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21-03-01 Announcement—March 1 2021 Program Guidelines Update

03/01/2021
All policy changes and updates are referenced to the appropriate section below. These policy changes are effective 03/01/2021 unless otherwise noted.
Additionally, CBCMA has compiled all of its announcements related to COVID-19 into one section immediately following the Recent Updates and Announcements section. To review the program guidelines changes made February 12, 2021, or earlier, please follow this link to the archived Program Guidelines.

Announcement:
Chenoa Fund has added a new offering to its existing line of down payment assistance products. This new product is a 5% down payment offering following our DPA Edge Soft Second guidelines (Soft 5%). Except for the differences noted below, this product follows the DPA Edge Soft Second program guidelines:

DPA Edge Soft Second 5%

  • 5% down payment assistance which may be used to cover the borrower’s minimum required investment, closing costs, and/or prepaid items
    • Rounded up to the nearest whole dollar
    • Calculation based on 5% of the sales price or appraised value, whichever is lower
  • High balance loans not available
  • Standard DPA Edge YSP
  • 30-year term, forgivable after 10 years
    • No subordination during this time; a refinance would require a payoff
    • Loan loses its forgivable status if any payments on the first mortgage become 60+ days late
    • Loan loses its forgivable status if the loan is auto-subordinated under state law without the consent of CBCMA
    • If forgiveness is terminated, the down payment assistance still has a 0% interest rate, requires no monthly payment, and only needs to be repaid at the end of the 30-year term, upon transfer of ownership, or upon refinance
  • Income limit of 115% AMI of the subject property

The Soft 5% has a different rate than the 3.5% DPA Edge Soft Second, which can be found on our Daily Rate Sheet (YSP can be found there as well).

This product has been added to the correspondent lending guide and our various product matrices, in addition to our trainings and our website. The changes to our correspondent lending guide are detailed below.

Section 5.1 (Chenoa Fund): The first half of the paragraph has been reworded to acknowledge the 5% DPA option that Chenoa Fund now offers.
Chenoa Fund down payment assistance (DPA) is offered in the form of a second mortgage. The DPA amount is 3.5% or 5% of the purchase price or appraised value of the home, whichever is lower, depending on the product chosen. This amount is rounded up to the nearest whole dollar. In either case, this assistance may go towards the borrower’s minimum required investment, closing costs, or prepaid items, or any combination of the three. Following the close, our approved correspondent lenders, who offer Chenoa Fund products on CBCMA’s behalf, sell the first mortgage to CBCMA and receive a generous YSP. Correspondent lenders also get reimbursed for the second mortgage by CBCMA.

Section 5.3 (FHA Offerings): The first half of the second paragraph has been reworded to acknowledge the 5% DPA option that Chenoa Fund now offers. In addition, the third paragraph has been reworded to acknowledge that we will not allow high balance loans to be paired with DPA Edge 5% product.
The DPA Edge and Rate Advantage programs provide down payment assistance equal to 3.5% or 5% of the sales price or appraised value, whichever is less, rounded up to the nearest whole dollar. In either case, this assistance may be applied towards the borrower’s minimum required investment, closing costs, or prepaid items, or any combination of the three. When secondary financing is issued, the assistance must be in second lien position. Additional assistance (gift or secondary financing) may be combined with CBCMA’s assistance programs as long as the underlying FHA-insured loan is sold to CBC Mortgage Agency and any CBCMA lien is in second position. The only fees chargeable to the borrower in conjunction with the secondary financing are prepaid interest, recording fees for the Deed of Trust, reasonable settlement fees, any governmental levied property tax stamps or recording taxes, and a courier fee to return the signed documents to the Lender.
First mortgage loans must be a fixed rate and conform to standard FHA guidelines. High balance loans are acceptable, except for the DPA Edge Soft Second 5% down payment assistance product.

Section 5.3.1 (DPA Edge Program): The DPA Edge Soft Second 5% program has been added to this section.
The DPA Edge Program, which is for borrowers with a minimum FICO score of 620, has three separate product offerings.
DPA Edge: Soft Second: This second mortgage product offers 3.5% down payment assistance and is for borrowers whose income is less than 115% of the AMI for the subject property. This particular second is forgiven once the borrower makes thirty-six (36) consecutive on-time payments on the FHA first mortgage.
DPA Edge: Repayable Second: This second mortgage product offers 3.5% down payment assistance and has no income limits. This product is repayable and the borrower has two options for terms. One option is a 10-year term, 0% interest rate. The second option is a 30-year term, 5% interest rate.
DPA Edge: Soft Second 5%: This second mortgage product offers 5% down payment assistance and is for borrowers whose income is less than 115% of the AMI. This particular second may be forgiven if the borrower makes one-hundred and twenty (120) payments on the FHA first mortgage; this loan becomes unforgivable if any of the payments on the FHA first mortgage are sixty (60) or more days late, but will still have a 0% interest rate and no monthly payment. (If the loan loses its forgivable status, it will need to be repaid at the end of the 30-year term, upon transfer of ownership, or upon refinance.)

5.3.2 (Rate Advantage Program): A line stating that only the Rate Advantage program offers 3.5% and 5% DPA was removed.

5.4 (Product Comparisons): Added a new bullet point that references the DPA Edge Soft Second 5% program.

5.6 (Brief Description of DPA Product Types): Added a new paragraph that incorporates the DPA Edge Soft Second 5% program.
DPA Edge: Soft Second 5%: Down payment assistance in the form of soft (forgivable) secondary financing. Second lien is a 30-year term, 0% interest, with no payments due, and will be forgiven after one-hundred and twenty (120) regular payments of the underlying first mortgage, provided that no payment is 60 (sixty) or more days late. (If forgiveness is terminated, the down payment assistance still has a 0% interest rate, requires no monthly payment, and only needs to be repaid at the end of the 30-year term, upon transfer of ownership, or upon refinance.) Offers 5% assistance based on the sales price or appraised value, whichever is lower.

5.7 (Borrower Income Limits): Incorporated the DPA Edge Soft Second 5% program by adding it to the existing paragraph for the DPA Edge Soft Second.
DPA Edge: Soft Second and DPA Edge: Soft Second 5%: Soft (forgivable) secondary financing available to the borrower with qualifying income less than or equal to 115% of area median income based on the state and county of property.

5.27 (Maximum LTV/CLTV and Subordinate Financing): Clarified that the DPA amount could be 3.5% or 5%, and combined the DPA Edge and Rate Advantage categories.
All FHA Programs:

  • LTV to 96.5%

DPA financing may be 3.5% or 5% of the purchase price or appraised value, whichever is lower. (The DPA Edge Repayable Second product only offers 3.5% assistance.) No max CLTV; per FHA guidelines, additional outside financing may be acceptable with unlimited CLTV. (conditions may apply). Borrowers may increase their minimum required investment (down payment) by putting down additional funds above and beyond the assistance received from Chenoa Fund as long as the loan-to-value ratio does not go below 90%.

11.2.2 (Soft Seconds): The first paragraph received additional detail to clarify that soft seconds may not be subordinated, regardless of the DPA amount.
Soft seconds do not qualify for subordinations, whether the DPA amount is 3.5% or 5%. The note specifically dictates that a refinance of the first mortgage would trigger a payoff of the second mortgage. However, the DPA Edge Soft Second 5% may be subordinated after ten (10) years if the loan loses its forgivable status.