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VHDA Program Updates in August, 2008

To:       VHDA Originating Lenders
Date:    August 27, 2008

Re:       FHA Plus
            Federal First-time Homebuyer Tax Credit
            Escrows for New Construction Properties
 

VHDA’s FHA Plus Program:

There has been much confusion regarding the status of acceptable down payment assistance programs for FHA insured loans as a result of the recent federal legislation. VHDA’s FHA Plus program will remain unchanged.  Since VHDA is considered an “Instrumentality of the Government”, the FHA Plus down payment assistance program will not be restricted by the new combined loan to value guidelines.  The first mortgage will continue to be limited by the maximum FHA allowable limits and the FHA Plus second mortgage will be a maximum of five percent of the lesser of sales price or appraised value. Borrowers may not receive cash back at closing.  If a review of the HUD 1 indicates the borrower will receive funds, the FHA Plus second mortgage must be reduced.  This will require the Delegated Loan Approval to be resubmitted to VHDA as well as a revision to the Disbursement Funds request.  Borrowers must have a minimum of 1% contributed either towards the transaction or in reserves from their own funds (no gifts or loans) to be eligible for FHA Plus financing. 
 

Federal First-time Homebuyer Tax Credit

The new federal First-time Homebuyer Tax Credit will not be available to borrowers who receive a VHDA loan financed with mortgage revenue bonds.  It is important for borrowers who are eligible for VHDA financing to be aware of the benefits of the tax credit compared to those of VHDA financing.  VHDA has prepared a Federal First-time Homebuyer Tax Credit information brochure, that identifies the benefits of each and a comparison to assist Lenders, REALTORS ® and homebuyers in better understanding the two options. Lenders are encouraged to assist borrowers in fully exploring the benefits of the tax credit as compared to VHDA financing.
 

Accurate Tax Escrow Estimation for New Construction

Lenders are reminded that tax escrows for new construction are to be based on estimates of the property taxes considering the value of land and improvements. When qualifying borrowers and conducting the settlement, realistic estimates of property taxes reflecting the value when assessed should be used in qualifying and in the establishing the escrow amounts at closing.  Lenders are responsible for reviewing the HUD 1 and instructing the closing agent to establish tax escrows based on the estimated value with improvements.

 

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Toll free: 800-227-8432
Local: 804-783-6725
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VHDA Fraud, Waste or Abuse Hotline

Phone: 804-915-3146
Email: InternalAudit@vhda.com
Website: Reporting Fraud, Waste or Abuse