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4) Home Ownership: Pipe Dream or a New Reality
5) Daly Plan Pitifully Inadequate
6) May 16 HomeOwnership Debate in San Francisco
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 Loan Information ->FHA 0 dp loansFNMA Low programsFNMA Flexible 97FNMA Facts
Purchase money loans Nehemiah DP LoansHUD Special programFHA Fixup/Rehab loanCHFA Loan

Condos4Tenants: Fixup and Rehab Loan Programs:
FHA S-203(k) PROGRAM


HUD-FHA insures rehabilitation loans for owner-occupants to
(1) finance rehabilitation of an existing property;
(2) finance rehabilitation and refinancing of the outstanding indebtedness of a property;

(3) finance purchase and rehabilitation of a property.

Usage:
* 203(k) can be used with 1-4 family dwellings, condominiums and HUD Homes that require a minimum of $5,000 in repairs.
* 203(k) can be used to bring illegal dwellings into code compliance.
* Mixed use residential/commercial properties are eligible.
* A burnt out shell, incomplete shell or empty foundation is eligible for 203(k) financing provided it is over 1 year old.

Title 1 loans
The Federal Housing Administration (FHA) makes it easier for consumers to obtain affordable home improvement loans by allowing loans up to $25,000 without any equity in the home. In other words, the loan can exceed the value of the home.
The Title I program insures loans to finance the light or moderate rehabilitation of properties, as well as the construction of nonresidential buildings on the property. This program may be used to insure such loans for up to 20 years on either single- or multifamily properties. The maximum loan amount is $25,000 for improving a single-family home or for improving or building a nonresidential structure.
For improving a multifamily structure, the maximum loan amount is $12,000 per family unit, not to exceed a total of $60,000 for the structure. These are fixed-rate loans.
Eligible borrowers include the owner of the property to be improved, the person leasing the property (provided that the lease will extend at least 6 months beyond the date when the loan must be repaid), or someone purchasing the property under a land installment contract.
Title I loans may be used to finance permanent property improvements that protect or improve the basic livability or utility of the property--including manufactured homes, single-family and multifamily homes, nonresidential structures, and the preservation of historic homes. The loans can also be used for fire safety equipment.
Condos4Tenants: FNMA Flexible 97 Program

Borrower Economics
Flexible 97 features lowest amount of borrower's own funds to close, lowest qualifying income, and most flexible source of down payment funds with none of the income restrictions or counseling required of other loans. In addition, the monthly payment is held low with the innovative tradeoff of upfront fee for reduced mortgage insurance.
Flexible 97 requires less cash to close than FHA in many situations, particularly on loans in high-cost areas where the house price is $125,000 or greater, or in areas with lower closing costs.
Flexible 97 is always comparable to other options in terms of monthly payments.
The amount of income needed to qualify is lower for Flexible 97 than other options.
The upfront MI costs are lower for Flexible 97 -- 1.50% for Flexible 97, 2.0% for FHA.
The total amount of indebtedness is less for Flexible 97 than for FHA, resulting in significant equity buildup, even within the first five years.
Borrowers At-A-Glance
Strong credit profile
Limited funds for down payment and closing costs
Access to nontraditional sources of funds, such as gifts, grants, or loans from relatives, employer, etc.
Home buyers who may have difficulty meeting traditional qualifying ratios
Borrowers wanting to buy more home
Current homeowners who want to move up, but don't have sufficient equity in their current property to fund a conventional loan's down payment/closing costs requirements
What's the typical profile of a borrower who would get an approval recommendation through Desktop Underwriter?
Desktop Underwriter will evaluate each Flexible 97 loan based on a comprehensive
analysis of all the information in the borrower's application and credit report, and any number of variations in the risk factors evaluated by Desktop
Underwriter will result in approval recommendation. As a result, in some situations, borrowers with credit scores below the 660 threshold used in
our experiment will receive an approval recommendation -- and so will some borrowers with less than two months' reserves.
On the other hand, some borrowers with fewer compensating factors will need scores over 660, in fact greater than 680, to receive an approval recommendation.
Based on the delivery profile of Flexible 97 experiment loans and our expectations about borrowers to whom this product will be marketed, Fannie Mae expects that 7 out of 10 loans
with the following profile would receive an approval recommendation for the Flexible 97:

97% LTV
1-unit owner-occupied property

30-year fixed-rate purchase money mortgage credit score greater than 680 and 2 months' reserves
33/41 ratios
Condos4Tenants:

FNMA Loan Facts
Product type
Fixed-rate, fully amortizing, purchase money mortgages with 10-, 15-, 20-, 25-, or 30-year terms
Eligible properties
One family, principal residences, including condos and PUDs
Max loan amt
$252,700
Underwriting
Desktop Underwriter only
Max LTV/CLTV
97% (up to 105% CLTV allowed with Community Seconds® loan)
Source of funds
Gift, grant, or loan from family, employer, government, or nonprofit; or borrower's own funds, which includes loans secured by assets such as a 401(k) account, CDs, stock, cash-value life insurance, etc.
Seller contribution
3% -- may cover closing cost and upfront fee
Reserves
No minimum requirement -- actual amount varies based on loan characteristics
Ratios
Expanded -- varies based on loan characteristics
Origination
Retail, wholesale, or correspondent
Mortgage insurance
18% coverage; premium as low as 50 bp annually, payable monthly
Upfront fee
1.5% (supporting lower MI cost and all-in lower monthly payment, which may be premium rate e.g., 0.375% in note rate, or paid through seller contribution)
Delivery MBS -- delivered under existing contracts without restriction Cash -- special commitment required
Condos4Tenants: FNMA’s Low-Downpayment Programs
Community Lending mortgages are designed specifically for low- and moderate-income borrowers. To ensure that these loans are, in fact, used to assist this group in achieving homeownership, Community Lending products generally are limited to those whose income is no greater than 100 percent of the area median income (AMI) where the home is located.
There are ten mortgage options under Fannie Mae's Community Lending products. These are: Fannie Mae's Community Home Buyer's Program (SM), 3/2 Option®, Fannie 97®, Community Seconds® Mortgage Loans, Magnet 3/2® Employer-Assisted Housing Mortgage Loans, Magnet 5® Employer-Assisted Housing Mortgage Loans, Fannie Mae's Community Home Buyer's Program Start-Up Mortgage®, FannieNeighbors®, Lease Purchase Mortgage Loans, and Community Land Trust Mortgage Loans.
Specially designated high-cost areas and communities targeted for neighborhood revitalization are among the exceptions to this income limit. Income limits may also exceed 100 percent of the area median income when a housing finance agency provides the mortgage financing by using tax-exempt mortgage revenue bond funds or when a government agency uses federal, state, or local subsidy funds that have legislatively imposed income limits; in these cases, the income limits designated by such agencies shall control. State of California, borrowers may earn up to 140 percent of the area median income;
Fannie Mae's Community Lending product line can help eliminate the two primary barriers to homeownership for low- and moderate-income people -- lack of down payment funds and qualifying income. Community Lending products share many key benefits and flexible mortgage and underwriting features, such as:
Lower down payment requirements,
Lower qualifying income,
Expanded closing-cost assistance,
Lower cash reserve requirements, and Acceptance of nontraditional credit histories.
In most cases, Community Lending loans require that borrowers have incomes no greater than 100 percent of the area median income (with exceptions made for specially designated high-cost areas and communities targeted for neighborhood revitalization). Income limits may also exceed 100 percent of the area median income when a housing finance agency (HFA) provides the financing by using tax-exempt mortgage revenue bond funds, or when a government agency uses federal, state, or local subsidy funds that have legislatively imposed income limits.
Fannie Mae's Community Home Buyer's Program (CHBP), our signature Community Lending product for low- and moderate-income home buyers, is available to home buyers who earn no more than 100 percent of the area median household income. Income limits can be removed if the home is located in certain designated underserved areas using FannieNeighbors®. This 5 percent low down payment mortgage is a 15- to 30-year fixed-rate mortgage with 33/38 debt-to-income ratios. No cash reserves are required. Home-buyer education is required, but can be waived in certain circumstances.
3/2 Option® is a low down payment mortgage that offers all the underwriting flexibilities of Fannie Mae's Community Home Buyer's Program but requires less funds directly from the home buyer. With the 3/2 Option, borrowers provide 3 percent of their down payment from their own funds, and the remaining 2 percent can come from a gift from a family member, a grant or unsecured loan from a nonprofit organization or government agency, or (under certain conditions) secured financing from a government agency or nonprofit organization. Debt ratios of 33/38 are allowed on 15- to 30-year fixed-rate mortgages. No cash reserves are needed at closing. Home-buyer education is required, and post-purchase early delinquency counseling is recommended.
FannieNeighbors® is a nationwide, neighborhood-based mortgage product created to increase homeownership and revitalization in minority and low- and moderate-income communities. Income limits are removed for borrowers financing homes located in designated central cities, in eligible low-income or minority census tracts, and in HUD-designated underserved areas. All other CHBP underwriting flexibilities apply to FannieNeighbors mortgages. Home-buyer education is required but can be waived if a borrower meets certain conditions. For a list of eligible FannieNeighbors areas, call Fannie Mae at 1-800-7FANNIE. San Francisco is eligible for FannieNeighbors
Community Lending products generally limit a borrower’s income to 100 percent of the area median income (AMI) where the home is located. Specially designated high-cost areas and communities targeted for neighborhood revitalization are among the exceptions to this income limit. San Francisco is eligible, as a high-cost area.
Fannie 97® is a 3 percent, low down payment mortgage, which is ideal for the home buyer with enough income to handle monthly mortgage payments but who has difficulty accumulating cash for the down payment. The Fannie 97 mortgage features a loan-to-value (LTV) ratio of 97 percent. The product is limited to home buyers earning up to 100 percent of the area median income, with exceptions for certain high-cost areas and where the loan is made in connection with a federal, state, or local government program, where income limits are legislatively imposed.
Borrowers may choose either a 25-year term with underwriting ratios of 33/36 or a 30-year term with standard underwriting ratios of 28/36. Only one month's mortgage payment reserves are required. Face-to-face prepurchase home-buyer education and post-purchase early delinquency counseling are also required.
Community Seconds® Mortgage Loans encourage partnerships among lenders, government agencies, and nonprofit organizations while increasing affordability for borrowers. Home-buyer education and counseling is required. Community Seconds has three elements:
a Fannie Mae Community Lending mortgage loan (e.g., CHBP, 3/2 Option, or Fannie 97) that is originated by a Fannie Mae-approved lender, serves as a first mortgage, and is sold to Fannie Mae;
a subsidized second-lien mortgage -- also called a soft second -- that is often deferred, forgiven, or carries no interest or very low interest (typically provided by a federal, state, or local government agency, nonprofit organization, employer, or private foundation) and may also be supplemented by a gift, loan, or grant; and
a low down payment from the borrower.
Lease-Purchase Mortgage Loans enable nonprofit organizations to purchase homes that they then lease to lower income families with an option to buy. This gives low- and moderate-income families time to save the down payment needed to purchase the home. Part of the rent payment is escrowed into savings for the purpose of accumulating the down payment and closing costs. Fannie Mae purchases the long-term, fixed-rate, first mortgages with the nonprofit as the borrower and permits a one-time assumption by the renting families when they are ready to buy the homes. Home-buyer education is required. The Lease-Purchase Mortgage Loan can be combined with Fannie Mae's CHBP, Fannie 97, 3/2 Option, FannieNeighbors, and Community Seconds to increase affordability.

CRA Portfolio Transactions have been expanded due to the undertaking of a targeted approach to purchase or securitize CRA loans under more flexible credit and pricing terms. By focusing on payment history and the creditworthiness of the homeowner as compensating factors for underwriting flexibilities, Fannie Mae is able to work with key community groups and lenders to create tailored housing opportunities for low- and moderate-income people and communities.
Condos4Tenants: HUD Community special loan programs:
1) Officer next Door:
HUD wants to strengthen America's communities and build a safer nation by offering homeownership opportunities to law enforcement officers through the Officer Next Door Program. Designated HUD-owned properties in revitalization areas will be available under this program at a 50 percent discount. To make properties even more affordable, when a law enforcement officer uses an FHA-insured mortgage the downpayment is $100.
The law enforcement officer must occupy the purchased property as his/her principal residence for at least three years. Although not required, law enforcement officers are encouraged to purchase a home in the community they serve.
HUD's designated revitalization areas are neighborhoods that have many vacant properties, including properties needing extensive repairs, and have been selected by the locality for economic development efforts.
2) Teacher next Door:
HUD's wants to strengthen America's communities. The Teacher Next Door (TND) Initiative offers HUD-acquired, single family homes to public school teachers at a 50 percent discount. Teachers are an integral part of our communities and are often the most important mentors in a child's life. In fact, other than families, teachers are often the most important mentors in a child’s life.
Under the program, HUD offers homes located in designated revitalization areas. Revitalization areas are typically in low- and moderate-income neighborhoods, have many vacant properties and often have high crime rates, but are considered good candidates for economic development and improvement. Homes offered for sale in the program were previously insured through the FHA and then foreclosed. HUD also reduces the downpayment requirement to just $100 if the home is purchased with an FHA insured mortgage.
Teachers must live in the property as their sole residence for at least three years after purchase. A teacher is defined as an individual employed full time by a public school, private school, or Federal, State, county, or municipal educational agency as a State-certified classroom teacher or administrator in grades K through 12.
Condos4Tenants: Nehemiah Downpayment Loans:
Nehemiah will gift up to 3% of the final sales price to a qualified Nehemiah buyer for down payment and closing costs. Nehemiah is a private California non-profit housing corporation. Nehemiah is not a government program. The Nehemiah Program gifts money to qualified buyers to purchase Nehemiah properties throughout the United States.
Before a Nehemiah transaction is scheduled to record, Nehemiah delivers, for the participating buyer, a 3% gift taken from a pre-existing pool of funds to the closing company. The seller makes a 4% contribution to Nehemiah only after the successful close. Nehemiah is using its own money from a pre-existing trust fund.
Condos4Tenants: Purchase money loans
FHA/VA up to $ 220K
FNMA up to $ 253K
CRA (Community Reinvestment Act)
San Francisco City DALP loans
FNMA / CRA 1st loan at 80-90% LTV (loan to value) plus SF City loan 2nd of 5-15% LTV
1) FHA loans up to $ 220K/loan – the benefit is that unlimited amounts of FHA loan $ are available – they are federally guaranteed, securitized & sold in secondary markets. Most larger apartment buildings (eg in Lower Nob Hill) have smaller units, average 600 square ft, and will sell for prices $ 100K- 250K. (ie $ 125-400 per square foot, depending on neighborhood). Most studios and many 1BR units in SF will qualify under the FHA limits. FHA requires a 3% downpayment. FHA also has the Access program which lends the 3% for downpayment plus 2% for closing costs so that the loan is actually for more than the purchase price – this makes housing truly affordable.
2) FNMA loan programs with $ 252,700 loan limits including low downpayments (3-5%) and flexible underwriting are available. See appendices for detailed discussion of variety of FNMA options. Higher loan limits of 150% of "regular" limits ie $ 379K for high-cost areas like San Francisco are being discussed at the Federal level by HUD, FNMA etc. Some areas, like Hawaii, Alaska, Guam already have higher loan limits due to their higher prices. An excellent argument for including San Francisco in the higher limit eligibility areas can be made. This would open up the $ 400K-500K price range units for FNMA funding, also a virtually limitless pool, since they can be easily sold on the secondary market, even though not federally guaranteed. This would help tenants with larger units, and also include more of the expensive neighborhoods of the city.
3) CRA (Community ReInvestment Act) loans are currently available through lenders in the community like Bank of America, World Savings, Wells Fargo etc. as part of their stated commitment to support their local communities. They usually follow the FNMA loan limits, but there is no reason that they cannot unilaterally increase their loan amounts, either in concert with FNMA, or because local conditions or political pressure requires the higher limits.
4) Where necessary, San Francisco tax-exempt city bonds to finance the final 5-15% loan to bridge the gap between what is available through the typical loan process, and the money needed to buy a house or condominium. This will leverage city funds to maximum advantage. The approximate 2% interest spread on city funds would be used to subsidize rents for those disabled and elderly tenants who choose not to buy.
 


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