1. CBCMA Training Series #2: Underwriting
2. Chenoa Fund by CBC Mortgage Agency: General Overview • The Chenoa Fund, as a whole, is subdivided into three different programs with one to two products apiece. • The Rate Advantage and DPA Edge Programs are issued in conjunction with FHA insured loans. • Our two conventional offerings are issued in conjunction with conventional loans. • Only the DPA Edge program includes a forgivable second option. • CBCMA offers the Rate Advantage Product to provide a lower interest rate for the borrower, and to provide a better YSP for the lender.
3. Chenoa Fund Overview Continued • The programs are allowed in all states except New York. • All programs offer 3.5% for the second mortgage. • Up-front fees are limited only by the 3% points and fees rule. • The first mortgage must be sold to CBC Mortgage Agency. • At the time you sell your first mortgage to CBC Mortgage Agency, the down payment funds you advanced are reimbursed. • Your underwriter underwrites the file. • Approved property types include SFR, PUD, Townhome, Condo, Attached, Detached, and Modular Homes. • No Manufactured Homes. • HPML (Rebuttable Presumption) is allowed, but no High Cost Mortgages.
4. Fannie Mae’s HomeReady®️ Program* AND Conventional Standard 97% LTV Loans*
5. Note: In order to offer conventional products, you must be FNMA approved. *Neither the Chenoa Fund, CBCMA nor any of their products are approved by or affiliated with Fannie Mae. It is the originating lender’s responsibility to ensure that the use of CBCMA second mortgages, the CBCMA first mortgage, and combination of the CBCMA first and second mortgages are compliant with Fannie Mae requirements. CBCMA’s correspondent guidelines include additional overlays to the HomeReady®️ program. HomeReady®️ is a registered trademark of Fannie Mae.
6. 1. No borrower investment required. 2. Single family only. 3. No income limits in low-income census tracts. 4. 100% of area median income (AMI) in all other census tracts. 5. Purchase Only. 6. All borrowers must have a minimum FICO score of 640. 7. 30-year Fixed Rate Mortgage. 8. Second lien is a 10-year Fixed Rate Mortgage with an interest rate 2% higher than the first mortgage. 9. MI Coverage 25%. 10. DU®️ Only – to 97. 11. Concurrent Homeownership Allowed. 12. Requires borrower to take Homebuyer Education class. DU®️ is a registered trademark of Fannie Mae. HomeReady®️
7. Conventional Standard 97% LTV Loans 1. No borrower investment required. 2. Single family only. 3. No income limits. 4. Purchase only. 5. All borrowers must have a minimum FICO score of 640. 6. 30-year Fixed Rate Mortgage. 7. Second lien is a 10-year Fixed Rate Mortgage with an interest rate 2% higher than the first mortgage. 8. MI Coverage 35%. 9. DU®️ Only – to 97. 10. Concurrent Homeownership Allowed, but at least one borrower must be first-time homebuyer. 11. No Homebuyer Education class required.
8. PRODUCT: Rate Advantage
9. • Qualifying Income: < or = 115% AMI • Requires monthly payment. • FICO Scores 640 minimum. • 10-Year term 8% Interest rate. • Non-occupant co-borrowers are not allowed. • No concurrent homeownership. • Max DTI 50% • Manual underwrites are not allowed. Note: Look to this one first to benefit you. Rate Advantage Program
10. PRODUCTS: DPA EDGE Soft Second Repayable Second
11. • Only Qualifying Income used for AMI calculations. • FICO Scores minimum of 620. • Non-occupant co-borrowers are allowed. • DTI per AUS or FHA manual underwriting guides. Advantages with the DPA Edge Program DPA Edge FHA Overlays • Only offered for single-family and two unit properties. • Three to four unit properties not allowed.
12. • Qualifying Income: < or = 115% AMI. • No monthly payment. • FICO Scores 620 minimum. • 0% Interest Rate and 30-year Term. • Forgiven after 36 consecutive on-time payments on FHA 1st Mortgage. 1. No Payment 2. 0% Interest Rate and 30-year Term 3. Forgiven after 36 consecutive on-time payments on FHA 1st Mortgage 4. Qualifying Income <= 115% AMI 5. FICO Scores down to 620 6. Section H of 1003 must indicate down payment borrowed 7. Requires Funding Obligation Letter Issued prior to closing-only CBCMA signature Chenoa Fund Soft SecondDPA Edge: Soft Second
13. • Qualifying Income: > 115% AMI. • Requires monthly payment. • FICO Scores 620 minimum. • 10-Year term 0% interest rate. • 30-Year term 5% interest rate. DPA Edge: Repayable Second
14. Rate Advantage a.) CBCMA offers 3.5% to cover down payment. b.) 2nd mortgage repayable. c.) 8% with 10 year term. d.) 640 minimum FICO score. e.) Qualifying Income less than or equal to 115% AMI. f.) Max DTI 50%. g.) Homebuyer education not required. h.) Please see HUD handbook 4000.1 for current upfront MIP rates. DPA Edge: Repayable Second a.) CBCMA offers 3.5% to cover down payment. b.) 2nd mortgage repayable. c.) 0% interest with 10 year term or 5% interest with 30 year term. d.) 620 minimum FICO score. e.) Qualifying Income greater than 115% AMI. f.) DTI restrictions per AUS guidelines. g.) Homebuyer education required for borrowers with credit scores between 620- 639. h.) Please see HUD handbook 4000.1 for current upfront MIP rates. DPA Edge: Soft Second a.) CBCMA offers 3.5% to cover down payment. b.) 2nd mortgage forgivable. c.) Forgivable after 36 consecutive on-time payments on the 1st mortgage. d.) 620 minimum FICO score. e.) Qualifying Income less than or equal to 115% AMI. f.) DTI restrictions per AUS guidelines. g.) Homebuyer education required for borrowers with credit scores between 620- 639. h.) Please see HUD handbook 4000.1 for current upfront MIP rates. HomeReady®️ a.) CBCMA offers 3% to cover down payment, 0.5% to cover closing costs. b.) 2nd mortgage repayable. c.) 10 year term, with an interest rate 2% higher than the first mortgage. d.) 640 minimum FICO score. e.) No income limits. f.) DTI restrictions per AUS guidelines. g.) Homebuyer education not required. h.) MI Coverage 35%. Conventional Standard 97% LTV Loans a.) CBCMA offers 3% to cover down payment, 0.5% to cover closing costs. b.) 2nd mortgage repayable. c.) 10 year term, with an interest rate 2% higher than the first mortgage. d.) 640 minimum FICO score. e.) No income limits in low- income census tracts; 100% AMI in all other income tracts. f.) DTI restrictions per AUS guidelines. g.) Homebuyer education required. h.) MI Coverage 25%. Quick Comparison Matrix: All Products
15. Did you know… …if you go to chenoafund.org and click on the Program Guidelines link at the top of the page, you will be taken to a more detailed version of the Product Matrix, as well as a more complete version of our programs?
16. • Go to the HUD Area Median Income Site. https://www.huduser.gov/po rtal/datasets/il.html • Select the most recent fiscal year. • Then “Click Here for FY [most recent year] IL Documentation” Calculating Area Median Income
17. • Select the state. • Select the county. • Click “View County Calculations.” Note: This is a third party site. CBCMA State Restrictions still apply, even if you see the option here. Calculating Area Median Income
18. Calculating Area Median Income: Primary Method • For families with a size of 1-4, you’ll want to pull the number from the “Median Family Income” column. This is outlined in red. • You determine the AMI by multiplying the Median Family Income by 115%. Example: $69,100 x 115% = $79,465
19. Calculating Area Median Income: Alternative Method There is an alternative calculation method allowed within the UW comments on the 1008. For families with a size greater than 4 (5 and up), use this method. • First, locate the appropriate family size underneath the “Persons in Family” column, in the “Very Low (50%) Income Limits” row. • Find the appropriate income limit, and then multiply that number by two. • Then, multiply that number by 115%. Example, using a family of 6: $40,100 x 2 = $80,200 X 115% = $92,230
20. Pre-Registration: The 1003
21. Both the First and Second Mortgage require a full set of TRID compliant disclosures, which should include the: • 1003 • LE • Initial CD • Final CD For a comprehensive list of all the documents we require the borrower to sign, please refer to our Program Guidelines, which can be found at ChenoaFund.org. 1003: Important To Remember
22. Image: List secondary financing as follows on the 1003. Secondary Financing on 1003 (1st Mortgage)
23. Image: Where to disclose the DPA. Declarations Page of 1003 (1st Mortgage)
24. Reflecting Secondary Financing in DU®️ (1st Mortgage) Page 2-Types, Terms, & Property Page 7-Transaction Details
25. Reflecting Secondary Financing in DU®️ (1st Mortgage) Please use Special Feature Code 118 when running your conventional loans through Desktop Underwriter. This can be found under the Additional Data Screen in DU®️. ®️.
26. Image: You will see this screen if you are using Secondary Financing LP system. Secondary Financing LP (1st Mortgage)
27. Image: The DPA must be listed as “CBC Mortgage Agency 2nd Lien” under section L04 or under Other Credits. 1st Lien Closing Disclosure (1st Mortgage)
28. Important Reminder • You must deliver disclosures to borrower following the TRID guidelines. • The LE must be mail stamped or signed by borrower within 3 days of the 1003. • Digital signatures are acceptable.
29. Underwriting
30. • Agency guidelines. • FHA • Fannie Mae • TRID compliance. • Industry standards. Underwriting must follow …
31. • Secondary Financing closes in the name of your company. • Secondary Financing is transferred to CBC Mortgage Agency after close. • 2nds are required to be registered with MERS. • You will need to provide a MERS number for the 2nd mortgage deed and note.
32. Your FHA First Mortgage will NOT BE INSURABLE if you do not have a Secondary Financing MERS transfer to CBCMA BEFORE you request a MIC. Or, if it applies, BEFORE you have an executed assignment of the Second Mortgage to CBC Mortgage Agency. Under the terms of the funding obligation letter, your company extends funds at the closing table on behalf of CBC Mortgage Agency for the borrower’s down payment. These funds are reimbursed by CBC Mortgage Agency at the time the first mortgage is purchased. FHA requires that the secondary financing be in the name of the government agency prior to insuring, so it is EXTREMELY important that all second mortgage MINS are registered with MERS as soon as possible after closing and the TOS/TOB be executed immediately. The second has to be transferred to CBC Mortgage Agency as soon as the file has been closed.
33. Important CBC Mortgage Agency Contacts Information and questions info@chenoafund.org Portal Questions submissions@chenoafund.org Underwriting Questions scenariodesk@chenoafund.org Purchase Clearing Please contact the Purchase Clearing specialist for the specific loan you’re working on. Collateral/Shipping finaldocs@chenoafund.org Servicing servicing@chenoafund.org
34. Conclusion
View Video