| (d) The Department reserves the right to deny assistance
in the event that the senior lien conditions are not to the satisfaction
of the Department, as outlined in the Program Rules.
(e) Lien Position Requirements.
(1) A Mortgage Loan made by the Department shall be
secured by a first lien on the real property if the Department's Mortgage
Loan is the largest Mortgage Loan secured by the real property; or
(2) The Department may accept a Parity Lien position
if the original principal amount of the leveraged Mortgage Loan is
equal to or greater than the Department's Mortgage Loan; or
(3) The Department may accept a subordinate lien position
if the original principal amount of the leveraged Mortgage Loan is
at least 55% of the combined repayable or amortized loans; however,
liens related to other subsidized funds provided in the form of grants
and non-amortizing Mortgage Loans, such as deferred payment or Forgivable
Loans, must be subordinate to the Department's payable Mortgage Loan.
(f) Loan Terms. All Mortgage Loan terms must meet all
of the following criteria:
(1) May not exceed a term of 30 years;
(2) May not be for a term of less than five years;
and
(3) Interest rate may be as low as 0% as provided in
the Program Rules.
(g) Loan Assumption. A Mortgage Loan may be assumable
if the Department determines the potential Borrower assuming the Mortgage
Loan is eligible according to the underwriting criteria of this section
and complies with all Program requirements in effect at the time of
the assumption.
(h) Cash Assets. An Applicant with unrestricted cash
assets in excess of $25,000 must use such excess funds towards the
acquisition of the property in lieu of loan proceeds. Unrestricted
cash assets for this purpose are Net Family Assets defined in 24 CFR §5.603.
(i) Appraisals.
(1) An appraisal is required by the Department on each
property that is part of an acquisition Activity, except for down
payment assistance only, prior to closing to determine the current
market value.
(2) The appraisal must conform to the Uniform Standards
of Professional Appraisal Practice (USPAP) as adopted by the Appraisal
Standards Board of the Appraisal Foundation.
(3) The Appraiser must have an active and current license
by the Texas Appraisal Licensing and Certification Board.
(j) Combined Loan to Value. The Combined Loan to Value
ratio of the property may not exceed 100% of the cost to acquire the
property. The lien amounts of Forgivable Loans shall be included when
determining the Combined Loan to Value ratio. The cost to acquire
the property may exceed the appraised value only for an amount not
to exceed the closing costs but in no case may result in cash back
to the Borrower or exceed the limits under subsection (a) of this
section.
(k) Escrow Accounts.
(1) An escrow account for real estate taxes, hazard
and flood insurance premiums, and other related costs must be established
if:
(A) The Department holds a first lien Mortgage Loan
which is due and payable on a monthly basis to the Department; or
(B) The Department holds a subordinate Mortgage Loan
and the first lien lender does not require an escrow account.
(2) If an escrow account held by the Department is
required under one of the provisions described in this subsection,
then the following provisions described in subparagraphs (A) - (G)
of this paragraph are applicable:
(A) The Borrower must contribute monthly payments to
cover the anticipated costs, as calculated by the Department, of real
estate taxes, hazard and flood insurance premiums, and other related
costs as applicable;
(B) Escrow reserves shall be calculated based on land
and completed improvement values;
(C) The Department may require up to two months of
payment reserves for hazard and/or flood insurance, and property taxes
to be collected at the time of closing to establish the required amounts
in the escrow account;
(D) In addition, the Department may also require that
the property taxes be prorated at the time of closing and those funds
be deposited with the Department;
(E) The Borrower will be required to deposit monthly
funds to an escrow account managed by the Mortgage Loan servicer for
payment of the taxes and insurance on the property. This will ensure
that funds are available to pay for the cost of real estate taxes,
insurance premiums, and other assessments when they come due;
(F) These funds are included in the Borrower's monthly
loan payment to the Department or to the Mortgage Loan servicer; and
(G) The Department will establish and administer the
escrow accounts in accordance with the Real Estate Settlement and
Procedures Act of 1974 (RESPA) under 12 U.S.C. §2601 and its
implementing regulations at 12 CFR Part 1024 (Regulation X), as applicable.
(l) Requirements for Originating Mortgage Loans for
the Department.
(1) Any person or organization originating Mortgage
Loans for the Department must be properly licensed and registered
as a residential mortgage loan originator in accordance with Chapters
157 and 180 of the Texas Finance Code and its implementing regulations
at Chapter 81, Part 4 of Title 7 of the TAC, unless exempt from licensure
or registration pursuant to the applicable state and federal laws
and regulations regarding residential mortgage loans.
(A) The Department reserves the right to reject any
Mortgage Loan Application originated by an Administrator or individual
that is not properly licensed or registered.
(B) The Department will not reimburse any expenses
related to a Mortgage Loan Application received from an Administrator
or individual that is not properly licensed or registered.
(2) The Department will not allow disbursement of any
portion of the Department's Mortgage Loan for acquisition until seller
delivers to the Borrower a fully executed deed to the property. After
execution of the deed, the deed must be recorded in the records of
the county where the property is located.
(3) The first monthly mortgage payment upon closing
of the Mortgage Loan with monthly scheduled payments will be due one
full month after the last day of the month in which the Mortgage Loan
closed.
(m) Principal Residence. Loans are only permitted for
potential Borrowers who will occupy the property as their Principal
Residence. The property must be occupied by the potential Borrower
within the later of 60 days after Mortgage Loan closing or construction
completion, whichever occurs last. It must remain the Household's
Principal Residence as defined in the Mortgage Loan documents or in
the case of Forgivable Loans, until the forgiveness period has concluded
in accordance with the Mortgage documents.
(n) Life-of-Loan Flood Certifications will be required
to monitor for FEMA flood map revisions and community participation
status changes for the term of the Mortgage Loan.
(o) Requirements for Subordinating to a Refinanced
Loan. The Department may consent to the refinancing of the Household's
superior third-party lender mortgage and execute a subordination agreement
when the following conditions are met:
(1) Borrower is not refinancing into an adjustable
rate mortgage;
(2) Combined loan balances do not exceed 100% of appraised
value;
(3) There is no increase in principal or interest payments,
with the exception made for Borrowers refinancing from a 30-year term
to a shorter loan term;
(4) The Borrower will not receive any proceeds from
the transaction unless it is for overpayment of Borrower's costs;
(5) All lienholders have consented to the refinancing;
and
(6) In the case of Reverse Mortgages insured by the
federal government (e.g. Home Equity Conversion Mortgage insured by
the Federal Housing Administration), all other requirements are met.
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