Arkansas Administrative Code
Agency 109 - Arkansas Development Finance Authority
Division 03 - Single Family Housing
Rule 109.03.04-001 - HomeToOwn Program Guide
Current through Register Vol. 49, No. 2, February 2024
CHAPTER 1 - INTRODUCTION
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 will be posted at 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. ADFA will notify each Mortgage Lender via facsimile transmission, email transmission, or otherwise, in the event that the loan rate is raised or lowered; 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.l.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 7-0, 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 in an amount equal to one percent (1%) of each Mortgage Loan.
Eligible Borrower means a person:
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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.
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 schedule may be modified 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:
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 17-51-101 et 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.
Arkansas Development Finance Authority HomeToOwn Program
CHAPTER 2 MORTGAGE REVENUE BONDS - TAX CODE COMPLIANCE ISSUES
Participating 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.
It has been the experience of the Authority that the Treasury Department limits do not always seem realistic. In fact, it would be safe to say that on occasion they aren't even close. In order to address this problem, the Authority conducts its own data collection every January. We obtain year-end data from the various boards of realtors for the existing residences. New construction data is not so easy. We must rely upon participating Mortgage Lenders to obtain sales data for us. So, if you don't like the numbers reflected, give us a call and we will work with you in obtaining more accurate data and include it with our annual Private Letter Ruling Request that we send to the IRS every year.
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.
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.
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
HomeToOwn 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.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program Schedule III
STATE OF ARKANSAS 2004 INCOME BY COUNTY & HOUSEHOLD SIZE
Purchase Price Limits by County/New Existing (Effective March 19, 2004) Income Limits by County and Household Size (Effective February 27, 2004)
N=Non-Targeted T=Targeted |
PURCHASE PRICE LIMITS |
2004 INCC |
)ME LIMITS |
||
1-2 MEMBER |
3-MORE MEMBER |
||||
N/T |
COUNTY |
EXISTING |
NEW CONSTRUCTION |
HOUSEHOLD |
HOUSEHOLD |
N |
Arkansas |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Ashley |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Baxter |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Benton |
$160,176 |
$160,176 |
$52,000 |
$59,800 |
N |
Boone |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Bradley |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Calhoun |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Carroll |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Chicot |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Clark |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Clay |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Cleburne |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Cleveland |
$160,176 |
$160,176 |
$46,700 |
$53,705 |
T |
Columbia |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Conway |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Craighead |
$160,176 |
$160,176 |
$46,200 |
$53,130 |
T |
Crawford |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Crittenden |
$160,176 |
$160,176 |
$68,760 |
$80,220 |
T |
Cross |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Dallas |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Desha |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Drew |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Faulkner |
$160,176 |
$160,176 |
$55,100 |
$63,365 |
N |
Franklin |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Fulton |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Garland |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Grant |
$160,176 |
$160,176 |
$46,000 |
$52,900 |
N |
Greene |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Hempstead |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Hot Spring |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Howard |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Independence |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Izard |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Jackson |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Jefferson |
$160,176 |
$160,176 |
$54,720 |
$63,840 |
N |
Johnson |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Lafayette |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Lawrence |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Lee |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Lincoln |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Little River |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Logan |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Lonoke |
$160,176 |
$160,176 |
$55,100 |
$63,365 |
T |
Madison |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Marion |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Miller |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Mississippi |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Monroe |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Montgomery |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Nevada |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Newton |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Ouachita |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Perry |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Phillips |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Pike |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Poinsett |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Polk |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Pope |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
Prairie |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Pulaski |
$160,176 |
$160,176 |
$55,100 |
$63,365 |
N |
Randolph |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
T |
St. Francis |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Saline |
$160,176 |
$160,176 |
$55,100 |
$63,365 |
T |
Scott |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Searcy |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
N |
Sebastian |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Sevier |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Sharp |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Stone |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Union |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Van Buren |
$160,176 |
$160,176 |
$45,300 |
$52,095 |
N |
Washington |
$160,176 |
$160,176 |
$52,000 |
$59,800 |
T |
White |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Woodruff |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
T |
Yell |
$160,176 |
$160,176 |
$54,360 |
$63,420 |
SCHEDULE III
Page 3
The Maximum Household Income Limits are regulated by the Treasury Department. The following MUST be 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 ALL persons 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
Arkansas Development Finance Authority HomeToOwn Program
CHAPTER 3 MORTGAGE LENDER CREDIT/REAL ESTATE UNDERWRITING
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: (for pooling to Fannie Mae) will include Community Home Buyer Program Loans and the Housing Finance Agencies (HFA) One Percent Option using the Downpayment Assistant 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.
Arkansas Development Finance Authority ________________________HomeToOwn Program_______________________
CHAPTER 4 - DOWN PAYMENT ASSISTANCE LOANS
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 ranges from $1,000 up to a maximum of $3,000. 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.
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 100% of the lower of the Purchase Price or appraised value.
. USDARD: Sum of financing cannot exceed 100% of appraised value.
. DPA Loan must meet federal truth-in-lending disclosure requirements.
. A Notice to Mortgagor and Participant Lender Certification must be completed and included in the Mortgage File for purchase.
. 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 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) in an amount of $1,000 to $5,000 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.
Affordability Periods
Home Subsidy |
Affordability Period |
Less than $15,000 |
5 years |
$15,000-$25,000 |
10 years |
Arkansas Development Finance Authority ________________________HomeToOwn Program________________________
CHAPTER 5 - MORTGAGE LOAN ORIGINATION
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:
Prior to making a reservation request, the Mortgage Lender should have in hand the following information:
LABOR LIST (If Eligible Borrower is building his or her own house).
A $100reservation 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.
ADFA charges each lender a $25 fee for every loan that is reserved. The Lender cannot charge the fee to the buyer of the property on the HUD-1 Settlement Statement at closing due to FHA/HUD Regulations as to what are borrower items that may be charged at closing. 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**
ARKANSAS DEVELOPMENT FINANCE AUTHORITY HomeToOwn Program EXHIBIT 5-A
BORROWER'S CERTIFICATE AS TO INCOME
Ladies and Gentlemen:
I understand that HOUSEHOLD INCOME includes total income from all sources (before taxes or withholding) of all adult persons residing or intending to reside in the Single Family Residence to be financed with the proceeds of the Mortgage Loan. The total number of all persons who will reside or intend to reside in this Single Family Residence is______. The total number of all persons 18 years old or older who will reside or intend to reside in this Single Family Residence is______. Household Income is defined as the "current household income of a potential Mortgagor, and shall in any event include the current gross income of all persons 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." The information contained in the loan application is information relevant to a determination of my annual Household Income as the date hereof, and to the best of my knowledge and belief. Current gross income is gross monthly income multiplied by twelve (12). Gross monthly income is the sum of monthly gross pay, any additional income from overtime, part-time employment, bonuses, commissions, dividends, income from assets, interest, royalties, shift differential, pensions, VA compensation, net rental income, etc., and other income such as alimony, child support, mileage, military allowance, public assistance, sick pay, social security benefits, unemployment compensation, income received from trusts, and income received from business activities or investments, etc.
As defined above, my annual Household Income is $______________. I do not expect such annual Household Income to change within the next 120 days. This amount includes the annual income of all persons age 18 years and older who intend to occupy the mortgaged property.
BORROWER:CO-BORROWER:
(x) _______________________________
(x)__________________________________
Name:____________________________ Name:________________________________
Date:_____________________________ Date:_________________________________
PROPERTY ADDRESS:________________________________________________________
(MAILING ADDRESS/STREET & NUMBER) (AS ON NOTE & MORTGAGE) (CITY/STATE/ZIP CODE)
THIS DOCUMENT MUST BE EXECUTED BY BORROWER AND CO-BORROWER
AT TIME OF LOAN APPLICATION
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program
EXHIBIT 5 A-l
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program
EXHIBIT 5-B
The acquisition cost does not include:
I UNDERSTAND THAT FOR THE PURPOSES OF THE FOREGOING, EXAMPLES OF INTERESTS WHICH CONSTITUTE A PRESENT OWNERSHIP INTEREST (AND THUS WOULD RESULT IN MY NOT MEETING SUCH REQUIREMENTS) ARE THE FOLLOWING:
EXAMPLES OF INTEREST WHICH DO NOT CONSTITUTE PRESENT OWNERSHIP INTEREST AND THUS WOULD NOT RESULT IN MY FAILING TO MEET THE REQUIREMENTS ARE THE FOLLOWING:
||____ NOTICE TO BORROWERS _____||
THIS NOTICE IS FOR FHA AND RURAL DEVELOPMENT HOMEBUYERS
Your home purchase is being financed with a Mortgage Loan made available with the assistance of the Arkansas Development Finance Authority. This Mortgage Loan is made at an interest rate below what is usually being charged. Because of this, your Mortgage provides that you cannot sell your home to a person ineligible for the assistance from the Authority, unless you pay your loan in full. If you sell your home to a party ineligible for the Authority's assistance, the Authority may demand immediate full repayment of the Mortgage Loan. This could result in foreclosure of your Mortgage and repossession of the property. In addition, if you rent the property or committed fraud or intentionally misrepresented yourself when you applied for the Mortgage Loan, the Mortgage Lender may foreclosure your Mortgage and repossess the property. If the Mortgage Lender takes your home through foreclosure of the Mortgage because of these reasons, HUD/Rural Development will not be able to help you.
If the money received from the foreclosure sale is not enough to pay the remaining amount you owe on the Mortgage Loan, the Authority may obtain a deficiency judgment against you (a court ruling that you must pay whatever money is still owed on the Mortgage Loan after the foreclosure sale). Such judgment will be taken over by HUD/Rural Development if the Authority files an insurance claim against HUD/Rural Development because of the foreclosure. HUD/Rural Development may then bring an action against you to collect the judgment.
BORROWER:CO-BORROWER:
(x) ______________________________ (x)____________________________
Name.;____________________________ Name.;__________________________
Date:____________________________ Date:__________________________
THIS DOCUMENT MUST BE EXECUTED BY BORROWER(S) AT TIME OF LOAN APPLICATION
EXHIBIT 5-D
EXHIBIT 5-E
EXHIBIT 5-F
NOTICE TO MORTGAGOR OF POTENTIAL RECAPTURE TAX; OWNER
OCCUPANCY REQUIREMENT; PURCHASE PRICE LIMITS AND INCOME LIMITS;
_______________________________FINAL SHIPPING DATE_______________________________
TO BE DELIVERED TO MORTGAGOR AT THE TIME OF APPLICATION FOR MORTGAGE LOAN
Because you are receiving a mortgage loan from the proceeds of a tax-exempt bond, you are receiving the benefits of a lower interest rate than is customarily charged on other mortgage loans. If you sell or otherwise dispose of your home during the next nine years, this benefit may be "recaptured." The recapture is accomplished by an increase in your federal income tax for the year in which you sell your home. The recapture only applies, however, if you sell your home at a gain and if your income increases above specified levels.
You may wish to consult a tax advisor or the local office of the Internal Revenue Service at the time you sell your home to determine the amount, if any, of the recapture tax.
Upon the closing of your Mortgage Loan, you will be given certain additional information that will be needed to calculate the amount, if any, of the "recapture tax."
The undersigned mortgagor(s) is (are) aware that they must occupy the subject residence as their principal residence, or will do so within sixty (60) days of the date of the mortgage is executed, and will maintain such property (or unit) as their principal residence and will do so until the loan is paid in full or assumed by a qualifying borrower. The mortgagor(s) is (are) also aware of the Purchase Price Limits and Income Limits as set forth in Schedule II & III of the Supplement to the Mortgage Origination Agreement.
ALL FILES MUST BE CLOSED AND SHIPPED TO THE U.S. BANK HOME MORTGAGE OF BEDFORD, OHIO, THE MASTER SERVICER.
The undersigned mortgagor(s) has (have) received and read a duplicate copy of the foregoing Notice to Mortgagor of Potential Recapture Tax, Principal Residence Requirement, Sales Price and Income Limits, and Final Shipping Dates.
MORTGAGOR:CO-MORTGAGOR:
(x) _________________________________
(x)____________________________________
Name:______________________________________ Name:__________________________________________
Date:_______________________________________ Date:___________________________________________
Arkansas Development Finance Authority HomeToOwn Program
CHAPTER 6 - MORTGAGE LOAN PROCESSING
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 6-1, 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 6-1.
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.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program
EXHIBIT 6-G
EXHIBIT 6-H
EXHIBIT 6-I
EXHIBIT 6-J
CHAPTER 7 - MORTGAGE LOAN CLOSING
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 7-0) 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 7-0, 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.
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:
YOU MAY NOT COLLECT ANY ADDITIONAL FEES FROM EITHER THE BORROWER OR SELLER. DO NOT COLLECT UNDERWRITING FEES, ADMINISTRATION FEES, MORTGAGE LENDER'S DOCUMENT PREPARATION FEES OR LENDER'S COMMITMENT FEES.
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.
. Down Payment Assistance (DPA) Note
. Down Payment Assistance (DPA) Subordinate Mortgage
EXHIBIT 7-K
EXHIBIT 7-L
EXHIBIT 7-M
EXHIBIT 7-N
EXHIBIT 7-O
EXHIBIT 7-P
|| NOTICE TO MORTGAGOR OF INFORMATION REGARDING POTENTIAL RECAPTURE TAX ||
TO BE DELIVERED TO MORTGAGOR AT TIME OF SETTLEMENT OR ASSUMPTION OF MORTGAGE LOAN
Your mortgage loan has been financed with the proceeds of a tax-exempt qualified mortgage bond. As a result, pursuant to Section 143(m) of the Internal Revenue Code of 1986 (the "Code"), you may, at the time at which you resell the residence financed by the Mortgage Loan, be subject to a special "recapture tax" for federal income tax purposes. You should consult you tax advisor at the time of resale by you of the residence to determine the amount, if any, of such "recapture tax." The following information will assist you in determining the amount, if any, of "recapture tax."
(County Income Limit Sheet)
(County Income Limit Sheet)
*See Sample Chart Available
The undersigned Mortgagor(s) has (have) received and read a duplicate copy of the forgoing Notice to Mortgagor of Information Regarding Potential Recapture Tax.
MORTGAGOR:CO-MORTGAGOR:
(x) __________________________________
(x)_________________________________
Name:_____________________________ Name:_____________________________
Date:______________________________ Date:______________________________
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 |
48,50453 |
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 year.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeTo Own Program EXHIBIT 7-Q
||NOTICE TO HOMEOWNER^|
FHA Case Number: Notice to Homeowner
Assumption of HUD/FHA Insured Mortgages Loan Number:
Release of Personal Liability
You are legally obligated to make the monthly payments required by your Mortgage (deed of trust) and Mortgage Note.
The Department of Housing and Urban Development (HUD) has acted to keep investors and non-creditworthy purchasers from acquiring one-to-four family residential properties covered by certain FHA-insured mortgages. There are minor exceptions to the restriction on investors: loans to public agencies and some non-profit organizations, Indian tribes or service people; loans under special mortgage insurance programs for property sold by HUD; rehabilitation loans or refinancing of insured mortgages. Your lender can advise you if you are included in one of the exceptions.
HUD will therefore direct the lender to accelerate this FHA-insured mortgage loan if all or part of the property is sold or transferred to a purchaser or recipient (1) who will not occupy the property as his or her principal residence, or (2) who does occupy the property but whose credit has not been approved in accordance with HUD requirements. This policy will apply except for certain sales or transfers where acceleration is prohibited by law.
When a Mortgage Loan is accelerated, the entire balance is declared "immediately due and payable." Since HUD will not approve the sale of the property covered by this Mortgage to an investor or to a person whose credit has not been approved, you, the original homeowner, would remain liable for the Mortgage debt even though the title to the property might have been transferred to a new buyer.
Even if you sell your home by letting an approved purchaser (that is, a creditworthy owner-occupant) assume your mortgage, you are still liable for the mortgage debt unless you obtain a release from liability from your mortgage lender. FHA-approved lenders have been instructed by HUD to prepare such a release when the original homeowner sells his property to a creditworthy purchaser who executes an agreement to assume and pay the Mortgage debt and thereby agrees to become the substitute mortgagor. The release is contained in Form HUD-92210-1 ("Approval of Purchaser and Release of Seller"). You should ask for it if the Mortgage Lender does not provide it to you automatically when you sell your home to a creditworthy owner-occupant purchaser who executes an agreement to assume personal liability for the debt. When this form is executed, you are no longer liable for the mortgage debt.
You must sign and date this Notice as indicated, return one copy to your lender as proof of notification and keep one copy for your records.
Date:_____________ __________________________________________________
Instructions to Mortgage Lender: A copy of this notice must be given to the Mortgagor(s) on or before the date of settlement. You should retain a signed copy in the Mortgage File.
NOTE (ADFA DOWN PAYMENT ASSISTANCE PROGRAM)
DATE:________________________ ________________________________
City, State PROPERTY ADDRESS:____________________________________________________________
In return for a loan that I have received (the "Loan"), I promise to pay U.S. $_________(this amount is called "principal"), plus interest to the order of the Lender. The Lender is___________
____________, a_____________________________organized and existing under the laws of the
State of_______________________________________. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the "Note Holder."
The Loan evidenced by this Note is being made pursuant to the Arkansas Development Finance Authority Down Payment Assistance Program.
The Loan is being made in order to assist me in purchasing the Property. The sales price of the Property is $_____________________.
(Street) (City/State/Zip)
Interest will be charged on the unpaid principal until the full amount of principal has been paid. I
will pay interest at a yearly rate of_______%. The interest rate required by this Section 2 is the rate I pay both before and after any default described in Section 6(B) of this Note.
I will pay principal and interest as provided in Section 2 above by making payments every month.
I will make my monthly payments on the first day of each month beginning on the first day of________________, 2____. I will make these payments every month until I have paid all the principal and interest, if any, and any other charges described below that I may owe under this Note. My monthly payments will be applied to interest before principal. If, on the first day of______________, 2____, I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the "Maturity Date."
The principal amount of this Note shall be due and payable in full upon acceleration of the Note in the event of a default hereunder of the Subordinate Security Interest, or on the date of the first sale or transfer of the Property to occur after the date of this Note.
I will make my payments at_____________________________________________or at a different place if required by the Note Holder.
The indebtedness evidenced by this Note, and any other financial obligation which may hereafter be imposed on me by the Lender, is subordinate to the indebtedness evidenced by a note payable to a senior lender, which note is secured by a first mortgage on the Property (the "First Mortgage").
My monthly payments will be in the amount of U.S. $_________________________.
I have the right to make payments of principal at any time before they are due. A payment of principal only is known as a "prepayment." When I make a prepayment, I will tell the Note Holder in writing that I am doing so.
I may make a full prepayment or partial prepayments without paying a prepayment charge. The Note Holder will use all of my prepayments to reduce the amount of principal that I owe under this Note. If I make a partial prepayment, there will be no changes in the due date or in the amount of my monthly payment unless the Note Holder agrees in writing to those changes.
I have the right to prepay the principal amount of this Note, together with any accrued interest without any prepayment charge provided that such prepayment is in full or not in part.
If a law, which applies to this loan and which sets maximum loan charges, is finally interpreted so that the interest or other loan charges collected or to be collected in connection with this loan exceed the permitted limits, then;
If the Note Holder has not received the full amount of any monthly payment by the end of 15 calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 4% of my overdue payment of principal and interest. I will pay this late charge promptly but only once on each late payment.
If I do not pay the full amount of each monthly payment on the date that it is due, I will be in default.
If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is delivered or mailed to me.
Even if, at a time when I am in default, the Note Holder does not require me to pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time.
If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys' fees.
Unless applicable law requires a different method, any notice that must be given to me under this Note will be given by delivering it or by mailing it by first class mail to me at the Property Address above or at a different address if I give the Note Holder a notice of my different address.
Any notice that must be given to the Note Holder under this Note under this Note will be given by mailing it by first class mail to the Note Holder at the address stated in Section 3 (A) above or at a different address if I am given a notice of that different address.
If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of guarantor, surety or endorser of this Note, is also obligated to keep all the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note.
I and any other person who has obligations under this Note waive the rights of presentment and notice of dishonor. "Presentment" means the right to require the Note Holder to demand payment of amounts due. "Notice of dishonor" means the right to require the Note Holder to give notice to other persons that amounts due have not been paid.
In addition to the protections given to the Note Holder under this Note, a Subordinate Mortgage (the "Subordinate Security Instrument"), dated the same date as this Note, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. The Subordinate Security Instrument is and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the First Mortgage. The Subordinate Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under this Note. Some of those conditions are described as follows:
Transfer of the Property or a Beneficial Interest in Borrower. Except for a conveyance to the Senior Lien Holder under the First Mortgage, if all or any part of the Property or any interest in it is sold or transferred (or if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person) without Lender's prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if exercise is prohibited by federal law as of the date of this Security Instrument.
If Lender exercises this option, Lender shall give Borrower and the Senior Lien Holder prior written notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is delivered or mailed within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.
Witness the hand(s) and seal(s) of the undersigned.
____________________________________(Seal)
-Borrower
(Borrower's Typed Name)
____________________________________(Seal)
-Borrower
(Borrower's Typed Name)
SUBORDINATE MORTGAGE (ADFA DOWN PAYMENT ASSISTANCE PROGRAM)
THIS SUBORDINATE MORTGAGE ("Security Instrument") is made on this ______day of
_______________, 2____. The grantor is ___________________________________ ("Borrower"). This
Security Instrument is given to __________________________________, organized and existing under the laws of the State of _____________________ and whose address is
___________________________________________________ ("Lender"). Borrower owes Lender the principal sum of $_______________________. This debt is evidenced by the Borrower's note dated the same date as this Security Instrument ("Note").
The Note provides that the full debt, if not paid earlier, shall be due and payable on the______, day of
___________________, 2____the "Maturity Date" of the Note.
The loan evidenced by the Note and secured by this Security Instrument (the "Loan") is being made pursuant to the Arkansas Development Finance Authority Down Payment Assistance Program. In addition to the Loan, the Borrower obtained a mortgage loan (the "First Mortgage Loan") from
__________________________ organized and existing under the laws of the State of
___________________________(the "Senior Lien Holder"), which loan is secured by a first mortgage lien on the Property (the "First Mortgage"). The documents evidencing or securing the First Mortgage Loan are collectively referred to herein as the First Mortgage Loan Document.
This Security Instrument secures to Lender:
__________________________________________ and is further described in Exhibit A attached hereto
("Property Address");
TO HAVE AND TO HOLD this property unto Lender and Lender's successors and assigns, forever, all the improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of the property. All replacements and additions shall also be covered by this Security Instrument. All of the foregoing is referred to in this Security Instrument as the "Property."
BORROWER COVENANTS that Borrower is lawfully seised of the estate hereby conveyed and has the right to mortgage, grant and convey the Property and, except for the First Mortgage and the other encumbrances of record acceptable to the Senior Lien Holder, the Property is unencumbered. Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to such encumbrances of record.
Borrower and Lender covenant and agree as follows:
The Funds shall be held in an institution whose deposits are insured by a federal agency, instrumentally, or entity (including Lender, if Lender is such an institution) or in any Federal Home Loan Bank. Lender shall apply the Funds to pay the Escrow Items. Lender may not charge the Borrower for holding and applying the Funds, annually analyzing the escrow account, verifying the Escrow Items, unless Lender pays Borrower interest on the Funds and the applicable law permits Lender to make such a charge. However, Lender may require Borrower to pay a one-time charge for an independent real estate tax reporting service used by Lender in connection with this loan, unless applicable law provides otherwise. Unless an agreement is made or applicable law requires interest to be paid, Lender shall not be required to pay Borrower any interest or earnings on the Funds. Borrower and Lender may agree in writing, however, that interest shall be paid on the Funds. Lender shall give Borrower, without charge, an annual accounting of the Funds, showing credits and debits to the Funds and the purpose for which each debit to the Funds was made. The Funds are pledged as additional security for all sums secured by this Security Instrument.
If the Funds held by Lender exceed the amounts permitted to be held by applicable law, Lender shall account to Borrower for the excess Funds in accordance with the requirements of applicable law. If the amount of the Funds held by Lender at any time is not sufficient to pay the Escrow Items when due, Lender may so notify Borrower in writing, and, in such case Borrower shall pay the Lender the amount necessary to make up the deficiency. Borrower shall make up the deficiency in no more than twelve monthly payments, at Lender's sole discretion.
Upon payment in full of all sums secured by this Security Instrument, Lender shall promptly refund to Borrower any Funds held by Lender. If, under paragraph 23, Lender shall acquire or sell the Property, Lender, prior to the acquisition or sale of Property, shall apply any Funds held by Lender at the time of the acquisition or sale as a credit against the sums secured by this Security Instrument.
Security Instrument, and leasehold payments or ground rents, if any. Borrower shall pay these obligations in the manner provided in paragraph 2, or if not paid in that manner, Borrower shall pay them on time directly to the person owed payment. Borrower shall promptly furnish to Lender all notices of amounts to be paid under this paragraph. If Borrower makes these payments directly, Borrower shall promptly furnish to Lender receipts evidencing the payments.
Except for the lien of the First Mortgage, Borrower shall promptly discharge any other lien which shall have attained priority over this Security Instrument unless Borrower:
Further, if the Senior Lien Holder acquires title to the Property pursuant to a deed in lieu of foreclosure, the lien of this Security Instrument shall automatically terminate upon the Senior Lien Holder's acquisition of title, provided that (i) the Lender has been given written notice of a default under the First Mortgage and (ii) the Lender shall not have cured the default under the First Mortgage, or diligently pursued curing the default as determined by the Senior Lien Holder, within 60-day period provided in such notice sent to the Lender.
All insurance policies and renewals shall be acceptable to Lender and shall include a standard mortgagee clause. All requirements hereof pertaining to insurance shall be deemed satisfied if the Borrower complies with the insurance requirements under the First Mortgage. All original policies of insurance required pursuant to the First Mortgage shall be held by the Senior Lien Holder; provided, however, Lender may be named as a loss payee as its interest may appear and may be named as an additional insured. If Lender requires, Borrower shall promptly give to Lender copies of all receipts of paid premiums and renewal notices. In the event of loss, Borrower shall give prompt notice to the insurance carrier, the Senior Lien Holder and Lender. Lender may make proof of loss if not made promptly by the Senior Lien Holder or the Borrower.
Unless Lender and Borrower otherwise agree in writing, insurance proceeds shall be applied to restoration or repair of the Property damaged, if the restoration or repair is economically feasible and Lender's security is not lessened. If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with any excess paid to Borrower. If Borrower abandons the Property, or does not answer within 30 days a notice from Lender that the insurance carrier has offered to settle a claim, then Lender may collect the insurance proceeds. Lender may use the proceeds to repair or restore the Property or to pay sums secured by this Security Instrument, whether or not then due. The 30-day period will begin when the notice is given.
Unless Lender and Borrower otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly payments referred to in paragraph 1 and 2 or change the amount of the payments. If under paragraph 23 the Property is acquired by Lender, Borrower's rights to any insurance policies and proceeds resulting from damage to the Property prior to the acquisition shall pass to Lender to the extent of the sums secured by this Security Instrument immediately prior to acquisition.
Notwithstanding the above, the Lender's rights to collect and apply the insurance proceeds hereunder shall be subject and subordinate to the rights of the Senior Lien Holder to collect and apply such proceeds in accordance with the First Mortgage.
Any amounts disbursed by Lender under this paragraph 8 shall become additional debt of Borrower secured by this Security Instrument. Unless Borrower and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note rate and shall be payable, with interest, upon notice from Lender to Borrower requesting payment.
Prior to taking any actions under this Section 8, however, Lender shall notify the Senior Lien Holder of such default in the manner provided in Section 23 of this Security Instrument, and shall provide the Senior Lien Holder with the opportunity to cure any such default under this Security Instrument. All amounts advanced by the Senior Lien Holder to cure a default hereunder shall be deemed advanced by the Senior Lien Holder and shall be secured by the First Mortgage. In addition, the Lender agrees that it will not commence foreclosure proceedings or accept a deed in lieu of foreclosure, or exercise any other rights or remedies hereunder until it has given the Senior Lien Holder at least 60 days prior written notice. Any action by Lender hereunder to foreclose or accept a deed in lieu of foreclosure shall be subject to the "due on sale" provisions of the First Mortgage.
Lender and Borrower further agree that a default hereunder shall constitute a default under the First Mortgage. In the event of a default hereunder, the Senior Lien Holder shall have the right to exercise all rights and remedies under the First Mortgage.
In the event of a total taking of the Property, the proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with any excess paid to Borrower. In the event of a partial taking of the Property in which the fair market value of the Property immediately before the taking is equal to or greater than the amount of the sums secured by this Security Instrument immediately before the taking, unless Borrower and Lender otherwise agree in writing, the sums secured by this Security Instrument shall be reduced by the amount of the proceeds multiplied by the following fraction:
If the Property is abandoned by Borrower, or if, after notice by Lender to Borrower that the condemner offers to make an award or settle a claim for damages, Borrower fails to respond to Lender within 30 days after the date the notice is given, Lender is authorized to collect and apply the proceeds, at its option, either to restoration or repair of the Property or to the sums secured by this Security Instrument, whether or not then due.
Unless Lender and Borrower otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly payments referred to in paragraph 1 and 2 or change the amount of such payments.
or such other address the Senior Lien Holder designates by notice to Borrower. Any notice provided for in this Security Instrument shall be deemed to have been given to Borrower or Lender when given as provided in this paragraph.
If Lender exercises this option, Lender shall give Borrower and the Senior Lien Holder prior written notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is delivered or mailed within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.
Notwithstanding Lender's right to invoke any remedies hereunder, as provided in Section 8 above, Lender agrees that it will not commence foreclosure proceedings or accept a deed in lieu of foreclosure, or exercise any other rights or remedies hereunder until it has given the Senior Lien Holder at least 60 days prior written notice.
The Borrower and the Lender agree that whenever the Note or this Security Instrument gives the Lender the right to approve or consent with respect to any matter affecting the Property (or construction of any improvements thereon) or otherwise (including the exercise of any "due on sale" clause), and a right of approval or consent with regard to the same matter is also granted to the Senior Lien Holder pursuant to the First Mortgage, the Senior Lien Holder's approval or consent or failure to approve or consent, as the case may be, shall be binding on the Borrower and the Lender.
Loan Servicer and the address to which payments should be made. The notice will also contain any other information required by applicable law.
Borrower shall promptly give Lender written notice of any investigation, claim, demand, lawsuit, or other action by any governmental or regulatory agency or private party involving the Property and any Hazardous Substance or Environmental Law of which Borrower has actual knowledge. If Borrower learns, or is notified by any governmental or regulatory authority, that any removal or other remediation of any Hazardous Substance affecting the Property is necessary, Borrower shall promptly take all necessary remedial actions in accordance with Environmental Law. Prior to taking any such remedial action, however, the Borrower shall notify the Senior Lien Holder that such remedial action is necessary and shall obtain the Senior Lien Holder's prior written consent for such remedial action.
As used in paragraph 22, "Hazardous Substances" are those substances defined as toxic or hazardous substances by Environmental Law and the following substances; gasoline, kerosene, other flammable or toxic petroleum products, toxic pesticides and herbicides, volatile solvents, materials containing asbestos or formaldehyde, and radioactive materials. As used in this paragraph 22, "Environmental Law" means federal laws and laws of the jurisdiction where the Property is located that relate to health, safety or environmental protection.
Borrower and Lender further covenant and agree as follows:
If Lender invokes the power of sale, Lender shall mail copies of a notice of sale in the manner prescribed by applicable law to Borrower, the Senior Lien Holder and to the other persons prescribed by applicable law. Lender shall publish the notice of sale by public advertisement for the time in the manner prescribed by applicable law. Lender, without demand on Borrower, shall sell the Property at public auction to the highest bidder for cash at the time and place and under the terms designated in the notice of sale in one or more parcels and in any order Lender determines. Lender may postpone sale of all or any parcel of the Property to any later time on the same date by public announcement at the time and place of any previously scheduled sale. Lender or its designee may purchase the Property at any sale.
Lender shall deliver to purchaser Lender's deed conveying the Property without any covenant or warranty, expressed or implied. The recitals in the Lender's deed shall be prima facie evidence of the truth of the statements made therein. Lender shall apply the proceeds of the sale in the following order:
BY SIGNING BELOW, the Borrower and the Lender accept and agree to the terms and covenants contained in this Security Instrument.
BORROWERS:
(x) ____________________________
(Borrower's Typed Name)
(x) ____________________________
(Borrower's Typed Name)
LENDER:________________________
By:______________________________
(Signature)
(Name and Title) ATTEST:
(SEAL)
EXHIBIT A PROPERTY DESCRIPTION
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program
EXHIBIT 7-R
Arkansas Development Finance Authority HomeToOwn Program
CHAPTER 8 - MORTGAGE LOAN SALE TO MASTER SERVICER
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 180 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.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
HomeToOwn Program
EXHIBIT 8-S
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.
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.
Pay to the Order of:
U.S. Bank N.A. Without Recourse
By:______________________(signature)
XYZ Mortgage Corporation (full legal name) John Doe, Vice President (typed name & title)
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". 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:
Origination Agreement)
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.
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 Chapter 8 Page 25 07/04 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).
*NOTE all Manufactured homes must be eligible products as defined by the program documents. Additionally:
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, Parti.
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'V'Conditioris'V'Restrictions'V'Declarartions'V'Agreements'V'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.