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Meet Our DE Underwriters

Meet Our DE Underwriters. Jeannette DeMartini. Diane Shugrue. Susie Berry. Erin Murphy. Maria Ignacio. Marianne Seltenrich. Sherry Barnes. Lori Mathews. Joy Bean. Tammie Bohannan. Helen Smith. Clare Lavino. Julie Riccio. HUD/FHA Direct Endorsement (DE)

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Meet Our DE Underwriters

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  1. Meet Our DE Underwriters Jeannette DeMartini Diane Shugrue Susie Berry Erin Murphy Maria Ignacio Marianne Seltenrich Sherry Barnes Lori Mathews Joy Bean Tammie Bohannan Helen Smith Clare Lavino Julie Riccio

  2. HUD/FHA • Direct Endorsement (DE) • CAIVRs • LDP • GSA • MIP (Upfront & Annual) • Base Loan Amount • Total Loan Amount • URLA vs. 1003 • 92900 A (Addendum to the URLA) • 92900 LT vs. 1008 • Case # • FHAC (FHA Connection) • HOC (Home Ownership Center) • DELRAP/HRAP Condo Approvals • HECM (Forward vs. Reverse) • Mortgagee Letter Be a G-Man! Talk the talk… FHA SECRETS TITLE

  3. History of FHA • FHA was formed in 1934, to bring back the housing market after post 1929 stock market crash, by assisting homebuyers with low down payment • The Federal Housing Administration is a Federal Agency within the Department of Housing and Urban Development (HUD) • FHA does not provide the funds to borrowers for home loans • FHA provides mortgage insurance on loans made by FHA-Approved lenders throughout the US, as protection against default by borrowers

  4. Doesn’t FHA make me jump through hoops?

  5. FHA– Swiss Army Knife of Qualifying • FHA will be fulfilling their “mission” to stabilize housing for many years to come • Permanently approved to $625,500 for high cost • Down Payment 3.5% • Up to 85% cash out refinance • All funds may come from a gift • Seller can pay up to 6% toward all closing costs • Non-Occupant Co-Borrowers are allowed with true blended ratios • No Cash Reserves (1 and 2 unit properties) • Credit Leniency – BK 2 years, Foreclosures 3 years, Short Sales 3 years (sometimes less) • Streamline Refis & Fully Assumable • Finance Up Front MIP in Loan Amount

  6. FHA Products Purchase or Refi of 1-4 unit primary residence - FHA 203b • Fixed Products - 15 and 30 Years, Regular and High Balance • Arm Products - 1 Year Arm, 3/1 and 5/1 ARMs, 1/1/5 caps, 2.25% Margin • Temporary Buydown (built in pricing on rate sheet) • Funds may come from lender, seller, borrower or other party • Funds from seller must be included in max seller contribution of 6% • May not be more than 2% below Note Rate • Qualifying rate is the Note Rate Well Designed Arms “No Payment Shock”

  7. Case Numbers – requested on-line at our website www.pcmloan.com • As a sponsored broker you will not have access to the FHAC (FHA Connection) • Upon submitting your online request for Case # • PCM will email you the new case number and Refinance Authorization (if applicable) • All FHA loans must have a case # assignment to be insured • Case numbers are ordered in FHA Connection by PCM • Case numbers are assigned to the subject property • Case number must be reflected on all HUD documents • Case number printout is required with loan submission • Streamline Refinances need previously assigned case number • Case #s automatically cancelled by HUD after 6 months of inactivity (can be reinstated under certain circumstances) New ML 11-10 • You must have active loan application & property to request Case # New (ML-11-10) Case #?

  8. CAIVRs through FHA Connection-PCM will do this piece of processing • CAIVRs Credit Alert Interactive Voice Response System checks for delinquent federal debt, should be on Case Number Printout • PCM will access CAIVRS through the FHAC • This is informational only to you as a sponsored broker • Must be ordered on all borrowers • Any delinquency must be cleared, or not eligible for FHA loan • Should a delinquency or issued be uncovered by PCM you will be promptly notified CAIVRs: Not a Spelunking Term!

  9. LDP & GSA Databases • All parties to the transaction must be cleared in both databases (Government lists of bad players) • LDP (Limited Denial of Participation • Database can be accessed at http://portal.hud.gov/portal/page/portal/HUD/topics/limited_denials_of_participation • GSA (Excluded Parties List Service) • Database can be accessed at https://www.epls.gov/ • Use PCM Job Aid and Participants List

  10. Maximum LTV’s

  11. Maximum Loan Amount • High Balance Loan Amounts PCM High Balance pricing applies when base loan amount is over $417,000 • Maximum Mortgage Calculation - Purchase • 96.5% of the lesser of sales price or appraised value • Does not include Up Front MIP (UFMIP) • Borrower must have minimum of 3.5% down payment (Can be gift) • Closing costs may not be used in minimum 3.5% calculation • Seller Concessions maximum 6% • Maximum Mortgage Calculation – Refinance • No Cash Out and Streamline Refinances 97.75% of appraised value • Cash out Refinances - 85% of appraised value • FHA loan limits are set by HUD, and vary from county to county. Current loan amount limits can be found online at https://entp.hud.gov/idapp/html/hicostlook.cfm

  12. FHA Mortgage Insurance Premium (MIP) • Up Front MIP (UFMIP) the FHA mortgage insurance premium is paid at closing in the form of cash, or financed in the loan amount. • UFMIP must be 100% financed or 100% paid in cash, no partial financing • Annual MIP is collected in monthly payments and calculated in ratios

  13. Upfront MIP in Box #3 on 2010 GFE Upfront MIP $6,750 $6,750

  14. FHA Mortgage Insurance Premium (MIP) • Upfront Premiums are refunded ONLY to borrowers refinancing to another FHA insured mortgage within a 3 year time period. The refund will be calculated in FHA connection when case number is ordered. • The annual MIP will be automaticallycancelled with the following conditions: • Loan terms over 15 years the MIP will be cancelled when the LTV ratio reaches 78%, as long as the Borrower has paid MIP for at least 5 years • Loan terms 15 years and less and with LTV ratios 78% and greater, the annual MIP will be cancelled when the LTV ratio reaches 78%, irrespective of the length of time the Borrower has paid the MIP • Loan terms 15 years and less and with LTV ratios of 78% or less will not be charged an annual MIP

  15. FHA Purchases • The Borrower may not receive any cash back through a purchase, other than an amount representing: • A reimbursement for the Borrower’s overpayment of fees • Costs paid by the Borrower in advance; earnest money deposit, appraisal or credit report fees; or • A legitimate real estate tax credit in locales where real estate taxes are paid in arrears • If the Borrower receives an allowable amount of cash back, the minimum Borrower contribution must be met and verified • See Loan Amount Calculation Worksheet

  16. FHA Purchase Loan Calculation

  17. No Cash Out Refinance – Regular Refinance • Current mortgage must be a NON-FHA fixed rate or ARM • Single Family, Owner Occupied Primary Residence • Maximum mortgage is the LOWER of 97.75% of appraised value or Existing Debt Calculation • Existing Debt includes payoff of existing 1st, PM 2nd, jr. lien over 12 months, closing costs, prepaid expenses, borrower paid repairs, and discount pts • If any portion of funds of equity line in excess of $1000 in last 12 months, for purposes other than repairs and rehab. of property the line of credit may not be included. • Property owned less than 12 months, must use lesser of original purchase price + expenditures for repairs, or current appraised value • Proceeds to buy out ex-spouse are okay • Borrower may not receive more than $500 at closing • Non-Occupant Co-Borrower may be added • 2nd Liens may subordinate, up to 97.75% (case numbers as of 9/7/2010) • Terms of subordinate lien must not have a balloon, • No prepayment penalty (with 30 days notice) • Payments are calculated in qualifying

  18. No Cash Out Refinance Worksheet

  19. Cash Out Refinance • FHA will insure a cash out refinance, up to 85% of appraised value with the following requirements: • Properties owned 12 months or more, use current appraised value • Properties owned less than 12 months use lesser of purchase price or appraised value • All Borrowers must hold title to property for at least six months and minimum 6 payments must be made on existing loan • Borrowers whose loans are delinquent or in arrears are not eligible • Non-Occupant Borrowers may be not be added to qualify. • Existing or new subordinate financing to a maximum CLTV of 85% • Modified subordinate financing is acceptable to a maximum CLTV of 85% • 1 -4 units, 3-4 unit properties must pass self-sufficiency test • Properties owned Free and clear may be financed as cash-out transactions

  20. Cash Out Refinance Worksheet

  21. FHA Streamline Refinance • Current loan must be an FHA insured mortgage • Mortgage must be current, not delinquent • Must result in lowering monthly Principal and Interest Payments-Mustmeet Net Tangible Benefit test • Order new case number on PCM website, select Streamline Refinance • MIP refund will be disclosed on Refinance Authorization • LDP/GSA is required • Manual Underwrite, do not run through AUS • Credit report is now required - minimum credit score is 640 • Max cash back $500

  22. FHA Streamline Refinance (cont.) • Verification of Mortgage is required, no lates in past 12 months • Seasoning: 6 payments must have been made AND 6 mos. must have passed since 1st payment was due AND 210 days from closing of first • Credit Report (tri-merge or mortgage only) used to validate credit score and mortgage history • Employment and Income must be stated on 1003 and 92900LT-some types of income require documentation-see PCM guidelines • Funds to close (if needed) must be verified • Subordinate financing may remain in place to a maximum CLTV of 125% • Investment properties may be streamlined without Appraisal • Deleting individuals from title/original loan must credit qualify • Premium Pricing okay to cover closing costs • Tax impounds, use amount from prelim unless proof of new taxes from county • Condo Project Approval-not required

  23. Net Tangible Benefit (Streamline Refis) Part I:

  24. Net Tangible Benefit-Streamline Refis: Part II

  25. FHA Streamline Refi Maximum Mortgage Calculation WITHOUT Appraisal $_____________ Unpaid principal balance* of existing FHA loan - _____________Lesser of Refund credit of UFMIP or 1% of principal balance =______________Base Loan Amount before UFMIP + _____________ New UFMIP = _____________ New Loan Amount including UFMIP *May include interest charged when payoff is not received on the first day of the month up to 60 days

  26. FHA Streamline Refinance without Appraisal-from our worksheet *Any additional UFMIP refund due the borrower to be refunded directly to borrower by HUD post closing

  27. Streamline Refinance with Appraisal The maximum insurable mortgage is the lower of: Outstanding principal balance* minus the lesser of refund of UFMIP or 1% of principal balance, plus closing costs, prepaid items to establish the escrow account and the new UFMIP OR 97.75% of the appraised value of the property plus the new UFMIP *May include interest charged when payoff is not received on the first day of the month up to 60 days

  28. FHA Streamline Refi Maximum Mortgage Calculation WITH Appraisal-from our worksheet Please note: Any additional UFMIP refund due the borrower will be refunded directly to borrower by HUD post closing

  29. Eligible Borrowers • U.S. Citizen • Permanent Resident Aliens • Non-Permanent Resident Aliens • All Borrowers must have a valid Social Security Number • Title must be held in individual names only

  30. Occupancy • Owner Occupied Principle Residence • Investment Properties are available on Streamline refis without an appraisal only • FHA limits borrowers to one FHA loan at a time. The following are potential exceptions: • Borrower relocated a reasonable distance away from prior home • Family size increased/decrease • Vacating jointly-owned property (Divorce) • Non-occupant Co-Borrower

  31. Transactions Affecting Maximum Mortgage • Identity of Interest– Family or business relationships - Limited to 85% LTV with the following exceptions: • Family member purchases another family member’s home as primary residence Note: If property is seller’s investment property, max mortgage is lesser of either 85% of appraised value or the appropriate LTV ratio percentage applied to sales price, plus or minus required adjustments. The 85% limit may be waived if family member has been tenant in subject property for at least 6 months • An employee of builder purchasing builder’s new home as primary • A tenant purchases rented property, evidencing at least 6 months as tenant immediately predating the sales contract • A corporation transfers an employee, purchases that employee’s home, then sells home to another employee

  32. Transactions Affecting Maximum Mortgage • Non-Occupant Co-Borrowers • Permitted for purchases, no cash out refinances - all LTVs • Not allowed on Cash Out Transactions • 2-4 units max LTV is 75% • Must be immediate family member (others, case by case) or max LTV is 75% • Housing and obligations are included in the DTI ratios. Credit, income and assets must be verified • Must sign Note and Security Instrument and all other closing documents

  33. Transactions Affecting Maximum Mortgage • 3 and 4 unit properties The maximum mortgage is limited so that the ratio of the monthly mortgage payment divided by the monthly net rental income does not exceed 100% • Monthly payment is principal, interest, taxes, insurance, mortgage insurance and any HOA dues. • Net rental income is appraiser’s estimate of fair market rent from ALL units, incl. borrower’s own unit, less the appraiser’s estimate for vacancies, or 15%*, whichever is greater (Santa Ana HOC) • The above calculations are only to determine max loan amount, borrower must still qualify as usual, and projected rent may only be used as gross income and not to offset mortgage payment • Borrower must have 3 months PITI reserves, cannot be a gift

  34. Transactions Affecting Maximum Mortgage • Properties under Construction or Existing less than one Year Limited to 90% LTV, with the following exceptions: • Construction completed more than one year preceding borrower’s signature on HUD92900-A • The dwelling’s site plans and materials were approved by VA, an eligible DE Underwriter, or an FHA certified builder prior to construction • Local jurisdiction issued BOTH a building permit AND a Certificate of Occupancy or equivalent • The dwelling is covered by a builder’s ten-year warranty plan acceptable to HUD New Construction? Call us…

  35. Condo Project Approvals: • HRAP (HUD Review Approval Process) • Submit direct to HUD for Project Approval • http://www.hud.gov/offices/hsg/sfh/condo/ • Use a third party Project Approval Company • http://www.projectapprovals.com/ • DELRAP (DE Lender Review Approval Process) • DE (Direct Endorsement) lender reviews the Condo Documents • PCM does not process DELRAP approvals but we lend behind them • Recertification Process (for expiring projects approved on/after January 1, 2000) • PCM does not process Recertifications at present time • Submit direct to HUD for Recertifications • http://www.hud.gov/offices/hsg/sfh/condo/

  36. Condo Project Approvals-continued • For HRAP and DELRAP approved projects-PCM will need: • FHA Condo Review Form completed by HOA • PCM must warrant the following items: • Owner Occupancy ratio • HOA delinquencies-generally not to exceed 15% (if > 15% we will need to review the Budget • FHA Concentration in project • Presale ratio • Project Approval Not Required on Site Condos • HO-6 (Walls in) required on ALL Condos • 2 Million Liability per occurrence required on ALL Condos

  37. Condo projects must the following criteria: • 50% presold • 50% owner occupied • No more than 10% owned by any one investor • No more than 15% of units more than 30 days delinquent (including REO) • Any pending litigation or special assessments must be reviewed carefully and may/may not be acceptable • No more than 25% of floor space can be commercial use. • Need budget to show that at least 10% is allocated to reserves • Master insurance must show 100% cost replacement and liability coverage for all common elements, commercial space and public ways of project. • HO-6 walls in coverage (if not included in master policy) required with 20% of appraised value and maximum of 5% deductible. This must be impounded. • Fidelity coverage for any projects over 20 units is required (HOA dues x 3 x #units + reserves) • FHA concentration 30% or less

  38. Documentation Required on Condo Projects • Condominium project must be either HRAP/DELRAP approved in FHA connection. • HOA Questionnaire completed in full (link to PCM HOA form) • Master insurance and HO-6 coverage policy • Last two meetings minutes • Budget • Documentation to show FHA concentration

  39. FHA Property Flipping • Property flipping is when properties are purchased and resold in a short period of time for a considerable profit • FHA requires that • Only owners of record may sell properties that will be financed using FHA insured mortgages. No sales or assignment of contract. • Any resale of a property may not occur 90 or fewer days from the last sale to be eligible for financing-Exemptions to be discussed in subsequent slide • Resales between 91 and 180 days where the new sales price exceeds previous price by 100% or more, additional documentation will be required

  40. FHA Property Flipping (cont.) Resales Occurring 90 days or less • If the owner sells a property within 90 days after the date of acquisition, it is not eligible, unless it falls into one of the following exceptions: • Sales by HUD of REO’s • Sales by other US Government entities • Sales by nonprofits approved by HUD • Sales acquired by inheritance • Sales by employers or relocation agencies • Sales by mortgage companies, their subsidiaries and any vendors hired by these exempt entities • Sales by State and Federally chartered financial institutions and Government sponsored enterprises (Fannie Mae and Freddie Mac) • Sales by local and state government agencies Please Note: Properties acquired by individuals, investment groups, REO property-re-sellers or others whose intent is the purchase, repair and reselling of the property are not exempt from the 90-day resale restriction-This is a PCM guideline based on investor overlays. HUD issued a waiver.

  41. FHA Property Flipping (cont.) • Resales Occurring between 91 and 180 days from acquisition • If resale price is 100% or more over seller’s acquisition price, a second appraisal will be required. Properties with close to a 100% increase in value may be subject to a second appraisal, and/or documentation to substantiate increase. • Additional documentation showing the costs and details of improvements • The cost of the second appraisal may not be charged to the homebuyer

  42. Appraisals/Property Requirements • Must be completed by an FHA approved appraiser • CASE NUMBER Must be ordered PRIOR to appraisal being complete • Termite Reports/Clearances no longer mandatory • Well/Septic not mandatory • The appraisal report must be dated within 90 days prior to receipt of the credit package, and dated within 120 days of the Note date • NOTE: Need at least 2 comps dated within 90 days of appraisal, and two current pending sales or active listings. 1004 MC addendum required.

  43. Appraisals/Property Requirements (cont.) • Appraisals may not be reused after the mortgage for which the appraisal was ordered has closed. • An operating income stmt must be provided for all 2-4 unit properties • The appraisal must state that the property is average or above condition • Appraiser must follow HUD standards • Mechanical Certifications must be made by appraiser, including ; electrical, plumbing and heating certifications • FHA Case number must be on all pages of appraisal

  44. Second Appraisal Requirements: • Resale date is between 91 and 180 days following acquisition of property by the seller AND • The resale price is 100% or more over the price paid by the seller Note: Borrower cannot pay for the second appraisal.

  45. Conversion of Primary Residence to Rental Effective with Case numbers ordered on or after September 19, 2008, ML 2008-25, rental income on current primary residence being vacated, may not be considered, with the following exclusions: • Relocations – Homebuyer is relocating with new employer or transferring with current employer • Properly executed lease agreement of at least one year • Evidence of security deposit and/or • Evidence of first month’s rent paid to homeowner • Sufficient Equity in Vacated property • LTV of 75% or less, determined by a current appraisal, less than 6 months old or by comparing the unpaid principal balance to original sales price • PCM will require a signed lease agreement

  46. Occupancy of Former Investment PropertyNew from ML 11-11 (effective April 14th, 2011)

  47. Qualifying Ratios • Automated Approval (DO/LP) ratios per findings • Note: we generally don’t see ratios over 46 on top or 57 on bottom get approved. • Manual underwrite • Maximum ratios are 31%/43% • Higher ratios may be acceptable only if the borrower has at least 3 very strong compensating factors and at underwriter’s discretion • Minimum Credit Score is 640 • Housing ratio is computed as PITI plus MI, HOA fees, ground rent, special assessments and payments on secondary financing to income.

  48. Credit Evaluation • Minimum Decision Credit Score 640 (regardless of AUS findings) • All borrowers must have credit score • Non-purchasing spouse’s credit must be pulled separately, in community property states (CALIFORNIA), negative credit is not to be considered, but debts will be considered in payments. • Credit will be closely examined over past 12 – 24 months, with greater emphasis on past 12 months • Borrower’s housing payment history is very important • Student loans deferred over 12 months are not considered Note: Get credit authorization before pulling credit on NPS!

  49. Credit Evaluation (cont.) • CAIVRS • All Borrower’s need to be checked through FHA’s CAIVRs system • The system checks for delinquent federal debt • Any issues will need to be cleared • Verify previous/current housing obligations-Can be waived with AU approval • Rental verification: Credit report, management service or 12 months cancelled checks. Note: if the borrower is renting from a private party PCM will require 12 months cancelled checks. • Mortgage Verification Credit Report, Verification of Mortgage or 12 months cancelled checks. Note: if the borrower has privately held mortgage, PCM will require 12 months cancelled checks.

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