquency letter (30-45 days) Notice of intent to foreclose Leased land (review for reporting requirements to tribe) Section 184 Training, Sponsored by HUD

121 FORECLOSURE OR ASSIGNMENT Option to foreclose or assign 100% payment Claim submission Section 184 Training, Sponsored by HUD

122 REPORTING REQUIREMENTS Notify HUD when delinquent days Quarterly reports to HUD – Principal balance – Delinquency status (if applicable) 184 Servicing Contact: – Thelma Pillay (202) Section 184 Training, Sponsored by HUD

123 SECONDARY MARKETS Ginnie Mae Fannie Mae Freddie Mac Local Markets Section 184 Training, Sponsored by HUD

124 THANK YOU! More information on the 184 program: – ml ml – HUD/Office of Native American Programs Toll Free: Section 184 Training, Sponsored by HUD


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