FHFA Statement on Certain Energy Retrofit Loan Programs

After careful review and over a year of working with federal and state government agencies, the Federal Housing Finance Agency (FHFA) has determined that certain energy retrofit lending programs present significant safety and soundness concerns that must be addressed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Specifically, programs denominated as Property Assessed Clean Energy (PACE) seek to foster lending for retrofits of residential or commercial properties through a county or city’s tax assessment regime. Under most of these programs, such loans acquire a priority lien over existing mortgages, though certain states have chosen not to adopt such priority positions for their loans.

First liens established by PACE loans are unlike routine tax assessments and pose unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors. The size and duration of PACE loans exceed typical local tax programs and do not have the traditional community benefits associated with taxing initiatives.

FHFA urged state and local governments to reconsider these programs and continues to call for a pause in such programs so concerns can be addressed. First liens for such loans represent a key alteration of traditional mortgage lending practice. They present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation.

While the first lien position offered in most PACE programs minimizes credit risk for investors funding the programs, it alters traditional lending priorities. Underwriting for PACE programs results in collateral-based lending rather than lending based upon ability-to-pay, the absence of Truth-in-Lending Act and other consumer protections, and uncertainty as to whether the home improvements actually produce meaningful reductions in energy consumption.

Efforts are just underway to develop underwriting and consumer protection standards as well as energy retrofit standards that are critical for homeowners and lenders to understand the risks and rewards of any energy retrofit lending program. However, first liens that disrupt a fragile housing finance market and long-standing lending priorities, the absence of robust underwriting standards to protect homeowners and the lack of energy retrofit standards to assist homeowners, appraisers, inspectors and lenders determine the value of retrofit products combine to raise safety and soundness concerns.

On May 5, 2010, Fannie Mae and Freddie Mac alerted their seller-servicers to gain an understanding of whether there are existing or prospective PACE or PACE-like programs in jurisdictions where they do business, to be aware that programs with first liens run contrary to the Fannie Mae-Freddie Mac Uniform Security Instrument and that the Enterprises would provide additional guidance should the programs move beyond the experimental stage. Those lender letters remain in effect.

Today, FHFA is directing Fannie Mae, Freddie Mac and the Federal Home Loan Banks to undertake the following prudential actions:

1.
For any homeowner who obtained a PACE or PACE-like loan with a priority first lien prior to this date, FHFA is directing Fannie Mae and Freddie Mac to waive their Uniform Security Instrument prohibitions against such senior liens.

2.
In addressing PACE programs with first liens, Fannie Mae and Freddie Mac should undertake actions that protect their safe and sound operations. These include, but are not limited to:
- Adjusting loan-to-value ratios to reflect the maximum permissible PACE loan amount available to borrowers in PACE jurisdictions;
- Ensuring that loan covenants require approval/consent for any PACE loan;
- Tightening borrower debt-to-income ratios to account for additional obligations associated with possible future PACE loans;
- Ensuring that mortgages on properties in a jurisdiction offering PACE-like programs satisfy all applicable federal and state lending regulations and guidance.
Fannie Mae and Freddie Mac should issue additional guidance as needed.

3.
The Federal Home Loan Banks are directed to review their collateral policies in order to assure that pledged collateral is not adversely affected by energy retrofit programs that include first liens.

Nothing in this Statement affects the normal underwriting programs of the regulated entities or their dealings with PACE programs that do not have a senior lien priority. Further, nothing in these directions to the regulated entities affects in any way underwriting related to traditional tax programs, but is focused solely on senior lien PACE lending initiatives.

FHFA recognizes that PACE and PACE-like programs pose additional lending challenges, but also represent serious efforts to reduce energy consumption. FHFA remains committed to working with federal, state, and local government agencies to develop and implement energy retrofit lending programs with appropriate underwriting guidelines and consumer protection standards. FHFA will also continue to encourage the establishment of energy efficiency standards to support such programs.

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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.9 trillion in funding for the U.S. mortgage markets and financial institutions.

The Homebuyer Assistance and Improvement Act of 2010, enacted on July 2, 2010, extended the closing deadline from June 30 to Sept. 30 for eligible homebuyers who entered into a binding purchase contract on or before April 30 to close on the purchase of the home on or before June 30, 2010.

Here are five facts from the IRS about the First-Time Homebuyer Credit and how to claim it.

1. If you entered into a binding contract on or before April 30, 2010  to buy a principal residence located in the United States you must close on the home on or before September 30, 2010.
2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
3. To be considered a long-time resident homebuyer, your settlement date must be after November 6, 2009 and you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.
4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
5. To claim the credit you must file a paper return and attach Form 5405, First Time Homebuyer Credit, along with all required documentation, including a copy of the binding contract. New homebuyers must attach a copy of the properly executed settlement statement used to complete the purchase. Long-time residents are encouraged to attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statements, property tax records or homeowner’s insurance records.

For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit IRS.gov/recovery.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 3500 [Docket No. FR–5425–IA–01]

TITLE: Real Estate Settlement Procedures Act (RESPA): Home Warranty Companies’ Payments to Real Estate Brokers and Agents

AGENCY: Office of General Counsel, HUD.

ACTION: Interpretive rule.

DATES: Effective date: June 25, 2010. Comment Due Date: July 26, 2010.

SUMMARY: Under section 8 of RESPA and HUD’s implementing RESPA regulations, services performed by real estate brokers and agents as additional settlement services in a real estate transaction are compensable if the services are actual, necessary and distinct from the primary services provided by the real estate broker or agent, the services are not nominal, and the payment is not a duplicative charge. A referral is not a compensable service for which a broker or agent may receive compensation…

To read this Interpretive rule in its entirety, and provide comments please visit: http://edocket.access.gpo.gov/2010/pdf/2010-15355.pdf (please do not reply to this email to comment.)

The Senate had needs to approve in the next 24 hours to meet the June 30th deadline .

Buyers must have signed a contact by April 30 to qualify.  The issue is the date the sale must be closed by. June 30th versus Sept 30. Many lenders and title companies are having trouble closing the sales on time. If they close one minute passed the deadline there are about 200,0o0 buyers that will loose their $8000 credit.

The House voted 409 to 5 to delay the closing deadline to September 30 in a stand-alone measure.  The move comes after the Senate failed to approve the jobs bill which contained the tax credit provision.

The House bill would raise the deficit by $9 million.

It is now up to the Senate.  Let’s hope it passes there are a lot of people stressing out. The good news, all my clients that needed to close before the cutoff closed last week.

An individual must have entered into a binding written contract on the home prior to April 30, 2010. Once that requirement was satisfied, that individual had until June 30, 2010 to complete the closing on the purchase. If the home is not closed prior to 11:59 PM on June 30, 2010, then that individual will not be eligible to claim the homebuyers’ tax credit. The amendment to the statute (which has not been approved by Congress) would extend that closing deadline until 11:59 PM on September 30, 2010.

The National Association of REALTORS® is actively pursing all available options with Congressional staff to secure passage of legislation that would extend the closing deadline for the homebuyers’ tax credits to September 30, 2010. However, it is uncertain at this time whether those efforts will be successful. If Congress does extend the closing deadline for the homebuyers’ tax credits, we will let you know. In closing, please be aware that nothing has changed for the time being and the current closing deadline for the homebuyers’ tax credits remains at June 30, 2010.

EPA maintains a comprehensive web site on radon at: http://www.epa.gov/iaq/radon/ where you can find internet versions of all of EPA’s documents, brochures and publications relating to radon.

Below are descriptions of three of the more common EPA publications on radon, copied from site http://www.epa.gov /iaq/radon/pubs/index.html

A Citizen’s Guide To Radon (second edtition) The Guide To Protecting Yourself And Your Family From Radon.
This booklet was developed by the EPA, the U.S. Department of Health, Human Services and the U.S. Public Health Service.  This is a complete guide to taking action to lower the radon level in your home. It offers strategies for testing and discussions of what steps to take after you have tested, discussions of the risk of radon and radon myths.
EPA Document Number 402-K-92-001. September 1994. (www .epa.gov/iaq/radon/pubs/citguide.html)

Consumer’s Guide To Radon Protection How To Reduce Radon Levels In Your Home …
This booklet is for people who have tested their home for radon and confirmed that they have elevated radon levels. EPA Document Number 402-K-*93-003.  (www.epa.gov/iaq/radon/pubs/consguid.html)

Home Buyer’s And Seller’s Guide To Radon
This guide has been developed for anyone buying or selling a home who wants to learn about radon. For sale by the U.S. Government Printing Office, Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328. Order Number – ISBN: 0-16-041680-9. EPA Document Number: 402-R-93-003, March 1993. (www.epa.gov/radon/pubslhmbyguid.html)

KEY POINTS -
There is a period that the lender MUST give the borrower to review the documents. At least 10 days.
If there are changes in the original docs, the borrower could need at least another 3 days to review the docs.

This may be overly simplified, because there are very complicated rule on each item, but at the end it boils down to 10 days for big $$$ things, 3 days for small.

What does this mean? GET YOUR LENDER TO GIVE YOU THE GOOD FAITH ESTIMATE IMMEDIATELY so that 10 day clock begins to run. Then, if you need to make any changes,  you can close within 3 days of the buyer receiving new docs.

Here is a sample copy of the new good faith estimate HUD GFE.

A buyer may use any home inspector they like. Here are a few home inspectors that I trust. No one is perfect, but these are some of the better ones. These are licensed and insured. It is a law in Kansas but not in Missouri. For a Missouri inspection be sure to ask. A good inspector will climb on the roof, crawl in the attic and in the crawl space. They can arrange for termite and radon testing. Some may be available on Saturdays.

An inspection is typically 2-3 hours. Some buyers are there the whole time, some come for the last 30 minutes or so to review the findings.  Most inspectors produce a 30-50 page report with photos for the client’s review later review. I’ll be there as well.

The weather is the trick. Normally I like to get the inspections done ASAP. That way if we need to call in any specialists we have ample time.

It is a good practice for the buyer to contact the inspector directly to schedule the appointment. Also, to arrange for payment which is normally due at the time of inspection.

If there is ice or snow the inspectors will not climb on the roof.

Star Home Inspections – Larry or Greg
http://www.starhomeinspection.biz/ContactUs
816-554-1110

Sweet Home Inspections – James Allen
http://sweethomeinspections.com/index.html
913-894-5893

The Home Team – Mike Faulconer
http://www.kansascity-homeinspections.com/
913-642-3515

INSURANCE INSPECTION – It is wise to contact your insurance agent immediately. Due to some heavy claims in the KC area some companies are hesitant to write policies on homes and/or exclude items, such as the roof or an electrical fire.  A good broker that I trust is Chuck Eberly with Goodman Gravely (913) 782-1404. Email: ceberle@insurancesourceagency.com

Call them to inspect the property quickly. If an insurance issue is found after the inspection period the buyer may not have any recourse.

Steve Kornspan
Re/Max Premier Realty Kansas City | Associate Broker, ABR, GRI, SRES
913-871-4148 ext 2 | Fax:  913-562-5789

FHA loans with a case number assigned on or after April 5, 2010, will have a 2.25% upfront mortgage insurance premium. This 0.5% increase is roughly $750 on a $150,000 loan. This goes into effect April 5, 2010.

Case numbers are generally assigned when there is a contract with a property address, and a closing date AND the borrower has committed to go forward with the loan.

Annual premiums (remitted on a monthly basis) will not change at this time. Please go to http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-02ml.pdf. for more information.

SOME OTHER CHANGES -

New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program.

Borrowers with less than a 580 FICO score will be required to put at least 10% down.

NOTE: Most lenders will not make loans to borrowers with FICO scores lower than 620.

Seller concessions will be reduced from 6% to 3%. HUD has not yet released an effective date for this change.

Buyers are encouraged to conduct any and all inspections by qualified experts to verify the condition of a property. This list summarizes many types of inspections, but you should investigate anything that concerns you. Be careful to watch the dates and other requirements about inspections in your sales contract.

Order a C.L.U.E. report from www.choicetrust.com to determine any potential insurance issues for your or the property.

Research School Information (School District – Be sure to ask about any upcoming school boundary changes.)
Covenants and Restrictions

Talk to Neighbors

Builder’s References and Reputation (for new home purchase)

Building Site Info (i.e. excessive fill, built over pond site, etc.) Check with engineering firm that developed the area.

Whole House Inspection (for plumbing, electrical, heating, cooling, appliances)

Structural Engineer (for foundation, roof structure and chimney)

Termites & Wood Destroying Insects

Radon Gas (EPA Radon Gas)

Chimney Sweep

Roof

Sewer Line (house to street) Sewer Hook-up (Is it actually hooked up to the public system?)

Septic system (Johnson County Sewer / Septic Inspection)

Masonite Siding (Masonite Siding Claims)

Mold & Microbials (EPA Airduct Information)

Synthetic Stucco Exterior (EIFS)

Polybutylene Pipes (http://www.plumbing911.com/)

Proximity to Toxic Areas (www.epa.gov)

Proximity to Sexual Predators (Contact local Sheriff’s Department)

Swimming Pool

Sauna, Hot Tub

Inground Sprinklers

Alarm system

Taxes & Zoning & City or County Master Plans – Contact local city and county governments.

Cistern / Well (EPA Safewater)

Lead Based Paint (EPA Lead)

Asbestos EPA Asbestos

Electromagnetic Fields

Carbon Monoxide

Underground Storage Tanks

Hillside Stability

Air and Water Quality (EPA Air & Water Quality)

Causes of Moisture in Basement (Water in Basements)

Other Information: Consumer Housing Advocates – HADD) and Better Business Bureau

Inspectors are supposed to be licensed and insured in Kansas but not Missouri.

Many belong to National Home Inspection Associations. –

ASHI(American Society of Home Inspectors)

NACHI (National Association of Certified Home Inspectors)

NAHI (National Association of Home Inspectors)

PITI (Professional Inspection Training Institute)

ACI (Association of Construction Inspectors)

IHINA (Independent Home Inspectors of North America)

Another consideration is a “re-inspection” by your own inspector after the Seller has completed the agreed-upon repairs.

Always hire the most qualified person you can find. Ask about their experience, education, references and insurance. Many of the above inspections require an engineer to conduct a “Phase 1 Inspection.” Making informed decisions about your home avoids surprises. You can eliminate the guesswork and reduce the potential for problems by hiring qualified inspectors. Your cousin Bob might not be that person. ]]> http://kansascityrealestatereport.com/2010/01/buyer-inspection-list/feed/ 0