Homebuyer Rehab Assistance Program Lender Guidelines Effective March 2015 SECTION 1. Program Administrator Lenders will work with the Affordable Housing Corporation of Lake County (AHC) to access and administer all aspects of the Homebuyer Rehabilitation Assistance Program (HRAP). AHC is a nonprofit agency that empowers residents and communities to buy homes, improve homes and save homes from foreclosure. We utilize construction services, lending programs and education and counseling to fulfill our mission. AHC steps in where the private market cannot in order to create revitalized, accessible and sustainable homeownership opportunities for low- and moderate income households. SECTION 2. Purpose & Benefits of Homebuyer Rehabilitation Assistance Program (HRAP) The purpose of HRAP is to simultaneously stabilize communities and create homeownership opportunities by empowering low-income households to purchase, improve and owner-occupy a vacant property. Our 3-pronged approach includes financial assistance, construction services and consumer empowerment, including: • A $3,000 or $5,000 forgivable grant to offset down payment and closing costs • A forgivable grant of up to $20,000 to provide repairs and improvements • Construction management services to insure quality work at a fair price • Education classes to help buyers navigate the complex home-buying process • Counseling to empower buyers toward stable financials and responsible homeownership SECTION 3. Program Resources Lenders work primarily with AHC’s Loan Programs Manager, Laura Olvera, who is available at 847/263-7478 or [email protected]. All mortgages, notes, recapture agreements, guidelines and forms are available online at www.ahclc.org. SECTION 4. Purchase Assistance Buyers receive two forms of assistance. Buyers must accept both forms of assistance in order to participate in the program. a) Acquisition Assistance ($3,000-$5,000): Buyers will receive $3,000 to offset down payment and closing costs; buyers below 50% of median family income will receive $5,000. This is a 5-year forgivable grant, secured by a Recapture Agreement and a Note. Assistance is provided in the form of interest-free deferred loans, with no monthly payment, and forgiven at a rate of onesixtieth per month. Unforgiven assistance will be immediately due and payable in full should any of these conditions occur within the first five years: sale; voluntary or involuntary transfer of title; cash-out refinance; or failure to owner occupy the property as his/her primary residence. b) Rehabilitation Assistance ($5,000 - $20,000): Buyers will receive a maximum of $20,000 to make repairs, updates and improvements. This is a 5-year forgivable loan secured by a mortgage and a note. Minimum loan amount is $5,000. Assistance is provided in the form of interest-free deferred loans, with no monthly payment, and is forgiven at a rate of one-sixtieth per month. Unforgiven assistance will be immediately due and payable in full should any of these conditions occur within the first five years: sale; voluntary or involuntary transfer of title; cash-out refinance; or failure to owner occupy the property as his/her primary residence. SECTION 5. Homebuyer Eligibility Buyers must meet all eligibility criteria to participate in HRAP a) Income: Gross household income may not exceed 80% of median family income, adjusted for family size. Guidelines are determined by Illinois Housing Development Authority using Chicago MSA Guidelines, and are adjusted annually. Guidelines effective as of 1-1-2014 are: Household Size 1 2 3 4 5 6 7 8 50% MFI $26,600 $30,400 $34,200 $38,000 $41,050 $44,100 $47,150 $50,200 80% MFI $42,600 Updated as of 3/20/15 $48,650 $54,750 $60,800 $65,700 $70,550 $75,400 $80,300 b) Owner-Occupancy & Principal Residence: Buyer(s) must certify intent to owner-occupy property as their principal residence for 5 years until after closing, and will be contacted annually thereafter to verify continued owner occupancy. Funds will be subject to immediate repayment if it is determined that the household is not owner-occupying during the 5-year period. c) Education/Counseling: Buyer(s) must attend a homebuyer education class and one-on-one counseling with AHC. A certificate of completion, certifying that education/counseling was completed not more than 12 months prior to closing must be on file. Buyers may be required to complete additional one-on-one counseling at AHC’s discretion. SECTION 6. First Mortgage Financing and Underwriting Buyer must qualify for a first mortgage with an approved lender and meet the below criteria. a) IHDA First Mortgage: HRAP assistance may be paired with Illinois Housing Development Authority’s Smart Move and Welcome Home products, and will be eligible for resale to US Bank. The loan will be underwritten in conjunction with all Smart Move and Welcome Home mortgage guidelines. b) Other First Mortgage Products: Lenders may choose to pair HRAP assistance with other loans or their own portfolio products. Such loans require satisfactory credit, a housing-to-income ratio of 35%, and a debt-to-income ratio of 41%. c) Down Payment: Buyer must contribute 1% of the purchase price toward down payment, with a minimum contribution of $1,000 through earnest money or cash at closing. If the latter, funds would need to appear on the bottom line of the HUD-1. 2 d) No Cash Back: Under no circumstances will the buyer be allowed cash back at closing. Any additional funds must be applied toward principal reduction. e) Allowable Lender Fees: Loan origination fees and points are allowed. Brokering fees and prepayment penalties are not allowed. All other fees must be reasonable within acceptable industry standards. Multiple junk fees will be questioned and potentially disallowed, as will third party fees that seem excessive. At AHC's discretion, lenders may be required to reduce their fees. SECTION 7. Property Eligibility Buyers must purchase properties that meet all of the below criteria. a) Vacant and In Need of Improvement: Property must be vacant at time of contract initiation and require improvement. Such improvements may be cosmetic in nature and/or related to health, safety and code-compliance. b) Location: Must be located in Lake County, Illinois. c) Type of Housing: Any one-unit single-family property, condo, townhome, or manufactured home on a permanent foundation is eligible. Properties must be purchased with a fee-simple title. d) Home Inspection and Property Standards: AHC will conduct a comprehensive inspection of the entire unit, and may conduct or order special inspections for lead, asbestos, mold and radon. At the time of closing, the property must meet Housing Quality Standards and all applicable codes. Although not required, buyer may also choose to hire a home inspector licensed in the State of Illinois or Wisconsin. e) Required Termite Inspection. The purchase contract must address that closing in contingent on a termite inspection conducted by a certified termite inspector, to be paid for at the Buyer’s expense. f) Adequate Funding to Repair: The maximum allowable rehabilitation costs of $20,000 must be adequate to make needed repairs. g) Notice to Seller Rider: Purchase contract must have a rider (to be provided by AHC) executed by both Buyer and Seller stating: (i) Seller is voluntarily selling the property and buyer does not have power of eminent domain; (ii) Contract will be void if $20,000 is inadequate for the property to meet Housing Quality Standards. h) Flood Insurance: Any property identified by FEMA as having special flood hazards must obtain flood insurance under the National Flood Insurance program and evidence of this insurance must be submitted to AHC. SECTION 8. Rehabilitation Priorities HRAP provides up to $20,000 is assistance to use toward rehabilitation. These funds must be utilized as follows. 3 a) Eligible Improvements: Improvements may be cosmetic in nature and/or related to health, safety and code-compliance. b) Rehabilitation Priorities. Improvements that will receive first priority include: (i) Building code violations; (ii) Improvements needed to establish Housing Quality Standards; (iii) Major systems such as windows, HVAC, water heater, plumbing, electrical, roof and siding; (iv) Energy conservation; (v) Painting, new fixtures and Energy Star Appliances. c) Other Improvements: Remaining improvements will be prioritized in conjunction with the Buyer’s wishes. Garages are eligible for improvements only if they are attached. d) Construction Management Services. AHC oversees all construction management services at no cost to the buyer including inspection, work write up, bidding, oversight of rehab work and ongoing inspections. AHC maintains a list of approved contractors that meet certain standards. The lowest responsible bidder must be accepted. The contract for work is between the Buyer and General Contractor, with AHC serving as a facilitator and liaison. Buyer signs off on all inspections and work payouts. These procedures are described in detail in AHC’s Rehabilitation Manual, a copy of which is available upon request. SECTION 9. Application Submission Procedures Lenders with a qualified customer may apply for HRAP funding as follows. a) Call AHC to Inform of Upcoming Contract Signing and HRAP Application: AHC will provide a Notice to Seller and Rider to Purchase Contract that the homebuyer must submit to seller along with the Real Estate Purchase Contract. Due to HRAP’s tight timelines and the need for this Notice/Rider, it is imperative that AHC is aware that a buyer is considering making an offer on a vacant property and will be applying for HRAP assistance. b) Application Submission, Part 1 with Fee (within 24 Hours of Purchase Contract Signing): Lender must submit all items in Part 1 of the Loan Transmittal Checklist so that AHC may verify income eligibility, acceptable first mortgage financing, and, where appropriate, housing- and debt-to-income ratios. Submission must be accompanied by a $150 fee to be paid by lender. c) AHC Property Inspection (within 4 Days of Purchase Contract Signing): Upon verification of the items in (b) above, AHC will conduct a property inspect inspection to insure the unit is acceptable per HRAP standards. d) Notice of Readiness to Proceed: Upon verifying that the buyer and property both meet or do not meet initial eligibility criteria, AHC shall notify the Buyer and their Realtor, Lender and Attorney that the process shall continue or conclude. e) Application Submission, Part 2 (within 7 days of Notice of Readiness to Proceed): Lender must submit ALL items in Part 2 of the Loan Transmittal Checklist. Neither the loan qualification or property rehab processes will move forward until all such documents are received. Outdated financial documentation, unsigned documents or even one piece of missing information constitutes an incomplete application submission; this will likely cause delays and may prevent your loan from closing on the desired date. Within 3 business days of submission, AHC will notify the lender representative and borrower via email if an application package is incomplete and list the documentation still needed. 4 f) Incomplete or Ineligible Applications: AHC will review the application package within 3 business days of receipt. If the application is incomplete, the lender and borrower will receive correspondence via email stating the items needed. If the application is ineligible, AHC will notify the lender and borrower via phone or email and terminate the file. g) Notice of Borrower Approval: If the borrower is eligible for assistance, a Borrower Notice of Approval will be issued that confirms eligibility and states the estimated amount of assistance to be awarded. Funds will be reserved for 60 days; extensions may be granted at the discretion of AHC. h) Inspection & Bidding Process: While lender is internally processing the first mortgage, AHC will be working with the Buyer to discuss needed improvements, how they should be prioritized, and preparing for construction management services to begin. i) Required Documentation 7 Days Prior to Closing: All remaining documentation as outlined on Part 3 of AHC’s Lender Transmittal Checklist must be submitted 7 business days prior to closing for both the acquisition and rehabilitation assistance. Incomplete, outdated or unsigned documentation will constitute an incomplete submission and create delays. j) Acquisition Assistance Grant Closing: AHC will facilitate the closing of the acquisition assistance loan, including coordinating with the lender to insure the documents and funding are at the closing table. Lenders that choose to have AHC courier or FedEx/UPS the closing package must to so at their own expense. k) Rehabilitation Assistance Loan Closing: Within 3 days of the acquisition assistance loan closing, the Rehabilitation Assistance will close using the same procedures described above. l) Pre-Application Questions: Lenders that are unsure if a borrower or property will qualify for assistance are strongly encouraged to discuss their file with AHC prior to submission. While AHC is unable to offer a formal written assessment, we will discuss our understanding of what you can expect based on the information we have available to us at the time. SECTION 10. Miscellaneous a) Equal Opportunity: No person with a valid social security number in the United States shall on the grounds of race, ethnicity, color, national origin, religion, sexual orientation, gender identity or sex be excluded from participation in, be denied the benefits of, or be subjected to discrimination under this program. b) Program Guidelines Subject to Change: Program guidelines are subject to change without notice if so necessitated by new requirements set forth by the AHC Board of Directors or the program investors. c) AHC's Allowable Discretion: At any point in the transaction, AHC may choose not to provide financing if it is determined that any party of the transaction has behaved in a manner or presented information that is in any way deceptive or undermining of either the letter or spirit of our program guidelines. Any such persons or companies may be banned from working with AHC in the future. 5
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