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FHA Programs: Rehabilitation Loan,
     EEM, & Solar and Weatherization
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FHA Specialty Programs
U.S. Department of Housing And
      Urban Development
        December 2010

           Company
           LOGO
Todays Agenda
 FHA Rehabilitation Loan Programs (203ks)
    Regular Rehabilitation Loan

       203(k)
    Streamline Rehabilitation Loan

       Streamlined 203(k)
 Energy Efficient Mortgage
    EEM

 Solar and Weatherization Programs
Two Rehabilitation Programs

 Regular Rehabilitation
    Also known as 203(k)

 Streamline Rehabilitation
    Also known as Streamlined 203(k)

    Announced in 2005

       Mortgagee Letter 2005  50
 Both available for purchase or refinance
Two Rehabilitation Programs (Cont.)

 Both allow for repairs to be financed
   One loan

   Repair costs funded at time loan

    closes
        Sale proceeds disbursed at closing
     Lender or escrow holds repair funds
        Funds disbursed as work completed
        May require FHA inspections and/or
         lender inspections
How It Works
 Borrower required to meet FHAs
  minimum cash investment
     Based on total combined purchase price or
      appraised value plus rehabilitation costs
     Minimum 3.5%
        Downpayment if purchase
           More if sales price exceeds appraised
            value
        Equity if refinance
How It Works  Continued

 Loan amount determined based on 110% of
  After Improved Value or As Is Value plus
  cost of repairs
     Whichever is less
 Both programs require work to be complete
     Within six (6) months of closing
 Landscaping and luxury items not allowed
  under either program
How It Works  Continued

 Maximum 96.5% loan-to-value (LTV)
       Determined based on purchase price or
        appraised value (whichever is less)
          Purchase or refinance if owned < 12
           months
       Appraised value if refinance and owned >12
        months
     Excluding upfront mortgage insurance
      premiums
Example:
Purchase Price/Appraised Value   $300,000.00
Rehabilitation Cost              $ 14,700.00
Total Needed Financing Repairs   $314,700.00
Required Investment (3.5%)         11,014.50
Base Loan Amount                 $303,685.00

  *Note: Required investment only $514
          more with rehabilitation loan
  *Note: Upfront Mortgage Insurance added
          to base loan amount
Rehabilitation Program Comparisons
 All features on Regular Rehab not
  available on Streamlined Rehab
     Streamline Rehab intended to facilitate
      uncomplicated repairs
 Both are great tools for Real Estate
  Owned properties
 Both are great tools for First Time
  Homebuyers
     Easier transition from renter to homeowner
Rehabilitation Program Comparisons
 Streamline Rehab             Regular Rehab
    No minimum required         $5,000 minimum

     repair threshold             repair cost threshold
    Maximum limit on            No maximum limit on

     repairs = $35,000            repairs
    No general contractor or    General contractor and

     architectural drawings       normal architectural
     required                     drawings required
    Allows for two payments     Maximum five

     per contractor               payments total to
                                  general contractor
Rehabilitation Program Comparisons
Streamline Rehab         Regular Rehab
 No special FHA          FHA Inspector
  required inspections     required for all repairs
    Under $15,000           All loan amounts
 Must use                Must use
  licensed/bonded          licensed/bonded
  contractor               contractor
    Self-help               Self-help
     discouraged              discouraged
Rehabilitation Program Comparisons

Streamline Rehab            Regular Rehab
 Accessibility             Accessibility
  improvements               improvements
    Persons with              Persons with

     disabilities               disabilities
 No contingency            10% contingency reserve
  reserve required           required
     Lender may require        Lender may require more
Streamlined Rehab Eligible Repair Items

 Repair/Replace
   Roofs, gutters, downspouts

   Heating, ventilation, and A/C systems

   Plumbing and electrical systems

   Flooring

   Windows, doors, exterior siding

   Well; septic systems
Streamline Rehab Eligible Repairs
                      (Continued)
 Minor remodeling
    Not structural

 Painting
    Exterior/Interior

 Lead based paint abatement
 Free standing appliances
     Range, refrigerator, washer/dryer, etc.

  *NOTE: This list is not all-inclusive
Ineligible Work Items Under the
             Streamlined Rehab
Major rehabilitation
   Relocation of load bearing wall

   Room additions

   New construction

Repairs requiring detailed drawings
 or architectural exhibits
Repair of structural damage
Regular Rehabilitation Eligible
                  Repairs (203 (k))
 Same items as in Streamlined Rehabilitation
  (Streamlined Rehab 203(k) loan)
     See previous list (not all inclusive)
   Structural changes
   Room additions
   Additional living units (if allowed by city)
  For more information on the 203(k) program
     please visit:
  http://www.hud.gov/offices/hsg/sfh/203k/203k--df.cfm
Final Notes On Rehab Programs
 Repair funds not used
     Not given to borrower
     Applied as principal reduction to mortgage
     No change of terms of mortgage
 Repair funds insufficient to complete work
     Borrower must pay out of own funds or may
      reapply for another rehabilitation loan if eligible
 Regular Rehabilitation program can finance up
  to six months of mortgage payments
     Not available on Streamline Rehabilitation
Energy Efficient Mortgage
               (A.K.A. EEM)
May be used with other FHA
 mortgages
No special underwriting or appraisal
 requirements
May be able to finance 100% of the
 energy improvement
     Based on lesser of three calculations
Energy Efficient Mortgage (A.K.A.
                    EEM)  Continued

 Lesser of three calculations used to determine
  amount of maximum financed energy
  improvement
     5% of the property value
     115% of the median area price
     150% of the Freddie Mac conforming loan limit
Energy Efficient Mortgage
               (A.K.A. EEM)  Example
   Appraised Value/Sales Price $300,000
   Energy improvement costs $10,000
     5% of value $300,000 x .05 = $15,000
     115% of $265,250 median price = $305,000
     150% of GSE is $417,000 = $625,500
   The maximum allowable financing for EEM
    funding would be 115% calculation or $5,000
      Lesser of the three
   Would have to adjust energy improvements to fit
    within limits or borrower pays difference
Other Repairs & Improvements
 Repairs & Improvements required by appraiser as
  essential for property eligibility and to be paid by the
  borrower
    May be added to sales price before calculating

     mortgage amount
    Sales contract must identify borrower as responsible

     for paying or completing repairs
 Amount added is lesser of three calculations
    Amount the value of the property exceeds sales price

    Appraisers estimate of repairs and improvements

    Amount of contractors bid (if available)
Energy  Related Weatherization
 Mortgage amount may be increased for cost of
  items by
     $2,000 without a separate value determination or
     Up to $3,500 if supported by a value determination
      by FHA approved appraiser or DE underwriter or
     More than $3,500 subject to value determination
      by FHA approved appraiser or DE underwriter and
      a separate site inspection
 Items include
     Thermostats, insulation, storm windows/doors,
      weather stripping, caulking, etc.
Solar Energy Systems
 The cost of both active and passive solar
  energy systems may be added directly to the
  mortgage amount
     Before adding the Up Front Mortgage Insurance
      Premium (UFMIP)
     After applying applicable Loan-to-value limits
        Statutory mortgage limit may be exceeded by 20% to
         accommodate the cost of the system
 Limited to the lesser of
     Solar energy systems replacement cost
     Its effect on the propertys market value
Where to Get More Information
 1  800  CALL  FHA (1  800  225  5342)
      A source for all FHA questions
        Industry partners and Consumers
 www.hud.gov
     On-line resource for info about FHA and FHA
      programs
     On-line source for all other HUD programs, grants,
      forms, press releases, etc.
     User friendly
 www.fhaoutreach.gov/FHAFAQ
     On-line resource to frequently asked questions
www.hud.gov
www.hud.gov
www.fhaoutreach.gov/FHAFAQ
The U.S. Department of Housing and Urban
                   Development
             would like to thank the
California Association of Mortgage Professionals
                      And
 Oregon Association of Mortgage Professionals
               for your interest in
            FHA and FHA programs

More Related Content

Rehab eem weatherization other repairs dec 2010

  • 1. FHA Programs: Rehabilitation Loan, EEM, & Solar and Weatherization Thank you for joining the Webinar! We will begin at 1 p.m. Your phone will be muted, as there are hundreds of Members on the call. Dont forget to turn on your computer speakers or call in to hear the audio. You can shrink the control window by clicking on the right hand arrow. You can type your questions in the chat window and we will do our best to answer in the course of the session. Connect to the audio by 1) Teleconference Or 2) VoIP: Ensure that your computer speakers are on (a headset is recommended)
  • 2. FHA Specialty Programs U.S. Department of Housing And Urban Development December 2010 Company LOGO
  • 3. Todays Agenda FHA Rehabilitation Loan Programs (203ks) Regular Rehabilitation Loan 203(k) Streamline Rehabilitation Loan Streamlined 203(k) Energy Efficient Mortgage EEM Solar and Weatherization Programs
  • 4. Two Rehabilitation Programs Regular Rehabilitation Also known as 203(k) Streamline Rehabilitation Also known as Streamlined 203(k) Announced in 2005 Mortgagee Letter 2005 50 Both available for purchase or refinance
  • 5. Two Rehabilitation Programs (Cont.) Both allow for repairs to be financed One loan Repair costs funded at time loan closes Sale proceeds disbursed at closing Lender or escrow holds repair funds Funds disbursed as work completed May require FHA inspections and/or lender inspections
  • 6. How It Works Borrower required to meet FHAs minimum cash investment Based on total combined purchase price or appraised value plus rehabilitation costs Minimum 3.5% Downpayment if purchase More if sales price exceeds appraised value Equity if refinance
  • 7. How It Works Continued Loan amount determined based on 110% of After Improved Value or As Is Value plus cost of repairs Whichever is less Both programs require work to be complete Within six (6) months of closing Landscaping and luxury items not allowed under either program
  • 8. How It Works Continued Maximum 96.5% loan-to-value (LTV) Determined based on purchase price or appraised value (whichever is less) Purchase or refinance if owned < 12 months Appraised value if refinance and owned >12 months Excluding upfront mortgage insurance premiums
  • 9. Example: Purchase Price/Appraised Value $300,000.00 Rehabilitation Cost $ 14,700.00 Total Needed Financing Repairs $314,700.00 Required Investment (3.5%) 11,014.50 Base Loan Amount $303,685.00 *Note: Required investment only $514 more with rehabilitation loan *Note: Upfront Mortgage Insurance added to base loan amount
  • 10. Rehabilitation Program Comparisons All features on Regular Rehab not available on Streamlined Rehab Streamline Rehab intended to facilitate uncomplicated repairs Both are great tools for Real Estate Owned properties Both are great tools for First Time Homebuyers Easier transition from renter to homeowner
  • 11. Rehabilitation Program Comparisons Streamline Rehab Regular Rehab No minimum required $5,000 minimum repair threshold repair cost threshold Maximum limit on No maximum limit on repairs = $35,000 repairs No general contractor or General contractor and architectural drawings normal architectural required drawings required Allows for two payments Maximum five per contractor payments total to general contractor
  • 12. Rehabilitation Program Comparisons Streamline Rehab Regular Rehab No special FHA FHA Inspector required inspections required for all repairs Under $15,000 All loan amounts Must use Must use licensed/bonded licensed/bonded contractor contractor Self-help Self-help discouraged discouraged
  • 13. Rehabilitation Program Comparisons Streamline Rehab Regular Rehab Accessibility Accessibility improvements improvements Persons with Persons with disabilities disabilities No contingency 10% contingency reserve reserve required required Lender may require Lender may require more
  • 14. Streamlined Rehab Eligible Repair Items Repair/Replace Roofs, gutters, downspouts Heating, ventilation, and A/C systems Plumbing and electrical systems Flooring Windows, doors, exterior siding Well; septic systems
  • 15. Streamline Rehab Eligible Repairs (Continued) Minor remodeling Not structural Painting Exterior/Interior Lead based paint abatement Free standing appliances Range, refrigerator, washer/dryer, etc. *NOTE: This list is not all-inclusive
  • 16. Ineligible Work Items Under the Streamlined Rehab Major rehabilitation Relocation of load bearing wall Room additions New construction Repairs requiring detailed drawings or architectural exhibits Repair of structural damage
  • 17. Regular Rehabilitation Eligible Repairs (203 (k)) Same items as in Streamlined Rehabilitation (Streamlined Rehab 203(k) loan) See previous list (not all inclusive) Structural changes Room additions Additional living units (if allowed by city) For more information on the 203(k) program please visit: http://www.hud.gov/offices/hsg/sfh/203k/203k--df.cfm
  • 18. Final Notes On Rehab Programs Repair funds not used Not given to borrower Applied as principal reduction to mortgage No change of terms of mortgage Repair funds insufficient to complete work Borrower must pay out of own funds or may reapply for another rehabilitation loan if eligible Regular Rehabilitation program can finance up to six months of mortgage payments Not available on Streamline Rehabilitation
  • 19. Energy Efficient Mortgage (A.K.A. EEM) May be used with other FHA mortgages No special underwriting or appraisal requirements May be able to finance 100% of the energy improvement Based on lesser of three calculations
  • 20. Energy Efficient Mortgage (A.K.A. EEM) Continued Lesser of three calculations used to determine amount of maximum financed energy improvement 5% of the property value 115% of the median area price 150% of the Freddie Mac conforming loan limit
  • 21. Energy Efficient Mortgage (A.K.A. EEM) Example Appraised Value/Sales Price $300,000 Energy improvement costs $10,000 5% of value $300,000 x .05 = $15,000 115% of $265,250 median price = $305,000 150% of GSE is $417,000 = $625,500 The maximum allowable financing for EEM funding would be 115% calculation or $5,000 Lesser of the three Would have to adjust energy improvements to fit within limits or borrower pays difference
  • 22. Other Repairs & Improvements Repairs & Improvements required by appraiser as essential for property eligibility and to be paid by the borrower May be added to sales price before calculating mortgage amount Sales contract must identify borrower as responsible for paying or completing repairs Amount added is lesser of three calculations Amount the value of the property exceeds sales price Appraisers estimate of repairs and improvements Amount of contractors bid (if available)
  • 23. Energy Related Weatherization Mortgage amount may be increased for cost of items by $2,000 without a separate value determination or Up to $3,500 if supported by a value determination by FHA approved appraiser or DE underwriter or More than $3,500 subject to value determination by FHA approved appraiser or DE underwriter and a separate site inspection Items include Thermostats, insulation, storm windows/doors, weather stripping, caulking, etc.
  • 24. Solar Energy Systems The cost of both active and passive solar energy systems may be added directly to the mortgage amount Before adding the Up Front Mortgage Insurance Premium (UFMIP) After applying applicable Loan-to-value limits Statutory mortgage limit may be exceeded by 20% to accommodate the cost of the system Limited to the lesser of Solar energy systems replacement cost Its effect on the propertys market value
  • 25. Where to Get More Information 1 800 CALL FHA (1 800 225 5342) A source for all FHA questions Industry partners and Consumers www.hud.gov On-line resource for info about FHA and FHA programs On-line source for all other HUD programs, grants, forms, press releases, etc. User friendly www.fhaoutreach.gov/FHAFAQ On-line resource to frequently asked questions
  • 29. The U.S. Department of Housing and Urban Development would like to thank the California Association of Mortgage Professionals And Oregon Association of Mortgage Professionals for your interest in FHA and FHA programs