H2O New Product Guidelines Effective 1/1/08
Release Date:November 8th, 2007

Product Guideline-Effective 1/1/08
House to Home Ownership
Down Payment Assistance Program (H2O)®

Eligible Borrowers: First-time homebuyers, defined as borrowers who have not owned a residence within     the past three years, or in case of divorce or separation, a displaced homemaker.  This applies to all signers to the loan.

Eligible Properties: Any dwelling unit located within Colorado currently titled as real property, subject to primary mortgage lender acceptance.

Income Threshold: 80% of the most recently published HUD Area Median Income, adjusted for actual household size, for the county in which the property is located.  Income is established by the currently demonstrated income, excluding overtime, shift bonus, commission and bonus income that have not been earned consistently for the most previous 2-year period with a strong likelihood of continuance.  

Loan Amount: 5% of the contract purchase price, subject to reasonable accommodation of local housing prices for household size. 

Compatible Mortgages: H2O may be used in conjunction with conforming conventional and certain portfolio programs that offer fixed or intermediate variable rate terms designed for entry-level buyers. (i.e. FLEX, My Community, 5/1, 7/1, etc.). FHA, VA, Subprime and other non-conforming products are not permitted.

Loan to Value:  Maximum Combined Loan to Value is 105% of purchase price.

Debt Ratio: Maximum back ratio of 41%.

Minimum Investment: Borrower must have a minimum direct transaction investment of $1,000 from a source acceptable to the primary lender.  In no case may the Seller or premium pricing of the mortgage interest rate satisfy this minimum requirement.

Assets: Borrower may not have verified assets in excess of the purchase price.

Repayment: Periodic payments are not required.  Payments for less than the full amount of principal, accrued interest and public recording fees are not accepted. Subsequent subordination requests are not permitted.

Use of Funds: Down payment, closing costs and pre-paid items related to the primary loan.

Homebuyer Training: Required on all loans, as evidenced by a Fannie Mae, Freddie Mac, HUD or CHFA-approved provider.

Term: Maximum term is 15 years.

Loan Fees: $150 Application Fee shall be charged only at the time of loan closing and reflected on the HUD1 Settlement Statement. A $50 fee will be charged on all H2O loans processed in conjunction with a contract loan closing.

Collateral: Subordinate lien priority on subject real property.

Equity Share: Loans repaid in full within the initial 24 month period will include loan principal only. Repayments that occur thereafter will include loan principal plus a pro rata share of recognized appreciation (if any) based upon the percentage of the H2O loan to the original purchase price.  (If H2O loan represents 5% of original purchase price, the borrower would repay the original principal balance plus 5% of the equity gain at the time of loan repayment.) At time of pay off request the appreciation of the home is established by appraisal, sales price or satisfactory Comparative Market Analysis.

Rate Caps: Not Applicable.

Exceptions Policy: All aspects of H2O eligibility and underwriting criteria are subject to Staff-level exception authority.  Loan terms and pricing must be approved by the FP Loan Committee.

Origination Procedures

Application: Mortgage loan officer submits Loan File Checklist to Funding Partners, complete with all documentation shown on the form.  A loan commitment is usually issued within 48 hours, or less.  Any remaining documentation requirements will be detailed.

Processing: Funding Partners will order title commitment and evidence of hazard insurance.  Final loan documents are delivered electronically to loan officer for presentation to borrower.  All outstanding items must be cleared prior to funding.

Closing: FP will deliver closing instructions and loan proceeds direct to title.  Wires are sent 24 hours prior to scheduled closing date, so the loan officer must advise of any schedule changes as soon as possible.

Fees Collected: The Application Fee of $150 is collected at closing, in addition to the public recording fee for the deed of trust (4 pages), and will appear on the HUD1 Settlement Statement. A $50 fee will be charged on all H2O loans processed in conjunction with a contract loan closing.   All settlement figures should appear on a single statement.  FP will review and approve the final statement prior to funding.  Title insurance is not required for H2O loans.

Requirements: LOAN OFFICER’S ARE REQUIRED TO PRESENT ALL H2O DOCUMENTS AT, OR PRIOR TO, CLOSING.  Both the borrower and loan officer must execute the Lender Certification form, acknowledging disclosure of all loan terms and contact information. 

Settlement: Borrower may NOT receive any proceeds at the time of settlement regardless of total contribution.  Title will be instructed to show any excess proceeds as a principal reduction to FP on the Settlement Statement and return such funds for proper credit.  No changes to the H2O loan documents or loan amount shown on the HUD1 are permitted as a result of excess proceeds.  

Post Closing: The original deed will be recorded by title with all other original H2O loan documents returned to FP via overnight courier.  Any excess proceeds will be applied as principal reduction, with applicable notice delivered to the borrower upon receipt.

Contact Information:
Connie Ealey
Funding Partners for Housing Solutions
214 S. College Ave, Second Floor
(970) 494-2021
Fort Collins, Colorado 80524