PROCEDURAL MANUAL - AHFA Manu… · Revised 06/17 • Page 4 INTRODUCTION The Alabama Housing...
Transcript of PROCEDURAL MANUAL - AHFA Manu… · Revised 06/17 • Page 4 INTRODUCTION The Alabama Housing...
Revised 06/17 • Page 2
CONTENTS
INTRODUCTION
SECTION I—DEFINITIONS .......................................................................................................................................................... 4
SECTION II—MORTGAGOR ELIGIBILITY EVALUATION ................................................................................................................ 6
A. IncomeRestrictions ..................................................................................................................................................... 6B. Occupancy ................................................................................................................................................................... 6C. ResidenceUsedasVacation,Seasonal,Rental,RecreationalorSecondHome .......................................................... 6D. LegalSeparation .......................................................................................................................................................... 6E. HomebuyerEducation ................................................................................................................................................. 6F. Credit Score Requirement ............................................................................................................................................ 7G. TotalDebt-to-IncomeRatio .......................................................................................................................................... 7H. AcceptableMIProviders .............................................................................................................................................. 7I. AUS Findings ................................................................................................................................................................ 7J. Tax Liens ....................................................................................................................................................................... 7K. FederalTaxReturnTranscripts ..................................................................................................................................... 7L. PreviousForeclosure .................................................................................................................................................... 8
SECTION III—LOAN ELIGIBILITY EVALUATION ............................................................................................................................ 8
A. PermittedEncumbrances ............................................................................................................................................ 8B. Types of Loans ............................................................................................................................................................. 8C. Amount of Mortgage Loan .......................................................................................................................................... 8D. New Mortgage Requirements ..................................................................................................................................... 8
SECTION IV—PROPERTY ELIGIBILITY EVALUATION .................................................................................................................... 8
A. EligibleLoanArea ........................................................................................................................................................ 8B. QualifyingResidences ................................................................................................................................................. 8C. Foreclosures ................................................................................................................................................................. 9D. AHFA Requirements for Repair Escrows ....................................................................................................................... 9
SECTION V—RESERVATION SECTION ......................................................................................................................................... 9
A. ReservationProcedures .............................................................................................................................................. 9B. Rate Commitment Form .............................................................................................................................................. 9C. ReservationDocumentDelivery ................................................................................................................................ 10D. ReservationExpirationDate ...................................................................................................................................... 10E. LockPolicy .................................................................................................................................................................. 10F. CancellationofReservation ....................................................................................................................................... 11G. TransferofReservation ............................................................................................................................................. 12
SECTION VI—LOAN PROCESSING AND UNDERWRITING PROCEDURES .................................................................................. 12
A. RequestforConditionalCommitmentPackage ........................................................................................................ 12B. RequestforConditionalCommitment ...................................................................................................................... 12
SECTION VII—INCOMEGUIDELINESFORSALARIEDANDSELF-EMPLOYEDMORTGAGORS ..................................................... 13
A. SalariedMortgagors .................................................................................................................................................. 13B. Self-EmployedMortgagors ........................................................................................................................................ 16C. Non-BorrowingSpouses,Partners,AllOtherOccupants18YearsorOlder ............................................................... 17D. CurrentlySeparatedorSeparatingSpouses ............................................................................................................... 17E. Co-Signer/Non-OccupantGuarantors ........................................................................................................................ 17
SECTION VIII—ISSUANCE OF THE CONDITIONAL COMMITMENT ............................................................................................ 18
Revised 06/17 • Page 3
SECTION IX—CLOSED LOAN PROCEDURES .............................................................................................................................. 18
A. ConditionalCommitment .......................................................................................................................................... 18B. VerificationsofIncome.............................................................................................................................................. 19C. SettlementStatementFees ....................................................................................................................................... 19
SECTION X—LOAN PURCHASES AND TRANSFER OF SERVICING RIGHTS ................................................................................. 19
A. ReviewoftheMortgageLoan ................................................................................................................................... 19B. PenaltiesWithheldfromFunding .............................................................................................................................. 19C. FundingoftheMortgageLoan .................................................................................................................................. 20D. FinalDocumentation ................................................................................................................................................. 20E. TransferofLoanServicingRightsandBenefits .......................................................................................................... 20
SECTION XI—MODIFICATIONS ................................................................................................................................................ 21
SECTION XII—ASSUMPTIONS .................................................................................................................................................. 21
SECTION XIII—DOWN PAYMENT ASSISTANCE ......................................................................................................................... 21
A. Reservations .............................................................................................................................................................. 21B. Eligibility .................................................................................................................................................................... 21C. Types of Loans ........................................................................................................................................................... 21D. CalculationofAssistanceAmount ............................................................................................................................. 22E. RequiredDocumentation .......................................................................................................................................... 22F. Term and Repayment ................................................................................................................................................ 22G. Commitment Periods ................................................................................................................................................ 22H. Issuance of Funds ...................................................................................................................................................... 22I. FeesinOrigination .................................................................................................................................................... 22J. PurchaseandServicing ............................................................................................................................................. 22K. Assumptions .............................................................................................................................................................. 22
SECTION XIV—DELEGATED EXAMINER OPTION ...................................................................................................................... 22
Revised 06/17 • Page 4
INTRODUCTIONTheAlabamaHousingFinanceAuthority(theAuthority),isapubliccorporationandaninstrumentalityoftheState.ItwasorganizedpursuanttoTitle24,Chapter1AoftheCodeofAlabama,asrevised.TheAuthority,anon-profitorganization,wasestablishedasthehousingentityforthestatein1980andcurrentlyadministersseveralhousingprogramssuchastheFirstStepMortgageRevenueBondProgram,theMortgageCreditCertificateProgram,theStepUpProgram,theDownPaymentAssistanceProgram,theHabitatforHumanityLoanPurchaseProgram,theLow-IncomeHousingTaxCredit“LIHTC”andtheHOMEProgram,aswellasseveralspecialtyhousingprogramswithinthestateofAlabama.
Thelenderdeterminesifthemortgagor,loan,andpropertyarewithinguidelinesasstatedinSectionsII,III,andIVoftheStepUpProceduralManualbaseduponinformationobtained.ThelendermustexplaintheProgramanditsrequirementstothebuyer.
ThelenderreservesfundsandsendstotheAuthoritythereservationpackageasstatedinSectionVoftheStepUpProceduralManual.
ThelenderprocessesandunderwritestheloanasstatedinSectionsVIandVIIoftheStepUpProceduralManual.ThelendersendstotheAuthoritytheRequestforConditionalCommitmentpackagebeforeclosingasstatedinSectionVIoftheStepUpProceduralManual.UponapprovaloftheloanthelenderwillreceivefromtheAuthorityaconditionalcommitment.Thelendermaythenclosetheloanwiththeconditionslistedontheconditionalcommitment.ThelendermusthavetheloanapprovedbytheAuthorityandclosetheloanbeforethereservationoffundsexpires.
AftertheloanclosingthelendersendstotheAuthoritytheclosedloanpackageasstatedinSectionVIIIoftheStepUpProceduralManual.Uponreceiptandapprovaloftheclosedloanpackage,theAuthoritywillfundthemortgageloanasstatedinSectionIXoftheStepUpProceduralManual.
ThepurposeofthismanualistoprovidepertinentinformationandtoenhanceanycurrentguidelinesestablishedbyAuthorityfortheStepUpProgram.ApplicableProgramGuidelinesandtheOriginationandSaleAgreementsupersedethismanual.Pleaseutilizetheappropriate,applicabledocuments.TheAuthorityreservestherighttoupdateorrevisetheStepUpProceduralManualatanytime.
SECTION I—DEFINITIONS
Agreement: TheOriginationandSaleAgreementbetweentheOriginatorsandtheAuthority,andallamendmentsorsupplementswhereappropriate,theInvitation,theNoticeofAcceptance,andallformsorreportsprescribedbytheAuthority.
Appraised Value: Anappraisers’opinionofvaluebasedonregulationsandguidelinesestablishedbythemortgageindustry.
Authority: AlabamaHousingFinanceAuthority,apubliccorporationandinstrumentalityoftheStateorganizedpursuanttotheAct,oranysuccessortoitsduties.
Co-Signer: Apersonwhowilloccupythepropertybeingpurchasedandwhowillbesecondarilyliableforthemortgageloan.
Commitment Fee: Apercentageamountoftherelatedmortgageloan,tobepaidtotheAuthoritythroughaLenderatthetimeofReservationofFunds.
Conventional Mortgage:AMortgageLoanotherthananFHA-InsuredMortgageLoanoraMortgageLoanwithaVAGuarantyoraRuralDevelopmentGuaranty.
Eligible Mortgagor: ApersonintendingtopurchaseaprincipalresidencetobefinancedwithaStepUploan,whocanmeetallqualificationsasestablished.
Eligible Loan Area: TheentiregeographicalareaoftheStateofAlabama.
Revised 06/17 • Page 5
Equal Credit Opportunity Act (ECOA): Afederallawthatprohibitslendersfromdenyingmortgagesonthebasisoftheborrower’srace,color,religion,nationalorigin,age,sex,maritalstatus,orreceiptofincomefrompublicassistanceprograms.
Family Income: ThemeaninggiventosuchterminSectionIIofthisManual.
Fannie Mae: TheFederalNationalMortgageAssociation,oranysuccessorthereto.
Fee Simple: Thegreatestpossibleinterestapersoncanhaveinrealestate,includingtherighttodisposeofthepropertyorpassitontoone’sheirs.
FHA: TheFederalHousingAdministrationoftheDepartmentofHousingandUrbanDevelopmentoftheUnitedStatesofAmerica,oranysuccessorthereto.
Ginnie Mae: TheGovernmentNationalMortgageAssociation,aentirely-ownedcorporateinstrumentalityoftheUnitedStatesofAmericawithintheDepartmentofHousingandUrbanDevelopment,whosepowersareprescribedgenerallybyTitleIIIoftheNationalHousingActof1932,asamended.
Ground Rent: Theearningsofimprovedpropertyallocatedtothegrounditselfafterallowanceismadeforearningsoftheimprovements.Also,paymentfortheuseoflandinaccordancewiththetermsofagroundlease.
Guarantor: Apromisebyonepartytopaydebtorperformanobligationcontractedbyanotherintheeventthattheoriginalobligorfailstoperformascontracted.
Interest Held In Trust: Propertyheldintrustuntilfulfillmentofcertainconditionsaremet.
Joint Tenancy:Jointownershipbytwoormoreperson,givingeachtenantequalinterestandrightsintheproperty,includingtherightofsurvivorship.
Lease: Awrittendocumentcontainingtheconditionsunderwhichthepossessionanduseofrealand/orpersonalpropertyaregivenbytheownertoanotherforastatedperiodandforadatedconsideration.
Life Estate: Afreeholdestategivingabeneficiaryallpropertyrights,excepttherighttosell.Theestateisterminateduponthedeathofthebeneficiary.
Mortgage: TheinstrumentsecuringamortgageloanwhichcreatesalienonaResidencesubjectonlytoPermittedEncumbrances.
Mortgage Documents: ThedocumentsspecifiedfordeliverytotheAuthority.
Mortgage Loan: AnyloanevidencedbyaMortgageNotewhichissecuredbytherelatedMortgageforfinancingthepurchaseofaResidence.
Mortgage Note: Thepromissorynoteevidencingtheobligationtorepayamortgageloan,payabletotheorderofalender,executedbyamortgagortoevidenceobligationtorepaythemortgageloan.
Mortgagor: Thepurchaserofasingle-familyresidencewhoborrowsfundstoobtainaResidence.
New Construction: Single-Familyresidenceslessthanoneyearoldandneveroccupied.
Originators: LendinginstitutionsthatexecuteanAgreementwiththeAuthoritytoparticipateintheProgram.
Permitted Encumbrances: ThetitleencumbrancesonaResidencepermittedundertheProgramGuidelines.
Primary Wage Earner: Theoccupying,note-signingborrowerwhoreceivesthemostmonthlyincome.
Principal Residence: HousingwhichtheEligibleMortgagorintendstooccupyasaprimaryresidenceandwhichisnottobeusedinatradeorbusiness,orasaninvestmentproperty.
Profit and Loss: Astatementbyabusinessreflectingafinancialgainorlossforagivenperiod.
Revised 06/17 • Page 6
Program Guidelines: GuidelinesestablishedbytheAuthoritytoadministertheStepUpProgramandanyrevisions,amendmentsandmodificationsthereof.
Program Participation Fee: AfeetobesetbytheAuthorityforeachseries.
Rate Commitment: Aninterestrateguaranteedtotheborrowerforeither15daysor30daysfromtheloanreservationdate.
RD (Rural Development): AU.S.agencyformerlyknownasFarmersHomeAdministration.
RD Guaranty: AguarantyofamortgageloanbyRDundertheprovisionsofSubchapterIII,Chapter8A,Title42,U.S.CodeAnnotated.
Remainder Interest: Thepropertyremainderofanestateaftertheterminationofapriorestate;canhaveeitheravestedorcontingentinterest.
Reservation Expiration Date: Aperiodof30daysor15daysfromthereservationdate.
Reservation of Funds: ReservedfundsequaltothemortgageloanamountforanEligibleMortgagor.
Residence: Asingle-familyowner-occupieddwellingunitlocatedwithintheEligibleLoanArea,includingdetachedandattachedunits,condominiums,plannedunitdevelopmentsandmanufacturedhomeswhichhaveaminimumof400squarefeetoflivingspaceandaminimumwidthof102inchesandwhichisofakindcustomarilyusedatafixedlocation,andmeetingapplicablelenderrequirements.
Servicer: AlabamaHousingFinanceAuthority.
State: TheStateofAlabama.
Survivorship: Thelegalrightofthesurvivororpersonshavingjointinterestinpropertytotaketheinterestofthepersonwhoisdeceased.
Take-Out Loan: Anymortgageloanmadeforthepurposeofpayingaconstructionperiodloan,bridgeloanorsimilartemporaryinitialfinancingwhichqualifiesassuchpursuanttoSectionII,oftheStepUpProceduralManual.
Transfer Date: AdatetobedesignatedinaccordancewiththeOriginationPeriodasdefinedintheProgramGuidelinesofanyseries.TheTransferDateisestablishedbytheAuthority.
SECTION II—MORTGAGOR ELIGIBILITY EVALUATION
A. IncomeRestrictions.TheAuthorityhasadoptedasingleincomerestrictionfortheprogram.Theannualfamilyincomeofthemortgagormaynotexceed200%ofthestatewidemedianincome—or$97,300asofOctober21,2005.Annualfamilyincomewillbecalculatedtoincludetheincomeofanyoneover18yearsofagewhowillresideinthehome.TheAuthoritymayrevisetheincomeeligibilitycriteriainthefuture.
B. Occupancy. MortgagormustoccupytheresidenceastheirPrincipalResidencewithin60daysaftertheclosingandthereafter,astheirprincipalandpermanentresidence.
C. ResidenceUsedasVacation,Seasonal,Rental,RecreationalorSecondHome.TheMortgagorcannotpurchasetheresidenceforuseasarental,recreational,seasonal,vacationorsecondresidence.
D. LegalSeparation.Legalseparationagreementsarenotacceptabledocumentationinthedeterminationofahousehold’seligibility.LendersmusttreatseparatedoccupantsasmarriedandtheseparatedspousemustmeetallStepUpguidelinesasestablishedinSectionsII,III,&IVofthismanual.
E. HomebuyerEducation.AlleligiblemortgagorsmustcompleteanAHFA-approvedhomeownershipeducationcoursepriortoloanclosing.TheOriginatormustsubmitthecertificateofcompletionwiththeclosedloanfile.CertificatesofcompletionmustbedatedwithinoneyearofloanreservationtoAHFA.Acceptableformsofcounselingincludeface-
Revised 06/17 • Page 7
to-face,variousonlinecourses,andtheKeystoHomeownershipbookpublishedbytheNationalFoundationforCreditCounseling.
F. CreditScoreRequirement.UnderFHAStepUpandConventionalStepUp,theprimarywage-earning,occupyingborrowermusthaveamiddlecreditscoreofatleast620tobeeligiblefortheprogram.Inthecasetheprimarywage-earnerhasonlytwoscores,thelowerofthetwoscoresmustbeused.Inthecasetheprimarywage-earnerhasonlyonescoreordoesnothaveacreditscore,theborrowerwouldnotbeeligiblefortheprogram.Theprimarywage-earnerisdefinedastheoccupyingborrowerwiththehighestmonthlyincome.
AllotheroccupyingborrowersmustmeetFHAcreditscorerequirementsforFHAStepUp;orFannieMaeandtheapplicableMIcompanycreditscorerequirementsforConventionalStepUp.
G. TotalDebt-to-IncomeRatio.TheTDTIratiomaynotexceed45percentfortheStepUpprogram.Whenusingthe“HFAPreferred”conventionalproduct,thelenderwillalsoneedtoadheretocurrentFannieMaeTDTIrequirements,inadditiontotheapplicableMIcompanyTDTIrequirements.TDTIratioshouldbebasedonthelender’s qualifyingtotalincomeandtotaldebts.ToverifyTDTI,thefollowingdocumentationmustbesubmittedwiththecompliancepackage:
•DUFindingsorFHATotalScorecardFindings(FHA)
•DUFindingsonly(conventional)
AND
•HUDForm92900-LT(FHALoanUnderwritingandTransmittalSummary)forFHAloans
•1008forconventionalloans
Oncetheclosedfileisreceived,AHFA’sFundingandDeliveryDepartmentwillensurethefinalTDTImeetsprogramguidelinesbyreviewingthefinalAutomatedUnderwritingFindingsandfinalFHALoanUnderwritingandTransmittalSummary.Loansnotmeetingprogramrequirementswillnotbepurchased.
H. AcceptableMIProviders.Lendersmayusethefollowingproviders:1)Arch,2)Essent,3)Genworth,4)MGIC,5)NationalMI,or6)Radian.Thislistissubjecttochange.
I. AUSFindings.AHFAwillnotacceptmanualunderwritingforFHA/conventionalloanapprovals.WeacceptDUorFHATotalScorecardFindingsresultinginApprove/EligibleorAccept/AcceptthatisconsistentwithFHAguidelines,andDUFindingsresultinginApprove/Eligibleconsistentwithconventionalguidelines.DU/FHATotalScorecardsubmissionsforFHAloansresultinginaReferdecisionwillbeineligiblefordeliverytoAHFA.DUsubmissionsresultinginaReferdecisionwillbeineligiblefordeliverytoAHFA.
J. Tax Liens.Unpaid,unsatisfied,and/orunreleasedfederalorstatetaxliensarenotpermittedundertheStepUpProgram.Anyborrowerorspousewhowillholdtitlethathasataxliencannotutilizetheprogram.Wewillnotacceptrepaymentplansonfileswithanestablishedlien.Allliensmustbesatisfiedpriortoapprovalandevidencetosupportthereleaseincludedintheloanfile.
Furthermore,ifaborrowercurrentlyhasarepaymentplaninplacefortaxesowed(notyetataxlien)andshowsahistoryofprevioustaxlienspercreditdocuments,theywillnotbeeligiblefortheStepUpprogramaswell.
Asasidenote,shouldaborrowercurrentlyhavearepaymentplaninplacefortaxesowed(notataxlien)andthatcreditissueisreferencedinourcompliancepackage,forourpurposes,AHFAwillrequireverificationfromtheIRSthattheaccountiscurrent.Iftheaccountisnotcurrent,AHFAwillnotbeabletoapprovetheloanduetotheuncertaintythatataxliencouldbeimposedatanypoint-in-time.
K. FederalTaxReturnTranscripts.Thelendermustbeabletoprovidethemostrecentyear’sIRStaxtranscriptsforeachoccupyingborrowerandnon-borrower(s),18yearsofageandolder.Self-employedborrowersarestillrequiredtoprovidethemostrecenttwoyears’transcriptsandayear-to-dateprofitandlossstatement.AnylatefilersorIRSresponsesof“norecordoftaxreturnbeingfiled”wherereturnswereapplicablewillhavetobesatisfactorilyresolvedbeforetheloanwillbeeligibleforStepUp.ExtensionswillnotbeacceptedbyAHFA.
L. PreviousForeclosure.Anyborrowerwithapreviousforeclosureor“DeedinLieu”,byanyservicer,mustwaitthreeyears
Revised 06/17 • Page 8
beforeapplyingforfinancingthroughAHFA’shomeownershipprograms.Inaddition,theymusthaveestablishedtwonewcreditlines(asreportedonthecreditreport)followingtheforeclosuresalewithanacceptablepayhistory,andtheymusthavea660minimumcreditscore(middlescore).Non-traditionalcreditaccountswillnotbeacceptableasnewaccounts.ThelendermustreceiveanApprove/Eligibleunderwritingdecision.Manuallyunderwrittenloanswillnotbeeligiblefortheprogram.
SECTION III—LOAN ELIGIBILITY EVALUATION
A. PermittedEncumbrances.AllMortgageLoansmustbesecuredbyafirstlienonthefeesimpletitleorleaseholdestatetotheResidence.PermittedEncumbrancesarethoseliens,covenants,conditionsandrestrictions,rightsofway,easementsandothermattersofpublicrecordasofthedateoftherecordingoftherelatedMortgage.TheseencumbrancesmustbepermittedunderFHAandGinnieMae,asapplicable.
B. TypesofLoans.Inordertoqualifyundertheprogram,eachmortgageloanmustbeinsuredbyFHA(203(k)loansarenoteligibleforinclusionintheStepUpprogram)orFannieMae.
C. AmountofMortgageLoan.ThemaximumamountofanymortgageloanmaynotexceedtheapplicablerequirementsofFHAandGinnieMaeasoftheclosingdateofthemortgageloan.
D. NewMortgageRequirements.Norefinancingofanyoutstandingindebtednessshallbepermittedexceptwithregardtotake-outloans.Atake-outloanmaybemadetopermitanEligibleMortgagortofinancearesidencewhichqualifiesasanewlyconstructedresidenceundertheProgramGuidelines.
Ifwarrantedbythecircumstances,anEligibleMortgagorshallbeconsideredasbothaMortgagorandasellerwithrespecttotake-outloans.Anewlyconstructedresidenceisconsideredaresidencewhichhasnotpreviouslybeenoccupied,andislessthanoneyearold.
SECTION IV—PROPERTY ELIGIBILITY EVALUATION
A. EligibleLoanArea.TheEligibleLoanAreashallbetheentiregeographicboundariesoftheState.
B. QualifyingResidences.Subjecttocertainlimitationsdescribedbelow,allResidencesfinancedbytheStepUpProgrammustmeetthefollowing:
1. TheResidencesmustbepermanentlyaffixed,andconsidered“RealProperty”;
2. Detachedsingle-familyhouses,consistingofnomorethanonedwellingunit;
3. Attachedsingle-familyhousesortownhouses,unitswhicharemanufacturedhousinginsuredunderSection203(b)oftheNationalHousingActof1934,asamended;and
4. Unitsofa“condominium”orunitswithina“plannedunitdevelopment”assuchtermsaredefinedintheFannieMae guide.
5. ManufacturedhomesusingFHAfinancingmustmeetthefollowingrequirements:
(a) Themanufacturedhomemustbeattachedtotheland.
(b) Themanufacturedhomemustbeclassifiedandtaxedasrealestate.
(c) Inaccordancewiththejurisdictionalrequirements,themanufacturedhometitlehastobesurrendered/cancelled(copyofcancellationmustbeprovidedatthetimeofloanpurchasebyAHFA).
Nomorethan5%oftheReservationsofFundsmaybeused,withoutthewrittenauthorizationoftheAuthority,tooriginatemortgageloanswhichconstitutemanufacturedhousing.Allproductguidelinesconcerningtheeligibilityof
Revised 06/17 • Page 9
manufacturedhousingmustbemet.
C. Foreclosures.AllforeclosedpropertiesmusthaveaffirmativetitlecoveragewithnoexceptionforRightofRedemption.
D. AHFARequirementsforRepairEscrows.SincetheparticipatinglenderistheserviceruntiltheloanispurchasedbytheAuthority,thelenderwillapproveanyrepairescrow,followingapplicablecreditguidelines.
Furthermore,theAuthoritywillnotpurchaseaStepUploanwithanoutstandingrepairescrow.TheclosedloanpackagesubmittedtoourFundingDepartmentwillneedtoincludetheFinalInspection,verifyingrepairshavebeencompleted,inorderfortheloantobepurchasedbytheAuthority.Asaresult,thelenderneedstobemindfulthatanydelaysinthecompletionwillcauseadelayinthepurchaseoftheloan.
SECTION V—RESERVATION SECTION
A. ReservationProcedure.Subjecttothefundingrestrictionsandapplicablereservations,applicationsformortgageloanswillbeacceptedinallofthelendingofficesofeachParticipatingOriginatorintheState.Reservationswillbemadeonafirst-come,first-served,fairandequalbasisirrespectiveofrace,color,religion,nationalorigin,age,orsex.
Priortomakingareservationrequest,thelendermusthavetakenamortgageloanapplicationfromapotentialEligibleMortgagor.Themortgagorfurnishesthelenderanearnestmoneysalesagreementorconstructioncontractenteredintobytheseller/builderofaResidenceandtheEligibleMortgagor.LendersareresponsibleformakingapreliminarydeterminationtoseeifthepotentialEligibleMortgagorwillqualifyforthemortgageloan.TheProgramprocessingisdesignedtocomplimentthelender’sregularcreditandunderwritingprocedures.SincetheAuthorityisnotpartofthecreditapprovalprocess,noformalnoticeofrejectionoftheStepUploanisrequiredbytheAuthorityundertheEqualCreditOpportunityAct.TheAuthorityrecognizestheproceduralvariationsamongparticipatinglenders.
Thefollowingstepsareforthereservationandloanprocessingprocess:
1. TheEligibleMortgagorappliesformortgagefinancingfromaparticipatinglender.
2. ThelenderdeterminesiftheloanapplicantiseligiblefortheStepUpProgrambasedonpreliminaryinformationobtainedonannualincome.
3. Allmortgageloansmustbeoriginatedincompliancewith,andmustconformtotheprovisionsofallapplicablerules,regulationsandlimitationsofFHA,GinnieMae,andFannieMaeasappropriate.
EachlenderistoassignusernamesandpasswordstodesignatedemployeesresponsibleformakingrequestsforReservationsofFunds.AllreservationsmustbemadethroughtheAuthority’sonlinereservationsystem,https://lenders.ahfa.com. Telephonedrequestsforreservationswillbeacceptedifthewebsiteisunavailableformorethan24hours.Inthatevent,telephonereservationswillbeacceptedtemporarilyuntilthesiteresumesoperation.The Authority, at its sole discretion, may continue to accept reservation request in the manner specified even though the available funds may be fully reserved. Thesereservationrequestsmaybeeligibleforfundingonafirst-come,first-servedbasisunderanyfutureStepUpprograms.
B. Rate Commitment Form. BeginningonadatedesignatedbytheAuthority,theparticipatinglendersmayrequestReservationsofFundsonlineathttps://lenders.ahfa.com.ThelendercompletestheNewReservationFormwithintheonlinesystemtoreservefundsandsecurethecurrentinterestrate.Uponcompletionoftheform,theonlinesystemwillgenerateacommitmentnumberandexpirationdateofthecommitment.ThelenderthenprintstheReservationofFunds/RateCommitmentFormwithintheonlinesystemfortheborrower(s)’sexecution.ThelenderwillincludethisformandtheReservationAcceptanceinStep1oftheStepUppackage.
NOTE:Thelenderisresponsibleformakingthereservationinatimelymannerwhiletherateisstillavailable.TheStepUprateissubjecttochangewithmarketactivity.Undernocircumstancesshouldalenderpostponeordelaymakingareservation,duetothepossibilityofanincreaseintherate.AHFAcannothonoralender’sdisclosuretoaborrowerwithoutanactualloanreservationcommitmentissuedfromLenderOnLine.
(ProposedConstruction)ReservationofFundsCommitmentForm.WhiletheAuthorityofferstheAlabamaHomeBuyer
Revised 06/17 • Page 10
InitiativeunderConventionalStepUp,lenderswillhavetheopportunitytoreservefundsonlyfora120-dayperiodonproposedconstruction.Thisoptionwillbeavailableforalimitedtime.ThelenderusesthesameNewReservationFormafterselectingtheproposedconstructionoptionwithintheonlinesystem.Uponcompletionoftheform,theonlinesystemwillgenerateacommitmentnumberandexpirationdateofthefunds.Thelenderthenprintsthe(ProposedConstruction)ReservationofFundsCommitmentFormwithintheonlinesystemfortheborrower(s)’sexecution.ThelenderwillincludethisformandtheReservationAcceptanceinStep1(a)oftheStepUppackage.
Thelenderwillthenberesponsibleforlockingtheinterestratebythecommitmentexpirationdate.ThiswillbeachievedbysubmittingtheRateLockRequestFormtotheAuthoritytolockthecurrentinterestrate.Oncethelenderreceivesconfirmationoftheratelock,theywillprinttheReservationofFunds/RateCommitmentFormtoconfirmtherateandrevisedcommitmentexpirationdate.Theborrower(s)willexecutetheform,anditwillbeincludedinStep1oftheStepUppackage.ThestandardStepUpnon-refundablecommitmentfeewillbedueatthistimewhichis0.50%fora15-dayreservationand0.75%fora30-dayreservation.
C. ReservationDocumentDelivery.UponcompletionoftheLoanReservationFormandreservationprocedure,eachlendermustfurnishtheAuthoritywiththeReservationPackageasstatedontheStepUpTransmittalChecklist(Step1),Appendix1.TheAuthoritymustreceivethesedocumentswithin72hours(threeworkingdays)ofreceiptofacommitmentnumber.FailuretodelivertherequesteddocumentationtotheAuthoritywithinthetimespecifiedmayresultincancellationoftheReservationofFundsandRateCommitment.Documentationshouldbemailedto7460HalcyonPointeDrive,Suite200,Montgomery,AL36117.
D. ReservationExpirationDate.Therewillbetwoavailable“lockin”commitments:
1. A30-dayreservationexpirationrequiringanon-refundablecommitmentfeeof0.75%ofthetotalloanamountforFHAandconventionalloans.
2. A15-dayreservationexpirationrequiringanon-refundablecommitmentfeeof0.50%ofthetotalloanamountforFHAandconventionalloans.
E. LockPolicy.ThepurposeofthispolicyistoenhancetheAuthority’sStepUpprogrambyofferingspecificrulesandguidelinesinareasthatwerepreviouslyhandledonacase-by-casebasis.
1. Extensions
(a) Fifteen-dayextensionsareavailableon15-dayor30-dayreservations.
(b) Thecostperextensionis0.25percent.
(c) Extensions must be requested on or before the reservation expiration date.
(d) Amaximumoftwoextensionsareavailableona15-dayreservation,oneona30-dayreservation.
(e) Theextensionfeemustbereceivedwithin72hoursoftheextensionrequestorthereservationwillexpireandtheextensionopportunitywillbelost.
2. Re-locks
(a) Re-locksareavailableatworst-casepricingforexpiredreservationsorreservationsthathavebeenextendedthemaximumamountoftimeallowed.
(b) Re-lockedloansmustpayanadditionalcommitmentfee.
(c) Reservationsthatarenotexpiredmaynotre-lock.
(d) Areservationto the borrowermustbeexpiredfor60daystogetcurrentmarket(betterrate).
(e) Reservationsthatarecancelledduetononpaymentofthecommitmentfeemayre-lockatworst-casepricing.
Revised 06/17 • Page 11
(f) Borrowersthatchangelendersmustre-lockduetosystemlimitations,butwillretaintheoriginalreservation.
(g) Borrowersthatchangeproperty,providedthattheloanamountiswithin10percentoftheoriginalloanamount,willretaintheoriginalreservation.
3. Expiredreservations
(a) Loansnotclosedonorbeforethereservationexpirationdatewillbechargeda0.25percentpenalty.
(b) Thepenaltywillbenettedfromtheloanfundingproceeds.
4. LateDelivery
(a) Loansthatarenotdeliveredinfundableformatwithin10daysofthecommitmentexpirationwillnotbepaidper-dieminterestfromthe10thdayuntilthefundingdate.
(b) Loansthatarenotdeliveredinfundableformatwithin10daysofthecommitmentexpirationwillbesubjecttoworst-casepricing.
(c) Loansthatarenotdeliveredinfundableformatwithin15daysofthecommitmentexpirationwillbesubjecttoanadditional0.25percentlatedeliverypenaltyforeach15dayspastthecommitmentexpiration.
(d) Loansthatarenotdeliveredinfundableformatwithin15daysofthecommitmentexpirationwillbesubjecttoafundingadjustmentequaltothegreaterofworst-casepricingoralatedeliverypenalty,asdetermined by AHFA.
(e) Latedeliverypenaltieswillbenettedfromtheloanfundingproceeds.
(f) Loansthatarenotdeliveredinfundableformatwithin30daysofthecommitmentexpirationwillnotbepurchasedandwillbereturnedtotheoriginatinglender.
5. Definitions
(a) Worst-casepricing:Thehigherofeithertheoriginallockrateorthecurrentmarketrateatthetimeoftherequestoratthetimeofthefunding,ifnorequestismade.Alternatively,iftheratecannotbechanged,thelowerofeithertheoriginallockpriceorcurrentmarketpriceatthetimeoftherequestoratthetimeofthefunding,ifnorequestismade.
(b) Days:Allreferencestodaysshallbecalendardays.
F. CancellationofReservation.Ifitisdeterminedthattheproposedmortgagordoesnotqualifyfortheprogram,thereservationwillbecanceled.IftheAuthoritydeterminesthatamortgageloanapplicationwastakenbyalenderafterthedatethelendersubmitteditsrequestforReservationofFunds,thereservationwillbecanceled.Thecommitmentfeeisnon-refundable.
WrittennotificationmustbesenttotheAuthoritywithin24hoursofreservationifitisdeterminedthatthemortgagorsdonotmeetStepUpProgramguidelines.Otherwise,thecommitmentfeewillhavetoberemittedtoAHFAregardless.
LenderswhorepeatedlymakeStepUpreservations,butfailtofollowthroughwiththeloanprocessanddonotremitthecommitmentfee,willbebilled.Furthercontinuedabusemayresultinexpulsionfromtheprogram.
G. TransferofReservation.TheAuthoritywillallowatransferofanyReservationofFundsfromoneEligibleMortgagortoanother,withAuthorityapproval.AnewRateCommitmentFormisrequired.TheAuthorityalsomayallowaloantransferfromoneapprovedlendertoanother.TheCommitmentFeewillbetransferreduponapprovalbytheAuthority.ReservationsofFundsmaybetransferredonetimeonly.
TheReservationofFundsandRateCommitmentcommittedtoanEligibleMortgagormaybetransferredfromonepropertytoanotherwiththepriorapprovaloftheAuthority.Loan amount changes may affect your commitment.
Revised 06/17 • Page 12
Notify the Authority of any changes immediately.
SECTION VI—LOAN PROCESSING & UNDERWRITING PROCEDURES
A. RequestforConditionalCommitmentPackage.TheOriginatorperformsthecustomaryverificationsforloanunderwritingasrequiredbytheOriginationandSaleAgreement.TheOriginatorcompletestheremainderofthemortgageapplicationprocessandsendstotheAuthoritytheRequestforConditionalCommitmentPackageasstatedontheTransmittalChecklist(Step2).Uponreceiptoftherequireddocumentation,thepackageisplacedinafirst-comefirstservedorderandprocessedwithin72hours(threebusinessdays)beginningthenextbusinessday.
Delegated Examiners only: TheOriginatorcompletestheremainderofthemortgageapplicationprocessandsendstotheDelegatedExaminertheRequestforConditionalCommitmentPackageasstatedontheDelegatedExaminers’TransmittalChecklist(Step2).Uponreceiptoftherequireddocumentation,theDelegatedExaminerwillreviewthepackageandmakeacompliancedetermination.TheDelegatedExaminerwille-mailadecisiontocompliance@ahfa.com usingtheDelegatedConditionalCommitmentform.
B. RequestforConditionalCommitment.TheRequestforConditionalCommitmentpackageandthereservationpackagewillbecomparedatthetimetheRequestforConditionalCommitmentpackageisreceived.
Delegated Examiners only: TheRequestforDelegatedConditionalCommitmentpackageandacopyofthereservationpackagewillbecomparedatthetimetheRequestforDelegatedConditionalCommitmentpackageisreceivedbytheDelegatedExaminer.
Thefollowingcriteriawillhelpensureaccuracyandconsistencyinfileswhenreviewed:
1. Commitment Fee. Thenon-refundablecommitmentfeeistobecheckedtoensuretheamountreservediscovered.Thecommitmentfeeshouldbepaidwithin72hoursofloanreservationandshouldagreewiththeamountshownontheRateCommitmentForm.Iftheamountsdonotagree,arequestinwritingforadecreaseorincreaseisneeded.(Amountsthatincreasewillrequireadditionalfundstocoverthecommitmentfee,andaresubjecttotheavailabilityoffunds.)SeeSectionX,Modifications,formoreinformation.
2. RequestforConditionalCommitment.TheTransmittalChecklistmustbecompletedthoroughly.TheAuthoritywillchecktheincomereflectedontheIncomeCalculationWorksheettoensurecompliancewithapplicablelimits.InformationprovidedontheworksheetshouldagreewiththeRateCommitmentForm,handwrittenapplicationandthesalescontract(name,propertystatus,etc.).
2. Delegated Conditional Commitment (Delegated Examiners only). TheDelegatedExaminers’TransmittalChecklistmustbecompletedthoroughly.TheDelegatedExaminerwillchecktheincometoensurecompliancewithapplicablelimits.InformationprovidedshouldagreewiththeRateCommitmentForm,handwrittenapplicationandthesalescontract(name,propertystatus,etc.).
3. Handwritten/InitialApplication.Thehandwritten/initialapplicationshouldbecompleted,signed,anddatedbythemortgagorsandlender.AllinformationshouldagreewithallapplicableareasoftheRateCommitmentFormandsalescontractasfollows:
(a) Namesofthemortgagors.
(b) Propertyinformationsection.
(c) Numberofdependents.
(d) Maritalstatus.
(e) Residencyhistory.
(f) Employment(incomepurposes).
(g) Otherincomesection(toensureallincomehasbeenincluded).
Revised 06/17 • Page 13
(h) Scheduleofrealestateownedsection(toestablishwhethertheborrowershaverentalproperty,ownsalotorpresentlyownsahome.Additionalincomemaybereceivedfromthesesources).
(i) Assetssectiontoensureallfundswhicharenotapartofclosingareincludedintheannualfamilyincome,i.e.,interestanddividendsearnings.
(j) Declarationsectionreflectsthemortgagorsintenttooccupythepropertyastheirprimaryprincipalresidence.
4. FullyExecutedSalesContract.AnychangesoraddendumstothesalescontractmustbereviewedbytheAuthoritypriortoclosing.
Changesinthesalespricewillrequireanamendedsalescontract.Allchangesaretobeinitialedbyallpartiesinvolved.
Allareasofthesalescontractaretobecompletedandproperlyexecutedbythemortgagorandsellerwhereapplicable.ThefollowingareasshouldbeconsistentwithallapplicableareasoftheRateCommitmentFormandhandwrittenapplication.
(a) Namesofthemortgagors.
(b) SalesPrice.
(c) Propertyaddress.
(d) LoanType:FHAorConventional.
(e) Realestateagency’snameandaddress.
(f) Numberofdaysforthesellertosurrenderpossessionis60daysorlessafterloanclosing.
(g) Signaturesofthesellersandbuyerswithdates.
SECTION VII—INCOME GUIDELINES FOR SALARIED & SELF-EMPLOYED MORTGAGORS
A. SalariedMortgagors
1. GrossMonthlyIncome.Grossmonthlyincomeincludes:grossmonthlypay,anyadditionalincomefromovertime,part-timeemployment,bonuses,dividends,interest,royalties,pensions,VeteransAdministration(VA)compensation,netrentalincome,etc.;andotherincome(suchasalimony,childsupport,publicassistance,sickpay,socialsecuritybenefits,unemploymentcompensation,incomereceivedfromtrusts,andincomereceivedfrombusinessactivitiesandinvestments,etc.)Overtimepayandbonusesaretobeprojectedinanamountconsistentwiththeearningshistoryofeachhouseholdmember.
Theincometobetakenintoaccountindeterminingthegrossmonthlyincomeistheincomeofanypersonwhoisexpectedtoliveintheresidencebeingfinanced.Theincomeofapersonwhoisunder18yearsofageandafull-timestudent(excludingthemortgagors)willnotbeincludedinthegrossmonthlyincome.
Personsover18yearsofagewhoarenotemployedanddonotintendtoseekemploymentwithinthenext12monthswillberequiredtosignastatementtosuch,seeAppendix5,EmploymentStatement.
2. VerificationsofEmployment.Whencheckingverificationsofemployment,allareasoftheverificationshouldbecompletedandexecutedbytheemployer.Makesureallincomehasbeenderived(i.e.,raises,bonuses,commissions,carallowance,etc.).Verifythatpaystubsandverificationsareconsistentwithoneanother.Iftheydiffer,anexplanationmustbeprovided.Previousyearearnings(overtime,etc.)shouldbeconsistentwithcurrentyearearnings.Ifnot,itmaybenecessarytouseonlyyear-to-datefiguresdependingupontheincreasesthemortgagorhasreceived(overtime,raise,etc.).VerificationsofEmploymentmustbeupdatediftheyaremorethanfourmonthsoldatthetimeofclosing.
Revised 06/17 • Page 14
Whenreviewingverifications,watchforcertaintypesofemployment,i.e.,ministers,nurses,etc.,whichhaveunusualincome.Forexample,aminister’sincomeusuallyconsistsofabaseincome,utilitiesallowance,housingallowance,insuranceallowanceandcarallowance.Anurse’sincomeusuallyconsistsofabaseincome,overtime,andshiftdifferentialsfornightandweekendpay,whichinmostcasesdiffer.Beverycautiouswhencalculatingincomeforthesetypesofemploymenttoensureallincomehasbeenincludedinthecalculations.
Ifaletterisusedinlieuoftheoriginalverificationform,itmustcontainallitemscoveredintheoriginalverification.
3. Paystubs.Paystubscoveringthemostrecent30-dayperiodarerequiredonallloansandincomemustbeconsistentwiththeVerificationofEmploymentorW-2form.Paystubsmustbedatedwithin30daysofsubmission.
4. IncomeHistory.Iftheprospectivemortgagorhasadditionalearnedincomeandhasahistoryofsuchearnings,thentheincomeistobeincludedinthegrossmonthlyincome.Iftheincomeisearnedonlywithinthecurrentyearwithnopriorhistory,andwillnotcontinueafterclosingthenastatementfromtheemployerstatingtheearnedincome,(i.e.,overtime,etc.)willnotcontinueisrequired.
5. AlternativeDocumentation.AHFAallowsdocumentationfortheverificationofemploymentwiththefollowingrequirements:
(a) Paystubscoveringthemostrecent30-dayperiodwhichreflectthemortgagor’sname,SocialSecuritynumber,hourlyrateofpay,numberofhoursworkedperpayperiod,andyear-to-dateearnings.
(b) Copyofthepasttwo-years’W-2formsor1099whichincludesthemortgagor’sname,SocialSecuritynumber,companyname,andtotalcompensation,orastandardVerificationofEmployment(VOE)completedandsignedbytheemployer.
(c) Telephonecertification.
6. Averaging Income. Incomeisaveragedforovertime,commissions,andanyotherincome(exceptbaseearnings)overaperiodofnolessthan15months,butnomorethan27months.However,ifincomeoverbaseearningsisnotconsistentwithpastyears’earnings,ortheincomehistoryislessthan15months,theAuthoritywilldeterminetheperiodforincomecalculations.
7. OvertimeEarnings.Incomeearnedfromovertimewillbeincludediftheborrowerhasahistoryofsuchincomeortheincomewasearnedduringthecurrentyear.Theverificationofemploymentformfromtheemployermustexplainhowmuchovertimeisexpectedifany,andatwhatrateofpay.
8. Bonus. Thegrossamountofrecurringbonusesistobeincludedintheincomecalculationsif:
(a) Thebonusispartofacollectivebargainingagreementandmustbepaid;or
(b) Thebonusisincludedinthecomputationofincomebytheemployer;or
(c) Thereisahistoryofbonuses.
Ifthereisahistoryofbonusesbuttheapplicantdoesnotknowifabonusisplanned,nordoestheemployerdivulgeitsplansforabonusortheprojectedamount,anaverageofpastyears’bonuseswillbecalculatedasincome.AbonushistoryforStepUppurposesistobeconsideredforoneyearormore.
Thebonusisnottobeincludedintheannualfamilyincomeifthereisnohistoryofabonusandthebonusistotallydiscretionarybytheemployerandwagesoftheapplicantarethebasicsourceofincome.Thefilemustbedocumentedwithastatementfromtheemployer.
9. RentalPropertiesorContractIncome.Rentalincomeandcontractincomeisdeterminedbysubtractingthemonthlymortgagepaymentfromthegrossrentalincome.Depreciationshouldbeaddedbacktonetrentalincomewhereapplicable.Contractincome(incomederivedfromthemortgagorsellingpropertywithownerfinancing)istobeusedincalculatingannualfamilyincome.
Theuseofstandardunderwritingcriteriatodocumentthisincomeisacceptable(i.e.copiesofleases&mortgageverifications).
Revised 06/17 • Page 15
10. ChildSupport/Alimony.Childsupportandalimonymustbeincludedintheannualfamilyincomeandacopyofthefinaldivorcedecreeisrequired.Ifthemortgagorshavenotreceivedchildsupportoralimonyforthepast24monthsandtotheirknowledge,noneisforthcoming,astatementfromthemortgagorsisrequired,seeChildSupport Statement.
11. EducationGrants.Theportionoftheincomefromgrantsthatisusedforlivingexpensesistobeaddedtotheannualfamilyincomeifthisincomewillcontinueforthenext12months.
12. EmployeeBenefitsProgram.Somecompaniesofferanemployeebenefitsprogramdesignedtoletemployeescreatetheirowninsurancepackage.Themonthlyamountisusuallyshownseparatelyonthepaystub,yetincludedinyear-to-dateearnings.Thepaystubusuallyshowsthemonthlyamountactuallyspentonthisplan.Aletterfromtheemployerisneededtoverifytheactualcostofthisplanyear-to-date,inordertodeterminediftheemployeesreceivedfundsovertheactualcost.Inthiscasetheadditionalunusedportionwouldbeincludedintheannualfamilyincome.
Ifthemortgagorreceivesmonthlyincomefortheemployeebenefitprogramandelectsnottopurchasebenefitsofferedbytheprogram,thenthefullamountwillbeaddedtotheannualfamilyincome.
13. PermanentSeasonal,Seasonal&TemporaryIncome.Includeallpermanentseasonal,seasonalandtemporaryearningswhencalculatingannualfamilyincome.
14. SocialSecurity/VABenefits.SocialSecurityincomeshouldbeverifiedwithanAwardsletterobtainedfromtheSocialSecurityoffice.VAbenefitsshouldbeverifiedwithabenefitsletterfromtheVeteransAffairsOffice.
15. LumpSumPayments.Lumpsumpayments,includingbutnotlimitedto,inheritance,reenlistmentbonuses,anddisbursementsfrominsurancepoliciesdonothavetobeincludedintheannualfamilyincome.However,interestincomeoninvestmentsmustbeincludedandcalculatedatthecurrentpassbookratesovera12-monthperiod.Iftheincomeisreceivedinanyotherformotherthanlumpsum(i.e.monthlyorannual),thenitmustbetreatedaspermanentincomeandaddedtotheannualfamilyincome.
16. CapitalGains/Loss.Bothtaxableandnon-taxableportionsofcapitalgainsaretobeincludedasincomeifahistoryofthisincomeexists.Ifthetwo-yearaverageresultsfromthetaxreturnsisagain,thenitmustbeaddedtoannualfamilyincome(lossescannotbeusedtoreduceannualfamilyincome).
17. PensionandStockWithdrawals.Withdrawalsofprincipalfundsfrompensionorstocksourcesisnotconsideredincome.However,annuityorinterestpaymentsunderapensionorstockinvestmentprogramareconsideredincome.Verificationofbenefitswillberequired,i.e.,federaltaxreturns,statementofbenefits,etc.
18. Interest,DividendandRoyaltyIncome.Interest,dividendandroyaltyearningsareconsideredincome.Currentinterestanddividendearningsarecalculatedatcurrentpassbookratesovera12-monthperiod.Incomecalculationsforroyaltiesarecalculatedbynetearningsandinterest.EarningsfromIRAsand401Ksarenotincluded.Documentationwillberequiredtoverifythesessourcesofincome,i.e.,federaltaxreturns,statementofbenefitsandcontractagreementsforroyaltiesincome.
19. ExclusionfromGrossMonthlyIncome.Grossmonthlyincomeshallnotincludecasual,sporadicorirregulargifts;amountsthatarespecificallyfororinreimbursementofmedicalexpenses;inheritances;insurancepayments(includingpaymentsunderhealthandaccidentinsuranceandworkmen’scompensation,otherthanpaymentsinlieuofearnings);settlementforpersonalorpropertylosses;amountsofeducationscholarshipspaiddirectlytothestudentortheeducationalinstitutionandamountspaidbythegovernmenttoaveteranforuseinmeetingthecostsoftuition,fees,booksandequipment,butineithercaseonlytotheextentusedforsuchpurpose;specialpaytoactivemilitarypersonnelexposedtohostilefire;andfosterchildcarepayments.
B. Self-EmployedMortgagors
1. AnnualFamilyIncome.Theproceduretocalculateannualfamilyincomeforself-employedmortgagorsrequiresthefollowing:
(a) Depreciationanddepletionistobeaddedbacktotheadjustedgrossincome(AGI)onallself-employedmortgagors.
Revised 06/17 • Page 16
(b) Twoyears’currentsignedindividualfederalincometaxreturnswithallapplicableschedules.
(c) Year-to-dateProfit&Loss.Ifasoleproprietorship,P&Lcancomedirectlyfromsoleproprietorhimself/herself.Ifapartnership,S-corp.,orcorporation,P&Lmustbeprovidedbyanaccountant.
(d) U.S.PartnershipReturnsandU.S.CorporatefederalincometaxreturnswithallschedulesandW-2form(whereapplicable),withindividualfederalincometaxreturns(form1040)
Incomemustbeaveragedoveraperiodofnolessthan15months,butnomorethan27months.Self-EmployedmortgagorsmayneedtwoyearsoffederalincometaxreturnswithacurrentProfitandLoss.AfterApril15eachyear,themost“currentyear”federalincometaxreturnsarerequired.
2. SoleProprietorship.SoleProprietorshipisabusinessownedbyoneperson.IRSform1040—ScheduleCorScheduleC-EZisrequired.SoleProprietorshipincomeisdetailedonForm1040(ScheduleC)ofU.S.incometaxreturns.Thisformwilllistallincome,depreciation,anddepletionwhichisaddedbacktotheAGI.
3. GeneralPartnership.AGeneralPartnershipisabusinessownedbytwoormorepartners.Eachpartnerispersonallyliableforalldebtsofthebusiness.Eachpartnerisresponsibleforallotherpartners.Thefollowingdocumentsarerequired:
(a) IRSform1065—ScheduleK-1&ScheduleE,PartII.
(b) U.S.PartnershipReturnswithallapplicableschedules.
GeneralPartnershipsrequireincometobecalculatedonform1065ofU.S.PartnershipReturns,todeterminetheshareofnetincomedistributabletoeachpartner.ThisisreportedonScheduleK-1ofform1065andontheindividual’sScheduleE,PartII;thisamountisincludedintheAGIonform1040.Note:Thetotaldepreciationanddepletionwillbedeterminedbythenumberofthepartners,andshouldbedividedtodeterminewhatpercentageortotaldollaramounttobeaddedbackforeachpartner.
4. LimitedPartnerships.LimitedPartnershipsareusuallyformedforinvestingmoney.Limitedpartnersoftentakealossontheirinvestment,whichreducestheirtaxableincome.Liabilityislimitedtotheamountinvested.Thefollowingdocumentsarerequired:
(a) IRSform1065—ScheduleK-1&ScheduleE,PartII.
(b) U.S.PartnershipReturnswithallapplicableschedules.
LimitedPartnershipsrequireincometobetakenfromScheduleK-1(form1065),andtheindividual’sScheduleE,PartII;thisamountisincludedintheAGIonform1040.
5. S-Corp.Usuallyasmallstart-upbusinessrequiringthefollowingdocumentation:
(a) IRSforms1120/1120S—ScheduleK-1,ScheduleE,II.
(b) VerificationofW-2earnings.
SCorporation’sincomeisdetailedonform1120S(USfederalincometaxreturnforanSCorporation).ScheduleK-1willlistborrower’spercentageofownershipandordinaryincome,depreciationanddepletionfromtheSCorporation(thisinformationistransferredtoScheduleE,SectionIIoftheindividualtaxreturns).Thisincomemustbeproportionatelyaddedbackasdeterminedbythepercentageofownershiptotheordinaryincomesincedepreciationanddepletionareactuallynon-cashexpenses.TheprimarysourceofincomeforanownercomesfromW-2wages,whichmustbeincludedinearningsinadditiontocorporateearnings.
6. Corporation.ACorporationrequiresastatecharterandisaseparatelegalentityfromitsowners(stockholders).Thecorporation’sprofits(retainedearnings)areputbackintothebusinessoraredistributedtostockholdersintheformofdividends.Stockholdersarenotresponsibleforthedebtsofthecorporation.Thefollowingdocumentationisrequiredtodetermineeligibility:
(a) U.S.CorporationIncomeTaxReturns,form1120&ScheduleL,(ifapplicable).
Revised 06/17 • Page 17
(b) W-2form.
CorporationsrequireincometobetakenfromtheIRSform1120,andScheduleLwillshowthecurrentyearcorporatebalancesheet.IncometotheofficersandstockholdersisreportedbyW-2formsandreflectedontheirindividualform1040.
Dividendearningsarereportedon1099formsandreflectedontheirindividualreturns.
C. Non-BorrowingSpouses,Partners,AllOtherOccupants18YearsorOlder
AHFAprogramsrequiretheincometobedocumentedforthetotalhousehold.Totalhouseholdincomeisdefinedastheindividuals18yearsofageorolderwhointendtooccupythepropertywithinthenext12calendarmonths,eveniftheyarenotapartytotheloan.
DocumentationrequiredforsubmissioninStep2:
1. SignedNon-BorrowerStatement
2. Eitherfullincomeverificationoraltdocincomeverificationasrequiredforallsalariedorself-employedborrowers,orasignedEmployment/IncomeStatement,iftheoccupantdoesnothaveANYsourceofincome.
3. DocumentationofSocialSecuritybenefits,pensions,annuities,ifapplicable
4. Most recent year’s IRS tax return transcripts
D. CurrentlySeparatedorSeparatingSpouses
Allseparatedspouses’incomedocumentationmustalsobesubmittedtoAHFAcomplianceinStep2.Thisisregardlessofwhethertheseparatedspouseisapartytotheloan,orevenintendstooccupytheproperty.TheStateofAlabama,forAHFApurposes,doesnotrecognize“separated.”Thepartiesareconsideredeithermarriedordivorced.
DocumentationrequiredforsubmissioninStep2:
1. SignedNon-BorrowerStatement
2. Fullincomedocumentationoraltdocdocumentation
3. SeparationAgreement,includinganyPropertySettlementAgreement
4. Most recent year’s IRS tax return transcripts
E. Co-Signer/Non-OccupantGuarantors
Co-Signer/Non-OccupantsandGuarantorsareallowed,providedthatthefollowingconditionsaremet:
1. TheCo-Signer/Non-OccupantorGuarantorisactinginsuchacapacitysolelyforthepurposesofprovidingadditionalsecurityforthemortgageloan,andwillnottaketitletothepropertyorbeapurchaseronthesalescontract.
2. Theprimaryoccupyingborrower(s)mustbeabletomeetaminimumof40percentofthePITIbyverifiableanddocumentedincome,ORmusthavedocumentedincomerepresentingfull-timeemploymentatnolessthan30hoursperweek.
3. TheCo-Signer/Non-OccupantorGuarantorwillnotoccupytheresidenceashisprimary/permanentresidence.
4. TheCo-Signer/Non-OccupantorGuarantorisarelativeofthemortgagor.
Revised 06/17 • Page 18
5. TheCo-Signer/Non-OccupantorGuarantorispermittedbyapplicableFHAandGinnieMaeguidelines.
6. TheCo-Signer/Non-OccupantorGuarantorwillberequiredtosignastatementcertifyingtotheaboveconditions(seeAppendix6,Co-Signer/Non-OccupantStatement).Taxreturnsandincomeverificationsarenotapplicable.TheseCo-Signer/Non-OccupantsorGuarantorswillbetreatedasnon-occupantCo-Signersforqualifyingpurposes.
Pleasenote:ForallpartiessigningtheEmployment/IncomeStatement,AHFAwithholdstherighttorequiredocumentationfromtheIRSsupportingthesignedstatement.
SECTION VIII—ISSUANCE OF THE CONDITIONAL COMMITMENT
Pleasenote:LendersareresponsibleformonitoringthestatusoftheirloansonLenderOnline,whichincludescheckingforthepostingofconditionalcommitmentsasshownbelow.
Delegated Examiners only: TheDelegatedExaminermustreviewthecompliancepackagepriortoissuingtheDelegatedConditionalCommitment.Oncethepackagehasbeenreviewedandapproved,theDelegatedExaminerisrequiredtoissuetheDelegatedConditionalCommitmentande-mailtheformtotheAuthorityatcompliance@ahfa.comorfaxtheformto(334)244-9213.FailuretocomplywiththisprocessmayresultinremovaloftheOriginator’sDelegatedauthority.OriginatingbranchesmayviewloanconditionsonLenderOnline.
SECTION IX—CLOSED LOAN PROCEDURES
A. ConditionalCommitment.UponissuanceoftheConditionalCommitmentaspostedontheLoanStatusscreen,thelendermayclosetheloaninaccordancetotheconditionsstatedontheConditionalCommitment.Theloanistoclose
Revised 06/17 • Page 19
beforethereservationexpirationdatestatedontheConditionalCommitment.Themortgagor,address,interestrate,loanamount,andtermofloanmustagreewithallclosingdocuments.ChangesoftheseitemsaretobeapprovedbytheAuthoritybeforeclosing.Failuretodosocouldresultinrejectionoftheloan.
Delegated Examiners only: UponissuanceoftheDelegatedConditionalCommitmentaspostedontheLoanStatusscreen,thelendermayclosetheloaninaccordancetotheconditionsstatedontheDelegatedConditionalCommitment.TheloanistoclosebeforethereservationexpirationdatestatedontheDelegatedConditionalCommitment.Themortgagor,address,interestrate,loanamount,andtermofloanmustagreewithallclosingdocuments.ChangesoftheseitemsaretobeapprovedbytheAuthoritybeforeclosing.Failuretodosocouldresultinrejectionoftheloan.
B. VerificationsofCreditDocuments.Allverificationsshouldbelessthanthreemonths(90days)oldatthetimeofclosingorcurrentinformationwillberequired.Creditdocumentsmorethan90daysolduponsubmissionoftheclosedloanpackagecouldresultinrejectionoftheloan.
C. SettlementStatementFees.Inconnectionwitheachmortgageloan,alendermaychargeandcollectfromanEligibleMortgagororselleratclosing,reasonableandcustomarycharges.Alllendersmustchargea1%originationfee.Otherchargesmaynotexceedtheusualandreasonable“settlementandfinancingcost”thatarecustomaryasfollows:
1. “SettlementCosts”includetitleandtransfercosts,titleinsurance,surveyfeesandothersimilarcosts;and
2. “Financingcosts”includecreditreportfees,legalfees,appraisalexpenses,pointswhicharepaidbytheborrowers,orothercostsoffinancingtheResidence.
SECTION X—LOAN PURCHASES AND TRANSFER OF SERVICING RIGHTS
A. ReviewoftheMortgageLoan.TheclosedmortgageloanpackageistobereceivedbyAlabamaHousingFinanceAuthority(AHFA),within10daysofloanclosing.
1. LendersmustchecktheclosedloanpackagetoconfirmallitemslistedontheFundingChecklistareincludedinthepackageLoanswillnotbefundedifanyoftheitemsonthechecklistaremissingorincorrect.
2. AllloanspurchasedbyAHFAwillrequiremandatoryregistrationwithMERS.Noassignmentswillbeacceptedforfirstorsecondmortgages.LendersmusttransferallapplicablerightsinMERStoAHFAimmediatelyafterpurchase.
Uponcompletionoftheclosedloanfilecompliancereview,themortgageloan(s)willbefundedifthefileiscompleteandisincompliancewithallrequirements.Closedloanpackageswillnotbefundeduntilallrequiredfundabledocumentationhasbeenreceivedandallcomplianceissuescleared.
B. PenaltiesWithheldFromFunding.Lendershave10daysfromclosingtodeliverthecompleteclosedloanpackagetoAHFA.Aloanisconsideredtobeinafundableconditionwhenacompleteclosedloanpackageisdeliveredwithouterrorsormissingdocuments.Also,loanswithdelinquentpaymentswillnotbepurchased.Lenderswillhave40daysfromthedateofclosingtocleartheloanexceptionwithnopenalty.Iftheloanisnotcleareduntil41daysfromthedateofclosing,thelenderwillbechargedalatedeliveryfeeof50basispoints(0.50%)oftheprincipalpurchased.Ifthefileisnotclearedbythe71stdayfromthedateofclosing,originalNoteswillbereturnedtothelenderandtheloan(s)willnotbepurchased.Thissectiondoesnotoverrideanyapplicablelockexpirationperiod.ExtensionfeesmayberequiredbyAHFAiftheloanisnotfundedbytheapplicableexpirationdate.Theamountsofallfeesandpenaltiesaresubjecttochange.PleaserefertothecurrentscheduleofpenaltiesandfeeslocatedintheBulletinBoardSectionoftheLenderOnlineportalathttps://lenders.ahfa.com/Bin/Display.exe/ShowSectionforthemostcurrentinformation.
C. FundingoftheMortgageLoan.AHFAwillissueanACHorwireonsingleandmultiplefundingseachWednesdayandFridayforeachlender.Abreakdownofthemultiplelender’sfundingswillbeincludedwiththeACHorwire.AnydiscrepanciesshouldbedirectedtotheFundingandDeliveryDepartment.OnlyonesetofACH/wiringinstructionswillbeacceptedfromeachlender.Lendersareallowedonechangetothewiringinstructionspercalendaryear.SubsequentchangestoACH/wiringinstructionswillresultina$500feepertransaction.
LendersareresponsibleforservicingtheloanuntilpurchasedbyAHFAtoincludethepaymentofallrequiredescrow
Revised 06/17 • Page 20
disbursementsforeachloanduringtheperiodfromclosingtopurchase.
Ingeneral,fundableclosedmortgageloanpackagesreceivedbythecloseofthebusinessdayonMondayofeachweekwillbefundedonFridayandthosereceivedbythecloseofbusinessonThursdaywillbefundedonWednesdayofthenextweekonceapprovedbyAHFA.
Thefundingamountforbothfirstandsecondmortgageswillconsistof:
1. Scheduledunpaidprincipalbalance
2. ServicingReleasePremiumpertheProgramGuidelines(firstmortgagesonly)
3. Interestfromtheclosingdatethroughthepurchasedateorinterestfromthelastpaidinstallmentdatetopurchasedateattheloan’sperdiemrate
Amountstobedeductedfromfundingofbothfirstandsecondmortgageswillconsistof:
1. PenaltiesorfeesassessedinSectionX,BorC
2. Floodnotificationtransferfeeof$10(notrequiredforfloodcertificationfromCoreLogic).
3. Prepaidinterest(Loanspurchasedbythe10thofthemonthpriortothefirstpaymentduedateonly).
4. Prepaidescrow(unlessafterfirstpayment)orcurrentamortizedescrowbalanceontheloanlessanddisbursements
5. Taxservicefeeof$65
6. LoanLevelPriceAdjustments(FannieMaeStandardloansonly).
7. Wirefeeof$20(pertransaction(ifapplicable)
D. FinalDocumentation.ThelenderistosubmitthefinalmortgageloandocumentationconsistingofthefollowingoriginaldocumentstoAHFAwithin120daysofclosing:
• Recorded First Mortgage
• TitlePolicy
• MortgageInsurancedocumentation(FHAMortgageInsuranceCertificate,PMICertificateofCoverage,LoanGuarantyCertificate)
• RecordedSecondMortgage(ifapplicable)
E. TransferofLoanServicingRightsandBenefits.TheoriginatinglenderretainstheloanservicingrightsandbenefitsuntilAHFApurchasestheloan.Theoriginatinglenderwillperformallservicingdutiesuntilthattime.ServicingandbenefitsrightstransfertoAHFAatthetimeofloanpurchase.Lenderwillbesentareminderalongwiththepurchasepaymentadvicetosendouttheirgoodbyelettertotheborrower.AHFAwillsendtheborroweraNoticeofSale,AssignmentorTransferandtwotemporarypaymentcouponsatthetimeofloanpurchase.(ThefirstpaymentduetoAHFAwillbedeterminedbaseduponwhentheNoticeofSale,AssignmentorTransferissent.)Iftheloanispurchased(purchasedate)onorbeforethe10thofthemonth,thefirstpaymentduetoAHFAwillbethenextscheduledmonthlypaymentduedate.Afterthe10th,theeffectivedatewillrolltothefollowingscheduledmonthlypaymentduedate.ThelendermusttransfertheloantoAHFAthroughtheMERSsystemimmediatelyafterpurchase.
Examples:
• Aloanthatclosedon06/02/16isreceivedinouroffice06/8/16andisbeingfundedon06/10/16.Thisloanwillbepurchasedattheoriginalnoteamountwithnolatedeliverypenalty.
• Aloanthatclosedon06/24/16isnotreceivedinourofficeuntil7/28/16andisreadytobefundedon08/11/16.Theinitialpaymentonthisloanisdueon08/01/16.Sincethisloanisbeingpurchasedafterthe10thofthemonth,
Revised 06/17 • Page 21
theloanwillbepurchasedeffectivewiththepaymentscheduledfor10/01/16.Thelenderwouldbechargedalatedeliveryfeeof50basispoints(0.50%)oftheprincipalpurchased.
SECTION XI—MODIFICATIONS
Itisthelender’sresponsibilitytonotifytheAuthorityofanymodifications.Expirationdates,penaltiesandextensionsareaddressedinSectionVI.
1. MortgageDecrease.MortgageamountdecreaseswillrequireapprovalbytheAuthority.
2. MortgageIncrease.MortgageamountincreaseswillrequireapprovalbytheAuthorityandwillbesubjecttotheavailabilityoffunds.
3. PropertyAddress.PropertyaddresschangesrequireapprovaloftheAuthority.
4. Marriage.Ifthemortgagormarriespriortoloanclosing,thespouse’sincomewillbeincludedinthetotalannualfamilyincome.ThelendermustobtainthisinformationpriortoclosingandsubmitthesedocumentstotheAuthority.Theannualfamilyincomemaynotexceedtheincomelimitation.ThespousewillalsohavetomeetallStepUprequirementsasestablishedinSectionII,IIIandIVofthismanual.
SECTION XII—ASSUMPTIONS
AssumptionloansrequirethesamequalifyingprocessasthecurrentStepUpProgramGuidelines(refertoSectionII,IIIandIVoftheStepUpmanual).IncomeguidelinesarethemostcurrentincomeguidelinesprovidedbytheAuthority.Investorguidelinesmustbefollowed.
The down payment assistance second mortgage is not assumable.
SECTION XIII—DOWN PAYMENT ASSISTANCE
Thepurposeofthisprogramistoprovidedownpaymentandentrycostassistancetohomebuyerswithlowtomoderateincomes.DownpaymentassistanceisusedinconjunctionwiththeStepUpProgramonlyasasecondmortgage.Onlyborrowerswhoseprimarywageearnerhasamiddlecreditscoreofatleast620willbeeligibleforDownPaymentAssistance.
A. Reservations.Ifneeded,reservationsforDownPaymentAssistancewillbemadethroughtheAuthority’sreservationwebsite,https://lenders.ahfa.com,andistiedtothefirstmortgagereservation.
B. Eligibility.AllhomebuyersmustmeetthequalificationsstatedontheDownPaymentAssistanceApplication,Appendix11.ThemaximumincomeisstatedontheDownPaymentAssistanceApplicationandiscalculatedasstatedinSectionIIofthisStepUpProceduralManual.
C. TypesofLoans.ThisprogramwillbeavailableinconjunctionwithhomesfinancedundertheFHA203(b)mortgageproductortheHFAPreferredconventionalloanprogram.ThisprogramcannotbeusedinconjunctionwithanyotherdownpaymentassistanceprogramorgrantprogramwithoutpriorapprovalfromtheAuthority.AllFHAguidelinesmustalsobemet.
D. CalculationofAssistanceAmount.Themaximumdownpaymentassistanceavailabletoahomebuyeristhelesserof$7,500or3%ofthesalesprice.
E. RequiredDocumentation.Thelendermustprovide:
1. Theexecuted,completedDownPaymentAssistanceApplication;
Revised 06/17 • Page 22
2. Acopyoftheprimarywageearner’screditreport(occupyingborrower);
3. AcopyoftheHUD92900-LTworksheetoftheFannieMae1008,reflectingtheDPAassecondaryfinancing;and
TheAuthoritywillissuealegallybindingobligationletterforthesecondmortgageDPAonallFHAfirstmortgageloansusingtheAuthority’sDPAprogram.Thelendermustbeinpossessionofthelegallybindingobligationletterbeforetheyclosetheloans.
TheDownPaymentAssistanceNoteandMortgagearetobeexecutedatclosing.Thelenderwillovernighttheoriginalexecutedsecondnote,endorsedtotheAuthority,alongwiththefirstmortgagenote.
If the lender’s first mortgage loan is using FHA financing with the DPA second, the lender must transfer the loans in MERS to the Authority PRIOR to submitting for MIC. The lender should include a copy of the legally binding obligation letter and executed second note and mortgage in the case binder file.
F. Term and Repayment. Asecondmortgagewillberecordedagainstthepropertybeingpurchased.Thetermofthesecondmortgagewillrunfor10years.Thesecondmortgagewillbearinterestatthefirstmortgagenoterate.Thesecondmortgagewillamortizein120equalmonthlypaymentsofprincipalandinterest.Repaymentwillberequireduponsaleoftheproperty,refinanceofthefirstmortgage,and/orpayoffofthefirstmortgage,aswellastheassumptionofthefirstmortgage.
G. CommitmentPeriods.TheCommitmentperiodsofthisprogramwillrunconcurrentwiththeStepUpProgramasdefinedintheProgramGuidelines.
H. IssuanceofFunds.TheAuthoritywillpurchasetheDownPaymentAssistancesecondmortgagewiththepurchaseoftheStepUpfirstmortgageforconventionalloans.
I. FeesinOrigination.Alendermaynotchargeanyadditionalfeesinconjunctionwiththisprogram.Therecordingcostsofthesecondmortgageloanaretobebornebytheborrowerorseller.
J. PurchaseandServicing.Lenderswillsellthesecondmortgageloanswhichitoriginates,accordingtoconventionalguidelines,totheAuthority.ThepricetobepaidbytheAuthoritywillbetheamountequalto100%oftheprincipalamountofthesecondmortgage,plusperdieminterestinaccordancewithSectionIX,LoanDelivery.
K. Assumptions.TheDownPaymentAssistancesecondmortgageloanisnotassumable.
SECTION XIV—DELEGATED EXAMINER OPTION
DelegatedExaminershavetheopportunitytoacceleratetheStepUploanapprovalprocessbyperformingthecompliancereviewfunctionsinhouse.AHFAwouldonlyreviewloanfilesatthetimeofpurchase. Toqualify:
A. LendersarerequiredtobeanApprovedParticipatingLenderforaminimumofone(1)year.
B. AHFAcanatitsowndiscretionrescindtheprivilegeofDelegatedExaminersforanyreason(latedeliveryofclosedfiles,QCissues,oranyotherissuesregardinglenderperformance).
C. LendersmustbeingoodstandingwithAHFA’sFundingandDeliveryDepartmentandAHFA’sQualityControlDepartment
D. LendersmustbeapprovedfortheprogramasanOriginatorI,OriginatorII,oranOriginatorwhohascreditunderwritersonstaff.
E. Lendersarerequiredtosubmitaminimumoftenqualityfileswithina12-monthperiod:
F. EachpersonnominatedbythelenderasaDelegatedExaminerisrequiredtometthetenqualityfileminimum.
G. Testfileswithmajorcomplianceconditionswillnotbeconsideredinthetenqualityfilecount.(Majorconditionsincludebutarenotlimitedtoincomeissues,contractissues…)