Ihda illinois smart move

The Illinois Smart Move Program

Objectives:
After completion of this presentation participants will be able to:
 Explain to homebuyers the benefits of the Smart Move Loan and Smart
Move assistance programs
 Explain the Smart Move Down Payment assistance
 Explain the three compliance qualifications of the Smart Move program
 Explain why targeted areas are beneficial and where a list of targeted
areas can be found.
 Explain the three recapture triggers
 Explain the five steps of the IHDA loan process
 Find guides to assist in submitting IHDA loans

Illinois Housing Development Authority
“To finance the creation and the preservation of
affordable housing throughout the State to increase the
supply of decent and safe places for people of low or
moderate means to live.”

Housing Finance Agency
Bank with a public mission
Advocate for affordable housing
Affordable housing expert
Partner

Advantages to IHDA’s Programs
Safe and reliable products
Reach a different consumer
Affordable interest rates
Easy process

First Mortgage:
30-year; Fixed rate; Affordable interest rate program
Highlights:
 Either FHA, Conventional ,USDA and VA insured
 Maximum LTV: 96.5 (FHA) ; 97(Conventional) 100 (USDA & VA)
 First-time homebuyer or exempt
 Minimum credit score of 620
 Maximum total debt (back end) ratio of 45 percent
 Must contribute 1 percent or $1,000 from buyer’s own funds, whichever is greater
 Homeownership counseling required
Current Rates
4.00% FHA, USDA, VA
4.25% Conventional
Subject to change

First Mortgage plus Down Payment Assistance (DPA):
Characteristics of Down Payment Assistance:
 Provides 3 percent of the purchase price, up to $6,000 for households
 0 percent, 10-year forgivable loan, recorded as a second mortgage
 Mortgage balance is repaid if home is sold or 1st mortgage refinanced within 1st 10 years
 The interest rate on the First Mortgage under this package will be slightly higher
than the interest rate on the First Mortgage under package one
Consists of a Smart Move First Mortgage plus a Smart Move Down Payment
Assistance Loan
Current Rates
4.50% FHA, USDA, VA
4.75% Conventional
Subject to change

Conventional Program:
 Job Lost Protection available with MI companies
 No Adverse Market Fees
 No Pricing Adjustments
 Reduced PMI Coverage:
• 18% for LTVs greater than 95% and less than or equal to 97%
• 16% for the LTVs greater than 90% and less than or equal to 95%
Delivery Requirements
• Special Feature Code (“SFC”) Bond Loans– 88
• Special feature code (“SFC”) 460 for my community mortgage code

Tax Code Compliance

Smart Move has three basic compliance qualifications
1. Borrower(s) must be a first time home buyer or exempt
2. The borrower(s) and relevant parties must have a total
household income that does not exceed the applicable limit
3. The residence being financed must be a qualified dwelling and
the acquisition cost must be within the applicable limit.

Tax Code Compliance Underwriting:
Qualification #1: First-time homebuyer or exempt
First-time homebuyer:
 A person who “has not” had an ownership interest in a
principal residence at any time during the three-year period
prior to the date the mortgage is executed.
Exemptions:
 If the residence to be purchased is within a target area.
 If the borrower is a veteran, this requirement is waived.

What are targeted areas and why are they beneficial for you?
Targeted Area benefits
 Higher income and purchase price limits
 Do not have to be a first time home buyer
 Good selling point for both originators and realtors
Targeted Areas: Areas of the state where seventy percent
(70%) or more of the families have an income which is eighty
percent (80%) or less of the median family income, as
established by HUD.
There are thousands of targeted areas within Illinois. For a list by zip code within
each County, visit www.ihda.org.

This is where you
find, targeted
area look-up
guide, procedural
guides and
forms.
<

Qualification #2: The borrower(s) and relevant parties must have a
total household income that does not exceed the applicable limit.
The term “borrower” includes:
 The borrower and co-borrower(s).
 Relevant parties- includes a spouse even if they are not going
on title or are waiving homestead rights. Any adult (over 18)
who will live in the home and their income must also be
included.

How to calculate total household income:
Calculation: Total household income is the borrower’s and
co-borrower’s and relevant parties’ annualized gross income.
Example: Check Stub dated 2/28/2011*
Gross base Income is $2,000
$2,000 divided by 2 months, result multiplied by 12 = $12,000 Base income
Overtime, Bonuses Commissions generally average with last year and YTD totals
2010 OT $5,000
2011 OT $3,000
Total $8,000 divided by 14, result multiplied by 12=
$6,857
Grand Totals: $12,000 base plus OT $6,857 equals $18,857
* The above is a general example, individual files may require different calculations

Gross Monthly Income Includes:
Income from all sources!
 Gross base pay
 Overtime
 Part-time employment
 Bonuses
 Commissions
 Child support
 Alimony
 Investment income
 Dividends and interest
 Social security
 Pension income
 Unemployment

Qualification #3: The residence being financed must be a qualified
dwelling and the acquisition cost must be within the applicable limit.
To be a qualified dwelling,
a) The borrower must acquire a fee simple interest in the real
estate.
b) The home must become the principal place of residence of
the borrower within 60 days after closing on the loan.
c) The residence must be located in Illinois and be designated
for residential use.

The following residences can be Qualified Dwellings:
1. Single family detached home
2. Townhome
3. Condominium unit
4. Two-unit residential structure
Co-op apartment units are not eligible under the Program

Federal Recapture

Federal Recapture Tax
The Smart Move Program uses the proceeds of tax-exempt bonds to
provide financing benefits for first-time homebuyers.
If the home, financed through a Smart Move product, is sold or otherwise
disposed of within nine (9) years of purchase, this benefit may be
"recaptured".

The tax is triggered if all three of the following conditions apply:
1. The home is sold or disposed of within nine (9) years of
being purchased, for reasons other than death; and
2. There is a capital gain on the sale of the home, and
3. The household income for the year in which the home is sold
exceeds federal recapture tax limits.
For an example of a recapture scenario please see the
recapture addendum of this presentation or go to ihda.org

IHDA’s Reimbursement Policy:
IHDA will reimburse buyers for the recapture tax as long as
they can provide documentation showing that the recapture
tax was paid (IRS tax transcripts).
The Reimbursement Policy does not apply to borrowers accessing a
Mortgage Credit Certificate (MCC).

Smart Move Process

Smart Move Process
1. RESERVATION
2. COMPLIANCE REVIEW
3. CREDIT UNDERWRITING (#’s 2 and 3 can occur simultaneously)
4. CLOSING
5. LOAN SALE & POST CLOSING

Smart Move Process
Step One: Reservation
 Reservations are made online at https://ilrss.ihda.org/ilrss/ IHDA provides a reservation
manual to assist you. A copy is provided as part of this presentation. It is also located
at ihda.org
 In order to make a reservation you must have an user id and password
 To obtain an user id and password you must contact your system administrator
1. Every lender has an internal administrator at their institution
2. Do you know who’s your administrator?
 Once a reservation is made it must close within 60 days. If it doesn’t close within that
time frame, IHDA’s worst case pricing will apply
 Rates are subject to change without notice

Smart Move Process
Step Two: Compliance Review
 A compliance file is sent by the lender to IHDA, where we determine if the buyer meets
compliance guidelines (first time homebuyer, income and purchase price limits)
 Compliance files can be uploaded through the Mitas system to IHDA for review
 IHDA provides compliance checklists to assist you. They are mandatory forms and must
be submitted with every compliance file
 It take on average 48-72 business hours to complete the initial review
 Lender is notified of review by email

Smart Move Process
Step Two: Compliance Review Continued
Smart Move compliance files consists of the same forms that lenders use on a daily
basis. There are documents that are unique to IHDA and are listed below:
 Smart Move Buyer and Seller Affidavits
 Smart Move Certificate of Income
 Recapture notice
 Three years of tax returns.
 IHDA provides guides on how to complete the above forms. They are included as part of this
presentation and are available at ihda.org.
 All IHDA forms are available at ihda.org
All compliance files are sent to the following address
Homeownership Programs
401 N. Michigan Avenue, Suite 700
Chicago, IL 60611

Smart Move Process
Step Three: Credit Underwriting
When underwriting Smart Move Loans, you will underwrite according to the program that you
are using (FHA, Conventional, USDA, VA). Please note that IHDA does have two caveats up
and beyond typical underwriting guidelines
 Buyers must have a minimum middle fico score of 620
 Back end ratio cannot exceed 45%
 If you do not have the ability to underwrite loans at your organization, contact US Bank
Help Desk at 1-800-562-5165 for available options

Smart Move Process
Step Four: Closing
Once you have IHDA and credit approval you can close. Please be aware
of the following.
 IHDA offers an optional pre-closing review. Within 24 hours of closing
fax to (312) 832-2195
 Copy of the Hud-1
 Face pages of the first and second mortgages

Smart Move Process
Step Five: Loan Sale and Post Closing
 Smart Move Loans are sold to US Bank who also acts as the servicer
 Purchase files are submitted to both IHDA and US Bank, which
largely mirror each other.
 Lender has 10 days from the loan closing date to send the post
closing documents to IHDA.
 Loan must have approval from US Bank and IHDA before it is
purchased.
 For details on US Bank’s purchase process call their help desk at
1-800-562-5165 or www.mrbp.usbank.com

Smart Move Process
Step Five: Loan Sale and Post Closing
Smart Move purchase files consist of the same forms that lenders use on a daily basis. There
are documents that are unique to IHDA and are listed below:
 Smart Move Buyer and Seller Affidavits
 IHDA Mortgage Rider
 IHDA Second Note and welcome letter
 IHDA Second Mortgage
 IHDA provides checklists for to assist you. They are mandatory forms and must be submitted with
every compliance file
 IHDA provides guides and checklists on how to complete the above forms. They are included as
part of this presentation and is available at ihda.org.
All purchase files are sent to the following address
Homeownership Programs
401 N. Michigan Avenue, Suite 700
Chicago, IL 60611

Step Five: Loan Sale and Post Closing Cont’d
Below are common errors that occur on IHDA closing submissions
 IHDA closing conditions are not met.
 Errors on IHDA Mortgage Rider
 Rider is recorded with the first mortgage only
 Marital Status missing on either the first or second mortgage
By following the IHDA post closing checklist you should eliminate most if not all
errors. Use of the checklist is mandatory.

The Illinois HOME START Program
Closing a Down Payment Assistance Loan (DPA)
 DPA loan closes in name of “Illinois Housing Development Authority”
 No Truth in Lending (T-I-L) required
 Loan can be reflected as subordinate financing on HUD-1 generated for
first mortgage or can have it’s own HUD-1
It is not required to execute an Assignment in
order to sell the second mortgage to U.S. Bank
Home Mortgage.

Lender Compensation:
The Illinois HOME START Program
Origination Fee: Lender can charge 0.5% origination fee to the borrower(s)
Allowable Fees: Lender can charge fair and reasonable fees (up to $1,200)
for services allowed
Service Release Fee: Lender will receive 2.25% of the 1st mortgage amount
as a service release fee for FHA, USDA, & VA loans
For Conventional loans lender will receive 2.25% of the
1st mortgage amount

Resources:
IHDA Compliance Officers: Linda Benson 312-836-5249
Allison Crane 312-836-8561
IHDA Account Managers: Scott Bush 312-898-3317
ScottBush@IHDA.org
Greg Faulkner 312-914-5023
GFaulkner@IHDA.org
IHDA Toll Free Hotline: 1-877-456-2656
IHDA website: www.ihda.org
U.S. Bank Help Desk: 1-800-562-5165

Objectives Recap:
After completion of this presentation participants will be able to:
 Explain to homebuyers the benefits of the Smart Move Loan and Smart
Move assistance programs
 Distinguish whether a buyer qualifies for 3% or 5% Smart Move
assistance
 Explain the three compliance qualifications of the Smart Move program
 Explain why targeted areas are beneficial and where a list of targeted
areas can be found.
 Explain the three recapture triggers
 Explain the five steps of the IHDA loan process
 Find guides to assist in submitting IHDA loans

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Ihda illinois smart move

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