MSHDAs Homeownership Programs Delivering the Dream to Michian

MSHDA’s Homeownership Programs Delivering the Dream to Michian Families Nancy Baker May 1, 2018

Homeownership Division MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

Who We Are • MSHDA is a Housing Finance Agency and acts as an investor in the mortgage process • We issue Mortgage Credit Certificates (federal tax credit) • We administer funds for Homebuyer Education and Foreclosure Prevention Counseling • We oversee the Step Forward Michigan program to Help Michigan’s Hardest Hit homeowners

Statistics - 2017 • Funded 2, 194 MI Home Loan purchases. • Funded 2, 131 Michigan Down Payment loans. • Issued $39. 2 million worth of Mortgage Credit Certificates to 329 homebuyers. • Provided $15. 6 million in assistance to 2, 384 households through Step Forward Michigan. • Provided Homebuyer Education services to 2, 469 households.

Misconceptions • MSHDA runs out of money Funding is sustained through bond issuance and loan payments • Loan approval takes too long Complete loan packages processed within 24 -72 hours • Only for low-income buyers Income limits range from $64, 100 - $123, 620

Misconceptions • Sales prices are too low Sales price limit state-wide is $224, 500 • Only for first-time homebuyers MI Home Loan available to first-time homebuyers state-wide and repeat homebuyers in targeted areas. MI Home Loan Flex available to first-time and repeat homebuyers statewide.

MI Home Loan Program MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY TITLE SLIDE NAME (NEW SECTION)

Process Flow Signed purchase agreement submitted to lender Lender makes reservation to lock in the interest rate Lender underwrites and approves loan Loan package sent to MSHDA purchases loan and sends funds to lender Lender sends closing package to MSHDA for purchase Lender closes and funds loan MSHDA reviews & commitment is sent to lender

Compliance Requirements • Prior Homeownership (Targeted/Non-Targeted areas) • Sales Price Limits • Income Limits • Asset Limit for Michigan Down Payment Assistance loans

Interest Rates 30 year fixed = 4. 000% 30 year fixed with Down Payment Assistance = 4. 750% Rates good for 90 days.

Sales Price & Income Limits Sales Price Income Limits $224, 500 (maximum purchase price Statewide) $64, 100 - $123, 620 (maximum combined household income) Income requirements vary depending on location & family size

Targeted Areas Prior homeownership permitted Income limits are higher 66 of Michigan’s 83 counties are targeted 1 -2 member 3+ member Eaton County $81, 960 $95, 260 Brookfield Twp. , Charlotte, Olivet, Roxan Twp. , Vermontville Ingham County

Non-Targeted Areas Must be a first-time homebuyer Income limits are lower 17 of Michigan’s 83 counties are non-targeted 1 -2 member Remainder Eaton Co. 3+ member $68, 300 $78, 545

Buyer Requirements • Principal residence • Co-signers/nonoccupying co-borrowers not allowed • All adults in household must apply (unless fulltime student-12 credit hours or disabled and legally unable to enter into a contract)

Credit Requirements • FICO: minimum 640 -- 660 for manufactured housing • Previous foreclosure/deed in lieu or bankruptcy (lender must follow guidelines per specific loan type) • Alternative Credit (follow loan type guidelines)

Seller Contributions • FHA, VA, RD – maximum allowed by these programs • Conventional a) 6% if LTV is 76% - 80% b) 9% if LTV is 75% or less

Eligible Property Types • Single-family homes (New or Existing) New, never occupied homes - End financing - Must be completed prior to loan purchase • Manufactured housing (New or Existing) - Original site where constructed - Built after 6/14/1976 - Multiple-section - Taxed as real estate - Permanently affixed to foundation

Eligible Property Types • Condominiums - Approved by Fannie Mae, Freddie Mac or insurer (FHA or VA) - FHA: Lender responsible for making sure condo is insurable for both new and existing - Conventional: Condo Warranty Certificate signed by underwriter

Property Requirements • Full Appraisal: Appraised value must support the purchase price when using the Michigan Down Payment • Repair Escrows are permitted for weather related repairs only ($500 minimum or 1 ½ times the bid OR the repair amount on the appraisal) • Mortgage Survey (New construction, required by title company, or case-by-case basis)

Max Acreage/Lot Size • Cannot be large enough to construct more than one house or include land that consists of two or more separate buildable lots • Maximum 2 acres or Minimum lot size established by local zoning • Exceptions - up to a 5 -acre maximum (additional documentation is required; survey or letter from local municipality)

Loan Types MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

FHA • 96. 5% LTV • Gift allowed for 100% of cash required • Michigan Down Payment available • May be used for manufactured housing

Rural Development • LTV determined by RD • Gift allowed for 100% of cash required • Michigan Down Payment (prepaids, closing costs and guarantee fee) • RD commitment required • May be used for new manufactured housing

VA • LTV determined by VA • Gift allowed for 100% of cash required • May be used for manufactured housing

Conventional 97% • Up to 97% LTV (1 -unit and Condos) 95% LTV Manufactured home (DPA not allowed) • Michigan Down Payment available • May be used for manufactured housing • Homebuyer Ed required for loans with DPA and all MI Home Loan Flex Conventional

Conventional 97% HFA Preferred MI Rates • 95. 01 – 97% LTV 18% • 90. 01 – 95% LTV 16% • 85. 01 – 90% LTV 12% • 80. 01 – 85% LTV 6%

MI Home Loan Flex Program MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

Description • Mortgage Backed Security product • Available to first-time and repeat homebuyers • Less restrictive than Bond product • Michigan Down Payment available • Rate floats with the market and can change daily

Program Comparison MI Home Loan Flex • DPA up to $7500 for qualified buyers • DPA up to 4% of sales price ($7, 500 max) • Maximum lot size – 2 acres • Maximum lot size – no restrictions

Program Comparison MI Home Loan • Credit Score Required 640 – 660 manufactured housing MI Home Loan Flex • 660 – no manufactured housing allowed • All adults in household must apply and credit qualify • Only one qualified buyer required

Program Comparison MI Home Loan • Possibility of recapture tax • Conventional – Condo LTV up to 97% MI Home Loan Flex • No recapture tax • All conventional loans require Homebuyer Ed • Conventional – Condo LTV 95%. Must be on US Bank’s approved condo list

Michigan Down Payment MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

Michigan Down Payment Cash to close is critical for homebuyers: • The down payment is still one of the biggest obstacles for consumers • Required cash to close with a DPA is often less than the required cash for a rental property (first month’s rent and security deposit)

Michigan Down Payment • $7, 500 maximum • Appraised value must support sales price • Down payment, closing costs, prepaid/escrow items (no cash back) • 0% interest with no monthly payments • Use with MSHDA/FHA, MSHDA/RD & MSHDA/Conventional

Michigan Down Payment • Borrower cash investment 1% of sales price (may come from approved gift source) • Cash asset restriction - $10, 000 (includes equity in current home) • Homebuyer Education required – MSHDA or HUD approved counselors w/Michigan location (all adults must be certified) • Michigan Down Payment loan due on sale, transfer, refinance, or repayment of first MSHDA mortgage

Michigan Down Payment • Visit the Michigan Down Payment website at www. michdownpayment. com • Marketing Kit Brochures Product Comparison Income/Sales Price Limits Request a Speaker MSHDA Eligibility Tool Digital Marketing Graphics Michigan Down Payment yard signs

Mortgage Credit Certificate MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY TITLE SLIDE NAME (NEW SECTION)

Description • Federal income tax credit • Tax credit is based on the annual mortgage interest paid times the 20% credit issued by MSHDA • Available for life of original mortgage (as long as home is primary residence) • Single family, owner occupied principal residences

Eligibility & Fees • • Sales Price - $224, 500 Income Limits - $64, 100 to $123, 620 Targeted and Non-Targeted areas apply Fee = $400 -$500 – (paid at closing and can be paid with seller concessions) • Land not to exceed 2 acres (no acreage waiver) • Use credit after all other credits subtracted • Unused credit can be carried forward (3 years)

Credit Calculation Total Mortgage Amount x Loan Interest Rate = Interest for Year Annual Interest x MCC Rate (20%) = Tax Credit for the Year Assuming a mortgage of $100, 000 at 4% interest, the Tax Credit would be: $100, 000 mortgage x 4% interest rate = $4, 000 interest $4, 000 x 20% = $800 first year tax credit

Benefits • Up to 20% of the mortgage interest credited on federal tax return, (dollar for dollar reduction of borrower’s annual tax liability). Remaining mortgage interest (80%) qualifies as itemized deduction.

Recapture Tax MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

Recapture Tax Most borrowers will NEVER pay this tax Tax is limited to 6. 25% of original mortgage or 50% of net gain on sale (whichever is less) ALL of the following must happen: 1) Sell the MSHDA purchased home in 9 years 2) Earn significantly more income than when the home was purchased 3) Gain from the sale

Recapture Tax Reimbursement Program Michigan homeowners that are liable for this tax will receive a reimbursement from MSHDA by providing: • IRS form 8828 • Signed copy of IRS 1040 • Proof of payment.

Homeownership Counseling Program MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

Homeownership Counseling Program • Statewide network of counselors that help increase homeownership opportunities • Homebuyer Education required for Michigan Down Payment and MI Home Loan Flex Conventional Loans

Services • Homebuyer Education • Financial Capability Education • Pre-purchase Counseling • Foreclosure Prevention Counseling

Step Forward Michigan MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY

Hardest Hit Fund • Federal Program § U. S. Dept. of Treasury § $96 Billion § 18 states and DC § $761 Million for Michigan

Qualifying • To qualify, the homeowner must be: § A Michigan resident § Have ownership interest and be able to sign a new mortgage lien on property § Occupy property as primary residence § Have a qualifying involuntary hardship § Have income necessary to sustain ongoing mortgage § Have limited cash reserves (no more than $10, 000)

Assistance Per Household • Up to $30, 000 to pay: § Delinquent Mortgage Debt § Past Due Property Taxes § Outstanding Condo Fees

HHF Loan Terms • 0% interest • No monthly payments • Five (5) Year Forgivable Loan – loan forgiven 20% per year Homeowner retains occupancy

Application • Homeowners apply online: www. Step. Forward. Michigan. org

Questions? MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY TITLE SLIDE NAME (NEW SECTION)