CalHome Program Managing your Contract 2010 California Department of Housing and Community Development
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2010 CalHome Program Managing your Contract California Department of Housing and Community Development Chris Westlake – Deputy Director Nicole Carr – Assistant Deputy Director Program Staff CalHome Program Manager Raymond Victor 916.327.8255 [email protected] Program Representatives Rikki Bradley 916.445.8335 [email protected] Imperial, Kern, Los Angeles, San Bernardino, San Luis Obispo, Ventura Rick Gadberry 916.327.3647 [email protected] Butte, Glenn, Humboldt, Lake, Mendocino, Mono, Nevada, Orange, Shasta, Riverside, San Diego, Sonoma, Trinity, Tulare, Tuolumne Dana Kleiman 916.327.3594 [email protected] Alameda, Contra Costa, Madera, Merced, Monterey, Napa, Placer, Sacramento, San Francisco, San Joaquin, San Mateo, Santa Clara, Santa Cruz, Stanislaus, Solano, Sutter, Yolo, Yuba Gary Pettigrew 916.327.3586 [email protected] Project Development Loans and Mortgage Assistance Loans within named Projects 2 Standard Agreement Standard Agreement (STD 213) First Page: • • • • Standard Agreement Number Standard Agreement Amount Recipient Authorized Signature Important Dates Term of the Agreement Effective date stamped in bottom right corner NO FUNDS MAY BE OBLIGATED BEFORE THE HCD DATE STAMP 4 Standard Agreement (STD 213) continued Exhibit A: • Contract Deadline - October 19, 2013 • • • 100% expenditure deadline AND Termination of Grant Agreement Special Conditions or Restrictions • • Federally-qualified census tract(s) Redevelopment area(s) 5 Standard Agreement (STD 213) continued Exhibit B: • One Time Submissions Program Guidelines to include each activity Loan Servicing Plan Reuse Account Plan Homebuyer Education Plan • Mortgage Assistance Program only Loan Document Templates for each activity • Should be only for CalHome funds Executed Monitoring Agreement All items must be submitted, reviewed and approved PRIOR to release of funds 6 Program Guidelines The Local Look of Your CalHome Program Program Guidelines Blueprint of Your Program Operation: • Designed to meet your local needs • Developed by you • comprehensive • clearly written • Must comply with CalHome Regulations 8 Program Guidelines continued Includes: • Types of housing allowed SFR, 2-4 units, Condo, Manufactured housing • Interest rate on loans Consistent throughout program • Maximums for: CalHome subsidy amounts per loan CLTV Sales price/value • Data source for setting maximum sales price/value 9 Program Guidelines continued • Underwriting policies Methodology for determining eligibility Methodology for determining income Benchmarks for credit worthiness • Allowable terms of senior and junior liens • Subordination of the CalHome loan to a new senior lien Restrictions - avoid jeopardizing CalHome lien • CLTV • Rate and term • Methodology for handling Defaults Foreclosures Short sales 10 Program Guidelines continued • CalHome Core Requirements Low to very low income per HCD chart Owner-occupancy Not assumable Limited permissible transfers Interest rate up to 3% or shared net equity Deferred payments for term of the loan 11 Program Guidelines continued • Activity Specific requirements – Mortgage Assistance • Gap financing • First-time Homebuyer • Home Buyer Education • 30 year term (except with USDA 502) • Purchase with rehabilitation 12 Program Guidelines continued • Activity Specific requirements – Rehabilitation Development of scope of work and costs for: Correction of Health or Safety issues Correction of Code violations Compliance with a local ordinance Processes for bidding by licensed contractors Management of construction progress Agreement between Borrower and Recipient Agreement between Borrower and Contractor Dispute resolution 13 Loan Servicing Loan Servicing Requirements • You are responsible for loan servicing for the term of the loan • May be done by Recipient or contracted to a third party • If a third party provides this service you must submit a copy of the contract 15 Loan Servicing continued Loan Servicing Plan Elements: • Procedure for verifying: Owner-occupancy Current status of insurance Property taxes are current and paid • Methodology to: Track loan repayments Calculate pay-offs and process demands Reconvey Deeds of Trust 16 Loan Servicing continued Additional concerns: • Identify eligible transfers • Describe accelerating events • Set out processes for Collections and Defaults Foreclosure of CalHome loan Foreclosure of a senior lien Short-sale • Define refinancing requirements Rate and term only 17 Reuse Account Plan Reuse Account Plan Requirements • Must be a designated account Separate from active grant account Can contain funds from more than one CalHome grant No co-mingling of funds • Describe tracking system • Describe funds contained in it Repayments of Principal and Interest Allowable excess from OOR projects Interest earned on Active Account Interest earned on Reuse Account 19 Reuse Account Plan continued • Describe eligible use of account funds May be used for any CalHome eligible activity • Mortgage Assistance • Mortgage Assistance with rehabilitation • Owner-Occupied Rehabilitation May be used for ADF reimbursement • Restricted to loans made entirely from the Reuse Account • Must be for actual costs, reasonable and normal for the area • Includes $350 for Homebuyer Education May be used for loan servicing • Up to 5% of funds deposited 20 Homebuyer Education Homebuyer Education Requirements • For Mortgage Assistance activities only • You are responsible for the contents and delivery of the Homebuyer education • May be done by Recipient or contracted to a third party • If a third party provides this service you must submit a copy of the contract or MOU 22 Homebuyer Education Plan continued Homebuyer Education Plan Elements: • Establish the amount of reimbursement per CalHome loan closed ($350 maximum) • Identify who is to provide training Recipient Third Party • • • Must be in business of providing homebuyer education Lenders, Realtors, and on-line are usually not acceptable Identify who must receive training All borrowers must complete a 5-8 hour live course Each borrower must receive a certificate 23 Homebuyer Education Plan continued • Set out the required curriculum: Preparing for homeownership/shopping for a home Available financing, credit analysis and making an offer Loan closing Homeownership responsibilities • home maintenance • Avoiding foreclosure Loan payments and servicing 24 Disbursement Procedures Disbursement of Funds • After all predisbursement requirements have been met • What amount may be requested? Promissory Note amount Activity Delivery Fee Reimbursement (cost recovery) • Normal and Customary for market • Reasonable and justifiable • Actual Combined amounts may not exceed $60,000 cap 26 Disbursement of Funds continued • Draw Request on appropriate form Must be signed by Authorized Signatory • Request for funds as Reimbursement Submit Borrower Summary and ADF Reimbursement forms Attach all documentation identified on Borrower Summary • Request for funds as an Advance Up to 25% of the award amount each time 2/3 of the advanced funds must be documented before next request will be processed To document usage: • Submit Borrower Summary and ADF Reimbursement forms • Attach all documentation identified on Borrower Summary 27 Income Qualifying Income Qualifying Requirements Two factors to consider: • Household size Count all persons living in the property regardless of age Exceptions: • • • • Foster children Unborn children Children subject to shared custody if less than 50% of time Non-related live-in caretakers if paid by outside agency 29 Income Qualifying continued • Gross Income of all adult household members Income inclusions and exclusions per 25 CCR, Section 6914 • Appendix A in CalHome Operations Handbook • Exclude income from non-related live-in caretaker if paid outside Verified by use of: • • • • Source documents Third Party verifications Credit Report EDD verifications of UI or DI benefits 30 Income Qualifying continued • Project 12 months into the future • Complete the CalHome Gross Income Worksheet “Forms” tab in CalHome Operations Handbook Guides you through treatment of assets • • • • Asset liquidation not required Show but do not include amounts to be used for transaction Asset value if being retained is market value - NOT cash value Income from assets only if asset value is $5,000 or more • Compare to State Income Limits for County 80% or less (low or very low income) Adjusted for household size 31 Underwriting Requirements Underwriting Requirements For each CalHome Program Loan: • Have a loan application signed and dated by Borrower Recipient’s own form To be analyzed and confirmed by Underwriter (sign and date) • Determine eligibility: Property • Requirements for an appraisal • Sales price or value limits • If Mortgage Assistance only, must be ready for occupancy First time homebuyer or confirm presently on title 33 Underwriting continued • Determine eligibility (continued): Income • Amount of gross income • Income for household does not exceed income limits Risk level • • • • Credit worthiness Debt Ratios Compensating factors CLTV does not exceed 100% plus 5% for closing costs 34 Underwriting continued • Confirm Subsidy amount plus ADF does not exceed CalHome cap CalHome loan term is consistent within program: • 30 years for Mortgage Assistance (either stick built or manufactured home on non-permanent foundation) • Up to -30 years for Owner-Occupied Rehabilitation • 10-30 years for manufactured home on a non-permanent foundation • 20 years for a forgivable loan on a manufactured home on a nonpermanent foundation • 33-38 years if behind USDA-RHS 502 loan If CalHome is only subsidy, Borrower may sell at fair market value at any time regardless of restrictions 35 Underwriting continued • Confirm continued: Terms of senior liens meet CalHome Requirements • • • • No ARMs or negative amortization loans No temporary buydowns No balloon payments or deferred interest Maturity date must be same as CalHome loan Terms of subordinate liens meet CalHome Requirements • Fees reasonable and consistent with those charged for first liens • No balloon payment before the maturity date of the CalHome loan • Must defer principal and interest for the term of the CalHome loan 36 Loan Closing Procedures Loan Closing Procedures Pre-Closing • Update income if data is older than 6 months • Review for compatibility with CalHome requirements: First mortgage lender’s instructions to Escrow First mortgage lender’s exceptions and exclusions to title First mortgage lender’s loan documents • Provide Instructions to Escrow No cash out Recording sequence – CalHome first subsidy Exceptions and endorsements to title policy Insurance requirements – Recipient is Loss Payee Request for recording information/document numbers 38 Loan Closing Procedures continued • Provide documents to Escrow CalHome Deed of Trust Request for Notice of Default Request for Notice of Completion Disclosure forms required by law 39 Loan Closing Procedures continued Post-Closing • Review for Completeness and Compliance: Signed and certified loan documents and disclosures Certified FINAL Settlement Statement Evidence of Insurance with Recipient as additional Loss Payee • Confirm Title policy has: Correct borrower Correct address Liens in appropriate position and amounts Exceptions as allowed Requested endorsements attached • Confirm all required documents have been recorded 40 Performance Reporting Performance Reporting Two Reports – “a snapshot in time” • Quarterly reports for active grants March 30th June 30th September 30th December 31st • Annual Reports July 1st through June 30th During Active grant phase • Covers only the one grant • Also reports the amounts in the Reuse Account Reuse Account Annual Report after first Active grant has closed • Covers more than one grant Reports are due 30 days after end of reporting period 42 Performance Reporting continued Reports include: • Narrative summary Operational successes Operational difficulties Number and type of units assisted • Financial summary Includes funds in Reuse Account as a separate line item Reuse Annual Account should reconcile to other reports • Signature and title of Authorized Signatory • Signature date 43 Recipient Monitoring Monitoring Purposes for Monitoring • To ensure compliance with CalHome Regulations • To provide technical assistance • To suggest best practices Major Methods of Monitoring • Desk Reviews Borrower Summaries and attached documentation Quarterly and Annual Reports • Correspondence and phone calls • Site visits during active grant phase • Site visits during remainder of 20-year Agreement 45 Monitoring continued Monitoring Highlights • During the term of the Standard Agreement and three years beyond: Program Activity is monitored and subject to audit • • • • Individual Borrower files All financial records associated with the CalHome Program All other records as provided for in the Standard Agreement All other program operations • During the term of the Monitoring Agreement 20 years term from date of stamp on Standard Agreement • Loan Servicing • Reuse Account 46 Questions or Comments? 47 Thank you! 48