Government Products for Correspondents 7-18-11 · Underwriting: 6 Government Lending Products ......

Rev. 7-18-11

Government Products(for Correspondents with Government Delegation Authority)

Presented by: The Correspondent Client Services Consultant Team

The following slides highlight some key components of Citi’s Government Lending. For detailed requirements, please refer to the Citi Correspondent Manual and the respective investor/insurer guidelines.

© 2011 Citibank, N.A., equal housing lender, member FDIC. Citi, Citibank, Arc Design and Citi with Arc Design are registered service marks of Citigroup Inc. Citibank reserves the right to change or discontinue this program at any time.

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Government Lending ProductsGovernment Lending Products

Introduction

Citi is pleased to present this Government Product overview to our Correspondent clients. This is a broad overview of the government products that you may be selling to us; but it does not substitute for the details contained in the Correspondent Manual that form a portion of your contract with Citi.

To the extent of any conflict between this overview and the Correspondent Manual, the Correspondent Manual provisions control.

We will review FHA and VA lending particularly any Citi overlays and also requirements for ensuring that government loans are insurable.

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Objectives

The objectives of the discussion is to help Correspondents:

• Submit loans that meet Citi’s and HUD’s file quality guidelines

• Reduce errors and deficiencies in submitted loans

• List the steps necessary to acquire mortgage insurance and loan guaranty

• Identify resources available to support government loan origination

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FHA Agenda1. FHA Basics

2. FHA Terminology

3. Mortgage Limits

4. Mortgage Insurance

5. Conventional versus FHA

6. Downpayment assistance

7. FHA Calculations

8. Loan Files & Endorsement

9. List of Top Deficiencies

10. FHA Resources

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FHA- The Basics

Fixed Rate - 15- or 30-year term ARM - 3/1, and 5/1 – 30-year terms

Purchase

Rate term refinance

Cash-out refinance

Streamline Refinance with appraisal (without appraisal if a Citi payoff)

203(b) Basic with HUD ADP codes of 703, 729, 748, 796

234(c) Condos with HUD ADP codes of 731, 734, 749, 797

Transaction Types:

Eligible Loan Types:

Available Products & Terms:

Occupancy:

Owner occupied

All loans must be submitted to TOTAL Scorecard

Loans must receive Approve/Accept or Refer/Eligible

Underwriting:

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Poll Question

FHA financing and insuring is available for a number of property types. Which of the following may not be delivered to Citi? – PUDS– Condos– Manufactured homes– Single Family residences

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FHA- The Basics cont’d

Single family, detached and attached

PUDs FHA Approved Condominiums 2-4 family properties

31%/43% or as allowed with DU or LP TOTAL Scorecard

Documented Energy Efficient Home: 33%/45%

Fixed < 95% Qualify @ Note Rate. 3/1 and 5/1 Arm's Qualify @ Note Rate

Property Types:

Ratios:

Minimum FICO Requirements:

660FHA > $417,000

640FHA ≤ $417,000

Minimum FICO score(overlay)*

Scenario

The above credit score overlays apply to all FHA transactions, and all borrowers, including Streamline Refinance, regardless of AUS Findings.

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FHA -Terminology• Mortgagee Letters: FHA’s main contact with lenders to communicate new procedures and updates

• HOC’s: FHA’s Single Family Homeownership Centers; 4 locations: Denver, Philadelphia, Atlanta, & Santa Ana

• CAIVRS: Credit Alert Interactive Voice Response System; used to verify a borrower’s federal debt status

• HUD 92900-LT: FHA Loan and Underwriting Transmittal Summary is used by DE Underwriter to summarize the loan parameters.

• Statutory Investment: Borrower’s minimum required investment in the transaction; calculated as 3.5% of the lesser of the sales price or appraised value re: Mortgagee Letter 2008-23

Low Down Payment, 3.5%

UFMIP can be financed

Higher DTI guidelines

Sweat Equity

Boarder Income (from relatives)

Secondary Financing from Family Members

FHA Allows:

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2009 FHA Mortgage Limits

Mortgage Limits Effective thru 9/30/2011:The maximum loan amounts vary by location. A schedule of FHA mortgage limits for all areas is available online at: https://entp.hud.gov/idapp/html/hicostlook.cfm.

Important Note: Any Loan that has a base loan amount exceeding $417,000, prior to the inclusion of any up-front insurance premium (UFMIP), must be registered with FHA 30 Jumbo in the Product field and FHA Jumbo in the Subprogram Code field.

$2,105,100$1,403,400$521,2504-unit

$1,693,875$1,129,250$419,4003-unit

$1,401,300$934,200$347,0002-unit

$1,094,625$729,750$271,0501-unit

AlaskaHawaiiHigh Cost Areas 1

All StatesEXCEPT

High Cost Areas and AK & HI

# Units

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FHA – Single Family Mortgage Insurance

.50%>901.15%>95

.25%78.01 to 901.10%≤95

None≤78

AnnualLTVAnnualLTV

For loans with terms ≤15 years*For loans with terms >15 years*

• Up-Front MIP Premiums:

• Annual MIP Premiums (For Purchase, Refinance and Streamline Refinances):

* MIP Premiums for case numbers assigned after 4/18-11. The LTV must be computed two decimal places in order to determine the appropriate MI factor above.

1.00%Purchase and Refinance Transactions

Up-FrontTransaction Types

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Conventional vs. Government

• Bankruptcy: 2 years

• Foreclosure: 2 years

• 1 year payment history for Chapter 13 and approval from the Trustee.

• Bankruptcy: 2 years

•Foreclosure: 3 years

• 1 year payment history for Chapter 13 and approval from the Trustee.

• Exceptions for extenuating circumstances

• Bankruptcy: 4 years; Foreclosure: 5 years

• DU/LP may approve with less

• Exceptions for extenuating circumstances

Bankruptcy/ Foreclosure

• Permitted

• 3/1, 5/1, 7/1 & 10/1 LIBOR

• Annual or Monthly PMI (borrower- or lender-paid)• MI may not be financed

• Second homes and investment properties eligible

• Based on Conforming limits• May go up to the Agency Mortgage Limits. Agency Jumbo may be available (vary by county/property location)

Conventional

• VA funding fee• No monthly/annual MI• Funding Fee may be financed

• Second homes and investment permitted on VA IRRRL’s only

• May go up to a cap with $1,000,000, inclusive of the VA funding fee, depending on the level of delegation

VA

• Not permittedEscrow Waivers• 3/1 and 5/1 ARM’s

• UFMIP in addition to monthly premium- MIP• UFMIP may be financed

MI

• Primary residence Occupancy

• Based on HUD statutory limits • May vary as determined by High Cost areas per the American Recovery and Reinvestment Act of 2009 (ARRA 2/17/09)• FHA Jumbo may be available

Loan Limits

FHA

QuickComparison

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Poll Question

In your opinion which of the following is the top benefit of government loans as compared to conventional loans?– Higher DTI (debt to income)– Less time since bankruptcy– Less time since foreclosure– Loan limits

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Keys to a Successful FHA TransactionExample: John Q. Customer is purchasing a 1-unit residence with a sales

price and appraised value of $203,000. He needs a 30-year Fixed Rate loan at 95% LTV and will be financing the UFMIP. Case number assigned May 1, 2011. Calculate the Monthly and UFMIP and the borrower’s minimum required investment.

?!?= Note Loan Amount+ $195,895Add Base Loan Amount

?!?= UFMIP 1.0%Multiply by Upfront MI Factor

$195,895Base Loan Amount

$2,252.79/12 = = Monthly Estimate of MIP


?!?= Min Investment:

3.5% 3.5%$203,000Sales Price

?!?Multiply by MI Factor (1.15%)

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Keys to a Successful FHA Transaction

$197,853= Note Loan Amount+ $195,895Add Base Loan Amount

$1,958.95= UFMIP 1.0%Multiply by Upfront MI Factor


$2,252.79/12 = = Monthly Estimate of MIP


$7,105= Min Investment:

3.5% 3.5%:$203,000Sales Price:

$187.73Multiply by MI Factor (1.15%)

Example: John Q. Customer is purchasing a 1-unit residence with a sales price and appraised value of $203,000. He needs a 30-year Fixed Rate loan at 95% LTV and will be financing the UFMIP. Case number assigned May 1, 2011. Calculate the Monthly and UFMIP and the borrower’s minimum required investment.

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FHA Post Closing

Procedures for obtaining insurance on FHA Loans.

• Steps to Endorsement

• Up-front MIP payment

• Submission of Case Binder

• The Mortgage Insurance Certificate (MIC)

• Top 10 List of Deficiencies and how to prevent them

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Steps to Endorsement

Step 1: Submit UFMIP payment within 10 days of settlement.

Step 2: Enter all required data into FHA Connection.

Step 3: Stack closing and credit documents.

Step 4: Review each document for accuracy (clear any deficiencies.)

Step 5: Place documents in HUD Binder.

Step 6: Make extra copy of the appraisal, staple and leave loose in the binder.

Step 7: Ship file to appropriate HOC (Must be done within 60 days of settlement.)

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UFMIP Payment

• Payment required within 10 calendar days of settlement or disbursement, which ever is later

• Payment collected directly by HUD and processed using Treasury Department’s www.pay.gov

• Premium payments must be received by HUD by 8:00 pm, Eastern time

• Additional information can be found at: http:www.hud.gov//offices/hsg/comp/premiums/sfpaygov.cfm#upfront

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Submission of a Casebinder

• Misplacement of a document could result in the binder being rejected and returned without the insurance being issued.

• Deficient submissions will result in a Notice of Rejection (NOR) and the file returned.

• Lender has the responsibility to ensure all documents are:– Correct, factual and legible– Originals or certified true copies, as applicable– Conform to the requirements of Handbook 4155.2

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Mortgage Insurance Certificate• All FHA Loans must receive a Mortgage Insurance Certificate (MIC).

• FHA allows two processes to obtain the certificate.– Submission of the case binder to the HOC, (Standard program) or– Electronic submission of audit documents, LIP (Lender Insurance

Program)

• LIP is only available to lenders who have acceptable default and claim rates.

• HUD randomly selects case binders for review after endorsement to ensure that LIP Lenders comply with requirements.

• Review FHA Connection on a daily basis to track endorsement progress and identify loans that are rejected.

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Mortgage Insurance Certificate cont’d

Mortgage Insurance Certificates (MIC) may be submitted to Citi two ways:

• Submit the certificate to the document fax number 866-305-5948

• Mail it to the following address -Citibank N. A.Document Processing MS 321 1000 Technology Drive O’Fallon, MO 63368

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HUD’s Top 10 List of Deficiencies

10. Source of Funds - Improper or inadequate documentation of the funds used for closing

9. Borrower Credit - Failure to consider installment debt or non-purchasing spouse liabilities

8. Qualifying Ratios - Failure to document compensating factors to justify high ratios

7. Income & Employment Documentation - Verification of 2-year history, explain gaps

6. General Data Integrity - Failure to resolve inconsistencies in documentation

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HUD’s Top 10 List of Deficiencies, cont’d

5. Quality Control; failure to implement the QC plan, or to conduct timely QC reviews

4. Late Submissions of Up-Front MIP; not submitting funds within time frames

3. Late Submission of Endorsement Packages; missed 60 day submission timeframes

2. Incorrect calculation of Maximum Mortgage Amounts; resulting in over-insured loan

1. Net Branching; failure to adhere to branch office criteria

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Citi’s List of Top Suspense Items

• Missing or Incomplete Government Application Addendum

• Missing Initial Signed 1003

• Proof of UFMIP payment

• Inaccurate Income Calculations

• Incomplete 92900; missing signatures

• Missing paper trail for large deposits

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FHA ResourcesHomeownership Centers (HOC’s)

Denver HOC: 1-800-543-9378http:/www/hud.gov/offices/hsg/sfh/talk/addr_den.cfm

Covers: AR, CO, IA, KS, LA, MN, MO, MT, ND, NE, NM, OK, SD, TX, UT, WI, WY

Philadelphia HOC: 1-800-440-8647 http:/www/hud.gov/offices/hsg/sfh/talk/addr_phi.cfm

Covers: CT, DC, DE, MA, MD, ME, MI, NH, NJ, NY, OH, PA, RI, VA, VT, WV

Atlanta HOC: 1-888-696-4687 http:/www/hud.gov/offices/hsg/sfh/talk/addr_atl.cfmCovers: AL, FL, GA, IL, IN, KY, MS, NC, SC, TN

Santa Ana HOC: 1-888-257-5605 http:/www/hud.gov/offices/hsg/sfh/talk/addr_sna.cfm

Covers: AK, AX, CA, VA, HI, ID, NV, WAAlways work with the HOC serving the state in

which the property is located

Real Estate Appraisal Center:1-888-245-4860

For all appraisal/property questions

HUD Reference Website:http://www/hud.gov/offices/hsg/sfh/ref/hsgrcont.cfm

Contains copies of Mortgagee Letters, maximum mortgage amounts, and help with many common FHA credit and appraisal issues.

List of FHA Approved Condo Projects:https://entp.hud.gov/idapp/html/condlook.cfm

FHA Connection:http://www.hud.gov/

Request an FHA Case Number

Verify credit via CAIVRS

Assign an appraiser

Transfer Servicing

View list of Approved Appraisers

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VA Agenda

• Lending Basics

• Terminology & Helpful Hints

• Eligibility

• Resources

• Loan Guaranty

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VA- The Basics

Fixed Rate 15-year or 30-year term

3/1 ARM & 5/1 ARM – 30-year term

Available Products & Terms: Transaction Types: Purchase

Streamline Refinance (IRRRL)

Other Refinancing Loans

Cash-out refinance

* Permitted on VA IRRRL’s only

Occupancy:Ineligible Loan Types:

Shared equity (non-veteran) VA mortgages without a Guaranty

and down payment/equity of 25% Any loan that VA’s LGC cannot be

issued Deed Restricted Properties Non-Traditional Credit

Owner occupied

Second Home*

Investment*

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VA- The Basics cont’d

Property Types: Single family, detached and

attached residences

VA Approved PUDs

VA approved Condominiums

2-4 family properties

DU/LP for Government Loans (Pmi AURA)

Manual Underwrite

Total debt ratio is 41% or as determined by DU/LP

Residual income should be sufficient to support the household based on loan size, family size and region of the country. Refer to current VA requirements.

Underwriting Options:

Ratios:

660VA > $417,000640VA ≤ $417,000

Minimum FICO score(overlay)*

Scenario

Minimum FICO Requirements:

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VA- Terminology & Helpful Hints• IRRRL: VA Interest Rate Reduction Refinance Loan; a streamline refinance

• Entitlement: the amount of money the government will guarantee to lenders who make loans to Veterans.

• Certificate of Eligibility (COE): indicates the Veteran’s amount of entitlement

• Residual Income: the amount of income remaining (after deduction of debts, obligations, and monthly housing expenses) to cover family living expenses such as food, health care, clothing, and gasoline

Less Cash to Close

• No Down Payment

• VA Funding Fee can be financed

• Seller contributions allowed to cover prepaids

• Lower closing costs (typically) than conventional

Qualify for More Money

• No Front-End Ratio requirement

• Higher DTI guidelines

• Seller contributions can be applied towards borrower’s debt

• Higher cash-out refinance LTV guidelines

How will a VA loan help my borrower?

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VA- Eligibility

Who is eligible for a VA Mortgage?

Individuals who are currently serving or who served and were honorably discharged from the U.S. Military:

Army

Navy

Air Force

Marines

Others who are eligible: Un-remarried surviving spouse of a Veteran who died in service

Spouse of active duty service member listed as MIA or POW for atleast 90 days

Reserves

National Guard

Coast Guard

Merchant Marines

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VA- Resources

List of VA Approved Condo Projects:

http://condopudbuilder.vba.va.gov/2.2/frames.html

VA Reference Website:www.homeloans.va.gov

Lender’s Handbook

VA Forms

FAQ’s

Email Addresses

Links to lists of VA acquired homes

Training courses and materials

How to access the VA Handbook online:

Go to www.homeloans.va.gov Click on The Lender’s Handbook in the

Lenders, Servicers, and Real Estate Professionals column.

VA Funding Fee Payment Information:

http://www.homeloans.va.gov/pdf/va_ffps_users_guide.pdf

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VA Loan Insuring

Lenders must obtain Loan Guaranty Certificates (LGCs) for the VA loans they close. Loan must be reported within 60 days followingdisbursement.

A loan is automatically guaranteed by VA upon closing, prior to issuance of the LGC, provided:The loan was made by a supervised lender, OR

The loan was made by a non-supervised lender with automatic authority AND,

Applicable law and regulations have been complied with.

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VA Insuring cont’d

An increasing number of guaranty submissions lack the appropriate documentation. Without the items listed below, the case cannot be properly entered into VA systems to issue the LGC;

Original COE (Certificate of Eligibility)

Funding Fee receipt (or evidence the veteran is exempt)

Certificate of Reasonable Value, Notice of Value or Master Certificate of Reasonable Value with front page and options pages

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VA Insuring Process

Steps for obtaining the Lending Guaranty Certificate are as follows:

1. Establish a tracking system as a part of your closing process

2. Set up the loan file

3. Assign VA Loan Identification Number (LIN)

4. Input data into the Loan Processing (LP) system

5. Follow up guaranty status and address suspended files

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VA Insuring Resource• Go to www.homeloans.va.gov

• In the search field enter ‘Issue LGC’

• Click the link; Chapter 6 How to Process Loan Submissions and Issue Evidence of Guaranty

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Citi’s List of Top VA Suspense Items

1. Incomplete Final Report & Certificate of Loan Disbursement Form 26-1820

2. Missing Initial Signed 1003

3. Inaccurate data integrity

4. Missing Verification Of Employment

5. Inaccurate program guidelines

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Summary

• Citi accepts a variety of FHA/VA loan products.

• Complete, accurate loan packages reduce pre-purchase turn around.

• Correspondent Lenders must follow through the process of obtaining mortgage insurance and loan guaranty.

Rev. 7-18-11

Government Products for Correspondents 7-18-11 · Underwriting: 6 Government Lending Products ......

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Transcript of Government Products for Correspondents 7-18-11 · Underwriting: 6 Government Lending Products ......