To: VHDA Originating Agents
Date: April 10, 2008
Re: Lender Approval Requirements
Reservation Lock-In Procedures - Reminder
Conventional Insured Loans
Affidavit of Seller/Bank-Owned Properties
Gifts – Allowable Sources
Lender Approval Requirements
VHDA regulations have been revised regarding approved lender requirements. All active VHDA lenders must comply with these requirements no later than March 31, 2009.
1. Must be licensed as a mortgage lender or broker as applicable under the Virginia Mortgage Lender or Broker Act (including nonprofit corporations that may be exempt from licensing when making mortgage loans on their own behalf), unless the lender is exempt from licensure under certain specified exemptions in the act.
2. The minimum net worth requirement for approved lenders is increased to $500,000.
3. All approved lenders must have a physical office located in Virginia that is staffed with qualified personnel where the general public may go to make an application for a mortgage loan.
4. Requires that the lender be eligible to and have staff qualified to originate loans under all of VHDA’s single-family loan programs (excluding Rural Development).
5. Must have a fidelity bond and mortgage errors and omissions coverage in an amount at least equal to $500,000.
6. Requires that the originating lender must have a history of satisfactory performance in VHDA’s and other lenders’, insurers’, guarantors’ and investors’ mortgage programs and that an originating agent terminated from the program may not re-apply for 24 months.
Lenders are also required to originate and close no less than 5 loans during the first 12 months of approval and each calendar year thereafter to continue active participation.
Reservation Lock-in Procedures
The current market environment and increasing demand for VHDA financing is creating the need for VHDA rates to be changed more frequently. Lenders are reminded that VHDA’s on-line reservation system is available 24 hours per day to enable loans to be locked after hours to protect borrowers from increasing rates. While we cannot guarantee the time or number of rate changes that may be necessary each day, we will attempt to have rates available each day until approximately 10:00 am each morning and will restrict rate changes when possible to only this time period each day (10:00 am – 12:00 noon).
SPARC reservations may not be made through the on-line system and must be faxed to VHDA after authorization from the SPARC sponsor. Please request the SPARC sponsors to fax these completed documents to you as quickly as possible so that you in turn can fax the request to VHDA to ensure the rate lock.
Conventional Insured Loans
Lenders are reminded that all VHDA loans that require mortgage insurance must comply with the individual mortgage insurer guidelines. Even though VHDA may offer more flexible guidelines, loans must meet the stricter of VHDA or the insurer guidelines. This includes adherence to criteria such as maximum LTV/CLTV, minimum credit scores, cash reserves, maximum seller contributions, maximum ratios, minimum borrower contribution and property requirements. Many of the mortgage insurance companies are now limiting their Loan to Value and Combined Loan to Value (including all liens, downpayment assistance, etc) to a maximum of 97%. In addition, stricter LTVs and CLTVs may apply to properties located in declining markets. Please contact your mortgage insurance representative to confirm their specific requirements and the effective date of any change. VHDA does not accept loans insured with A minus pricing.
Increased interest in the FHA Plus program has resulted in some issues regarding accurate input in the FHA Scorecard system and adherence to program guidelines. Please ensure the following guidelines are followed:
The FHA Plus second mortgage must be input as secondary financing and not as a gift or other asset.
The borrower must have the equivalent of 1% documented as available to either be contributed toward the funds for closing or available as cash reserves prior to loan approval.
Borrowers can not receive funds at closing. An overestimation of closing costs will create a loan amount that is too high and result in the borrower receiving funds at closing. If this occurs, then the FHA Plus loan amount must be reduced, underwriting approval revised, loan disbursement revised and loan closing will be delayed. VHDA does allow the lender to consider funds paid by the borrower (earnest money deposit, appraisal, credit report, reservation fees, etc.) reflected on the HUD 1 to offset any amounts received by the borrower at closing to avoid the need to revise the loan amount. This should be used as a cushion to avoid the need to revise the loan amount and not a method to allow the borrower to be reimbursed for all funds paid in advance of closing.
Affidavit of Seller / Bank Owned Properties
There have been an increased number of transactions where the property being financed with a VHDA loan is owned by a bank as a result of a foreclosure. Please remember that in these situations a representative of the seller (bank) must execute the Affidavit of Seller. If the bank has contracted with a third-party management company to sell the property, then we will allow the signature of the management company as power of attorney for the bank. The same management company representative must execute the Sales Contract, Deed and Affidavit of Seller.
Gifts – Allowable Sources
VHDA allows gifts from a relative, employer or non-profit not involved in the transfer or financing of the property. Gifts from seller-funded organizations such as Nehemiah, AmeriDream or Genesis may only to be used with FHA-insured loans in accordance with FHA Guidelines.