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21-04-23 Announcement—April 23 2021 Program Guidelines Update

04/23/2021

All policy changes and updates are referenced to the appropriate section below. These policy changes are effective 04/15/2021 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 of the Correspondent Lending Guide. To review the program guidelines changes made April 9, 2021, or earlier, please follow this link to the archived Correspondent Lending Guide.

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Announcement: The DPA Edge Soft Second program has had its naming conventions revised. All references to “DPA Edge Soft Second” in the Correspondent Lending Guide, matrices, and trainings now refer to both the 3.5% and 5% down payment assistance options. The DPA amount has been added to the end of the name when referring to a specific DPA amount: the DPA Edge Soft Second 3.5% or the DPA Edge Soft Second 5%.

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Guidelines Updates

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In section 5.17 (Present Housing Expense & Verification of Rent), the housing gap requirement has been limited to only borrowers in the 620–639 FICO bucket with a present housing payment. The updated paragraph is included below:

Borrowers in the 620–639 FICO range and making a housing payment may have a housing gap of up to ninety (90) calendar days before closing. (This gap may be included in the 12-month verification of housing payment or expense.) A letter of explanation will be required if the housing gap is larger than thirty (30) calendar days. For example, a borrower may have left a previous rental agreement and then lived rent-free with family in preparation for closing on a new home.

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Section 5.34.15 (South Carolina) has been updated. Alaska requires that all loans on a property be a minimum of $5,000 for the terms that we provide with our down payment assistance. This section has been renamed “Alaska and South Carolina,” though the content of the text within has been unaltered. For reference purposes, the text of the section is included below:

All Programs: The minimum second mortgage loan amount is $5,000. Therefore, for purchase prices below $143,800 with 3.5% assistance, or $100,000 with 5% assistance, the DPA amount will be $5,000.

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The forgiveness conditions for the DPA Edge Soft Second products, both 3.5% and 5% DPA, have been changed:

  • The forgivable second mortgage may be forgiven at the end of its 30-year term—this applies even if there are late payments. Forgiveness at the end of the loan’s 30-year term requires the borrower’s request and the borrower’s payment of processing the lien release.
  • The forgivable second mortgage will lose its forgivable status permanently if the borrower refinances the first mortgage and state law allows the second mortgage to subordinate without the consent of CBCMA. The loan will remain unforgivable even if the 30-year term is met.

All other forgiveness and repayment conditions remain unchanged. The above changes required updates to the following sections:

  • 5.3.1 (DPA Edge Program): Two separate paragraphs were changed.
    • DPA Edge: Soft Second 3.5%: 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. This forgiveness period resets if the borrower makes a late payment on the first mortgage. If this forgiveness condition is not met before the end of the 30-year term, then the loan may be forgiven at the borrower’s request and upon the borrower’s payment of processing the lien release. This loan permanently loses its forgivable status if, during the initial thirty-six (36) payments on the first mortgage, the borrower refinances the first mortgage and state law allows the second mortgage to subordinate without prior consent from CBCMA. (Please reach out to servicing@chenoafund.org to discuss subordinations.)
    • 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 all borrower payments are less than sixty (60) days late on the first one-hundred and twenty (120) payments on the FHA first mortgage. This forgiveness period does not reset if any of the first one-hundred and twenty (120) payments on the FHA first mortgage are sixty (60) or more days late; in such a situation, the loan would not be forgiven after the first one-hundred and twenty (120) payments on the FHA first mortgage, but the loan would still have a 0% interest rate and no monthly payment for the rest of the 30-year term. If this loan is not forgiven after the first one-hundred and twenty (120) payments on the FHA first mortgage and this loan reaches the end of its 30-year term, then the loan may be forgiven at the borrower’s request and upon the borrower’s payment of processing the lien release. This loan permanently loses its forgivable status if during the initial one-hundred and twenty (120) payments on the first mortgage the borrower refinances the first mortgage and state law allows the second mortgage to subordinate without prior consent from CBCMA. (Please reach out to servicing@chenoafund.org to discuss subordinations.)
  • 5.6 (Brief Description of DPA Product Types): Two separate paragraphs were changed.
    • DPA Edge: Soft Second 3.5%: Down payment assistance in the form of soft (forgivable) secondary financing. Second lien has a 30-year term, 0% interest, with no payments due, and will be forgiven after thirty-six (36) consecutive, on-time payments of the underlying first mortgage, or at the conclusion of the 30-year term. Offers 3.5% assistance based on the sales price or appraised value, whichever is lower.
    • DPA Edge: Soft Second 5%: Down payment assistance in the form of soft (forgivable) secondary financing. Second lien has a 30-year term, 0% interest, with no payments due, and will be forgiven after the initial one-hundred and twenty (120) regular payments on the underlying first mortgage, provided that no payment is 60 (sixty) or more days late. (This forgiveness period does not reset if any of the first one-hundred and twenty [120] payments on the underlying first mortgage are sixty [60] or more days late, but the down payment assistance will still have a 0% interest rate and require no monthly payment.) The loan is also forgiven at the end of the 30-year term if the prior forgiveness condition is not met, even if any payments were sixty (60) or more days late. Offers 5% assistance based on the sales price or appraised value, whichever is lower.
  • 11.2.2 (Soft Seconds): Two separate paragraphs were changed.
    • Soft seconds do not qualify for subordinations for the initial thirty-six (36) payments on the first mortgage, for 3.5% seconds, or the initial one-hundred and twenty (120) payments on the first mortgage, for 5% seconds. The note specifically dictates that a refinance on the first mortgage would trigger a payoff of the second mortgage. The DPA Edge Soft Second 3.5% may be subordinated after the initial thirty-six (36) payments on the first mortgage if it is not forgiven, and the DPA Edge Soft Second 5% may be subordinated after the initial one-hundred and twenty (120) payments on the first mortgage if it is not forgiven.
    • The DPA Edge Soft Second will permanently lose its forgivable status if the borrower refinances the first mortgage and state law allows the second mortgage to subordinate without prior consent from CBCMA, but only if this subordination occurs, for 3.5% seconds, during the initial thirty-six (36) payments on the first mortgage, or, for 5% seconds, during the first one-hundred and twenty (120) payments on the first mortgage. The loan will still have a 0% interest rate and have no monthly payment if its forgivable status is permanently lost, but it will need to be repaid upon refinance, transfer of ownership, or the end of the 30-year term.