LENDER MANUAL
August 2015 (v5)
DC Open Doors is administered by the District of Columbia Housing Finance Agency. The District of Columbia Housing Finance Agency was established in 1979 to stimulate and expand homeownership and
rental housing opportunities in Washington, DC. This Lender Manual has been designed to provide our Participating Lenders with the information necessary to carry out their responsibilities as DCHFA
approved and originating Lenders.
I. Overview
II. Participating Lenders
DCHFA and Master Servicer Approval Loan Reservation System
Prohibition of Discrimination Maintenance of Loan Documents Suspension from Origination Activity
III. Data Transmission between DCHFA and Participating Lenders IV. Availability of Funds
V. Program Documents
VI. General Eligibility Requirements Maximum Borrower Income Borrower Eligibility
Eligible Jurisdictions
Pre-Purchase Homebuyer Education Eligible Property Types
Ineligible Property Types
Non-Occupying Co-Borrowers (Co-Signors) Eligible Loan Types
Program Maximum Loan Amount Credit Overlays
Tax-Exempt Mortgage Revenue Bond Compliant Loans VII. Loan Application Process
Points, Fees and Charges VIII. Loan Reservations
Rate Lock and Extensions
Reservation Restrictions
IX. DCHFA Pre-Closing File Review
X. First Trust Mortgage Loan Closing and Funding XI. Post-Closing and Purchase File Submission
Post-Closing File Submission to eHousingPlus Purchase File Submission to US Bank
XII. First Trust Mortgage Loan Purchase
XIII. Down Payment Assistance Loans (“DPALs”) DPAL Terms and Conditions
Reserving a DPAL DPAL Documents
Closing and Funding a DPAL Lender Repurchase of DPAL
XIV. Servicing XV. Tax-Exempt Mortgage Revenue Bond (“MRB”) Funded Loans
Definitions
Tax-Exempt Mortgage Revenue Bonds Mortgage Loan Terms
First-Time Homebuyer Requirements Targeted Areas
Acquisition Cost Limits Household Income Limits
Household Income Limit Exceptions Calculating Household Income Recapture Tax
Additional Closing Documents Exhibits
I. Overview
The District of Columbia Housing Finance Agency (the “Agency”) was established in 1979 to stimulate and expand homeownership and rental housing opportunities in Washington, D.C. The Agency
stimulates and expands homeownership opportunities by offering funds for affordable first trust Mortgage Loans and down payment and closing cost assistance, both of which lower the cost of home purchase. The Agency embraces its responsibility with conviction and pledges its best efforts to serve as the City's champion for homeowners and to act as the City’s principal catalyst for neighborhood investment. This Lender Manual, together with the Participating Mortgage Lender Single Family Program Agreement and all other published materials make up DCHFA’s “Program Documents.” The Agency relies upon Participating Lenders to comply with all requirements set forth in the Program Documents when
originating Mortgage Loans to be purchased by the Agency’s master servicer. Mortgage loans that do not comply with stated requirements will not be eligible for purchase by the Agency’s Master Servicer. The Agency’s first trust mortgage and its down payment and closing cost assistance loans are offered to eligible borrowers on a first-come, first-served basis. Participating Lenders may reserve funds for a first mortgage and the Agency’s Down Payment Assistance Loan (“DPAL”) for eligible borrowers.
II. Participating Lenders
Pursuant to this Lender Manual, the DCHFA Participating Mortgage Lender Single Family Program Agreement, the U.S. Bank Participating Lender Agreement and any other documents identified with respect to DC Open Doors, Participating Lenders agree to originate qualifying Mortgage Loans and to transfer, without recourse, such Mortgage Loans to the designated Master Servicer. The Master Servicer shall service and aggregate the Mortgage Loans into pools for sale and assignment to the Government National Mortgage Association (“GNMA”), Fannie Mae (“FNMA”) and/or the Federal Home Loan Mortgage Corporation (“FHLMC”) pursuant to the U.S. Bank Participating Lender Agreement. The pools of qualifying Mortgage Loans will back up the pass-through certificates purchased by the Trustee. Agency and Master Servicer Approval
A Lender must be approved by the Agency and the Agency’s Master Servicer in order to originate Mortgage Loans on the Agency’s behalf. Lenders must execute the Agency’s Participating Mortgage Lender Single Family Program Agreement, US Bank’s Lender Agreement and comply with the terms and conditions in it and all other Program Documents.
Once a Lender has been approved, the Lender must ensure that appropriate staff attends lender training before any Mortgage Loans can be reserved. A Lender must also ensure staff is continuously trained as necessary and prudent and it must make staff available for training at the discretion of the Agency. From time to time, the Agency may offer loan products that require an additional layer of approval by its Master Servicer, e.g., the FHA 203K Streamline loan product. Lenders must obtain all levels of approval in order to originate loan products, as specified by the Agency and its Master Servicer.
Loan Reservation System
Participating Lenders will be granted access to the loan reservation system (“HDS system”) via user credentials. The user credentials will be provided once a Lender has been approved to participate in the Agency’s Program.
Prohibition of Discrimination
Except as provided in paragraph (b) below, Participating Lenders shall not enter into any agreement or arrangement with any person, firm or corporation to prefer any applicant or group of applicants for Mortgage Loans over any other applicant or group of applicants. Lenders must consider all applications for Mortgage Loans in the order in which they are received and on a fair and equal basis and will not arbitrarily reject an application because of the location and/or age of the property, or in the case of the borrower, arbitrarily vary the application procedures or reject a proposed borrower because of race, color, religion, national origin, age, sex, sexual orientation, disability, political affiliation, or marital status. In accepting, evaluating and acting upon such applications, the Lender shall comply, if applicable, with the Federal Equal Credit Opportunity Act and Regulation B promulgated thereunder (the “Equal Credit Opportunity Act”).
The Agency may reserve an amount of bond proceeds for a sponsor at a mortgage loan interest rate set forth in a written notice to the sponsor. The Agency may require the sponsor to pay fees and charges for each allocation.
Maintenance of Loan Documents
Participating Lenders must maintain copies of the Mortgage Loan files for each Mortgage Loan originated under the Program until at least three years after the date the Mortgage Loan is fully paid or otherwise terminated or for such other period as required by applicable law.
Suspension from Origination Activity
The Agency, at its sole discretion, may suspend any Participating Lender from originating in the Program based upon the Lender’s failure to comply with the Agency guidelines, procedures or requirements. The Lender will be notified, in writing, of any suspension.
III. Data Transmission between DCHFA and Participating Lenders
The Lender must designate a System Administrator who will manage its access to The Agency’s FTP portal. The Agency uses its FTP portal as the primary method of data transmission. The Agency prepares all closing documents for its DPALs (Deed of Trust, Deed of Trust Note, Lender Commitment Letter, Borrower Commitment Letter and Settlement Instructions) and uploads them to the FTP portal. The Agency will provide each Lender with one set of log-in credentials (username and password) for access to the FTP portal.
IV. Availability of Funds
Historically, the Agency has allotted a limited amount of funds and designated a specific time period during which all program funds were available. The Agency no longer has designated time periods during which funds are available for its first trust mortgage loans. The Agency now administers a continuous Single Family Program, although some specific mortgage loan products may be offered for a limited time.
The Agency will make its loan products and interest rates available on the loan reservation system. The Agency will also send updated information to its Lenders using Program Notifications sent via electronic
mail. Lenders are responsible for obtaining current interest rate and product information before reserving funds for a borrower.
Down Payment Assistance Loans are available at the Agency’s discretion. V. Program Documents
All the Program Documents relevant to the Program, inclusive of forms, checklists, training dates and materials, program highlights, etc. can be found on the Program website at www.dcopendoors.com.
VI. General Eligibility Requirements Maximum Borrower Income
The Agency has a program-wide borrower income maximum of $125,580. Unless otherwise stated, the Agency uses the income reported on the loan application Form 1003 as the borrower’s income. As such, the income reported on the Loan Application Form 1003 is what is applied towards the programmatic borrower income maximum of $125,580.
Participating Lenders should see Section XV below for tax-exempt mortgage revenue bond compliant loan product household income maximums.
Borrower Eligibility
All loan applicants shall be accepted with no discrimination regarding race, color, religion, national origin, sex, age, marital status, personal appearance, gender identity or expression, sexual orientation, familial status, family responsibilities, matriculation, political affiliation, genetic information, source of income, physical or mental disability, status as a victim of an intra-family offense, place of residence or business. Citizenship of the United States is not required; however, a borrower must have a valid Social Security Number and must meet all other Investor/Insurer guidelines.
Each borrower must be at least 18 years of age. If married, both spouses are not legally required to apply for a loan. The Lender cannot require the signature of a borrower’s spouse or any other person (except if the person is a co-borrower) on any credit instrument if the sole borrower qualifies for the Mortgage Loan under the Lender and investor standards.
Lenders should note the following:
a) One person or multiple persons are eligible to be a borrower or borrowers of a single family Mortgage Loan if such person or all such persons satisfy the criteria and requirements in this Lender Manual. All references in this Lender Manual to an applicant or borrower shall, in the case of multiple applicants or borrowers, be deemed to refer to each applicant or borrower individually, unless the provision containing such reference expressly refers to the applicants or borrowers collectively.
b) Borrower(s) must be at least 18 years of age or older.
c) Borrower(s) must intend to occupy the subject property as their principal residence within 60 days of the loan closing.
e) All borrowers must meet the applicable underwriting standards of the Insurer/Investor, Agency and the Master Servicer for all loan products.
f) Co-Signers are not permitted on Agency Mortgage Loans.
Borrower eligibility is applicable to both non tax-exempt mortgage revenue bond loans and tax-exempt mortgage revenue bond loans.
Eligible Jurisdictions
The Program is available to any eligible borrower purchasing a property in the District of Columbia. Agency’s products/programs can be used for purchase of a property in any ward, neighborhood or area of the District.
Eligible jurisdictions are applicable to both non tax-exempt mortgage revenue bond loans and tax-exempt mortgage revenue bond loans.
Pre-Purchase Homebuyer Education
The Agency may offer mortgage products that require homebuyer education and/or counseling. Unless otherwise stated, homebuyer education/counseling is required to meet the standards defined by the National Industry Standards for Homeownership Education and Counseling and must be an 8 hour curriculum..
Pre-purchase homebuyer education is applicable to both non tax-exempt mortgage revenue bond loans and tax-exempt mortgage revenue bond loans.
Eligible Property Types
The property must be a single family residence which is expected to become the primary residence of the borrower within 60 days of the loan closing. Single Family Residences include detached properties, semi-detached properties, townhomes, condominium units and one to four unit properties. The borrower must be purchasing a property that is located in the District of Columbia.
Lenders must ensure the property type is allowable by the respective Investor/Insurer and the Agency’s Master Servicer.
For tax-exempt mortgage revenue bond compliant loans, Participating Lenders should see Section XIV below.
Ineligible Property Types
Ineligible property types include manufactured homes, rental homes, cooperative housing units, recreational homes, vacation homes or second homes. In addition, factory-made housing not meeting applicable Agency standards as well as mobile homes not permanently affixed to the ground are ineligible.
Ineligible property types are applicable to both non exempt mortgage revenue bond loans and tax-exempt mortgage revenue bond loans.
Non-Occupying Co-Borrowers (Co-Signors)
Co-signors are not allowed on for this Program. All borrowers must occupy the property as their primary residence.
Non-occupying co-borrowers is applicable to both non exempt mortgage revenue bond loans and tax-exempt mortgage revenue bond loans.
Eligible Loan Types
DC Open Doors will make different loan types available for qualified borrowers, including FHA and Fannie Mae loan products. Lenders may view which product types DC Open Doors is currently offering on our website, www.DCOpenDoors.com.
The Agency will announce any new eligible loan types via a Program Notification.
Eligible loan types is applicable to both non tax-exempt mortgage revenue bond loans and tax-exempt mortgage revenue bond loans
Program Maximum Mortgage Loan Amount
DC Open Doors imposes a maximum Mortgage Loan limit of $417,000.
Participating Lenders should see Section XV below for Mortgage Loan amount limits for tax-exempt mortgage revenue bond compliant loan products.
Program Maximum Debt to Income Ratio
DC Open Doors imposes a maximum 45% DTI Ratio computed based upon Investor/Insurer/Servicer allowances.
Credit Overlays
Lenders are required to adhere to any credit overlays imposed by the Agency’s Master Servicer. Credit overlays are applicable to both non tax-exempt mortgage revenue bond loans and tax-exempt mortgage revenue bond loans.
Tax Exempt Mortgage Revenue Bond Compliant Loans
From time to time, the Agency will offer loan products that are financed by the issuance of tax-exempt mortgage revenue bonds. The Agency will release a Program Notification detailing the parameters and required tax-exempt mortgage revenue bond compliance restrictions of the respective loan products so its Participating Lenders are aware. The Agency may also host training sessions and/or rollout calls specific to the mortgage revenue bond compliant loan products for its Participating Lenders. Lenders will be required to participate in any trainings and/or rollout calls specific to mortgage revenue bond compliant loan products if they intend to originate the products.
Please see the Section XV, titled Tax-Exempt Mortgage Revenue Bond (“MRB”) Funded Loans below for the requirements and parameters of origination for mortgage revenue bond compliant loans.
Tax-exempt mortgage revenue bond funded loans have separate income, purchase price and first time homebuyer requirements. Lenders must adhere to the guidelines and parameters outlined in Section XV below for these loans.
VII. Loan Application Process
Participating lenders must interview borrowers to determine eligibility for the Program prior to reserving a loan in the loan reservation system. The Lender must pre-qualify the borrower using the guidelines and parameters set by the applicable insurer/investor as well as the Agency via its published Program
Documents.
In addition to processing information regarding the borrower’s income, expenses, debts, assets, etc., the Lender must also request and receive completed copies of the following prior to reservation:
a) Uniform Residential Loan Application (Form 1003) b) AU Findings
c) Borrower Income Documentation; and 1. At least 30 days’ worth of paystubs
2. W2’s or tax returns, as per Automated Underwriting/Servicer requirements 3. Appropriate documentation of any/all other borrower income received d) Fully Ratified Sales Contract
e) Affidavit of Mortgagor and Affidavit of Seller (for Mortgage Revenue Bond Compliant Loans only)
Points, Fees and Charges
Unless otherwise stated, DC Open Doors does not allow the assessment of origination points or discount points. The Agency will publish any fees applicable to the loan products/programs it may offer. In addition to the fees the Agency publishes, the Lender may assess origination charges that are reasonable and customary.
The Lender must comply with fee/charge restrictions imposed by the applicable Insurer/Investor and the Real Estate Settlement Procedures Act (“RESPA”).
The stated restrictions on points, charges and fees are applicable to both tax-exempt mortgage revenue bond funded loans and non-tax-exempt mortgage revenue bond funded loans.
VIII. Loan Reservations
Lenders must use the loan reservation system to reserve a Mortgage Loan for a borrower. Lenders must reserve funds for the first mortgage loan and the DPAL (if applicable) as two separate loans within the loan reservation system. A loan reservation serves as an Agency “rate lock.”
Each Mortgage Loan will be assigned a loan number by the loan reservation system including DPALs. Lenders have the option to input their respective loan number into the loan reservation system however; the Agency, the compliance agent and the Master Servicer will refer to each reserved loan using the loan number generated by the loan reservation system. Instructions on the use of the loan reservation system will be provided during lender training. These instructions should be followed carefully to limit
Rate Lock and Extensions
The Agency offers a base rate lock of 70 days for all reserved loans. It is recommended that lenders disclose a maximum 45 day lock term to borrowers to allow sufficient time for the loan to be delivered and purchased. Loans must be reserved, processed, underwritten, closed and purchased by the Master Servicer within 70 days to avoid extension fees. Should a Lender need an extension, DC Open Doors offers a 30-day extension at 0.25% of the loan amount and an additional 20-day extension at 0.50% of the Mortgage Loan amount. The loan may be ineligible for purchase after 120 days from reservation date. Extension fees are netted from the Mortgage Loan purchase price when Mortgage Loans are purchased by the Master Servicer. If, for any reason, a Mortgage Loan is ineligible for purchase by the Master
Servicer, the Lender is still responsible for any extension fees incurred and will be invoiced by The Agency.
Reservation Restrictions
a) Loan Reservation System Availability – The loan reservation system is live and available for Participating Lenders to reserve loans from the hours of 10am – 8pm ET, Monday through Friday. The loan reservation system is not available on weekends or holidays.
b) Reservation Changes (Product type, loan amount, etc.) – Once a loan has been reserved on the loan reservation system Lenders may make changes to the reservation up until the file has been submitted to the Agency for pre-closing review. Once the file has been submitted for pre-closing review, changes to the reservation must be made at the Agency level. After the file has been submitted for pre-closing review Lenders may request changes to the reservation by emailing: [email protected] with ‘Reservation Change, Borrower Last Name, First Name and Loan #’ in the SUBJECT line.
Lenders must be careful when pre-qualifying borrowers and ensure that all information is entered correctly in the loan reservation system.
c) Cancellation of Reservations – Reservations should only be canceled at the request of the borrower and only when the Lender has confirmed the loan is not viable and will not close. Cancellation requests should be sent to [email protected] with ‘Cancellation Request’ in the SUBJECT line and should include the borrower name, assigned loan number, loan amount(s), and reason for cancellation. All loans should be canceled by Agency staff. Lenders shall not cancel loans in eHousingPlus.
IX. DCHFA Pre-Closing File Review
Participating Lenders must submit a pre-closing review file to the Agency for approval prior to Mortgage Loan closing.
The Agency’s pre-closing review process includes: a) Review of the Ratified Purchase Contract;
b) Verification of borrower income not to exceed $125,580 (All borrower income must be disclosed and documented, regardless of whether being used for qualifying purposes); lender is responsible to ensure all income has been documented/submitted;
c) Review of the DPAL Loan Funding Request Form; d) Verification of homebuyer education (if applicable) and;
e) Any additional Program specific items required, as per our loan submission checklist or underwriting review findings
It is in the Lender’s best interest to send the pre-closing review file as close to the loan settlement date as possible, but not less than 5 business days prior. It is the Lender’s responsibility to ensure Mortgage Loan amounts, purchase prices, settlement fees/charges, seller’s contributions, etc. are final prior to submitting the pre-closing file to the Agency for review/approval.
If there are changes to the Mortgage Loan amount after the Agency issues a pre-closing approval the Lender must obtain an updated approval before the loan can close. The Master Servicer will not purchase a Mortgage Loan with a pre-closing approval referencing a different amount than what is represented in the purchase file. The Master Servicer will cite this discrepancy as a deficiency that the Lender must clear before loan purchase.
Lenders submitting pre-closing review files must follow the instructions below: a) Files must be submitted to the Agency at least 5 business days before closing;
b) Files must be uploaded via the Secure FTP Portal using the login credentials assigned to them;
c) Lenders are to create a folder labeled as follows:
Borrower Last Name, First Name, Loan #, Pre-Closing Review d) Files will be reviewed on a ‘first-come, first-served’ basis;
e) The Agency will prescreen files for completion using the pre-closing review checklist. Files missing documentation will be taken out of the review queue and placed in the pending queue until missing documents are provided by the Lender via the secure FTP portal. Once all missing documents have been provided and the file is complete, it will be placed back in the review queue the day the missing documentation is received;
f) Lenders must submit pre-closing conditions to the Agency by uploading the document to the secure FTP portal. The Lender must identify the file by naming it as such: LastName-FirstName-DocumentTitle; and
g) The Agency endeavors to provide pre-closing approval notice on completed submissions within two business days of receipt.
Lenders should forward all inquiries on the pre-closing review process to [email protected].
X. First Trust Mortgage Loan Closing and Funding
Participating Lenders must close and fund the first trust mortgage loans per the individual loan conditions as set forth by HUD/FHA, VA, Fannie Mae, Freddie Mac, and Ginnie Mae. Lenders must also comply with US Bank’s closing and funding parameters as detailed in its Lender Guide.
Participating Lenders are responsible for full compliance with RESPA, the Federal Truth in Lending Act and with supplying the correct information to ensure compliance with the Home Mortgage Disclosure Act. Lenders are responsible for the proper preparation and execution of all legal documents including, but not limited to the closing statements, HUD-1settlement statement, Truth in Lending forms or TRID, and any Program specific documents.
Lenders do not fund DPALs. DPALs are funded directly by the Agency.
Our Mortgagee Clause for Title Insurance and Homeowner’s Insurance is as follows:
District of Columbia Housing Finance Agency, a corporate body and instrumentality of the government of the District of Columbia, its successors and/or assigns ATIMA
815 Florida Avenue, NW Washington, DC 20001
XI. Post-Closing and Purchase File Submission
Participating Lenders must submit completed post-closing and purchase files to the Compliance Agent and the Master Servicer not more than 5 business days from the loan closing date.
The post-closing and purchase files are sent separately and individually, one to the compliance agent and one to the Master Servicer, using the respective checklists. The compliance agent and the Master Servicer will conduct separate post-closing and purchase reviews for purchase approval.
Post-Closing File Submission to eHousingPlus (“Compliance Agent”)
Post-closing files must be submitted to the compliance agent no more than five business days following loan closing. Packages submitted outside of this timeframe are at risk of non-purchase by the Master Servicer.
The Compliance Agent will communicate any deficiencies via the loan reservation system. It is the Lender’s responsibility to ensure that all conditions/deficiencies are cleared within five business days of notice so the Mortgage Loan(s) can be purchased within 70 days of the reservation date (without an extension).
Final document submission to compliance agent – checklist is located on the eHousingPlus website. Final submissions to the Compliance Agent should be addressed as follows:
eHousingPlus
3050 Universal Blvd., Suite 190 Weston, FL 33331
Purchase File Submission to US Bank
Final Document Submission to the Master Servicer – Lenders must submit a complete purchase file to the Master Servicer (US Bank, N.A.) per the funding documentation requirements as detailed in its Lender Guide (checklist can be found on US Bank’s website,
http://www.mrbp.usbank.com/cgi_w/cfm/personal/products_and_services/mortgages/mrbp_divisi on.cfm)
Final submissions should be forwarded to the Master Servicer not more than 5 business days after closing. Final document submissions to the Master Servicer should be uploaded to:
US Bank’s DocVelocity Imaging System, if Participating Lender has access, OR addressed as follows (please consult most recent US Bank checklist): U.S. Bank Home Mortgage
ATTN: HFA Operations Department 17500 Rockside Road
Bedford, OH 44146
Original 1st Trust Note/Collateral should be mailed to (please consult most recent US Bank checklist): U.S. Bank Home Mortgage
ATTN: Note Vault
1550 American Blvd. E., suite 440 Bloomington, MN 55425
Participating Lenders are responsible for clearing all post-closing and purchase file conditions in a timely fashion. Mortgage Loans with outstanding conditions beyond the 70 day purchase deadline (without an extension) are at risk of non-purchase by the Master Servicer.
XII. First Trust Mortgage Loan Purchase
Once the Master Servicer receives the post-closing approval from the eHousingPlus and it approves the purchase file, it will wire funds according to the wire instructions provided by the Participating Lender. US Bank will fax a purchase summary detailing the transaction on the day the funds are wired.
Participating Lenders should reference US Bank’s Lender Guide, ‘Purchase Funding’ section for additional details regarding Mortgage Loan purchase.
XIII. Down Payment Assistance Loans (“DPALs”)
DPALs are available on a ‘first come, first served’ basis and they must be reserved on the loan reservation system along with the first trust mortgage loan. It is the Lender’s responsibility to reference the product specific checklist to ensure all required documents are being submitted to obtain the DPAL associated with the first trust mortgage loan product.
DPAL Terms and Conditions
The DPAL is a 5 year forgivable, 0% interest rate, non-amortizing, subordinate loan. The DPAL is forgiven at a rate of 20% per year and is only repayable during the five year term if the borrower sells, refinances or no longer occupies the property as a primary residence.
Reserving a DPAL
DPALs should be reserved in the reservation system when the first trust mortgage loan is reserved. Lenders should enter as much borrower information as possible when the loan is reserved and up to the loan file submission to DCHFA for pre-closing review. Any required change to a DPAL reservation after the loan file has been submitted for pre-closing review should follow the same process as the first trust mortgage loan.
DPAL Documents
The Agency’s DPAL documents consist of:
a) DPAL Loan Funding Request Form (submitted to the Agency by the Lender) b) DPAL Settlement Instructions
c) Borrower Certification
d) DPAL Lender Commitment Letter e) DPAL Borrower Commitment Letter f) DPAL Deed of Trust Note; and g) DPAL Deed of Trust
Lenders must complete the DPAL Loan Funding Request Form and include it in the pre-closing review submission for all DPALs. Once the Agency has completed its pre-closing review, it will provide the Lender with settlement instructions, a Lender Commitment Letter, a Borrower Commitment Letter and a completed Deed of Trust and Deed of Trust Note for all DPALs via the secure FTP portal.
The Lender is responsible for providing the Agency’s Settlement Instructions, Borrower Commitment Letter, Deed of Trust and Deed of Trust Note to the settlement company. Per the Agency’s Settlement Instructions, the original executed Deed of Trust Note, a certified true copy of the Deed of Trust, the executed Settlement Instructions, and the recorded Deed of Trust are be forwarded to the Agency by the settlement company.
Closing and Funding a DPAL
Lenders are required to close a DPAL simultaneously with the first trust mortgage. Lenders must submit the DPAL Loan Funding Request Form in the pre-closing file to ensure the Agency can properly and efficiently wire funds to the settlement.
Lender Repurchase of DPAL
If a first trust mortgage contains deficiencies, or for any other reason is not purchased by the Agency’s Master Servicer, the Lender is responsible for reimbursing the Agency for the DPAL. Lenders will also reimburse the Agency for a DPAL if its Master Servicer demands a repurchase of the first trust mortgage. The Agency will send a letter to the Lender requesting immediate reimbursement and detailing how funds should be remitted. Failure to reimburse the Agency for a DPAL that was closed with a first trust
mortgage loan that was not purchased by the Agency’s Master Servicer could result in that Lender’s suspension from the Program.
XIV. Servicing
All amortizing first trust loans will be serviced by the Agency’s Master Servicer.
All amortizing DPALs will be serviced by the Agency’s Master Servicer. Non-amortizing DPALs will be serviced by the Agency.
XV. Tax-Exempt Mortgage Revenue Bond (“MRB”) Funded Loans
This section addresses requirements for eligibility for all loans funded by the proceeds of Agency tax-exempt mortgage revenue bonds. The definitions, terms, requirements, etc. detailed in this section are applicable to Mortgage Loans funded by tax-exempt mortgage revenue bonds only.
From time to time, the Agency may make mortgage loan products available that must be tax-exempt mortgage revenue bond compliant (“MRB”). MRB restrictions include first-time homebuyer
requirements except in targeted areas, acquisition cost limits and household income limits. In addition to imposed restrictions, MRB loans require additional documentation as detailed below.
Prior to the origination of Mortgage Loans that are MRB compliant, a Lender shall have entered into a US Bank Participating Lender Agreement with US Bank, the Agency’s current Master Servicer, or such other similar agreement required by a Master Servicer from time to time.
It is the Lender’s responsibility to reference the product specific checklist to ensure all restrictions and documents necessary for MRB compliant loans are properly compiled.
DEFINTIONS
“ACT” means the District of Columbia Housing Finance Agency Act, Chapter 27, Title 42 of the District of Columbia Code, as amended.
“ACQUISITION COST” shall be determined based upon the mortgagor’s adjusted basis in the Residence after the rehabilitation.
“ANNUAL INCOME” means the income per calendar year of each household member of a Residence, taking into account Base Income, Overtime and Commissions, Bonus Income and Alimony and/or Child Support, as described under “Calculating Household Income” below. The aggregate Annual Income of all household members of a Residence shall equal Family Income.
“CODE” means the Internal Revenue Code of 1986, as amended and applicable regulations, published rulings and court decisions thereunder as applicable.
“DESIGNATED SERVICER”, “MASTER SERVICER”, OR “SERVICER” means the servicer
designated by the Issuer to service Mortgage Loans originated by itself and Participating Lenders each in accordance with the provisions of the District of Columbia Housing Finance Agency Participating
Mortgage Lender Single Family Program Agreement, the U.S. Bank Participating Lender Agreement, any Program Notification and the Code.
“ELIGIBLE MORTGAGOR” means a person who makes the representations set forth in Exhibit C-I hereto and who intends to occupy the Residence purchased with the proceeds of the Mortgage Loan as a principal residence within 60 days of the date of execution of the Mortgage Loan and thereafter who covenants that such Residence will not be used in trade or business, as an investment property or as a recreational home, who, except with respect to the purchase of a Residence in a Targeted Area, has not had ownership in a principal residence at any time during the three-year period ending on the date the Mortgage Loan is executed and whose Family Income does not exceed the Maximum Household Income. “ELIGIBLE RESIDENCE” means a residence located in the District of Columbia, the acquisition cost of which does not exceed the Maximum Acquisition Cost.
“FAMILY INCOME” has the meaning assigned in this Lender Manual under Section “”XV. Tax-Exempt Mortgage Revenue Bond (“MRB”) Funded Loans – Calculating Household Income.]
“FHA MORTGAGE LOAN” means a Mortgage Loan which is insured by FHA Insurance. “FHLMC” means the Federal Home Loan Mortgage Corporation or any successor thereto.
“FHLMC CERTIFICATE” means a certificate secured by a Mortgage Pool issued by the Designated Servicer in certificated or in book-entry form, guaranteed as to timely payment of principal and interest by FHLMC, for purchase by the Trustee.
“FHLMC GUIDE” means the FHLMC Single-Family Seller/Servicer Guide in effect from time to time and as may be amended by FHLMC from time to time and any other applicable home mortgage lending guidelines established by FHLMC from time to time.
“FHLMC MORTGAGE LOAN” means a Mortgage Loan, other than a FNMA Mortgage Loan or a GNMA Mortgage Loan, satisfying the requirements of FHLMC to be included in a Mortgage Pool securing a FHLMC Certificate.
“FHA” means the Federal Housing Administration.
“FHA INSURANCE” means FHA mortgage insurance issued under one of the following FHA insurance programs pursuant to the National Housing Act:
(a) FHA section 203(b); (b) FHA section 203(k); (c) FHA section 203(n);
(d) FHA section 223(e); (e) FHA Section 234(c); or
(f) Any other sections designated by the Issuer in any Program Notification provided to the Participating Lender.
“FIRST-TIME HOMEBUYER” means someone who has not held an ownership interest in a property at any time during the three year period preceding the date of the Mortgage Loan application to the extent such person is purchasing a Residence in a Non-Targeted Area.
“FNMA” means Fannie Mae, a corporation duly organized and existing under the laws of the United States, or any successor thereto.
“FNMA GUIDE” means the FNMA Selling and Servicing Guides in effect from time to time and as may be amended by FNMA from time to time and any other applicable home mortgage lending guidelines established by FNMA from time to time.
“FNMA MORTGAGE LOAN” means a Mortgage Loan, other than a GNMA Mortgage Loan or a FHLMC Mortgage Loan, satisfying the requirements of FNMA to be included in a Mortgage Pool securing a FNMA Security.
“FNMA SECURITY” means a security secured by a Mortgage Pool issued by the Designated Servicer in certificated or in book-entry form, guaranteed as to timely payment of principal and interest by FNMA, for purchase by the Trustee.
“GENERAL INDENTURE” means, collectively, the various general indentures of trust, as such general indentures of trust may be amended and supplemented from time to time, each entered into by the Issuer and the Trustee for the purpose of authorizing Bonds under the Issuer’s Program.
“GNMA” means the Government National Mortgage Association, a wholly-owned corporate instrumentality of the United States within the Department of Housing and Urban Development.
“GNMA GUIDE” means the GNMA Mortgage-Backed Securities Guide in effect from time to time, as may be amended by GNMA from time to time as modified by any and all agreements between GNMA and a Participating Lender, including, without limitation, the GNMA Guaranty Agreement and any other applicable home mortgage lending guidelines established by GNMA from time to time.
“GNMA MORTGAGE LOAN” means a Mortgage Loan, other than a FNMA Mortgage Loan or a FHLMC Mortgage Loan, satisfying the requirements of GNMA to be included in a Mortgage Pool securing a GNMA Security.
“GNMA SECURITY” means a security secured by a Mortgage Pool issued by the Designated Servicer in certificated or in book-entry form, guaranteed as to timely payment of principal and interest by GNMA, for purchase by the Trustee.
“INDENTURE” means, together, the General Indenture and any Supplemental Indenture executed with respect to a Series of Bonds.
“ISSUER, “AGENCY” or “DCHFA” means the District of Columbia Housing Finance Agency established pursuant to the Act.
“LAW” or “LAWS” means all applicable statues, laws, ordinances, regulations, orders writs, injunctions or decrees of the United States of America, the District or any state or tribunal thereof.
“LOAN-TO-VALUE RATIO” means the ratio of the original principal amount of a Mortgage Loan to the lesser of the appraised value or the Acquisition Cost of a Residence. For purposes of this
definition, the term “Acquisition Cost” shall include that portion of the purchase price of the Residence attributable to payment by the purchaser of any usual and reasonable settlement costs, including title and transfer costs, title insurance, survey fees or other similar costs, credit reference fees, legal appraisal expenses, points or other costs of financing the Residence.
“MAXIMUM HOUSEHOLD INCOME” means the maximum permitted household income as established by the Issuer in accordance with the Code.
“MORTGAGE” means a deed of trust, mortgage or similar instrument creating a first lien on real property and improvements thereon securing a home mortgage subject only to permitted encumbrances, and which, in the case of a condominium, shall include a condominium rider in the Participating Lender’s standard form, which instrument shall be the then-effective form required by Fannie Mae for Fannie Mae loans, by Federal Home Loan Mortgage Corporation for Federal Home Loan Mortgage Corporation loans, by Federal Housing Administration for Federal Housing Administration loans, with such
modifications as may be required by the terms of the U.S. Bank Participating Lender Agreement and/or the District of Columbia Participating Mortgage Lender Single Family Program Agreement.
“MORTGAGE LOAN” means an interest-bearing loan originated by a Participating Lender secured by a mortgage, made to an Eligible Mortgagor, to finance the acquisition or rehabilitation or refinancing of an owner occupied Residence pursuant to the procedures established by the Issuer in an amount not
exceeding the applicable Loan-to-Value Ratio, evidenced by a note, so long as the Mortgage Loan is assigned to the Master Servicer under the Program, for interest at the applicable interest rate and for monthly payments of principal and interest (in arrears) payable on the first day of each month initially on the basis of a maximum 30-year amortization; provided however, that the Mortgage Loan may provide for different terms as to the payment of interest if it is ever determined not to be a Mortgage Loan, insured to the extent required by the U.S. Bank Participating Lender Agreement and formed into a Mortgage Pool represented by either a Fannie Mae, Federal Home Loan Mortgage Corporation or Government National Mortgage Association security or certificate purchased by the Trustee on behalf of the Issuer.
“MORTGAGE NOTE” means the promissory note payable to the order of the Participating Lender, on behalf of the Issuer, executed by an Eligible Mortgagor to evidence such Eligible Mortgagor’s obligation to repay the Mortgage Loan and in the form provided by the Issuer and then, upon purchase, endorsed and assigned by the Master Servicer.
“MORTGAGE POOL” means the group of Mortgage Loans securing a Pass-Through Certificate and in each case, issued by the Master Servicer.
“MORTGAGOR” means, when used with respect to a Mortgage Loan, the obligor or obligors on such Mortgage Loan including an obligor by way of assumption, other than a mere co-borrower on the Mortgage Note who does not have any ownership interest in the Residence being financed pursuant to such Mortgage Note.
“ORIGINATION FEE” means a fee to be determined from time to time by the Issuer which may be increased only by written notice executed by an authorized representative of the Issuer. Such fee shall be as set forth in the applicable Program Notification, and is payable to the Participating Lender in
connection with the origination of a Mortgage Loan as permitted by law, in connection with the origination of a Mortgage Loan.
“PARTICIPATING LENDER” OR “LENDER” means any person or entity that is authorized to do business in the District of Columbia, that is approved to be an originator of FHA Mortgage Loans, Fannie Mae Mortgage Loans or FHLMC Mortgage Loans, accepted by the Issuer to originate Mortgage Loans under the Program on an ongoing basis and that continues to be authorized to do business in the District of Columbia and that continues to be approved as an originator of such Mortgage Loans. The definition of Participating Lender includes the Issuer or its designee serving in such capacity or capacities.
“PASS-THROUGH CERTIFICATE” means, as applicable, a Fannie Mae security, FHLMC Certificate or GNMA security.
“PROGRAM” means the single family mortgage purchase program established by the Issuer and implemented with the proceeds of the Issuer’s Bonds, pursuant to which the Trustee, on behalf of the Issuer, will purchase Pass-Through Certificates and the Participating Lenders will originate Mortgage Loans and will sell and assign such Mortgage Loans to the Master Servicer, and the Master Servicer will service and aggregate Mortgage Loans into pools and issue Pass-Through Certificates backed by such pools of Mortgage Loans.
“PROGRAM NOTIFICATION” means any notice, announcement, letter or other written document, including but not limited to facsimile, email or other electronic transmission, provided from time to time by the Issuer to the Participating Lender setting forth Program determinations.
“RESIDENCE” or “SINGLE FAMILY RESIDENCE” means a residential unit which is located in the District of Columbia, including a condominium unit, meeting Fannie Mae, Federal Home Loan Mortgage Corporation or Government National Mortgage Association policies, in which ownership of a residence is fee simple, which is designated and intended primarily for residential housing for one, two, three or four family units, which is determined by qualified appraisals to have an expected useful life of not less than 30 years, which will be occupied by the Mortgagor as his or her primary residence within a time period not to exceed 60 days after financing is provided, which until it is permanently affixed to land, which appurtenant land reasonably maintains the basic habitability of the residence and does not provide other than incidentally, a source of income to the Mortgagor. A Residence does not include rental houses, vacation homes or factory-made housing or mobile homes that are not permanently affixed to real property and not deemed real property under the laws of the District.
“SERIES” means all the Bonds authenticated and delivered in a simultaneous transaction, pursuant to the Indenture and the same Supplemental Indenture and designated as a Series in such Supplemental
Indenture.
“SERVICER PARTICIPATING LENDER AGREEMENT” means an agreement between the Master Servicer and a Participating Lender with respect to the origination by a Participating Lender of Mortgage Loans for purchase by the Master Servicer.
“SUPPLEMENTAL INDENTURE” means the Supplemental Indenture of Trust between the Issuer and the Trustee relating to a Series.
“TARGETED AREA” means the areas within the District of Columbia consisting of (a) census tracts in which 70% or more of the families have income which is at 80% or less of the median family income, and (b) areas of chronic distress designated and approved as provided in Section 143 of the Code.
“TRUSTEE” means the person or entity named as Trustee by the Issuer until any successor Trustee shall have been appointed pursuant to the applicable provisions of the Indenture and thereafter “Trustee” shall mean such successor Trustee appointed thereafter.
Tax-Exempt Mortgage Revenue Bonds
The District of Columbia Housing Finance Agency Act, Chapter 27, Title 42 of the District of Columbia Code, as amended (the “Act”), pursuant to which the Issuer was created, authorizes the Issuer to carry out the public purposes described therein by (a) issuing its revenue bonds for the purpose of, among other things, making available financing for residential mortgages, (b) pledging the income, revenue and receipts derived from the trust properties of the Issuer as security for the payment of the principal of and interest on such revenue bonds, and (c) entering into contracts and other instruments in connection therewith (including warehousing arrangements with third parties or with the Issuer’s own funds). In order to finance residential ownership, rehabilitation and refinancing in the District of Columbia at interest rates affordable to low and moderate income persons, which constitutes a valid public purpose for the issuance of revenue bonds under the Act, the Issuer will issue its Bonds and will use the proceeds of such Bonds to make funds available to purchase Pass-Through Certificates in order to facilitate the origination and sale by Participating Lenders of Mortgage Loans.
The Issuer and its Trustee have entered into the Indenture, and will enter into in the future, various indentures of trust and supplemental indentures with respect to one or more Series of Bonds, authorizing the issuance of such Series of Bonds, pursuant to which the Pass-Through Certificates, the proceeds thereof and all other amounts (with the exception of amounts held in the Rebate Fund) held under the Indenture or such other indentures of trust will be pledged to secure payment of the Bonds.
Mortgage Loan Terms
Mortgage Loans shall be made only to Eligible Mortgagors for the purpose of providing financing for the purchase of a Residence. Each Mortgage Loan must be secured by a first priority mortgage lien on the Residence and all Mortgage Loans must be made in accordance with the Participating Lender’s current underwriting policies, the underwriting policies of FNMA, FHA, FHLMC, GNMA or any other respective investor/insurer, the requirements established in this Lender Manual, the current criteria set forth in the FNMA Guide, GNMA Guide, as appropriate, and FNMA, GNMA or FHA rules and regulations, as applicable.
Each Mortgage Loan (a) shall bear interest at the applicable mortgage loan interest rate, (b) will provide for substantially level monthly payments due the first day of each month, (c) will have an original term not exceeding 360 months (unless otherwise provided in any Program Notification), (d) shall be the subject of a title policy or the valid commitment for the issuance of a title policy and (e) will comply in all respects with the FNMA Guide, the GNMA Guide, as appropriate and FNMA, GNMA or FHA rules and regulations as applicable.
First-Time Homebuyer Requirements
For the purposes of the Agency’s Program, a First-Time Homebuyer is defined as someone who has not had ownership interest in a property at any time during the three year period preceding the date of the Mortgage Loan application. All borrowers purchasing a Residence in Non-Targeted Areas must meet this definition. Borrowers purchasing in Targeted Areas of the District of Columbia do not need to meet the First-Time Homebuyer definition.
The Agency reviews a borrower’s federal income tax returns solely for the purposes of determining whether a Borrower is a First-Time Homebuyer. The Agency specifically reviews a borrower’s federal income tax returns to determine if a mortgage interest deduction was taken in the three years preceding the Mortgage Loan application.
In general, a borrower may not have taken a mortgage interest deduction on such borrower’s federal income tax returns for the three years preceding the Mortgage Loan application date if they are purchasing a Residence in a Non-Targeted Area.
If a borrower has taken a mortgage interest deduction within such three year period, but has not resided in the Residence for three years, the Agency will request additional documentation to substantiate the borrower’s residency status. Acceptable verification can include a verification of rent or a credit report reflecting a three year rental history in addition to the address of residency reflected on the tax returns filed to match the place of residence
If a person owns property that is deeded in their name, that person may not take any ownership in the Agency financed property. In the case of a spousal relationship, if a spouse already owns property they may not have ownership in the Agency financed property. The spouse would need to relinquish the ownership interest (to include satisfying any/all mortgages secured by that property) prior to the closing of the Agency loan in order for him/her to have ownership interest in the Agency financed Residence. Targeted Areas
Borrowers purchasing in Targeted Areas of the District of Columbia do not have to be First-Time Homebuyers to qualify for the Agency’s Programs, however they may not have ownership interest in a property at the time of the application.
Acquisition Cost Limits
Participating Lenders must ensure a borrower does not exceed the Agency’s Acquisition Cost Limits for the property to be purchased.
The Agency’s Acquisition Cost Limits are listed below with ‘TAR’ representing the limits for properties located in Targeted Areas within the District of Columbia and ‘NON-TAR’ representing the limits for properties located in Non-Targeted Areas.
District of Columba Housing Finance Agency – Acquisition Cost Limits
One Unit Two Unit Three Unit Four Unit
NON - TAR $577,384 $739,176 $893,492 $1,110,392
If there is an increase in the Acquisition Cost of the property prior to the Mortgage Loan closing, and the new total cost exceeds the applicable Acquisition Cost Limit, the property is no longer eligible for Agency financing and the Mortgage Loan cannot close.
If there is an increase in the Acquisition Cost that results in the Mortgage Loan amount exceeding the reservation amount, the Lender must get approval from the Agency to increase the Mortgage Loan amount.
The calculation for the Acquisition Cost must include the following, all of which must be reflected on the Acquisition Cost Worksheet:
a) The contract sales price;
b) Any fixtures (for example carpeting, light fixtures, curtain rods, etc.) NOT included in the contract sales price for the property;
c) Any capitalized ground rent;
d) Any additional costs to complete the property NOT included in the contract sales price; and
e) Any other financial consideration between the buyer and seller in connection with the property NOT included in the contract sales price.
The Agency will send a Program Notification if Acquisition Cost Limits change. The Agency will also update this Lender Manual.
Lenders should direct any questions regarding the completion of the Acquisition Cost Worksheet to [email protected].
Family Income Limits / Maximum Household Income
The Agency will include the income of all household members 18 years of age or older who earn income in its Family Income calculation. The Agency calculates Family Income solely for the purposes of compliance with the Code.
Although the Agency will perform the Family Income calculation, Lenders should work to ensure a borrower’s Family Income does not exceed the Agency’s Maximum Household Income during its underwriting process. Lenders should estimate a borrower’s Family Income by using the Calculating Family Income section below as a guide.
Unless otherwise stated, the Maximum Household Income for DC Open Doors is $125,580. The Maximum Household Income is the same as the programmatic income limit of $125,580 for any household or family size.
Maximum Household Income Exceptions
The Agency has the ability to allow a limited amount of Mortgage Loan origination to borrowers with Family Income that exceeds the Maximum Household Income. In circumstances where a borrower meets all other Program requirements and has Family Income in excess of the Maximum Household
Income, the Lender can request a waiver to the Maximum Household Income restriction. The waiver request should be sent to the Agency at: [email protected] with ‘Maximum Household Income Waiver Request, Borrower Last and First Name’ in the SUBJECT line.
The Lender should proceed with reserving the Mortgage Loan in the loan reservation system only/if the Agency has approved the request.
Calculating Household Income
The Agency’s calculation of Family Income will include the income of all household members 18 years of age or older that earn income regardless of whether all persons are co-borrowers on the Mortgage Loan. The Agency’s determination of Family Income will typically be higher than the Lender’s determination of qualifying income, however the Agency’s determination of Family Income is not used for underwriting and it is not included in the file that is sent to the Master Servicer for purchase. The Agency strongly encourages Lenders to work to ensure a borrower’s Family Income is within the Agency’s determination of Family Income. A Mortgage Loan reserved for a borrower with a Family Income that exceeds the Maximum Household Income will not close unless the Agency has issued a waiver.
The Agency primarily uses the most recent paystub or a year to date profit and loss statement of all household members over the age of 18 to calculate the Family Income of those members. The Agency includes the following types of income in its calculation:
a) Base Income – Base income from salary/wages may be documented with 30 days’ worth of pay stubs or by a standard written Verification of Employment (VOE);
b) Overtime and Commissions –Overtime, and commission income may also be documented by a standard written VOE or by using pay stubs that clearly identify the amount attributed to overtime and/or commission income;;
c) Bonus Income – The Agency will need documentation to determine how often bonus income is paid in order to determine the amount to consider as part of the Maximum Household Income; and
d) Self-Employment Income – Self-employment income will be calculated using the borrower’s most recent filed Federal Tax return, including all schedules and most recent business return, if applicable. If the tax return for the most recent year is due and not yet filed, the Agency, at its sole discretion, may require a profit and loss statement for that year.
Alimony and/or Child Support – Court ordered alimony and/or child support received by any household member must be documented. Lenders can submit a copy of the divorce decree, separation agreement or the court order of child support to document these two forms of income. If this income is not being received on a regular basis then a child support statement from the office of Child Support Enforcement (or some other acceptable form of documentation) reflecting amounts received for the past 12 months can be used to document the reduced income amount.
If a household member 18 years of age or older does not earn income, the borrower must draft and sign a statement to this fact. The statement must be acceptable to the Agency, in its sole discretion.
If a borrower’s calculated Family Income exceeds the Maximum Household Income for the applicable family size, the borrower is not eligible for the Agency’s Program and the Lender must reject the
Mortgage Loan application. If the loan package has made it past the Lender and is being submitted to the Agency for pre-closing review and the Family Income exceeds the applicable Maximum Household Income the Agency will reject the loan application and the Lender is responsible for communicating the rejection to the borrower.
Lenders should forward all questions regarding Family Income calculations to
[email protected] with “Family Income Limit” in the SUBJECT line. Recapture Tax
Note: The following information is for informational purposes. Borrowers should consult a tax professional or the IRS for more specific information regarding recapture tax.
Tax-exempt mortgage revenue bond funded loans may be subject to recapture tax. In 1988 Congress enacted legislation, which was subsequently amended in 1990, to recapture some or the entire subsidy (savings realized from the lower interest rate) from first time homebuyers who receive financing from tax-exempt mortgage revenue bond programs.
In general, recapture applies to homeowners who obtained mortgage financing from a tax exempt mortgage revenue bond funded program and who also sell the primary residence financed with tax-exempt mortgage revenue bond proceeds within nine years of the purchase date. The recapture tax is paid as additional federal tax liability for the tax year in which the home is sold.
DCHFA will absorb any recapture tax liability due and payable for all DC Open Doors borrowers. The Borrower should contact the Agency directly regarding necessary documentation and payment. Additional Closing Documents
Participating Lenders must obtain completed and signed copies of the following documents for tax exempt mortgage revenue bond compliant loans:
a) Affidavit of Mortgagor
b) Acquisition Cost Limit Worksheet c) FHA/VA/FNMA/FHLMC Addendum d) Recapture Tax Notice
e) Affidavit of Seller