| (a) The fees to be paid by the Department or Borrower
upfront or through the closing must be reasonable for the service
rendered, in accordance with the typical fees paid in the market place
for such activities and:
(1) Fees charged by third party Mortgage lenders are
limited to the greater of 2% of the Mortgage Loan amount or $3,500,
including but not limited to origination, loan application, and/or
underwriting fees, and
(2) Fees paid to other parties that are supported by
an invoice and/or reflected on the Closing Disclosure will not be
included in the limit in paragraph (1) of this subsection.
(b) A Loan made by a third-party lender in conjunction
with a Mortgage Loan from a federal source must be fixed-rate and
may not include pre-payment penalties, balloon payments, negative
amortization, or interest-only periods.
(c) Mortgage Loan Underwriting Requirements. The requirements
in this subsection shall apply to all non-forgivable amortizing Mortgage
Loans.
(1) Debt-to-Income Ratio. The Household's total Debt-to-Income
Ratio shall not exceed 45% of Qualifying Income (unless otherwise
allowed or dictated by a participating lender providing a fixed rate
Mortgage Loan that is insured or guaranteed by the federal government
or a conventional Mortgage Loan that adheres to the guidelines set
by Fannie Mae and Freddie Mac.) A potential Borrower's spouse who
does not apply for the Mortgage Loan will be required to execute the
information disclosure form(s) and the deed of trust as a non-purchasing
spouse. The non-purchasing spouse will not be required to execute
the note. For credit underwriting purposes all debts and obligations
of the primary potential Borrower(s) and the non-purchasing spouse
will be considered in the potential Borrower's total Debt-to-Income
Ratio.
(2) Credit Qualifications.
(A) The Department may utilize credit reports submitted
by the Administrator that are not more than 90 days old as part of
the Mortgage Loan Application or may obtain tri-merge credit reports
on all potential Borrowers submitted to the Department for approval
at the time of Mortgage Loan Application. In addition to the initial
credit report, the Department may, at its discretion, obtain one or
more additional credit reports before Mortgage Loan closing to ensure
the potential Borrower still meets Program requirements. Acceptable
outstanding debt means that all accounts are paid as agreed and are
current.
(B) Unacceptable Credit. Applicants meeting one or
more of the following criteria will not be qualified to receive a
single family Mortgage Program Loan from the Department:
(i) A credit history reflecting payments on any open
consumer, retail and/or installment account (e.g., auto loans, signature
loans, payday loans, credit cards or any other type of retail and/or
installment loan, with the exception of a medical account) which have
been delinquent for more than 30 days on two or more occasions within
the last 12 months and must be current for the six months immediately
preceding the date of the Mortgage Loan Application;
(ii) A foreclosure or deed-in-lieu of foreclosure or
a potential Borrower in default on a mortgage at the time of the short
sale any of which had occurred or been completed within the last 24
months prior to the date of Mortgage Loan Application;
(iii) An outstanding Internal Revenue Service tax lien
or any other outstanding tax liens where the potential Borrower has
not entered into a satisfactory repayment arrangement and been current
for at least 12 months prior to the date of Mortgage Loan Application;
(iv) A court-created or court-affirmed obligation or
judgment caused by nonpayment that is outstanding at the date of Mortgage
Loan Application or any time prior to closing of the Mortgage Loan;
(v) Any account (with the exception of a medical account
that is delinquent or has been placed for collection) that has been
placed for collection, profit and loss, charged off, or repossession
within the last 24 months prior to the date of Mortgage Loan Application;
(vi) Any reported delinquency on any government debt
at the date of Mortgage Loan Application;
(vii) A bankruptcy that has been filed within the past
24 months prior to the date of the Mortgage Loan; or
(viii) Any reported child support payments in arrears
unless the potential Borrower has evidence of having met satisfactory
payment arrangements for at least 12 months prior to the date of the
Mortgage Loan.
(C) Mitigation for Unacceptable Credit. The following
exceptions will be considered as mitigation to the unacceptable credit
criteria in subparagraph (B) of this paragraph.
(i) The potential Borrower is a Domestic Farm Laborer
and receives a substantial portion of his/her income from the production
or handling of agriculture or aquacultural products, and has demonstrated
the ability and willingness to meet debt obligations as determined
by the Department.
(ii) The potential Borrower provides documentation
to evidence that the outstanding delinquency or unpaid account has
been paid or settled or the potential Borrower has entered into a
satisfactory repayment arrangement or debt management plan and been
current for at least 12 consecutive months prior to the date of Mortgage
Loan.
(iii) The potential Borrower submits to the Department
a written explanation of the cause for the previous delinquency, which
has since been brought current and is acceptable to the Executive
Director or his or her designee.
(iv) Any and all outstanding judgments must be released
prior to closing of Mortgaged Loan.
(v) If a potential Borrower is currently participating
in a debt management plan, and the trustee or assignee provides a
letter to the Department stating they are aware and agree with the
potential borrower applying for a Mortgage Loan. If a potential Borrower
filed a bankruptcy, the bankruptcy must have been discharged or dismissed
more than 12 months prior to the date of Mortgage Loan Application
and the potential Borrower has re-established good credit with at
least one existing or new active consumer account or credit account
that is in good standing with no delinquencies for at least 12 months
prior to the date of Mortgage Loan Application.
(vi) If a Chapter 13 Bankruptcy was filed, a potential
Borrower must have satisfactorily made 12 consecutive payments and
obtain court trustee's written approval to enter into Mortgage Loan.
(D) Liabilities.
(i) The potential Borrower's liabilities include all
revolving charge accounts, real estate loans, alimony, child support,
installment loans, and all other debts of a continuing nature with
more than 10 monthly payments remaining. Debts for which the potential
borrower is a co-signer will be included in the total monthly obligations.
For payments with 10 or fewer monthly payments remaining, there shall
be no late payments within the past 12 months or the debt will be
included into the Debt-to-Income Ratio calculation. Payments on installment
debts which are paid in full prior to the date of closing are not
included for qualification purposes. Payments on all revolving debts,
including credit cards, payday loans, lines of credit, unsecured loans,
and installment loans that have been opened within three months of
closing a prior account with the same lender will be included in the
Debt-to-Income Ratio calculation, even if the potential Borrower intends
to pay off the accounts, unless the account is paid in full and closed.
Any revolving account with an outstanding balance but no specific
minimum payment reflected on the credit report and no monthly statement
showing the required monthly payment will include a payment amount
calculated as the greater of 5% of the outstanding balance or $10.
(ii) if a potential Borrower provides written evidence
that a debt will be deferred at least 12 months from the date of closing,
the debt will not be included in the Debt-to-Income Ratio calculation.
Payments on any type of loan that have been deferred or have not yet
commenced, including student loans and accounts in forbearance, will
be calculated using .5% of the outstanding balance or monthly payment
reported on the potential Borrower's credit report, whichever is less.
Other types of loans with deferred payment will be calculated using
the monthly payment shown on the potential Borrower's credit report.
If the credit report does not include a monthly payment for the loan,
the monthly payment shown in the loan agreement or payment statement
will be utilized.
(E) Equal Credit Opportunity Act. The Department and/or
the Administrator on behalf of the Department will comply with all
federal and state laws and regulations relating to the extension of
credit, including the Equal Credit Opportunity Act (ECOA) (15 U.S.C.
1691 et seq.) and its implementing regulation at 12 CFR Part 1002
(Regulation B) when qualifying potential Borrower(s) to receive a
single family Mortgage Loan from the Department.
Cont'd... |
