Calhfa FHA Locked Rate Loan Program Loans Calhfa For

03/02/2020

before CALIFORNIA HOUSING FINANCE AGENCY or on CalHFA FHA locked rate Loan Program loans CalHFA For

LAST REVISED: JANUARY 1, 2020 CALHFA FHA LOAN PROGRAM Table of Contents

I. Program Summary 1

II. Eligibility 1

a. Borrower Requirements b. Eligible Homebuyers c. Homebuyer Education d. Owner Occupancy e. Property Requirements f. Lender Eligibility Requirements 2 g. Broker Eligibility Requirements 3

III. Underwriting & Compliance 3 03/02/2020 a. Transaction type b. Term c. FHA’s Section of the Act before d. LTV and CLTV or e. Maximum Loan Amount f. FHA High Balance Loan Limits on g. Maximum Sales Price Limits h. Income & Sales Price Limits i. Income Requirements 4

locked j. Qualifying Ratios k. Minimum Credit Score l. Automated Underwriting rate m. Sales Concessions/Contributions n. Miscellaneous Lakeview Loan Servicing Underwriting Guidelines 5 loans IV. Subordinate Financing 5

a. CalHFA Subordinate Financing b. Exceptions to First-time Homebuyer Requirement 6 c. Non-CalHFA Subordinate CalHFA d. Other Programs and Assistance

For V. CalHFA Loan Process (Submission, Approval & Purchase) 7

VI. Fees 7

VII. Reservations, Rate Locks & Extensions 8

a. Reservations and Rate Locks

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) ii CALHFA FHA LOAN PROGRAM Table of Contents (cont.)

VIII. Basic Home Protection Coverage 9

a. Mandatory Home Warranty Insurance Coverage

IX. Pre-Closing Loan Submission 9

a. Loan Submission Process b. Forms

X. Post-Closing Loan Delivery & Purchase 10

a. All CalHFA First Loans: b. All CalHFA Subordinate Loan(s): c. Forms 11 03/02/2020 XI. Frequently Asked Questions 12

a. Sale Tools And Marketing Materials 16 before or on locked rate loans CalHFA For

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) iii CALHFA FHA LOAN PROGRAM Program Summary

The CalHFA FHA program is an FHA-insured loan featuring a CalHFA fixed interest rate first mortgage. This loan is fully amortized for a thirty (30) year term and can be combined with either the MyHome Assistance Program (MyHome) or School Teacher and Employee Assistance Program (School Program). The CalHFA FHA loan is not subject to Recapture Tax.

Eligibility

Borrower Requirements Owner Occupancy

Each borrower must • All borrowers must occupy the property as their primary residence

03/02/2020 • Be either a citizen or other National within sixty (60) days of closing of the United States, or a “Qualified Alien” as defined at 8 U.S.C § • Non-occupant co-borrowers are not 1641 allowed before • Meet the credit, income and loan • Non-occupant co-signers are not or requirements detailed in this allowed program handbook, as well as on CalHFA’s Lender Manual, Fannie Property Requirements Mae, the CalHFA-approved lender, the mortgage insurer and CalHFA’s • Sales price of the home cannot exceed CalHFA’s sales price limits locked master servicer’s requirements established for the county in which Eligible Homebuyers the property is located rate This program is available for both first- • Property must be a single-family, time and non-first-time homebuyers. When one-unit residence, including FHA- combining the CalHFA FHA with CalHFA approved condominium/PUDs loans subordinate loans, the first-time homebuy- › FHA Single-Unit condominium er requirement applies. project approval process is not Homebuyer Education allowed

CalHFA Homebuyer Education counseling is › It is the responsibility of the required for one occupying first-time lender and not the master ser- For homebuyer. Homebuyer Education is not vicer to meet these guidelines required for non-first-time homebuyer(s). • Manufactured homes are permitted • Online Homebuyer Education with the following parameters: through eHome™ › Singlewide manufactured homes • Face-to-Face Homebuyer Education are not eligible through NeighborWorks America or › Not available on Limited 203(k) through one of the HUD approved Housing Counseling Agencies (continued on next page)

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 1 CALHFA FHA LOAN PROGRAM Eligibility (cont.)

› Manual Underwriting is not per- • Properties must meet the mitted on manufactured homes requirements of FHA and the California Health and Safety Code › All manufactured homes must meet FHA 4000.1, Master • Refer to the Lakeview program Servicer and CalHFA loan pro- matrix for their Disaster Policy gram requirements › See Lakeview Correspondent Additional Property Guidelines Lending website for details • Accessory Dwelling Units (ADU), • Escrow Holdbacks will be allowed Guest houses, “granny” units, and for minor outstanding repairs not “in-law” quarters are eligible completed prior to loan closing › The property must be defined as › The Property must be habitable 03/02/2020 a one-unit property and safe for occupancy at the time of loan closing › Multiple accessory units are not permitted › Lenders and/or closing agent will before be responsible for managing and › Must meet investor guide- or disbursing holdbacks lines and city/county zoning on ordinances › Lender must deliver loans that were originated in accordance • Per investor guidelines – If rental with FHA and Fannie Mae income from the ADU is used for guidelines

locked credit qualifying, CalHFA will also use the gross rental income for the » Please see Lakeview Loan compliance income calculation Servicing website for required rate documents • Leasehold Estates › Must follow FHA guidelines Property Flipping loans • Follow FHA first-mortgage under- › All Leasehold Estate documen- writing guidelines tation must be submitted to CalHFA’s Master Servicer with CalHFA requires a copy of all appraisals as purchase package for review and required by FHA. CalHFA approval When multiple appraisals are required,

For • Land Trusts and Co-ops are not CalHFA will base the subordinate loan permitted amount(s) on the lesser of the sales price • Non-permitted additions/alterations or lowest appraised value. must follow FHA guidelines Lender Eligibility Requirements • Lot size cannot exceed five (5) acres maximum To be eligible for this program lenders must be approved by:

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2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 2 CALHFA FHA LOAN PROGRAM Eligibility (cont.)

• CalHFA Broker Eligibility Requirements

• FHA Mortgage brokers can find a list of partici- pating CalHFA-approved wholesale lenders • Lakeview Loan Servicing (LLS), CalHFA’s master servicer. To on CalHFA’s mortgage broker webpage seek LLS approval contact the Counterparty Risk Management team at [email protected]

Underwriting & Compliance

03/02/2020 Transaction type Maximum Loan Amount

Purchase transactions only The maximum loan amount (excluding UFMIP) cannot exceed current FHA loan before Term limits for the county in which the property

or is located. Up to 30 years on FHA’s Section of the Act FHA High Balance Loan Limits All loans with a base loan amount exceed- CalHFA will accept the following FHA ing the current FHA loan limits will be Section of the Act mortgage types: locked subject to an additional fee. See CalHFA • 203(b)Home Mortgage Insurance rate sheet for applicable fees. rate • Energy Efficient Mortgages (EEM) All FHA High Balance Loan fees will be net • Limited 203(k) funded at the time of first mortgage purchase by the master servicer. loans • 184 Indian Home Loan Guarantee Program Maximum Sales Price Limits

› Cannot be combined with The Sales Price of the home cannot ex- Limited 203(k) and EEM ceed CalHFA Sales Price Limits for the CalHFA county in which the property is located. LTV and CLTV For Loan-to-Value (LTV) to follow FHA first Income & Sales Price Limits mortgage underwriting guidelines The following reference materials disclose Combined Loan-to-Value (CLTV) cannot income and sales price limits by county: exceed 105.00% 1. CalHFA Income Limits • Section 184 Indian Home Loan 2. Sales Price Limits Guarantee Program limited to 100% CLTV (continued on next page)

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 3 CALHFA FHA LOAN PROGRAM Underwriting & Compliance (cont.)

Income Requirements › If a merged credit report only returns one score, that score Lenders are required to calculate income must be used to qualify borrower(s) for loan approval using FHA guidelines. CalHFA will use the Automated Underwriting lender’s credit qualifying income to determine if the loan exceeds the maximum Automated Underwriting: All loans must program income limit. Income not used by be submitted through FHA Total Scorecard the lender for credit qualifying will not be through either Fannie Mae Desktop ® used by CalHFA. Underwriter (DU ) or Freddie Mac Loan Product Advisor (LPA®). MAXIMUM PROGRAM INCOME LIMITS Other customized automated underwriting

03/02/2020 The income of all borrowers cannot systems are not acceptable. exceed the published CalHFA income limits detailed in this program hand- Manual Underwriting is allowed with the book established for the county in following parameters: before which the property is located. • Maximum DTI ratio: 43.00% or Qualifying Ratios • Borrowers without a credit score are on not permitted The maximum total Debt-to-Income (DTI) ratio cannot exceed 45.00% for automated • Must meet FHA requirements underwriting or 43.00% for manual under- • Not permitted on manufactured locked writing. A MCC may not be used for credit homes qualifying purposes. • Non-traditional credit is not allowed rate Minimum Credit Score Manual Underwriting is required for • Credit Score 660 Section 184 Indian Home Loan Program loans • All borrowers must meet the mini- • Maximum DTI ratio: Per HUD mum representative credit score approval based on compensating requirements factors › Borrowers with no credit score CalHFA • Must meet Section 184 are not permitted requirements

For • The middle score of the lowest- • All loans must be approved by HUD scoring borrower should be used to prior to submission to CalHFA determine eligibility Sales Concessions/Contributions › If a tri-merged credit report is used, use the middle score Concessions/contributions as per FHA › If a merged credit report only guidelines except for the following: returns two scores, use the lower score (continued on next page)

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 4 CALHFA FHA LOAN PROGRAM Underwriting & Compliance (cont.)

• Payment of condominium fees • Non-arm’s length transactions must be fully disclosed • Personal property • Appraiser must meet all master • Down payment assistance servicer guidelines, see Lakeview • See Lakeview Correspondent Correspondent Lending website for Lending website for additional details requirements • 2-1 or 1-1 temporary buydowns are permitted as per FHA guidelines Miscellaneous Lakeview Loan Servicing Underwriting Guidelines › Loan must be credit qualified at Note rate • Credit Underwriting is the responsibility of the originating lender

03/02/2020 In the case of conflicting guidelines, the lender must follow the more restrictive to • Underwriters must consider the meet the credit, income limits, total debt- income, assets, liabilities and credit histories of co-signers to-income ratio and loan and property before requirements of CalHFA, FHA, the lender

or • Underwriters should: or the master servicer. › Make sound credit decisions on All loans are subject to audit by both › Assure data integrity CalHFA and Lakeview Loan Servicing. › Include all necessary documents locked in support of the underwriting decision rate Subordinate Financing

› Must be recorded in Second loans CalHFA Subordinate Financing Lien Position This program may be layered with the following down payment and/or closing cost › For full MyHome underwriting assistance options, for first-time homebuy- guidelines and details see the MyHome Program Handbook CalHFA ers only; unless the borrower has been affected by a California natural disaster as • School Teacher and Employee

For described below Assistance Program (School Program) • MyHome Assistance Program › May be used for down payment › May be used for closing cost assistance and/or closing cost and/or down payment assistance › In the case of conflicting guide- › In the case of conflicting guidelines, the lender must follow the lines, the lender must follow the more restrictive more restrictive (continued on next page)

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 5 CALHFA FHA LOAN PROGRAM Subordinate Financing (cont.)

› Must be recorded in Second › Borrowers affected by a declared Lien Position Major Disaster are eligible to purchase a new home using › For full School Program under- CalHFA loan programs within writing guidelines and details see three (3) years of that Major the School Program Handbook Disaster’s declaration date MyHome and School Program may not be combined. Non-CalHFA Subordinate This program may be layered with locality Exceptions to First-time Homebuyer programs to be used for closing costs and/ Requirement or down payment assistance as per indi- • Borrowers utilizing Section 184 vidual requirements. 03/02/2020 Indian Home Loan Guarantee • The locality subordinate loan must Program meet FHA underwriting guidelines • Borrowers affected by natural • The maximum CLTV must meet before disasters in California CalHFA requirements or › Previous property must be • In the case of conflicting guidelines, on located in an area declared as the lender must follow the more a Major Disaster and posted restrictive on the Federal Emergency Management Agency (FEMA) • Must be recorded in subordinate locked website lien position to CalHFA Subordinate Financing › Previous property must have rate been the borrower’s primary Other Programs and Assistance residence This program may be layered with a loans › Previous property must have Mortgage Credit Certificate (MCC). The been destroyed or declared MCC credit may not be used for credit uninhabitable with supporting qualifying purposes. documentation supplied from either (i) the insurance company CalHFA or (ii) the local government jurisdiction For

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 6 CALHFA FHA LOAN PROGRAM CalHFA Loan Process (Submission, Approval & Purchase)

The lender must upload to CalHFA’s MAS Upon receipt of the Notice of Commitment, a fully approved loan package per CalHFA’s the lender is authorized to close the Loan Submission Checklist for program loan(s). After closing, the lender will upload policy, compliance review and desktop a closed first mortgage purchase package underwriting validation. to CalHFA’s master servicer Lakeview Loan Servicing and any CalHFA subordinate loan CalHFA will review loan files on a first- (i.e. ZIP, MyHome or School Program) pur- come, first-served basis. CalHFA reviewers chase package(s) to CalHFA for purchase. will notify lenders of each conditional loan approval, suspension and/or rejection via Lenders must submit applicable ZIP, MAS. MyHome or School Program purchase packages to CalHFA at the same time the Suspended loan files will not be reviewed first mortgage is submitted to the master 03/02/2020 until all suspense items are uploaded to servicer to ensure that the purchase of all MAS. loans meet the rate lock expiration.

All loans must meet the rate lock expira- before tion date. or Fees on

Service Release Premium (SRP) Master Servicer Fees • Lenders will earn a 1.00% Service • LLS funding fee is $250 per loan locked Release Premium to release servicing to Lakeview Loan Servicing • Tax Service fee to LLS is $75 per loan rate (LLS) at time of purchase • LLS will purchase loans directly • Life of Loan Flood Certificate fee to from lender on a daily basis. LLS is $10 per loan loans • Funding fees paid by the borrower Lender Allowable Fees (Origination & or seller must be disclosed and Processing) documented on the final Closing • Customary lender origination fees Disclosure CalHFA not to exceed the greater of 3% of • Other customary master servicer the loan amount or $3,000 fees may apply For • Other customary third party fees • LLS will not purchase High Cost such as credit report fee, appraisal Loans fee, insurance fee or similar settle- ment or financing cost • Lenders should refer to their legal/ compliance department on how to • In all cases the lender must meet disclose fees federal and California lending laws regarding fees and charges

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 7 CALHFA FHA LOAN PROGRAM Reservations, Rate Locks & Extensions

Interest rates are available on the CalHFA • Lenders may not lock a loan in Interest Rate page. Interest rates are sub- MAS with an interest rate that ject to change at any time without notice. is higher than the interest rate reflected on the CalHFA Notice of Reservations and Rate Locks Commitment. • Reservations with a floating rate › If the current rate is higher than will be accepted from 6:00 a.m. the rate on the CalHFA Notice of to 11:59 p.m. Pacific Time, seven Commitment, please resubmit all days a week updated loan documents at the higher rate including Approved/ • Rate locks will only be accepted Eligible DU ® findings, lender- between the hours of 8:00 a.m. to signed HUD 92900-LT, and final 3:00 p.m. Pacific Time, Monday 03/02/2020 underwriting approval for CalHFA through Friday, excluding state-rec- re-approval ognized holiday, and days that the U.S. financial markets are closed Delivery Timeframes and Extensions:

before for business. Only lenders with full • Files should be received by the MAS access may lock the interest or master servicer by the 45th day rate or earlier, to ensure time to clear on • Lenders will have the option to float conditions and purchase prior to (90 days for existing/resale proper- rate lock expiration ties or 120 days for new construc- • CalHFA offers rate lock extensions tion properties) or lock the interest locked in 15 day increments up to a maxi- rate for sixty (60) days for both mum of 120 days from the original existing/resale properties and new

rate expiration date construction properties • Under no circumstances will • All CalHFA subordinate loan(s) will CalHFA extend a rate lock period receive the same reservation, lock loans longer than 120 days for both exist- and purchase periods as the CalHFA ing or new construction properties first mortgage from the original expiration date • Lender should factor in its own processing/underwriting Please see the Rates & Reservation page CalHFA time frames, as well as CalHFA for full details and FAQs. compliance review, and master For servicer review for purchase time frames when locking interest rates and submitting loan files

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 8 CALHFA FHA LOAN PROGRAM Basic Home Protection Coverage

Mandatory Home Warranty Insurance • Home Warranty to be paid through Coverage close of escrow • CalHFA requires that all first-time • Home Warranty must be disclosed homebuyer(s) obtain a one-year on Final Closing Disclosure or home warranty protection policy copy of insurance declaration page required › Non-first-time homebuyers are not required to obtain a home • Exception to Home Warranty: warranty protection › If borrower is purchasing a new • The insurance must cover the fol- construction property from a lowing items at a minimum: builder and the builder is provid- ing the home warranty

03/02/2020 › Water Heater(s) › Borrower is not a First Time › Air Conditioning Homebuyer › Heating before › Oven/Stove/Range or

on Pre-Closing Loan Submission

Loan Submission Process Forms

locked A lender makes reservations through The following forms will be needed when CalHFA’s Mortgage Access System (MAS). submitting a CalHFA FHA loan to CalHFA:

rate Refer to the Loan Submission Checklist for • CalHFA Borrower Affidavit minimum documentation requirements.

CalHFA FHA loan submission packages are loans to be sent electronically through MAS. CalHFA For

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 9 CALHFA FHA LOAN PROGRAM Post-Closing Loan Delivery & Purchase

All CalHFA First Loans: • Loss Payee Clause: • Use the master servicer Loan Lakeview Loan Servicing, LLC Purchase Checklist located on the c/o LoanCare, LLC Lakeview Correspondent Lending ISAOA/ATIMA website to ensure you are submit- PO Box 202049 ting a complete and accurate Florence, SC 29502-2049 package. • All loan deficiencies will be posted • Notes are to be endorsed to on the client facing website which is Lakeview Loan Servicing, LLC accessible 24 hours a day • Deeds of Trust are to be assigned to • All loans must be program approved Lakeview Loan Servicing, LLC and deficiency free before they can

03/02/2020 be purchased › All loans must be registered with Mortgage Electronic Registration All CalHFA Subordinate Loan(s): Systems (MERS) at the time

before of delivery to Lakeview Loan • All CalHFA subordinate loans must Servicing, LLC, and MERS be funded, delivered and purchased or transfer of beneficial rights of by CalHFA concurrently with the first mortgage on servicing rights must be initiated by the Lender, to Lakeview Loan • CalHFA subordinate loan purchase Servicing, LLC within 24 hours packages are to be sent electroni- of loan purchase cally through MAS locked › Register via MERS: › Use the Loan Purchase Checklist to ensure you are submitting a rate » Investor: 1010298 Lakeview Loan Servicing complete and accurate package. » Servicer: 1010298 Lakeview • Subordinate loan documents are to loans Loan Servicing be drawn in the Lender’s name » Subservicer: 1000723 › Note to be endorsed to CalHFA LoanCare LLC » Register via MERS:

CalHFA • CalHFA FHA closed loan files are • Investor: 1000645 to be sent electronically to the California Housing Finance

For master servicer via the Lakeview Agency Correspondent Lending website within ten (10) business days • Servicer: 1000645 California Housing Finance • Logon link will be in the top right Agency section of the website

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2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 10 CALHFA FHA LOAN PROGRAM Post-Closing Loan Delivery & Purchase (cont.)

» After loans are purchased Forms transfer via Mortgage Electronic Registration Lender must use the following forms: System (MERS) 1. Most current version of standard • Loss Payee Clause: FHA Fixed Rate Note California Housing Finance Agency 2. Most current version of standard Its successor and/or assigns FHA Deed of Trust Single Family Servicing – MS 980 500 Capitol Mall, Suite 400 3. Lender must also use other Sacramento, CA 95814 applicable documents (e.g., PUD Rider, etc.) 03/02/2020 before or on locked rate loans CalHFA For

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 11 CALHFA FHA LOAN PROGRAM Sales Tools and Marketing Materials

1. Government Program Matrix 2. Conventional Program Frequently Asked Questions 3. Scenario Calculator 4. Loan Submission, Review and Purchase Flow Chart 5. Lending Heroes Flyer 6. Lending Heroes Fillable Flyer 7. Lending Heroes Spanish Flyer

03/02/2020 8. Lending Heroes Spanish Fillable Flyer 9. Lending Heroes Korean Flyer before 10. 5 Easy Steps to Buying Your First or Home Flyer

on 11. 5 Easy Steps to Buying Your First Home Spanish Flyer

12. CalHFA and Listing Agents: a Great locked Team! Flyer rate loans CalHFA For

2020 CALIFORNIA HOUSING FINANCE AGENCY www.calhfa.ca.gov | 877.9.CalHFA (877.922.5432) 12