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SF Program Changes Take Effect April 1st

To: VHDA Originating Lenders

From: Michele Watson

Date: February 8, 2008

Re: Important Program Change Announcement

The recent turmoil in the housing and mortgage lending industry is posing significant challenges for VHDA Single Family Homeownership loan programs. The demise of sub-prime lending along with tightening of guidelines in other finance programs has resulted in increased demand for VHDA products. At the same time, it has become very difficult to sell our bonds in the capital markets which our programs rely on for funding.

This is severely limiting VHDA’s ability to raise capital for our lending programs, even though VHDA continues to maintain a strong financial foundation (AAA rating) and outstanding portfolio performance. This constricted access to capital has had the most significant impact on our ability to sell taxable bonds that fund our Flexible Alternative programs.

Therefore, in an effort to best utilize our resources, maintain adequate long term funding for our loan programs and to mitigate the risk to our borrowers and VHDA, the following program changes were approved by VHDA’s Board of Commissioners on Wednesday, February 6, 2008 and will be implemented effective with new reservations beginning
April 1, 2008:

Flexible Alternative Loan Programs:
All VHDA Flexible Alternative Loan Programs will be suspended and no new reservations accepted after March 31, 2008. VHDA will continue to assess the market and will consider re-activation of this program when long term resources are again available.

Step Rate Program:
VHDA’s Step Rate Program (including FHA, VA, RHS and Conventional) will be suspended effective April 1, 2008. The Step Rate program represents only a small portion of our overall loan production, however, the increasing payment structure presents a greater risk to our borrowers and VHDA in this uncertain market.

Conventional Insured Loans:
VHDA Conventional insured loans will be limited to a maximum 97% loan to value with new reservations beginning April 1, 2008.

All reservations made prior to April 1, 2008 will be honored with our standard reservation and commitment lock-in policy.

FHA,VA, Rural Housing Fixed Rate Loans:
VHDA FHA, VA, Rural Housing and FHA Plus fixed rate programs will remain unchanged.

VHDA will continue to assess market conditions and will make program modifications when appropriate. During this unstable market environment, VHDA is committed to make every effort to maintain our most essential products available to assist low to moderate income borrowers achieve affordable homeownership.

Thank you for your continued support of VHDA and our first time homebuyers. Please feel free to contact your assigned VHDA Business Development Officer, the VHDA Underwriting Department, Janice Burgess or myself at 804-343-5748 or by email at


Michele Watson
Director Homeownership Programs

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