109.03.06 Ark. Code R. 001
The Arkansas Development Finance Authority ("ADFA" or the "Authority") has developed this HomeToOwn Program Guide (the "Program Guide") for the use and benefit of any and all parties having an interest in the HomeToOwn Program (the "Single Family Program" or the "Program"). However, we have attempted to target the materials in the Program Guide to the Mortgage Lenders (as defined in Chapter 1, Section G) in order to aid and assist them in complying with the terms and conditions required for participation in the Single Family Program. Mortgage Lenders should familiarize themselves with each and every obligation set out in the Program Guide - the requirements discussed herein are mandatory and the failure of a Mortgage Lender to adhere to the Single Family Program requirements may lead to the termination of such Mortgage Lender's participation in the Single Family Program, as well as triggering possible claims for damages from other parties having a role or an interest in the Program. The terms and conditions set forth in this Program Guide are specifically incorporated by reference into each Mortgage Lender's "Mortgage Origination Agreement" by and among ADFA, the Master Servicer (as defined in Chapter 1, Section G) and the Mortgage Lender.
ADFA was created by Act 1062 of 1985, the Arkansas Development Finance Authority Act. This act abolished the former Arkansas Housing Development Agency, whose purpose was to develop safe, decent, sanitary and affordable housing for low and moderate income Arkansans, and transferred all records, funds, property, obligations, debts, functions, powers and duties to ADFA. This newly created Authority was empowered to issue tax-exempt bonds and other debt instruments for housing, manufacturing, export finance, small business, agricultural business enterprises, education, health care, municipalities and infrastructure projects.
The State of Arkansas is not obligated to pay the Bonds (as defined in Chapter 1, Section G) and other debt instruments of the Authority, and neither the faith and credit nor the taxing power of the State of Arkansas is pledged to the payment of the principal or redemption of interest on the Bonds and other debt instruments.
The HomeToOwn Program, formally known as the Mortgage Revenue Bond Program and referred to herein as the Single Family Program, has been a mainstay of the Authority since its formation and is designed to provide low-cost homebuyer financing for the low- to moderate-income citizens of Arkansas. As a means of providing improved delivery to the marketplace of low-cost Mortgage Loans (as defined in Chapter 1, Section G), ADFA is pleased to provide a "continuous funding" program. What this means to the Mortgage Lender is that ADFA will always have funds available. This will eliminate the peak periods of high demand and the rapid depletion of funds. By simplifying the procedure, the Authority hopes that Mortgage Lenders will soon realize that ADFA is offering an improved product for Eligible Borrowers (as defined in Chapter 1, Section G) that Mortgage Lenders can happily recommend.
Under the Single Family Program, ADFA accomplishes its public purpose primarily by selling Bonds in the municipal bond market. The interest that Bond holders receive is generally exempt from both Federal and Arkansas state income taxes. Because of this feature, investors are willing to accept a lower interest rate. This lower cost of borrowing enables ADFA to provide financing to Eligible Borrowers at a rate lower than the prevailing market rate. Bond proceeds ultimately are used to purchase Mortgage Loans from participating Mortgage Lenders.
Federal tax law places restrictions on (a) the type and value of property that may qualify; and (b) the persons who may qualify. This Program Guide will explain these various restrictions in later chapters. As an issuer of tax-exempt bond financing, ADFA must make a good faith effort to ensure that all Mortgage Loans comply with the guidelines. This is accomplished by the Mortgage Lenders and the ADFA staff. All Mortgage Lenders must thoroughly review all documents, tax returns, etc., before making any submission of the proposed Mortgage Loan to ADFA.
The consequences of ADFA's acceptance of a Mortgage Loan that does not comply with the Tax Code (as defined in Chapter 1, Section G) could be catastrophic to the Authority. The Bonds issued could become taxable, with interest and penalties, retroactive to the date of Bond sale. Thus, it is imperative that Mortgage Loans are made only to Eligible Borrowers purchasing Qualified Dwellings (all as defined in Chapter 1, Section G).
The Authority currently utilizes a master servicer to act as servicing agent and to purchase qualified Mortgage Loans from participating Mortgage Lenders. The master servicer (referred to in this Program Guide as the "Master Servicer" or the "Servicer") is:
U.S. Bank Home Mortgage 17500 Rockside Road Bedford, Ohio 44146 Telephone: 800-562-5165
The Master Servicer will pay each participating Mortgage Lender a Servicing Release Fee (as defined in Chapter 1, Section G) in an amount established by the Authority from time to time. The current Servicing Release Fee is posted on the ADFA website.
For information concerning the submission of documents to the Master Servicer, see Chapter 8 of this Program Guide.
Currently, the Single Family Program features a 30-year, fixed-rate Mortgage Loan. The interest rate on qualified Mortgage Loans is typically 50-75 basis points below the prevailing "conventional" rate for similar term, fixed-rate mortgage loans. With the implementation of continuous funding, ADFA will periodically adjust the Mortgage Loan interest rate. Remember, we want to eliminate peaks and valleys in the availability of funds. In addition, ADFA must offer other products from time to time. ADFA will notify each Mortgage Lender via facsimile transmission, email transmission, or otherwise, in the event that the loan rate is raised or lowered or new products are offered; also, current loan rate and other Single Family Program information will be posted on the ADFA website.
The following words and phrases shall have the following meanings:
Acquisition Cost means the total cost of acquiring a residence from a Seller as a completed residential unit and more fully described in Exhibit 5-B, Borrower's Application Affidavit and Certification. The meaning of Acquisition Cost is set forth in further detail in Chapter 2, Section C.1.c. of this Program Guide.
Affidavit of Seller shall have the same meaning as "Seller's Certificate," as defined below.
Annual Household Income means, for purposes of determining the qualifications of proposed borrowers under the income limitations of the Single Family Program, the current household income of a proposed borrower determined pursuant to Exhibit 5-A, Borrower's Certification as to Income, and shall in any event include the current gross income of all persons who reside or intend to reside with such borrower in the same residence (other than persons under age 18 who are not primarily or secondarily liable on the Mortgage Note), but exclusive of the income of any co-signer of a Mortgage Note who does not reside or intend to reside in the residence, as evidenced by documentation satisfactory to the Authority. The concept of Annual Household Income is further described in Chapter 2, Section B of the Program Guide.
Application Agreement means the "Application for ADFA Approved Mortgage Lender" which proposed mortgage lenders must submit to ADFA for approval prior to the execution of any Mortgage Origination Agreement.
Assignment of Mortgage Note and Mortgage/Deed of Trust means the instrument substantially in the form of Exhibit 7-O, completed and executed by the Mortgage Lender, in recordable form, and pursuant to which a Mortgage Lender assigns and delivers the related Mortgage and endorses the Mortgage Note to the Master Servicer in connection with the purchase of the related Mortgage Loan by the Master Servicer.
Average Area Purchase Price means the purchase price amounts, respectively, for (i) residences not previously occupied ("new residences") and (ii) residences previously occupied ("existing residences"), for the State as specified in Schedule II hereto or such other amounts as may from time to time be determined by the Authority or published by the United States Department of the Treasury as the average area purchase price for the State. An Average Area Purchase Price is not provided for new residences for three- and four-family homes because multi-unit dwellings, other than duplexes, may not be financed with the proceeds of the Bonds.
Bonds means any of the Authority's Home Mortgage Revenue Bonds authorized under the General Resolution and issued pursuant to a Home Mortgage Revenue Bond Series Resolution.
Builder means a person or firm regularly engaged in the construction of residential property within the State.
Business Day means any day other than a Saturday or Sunday or a day on which the principal trust office of the Trustee, Master Servicer or the banks in the City of New York are authorized to be open for regular business.
Buyer shall have the same meaning as borrower as used within this Program Guide.
Certificate of Compliance means the Authority's Certificate, substantially in the form of Exhibit 6-H, in which the Authority must certify to certain investigations made with respect to each Mortgage Loan approved for purchase by the Master Servicer. A Certificate of Compliance shall cover each Mortgage Loan and must be issued prior to Mortgage Loan Closing.
Closing and Closing Date mean the funding of the Mortgage Loan by the Mortgage Lender and the execution and delivery by the Borrower of all documents in connection therewith and the date on which such Closing occurs.
Commit or Commitment means a binding written commitment by the Mortgage Lender, in the form customarily used by the Mortgage Lender in its owner-occupied home lending practice or in a form customarily used in the mortgage lending industry, as may be specified by the Master Servicer, to a particular Eligible Borrower to finance the purchase of a particular Qualified Dwelling with a Mortgage Loan, which Commitment shall specify a stated expiration date, a stated principal amount and an interest rate equal to the Loan Rate.
Compliance Package or Preliminary Approval and Compliance Package means the documents listed in Exhibit 6-G.
Condominium Unit means a single family unit in a multi-unit housing development (i) which has been subject to a recorded declaration pursuant to the Condominium Property Act, and (ii) in which ownership of the units includes the ownership in fee of a specified residential unit together with an undivided pro rata interest in appurtenant real estate and any improvements thereon. A loan made on a condominium unit must be eligible for insurance by FHA, VA, USDARD, or the PMI insurer and Fannie Mae.
Cure Period shall mean the period of [thirty (30)] days from the earlier of the time the Mortgage Lender discovers a Defect or the Mortgage Lender receives notice of such Defect from the Authority or the Master Servicer.
Deed of Trust shall have the same meaning as the term "Mortgage", as set forth below.
Default means one or more of the following events:
Defect or Defective shall mean a failure to cause any Mortgage Loan to comply with the terms of the Mortgage Origination Agreement or this Program Guide.
Discount Fee means the fee to be collected at closing by each Mortgage Lender and remitted to the Authority within [thirty (30)] days of each Closing Date. The amount will be communicated separately to all lenders through the program brochure update as needed.
Eligible Borrower means a person:
Escrow Account means the account by that name created and maintained by the Mortgage Lender.
Fannie Mae means the Federal National Mortgage Association, or any successor thereto.
Fannie Mae Community Home Buyer's Program means the Community Home Buyer's Program described in the Pool Purchase Contract.
Fannie Mae Custodial Agreement means the Fannie Mae Form No. 2003 from a Custodian to Fannie Mae for the Program.
FDIC means the Federal Deposit Insurance Corporation, or any successor to its functions.
FHA means the Federal Housing Administration of the Department of Housing and Urban Development or any agency or instrumentality of the United States of America succeeding to the mortgage insurance functions thereof.
FHA Insurance means FHA mortgage insurance issued under one of the following FHA Insurance programs pursuant to the National Housing Act: FHA Section 203(b), FHA Section 234(c), FHA Section 221(d)(2), FHA Section 203b\vet, FHA Section 203(k) and FHA Section 203(h) in applicable areas. ADFA encourages all participating Mortgage Lenders to disclose to potential Eligible Borrowers the availability of an energy saving home mortgage. This optional service may be obtained and financed with an FHA-insured loan.
First-Time Homebuyer means any borrower who has NOT had a present ownership interest in his or her principal residence at any time during the three-year period ending on the date of the Closing of the Mortgage Loan and the execution of the Mortgage related thereto. The meaning of First-Time Homebuyer is set forth in further detail in Chapter 2, Section A of this Program Guide.
Flood Insurance Policy means the insurance coverage provided under the National Flood Insurance Program authorized by 42 U.S.C. Sections 4001-4128.
Freddie Mac - Federal Home Loan Mortgage Corporation (FHLMC)
General Resolution means the Home Mortgage Revenue Bond General Resolution of the Authority adopted June 20, 1995.
GNMA Custodial Agreement means the HUD Form 11215 from a Custodian to GNMA for the Program.
GNMA Commitment means a commitment to the Master Servicer from GNMA that GNMA will guarantee securities in the amounts stated in such commitment for a period of one year from the date of such commitment.
Government Obligations means direct obligations of the United States of America, or obligations the principal of which and interest on which are fully guaranteed by the United States of America.
HUD means the United States Department of Housing and Urban Development.
Loan Rate means the interest rate per annum with respect to the Mortgage Loans as specified by the Authority from time to time. The Loan Rate for each specific Mortgage Loan will be set at the time of loan reservation by the Mortgage Lender.
Manufactured Home means any residential dwelling built in an "off-site" production facility, transported to the customer's destination, and installed with a minimum of on-site construction.
Master Servicer means U.S. Bank Home Mortgage, its successors and assigns as servicer hereunder and under the Servicing Agreement, or any substitute or successor appointed pursuant to the Servicing Agreement.
Maximum Household Income Limit means the maximum permitted Annual Household Income of a borrower and anyone 18 years or older who resides in the Single Family Residence, determined pursuant to Chapter 2, Section B with reference to Schedules III and IV hereto and as such schedules may be modified from time to time by the Authority.
Maximum Purchase Price means the maximum Purchase Price permitted by the Single Family Program determined pursuant to Chapter 2, Section C with reference to Schedule II hereto, and as such, the maximum purchase price schedule may be modified from time to time by the Authority subject to the standards stated therein.
Mortgage means the written Mortgage or Deed of Trust instrument securing the related Mortgage Loan and encumbering a Single-Family Residence, which instrument shall be in the then-effective form required by FHA for FHA Insured Mortgage Loans, USDARD for USDARD Guaranteed Mortgage Loans, VA for VA Guaranteed Mortgage Loans, or Fannie Mae for Conventional Mortgage Loans, as applicable, with appropriate riders, and with such modifications as may be required by the terms hereof (particularly the restriction on assumptions set forth as Exhibit 7-N hereto).
Mortgage File means the mortgage documents (or photocopies, thereof) listed in Exhibit A to the Program Guide pertaining to a particular Mortgage Loan, except the original Mortgage Note and the related Mortgage, and all other documents as are customarily maintained in mortgage loan files by private institutional mortgage servicers, provided that there need be contained only a copy (or other evidence satisfactory to the Master Servicer) of hazard or other insurance policies, the original of which is not customarily held by a mortgagee.
Mortgage Lender means any party executing a Mortgage Origination Agreement on the final execution page thereof, being a home mortgage lending institution or entity approved by the Authority (i) which has been doing business on a regular basis in the State for at least 12 months and is currently participating in the local private home lending market from one or more offices located within the State, (ii) is a mortgagee approved by FHA, USDARD and/or VA, as applicable, (iii) which can make the representations, warranties and covenants set forth in Section 1.02 of the Mortgage Origination Agreement, and (iv) which has agreed to originate and sell Mortgage Loans in accordance with the terms of this Program Guide and to release servicing to the Master Servicer pursuant hereto.
Mortgage Lender's Delivery Obligation. The Mortgage Lender's agreement to make, deliver, and sell qualified Mortgage Loans to the Servicer pursuant to the Authority's agreement to purchase Mortgage Loans under the Mortgage Origination Agreements.
Mortgage Loan. A loan made by a participating Mortgage Lender to an Eligible Borrower for the purchase of a Qualified Dwelling and secured by a Mortgage on such real estate.
Mortgage Note means the written instrument executed to evidence the borrower's obligation to repay the Mortgage Loan, which shall be the then-effective form of mortgage note required by FHA for FHA Insured Mortgage Loans, USDARD for USDARD Guaranteed Mortgage Loans, or VA for VA Guaranteed Mortgage Loans, each approved under the GNMA Guide, or in the form required by Fannie Mae for Conventional Mortgage Loans, with such modifications or riders or addenda as may be required by the terms hereof.
Mortgage Origination Agreement means the agreement executed by the Authority, the Master Servicer and any Mortgage Lender that serves as the basis for such Mortgage Lender's participation in the Single Family Program.
Mortgage Purchase or Purchase means any closing held at which a Mortgage Loan is sold by the Mortgage Lender to the Master Servicer.
Mortgage Purchase Date or Purchase Date means the date on which a Mortgage Purchase occurs.
Mortgage Submission Voucher means the voucher substantially in the form of Exhibit B hereto, as the same may be amended by the Authority from time to time, which is submitted by the Mortgage Lender to the Master Servicer.
Mortgagor means any person who has a present ownership interest in a Single-Family Residence subject to the related Mortgage and/or executes the Mortgage (but such term does not include any person who (i) executes only the Mortgage Note as a guarantor or co-signor and does not have such a present ownership interest in the Single Family Residence, or (ii) executes the Mortgage solely for the purpose of waiving any rights of dower or curtesy in the Single Family Residence).
Mortgagor's Certificate means the forms of Mortgagor's Application Affidavit and Certification (attached as Exhibit 5-A) and Mortgagor's Closing Affidavit and Certification (attached as Exhibit 5-B) upon which each prospective borrower must certify certain things in order to comply with the Tax Code.
New Construction means a residence which has not previously been occupied.
Non-Qualifying Mortgage Loan shall mean and include any Mortgage Loan purchased hereunder with respect to which:
Borrowers do not meet the definition of First-Time Homebuyers except in relation to Mortgage loans for residences in designated targeted areas.
Mortgage Loan is not approved by FHA, USDARD or VA, as applicable, or the Mortgage assumability rider attached to an USDARD Guaranteed or Conventional Mortgage Loan is not approved by Fannie Mae.
Notice Address means:
Attention: Single Family Housing
Arkansas Development Finance Authority
423 Main Street - Suite 500
Little Rock, Arkansas 72201 or
P.O. Box 8023
Little Rock, Arkansas 72203-8023
U.S. Bank Home Mortgage 17500 Rockside Road Bedford, Ohio 44146
Attention: Corporate Trust Department
Simmons First National Bank
501 Main Street
Pine Bluff, Arkansas 71611
Origination Fees means the fees collected by the Mortgage Lender from an Eligible Borrower or Seller of a Single Family Residence.
Permitted Encumbrances means liens, encumbrances and clouds on the legal title of a Single Family Residence permitted by FHA, USDARD, VA, the PMI Insurer or Fannie Mae, as applicable.
Preliminary Approval and Compliance Package means Exhibit 6-G hereto, and all documents required by Exhibit 6-G to be delivered to the Authority prior to the Closing of a Mortgage Loan.
Prepayment means any monies, however derived, which are received or recovered by the Authority from any payment of, or with respect to, principal on any Mortgage Loan prior to scheduled payments of principal called for by such Mortgage Loan; provided, however, that no monies received or recovered by the Authority from the repurchase of a Mortgage Loan by a Mortgage Lender pursuant to any Mortgage Origination Agreement must be a prepayment.
Private Mortgage Insurance or PMI means any private mortgage insurance company approved by Fannie Mae and providing private mortgage guaranty insurance on Conventional Mortgage Loans in accordance with the Fannie Mae Guide, and licensed to conduct business in the State of Arkansas.
Property Value means the lesser of the Acquisition Cost or the Appraised Value of the Qualified Dwelling at the time of origination of the Mortgage Loan.
Qualified Appraiser means an individual who is approved and/or assigned, as applicable, by FHA, USDARD or VA, or the PMI Insurer and Fannie Mae, as applicable, and is licensed by the State under Arkansas Code Annotated Sections 17-51-101et seq., as amended and supplemented from time to time.
Qualified Census Tract means a census tract (as defined by the Secretary of Commerce) in which 70 percent or more of the families have an income which is 80 percent or less of the State-wide median family income.
Qualified Condominium Unit means a condominium unit meeting the requirements of the GNMA Guide or the Fannie Mae Guides, as applicable, and which is acceptable to FHA, USDARD or VA, or the PMI Insurer and Fannie Mae, as applicable.
Qualified Duplex means a Single Family Residence (i) consisting of two attached single family units, one unit of which is occupied by the owner as his or her primary residence or is to be so occupied within a reasonable time after the Purchase Date but not more than sixty (60) days thereafter and (ii) which was first occupied as a residence at least five (5) years before the Closing of the Mortgage Loan and the execution of the Mortgage related thereto.
Qualified Dwelling or Single Family Residence means a private detached or attached owner-occupied house, rowhouse, townhouse, or condominium which:
THE TERM QUALIFIED DWELLING SPECIFICALLY DOES NOT INCLUDE:
. Rental houses;
. Vacation homes;
. Factory-made housing that is not permanently affixed to land;
. Stock or any other ownership interest in a cooperative housing corporation or organization;
. Property, such as appliances or furniture, that is not a fixture under applicable law;
. Land that is not necessary to maintain basic livability of a residence or which provides, other than incidentally, a source of income to the eligible borrower. A general rule of thumb is that a residence in which more than fifteen percent (15%) of the total area is expected to be used in a trade or business or which contains land greater than 5 acres is NOT eligible!
Qualified Insurer means any insurance company approved by FHA, USDARD, VA, Fannie Mae, GNMA and the PMI Insurer, as applicable, to provide insurance, other than Private Mortgage Guaranty Insurance on single family residences in the State.
Qualified Mortgage Loan means a Mortgage Loan which is not a Non-Qualifying Mortgage Loan.
Resolution means, together, the General Resolution and the Series Resolution.
Seller shall mean any seller or sellers of a Qualified Dwelling to be acquired by a borrower using the proceeds of a Mortgage Loan.
Seller's Certification shall mean the Seller's Affidavit and Certification (attached as Exhibit 7-M) to be completed by the Seller of a Qualified Dwelling to be acquired using the proceeds of a Mortgage Loan upon which each Seller must certify certain things in order to comply with the Tax Code.
Series Resolution means any Series Resolution authorizing the issuance and sale of Home Mortgage Revenue Bonds.
Servicing Agreement means, collectively, the Master Program Administration and Servicing Agreement dated as of July 1, 1998, and supplemented as of June 1, 2000, and again on June 1, 2001, by and among the Authority and the Master Servicer.
Servicing Release Fee means the fee payable by the Servicer to a Mortgage Lender that shall equal a percentage of the outstanding principal amount of a Mortgage Loan as the Authority shall from time to time determine.
Single Family Residence has the same meaning as Qualified Dwelling, as set forth above.
Standard Hazard Insurance Policy means a standard homeowner's fire insurance policy with extended coverage as approved by the Insurance Commissioner of the State, and which qualifies under all applicable requirements of FHA, USDARD, VA or Fannie Mae, as applicable.
Standard Residential Purchase Contract means a contract to purchase residential property, but not an installment agreement for deed, articles of agreement for deed, land sales contract or any other form of ownership or financing that allows a purchaser to enjoy the benefits of ownership without title to the property.
State means the State of Arkansas.
Supplemental Notice means a written notice from the Authority to all affected Mortgage Lenders and the Master Servicer, by which the Authority exercises its reserved right to modify certain provisions of the Mortgage Origination Agreement and this Program Guide.
Targeted Area means an area which is either (a) listed as a Qualified Census Tract, or (b) an "area of chronic economic distress" designated by the State as meeting the standards established by the State and approved by HUD. ADFA maintains a current list of Targeted Areas on its website; also, the Targeted Area list is contained in Exhibit E.
Targeted Area Loans means Mortgage Loans secured by Mortgages on Single Family Residences located in a Targeted Area.
Tax Code means the Federal Internal Revenue Code of 1986, as amended, and all subsequent tax legislation duly enacted by the Congress of the United States of America. Each reference to a section of the Tax Code herein shall be deemed to include the United States Treasury Regulations proposed or in effect with respect or applicable thereto and applicable to the Bonds or the use of the proceeds thereof.
USDARD means the USDA Rural Development or any successor to its functions.
USDARD Guaranteed means guaranteed pursuant to an USDARD Guaranty.
USDARD Guaranty means a guaranty of a Mortgage Loan by the USDARD under Section 502 of Title V of the Housing Act of 1949, as amended, and as such Act may be amended from time to time.
VA means the Department of Veterans Affairs of the United States of America or any successor to its functions.
VA Guaranteed means guaranteed pursuant to a VA Guaranty.
VA Guaranty means a guaranty of a Mortgage Loan by the VA in accordance with the provisions hereof and under the Servicemen's Readjustment Act of 1944, as amended.
Unless otherwise defined herein, all words and phrases defined in Article I of the General Resolution or Article I of the Series Resolution shall have the same meaning herein.
You will notice throughout the Program Guide that, from time to time, the terms "buyer", "borrower", and "mortgagor" are used somewhat interchangeably. We apologize for any confusion this may cause. Please note that these variations are a product of the Tax Code. For the most part, when either term is used, it is possible to use the other without disrupting the overall meaning of the relevant provision.
Parti cipating Mortgage Lenders must understand that there are two separate but simultaneous reviews that will have an impact on any Mortgage Loan originated through the Single Family Program:
There are three key elements to the determination of Tax Code compliance with regard to borrower eligibility for participation in the Single Family Program:
. The borrower must be a First-Time Homebuyer (if property is located in a Non-Targeted County).
. The borrower's Annual Household Income must be within the allowable Maximum Household Income Limit for the county in which the property is located.
. The residence that will be subject to a Mortgage must meet the definition of a Qualified Dwelling.
ADFA requires documentation to support these three basic determinations. The documentation must be inclusive enough to satisfy IRS auditors.
As a general matter, a First-Time Homebuyer is an Eligible Borrower who has not had a present ownership interest in a principal residence at any time during the three-year period prior to the date on which the Mortgage is executed. Each Eligible Borrower (including a non-borrower spouse or co-occupant) must meet the First-Time Homebuyer requirements as set forth by Tax Code in order to participate in the Single Family Program (there is an exception for any residence located in a Targeted Area, as discussed below).
"Present ownership interest" includes not only an outright ownership interest (a fee simple interest) in a residence; it also includes any of the following interests if held directly by the borrower or in trust for the benefit of the Eligible Borrower:
. A joint tenancy
. A tenancy in common
. A tenancy by the entirety
. A community property interest
. The interest of a tenant-shareholder in a co-operative
. A life estate
. A contract for deed
"Present ownership interest" does not include:
. A remainder interest
. A lease with or without an option to purchase
. A mere expectancy to inherit an interest in a principal residence
. The interest that a purchaser of a residence acquires upon the execution of a purchase contract
. An interest in other than a principal residence during the previous three (3) years
. The components which operate only during transportation (hitch and axle) have not been removed;
. The mobile home is moveable and transportable; AND
. No permanent additions have been built around or added to the mobile home structure. Such items include permanently affixed decks, room additions, etc. However, if a deck has been built and the mobile home is merely sitting next to the deck, that would not constitute permanently affixed.
The prior ownership of a "double wide" mobile home will disqualify a prospective Eligible Borrower from First-Time Homebuyer status.
IF DEDUCTIONS WERE CLAIMED FOR MORTGAGE INTEREST OR FOR REAL ESTATE TAXES, THE ELIGIBLE BORROWER MUST SUPPLY A WRITTEN EXPLANATION OF THESE ITEMS, ALONG WITH SUPPORTING DOCUMENTATION. THE BURDEN OF PROOF WITH RESPECT TO QUALIFICATION AS A FIRST-TIME HOMEBUYER RESTS WITH THE ELIGIBLE BORROWER AND THE FAILURE TO ADEQUATELY EXPLAIN ANY MORTGAGE INTEREST OR REAL PROPERTY TAX DEDUCTIONS WILL RESULT IN THE DISQUALIFICATION OF THE ELIGIBLE BORROWER FROM THE SINGLE FAMILY PROGRAM.
During the period of January 1 through April 15, the question arises as to which three years of tax returns should be submitted. ADFA must have the three most recent returns. So the answer to the question depends on whether the Eligible Borrower has or has not filed a return for the prior year.
Example: On February 20, 2004, the Eligible Borrower makes application for a Mortgage Loan. If the Eligible Borrower has already filed his or her 2003 tax returns, then the Mortgage Lender must obtain a copy of the 2003 return along with the 2002 and 2001 returns. If the Eligible Borrower has not yet filed a 2003 tax return, then the Mortgage Lender must obtain copies of the
2002, 2001, and 2000 returns. Here is where it can get a little tricky. If the Eligible Borrower has provided the 2002, 2001 and 2000 returns and then, prior to the Closing, files a return for
2003, then the 2003 federal tax return will be required before ADFA can approve the Mortgage Loan for purchase. We strongly recommend that you obtain the return that is due on April 15 BEFORE you close the Mortgage Loan. This assures the Mortgage Lender that the Eligible Borrower, co-borrower or other occupant of the Single Family Residence of 18 years or older continues to meet the requirements for a First-Time Homebuyer.
. Mortgage Lenders should ask the Eligible Borrower whether he or she owned a residence during the previous marriage.
. The Mortgage Lender should review the divorced Eligible Borrower's prior year tax returns to see if deductions were taken for home mortgage interest or real estate taxes. If none were taken, you are probably OK.
. Mortgage Lenders should obtain a copy of the divorce decree along with any other relevant agreement, such as an agreement for child support, etc. Review the decree to determine if there is any language which may give an indication of prior residence ownership. References to such things as a quitclaim deed, a transfer of interest, a release of obligation or a hold harmless agreement are terms often used when settling property disposition. If these references are present, please forward a copy of the relevant document to ADFA for an opinion.
Example: An Eligible Borrower divorced two years ago. The divorce decree indicates that the Eligible Borrower split the proceeds from the sale of the former residence of which she was on title. Does this Eligible Borrower qualify as a First-Time Homebuyer? Based upon this information alone, the answer is no. However, if the Eligible Borrower presents documentation (for example, rent receipts) that substantiate that for 14 months prior to the divorce, the Eligible Borrower was separated and living in an apartment, the Eligible Borrower may in fact qualify. Even though this Eligible Borrower clearly had an ownership interest in a residence, it was not the Eligible Borrower's "principal place of residence;" therefore, the ownership interest is viewed similarly to an ownership of investment property. The Eligible Borrower satisfies the 3-year, non-ownership rule and can be treated as a First-Time Homebuyer.
The Eligible Borrower fails to qualify as a First-Time Homebuyer if he or she has had a prior mortgage loan or other financing on the subject residence, with the following exceptions:
Of the three compliance issues we review, Household Income is by far the most difficult and frustrating. In fact, the number one reason for rejection of a loan application under the Single Family Program is due to the Eligible Borrower being "over income." In the context of this issue, the term "Eligible Borrower" means the Eligible Borrower as well as any co-Eligible Borrower, and any person who is 18 or older who will reside in the residence, collectively, including those not taking title. The Eligible Borrower must satisfy each of the following requirements.
HUD publishes median household income figures that are the basis for determining the Maximum Household Income Limits. The Tax Code requires the Authority to set the Maximum Household Income Limit at the following percentages of the median household income for the area of the State in which the Eligible Borrower intends to reside:
Household Size of | One (1) or two (2) | Three (3) or more |
Targeted Areas | 120% | 140% |
Non-Targeted Areas | 100% | 115% |
NOTE: HUD issues revised figures periodically and generally on an annual basis. The Authority will notify all Mortgage Lenders in advance of the effective date when Maximum Household Income Limits are revised.
If a spouse of an Eligible Borrower (or any other occupant 18 years and older and residing in the home) is not taking title to the Single Family Residence, such spouse (or resident) must sign Exhibit 5-A along with the Eligible Borrower.
. Information obtained from loan application documents; i.e., the Affidavit of Buyer included in the initial loan application, copies of the two most recent pay stubs and tax returns, and the like; and
. A re-affirmation by the Eligible Borrower at Closing that the information set forth in the Affidavit of Buyer (including Household Income) is still true, correct and complete.
NOTE: IT IS VERY IMPORTANT TO DOCUMENT ANY AND ALL CHANGES WITH RESPECT TO THE FINANCIAL CONDITION OF THE BORROWER THAT MAY OCCUR AFTER PRIOR APPROVAL AND BEFORE CLOSING. IF A BORROWER'S HOUSEHOLD INCOME EXCEEDS THE APPLICABLE MAXIMUM HOUSEHOLD INCOME LIMIT, ADFA WILL NOT PERMIT THE PURCHASE THE MORTGAGE LOAN. IN OTHER WORDS, AN ELIGIBLE BORROWER WOULD BE WELL ADVISED NOT TO NOT BE A "SUPERSTAR" ON THE JOB UNTIL AFTER CLOSING. BIG PROMOTIONS MIGHT MAKE THE ELIGIBLE BORROWER INELIGIBLE. ALSO, BE CAUTIOUS OF ANY SITUATION WHERE AN ELIGIBLE BORROWER FALLS IN LOVE AND TAKES ON A ROOMMATE. IF THIS HAPPENS, AND IT HAS, ANNUAL HOUSEHOLD INCOME MUST BE RECALCULATED ALL OVER AGAIN.
NOTE: A PROFIT AND LOSS STATEMENT MAY ALSO BE REQUIRED FROM AN ELIGIBLE BORROWER WHO IS EMPLOYED FULL TIME, BUT SHOWS OTHER BUSINESS INCOME LOSS/GAIN ON HIS OR HER FEDERAL INCOME TAX (SEE LINE 12 OF FEDERAL INCOME TAX FORM 1040).
. Calculate Annual Household Income and include the employer contributions and employee elective contributions/deferrals. If the Eligible Borrower's income does not exceed the applicable Maximum Household Income Limit, you need to do nothing more.
. If the elective deferred income causes the Eligible Borrower to exceed the Maximum Household Income Limit, then the Eligible Borrower should obtain from his or her plan administrator a copy of the section from the plan document that provides for any restrictions governing withdrawals from the plan. If the plan document states that the contributions can only be borrowed against and cannot be withdrawn, then these amounts are not included in the Annual Household Income calculation.
. In all instances, the Eligible Borrower's elective deferrals or contributions must be included in the Annual Household Income calculation.
The residence being financed must be a Qualified Dwelling and must not exceed the Maximum Purchase Price for the area in which it is located. The Eligible Borrower must acquire a fee simple interest in the real estate and the residence being financed must become the principal residence of the Eligible Borrower within 60 days after the Closing of the Mortgage Loan.
. A single family detached residence, including a manufactured home that is permanently affixed to real property
. A townhouse
. A Condominium Unit
. A Qualified Duplex, provided the structure was first occupied as a residence at least 5 years before the execution of the Mortgage.
In determining purchase price limits, ADFA may also use limits that would mirror the FHA single unit maximum loan amounts. This is appropriate in the Arkansas Single Family Bond Program since the majority of our loans are FHA insured loans.
As defined by the Tax Code, Acquisition Cost includes all amounts paid, either in cash or in kind, by the borrower (or any party related to the borrower) to the Seller (or to any party related to the Seller) as consideration for the residence. This includes the reasonable cost of completing an incomplete or unfinished residence (incomplete or unfinished means that occupancy is not permitted under law, or that the residence lacks fixtures or architectural appointments normally included or needed to provide adequate living space for the family members who intend to occupy the residence). Completion costs are included in the Tax Code definition of Acquisition Cost whether or not the cost of completing construction is to be financed with a qualified Mortgage Loan. In other words, you must include everything the borrower pays the Seller or incurs to finish out the residence, minus the items listed below, to purchase the residence.
Acquisition Cost does not include:
. Usual and reasonable settlement or financing costs (including titling and transfer costs, title insurance, survey fees, credit reference fees, legal fees, appraisal expenses, "points" which are paid to the borrower, or other similar costs). Please note that, in order for these costs to be excluded from the definition of Acquisition Cost, they must not exceed usual and reasonable charges for these expenses.
. The unpaid value of services performed by the borrower or members of his or her family in completing or finishing the residence. THIS IS BETTER KNOWN AS SWEAT EQUITY.
. Items of personal property which are not fixtures and/or are permanently affixed to the property.
. The cost of minor repairs, fix-ups, etc. performed after Closing and paid for by the borrower.
When a Standard Residential Purchase Contract includes personal property, the borrower and Seller must establish a fair market value for the personal property. The fair market value must be deducted from the Purchase Price when calculating the Acquisition Cost and the loan-to-value ratio. We are not going to worry about such things as old refrigerators and stoves, draperies or other typical items that really have no value to the Sellers. We will concern ourselves if the Standard Residential Purchase Contract includes the $10,000 bass boat parked in the garage or the new stereo system. If in doubt, call the Authority.
The following are additional standards and requirements of a Qualified Dwelling.
transaction is clearly an "arm's length" transaction (not between relatives, for example), we usually conclude that our Eligible Borrower bargained for a "good deal." We may require a statement from the Eligible Borrower and Seller indicating that no relationship exists if we are unclear about the relationship between the Eligible Borrower and the Seller. If you discover that the transaction is NOT "arm's length," then you will be required to sell the loan to some other investor. Generally, the residence is not eligible if the appraised value exceeds 110% of the Purchase Price.
Copy of the Standard Residential Purchase Contract between borrower and Seller.
Copy of the appraisal.
Certified copy of deed for any property owned by Borrower prior to loan application.
The Federal government views Eligible Borrower who purchase a residence with Mortgage Loans financed with the proceeds of tax-exempt Bonds as having received a "subsidy" because of the below-market Loan Rate. The Tax Code requires that an Eligible Borrower who has taken advantage of the below-market Loan Rate may be required to repay part or all of this subsidy to the Federal government if: the Eligible Borrower sells the residence within nine (9) years of purchase; realizes a capital gain; and has had significant increases in Annual Household Income since the Mortgage Loan was made. The repayment is in the form of a tax and is commonly referred to as "Recapture."
Due to this provision in the Tax Code, ADFA requires that the potential Eligible Borrower be informed of this possible taxation at the time of loan application. The Notice to Eligible Borrower, attached as Exhibit 5-F, must be provided to and signed by the Eligible Borrower at the time of application. By evidence of the Eligible Borrower's signature, we are assured that the Eligible Borrower has been given notice. Two (2) additional notices will be provided to the borrower. One is incorporated into the Affidavit of Buyer and the other will be signed by the Eligible Borrower at Closing.
YEAR OF RESALE | RECAPTURE TAX RATE |
1 | 1.25% |
2 | 2.50% |
3 | 3.75% |
4 | 5.00% |
5 | 6.25% |
6 | 5.00% |
7 | 3.75% |
8 | 2.50% |
9 | 1.25% |
10 | No recapture tax due |
As you can see, the maximum amount of the recapture tax increases during the first five years of ownership and decreases for the next four years. After you have informed your borrower of the potential for a recapture tax, let the borrower know that in most cases (estimated to be around 90% - 95%), a recapture tax will not need to be paid!Several factors will determine whether the recapture tax must be applied. The factors include: the year in which the residence is subsequently sold; the circumstances surrounding this disposition of the residence; the household size and Annual Household Income at the time of resale; and the amount of capital gain made upon the resale.
. The Eligible Borrower lives in the residence for more than nine years.
. The Eligible Borrower does not realize capital gain upon resale.
. The Eligible Borrower dies.
. The Eligible Borrower's Annual Household Income at the time of resale has not increased to an amount greater than the Maximum Household Income Limit for the Single Family Program calculated with a 5% annual growth rate.
Let's focus on this last reason, since we feel that it will be the primary reason for not having to pay the recapture tax. Page 5 of Exhibit 7-P, signed by the borrower at the Mortgage Loan Closing, shows a worksheet of the real or perceived risks involved with recapture. We believe that, in most cases, the Eligible Borrower will not have to pay a recapture tax because his or her Annual Household Income likely will not exceed the Maximum Household Income Limit at the time of resale. As you will see in reviewing the chart, we have taken the Maximum Household Income Limit for the Single Family Program and projected it with a 5% annual growth rate. If the Eligible Borrower's income is at or below this adjusted amount at the time of resale, the Eligible Borrower pays no recapture tax! Since our typical borrower's Annual Household Income is well below the Maximum Household Income Limit, it would require an Eligible Borrower to realize significant increases (7% -15% or greater) annually before exceeding the limit.
. Single Eligible Borrowers. If they get married they can double their Annual Household Income overnight.
. Eligible Borrowers who are very close to being over income at the time of loan application. They will be limited to Annual Household Income growth of no more than 5% annually if they expect to stay beneath the allowable limits.
. Young professionals or "superstars" who anticipate significant salary increases within the near future and do not intend to stay in the property for more than nine years.
Example: The Eligible Borrower refinances in the third year. The recapture tax rate for year three is 3.75%. In year four the rate declines to 2.50%, year five it drops to 1.25% and year six it goes away. In any event, the Eligible Borrower would not pay any recapture tax until a resale of the residence occurs and the recapture tax rate would be the rate for the year of the subsequent sale. All other aspects of the recapture provision remain the same.
Often a purchaser wants to purchase a home that is subject to a previous mortgage, and the purchaser may want to assume all the rights and obligations of the prior owners under the previous mortgage. In such a case, the Master Servicer may release (subject to any required FHA, USDARD, VA and GNMA, or USDARD, PMI Insurer and Fannie Mae approval, as applicable, and in accordance with currently-applicable FHA, USDARD, VA and GNMA or USDARD, PMI Insurer and Fannie Mae rules and regulations) the prior owners and enter into or take an assumption agreement with or from the new purchaser. However, the Master Servicer can only agree to an assumption with ADFA's written approval.
the mortgage assumption must satisfy the mortgage eligibility requirements:
ADFA will not consent to the assumption if the eligibility requirements are not met.
. When a Mortgage is assumed, the interest rate on that Mortgage remains the same.
. The Master Servicer may charge a fee in connection with the assumption as permitted by FHA, USDARD, VA, GNMA and/or Fannie Mae. They may also charge the reasonable and customary out-of-pocket costs paid or incurred by the Mortgage Lender as specified in Section 4.04 and to the extent permitted by law.
. All warranties and representations of the Mortgage Lender made to the original Borrower with respect to the Mortgage Loan remain in full force and effect with respect to the period prior to the assumption. Once the assumption has occurred, the warranties and representations still apply, but they only apply to the extent they relate to facts concerning the status or performance of the assuming purchaser.
SCHEDULE I CURRENT LIST OF TARGETED AREAS
Borrowers purchasing a Qualified Dwelling in a Federally Targeted Area need not meet the First-Time Homebuyer regulation. The following counties constitute Targeted Areas:
Bradley | Lee |
Calhoun | Lincoln |
Chicot | Madison |
Clark | Mississippi |
Cleburne | Monroe |
Columbia | Nevada |
Conway | Ouachita |
Crawford | Perry |
Crittenden | Phillips |
Cross | Prairie |
Dallas | Scott |
Desha | St. Francis |
Drew | Searcy |
Jefferson | White |
Lafayette | Woodruff |
Yell |
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeTo Own Program
SCHEDULE II
MAXIMUM PURCHASE/SALES PRICE, DOWNPAYMENT REQUIREMENTS, LOAN AMOUNT REQUIREMENTS AND MORTGAGE LOAN INSURERS
The following are the Maximum Purchase/Sales prices permitted by the ADFA for housing purchased and/or constructed pursuant to this Mortgage Obligation Agreement:
SINGLE UNIT HOUSING | |
Newly Constructed | See Schedule III |
Existing Housing | See Schedule III |
PROVIDED FURTHER THAT THE APPRAISED VALUE OF SUCH HOUSING SHALL NOT EXCEED 100% OF SAID MAXIMUM PURCHASE/SALES PRICES.
Following Loan Insuring Agency guidelines and regulations.
The principal amount of the mortgage loan will not exceed any applicable loan-to-value limits as established by FHA, USDARD, VA, GNMA or FNMA/FHLMC.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program Schedule III STATE OF ARKANSAS 2006 INCOME BY COUNTY & HOUSEHOLD SIZE Purchase Price Limits by County/New Existing (Effective April 7, 2006) Income Limits by County and Household Size (Effective April 7, 2006)
N=Non-Targeted | 2005 INCOME LIMITSPURCHASE PRICE LIMITS | ||||
T=Targeted | 1-2 MEMBER | 3-MORE MEMBER | |||
N/T | COUNTY | EXISTING | NEW CONSTRUCTION | HOUSEHOLD | HOUSEHOLD |
N | Arkansas* | $200,160 | $200,160 | $48,480 | $56,560 |
N | Ashley* | $200,160 | $200,160 | $49,680 | $57,960 |
N | Baxter* | $200,160 | $200,160 | $46,080 | $53,760 |
N | Benton | $200,160 | $200,160 | $52,000 | $59,800 |
N | Boone* | $200,160 | $200,160 | $46,560 | $54,320 |
T | Bradley | $200,160 | $200,160 | $54,360 | $63,420 |
T | Calhoun* | $200,160 | $200,160 | $54,360 | $63,420 |
N | Carroll | $200,160 | $200,160 | $45,300 | $52,095 |
T | Chicot | $200,160 | $200,160 | $54,360 | $63,420 |
T | Clark* | $200,160 | $200,160 | $54,360 | $63,420 |
N | Clay | $200,160 | $200,160 | $45,300 | $52,095 |
T | Cleburne* | $200,160 | $200,160 | $54,360 | $63,420 |
N | Cleveland | $200,160 | $200,160 | $50,280 | $58,660 |
T | Columbia* | $200,160 | $200,160 | $54,360 | $63,420 |
T | Conway* | $200,160 | $200,160 | $54,360 | $63,420 |
N | Craighead * | $200,160 | $200,160 | $51,480 | $59,909 |
T | Crawford | $200,160 | $200,160 | $54,360 | $63,420 |
T | Crittenden | $200,160 | $200,160 | $68,760 | $80,220 |
T | Cross | $200,160 | $200,160 | $54,360 | $63,420 |
T | Dallas | $200,160 | $200,160 | $54,360 | $63,420 |
T | Desha | $200,160 | $200,160 | $54,360 | $63,420 |
T | Drew* | $200,160 | $200,160 | $54,360 | $63,420 |
N | Faulkner | $200,160 | $200,160 | $55,100 | $63,365 |
N | Franklin | $200,160 | $200,160 | $48,240 | $56,280 |
N | Fulton | $200,160 | $200,160 | $45,300 | $52,095 |
N | Garland | $200,160 | $200,160 | $50,640 | $59,080 |
N | Grant * | $200,160 | $200,160 | $51,175 | $58,851 |
N | Greene* | $200,160 | $200,160 | $49,680 | $57,960 |
N | Hempstead* | $200,160 | $200,160 | $45,360 | $52,920 |
N | Hot Spring* | $200,160 | $200,160 | $49,440 | $57,680 |
N | Howard* | $200,160 | $200,160 | $45,840 | $53,480 |
N | Independence* | $200,160 | $200,160 | $51,120 | $59,640 |
N | Izard | $200,160 | $200,160 | $45,300 | $52,095 |
N | Jackson | $200,160 | $200,160 | $45,300 | $52,095 |
T | Jefferson | $200,160 | $200,160 | $54,720 | $63,840 |
N | Johnson | $200,160 | $200,160 | $45,300 | $52,095 |
T N T T N N N T N N T T N T N T T T N N N N T N N T N T T N N N N N N N T T T | Lafayette | $200,160 | $$200,160 | $54,360 | $63,420 |
Lawrence | $200,160 | $200,160 | $45,300 | $52,095 | |
Lee | $200,160 | $200,160 | $54,360 | $63,420 | |
Lincoln | $200,160 | $200,160 | $54,720 | $63,840 | |
Little River* | $200,160 | $200,160 | $48,000 | $56,000 | |
Logan | $200,160 | $200,160 | $45,300 | $52,095 | |
Lonoke | $200,160 | $200,160 | $55,100 | $63,365 | |
Madison | $200,160 | $200,160 | $62,400 | $72,800 | |
Marion | $200,160 | $200,160 | $45,300 | $52,095 | |
Miller * | $200,160 | $200,160 | $51,355 | $59,058 | |
Mississippi | $200,160 | $200,160 | $54,360 | $63,420 | |
Monroe | $200,160 | $200,160 | $54,360 | $63,420 | |
Montgomery | $200,160 | $200,160 | $45,300 | $52,095 | |
Nevada | $200,160 | $200,160 | $54,360 | $63,420 | |
Newton | $200,160 | $200,160 | $45,300 | $52,095 | |
Ouachita* | $200,160 | $200,160 | $54,360 | $63,420 | |
Perry | $200,160 | $200,160 | $66,120 | $77,140 | |
Phillips | $200,160 | $200,160 | $54,360 | $63,420 | |
Pike | $200,160 | $200,160 | $45,300 | $52,095 | |
Poinsett | $200,160 | $200,160 | $45,300 | $52,095 | |
Polk | $200,160 | $200,160 | $45,300 | $52,095 | |
Pope* | $200,160 | $200,160 | $51,840 | $59,840 | |
Prairie* | $200,160 | $200,160 | $54,360 | $63,420 | |
Pulaski | $200,160 | $200,160 | $55,100 | $63,365 | |
Randolph | $200,160 | $200,160 | $45,300 | $52,095 | |
St. Francis | $200,160 | $200,160 | $54,360 | $63,420 | |
Saline | $200,160 | $200,160 | $55,100 | $63,365 | |
Scott | $200,160 | $200,160 | $54,360 | $63,420 | |
Searcy | $200,160 | $200,160 | $54,360 | $63,420 | |
Sebastian | $200,160 | $200,160 | $49,440 | $57,680 | |
Sevier* | $200,160 | $200,160 | $45,960 | $52,620 | |
Sharp | $200,160 | $200,160 | $45,300 | $52,095 | |
Stone | $200,160 | $200,160 | $45,300 | $52,095 | |
Union* | $200,160 | $200,160 | $49,080 | $57,260 | |
Van Buren | $200,160 | $200,160 | $45,300 | $52,095 | |
Washington | $200,160 | $200,160 | $52,000 | $59,800 | |
White* | $200,160 | $200,160 | $54,360 | $63,420 | |
Woodruff | $200,160 | $200,160 | $54,360 | $63,420 | |
Yell | $200,160 | $200,160 | $54,360 | $63,420 | |
*High Housing Cost Area
7/1/2006
SCHEDULE III
Page 3
The Maximum Household Income Limits are regulated by the Treasury Department. The following MUSTbe considered when calculating borrower's income. ALL SOURCES OF INCOME MUST BE CONSIDERED.
Household Income is defined as "the current family income of a potential Mortgagor, and shall in any event include the current gross income of ALLpersons who reside or intend to reside with such Mortgagor in the same dwelling unit (other than persons under 18 years of age who are not primarily liable or secondarily liable on the Mortgage Note), but exclusive of the income of any CO-SIGNER of a Mortgage Note who does not reside or intend to reside therein, as evidenced by documentation satisfactory to the Authority." Current gross income is annualized current gross monthly income (gross monthly income multiplied by 12).
Gross monthly income is the sum of monthly gross pay AND ANY ADDITIONAL INCOME INCLUDING BUT NOT LIMITED TO THE FOLLOWING:
Alimony
Bonuses
Business Activities Income
Child Support
Commissions
Dividends
Income from Assets
Interest Investments Income
Mileage
Military Allowance
Net Rental Income
Overtime
Part-Time Employment
Pensions
Public Assistance
Royalties
Shift Differential
Sick Pay
Social Security Benefits
Trust Income
Unemployment Compensation
VA Compensation
ADFA is pleased to purchase the following types of Mortgage Loans for our HomeToOwn Program. These types of Mortgage Loans are eligible for participation in the Single Family Program:
FHA Loans: 203(b), 203(b)/Vet, 234c, 203(k), 203(h), in applicable areas. ADFA encourages the use of the FHA Energy-Saving Mortgage.
V.A. Guaranteed Loans: Guaranteed by the Department of Veterans Affairs.
Conventional Loans: (All conventional loans are put into Fannie Mae pools. They include all conventional loans including the Fannie Mae My Community Mortgage loan. Rural Development: Guaranteed Rural Housing Loans.
Each Mortgage Lender is required to provide to ADFA, in the Mortgage Origination Agreement (as defined in Chapter 1), its Approved Mortgage Lender Numbers for FHA Loans, VA Loans, FNMA Loans and Rural Development Loans. If the Mortgage Lender is also an approved direct endorsement "Chums Underwriter", those approved mortgager lender numbers must also be included in the Mortgage Origination Agreement. If any changes occur within your lending institution, please notify ADFA.
As our bond lender, we are allowing you to credit underwrite our ADFA loans. ADFA needs additional compliance underwriting information to make our files complete. Items we now request must include:
FHA Loans:signed mortgage credit analysis worksheet (MCAW), and any automated underwriting finding (if applicable).
V.A. Guaranteed Loans:signed loan analysis approval sheet, and automated underwriting findings (if applicable).
Conventional Loans:signed uniform underwriting transmittal summary (1008), and automated underwriting findings (if applicable).
Rural Development:signed conditional commitment and any automated underwriting findings (if applicable).
Please note that the Master Servicer has provided the following underwriting checklists for use with the following categories of Mortgage Loans: FHA Loans, VA Loans, Conventional Loans and USDA Rural
Development Loans. For your convenience, ADFA has included copies of those four checklists at the end of this Chapter.
The Real Estate Appraisal should have consistency throughout the appraisal. The comparables need to be similar. All appraisers must be on the Mortgage Lender's approved appraiser list. Note: If there are any discrepancies with the appraisal, ADFA may ask for clarification.
ALL MORTGAGE LOANS MUST BE INSURABLE OR GUARANTEED BY MORTGAGE TYPE AND SALEABLE ON THE SECONDARY MARKET. IN THE EVENT THAT A MORTGAGE LOAN IS NOT INSURABLE OR GUARANTEED, BOTH THE MORTGAGE LOAN AS WELL AS ANY DPA LOAN MUST BE REPURCHASED BY THE ORIGINATING MORTGAGE LENDER.
ADFA's main goal is to quickly process loans with accuracy so when the loans are delivered to the secondary market, they can be purchased faster with no exceptions.
ADFA is ready to offer two types of down payment assistance loans. Both of these down payment choices will be available on the Internet Reservation System for ADFA's approved lenders. The two types of loans include the current Down Payment Assistance (DPA) Loan that is a 10 year amortizing mortgage or the American Dream Down Payment Initiative (ADDI)/HOME Program that is a forgivable loan with a five year affordability period attached to it.
ADFA is pleased to be able to provide down payment and closing cost assistance in the form of a Down Payment Assistance Loan secured by a second mortgage ("DPA Loan") to those who qualify for it. The amount of assistance available will be communicated separately to all lenders through the Program Brochure. All DPA Loans must be issued in conjunction with a Single Family Program Mortgage Loan. Please note that the funds are a loan.
The proceeds of the DPA Loan can only be used for certain items. Of course, funds may be used for an Eligible Borrower's down payment and Closing costs. There is no "cash back" to the Eligible Borrower at Closing. If the amounts of the Mortgage Loan and the DPA Loan exceed the amounts required at Closing, the DPA Loan amount must be reduced. We urge you to calculate your loan amounts as accurately as possible to save everyone the hassle of reducing the principal balance of the Mortgage Loan at Closing. It is also important to calculate the loan amounts accurately, because in most cases, the reduction of Mortgage Loan principal costs the Eligible Borrower extra money! Origination fees and other fees based on a percentage of the Mortgage Loan amount would have already been incurred. Reducing the principal balance of the Mortgage Loan doesn't allow the Eligible Borrower to recoup any of these fees, nor does it reduce the monthly payment amount. So do everybody a favor and keep all loan amounts accurate!
The DPA Loan term is based on a 10-year amortization. It is due on sale, transfer, other disposition of the property (including any involuntary transfer by or as a result of foreclosure or judicial sale or operation of law), refinance or other satisfaction of the Mortgage Loan.
In the event the Mortgage Note Holder and the Servicer, in their sole and absolute discretion, after a loss mitigation analysis, find that a catastrophic event, including but not limited to Borrower's death or extended illness, or the extended illness of a close family member who depends primarily on the borrower for support, has occurred which submitted substantially and permanently impairs their ability to repay second mortgage note and requires them to sell the Property for an amount less than the mortgage note, that portion of the lien of second mortgage note which can not be satisfied from the proceeds of such sale shall be released.
The interest rate on DPA Loans may be changed by the Authority at any time. Please refer to the ADFA website for the current rate.
Here are some other requirements for down payment assistance loan:
. FHA: The sum of all financing may not exceed 100% of the Acquisition Cost plus any prepaid expenses.
. VA: The sum of all financing may not exceed 100% of the reasonable value of the property established by VA plus any Closing costs and prepaids.
. Conventional: The sum of all financing cannot exceed 105% of the lower of either Purchase Price or appraised value.
. USDARD: Sum of financing cannot exceed 100% of appraised value plus the Rural Development Fee.
. DPA Loan must meet federal truth-in-lending disclosure requirements.
. Second mortgage must be recorded in the official public records of the County Recorder's Office such that it constitutes a valid second lien upon the property.
. Hazard insurance policy must show the Mortgage Lender and/or its assigns as an insured second mortgagee.
. Title insurance policy must reflect the second mortgage as a valid lien against the property subordinate to the Mortgage.
. Mortgage Lender advances the funds and is reimbursed at the purchase by the Master Servicer.
. The DPA loan will be assigned to Arkansas Development Finance Authority.
. DPA Loan will be serviced by the Master Servicer.
. A monthly payment statement will be issued and the Eligible Borrower will remit one check to cover both the first and second mortgage loan obligations.
. Assumptions are not allowed.
. A DPA Loan administration fee of $150 will be netted at purchase from the DPA Loan funds by the Master Servicer.
. There is no prepayment penalty.
. There is no recapture tax provision.
. In the event that the Mortgage Loan (the "First Mortgage") is determined to be uninsurable on the secondary market, then the originating Mortgage Lender will be obligated to repurchase both the Mortgage Loan ("First Mortgage") as well as the DPA Loan.
President Bush signed the American Dream Down payment Initiative (ADDI) into law on December 16, 2003, under the American Dream Down payment Act ( Public Law 18-186) (ADDI statute). Funds made available under the ADDI statute will be allocated to eligible HOME Investment Partnerships Program participating jurisdictions (PJ) to assist low-income families become first-time homebuyers. Goals of the ADDI Program include increase overall homeownership rate, create greater opportunity for homeownership among lower income and minority households, and revitalize and stabilize communities.
ADFA will provide the ADDI/HOME Program funds in the form of a forgivable loan (second mortgage) at a maximum of $10,000 for down payment and closing costs in conjunction with ADFA's HomeToOwn Mortgage Revenue Bond Program. The ADDI/HOME Program forgivable loan is accessible through the Internet Reservation System. The assistance will be forgiven in equal annual installments over the five-year affordability period for qualified borrowers who have maintained the home as their principal residence. The documents for this program will include a note, mortgage, assignment and ADDI/HOME Agreement.
If the home is pre-1978 built, lead-based paint may need to be addressed and the HOME staff will work with the first-time homebuyers in making the home free of any lead-based paint by placing another forgivable loan on the property with an affordability period attached to it also. Documents will include a note, mortgage and Lead-based Paint HOME Agreement. All of these documents will be available through the Internet Reservation System.
Requirements of the ADDI/HOME Program that must be attained include:
ADFA Inspectors. This inspection will be done on all homes that are using the ADDI/HOME Program. This is NOT a home inspection. If repairs are needed, lender must review and discuss "Acknowledgment of Repairs" sent by ADFA underwriter with borrower(s). The Acknowledgment of Repairs must be signed by lender and borrower(s) and sent to ADFA underwriter.
Affordability Periods
Home SubsidyAffordability Period Less than $15,000 5 years
$15,000 - $25,000 10 years
. The ADDI/HOME Subordinate mortgage must be recorded in the official public records of the County Recorder's Office such that it constitutes a valid second lien upon the property.
. ADDI/HOME Program Assignment of subordinate mortgage must be recorded in the official public records of the County Recorder's Office.
. ADDI/HOME Program Homebuyer Assistance Agreement must be recorded in the official public records of the County Recorder's Office.
. Hazard insurance policy must show the Mortgage Lender and/or its assigns as an insured second mortgagee.
. Title insurance policy must reflect the ADDI/HOME subordinate mortgage as a valid lien against the property.
. Copy of flood certification must be provided.
. Mortgage Lender advances the funds and is reimbursed by ADFA upon receipt of the original signed ADDI/HOME Program Note and copy of the RECORDED ADDI/HOME Subordinate Mortgage.
. The ADDI/HOME loan will be assigned to Arkansas Development Finance Authority.
ADDI/HOME Program Loans:
. ADDI/HOME Loans will be serviced by ADFA Loan Servicing Department.
. Assumptions are not allowed.
. There is an affordability period that varies with the ADDI/HOME loan amount.
. Lender must provide to ADFA Single Family, final RECORDED documents that include:
HOME Lead Base Paint Loans:
. All documentation pertaining to lead base paint loans are to be sent to the HOME Department at ADFA.
ADDI - EXHIBIT "A" 2006 LIMITS | |||||||||
ARKANSAS DEVELOPMENT FINANCE AUTHORITY | |||||||||
AMERICAN DREAM DOWNPAYMENT INITIATIVE (ADDI)/HOME PROGRAM | |||||||||
in conjunction with the Single Family HomeToOwn Program | |||||||||
HUD HOME PROGRAM INCOME LIMITS 04/2006 | |||||||||
NUMBER OF PERSONS/MAXIMUM HOUSEHOLD INCOME AT 80% OF MEDIAN | |||||||||
INCOME | |||||||||
N/T | COUNTY NAME | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
N | Arkansas | 23250 | 26550 | 29900 | 33200 | 35850 | 38500 | 41150 | 43800 |
N | Ashley | 24550 | 28050 | 31550 | 35050 | 37850 | 40650 | 43450 | 46250 |
N | Baxter | 22750 | 26000 | 29250 | 32500 | 35100 | 37700 | 40300 | 42900 |
N | Benton | 29100 | 33300 | 37450 | 41600 | 44950 | 48250 | 51600 | 54900 |
N | Boone | 22850 | 26100 | 29400 | 32650 | 35250 | 37850 | 40500 | 43100 |
T | Bradley | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Calhoun | 22800 | 26050 | 29300 | 32550 | 35150 | 37750 | 40350 | 43000 |
N | Carroll | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Chicot | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Clark | 24450 | 27950 | 31450 | 34950 | 37750 | 40550 | 43350 | 46150 |
N | Clay | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Cleburne | 23750 | 27150 | 30550 | 33900 | 36650 | 39350 | 42050 | 44750 |
N | Cleveland | 25550 | 29200 | 32850 | 36500 | 39400 | 42350 | 45250 | 48200 |
T | Columbia | 23900 | 27350 | 30750 | 34150 | 36900 | 39650 | 42350 | 45100 |
T | Conway | 24200 | 27650 | 31100 | 34550 | 37300 | 40100 | 42850 | 45600 |
N | Craighead | 25950 | 29650 | 33350 | 37050 | 40000 | 43000 | 45950 | 48900 |
T | Crawford | 25300 | 28950 | 32550 | 36150 | 39050 | 41950 | 44850 | 47750 |
T | Crittenden | 32100 | 36700 | 41250 | 45850 | 49500 | 53200 | 56850 | 60500 |
T | Cross | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Dallas | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Desha | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Drew | 24000 | 27450 | 30900 | 34300 | 37050 | 39800 | 42550 | 45300 |
N | Faulkner | 30850 | 35300 | 39700 | 44100 | 47650 | 51150 | 54700 | 58200 |
N | Franklin | 23800 | 27200 | 30600 | 34000 | 36700 | 39450 | 42150 | 44900 |
N | Fulton | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Garland | 24700 | 28250 | 31750 | 35300 | 38100 | 40950 | 43750 | 46600 |
N | Grant | 27150 | 31050 | 34900 | 38800 | 41900 | 45000 | 48100 | 51200 |
N | Greene | 24000 | 27450 | 30900 | 34300 | 37050 | 39800 | 42550 | 45300 |
N | Hempstead | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Hot Spring | 24150 | 27600 | 31050 | 34500 | 37250 | 40000 | 42800 | 45550 |
N | Howard | 22850 | 26100 | 29400 | 32650 | 35250 | 37850 | 40500 | 43100 |
N | Independence | 24850 | 28400 | 31950 | 35500 | 38350 | 41200 | 44050 | 46900 |
N | Izard | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Jackson | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Jefferson | 25550 | 29200 | 32850 | 36500 | 39400 | 42350 | 45250 | 48200 |
N | Johnson | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Lafayette | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Lawrence | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Lee | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Lincoln | 25550 | 29200 | 32850 | 36500 | 39400 | 42350 | 45250 | 48200 |
N | Little River | 22900 | 26200 | 29450 | 32700 | 35350 | 37950 | 40550 | 43200 |
N | Logan | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Lonoke | 30850 | 35300 | 39700 | 44100 | 47650 | 51150 | 54700 | 58200 |
T | Madison | 29100 | 33300 | 37450 | 41600 | 44950 | 48250 | 51600 | 54900 |
N | Marion | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Miller | 26100 | 29850 | 33550 | 37300 | 40300 | 43250 | 46250 | 49250 |
T | Mississippi | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Monroe | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Montgomery | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Nevada | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Newton | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Ouachita | 22500 | 25750 | 28950 | 32150 | 34750 | 37300 | 39900 | 42450 |
T | Perry | 30850 | 35300 | 39700 | 44100 | 47650 | 51150 | 54700 | 58200 |
T | Phillips | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Pike | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Poinsett | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Polk | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Pope | 24850 | 28400 | 31950 | 35500 | 38350 | 41200 | 44050 | 46900 |
T | Prairie | 23450 | 26800 | 30150 | 33500 | 36200 | 38900 | 41550 | 44250 |
N N | Pulaski Randolph | 30850 22400 | 35300 25600 | 39700 28800 | 44100 32000 | 47650 34550 | 51150 37100 | 54700 39700 | 58200 42250 |
T | St. Francis | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Saline | 30850 | 35300 | 39700 | 44100 | 47650 | 51150 | 54700 | 58200 |
T | Scott | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Searcy | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Sebastian | 25300 | 28950 | 32550 | 36150 | 39050 | 41950 | 44850 | 47750 |
N | Sevier | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Sharp | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N | Stone | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
N N | Union Van Buren | 24200 22400 | 27650 25600 | 31100 28800 | 34550 32000 | 37300 34550 | 40100 37100 | 42850 39700 | 45600 42250 |
N | Washington | 29100 | 33300 | 37450 | 41600 | 44950 | 48250 | 51600 | 54900 |
T | White | 25150 | 28750 | 32350 | 35900 | 38800 | 41650 | 44550 | 47400 |
T | Woodruff | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
T | Yell | 22400 | 25600 | 28800 | 32000 | 34550 | 37100 | 39700 | 42250 |
** | HUD Reviews the income limits annually for all 75 counties. | ||||||||
Mortgage Lenders may accept applications on residences located anywhere within the State. If, after a particular Mortgage Lender initially joins the Single Family Program by executing a Mortgage Origination Agreement, the Mortgage Lender opens additional loan origination branches, the Mortgage Lender must send or fax a letter to ADFA listing the name, address, telephone and contact person at each new location.
. Is the Eligible Borrower and any Co-Eligible Borrower a first-time homebuyer?
. Is the Eligible Borrower's spouse a first-time homebuyer even though he or she may choose not to be liable on the Mortgage Loan?
. How does the Eligible Borrower honestly describe his or her credit history?
Once the Mortgage Lender is satisfied with the answers and believes that it has a legitimate candidate for the Single Family Program, then the Mortgage Lender should take the application and proceed to website at:
The next step is to reserve Single Family Program funds for the borrower. In order to reserve funds, Mortgage Lenders need only access to the ADFA web page at:
https://www.adfaweb.adfa.state.ar.us/logon.htm
Prior to making a reservation request, the Mortgage Lender should have in hand the following information:
A $100 reservation fee must be collected on all Mortgage Loans--including new construction--to be credited at Closing. Please be sure that all documents are executed by all parties involved.
The loan reservation system is open from 7:00 a.m. to 10:00 p.m., Monday through Friday, except for State-observed holidays.
At time of reservation, you will be assigned a loan tracking number. This is very important. Put the tracking number on all documentation throughout your file. Refer to it every time you send us a fax, a letter or other documentation. If you don't, we won't be able to respond in a prompt manner because we will be conducting computer searches to identify the file and its underwriter. If you are utilizing our downpayment assistance program (described below), you will also reserve those funds at this point.
Keep in mind that you have thirty (30) days to review the Mortgage File, assemble the ADFA package and send it to us. WE ARE NOT OBLIGATED TO HONOR THE RESERVATION AFTER THE THIRTY (30) DAYS HAVE EXPIRED.
Note: At the time the reservation is made the Loan Rate is LOCKED regardless of future rate changes.
Please keep in mind that once you've received a tracking number, you're telling us you're pretty much ready to go with that specific Eligible Borrower and Mortgage Loan. We realize there might be an occasion to transfer either a given residence (property address) or a Mortgage Lender and we will consider these types of requests, but know that we will ask for a written explanation from the loan officer.
The $25.00 loan reservation fee can be paid be either the lender or the borrower. This $25.00 fee needs to be sent with the closing package that ADFA receives after the loan is closed.
**Applicable Forms - Available on Internet Reservation System in fillable form**
ADDI/HOME Program required compliance document :
ADDI/HOME Program Notice to Homebuyer (signed by borrower(s) and lender).
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program
EXHIBIT 5-A
EXHIBIT 5 A-1
EXHIBIT 5-B
EXHIBIT 5-C
EXHIBIT 5-D
EXHIBIT 5-E
EXHIBIT 5-F
Changes in Mortgage Loan amounts can be made in our system prior to ADFA receiving the complete Mortgage Loan package. Once the compliance package has been received at ADFA, any additional change must be requested by fax using form Exhibit 6-J. It is very important that you do not ship a Mortgage Loan to the Master Servicer without notifying us of any changes in Mortgage Loan amounts.
If you need to cancel a Mortgage Loan, please do so within three (3) business days upon the decision that the Mortgage Loan will not qualify. We have provided a form, Exhibit 6-I, Cancellation of Reservation Form, specifically for this purpose. We will accept a copy of your notice of adverse action as long as it contains all of the information outlined in our Exhibit 6-I.
Canceled Mortgage Loan files will be warehoused at ADFA for a maximum of 30 days from cancellation and will be destroyed unless we hear from you that you want the file returned. If ADFA denies the file, we will return file to the Mortgage Lender per written request; otherwise, the denied file will be destroyed within 30 days of cancellation.
Mortgage Lenders underwrite the Mortgage Loan for credit. Upon your institution's conditional approval, you send the complete file to ADFA, as outlined on the checklist provided in Exhibit 6-G. We urge you to submit a completed package, as incomplete packages impede the approval process. Failure to submit the required documentation may result in the deletion of your Mortgage Loan from the reservation system.
Tax Code compliance issues are addressed more comprehensively in Chapter 2 of this Program Guide.
EXHIBIT 6-G
EXHIBIT 6-H
EXHIBIT 6-I
EXHIBIT 6-J
Upon receiving approval from the Authority, you may proceed to schedule the Mortgage Loan Closing.
NOTE: We will carefully examine every Mortgage Loan submitted for purchase. These procedures, if followed by you, will help reduce:
. The period of time between the date of Closing and the Mortgage Loan purchase date per the Master Servicer.
. The number of Mortgage Loans we refrain from purchasing while waiting for the Mortgage Lender to chase after title companies, borrowers, sellers, and so forth.
. The number of Mortgage Loans not purchased and ultimately reassigned to your institution.
Our expectations are the same as any other secondary investor. We want to purchase Mortgage Loans that are compliant with the Tax Code and are "investment quality" with "valid and perfected" liens and "clean" title. Much of what you are about to read should not be new material, because it is what you do normally.
. The coverage must include all fire and extended coverage risks customarily insured against in the geographical area in which the property is located. The policy must provide a minimum fire and extended coverage insurance on a replacement cost basis in an amount not less than (i) one hundred percent (100%) of the replacement cost, or (ii) the outstanding principal balance of the Mortgage Loan, whichever is less;
. The hazard insurance policy must be in effect on the date of Closing of the Mortgage Loan;
. Insurance policies must be sufficient in amount and scope of coverage to meet the requirements of any private mortgage insurer and/or pool insurance;
. Policies containing a deductible clause up to industry standard of $1000 (maximum deductible) applicable to either fire or extended coverage, or both, are acceptable in areas where these provisions are mandatory or customary;
. The "Loss Payee" must be the Mortgage Lender "and/or its successors or assigns";
. All policies of hazard insurance must contain or have attached the standard mortgage clause customarily used in the area where the home is located. Each policy must provide that the insurance carrier notify the Master Servicer, at least ten days in advance of the effective date, of a reduction in the coverage or cancellation of the policy.
. We require flood insurance for any property located in a special flood area that has federally mandated flood insurance purchase requirements. The Mortgage Lender/Master Servicer must ensure that flood insurance is maintained and that it provides coverage at least equivalent to the coverage provided under the National Flood Insurance Program. Flood insurance must remain in force for the term of the loan in an amount at least equal to 1/3 of the outstanding principal balance of the Mortgage Loan. Flood insurance policies should generally be in the form of standard policies issued by members of the National Flood Insurers Association. The maximum deductible should be the lesser of $1,000 or 1% of the policy face amount.
. Note - The debt of each Mortgage Loan must be evidenced by a properly executed Mortgage Note made payable to the particular Mortgage Lender;
. Mortgage - Each Mortgage Loan must be secured by a Mortgage or Deed of Trust, as applicable, constituting a first lien on the residence financed by the Mortgage Loan;
. ADFA Rider - (Exhibit 7-N) The Provisions of this rider substantially modify the terms of the Mortgage and must be attached and recorded with the Mortgage;
. Assignment of Mortgage - (Exhibit 7-O) Each Mortgage Loan must be assigned by your institution to the Master Servicer by a properly executed and recorded Exhibit 7-O - Assignment of Mortgage/Deed of Trust.
Exhibit 7-K is the checklist used by the Authority in reviewing the Closing/Mortgage File. ADFA requires you to use this checklist as well as Exhibit 6-G, Preliminary Approval and Compliance Package, for both preliminary Mortgage Loan approval as well as Mortgage Loan Closing.
At this point you should be ready to close the Mortgage Loan and disburse funds. Once again you should look over the ADFA checklist for reviewing purchase files to make sure that your Closing instructions cover the necessary items. In order to be eligible for purchase by the Authority and the Master Servicer, each Mortgage Loan must be delivered to the Authority within 30 days of Closing. The Mortgage Lender must deliver to the Authority the following documents, arranged in the order listed with first item on top.
. The original Exhibit 7-K, ADFA Required Closing Documents.
. Mortgage Lender check for 1% discount fee and $25.00 Reservation Fee payable to ADFA.
. Typed copy of final loan application with appropriate addendums (signed by all parties, including Mortgage Lender).
. Copy of HUD -1 Settlement Statement (signed by all parties), which must:
. Copy of Mortgage Note.
. Copy of Mortgage/Deed of Trust and Exhibit 7-N rider and any other applicable riders.
. Copy of Exhibit 7-O, Assignment of Mortgage/Deed of Trust.
. Original Exhibit 7-L, Mortgagor's Application Affidavit and Certification.
. Original Exhibit 7-M, Seller's Affidavit and Certification.
. Original Exhibit 7-P, Notice to Mortgagor of Information Regarding Potential Recapture Tax (NOTE: Please be sure you have inserted the appropriate county page for the sample table (Exhibit 7-P, page 4) and completed the top of the page with the borrower's information. A copy of the completed document should be given to the borrower at Closing.).
. Copy of Title Commitment including any title exceptions that need to be cleared or noted due to encumbrances.
. Copy of DPA Loan note (if applicable).
. Copy of un-recorded DPA Loan second mortgage (if applicable).
. Copy of un-recorded assignment of DPA Loan note and second mortgage (if applicable)(Exhibit 7-R).
. Copy of DPA Loan Truth-In-Lending Disclosure form (if applicable).
. Copy of DPA Loan certificate of completion for homebuyer education course (if applicable).
. Copy of the Hazard Insurance Policy and Endorsement reflecting ADFA as second mortgagee if borrower received DPA Loan (if applicable).
The Mortgage Lender is responsible for the timely transfer of Mortgage Loan data to ADFA and the Master Servicer. In any event, the information must be provided within thirty (30) days of the date of Mortgage Loan closing. It is of primary importance that the Mortgagee be protected in this transfer. The Master Servicer and ADFA are on-line together through the Mitas System which allows the Mortgage Lender to send the complete closing package following the Master Services document guide before ADFA's approval is given. The Master Servicer will read the Mitas Pipeline Tracking Status for Closing Approval and then will purchase the Mortgage Loan based on ADFA's Pipeline Tracking Status Criteria.
The Authority has advised you of the identity of the Master Servicer and with the name of a contact person. You should establish contact with the contact person and become familiar with the Master Servicer's delivery guide, Mortgage Loan set-up requirements and transfer procedures.
If you have any questions regarding this data, you should contact the Master Servicer. IT IS YOUR RESPONSIBILITY TO GET COMPLETE DOCUMENTATION TO THE MASTER SERVICER.
The Mortgage Lender is also responsible for advising the borrower of the servicing change. This is done through the "goodbye" letter, as required by RESPA. Pay close attention to the minimum time requirement of RESPA. The contents of the "goodbye" letter should be coordinated with the Master Servicer, especially regarding such items as when and where to send payments and customer service numbers. NOTE: Exhibit 8-S - Form to Notice of Sale of Service is an example of this transaction.
If you receive a payment after the transfer of a Mortgage Loan, it is your responsibility to forward all payments to the Master Servicer in a timely manner.
If a problem arises regarding the transfer of the Mortgage Loan, you should contact the Master Servicer and the Authority.
The Mortgage Lender may, at the appropriate processing stage, collect the following fees:
of the Mortgage Loan amount. This fee must be remitted to ADFA within thirty (30) business days of Mortgage Loan Closing.
The fee is non-refundable and can be paid by the borrower.
Lenders may collect any "normal and customary" fee's from either the borrower or the seller. ADFA Single Family Staff will monitor for appropriateness.
The principal amount of the Mortgage Loan may not exceed the applicable loan-to-value limits as established by HUD, USDARD, VA, or Fannie Mae. The financing of allowable closing costs is acceptable as permitted by the loan insuring agency.
Second Mortgage/DOWNPAYMENT ASSISTANCE LOAN
. Down Payment Assistance (DPA) Note
. Down Payment Assistance (DPA) Subordinate Mortgage
AMERICAN DREAM DOWN PAYMENT INITIATIVE (ADDI/HOME) PROGRAM
. ADDI/HOME Program Promissory Note
. ADDI/HOME Program Subordinate Mortgage
. ADDI/HOME Program Assignment
. ADDI/HOME Program Homebuyer Assistance Agreement
EXHIBIT 7-K
EXHIBIT 7-L
EXHIBIT 7-M
EXHIBIT 7-N
EXHIBIT 7-O
EXHIBIT 7-P
SAMPLE ONLY
Mortgage Lender must use correct county document
County: Arkansas Borrower's Name: Co-Borrower's Name: Tracking Number:
Date That You Sell Your Home | Holding Period Percentage | Adjusted Qualifying Income | |
# of Family Members Living In Your Home at the Time of Sale | |||
2 or less | 3 or more | ||
Before the first anniversary of closing (See Note below) | 20% | 34,700 00 | 39,905 00 |
On or after the first anniversary of closing, but before the second anniversary of closing | 40% | 36,435 00 | 41,900 25 |
On or after the second anniversary of closing, but before the third anniversary of closing | 60% | 38,256 75 | 43,995 26 |
On or after the third anniversary of closing, but before the fourth anniversary of closing | 80% | 40,169 59 | 46,195 03 |
On or after the fourth anniversary of closing, but before the fifth anniversary of closing | 100% | 42,177 85 | 48,504 53 |
On or after the fifth anniversary of closing, but before the sixth anniversary of closing | 80% | 44,286 92 | 50,929 95 |
On or after the sixth anniversary of closing, but before the seventh anniversary of closing | 60% | 46,501 47 | 53,476 69 |
On or after the seventh anniversary of closing, but before the eighth anniversary of closing | 40% | 48,826 37 | 56,150 33 |
On or after the eighth anniversary of closing, but before the ninth anniversary of closing | 20% | 51,267 86 | 58,958 04 |
NOTE: Closing means the closing date of your loan.
Please insert here the correct County Income Limit Sheet for your county each yearj
EXHIBIT 7-Q
EXHIBIT A
PROPERTY DESCRIPTION
EXHIBIT 7-R
EXHIBIT A PROPERTY DESCRIPTION
Once ADFA approves the Mortgage Loan for compliance and issues a Form 6-H, you may schedule the Closing. The Mortgage Lender will close the Mortgage Loan, send the appropriate documents for recording and deliver the appropriate documents to the Master Servicer and ADFA. Closing of the Mortgage Loan must occur no later than one hundred eighty (180) days after the Mortgage Loan reservation date. You must submit the Closing documents to ADFA within thirty (30) days of Closing. If no other documentation is needed, an ADFA representative will sign Exhibit 7-K and fax a copy to you. You may elect to attach a signed copy of the Exhibit 7-K to the Closing documents submitted to the Master Servicer. The Master Servicer is not obligated to purchase any Mortgage Loan if the Mortgage File takes longer than thirty (30) days to be delivered. If you elect to speed up the process, the Mortgage Lender may send a closing package to Master Servicer at the same time. The Master Servicer will purchase the Mortgage Loan based on the electronic approval from ADFA.
Closing issues are addressed more comprehensively in Chapter 7 and the Master Servicer section of this Program Guide. Use Exhibit 8-S Notice of Sale of Servicer to notify the Borrower(s).
Please note that the Master Servicer has provided the following delivery checklists for use with the following categories of Mortgage Loans: FHA Loans, VA Loans, Conventional Loans and USDA Rural Development Loans. For your convenience, ADFA has included copies of those four checklists below.
The final step in the process is delivering the original recorded mortgage, assignment and final title policy. The Mortgage Lender is required to deliver these documents as soon as you receive them. We have established a maximum of 90 days from the date of Closing to get your documents recorded and delivered. ADFA or the Master Servicer may require you to repurchase any Mortgage Loan for failure to meet the 180 day time frame.
Delivery Section
GENERAL CLOSING REQUIREMENTS
INTRODUCTION General Information
The following instructions are applicable to FHA, VA, RD, and Conventional bond mortgage loans to be sold to U.S. Bank Home Mortgage (USBHM). All loans will close in the name of the Originating Lenders. The mortgage loans must be readily marketable to prudent investors in the secondary mortgage market. In addition to these instructions, Originating Lenders must comply with individual loan conditions as set forth by the Department of HUD (FHA), the Department of Veterans Affairs (VA), the U.S. Dept of Agriculture (RHS or RD), Fannie Mae, FHLMC (Federal Home Loan Mortgage Corporation aka Freddie Mac), GNMA (Government National Mortgage Association aka Ginnie Mae), U.S. Bank Home Mortgage, and all conditions as set forth in the bond origination documents.
Originating Lenders are responsible for full compliance with the Real Estate Settlement Procedures Act (RESPA), Federal Truth-in-Lending Law, and with supplying USBHM with the correct information to comply with the Home Mortgage Disclosure Act.
Originating Lenders will be responsible for the proper preparation and execution of all legal documents including but not limited to the closing statements, HUD-1 forms and Truth-in-Lending forms.
A complete closed loan package must be received in fundable condition by the Program deadline date for delivery of the loan file for purchase. If the loan being delivered is seasoned (90 days old), the closing loan package must include the original recorded Security Instrument, final Title Policy, original recorded Assignment(s) of Mortgage, if applicable, evidence of insurance on FHA/VA loans, and the original LNG (Loan Note Guaranty - RHS loans). The loan will not be considered eligible for purchase until these documents are provided.
If the loan has exceptions, which prevent immediate purchase, you will receive an individual letter regarding the items/documents needed as well as a stated time to clear the exceptions. Weekly reports of all loans with exceptions will be faxed to the Originating Lender. Failure to clear loans for purchase within the stated timeframe may result in the assessment of penalties or the return of the loan file to your institution.
Second Mortgages
US Bank MUST approve any type of secondary financing used in conjunction with the first mortgage. Lenders must provide US Bank with the following information for all forms of secondary financing:
* All 2nd mortgage loans must be clearly identified on both the 1003 and HUD-1. For assistance/grant programs, US Bank must be provided with a program description.
Loan packages must be sent via overnight delivery to the following address:
U.S. Bank Home Mortgage |
17500 Rockside Road |
Bedford, Ohio 44146 |
Attn: MRBP Operations Department |
Please follow these instructions:
. All documents must be complete and correct.
. White-outs are not acceptable.
. Strike-outs must be initialed by the appropriate party.
. Holes cannot be punched through recording information.
. Information in any one document must agree with the information in all other documents.
. All signatures must be identical to the printed or typed name.
. All certified copies must be an original certification with original signatures of initials.
. Certified copies of recorded documents (Assignments) must say "certified copy of the original document that has been sent for recordation".
In addition to the above listed, please follow these requirements on all Bond Program Affidavits:
. Mortgage Loan files submitted to the Servicer must contain signed original affidavits.
. Blanks must be completed (enter "N/A" if not applicable to that loan).
. The individuals signing the affidavits must initial any corrections or changes.
. Use of BLUE PEN on documents is preferred. Pencil is not acceptable.
This section is to clarify the funding documentation requirements for most loans. The documentation mentioned herein may not necessarily fulfill all requirements for all loans submitted to U.S. Bank Home Mortgage for purchase. U.S. Bank Home Mortgage reserves the right to require additional documentation needed to enhance a loan file on the case-by-case basis. Please ensure that each document submitted is properly completed and correct.
If an original note needs to be returned to you for any reason, it will be sent by overnight mail at your expense. When corrected, it is to be returned by overnight mail. If the note comes from your bank with a bailee letter, it will be returned to your bank.
_______________________________________________
Jane Doe By John Doe, Her Attorney-in Fact
The signature could be: "Jane Doe by John Doe, Her Attorney-in Fact", "John Doe, Attorney-in Fact for Jane Doe: or John Doe". The manner of signing must be legally acceptable according to state guidelines and must clearly show the signer to be the one authorized to sign for the other specifically named individual.
ASSIGNMENT OPTIONS:
MERS (Mortgage Electronic Registration System):
USBHM is a member of MERS. MERS is an electronic registration system that tracks the ownership and servicing rights of a loan. If you are a member of MERS, USBHM will accept your MOM (MERS as Original Mortgagee) documents. If you are not a MERS member, you will need to close the loan using the customary mortgage forms and assignments.
When you are MERS ready and will be shipping your first MOM loan, U.S. Bank Home Mortgage will need your Organization ID number (ORG ID) and the name and phone number of a contact person. A MERS Contact Sheet is provided for your use (See FORMS section). USBHM's system must be updated with your ID number and a lack of notification could result in a purchase delay.
If MOM documents have been used, please do not include copies of any assignments in the loan file that is shipped to us, as they are unnecessary. If you are a member using a customary mortgage form, but will be registering the loan with MERS, a copy of the assignment to MERS must be included in the shipped loan file. U.S. Bank Home Mortgage requires that the Beneficial and Servicing Rights be transferred to us within ten (10) business days of purchase.
Check HUD I:
Check for these items on the title commitment:
Check the following items:
All files must contain a Life of Loan Flood certification from an outside third party.
U.S. Bank Home Mortgage requires an insurance policy or binder (if in a binder state) with a paid receipt for one year. Please check for the following:
U.S. BANK N.A. its successors and or assigns as their interest may appear. c/o U.S. Bank Home Mortgage P.O. Box 7298 Springfield, OH 45501-7298
. Acceptable Evidence of Payment of Hazard Insurance
(Note: Loans on properties in a non-participating community, which is in a flood zone, will NOT be eligible for purchase
U.S. BANK N.A., its successors and/or assigns as their interest may appear. c/o U.S. Bank Home Mortgage P.O. Box 7298 Springfield, OH 45501-7298
. Acceptable Evidence of Payment of Flood Insurance
U.S. Bank Home Mortgage requires Private Mortgage Insurance (PMI) on all Conventional Mortgage Loans with a Loan-To-Value (LTV) in excess of 80.00%.
Please review the following:
. Acceptable Private Mortgage Insurance Companies
GEMICO RADIAN UGI RMIC MGIC PMI
One-time MI premiums offered by some mortgage insurance companies are acceptable provided that total LTV doesn't exceed 90% including MI premiums. Any program LTV limitation would take precedence on Fixed Rate Purchases and Fixed Rate Refis.
The monthly MI premium plan is acceptable for all loan programs requiring mortgage insurance. The monthly premium plan is currently available through all the approved primary MI companies (see above). Two month's premiums must be collected at closing and non-refundable premium rates should be used. Check with your local MI company representative to make sure the program is available in your area.
U.S. Bank Home Mortgage requires full MI coverage per Fannie Mae/FHLMC requirements and will not accept reduced MI coverage.
*NOTE - Insuring of all FHA, RD, and VA loans must be done within 60 days of loan closing.
Check the following items:
Federal regulations require us to have in each loan transaction, verification of the social security numbers for each borrower. The completed W-9 form signed by all mortgagors satisfies this requirement. The form is to be completed with the name, mailing address and social security number of the mortgagor. Each W-9 form must be signed and dated.
U.S. Bank Home Mortgage requires IRS Form 4506 to be executed by the borrower(s) on any loan that is underwritten using alternative documentation (virtually all LP or DU approvals). A signed Form 4506 must accompany all packages submitted for validation of underwriting approval. Also, a Form 4506 will be required on all loans for which tax returns have been obtained, including self-employed borrowers. An additional Form 4506 must be executed at time of loan closing and submitted with the closed loan package.
All fees considered finance charges must be include in the calculation of the total finance charge and the APR. Any finance charges paid by the borrower outside closing must be included in the calculations. Any finance charges paid by the seller or another third party should not be included in the calculation. If the seller is paying a pre-determined amount of the borrower's closing costs, all fees that are not finance charges should be paid first before applying the seller credit to any of the finance charges. *Please note that the INITIAL TIL must be dated within three (3) days of application.
The notice to the mortgagor advising them of the actual transfer of servicing must contain the required RESPA information. The Cranston Gonzales Act requires the borrower(s) to receive notification at least fifteen (15) days prior to the effective date of the transfer. U.S.
Bank Home Mortgage suggests using the Notice of Assignment, Sale or Transfer of Servicing Right form when notifying the borrower(s) that the loan has been sold to U.S. Bank Home Mortgage. Any equivalent type of "Good-bye" letter is acceptable as long as it has all the required information. This disclosure must provide the borrowers with the name of the new servicer, the address and toll-free phone number:
U.S. Bank Home Mortgage 17500 Rockside Road Bedford, OH 44146 1-800 240-7890
Originating Lenders will be responsible for collection of the appropriate amount of taxes and insurance.
The "Aggregate Method" of calculation must be used for establishing escrow accounts. It can be defined as the accounting method a lender or bank uses in computing the sufficiency of the escrow account funds by analyzing the account as a whole. Originating Lenders are responsible for collecting the correct amount of escrows at closing. If insufficient funds are collected at closing U.S. Bank Home Mortgage will require the Originating Lender to correct the shortage in addition to providing the borrower with a re-disclosed initial escrow account statement. The shortage must be corrected prior to purchase by U.S. Bank Home Mortgage.
*Please note that U.S. Bank Home Mortgage will not fund loans with negative escrow.
The Aggregate Accounting Adjustment reflected on lines 1006-1008 of the HUD-1 must always be a negative number (credit) or zero. If your calculations result in a positive number (greater than zero), you should re-check your calculations.
However, if your calculations are correct. You can only reflect a zero (0) for the Aggregate Accounting Adjustment on the HUD-1. The regulation does not permit a positive charge on the HUD-1. Keep in mind that you cannot collect the positive charge Aggregate Accounting Adjustment shown in your calculation.
All loans must be closed with the monthly payments coming due on the first day of each month. Therefore, the first payment should be set so the borrower, when making the first payment, will pay an entire month's interest. First payment dates cannot exceed 61 days from the date of disbursement.
Example: Closing date is May 1st- First payment is June 1st. The borrower would pay May's interest with the June payment
Closing date is May 2nd-First Payment is July 1st. The borrower would pay interest from May 2nd to May 31st at closing; June's interest would be paid with the first payment.
U.S. Bank Home Mortgage will allow other time frames to be considered on a case-by-case basis.
Per Diem is calculated on 365-day basis.
If your Notes are delivered directly to us from your Warehouse Bank, they must be delivered in identifiable form. Please instruct your Warehouse Bank to attach the Note to a cover sheet, which reflects the identifying U.S. Bank Home Mortgage loan number, borrower's name and the property address. This will enable us to quickly match the Note with the corresponding closed loan package. Please make your bank aware that it is critical that the Note be delivered to the following address:
U.S. Bank Home Mortgage 17500 Rockside Road Bedford, OH 44146 Attn: MRBP Bond Operations
Loans which are not in a fundable condition must be perfected within 30 days of notification by USBHM to Originating Lender.
A copy of the Exception Notice must be attached to all documentation sent to U.S. Bank Home Mortgage to clear a suspended loan.
Following receipt of a complete closed loan package or the exception items needed for purchase. U.S. Bank Home Mortgage will wire funds according to the provided wire instructions. You will receive a faxed confirmation detailing the purchase transaction on the day the funds are wired. To ensure that the proceeds from the purchase are wired to the correct warehouse bank, wiring instructions must be enclosed in each closed loan package. The instructions must include the borrower's first and last name along with the correct wire instructions.
Interest paid-to-date will be calculated by U.S. Bank Home Mortgage on a 360-day calendar year.
Any loan purchased between the 16th and the last day of the month, where the first payment is due the following month, will be funded at an amortized balance. It will be the Originating Lender's responsibility to collect that payment from the mortgagor.
Taxes/homeowners & flood insurance/MIP due prior to the first payment due to U.S. Bank Home Mortgage will be the responsibility of the correspondent to pay. (Needs to be double-checked). The Originating Lender is also responsible for late charges, penalties and other costs if they are not paid. To assure that MIP is paid timely and the borrower's escrow account is not negatively impacted, U.S. Bank Home Mortgage will collect and pay all MIP premiums unless a payment history is provided reflecting disbursement of the MIP. If the MIP is paid in error by the Originating Lender, the Originating Lender must obtain the refund from HUD. Any payment of taxes, homeowners or flood insurance, which are due before the first payment due to U.S. Bank Home Mortgage, will be the responsibility of the Originating Lender. The Originating Lender will also be responsible for late charges, penalties and other cost if not paid timely.
A loan history is required on loans where payment(s) were due on the first of the previous month (i.e., first payment due per Note is May 1; loan to be purchased on June 15). It is the Originating Lender's responsibility to forward an updated history if the history previously provided is outdated. Mortgage payments received after U.S. Bank Home Mortgage purchases a loan must be forwarded to:
U.S. Bank Home Mortgage
P.O. Box 790415
St. Louis, MO 63179-0415
Attn: Payment Processing Department
Tax bills received after U.S. Bank Home Mortgage purchases a loan must be forwarded to:
U.S. Bank Home Mortgage 17500 Rockside Road Bedford, OH 44146 Attn: Tax Department
Any required post-funding follow-up documentation will be notated in a letter that is sent to the Originating Lenders. The required follow-up documentation must be delivered to U.S. Bank Home Mortgage by the deficiency due date. If not, you may be required to repurchase said loans(s) within 30 business days of a written demand by U.S. Bank Home Mortgage.
A copy of the Exception Letter must be attached to all documentation that is sent to U.S. Bank Home Mortgage to clear a post-funding deficiency.
All final documentation must be delivered to U.S. Bank Home Mortgage within 90 days of the date of purchase. Failure to provide documentation within this timeframe will result in penalties or possibly repurchase of the loan. If required to repurchase the loan, a wire must be received within 30 business days of the written demand by U.S. Bank Home Mortgage. USBHM may elect to collect outstanding documentation. If so any costs associated with the collection will be invoiced to the correspondent with timely reimbursement excepted.
Original loan documents relating to each loan purchased, which U.S. Bank Home Mortgage must receive within said 90 day period include:
*Please note when submitting government insuring information to us, FHA loans must be insured within 30 days of CLOSING. The transfer of Servicing rights MUST be completed within 15 days of the purchase of the loan by U.S. Bank Home Mortgage. VA loans require the original LGC or a print screen from EDI evidencing the loan is insured. Rural Housing loans require the original LNG (Loan Note Guaranty).
All follow-up documentation, along with the Final Closed Loan Package Transmittal (see Forms section) should be forwarded as shown below.
U.S. Bank Home Mortgage 17500 Rockside Road Bedford, OH 44146 Attn: Document Control
U.S. Bank Home Mortgage will accept a title insurance policy issued by an American Land Title Association Title Company (ALTA) specially authorized by law or licensed to do business within the state where the property is located. Title Insurance Companies must be acceptable to Fannie Mae, Freddie Mac and Ginnie Mae in order to be eligible title insurers for loans purchased by U.S. Bank Home Mortgage. Short form policies are encouraged.
If the final title policy has not been issued at the time you deliver your closed loan file to U.S. Bank Home Mortgage we will accept a title binder. Your final title insurance policy must contain the following:
Mortgage from Robert T. Jones and Cynthia R. Jones, husband and wife, to U.S. Bank N.A., dated January 20, 1996, and recorded January 25, 1996 in Book No. 451, Page 3544, as Document No. 1242534 in Jefferson County, Kentucky, in the amount of $50,000.00. Note: if the security instrument has been re-recorded, the security instrument description must show the re-recording information also.
Surveys are acceptable up to six months old.
If a Location Endorsement, ALTA 116 is not customary to the state and no plat/survey is available, then survey exceptions cannot be noted on the title commitment/final policy.
U.S. Bank Home Mortgage requires the following endorsements to the final title policy:
Endorsement (ALTA 8.1).
Title to the mortgaged property must be free and clear of all exceptions that would affect the first lien position of U.S. Bank Home Mortgage in any way. Schedule B, Part 1 of the title binder and final title policy lists title exceptions for which the title company is not providing coverage. Before closing, Originating Lenders must determine what action, if any, should be taken to protect the interest of U.S. Bank Home Mortgage in the case of each such exception appearing on Schedule B, Part 1.
The Title insurance industry is in the business of insuring over the title to property, not over its value. If the defect in question has potential effect on the chain of title, the title company should insure over it on the final title policy, either by specific wording on Schedule B or by endorsement.
Examples of such defects are those referred to as:
"Convenants","Conditions","Restrictions","Declarartions","Agreements","By-laws", etc. which might cause the forfeiture or reversion of title if they were violated.
If the defect in question has the potential for an adverse effect on the use and enjoyment of the improvements and hence, on the value of the property as a whole, a specific waiver should be requested.
. The appraiser who completed the appraisal must execute conventional waiver.
. VA wavier request must be sent to the appropriate local VA office: Attn: Valuations.
. FHA waiver requests must be sent to the Direct Endorsement underwriter that underwrote the loan. If the wavier request involves a large adjustment in the value of the property, the local FHA office may need to approve.
All waivers should be reviewed and approved prior to closing by the appropriate agency or appraiser listed above.
Examples of defects of this kind are easements, right of way, and encroachments, which are not covered by the General Title Waivers.
Note: There are no "pending assessments now a lien."
. The following exceptions are not acceptable on final title policies:
. Rights of Tenants in Possession.
. Easements or claims of easements not shown of public record.
. Right of first refusal.
. Exceptions for dower or courtesy rights.
. Fraudulent Conveyances.
. Liens (except taxes not yet due and payable).
. Exceptions which state anything as to matters of survey:
(Examples: discrepancies, conflicts, and shortages in area or boundary lines, encroachments or any overlapping of improvements, which an accurate survey of the premises would disclose.) Exceptions which state "possible" or "if any" must be specified or deleted.
. Rights of others in and to the use of the secured property.
FORMS
109.03.06 Ark. Code R. 001