1 tracey b. james-towe, chief insurance and underwriting division, atlanta gerry glavey, director...

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1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners (H4H) Loan Closing and Insurance Endorsement

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Page 1: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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Tracey B. James-Towe, ChiefInsurance and Underwriting Division, Atlanta

Gerry Glavey, DirectorProcessing and Underwriting, Philadelphia

HOPE for Homeowners(H4H)

Loan Closing and Insurance Endorsement

Page 2: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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• All existing lien holders must extinguish (release) their liens– Prepayment penalties and late fees must be waived– Senior lien holders must accept the new H4H loan as

payment in full – Junior lien holders may share in future appreciation

• New subordinate financing is prohibited in the first 5 years– Exception: to bring property condition up to FHA

standards

H4H – Closing Requirements

Page 3: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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• The following must be recorded:– Applicable riders such as condo, co-op, and PUD– Shared Equity Note and Mortgage (SEM)– Shared Appreciation Note and Mortgage (SAM)

• Borrower’s 1st mortgage payment cannot be escrowed

• Register the H4H security instruments in the Mortgage Electronic Registration System (MERS)

H4H – Closing Requirements (Cont’d)

Page 4: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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• Equity = value at origination less the original principal balance on the H4H mortgage

• Originating lender prepares SEM

(Exhibit D in Mortgagee Letter 2008-29)

• SEM executed by borrower and recorded in second lien position

H4H – Shared Equity Mortgage

Page 5: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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H4H – Shared Appreciation Mortgage

• Appreciation = gross proceeds from sale less appraised value at origination– May subtract allowable closing costs connected with

sale and a percentage of capital improvements

• Originating lender prepares SAM (Exhibit E in Mortgagee Letter 2008-29)

• SAM executed by borrower and recorded in third position

Page 6: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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Appreciation Share Calculation

Amount Owed 1st Lien P&I 2nd Lien P&I 3rd Lien P&I Total P&L

Principal (P) 158,500 20,000 40,000 218,500

Accrued Interest (I) 10,900 2,200 4,400 17,500

Total P&I 169,400 22,200 44,400 236,000

Cumulative P&I as % of current

appraised value of %150,000

112.9% 127.8% 157.3%

Page 7: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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Appreciation Share Percentages

Subordinate Lien Holder % of unpaid P&I lien holder is entitled to receive from future appreciation if any

% of unpaid P&I lien holder is entitled to

receive upfront appreciation*

Cumulative LTV

> 135%3% 9%

Cumulative LTV

< 135%4% 12%

* If authorized

Page 8: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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H4H – Equity and Appreciation Sharing

Post Closing Document Delivery • Within 15 days of endorsement send

– Original recorded SEM/SAM documents– Copy of HUD-1 Settlement Statement– Copy of H4H Appraisal

c/o C&L Service Corporation/Morris-Griffin Corporation

2488 East 81st Street

Suite 700

Tulsa OK 74137

Page 9: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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Additional Documentation for Right Side of Case Binder• Prior Mortgage Origination Date• Payment History• Prior Total Mortgage Payment• Primary Residence• Consumer Disclosure and Certifications• Conviction of Fraud• Tax Returns• Trial Modification (if applicable)• First Payment• Lender Certifications

H4H – Endorsement Requirements

Page 10: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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• H4H loans are eligible for Direct Endorsement and Lender Insurance

• Lenders must request insurance/insure within 120 days of closing with evidence the mortgage is current

• The case binder must include evidence the first mortgage payment was made by the borrower

H4H – Endorsement Requirements

Page 11: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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• By statute, FHA is prohibited from paying insurance benefits to any lender on any H4H loan where the borrower fails to make the 1st payment– Lenders and interested third parties are

prohibited from making any payment on behalf of the borrower, including escrowing any payment or applying any payment from closing proceeds

H4H – First Payment Default

Page 12: 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners

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• 100 percent of H4H loans will undergo a Post Endorsement Technical Review– Focus will be on compliance with H4H statute and

documentation requirements

• Cases will be rated Conforming, Deficient, or Unacceptable

• Failure to respond satisfactorily to a Deficiency Letter may require the lender to indemnify HUD against loss

H4H – PETRs