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FHA Streamlined(K) & 203(k) Training PowerPoint PPT Presentation


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FHA Streamlined(K) & 203(k) Training. Presents. July 20, 2011. FHA Streamlined(k) Rehab Program. Enables borrowers to finance both the purchase or refinance of a home and the cost of its rehabilitation through a single mortgage. Standard FHA guidelines apply ( 1-4 units/ No Condo’s )

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FHA Streamlined(K) & 203(k) Training

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Fha streamlined k 203 k training

FHA Streamlined(K) & 203(k) Training

Presents

July 20, 2011


Fha streamlined k rehab program

FHA Streamlined(k) Rehab Program

  • Enables borrowers to finance both the purchase or refinance of a home and the cost of its rehabilitation through a single mortgage.

  • Standard FHA guidelines apply (1-4 units/ No Condo’s)

  • Cash out is not allowed. Loan proceeds not advanced must be applied to principal.

  • Streamlined(K) allows for limited improvements up to $35,000 Maximum. Up to 50% of the repairs released ($17,500 max)

  • Minimum repair amount for a streamlined(k) : NONE

  • Term: 30 year fixed, 30 year fixed w/buydown, 1 year ARM


Fha streamlined k rehab program1

FHA Streamlined(k) Rehab Program

The Streamlined (k) program is intended to facilitate minor rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. Due to the rehabilitation amount limitation of $35,000, eligible improvements are limited and can not include any major rehabilitation or remodeling, new construction such as a room addition, repairs to structural damage, or site amenity improvements.***

***Repairs of this nature should be completed under the standard

203(k) program.


Streamlined k eligible improvements

Streamlined(k) Eligible Improvements

Examples of eligible improvements are listed below (this list is not all-inclusive):

• Repair/Replacement of roofs, gutters, and downspouts

• Repair/Replacement/Upgrade of existing heating, ventilation, and air conditioning systems

• Repair/Replacement of plumbing and electrical systems

• Repair/Replacement of flooring

• Minor remodeling that does not involve structural repairs, such as kitchens

• Exterior and interior painting

• Weatherization, including storm windows and doors, insulation, and weather stripping

• Purchase and installation of appliances, including free-standing ranges, refrigerators,

washers and dryers, dishwashers, and microwaves

• Improvements for accessibility for persons with disabilities

• Lead-based paint stabilization or abatement of lead-based paint hazards

• Repair/Replacement/Addition of exterior decks, patios, porches

• Basement finishing and remodeling that does not involve structural repairs

• Basement waterproofing

• Replacement of windows and doors and exterior wall re-siding


Appraisal requirements

Appraisal Requirements

  • After Improved Value (2 appraisals not required)

    Appraiser to provide appraised value with improvements – Appraisal is requested from the appraiser as a Streamlined(k) appraisal. Provide appraiser with a copy of bid(s) from contractor(s), prior to inspection.

  • As is value

    *Purchase:Appraiser to provide an as is value in the body of the appraisal.

    *Refinance: Use the Existing Liens as the “As is” value when this does not exceed a reasonable estimate of value.

    (Not required for HUD-owned Property/ HUD contract sales price is the “AS IS value)

  • List Improvements/Repairs

    Appraiser to review and list on the appraisal as included repairs. List of repairs to correspond with the Contractors Bid.


Hud form 92700 203 k worksheet purchase transaction

HUD FORM-92700203(K) WorksheetPurchase Transaction

A1 Purchase Contract

A2 Appraisal

A3 Appraised Value (After Imp. Value)

A4 A3 X 110%

A5 Good Faith Estimate

B1 Contractors Bid/Appraisal

B2 Contingency Reserve Schedule

B3 1 Inspection Fee ($100 approx)

B10 Sub-total Lines B5 thru B9

B11 Origination Fee greater 1.50% or $350

B12 N/A Disc. Pts.

B13 Sub-Total Release for Closing

B14 Total Rehab cost less than $35,000

C1 Lesser of A1 or A2

C2 B14

C3 Lesser of C1+C2 or A4

C4 96.50% of Line C3*

*Maybe less if HUD Owned Property (REO)

C5 Will auto populate (ignore this figure)

C6 C3+C5-C4= required cash into transaction

Down payment + closing costs

C7 C4 (re-enter)

Enter UFMIP Premium, Interest Rate & Discount Points. (Total loan amount will self calculate)

DE Underwriter and Borrower(s) signature required.


Hud form 92700 203 k worksheet refinance transaction

HUD FORM-92700203(K) WorksheetRefinance Transaction

A1 Existing Liens for Refinance

A2 Existing Liens for a Refinance

A3 Appraised Value

A4 A3 X 110%

A5 Good Faith Estimate

B1 Contractors Bid/Appraisal

B2 Contingency Reserve Schedule

B3 1 Inspection Fee ($100 approx)

B10 Sub-total Lines B5 thru B9

B11 Origination Fee greater 1.50% or $350

B12 N/A Disc. Pts

B14 Total Rehab cost less than $35,000

D1 A1 + B14 + A5 + Discount Point on Total loan amount minus (-) B12 minus (-) MIP Refund

D2 Lesser of A2 + B14 or A4

D3 D2 multiplied by 97.75%

D4 Base Loan amount lesser of D1 or D3

D5 D1 – D4 = Borrowers required cash to close

Enter UFMIP, Interest Rate & Discount Points.

DE Underwriter and Borrowers signature(s) required


203 k codes

203(k) Codes

Section of the ActLoan Description ADP Code

203(k) Improvements/First Lien 702

203(k) Adjustable Rate Mortgage (ARM) 730

203(k) Interest Buy-down (IBD) 813


Contingency reserve

Contingency Reserve

  • A contingency reserve is typically required to cover unexpected expenses. On properties older than 30 years and over $7,500 in rehabilitation costs, the cost estimate must include a contingency reserve. The reserve must be a minimum of:

  • 10% of the cost of rehabilitation

  • If utilities were not turned on for inspection, a minimum 15% is required.

  • The contingency reserve can only be used on those changes that affect the health, safety, or an increase in cost due to a necessity item.


203 k lender collected fee

203(k) Lender Collected Fee

Supplemental origination fee When the mortgage involves issuance of advances, the Lender will collect from the borrower supplemental origination fee.

This fee is calculated at the greater of 1.5% of the portion of the mortgage allocated to rehabilitation, or $350.

JMAC Lending deducts this fee from wire proceeds for the management of the rehabilitation.

The supplemental origination fee is collected in addition to the origination fee.

***Refer to line 11 of HUD Form 92700 (203k worksheet)***


Contractors requirements

Contractors Requirements

  • W-9 form

    Required for every contractor signed and completed. (Check appropriate box)

  • Contractors Bid

    Signed & dated by borrower(s) and Contractor(s). Contractors Name, address & phone number. Contractor to list repairs, supplies, labor costs, etc. (Detailed)

  • Contractors License

    Verify on the appropriate State website. (State specific)

    Contractor must be licensed for the work requested. (General)

    Bond information is also available

  • Contractors Liability Insurance

  • Contractors Resume

    2 year as a licensed contractor

  • 3 Reference letters.

    Reference letters from previous customers, detailing specific work completed. (Name/addresses/phone numbers)

  • Homeowner/Contractor Agreement

    Signed & dated by borrower(s) and Contractor(s). Enter cost of work and target completion date.


W 9 form contractor to complete

W-9 FormContractor to Complete

Contractor to complete and check the appropriate box

for type of business.

Contractor to enter Social Security Number or Employer ID number.

Contractor to sign and date. Must be submitted with loan package.

Contractor to sign

and date


Sample contractor bid

Sample Contractor Bid

Business Letterhead

Detailed and list each item

of work and cost of each

item.

Detail % of funds to be

released at first draw.

Must include labor costs

Signed & dated by borrower

and contractor. Including

Phone numbers.


California state contractors license

California State Contractors License


California state contractors bond

California State Contractors Bond

Verify contractors

information

Commercial General Liability

Valid- verify on State of

California website that

the contractor renews

annually.


Nevada state contractors license

Nevada State Contractors License


Nevada state contractors bond

Nevada State Contractors Bond


Sample contractor resume

SampleContractor Resume

Minimum

2 years experience

Business Letterhead


2 nd sample of contractor resume

2nd Sample ofContractorResume

Minimum

2 years experience

Business Letterhead


3 reference letters

3 Reference Letters

Include name, address and phone number of client.

Detail specific work completed by the contractor.

Completed in a timely manner and to customer satisfaction.

Signed by client


Documents signed by borrower

Documents signed by Borrower

  • 203 (k) Worksheet

    Send out final with loan documents.

  • Contractors Bid

  • Homeowner/Contractor Agreement

    Complete form, include rehabilitation amount, and completion date

  • Borrowers Acknowledgment

    Signed by borrower(s) and Lender. Borrower(s) must check a box.

  • Rehabilitation Loan Agreement

    Enter date, borrower(s) and contractors names, rehabilitation amount

  • JMAC LENDINGDraw Request


Homeowner contractor agreement

Homeowner Contractor Agreement

Complete name,

addresses and phone

numbers

Enter agreement date

Enter the property address

Enter dollar amount of

rehabilitation

Borrowers and Contractors

to sign and date

Prior to Submission


203 k borrower s acknowledgement

203 (k) Borrower’sAcknowledgement

Borrower to check

one of the three

boxes.

All borrower s to

sign and Date

Lender (JMAC) to

sign at funding

Prior to Submission


Rehabilitation loan agreement

Rehabilitation Loan Agreement

This form will be populated and

sent out with loan documents.

Item #4 of this form is not

completed by the doc system. The

underwriter will be required to

enter this figure. This figure is

taken from line B14 of the 203(k)

Worksheet (HUD Form 92700)

Borrower(s) to sign and date

Lender to sign, date and add title

Sent out with Doc

Sent out with Docs


Rehabilitation loan agreement page 2 of 2

Rehabilitation Loan AgreementPage 2 of 2

Sent out with Doc


Jmac lending initial draw request

JMAC Lending Initial Draw Request

Contractors Name

List every contractor

Dollar amount of check

(not to exceed 50%)

All borrowers and

Contractors to sign & date

Must be submitted Prior to

documents


Funders requirements

Funders Requirements

  • Sign Rehabilitation Loan Agreement

  • Sign Borrowers Acknowledgment

  • Disbursements issued per Jmac Draw Request

  • Checks must be payable to Borrower and Contractor

  • May release up to 50% of Rehabilitation not to exceed $17,500


Streamlined k disbursement

Streamlined(k) Disbursement

  • Up to 50% of the rehabilitation funds are disbursed immediately. Included with the disbursement is an instruction letter that explains how the final disbursement works.

  • A W-9 must be provided to set up the contractor in our system, and a two-party check is made out to the borrower and the contractor and sent to the borrower. If multiple contractors are being used, up to 50% of the cost of the repairs for each contractor is disbursed up front. (Complete JMAC Initial Draw Request)

  • The balance is disbursed upon completion of all work. If the cost of the renovation is over $15,000, an inspection by the original appraiser is required. As with the rest of the rehabilitation process.

  • Streamlined(k) has two disbursements; one initially disbursed at closing, and the second and final disbursement once all work has been completed.


Application process

Application Process

Borrower locates property in need of repairs or determines that his/her current home needs improvements

Borrower determines improvements needed and schedules an inspection with a cost consultant (or creates a list of improvements)

Note: A cost consultant is not required on Streamline transactions

Cost consultant or borrower completes the work write-up and prepares contractor bid packages to obtain cost estimates

Appraiser uses work write-up to determine “as-is” and “improved value”

Loan closes

Construction begins within 30 days of loan closing — must be completed in six months or less


Example determining the maximum loan amount

Example: Determining the Maximum Loan Amount


References

References

  • HUD references: HUD 203k Handbook 4240.4http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4240.4/index.cfm

  • 203k Mortgagee letters: http://www.hud.gov/offices/hsg/sfh/203k/203kltrs.cfm

  • FHA 203k reference site: http://www.hud.gov/offices/hsg/sfh/203k/203kmenu.cfm

  • FHA Frequently asked questions: http://www.fhaoutreach.gov/FHAFAQ/

  • Cost Consultants: https://entp.hud.gov/idapp/html/f17cnsltdata.cfm

  • Contractors State License Board:

  • California:http://www.cslb.ca.gov/

  • Nevada: http://www.nvcontractorsboard.com/

  • Utah:https://secure.utah.gov/llv/search/index.html

  • Washington:http://www.lni.wa.gov/TradesLicensing/Contractors/HireCon/

  • Arizona:http://www.azroc.gov/ContractorInfoMenu.html

  • All State Lookup:http://www.crimcheck.com/resources/state-contractor-license-lookup.aspx


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