Solar Leases FHA/VA. Term of lease must be greater than the loan term

Solar Leases

FHA/VA

· Term of lease must be greater than the loan term

· The monthly payment for the lease must be included in the debt to income ratios for the

borrower

· Must have like comps (with solar panel leases)

· Appraiser must comment on market acceptability (to verify not a unique property)

· There cannot be any deed restrictions that would impair/restrict the first lien

· Property Assessed clean energy (PACE) Loans are not eligible when they do not meet applicable agency subordinate financing requirements,

including the requirement to provide a subordination agreement. The Home Energy Renovation

Opportunity (HERO) Program is an example of an ineligible program.)

· Underwriter should contact local HOC or RLC to verify acceptability

Conventional Financing:

· It must meet Agency requirements for a subordinating lien, as well as Agency guidelines relative to site utilities (typically Property Assessed clean energy (PACE) Loans are not eligible when they do not meet applicable agency subordinate

financing requirements, including the requirement to provide a subordination agreement. The Home

Energy Renovation Opportunity (HERO) Program is an example of an ineligible program.)

· There cannot be any deed restrictions that would impair/restrict the first lien

· The appraiser must comment that solar power is common for the area, that it meets community standards, and there are no marketability issues

· If the appraiser gives value to the solar energy source, it must be supported with closed comps of properties with the same type of solar energy,

otherwise no value can be given

· The monthly payment for the lease must be included in the debt to income ratios for the

borrower

· Must meet Agency requirements for Title Exceptions

SUBORDINATE FINANCING

· Secondary financing must meet FNMA/FHLMC standard secondary financing guidelines.

· The max LTV allowed is 80% when new

subordinate financing exists except when using a down payment assistance program (DPA). When using a DPA 80% max LTV limit does not apply.

· Private secondary financing is not allowed (with the exception of seller paid carrybacks, see details below on this option.)

· When a borrower is obtaining a new closed end second lien that will close simultaneously with the first mortgage, that closed end loan must be a fixed rate loan, may not be an interest-only loan nor have a balloon feature. This does not apply to Home Equity Lines of Credit (HELOC).

· Subordinate financing must not have negative amortization, no pre-payment penalties, no wrap around terms, no balloon of less than five years, no maturity of less than five years unless it is fully amortizing, no financing of judgments or tax liens.

· Subordinate financing with prepayment penalties are not permitted, unless all of the

following are met: (1) The subject property is a 1-unit primary residence or second home; (2) The maximum term of the prepayment penalty does not exceed 3

years from the note date of the subordinate lien; AND (3) A prepayment penalty, or flat fee, closure or early termination fee does not exceed the lesser of 1% of the subordinate lien note at the time of prepayment or $500.

Note: HELOCs or closed-end second mortgages that pay for some or all of the closing costs with terms that allow the lender to recoup the closing costs paid on behalf of the borrower if the HELOC or

second mortgage pays off early, are not defined as a prepayment penalty and is acceptable for the

purpose of subordinate financing.

· A copy of the note must be obtained for subordinating HELOC mortgages

· All subordinate financing must provide

documentation to show the subordinate financing repayment terms by providing a copy of the

subordination agreement, mortgage deed of trust, note, and proof of the current monthly payment (current statement)

· The following documentation from the

subordinate financing is required on LP loans with subordinate financing:

· Final Truth-in-Lending Disclosure Statement

· Good Faith Estimate

· HUD-1 Settlement Statement or other closing statement

· HELOC statement (if applicable)

· For loans combined with a downpayment assistance program (i.e. city seconds, etc) the

income is limited to a maximum of 100% of the Area Median Income (AMI) as defined by HUD, unless the property is located in a high cost areas where a

higher AMI is allowed.

· The borrower must contribute a minimum of 5% from their own funds.

· All additional guidelines required by the

specific second mortgage/down payment assistance program must be met.

· If secondary financing is a CHDAP, must enter CHDAP Number and registration expiration date in the Loan Notes section of FastTrac.

Seller Carrybacks:

· Owner Occupied principal residence props only.

· Borrower must have made a 5% minimum down payment/cash investment.

· The maximum CLTV is the lesser of 95% or the published CLTV limits for the product.

· Must meet all standard FNMA/FHLMC subordinate financing requirements.

· All payments related to secondary financing must be included in the debt ratio.

· The lien must be recorded and clearly subordinated.

· A copy of the note must be obtained to verify the amount secured against the property.

· Regular payments must cover at least the principal and the interest at the market rate.

If financing provided by the property seller is more than 2% below the current standard rates for second mortgages, it must be considered a sales concession and the subordinate financing amount must be

deducted from the sale price or appraised value, whichever is lower.

· The subordinate loan cannot have a maturity date or a balloon or call provision of less than five years from the Note date of the new mortgage, unless the junior lien is fully amortizing

· The subordinate loan must permit pre-payment at any time without a penalty.

· Scheduled payments under the secondary financing must be due on a regular, monthly basis