8. Delays in providing an energy audit on a residential property - urban & suburban areas. Rural areas will take longer due to a lack of raters in the area.
13. Energy Efficient Mortgage (EEM) Example $380,000 (value) x 5% = 19,000 488,750 (max loan limit for Stockton county for 1-unit) x 5% =24,437 417,000 (Freddie Mac cap) x150% = 625,500 x 5% = 31,275
14.
15.
16. 203(k) – Rehabilitation Loan Program What is a 203k? One loan to finance both acquisition & rehabilitation of a property (or refinance and rehabilitation)
17. 203(k) – Rehabilitation Loan Program Purpose of the 203k Restore and preserve the nation’s housing stock Expand homeownership opportunities Help community revitalization
18. 203(k) – Rehabilitation Loan Program Loan Amount The loan amount is based on projected value after the work is completed
19. 203(k) – Rehabilitation Loan Program FHA has two types of rehabilitation loans Standard 203k Rehabiliation – includes more complex repairs (i.e.structural) and requires a minimum of $5,000 in repairs Streamline 203k Rehabilitation – covers uncomplicated repairs up to $35,000 with no minimum dollar threshold– no structural repairs allowed
26. 203(k) – Standard Rehabilitation Loan Program Improvements Minimum $5,000 rehab costs Must increase the marketability and value of the property (“must have” repairs not “wish list” repairs) Repairs & Improvements must comply with HUD HB 4910.1 Meet local building & zoning codes Corrections of code violations Energy improvements
36. 203(k) – Standard Rehabilitation Loan Program Preliminary Feasibility Analysis Purpose Prevent wasted time & finances $100 financeable fee Optional
37.
38. 203(k) – Standard Rehabilitation Loan Program 203k Consultant HUD Approved 3 years experience as general contractor, remodeling contractor, or home inspector State licensed architect or engineer On FHA 203k Consultant Roster Selected by lender (ML 00-25)
39. 203(k) – Standard Rehabilitation Loan Program Consultant Responsibilities Complete a home inspection Obtain & review Architectural Exhibits Prepare Write Up & Cost Estimate Provide line item unit-cost breakdown Duties listed in ML 95-40
40. 203(k) – Standard Rehabilitation Loan Program Consultant Can’t be the contractor or appraiser, but can be the energy rater Work write up clearly indicate the required items vs. “wish list” items If using EEM, the work write-up must include Energy Package
41. 203(k) – Standard Rehabilitation Loan Program Work Write Up Specifications of Repairs Form 35 categories (HUD HB 4240.4 Rev-2, Appendix 1) Detail work to be completed Break down labor & materials All health & safety issues must be addressed first (and part of the first $5,000 minimum threshold) Consultant & Buyer agreement signed by both parties (ML 95-40)
42. 203(k) – Standard Rehabilitation Loan Program Forms & Exhibits Property report (existing) Termite/Well/Septic Report(s) EEM Rating or Analysis Proposed Plot Plan (new additions) Proposed Floor Plan (wall changes) Other reports as necessary Work write up – description of work Cost estimates - detailed
43. 203(k) – Standard Rehabilitation Loan Program Contractor Selection Lender must ensure acceptable contractor is hired Contractor credentials, work experience, licensing information/bonding or insuring, type of work performed and client references execution of Homeowner/Contractor Agreement ML 00-25, 98-11, 94-11
44. 203(k) – Standard Rehabilitation Loan Program Who Does the Work? Experienced general or specialized contractor No self-help
45. 203(k) – Standard Rehabilitation Loan Program Appraiser Responsibilities Appraisal made “subject to completion per plans & specifications” Appraisal must contain copy of plans, specs, work write up and other conditions upon which value is based 4150.2 & HOC Reference Guide
46. 203(k) – Standard Rehabilitation Loan Program 203k mortgage must be based on the lowest sales price in the last year ML 00-25
47. 203(k) – Standard Rehabilitation Loan Program Release of Funds Consultant performs inspection on behalf of lender Maximum 4 draws plus final draw 10% holdback on every intermediate draw Funds cannot be released for incomplete work
62. Window and door replacements and exterior wall re-siding
63.
64. 203(k) – Streamline Continued Ineligible Work Continued… Landscaping or similar site improvements Repairs requiring a work schedule longer than 6 months Repairs arising form the appraisal not on the list of eligible work items Repairs causing borrower to be displaced more than 30 days
65. 203(k) – Streamline Continued Required Exhibits for Eligible Work Pre-purchase home inspection (if performed) Borrower’s planned repairs Appraisal report indicating list of proposed repairs and costs
66. 203(k) – Streamline Continued Who Does the Work Specialized Contractor/Contractors Self-help
68. 203(k) – Streamline Continued 203k Worksheet (HUD92700) Mortgage Amount Maximum – statutory limit for the area or 110% of “after-improved” value Case Number ADP Code Repair Escrow Amount 203k Consultant ID Field
70. 203(k) – Streamline Continued Process Overview Borrower’s application Consultant Order Case Number Order Appraisal Processor Responsibilities Property & Credit Package
71. 203(k) – Streamline Continued Process Overview Direct endorsement underwriter’s responsibilities Conditions Loan Closes Repair Escrow Account Repairs/Inspections/Draws
72. 203(k) – Streamline Continued Completion & Payments Number of payments First Payment Permit Fees Final Payment Payment Schedule Issuance of Payments Lender’s Compensation Inspections Final Release
73. Information source: www.hud.gov, ml 2005-21, ML 2009-18 Roxanne Campanella, Account Liaison Federal Housing Administration Sacramento, CA
Stretch ratios of 33/45 apply only if the property meets International Energy Conservation Code (IECC) - Source: ML 2005-21
Bullet #2 - The median area price is the same as the maximum loan limit for the county (go to www.fha.gov for maximum loan limit by county) and Bullet #3 - the current conforming Freddie Mac limit is $417,000
In this example, $19,000 is the lesser of the three calculations and may be added to the base loan amount
Source: ML 2005-21 and HUD Handbook 4155.1 Chapter 2-19
The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.HUD's 203(k) program can help overcome this obstacle by enabling the purchase or refinance a property plus the cost of making the repairs and improvements in one mortgage.
