​2021 Equity Builder Program & Housing Our Workforce Final Steps: Requesting a Disbursement

2021 Equity Builder Program & Housing Our Workforce Final Steps: Requesting a Disbursement

0:00
Thank you everyone for attending today's webinar.
0:05
We're going to be talking about our Equity Builder Program and our Housing Our Workforce.
0:09
We're going to talk about the final steps when you are requesting a disbursement.
0:16
Thank you for everyone who is returning to our program.
0:20
We do have a lot of organizations who are repeat members who use either or both programs and welcome to any newcomers who are also participating the first time this year.
0:31
These programs are great opportunities to help your borrowers sustain homeownership. We will be recording today's session, and this will be posted on our website.
0:44
That way if you have some other staff members who are unable to participate in the live training sessions, they'll have access to today's presentation as well. The handouts are also located in the handout tab for today as a reference.
1:00
We do have a full agenda. We're going to cover a lot of ground during this presentation.
1:04
There are some improvements that we have made to both our programs. This is why we require annual training. We do make some minor adjustments every year. Also, if there's any staff turnover, we just want to ensure that all organizations understand how to administer EBP and HOW.
1:23
And the training is combined for both because procedurally, they operate the same. There are some overlays between either program that we do also cover in our training materials.
1:37
This roadmap is a strong depiction of our entire grant program process, and I recommend sharing it with your staff
1:46
as well as your homebuyers where we do not interact with customers directly -- meaning the homebuyers. Technically banks and credit unions are our customer and the homebuyers are your customers.
1:56
But I think this is a great way to kind of just show the overall process of how you need to have a fully baked file.
2:04
And the first mortgage financing does need to be in session with your organization. And then going through the entire enrollment process, which is typically, know from an operational standpoint, done by processors and underwriters.
2:18
…from the closing table, the important step … is that your organization is going to table fund the grant, meaning you're going to close.
2:27
…Once you have been in, the enrollment has been approved, and once you have closed on that first mortgage financing, that’s when either your closer or your post closer is going to submit all the appropriate documents.
2:41
Which we call the disbursement, that's the reimbursement.
2:46
…of the grant. And we say to allow 20 business days for us to process. It is a two-tier review.
2:52
However, we do try to process these a lot faster. We do say 20 business days, just depending on things from an accounting reconciliation standpoint, just to make sure that if we do have a little bit of a blackout period due to a month-end processing.
3:14
Communication is definitely key, and your organization has established two main contacts.
3:22
And it's important that the persons are kind of the gatekeepers of your organization when you're looking at it from a disbursement standpoint as well as the enrollment in other parts of the process.
3:35
These two persons are going to get all notifications from all the files from a disbursement standpoint.
3:42
If, you know, we do release the file back into member action required, we're going to send those to contacts and email with the request of trailing documentation.
3:52
And once we have approved the disbursement and we will be funding your IDEAL Way account, that email notification also goes to those two contacts.  Every organization operates differently. Those two contacts have been identified already.
4:08
If you think that the persons that you had selected initially maybe aren't a good fit or there is some staffing changes, you can always reach out to me directly and make some enhancements. We can do some manual updating throughout the program.
4:27
When we're talking about the requirements when you're submitting the disbursement, like I mentioned, your organization is going to close on the purchase transaction. You will be table funding the grant at closing.
4:40
You're obviously going to receive that enrollment approval in advance of proceeding with your closing.
4:46
Then your organization, depending on what program that homebuyer has been approved for, you're going to execute EBP or HOW retention documents. We do have mortgages and notes.
4:58
We will get to that later in the presentation and what that entails. And they do need to get executed at closing and be recorded with a Registry of Deeds. There is a lien on the property, so our instruments are very specific to both programs and also within the respective six New England states.
5:16
Once your organization has closed on that first mortgage, your disbursement can only be requested through the online system.
5:23
We do not accept any requests via e-mail.
5:26
And once we've reviewed all the documentation to make sure it's satisfactory, your organization will be reimbursed
5:34
accordingly in your IDEAL Way account. As I mentioned, there is a 20-business day turnaround time for our two-tier review. Like I said, we do turnings around much quicker, but just to build ourselves some time.
5:47
Also, because we do have multitude of housing community investment programs, so sometimes there is overlap with dates and deadlines. Something to note that at time of enrollment, if the property address has been changed, we do recommend doing that prior to closing your loan,
6:07
especially if it will impact the income6:13and maybe they're going from one city or town that's in a varying county. We just want to make sure that they do still receive the income eligibility and there's no impact.
6:24
However, if you know they're within the same town or city, you are able to do that at time of disbursement. If you ever have that and question it, please let us know.
6:35
But if it's something that's minor for, maybe it's a new construction property, maybe you only had a lot number at the time, but now you have that legal property address or looking at your title work, for some reason, you had some discrepancies at time of submission, you are able to do it at disbursement.
6:56
What we require at time of disbursement is the buyers' closing disclosure. For our EBP or HOW, we do not require a separate CD. There is a lien on the property. However, this is on a loan. This is a grant.
7:11
From a TRID standpoint, I know I get a lot of questions regarding this, about APR and things like that,
7:17
there is no monthly P&I. Therefore, the way we typically see the EBP or HOW grant reflected is on page three of the Closing Disclosure, and list it as a credit, and just make sure it reflects the appropriate grant amount and which program it is.
7:35I
do not recommend labeling it as a loan. I know sometimes, depending on the LOS software, sometimes it automatically defaults to that.
7:43
But I just want to make sure that when you're doing that, that you fully understand and if you are able to make a notice on that CD that it is a grant, EBP or HOW, just because we don't want the homeowner once they have closed to think that they have a loan with us.
8:04
Like I mentioned, we do have notes and mortgages. You need to use the current version.8:09We'll get into those requirements later in the presentation. And the recorded mortgage does have to be provided just to verify it went on record and being able to identify that appropriate book and page or that document number.
8:24
The Homebuyer Education Counseling Certificate also has to be provided.
8:29
This is only for first-time homebuyers. It does not apply if they are not a first-time homebuyer and we'll get into that as well today.
8:36
And for EBP only, if the homebuyer counseling is going to be paid at the closing table, and the EBP grant is going to be used for this,
8:49
we do require the invoice.
8:51
You may ask yourself, “why is this applicable if where, for EBP, it can used toward closing costs?” It is because some New England states do have rather costly education and counseling fees. It’s something that we just like to take note.
9:06
We don't include POC items paid outside of closing, so just something also to bring to your attention.
9:12
And for EBP only, we need the evidence of the member concession. We'll talk about that today and what the differences for EBP specifically on that.
9:22
And if your homebuyers, do you have any additional down payment assistance or other liens in addition to your first mortgage financing,
9:31
we do require copies of that. For example, if you have any state housing finance agency down payment assistance programs, any additional subsidies, or any municipality down payment assistance, we need copies of that. And the reason is that we just want to know what lien position that we are sitting in.
9:52
We're not lien sensitive, will sit in third or fourth position, even, depending we strongly encourage the layering of other grant programs or down payment assistance with our EBP or HOW. We just need to know that. And we also wanted to determine if those grants are forgivable, or if there is a monthly P&I amount.
10:15
As I mentioned, we cannot accept documents through e-mail or encryption and that's just because we do have a lot of banks and credit unions that are participating in our programs. So everything should be submitted through the online system.
10:31
When we're looking at the buyer's closing disclosure, when you're inputting all the information in the community lending login account that you should have, it's important to note [it is basically just] a paint by numbers. We want to know what the buyer's property address is,
10:48
your organization to be listed… the closing date.
10:52
We're going to reverify that contract sales price. If from in time of enrollment and disbursement there is an increase or decrease in that sales price, we will require an addendum to the P&S just evidencing that. We're going to look at the earnest money down payment on page three of the CD.
11:12
And something to note that, if they have put down an earnest money payment, it has to stay in the transaction.
11:19
It cannot change, and they can't get it back in that sense. And specifically, toward HOW is that it is for down payment only
11:28
with a 1 to 1 match. We’re going to talk about that later in today's training, but that's something to bring to your attention that we're really looking at that earnest money deposit in general, but more so for the HOW program.
11:43
As I mentioned too for EBP there's a member concession if that is the program that your homeowner is approved for.
11:52
We're going to look at your loan program. Your organization will basically use the same mortgage products that you're using. We just want to look and verify. We do have a couple of nuances, specifically for FHA loans, which we'll talk about.
12:10
Then when you're looking at ARM products that we cannot do less than a 5/1 ARM and the maximum caps are 2/6. We can't do 6/2/6 or 5/2/5. So, if you do have ARM products and 
12:24
you have any questions, always reach out before closing. We're happy to work with you and answer any questions that are specifically for that.
12:32
We're going to look at the total loan costs.
12:35
For EBP, it can be used for down-payment and closing cost assistance.
12:41
But this is a separate layer I want to explain this little clearer, because I know there have been questions in the past. We are required by the FHFA to verify what is considered reasonable loan costs. And that's why we ask for this data field when you're submitting the disbursement.
12:59
What we're looking at specifically is loan costs only.
13:04
So, that's page two, section D of the closing costs.
13:08
And that's that subtotal on your TRID formatted, CD, A, B, and C, and it's only the first column borrower paid at closing.1
3:20
So, I just want to note it’s not that we don't include all closing costs, which are also recording fees, things of that nature.
13:29
And on page three, we just have a monitoring and data reporting that we have to provide that we have deemed it reasonable.
13:40
Then another regulatory hard stop that we have with the FHFA is that the cash to close cannot exceed $250. We'll talk about that a little more, but that is a hard stop. And if you ever have situations when you're doing the prelim CD,
13:57
and you do see more than $250 cash back, reach out to us.
14:02
We'll walk you through the scenarios of how to cure this before closing, and we do understand that these things do happen, and we are equipped on how to give best practice advice.
14:15
So, when we're talking about the note,
14:17
like I said, it's very important to use the current versions on our website.
14:23
They will have a January 2021 date, and it's important. We can't accept prior years, because, number one, we do have regulatory changes.
14:32
We actually went through last year and as well as this year, a very significant regulatory change that is written in these instruments.
14:44
Also, to note, the reason why we can't also use prior years is because every year the templates themselves specifically reference the program year that your homebuyers have received the grant.
14:58
It’s important to know that.
15:00
And, also you can’t interchange EBP or HOW notes. This also pertains to the mortgage as well, just because they're specific to what the grant can be used for, and then also, these programs have income limits.
15:16
So, these instruments are very specific on what program and what income limit that the homebuyer has been
15:25
income eligible for. The homebuyers do have to execute them at closing, and the paragraph one does have to match the closing docs. The name, dates, the address, the grant amount should be consistent with all og your documents.
15:42
And, like I mentioned, we do have a specific part in both EBP or HOW for deed restrictions.
15:51
I want to get specific on this because the FHA loan products do have specific deed covenants that they want to include and that's important when you guys are submitting your FHA loans.
16:05
So, we do have a separate mortgage for FHA only, and we do list that on our website, but if you have a property that is an affordable unit and it does have a deed restriction, this example that we have highlighted in blue is specific wording that you have the option to edit.
16:26
So, it says as defined in subordinate mortgage, or deed restriction, as applicable, so that does cover you for a property that does have a deed restriction.
16:38
So, I just want to bring that to your attention.
16:40
And if you ever have questions, especially with FHA mortgages and how these instruments should be reflected, feel free to reach out.
16:49
It's just only something to just benefit your organization to avoid any kickbacks when you're submitting to the FHA portal.
16:58
When we're going to the EBP or HOW mortgage, similar process: use the 2021 versions, don't interchange EBP with HOW or vice versa.
17:09
Like I mentioned, FHA loan products only, they have a specific deed restriction mortgage and if it is not an FHA loan, you're going to use our standard mortgage template.
17:21
The homebuyers do have to execute at closing.
17:24
Something to note too if you have non-borrowing spouses who are on title, mortgage, and deed,
17:29
just like how your first mortgage standard practices are, they should be reflected on our mortgage. We default to the same exact mortgage underwriting standards that your organization would have.
17:42
…if we do see, when you're providing other documentation, as well as on the P&S if we see someone listed, we will question it,
17:51
and make sure that that is properly executed. Just like I said, just making sure everything texts and ties. Making sure that the deeds, the property address, the homebuyers’ names, the grant amount, everything matches.
18:05
And then paragraph five, like I said, the grant amount must match the CD and everything to be consistent through.
18:14
For Connecticut specifically, they do have their own retention documents because there are two witness lines to make sure they're compliant within the state of Connecticut. But then, for our other respective six New England states, they all have the same documents.
18:35
We’re talking about the homebuyer education and counseling.
18:38
…we talk about the time of enrollment just to make sure that every organization is aware of what is a valid source, what we're looking for on the certificate.
18:49
But just to clarify, if your organization uploads this at time of enrollment, this is not something that's required at enrollment. It gets reviewed at disbursement, so I just want to point that out in case people are including that for a full review at that time, it gets reviewed at this time of the EBP and HOW submission.
19:14
It is required for first-time homebuyers only. At least one adult household member must complete.
19:22
We are very specific on that and we do understand that, you know, especially with these courses, they can be eight-hour sessions. And we're trying to make sure that we are as flexible as humanly possible, but that is one thing to note.
19:35
If you have questions of who's appropriate and things of that nature, you can always reach out to us offline about that.
19:43
It needs to be completed 24 months prior to the closing, and we do not have a minimum required. However, we do recommend the best practice of eight-hour education
19:55
…with the counseling component.
19:56
The with counseling component is the most essential part, when I'm saying that, and we'll get into that in the second slide.
20:04
But we do have a list of approved agencies.
20:08
They are on our website as an additional resource on either of our landing pages for EBP and HOW. They should follow the accepted industry standards.
20:19
We take these lists from CHAPA, HUD, and National Industry Standards of Homeownership Education Counseling.
20:28
Your organization also, at time of application, has also kind of pre-stated what type of organizations will be utilized.
20:41
That is just an exercise to get a flavor of what type of organizations you see. You're not married to that list. So, if you realize that when you're getting a certificate that the homebuyer went to a different agency than what you … selected, you just want to refer to our master list and just make sure that that organization is just listed on our list.
21:04
We do have a question: “is that completed within 24 months of closing?”
21:10
So yes.
21:11
It is. We say prior to closing because depending at time of enrollment, these dates could be a little different. Especially with new construction, sometimes these closings are pushed out further so we just try to cover all our bases. When you’re getting to the disbursement, it should be within 24 months of closing. Thank you.
21:36
And like I mentioned, when we're talking about the homebuyer counseling invoice for EBP only. Like I said, some of the northern New England states have rather costly counseling fees. So if EBP is covering that cost, we just need [a] copy of that invoice. Also, it should tie up with your CD paid at time of closing.
22:05
So, when we’re looking at these certificates because we do see a lot of approved agencies pairing with online education resources,
22:16
we have in the past call that a blended approach if you will.
22:20
It’s important to note that when an organization pairs with an online agency, the only two that we at the Federal Home Loan Bank will accept is Framework or eHome America. We will not accept Fannie Mae, Freddie Mac, MGIC, or any other online organizations.
22:42
We have only vetted those two, and that is what we feel is deemed fit for the education component.
22:50
When we’re talking about that is, we do recommend having them go through an approved agency and then getting the specific code for Framework or eHome America. And, there's a couple of caveats why we find this to be the most appropriate best practice.
23:10
If the homebuyer goes directly to Framework or eHome America, they can opt out of the counseling component.
23:17
Our regulation is very specific that the homebuyer needs to receive education counseling.23:25So, that is the reason why we prefer it to be through the direct agency.
23:29
So, this certificate that we have highlighted here as an example, somebody did the online education through Framework, but they went through an approved agency in Massachusetts by the name of MAHA. So, this is just a good reference of when we're looking at these certificates
23:46
[of] what we deem acceptable. Naturally these homebuyers are savvy and they might have done this before even going to your organization for that first mortgage financing. If they've completed it through Framework or eHome America, your organization is required to ensure that that homebuyer completes the post-closing counseling component.
24:09
So that's also another thing. We put it back on your organization if we see that. And we understand with COVID that there are still some restrictions. A lot of these agencies are doing the counseling over the phone. They understand the safety protocols and things of that nature. We also do understand sometimes that going Framework or eHome America they do offer a variety of languages which is also beneficial for the homebuyers.
24:36
So we do understand and if we do see that certificate, we will work with you directly but I just want you to know that your organization is held accountable to make sure that some sort of counseling is completed and if it's done at the post-closing level, that you're going to have to certify that.
24:55
So, when we're comparing our programs, [a] good amount of this material applies to enrollment, but I want to get specific, kind of at the bottom half.
25:04
So, when we're looking at EBP, it's important to know that…for both programs, the required training is essential.
25:17
It does have to be for a purchase of a primary residence, owner occupied, and for EBP specifically,
25:26
the first one-third is for first-time homebuyers.
25:32
HOW does not have that requirement and something to note is that, at time of enrollment, your organization has done their due diligence on that.
25:40
But with that being said in general, when you do have first-time homebuyers, as we mentioned already, that the homebuyer education and counseling is required for both. There is a lien on the property. So, we do have a five-year retention period that applies for both EBP as well as HOW. They have notes and mortgages.
25:59
We are looking at the member concession for EBP only, that's not a requirement for HOW.
26:06
And for EBP, we do have a small subset of organizations that lend outside of New England, that has to be vetted in advance.
26:15
We do allow them to offer this program outside of New England, as I mentioned, and fully vetted at time when your banks and credit unions have applied to offer the program. That's not applicable to HOW. And only HOW has a down payment match requirement.
26:33
So, we're going to get into the down payment part of HOW eventually through this presentation. And I just want to go back and kind of reflect on things that are fully vetted at time of enrollment, but just in case, when you're passing these files off, just to make sure that everybody understands that
26:51
both programs have a maximum grant amount. Just making sure that you are doing your due diligence with that and the EBP can be used for down payment and closing costs, as well as rehab. And HOW is for a down payment only.
27:09
​When we're talking about the member concession, that only applies to our Equity Builder Program.
27:16
It must be provided at time of closing.
27:19
We typically will see it evidenced on the CD. If it's not evidenced on the CD, there are documents that you must upload to further support that.
27:30
And when you're doing the disbursement, there is a section where we ask you to explain the incentive or concession that you’re offering.
27:40
Now, we need something that's a little more, you know, less vague. I will say then refer to the closing disclosure just because we do understand that organizations can offer variations of credits, whether it's general lender credits, or if it's something specifically not applicable to the Equity Builder Program, please just make sure you are as clear and concise with what concession is being offered.
28:10
Some examples of concessions are lender credit.
28:14
We sometimes see that on page two, either in section J or maybe under the Paid by Lender section or we see it on page three. We look for you to deem whatever you think is acceptable.
28:26
We have flexibility on that. Waiving or reduction of fees.
28:31
So something to note is that if you have that example, you're just going to note: A good example would be… say you are waiving your underwriting fee, which is located under Section A of the page two of the CD, you're just going to note that we did not charge the $375 for an example.
28:52
If you're doing below market rate, we do need a standard rate sheet showing what the rate was at that time and making sure that the closing disclosure is below market rate.
29:04
We don't have any stipulation of how below market rate is, just as long as it's lower than what your traditional rate sheet reflects. When we get to expanded underwriting guidelines this
29:16
sometimes has a complexity, and if you do have that situation, please talk to us in advance because this sometimes can be a very gray area.  I'll give you some examples of what we deem acceptable.
29:29
For example, say maybe you are portfolioing your first mortgage for this homebuyer and maybe you have a minimum FICO score of a certain amount.29:42And you're willing to go lower than that.
29:45
We're not FICO sensitive by any means.
29:48
But that's an example that if you're specifically relaxing your underwriting guidelines for this Equity Builder grant recipient, that's deemed expanding your underwriting guidelines. Or maybe you have a certain loan-to-value requirement for your portfolios, and maybe you're willing to go slightly above. Sometimes we do see that people will waive the mortgage insurance. That's also something that is considered expanding underwriting guidelines. But anything of just saying, oh, we offered this state housing finance agency product is not expanding your underwriting guidelines.
30:26
We do appreciate that when you're running this through your loan software, that your pricing out these loans and you're seeing what loans and loan products are eligible to your homebuyers. And that's how it's predetermined.
30:40
So that's not considered expanding your underwriting guidelines because you're offering it to everybody not just your Equity Builder Program grant recipient. I will say that some people actually do only offer those products to EBP grant recipients or maybe they have their own down payment assistance program. That would be a great example of expanding your underwriting guidelines.
31:06
For EBP only, if you are mingling the grant funds with any rehab or construction component, it's important to note that before you submit the disbursement request, you have to have all documentation evidencing 100% of the work has been completed.
31:31
Please do not submit the disbursement
31:34
if work has not been completed because we cannot fund your IDEAL Way account without the required supporting documentation.
31:45
It has to be in connection with that transaction purchase, and the Closing Disclosure must evidence the escrow funds.
31:54
The docs that we require are paid invoices detailing the scope of work.
31:59
We're going to need documentation evidencing the disbursement from that escrow account.
32:05
For example, the copies of checks paid to the contractor or a builder. Any final inspection information that is just evidencing that it's 100% complete.
32:15
If you are using EBP, even to a small portion of the rehab component, this still is a requirement.
32:24
And if you do encounter this, please feel free to reach out to us in advance.
32:28
We can work with you specifically on this because I know that sometimes people submit the disbursement and they don't have all of this 100% evidenced. This can be held up with your accounting department because we cannot fund your IDEAL Way account.
32:46
For HOW only, this is a down payment assistance only.
32:51
And it's a match program. It's a 1 to 1 match this year that must be documented.
32:58
​For example, if a homebuyer contributes $10,000 at time of purchase and sale, or an additional deposit prior to closing, they're eligible for $10,000. They cannot request a grant amount that exceeds the difference between the purchase price minus the first mortgage loan amount. That is because this can be only used for down-payment assistance.
33:27
To follow this $10,000 example, if the purchase price is $275,000,
33:33
with a first mortgage loan amount of $265,000,
33:37
The total HOW grant down payment is $10,000. And that's something important to note.
33:45
I know I do get a lot of questions of, well, if they put down an earnest money deposit of $10,000 already, and they are only eligible for a HOW grant of $10,000,
34:01
can the EMD be factored into the situation where it covers the closing costs?
34:07
So that's how we're looking at it is that we're looking at what is going to be at closing from a down-payment standpoint.
34:19
It can't be commingled with closing costs. I'll give a good example, is that when you're looking at your loan amounts, especially with FHA loans, because there's that base loan amount and final loan amount, you need to make sure that you are using the final loan amount when you're factoring in that HOW is for a down payment only.
34:42
And I do recommend that when you are getting closer to the closing table, if you are concerned that HOW is being used for more than down payment, reach out to us.
34:53
We would love to just go over those scenarios before because we did have a couple of situations last year that we were unable to fund the entire grant amount.
35:05
I do have a question about this. The HOW down payment needs to be incorporated in the P&S.
35:11
In other words, with the same example, would the down payment have to be $10,000?
35:19
So,
35:20
I just want to make it clear: we have two calculations that we're looking at.
35:26
First is what is the 1 to 1 match?
35:30
The 1 to 1 match needs to be factored in.35:33Prior to the closing table, so that homebuyer, at time of P&S,
35:39
or an addendum to P&S, needs to put down $10,000 to get the grant for $10,000.
35:48
When you're getting closer to the closing, if you are adjusting or restructuring your loans, you just need to make sure that HOW is being used for down payment only.
35:59
So, you're really looking at what that purchase price is in conjunction with your first mortgage financing.
36:06
And when you're looking at the down payment, it does have to be cash to close,
36:13
like I mentioned. If for some reason, maybe you thought that this homebuyer was eligible for the Equity Builder Program and then you have realized it's for HOW, we will accept an addendum to the P&S that is fully executed.
36:29
We cannot match cash to close. And this is a reason because these closing disclosures are a moving target. The fees change all the time.
36:37
Sometimes, you know, when you're looking at different loan structures, and especially, with appraised values, if they come in low, or things of that nature, we do understand…or what they need to bring to the closing.
36:51
That you're either increasing or decreasing these loans. You just really got to pay attention to that.
36:57
And something to note that the contribution has to be the homebuyer’s own funds for the 1 to 1 match component. It cannot be a gift of equity or a gift. If they receive any additional gifts in the transaction, that is fine. It just cannot be factored in the 1 to 1 match.
37:18
We do see a lot of questions about this.
37:20
I just want to go through and make sure that some of them are not duplicates…
37:36
So, I have a question specifically about a purchase price that’s [$275,000] with a loan amount of $255,000.
37:46
That the earnest money down payment would be $5,000, and then HOW would be $5,000.
37:54
You’re correct with the 1 to 1 match. That if they put down five, they are only eligible to get five.
38:02
The maximum that HOW grant can be is $5,000. When you're structuring, we don't tell you how to structure a loan.
38:13
Also, something I just want to bring to your attention, is we’re giving this simple math as an exercise to make sure you're doing your due diligence that it's not being used … for closing costs.
38:25
So yes, in that situation when you're looking at it, that loan amount is acceptable but we're basing that it’s purchase price minus the first mortgage loan amount because like I said technically, when you're looking at the down payment at closing, you know you've already put down the earnest money deposit. We're looking for the future at the closing.
38:55
So HOW also has purchase price limits.
38:59
They are available on our website and they are based on the 2020 mortgage revenue bonds through the IRS.
39:09
Our online system does populate this information, but if you would like to look at it in advance, this is the hyperlink directly to it and also on our website.
39:25
When we're talking about Member Action Required, if a disbursement is missing some documentation, it is put into Member Action Required.
39:35
Some examples that we're looking at are all the closing documents that are provided. This example is for enrollment, I do apologize.
39:48
But specifically, if you do not provide the notes and mortgages to us, if you do not, if we need an addendum to that purchase and sales because something has changed,
40:00
anything regarding the closing disclosure being fully executed, member concessions, anything that we do we would put in Member Action Required, and we need the missing documentation submitted within …10 business days.
40:19
An email reminder will be sent out on the fifth business day to just let your organization know that we are still missing the outstanding items.
40:30
Obviously, if it takes a little time, especially with a Registry of Deeds, if something has to get reexecuted or rerecorded, we do understand sometimes once the loan is closed, from a post-closing standpoint, this stuff can exceed 10 business days. Just let us know. Communicate with us, we'll work with you.
40:48
It's just one of those things that we can't just let files hang out or you know, 30 to 90 plus days at a time. We would never intend to deny a disbursement.
41:00
But for a good example, the rehab component. If you've requested the disbursement and 100% of the work hasn't been completed, that is an issue because we do have regulatory requirements on the monitoring and compliance.
41:16
And, if we say that we have to administer the funds in a timely manner, we have to be compliant with our regulators. Just like if you are selling a loan on the secondary market, you only have a certain timeframe of,when they'll purchase the loan. So, similar concept.
41:32
When you're looking at our overall error rate, I will say back in 2019, the overall error rate in general, it's a combination of enrollment and disbursement, was around 80%.41:44I will say due to probably more one-on-one technical assistance that we provided
41:50
…also just making sure all our materials are straightforward and working with your membership, making sure everyone understands what's required and what's not,
42:01
it's down to the, you know, 69%  and 62% for both of our programs. And I think that's great.
42:08
I think that we all can strive to improve this as every year goes on. Since I've joined the Bank, this will be my fourth year running EBP and HOW is on its third year, so I think this is very successful. And if you ever have questions about things in Member Action -- when we're doing these, we do have a two-tier review. There's a first reviewer who will reach out and I'm always the second reviewer, who is the compliance review.
42:35
Sometimes there might be some additional documentation that I might request too, but work with us and we're happy to explain if you have any questions on things.
42:47
Once the loan closes, there is a monitoring requirement.
42:53
It's important to really understand that because a challenge with these grants is they are forgivable after five years, but if you're selling loans on the secondary market, you can't sell the EBP grant or the HOW grant. You have to monitor that from a loan servicing standpoint.
43:10
It just doesn't move over to where you're selling that first mortgage.
43:14
You have to treat them as a separate product, and you're going to need to monitor that five years.
43:22
We also let the homeowners know the five-year retention period in that EBP/HOW disclosure. We give them best practices and let them know there’s a lien on the property if they go to refinance, and they go to sell.
43:37
And we also have to always, when in doubt, link them back to your organization, even if they go to refinance or sell, and we'll get into that why, specifically. Like I said, it is given upon the completion of the five-year retention period.
43:54
The date they close once that five-year expiration is up, your organization will need to do a discharge for that homeowner. If they are going to sell or refinance, they're going to probably contact your organization, but they also might contact us.
44:14
We do get a lot of that because they see our information on probably the title work, or they're looking at the mortgage and note. But technically your organization is the lender.
44:27
We're only the funder of the grant, so we will point them back to you. We'll go into the components of when they refinance or they sell in further slides.
44:38
Something to note that foreclosures do not trigger a recapture.
44:43
When you do unfortunately have a foreclosure, we do need to be notified. We do need updates and documentation to know where it is in the process.
44:53
And when it’s confirmed that it has officially been foreclosed upon,
44:58
we will note that, especially with our FHFA regulation, and nothing is due back to us. That is specifically for foreclosures. That's also death upon the grant recipient, as well, and we do have all that communicated in our policies and procedures.
45:16
No matter what, which is why we always have to bring your organization back, even if you're selling that first mortgage, is that your organization will always be responsible for the discharge and release of the grant, and we do have that in our policies. I believe it's on page 18 this year.
45:37
So, monitoring, it's important, we kind of give these best practices that you remain the point of contact for that household, you provide your contact information to that homebuyer, whether it's someone in your loan servicing, or maybe it's your main contacts that we have on file.
45:56
If, for some reason they contact us, we will look at the current contacts on file, and it's also something to note, especially with mergers and acquisitions.
46:05
Sometimes you might have prior grants that were with an organization that yours might acquire. You're also responsible to monitor that pipeline as well.
46:16
If you ever have questions on that…
46:18
and you want a master list or things like that,
46:21
there is a part on our website that will provide that information, but if you have any questions about how to access that, reach out to us. We're happy to work with you on that.
46:31
We do recommend that you have some sort of mechanism within your software to be able to monitor it.
46:40
But we did enhance recently that you can pull these Excel spreadsheets within the community lending login for that purpose.
46:50
If there are mergers and acquisitions and you just want to make sure that you have all that reflected, reach out to me, because sometimes depending on when that is completed, it might not be 100% reflective 
47:05
if you're pulling from an Excel. Like I said, we recommend maintaining a separate file with all the important information for that five years.
47:15
For example, the notes and mortgages.
47:19
We also recommend the disclosure to keep that on file as well, especially if the homeowner has any questions and saying that they were unaware. We always point them back to the documents, the mortgage, and note, when they're signing at closing. We all know when they are in the process of closing, they’re signing their lives away.
47:37
It's just another piece of paper in the pile, and sometimes those things get lost in translation. We just try to let them know the multitude of resources that have all these stipulations written.
47:50
For subordinations, it's a very simple process, I will say, compared to probably other subordinations, which require a rigorous underwriting package. We don't have any of that at the Federal Home Loan Bank.
48:03
We only require you to complete the subordination template.
48:09
We do have specific ones that we will provide you for EBP, and then also for HOW. All you need to do is complete that information.
48:19
We send it to our legal team for review, and then you just have to make sure it is executed and on record.
48:26
Now we don't have access to the Registry of Deeds. We do six New England states that have a lot of counties, et cetera. And technically when you're looking at the notes and mortgages, you really are the lender. We’re only the grant funder.
48:41
So that's why if they aren't even refinancing with your organization, maybe they're going to another member bank or credit union or maybe even a mortgage company or someone that is not a member, we have to put this back on your organization to execute and complete.
48:55
There's no recapture that is calculated or required when we’re subordinating. This is a two business-day turnaround time just because we need to send it to our legal team for review.
49:12
When we get to the recapture, this is traditionally for if the homeowner is going to sell the property.
49:22
There also might be a situation on a refinance where the new lender will not permit a community second or our grant for example. Sometimes there could be divorce situations where it's a refinance but it's a buyout.
49:38
We don't have any stipulations on that.
49:40
However, if this is a requirement to be able to proceed with the transaction, we will do recapture but traditionally this really is for sales.
49:49
The homeowner needs to contact your organization to initiate the process.
49:54
As I mentioned, sometimes they will just go directly to us, especially their closing attorneys. We will always connect them with your organization because you will be doing the discharge.
50:07
When we're talking about the recapture calculation, the Federal Home Loan Bank always does the calculation.
50:13
We will be the ones administering the directions in the process and how it needs to go.50:20The requirements that we need that we communicate in this process is the seller closing disclosure. We compare that from when they bought the property.
50:31
We always have access to the buyer’s CD because of the disbursement.
50:36
And then we need that most final seller closing disclosure.
50:39
The date for the closing does have to be firm because of the calculation.
50:45
With the new regulation that we implemented, we early adopted a portion of January 2020, and in 2021 it was legally in effect with the FHFA.
51:00
And we do a…
51:03
So now it's a three-part series. Last year it was two. The first step … we do is, in prior years we said that if you could determine that -- for EBP only, this does not apply for HOW step one,
51:18
I want to make that very clear -- is that if it is a low to moderate household, the FHFA has granted us the use of a proxy, which is through the HUD Home Investment Partnership Program and the Housing Trust Fund.
51:36
These are value limits based on a subject property and location.
51:41
This is for EBP only because EBP is a low to moderate income program, whereas HOW is not. HOW is slightly moderate and/or above.
51:53
So, when we're looking at this, we look at the sales price.
51:57
We compare it to these HTF limits and determine if step one for EBP, any funds are due to the Bank.
52:08
If there aren't, we'll let you know,
52:10
and you can maintain the confirmation that we send via email, as well as the homeowner, that we've done our due diligence. We look all this information up. This is also included in our policies and procedures.
52:23
If that is not applicable, or it has been determined that it can't be forgiven …
52:34
Step two is the pro rata. So we've always had the pro rata calculation.
52:38
The reg is very specific
52:40
now that we do it with months opposed to years. That's what we'll look at. We'll compare the original buyer CD
52:49
with the seller CD, which is why that closing date should be firm, especially if, for example, you think that  they’re closing in March and they’re closing in May, that movement will have a significant impact on a pro rata.
53:02
And the beauty of this regulation is that if the recapture is $2,500 or less, nothing is due from the homeowner because the way the promise of this program is we don't want to recapture the funds. Anything that we recapture, we are required by the regulation to recycle it back into the general pool to promote homeownership.
53:24
And this is in more relaxed way to not have to collect smaller monies, like $500. Things like that.
53:33
If it is over $2,500, we do look at the pro rata, but then we also are looking to see if we can include the household investment and that's where that seller’s CD comes in. Any closing costs associated with buying, as well as selling.
53:53
That's a very robust second part of the calculation that we look at, to see if we can minimize the amount due to us. That is a two-tier review. We do say, two business days.
54:06
So, if, for some reason, the closing is happening soon, and it's not within that two business days, we always recommend holding the full grant amount, especially if you don't have a final closing disclosure. We do put all these instructions in the email, and they are in our procedures. We just make sure that we explain the process the best we can.
54:31
If you ever have questions about our programs, I am Kaitlyn, I am the Homeownership Set-Aside Programs Manager. We do have two analysts this year. We have Ivette Morillo and Kevin Ryan.
54:45
They do all the first reviews. They also assist with the
54:49
subordination and the recaptures, so you'll see some correspondence from them. Livia Bourque, she is our HCI Operations Manager. Sometimes you might see some second reviews from her as well as myself.
55:02
Paulette, she's our CDA Manager, but she does a lot of online user accounts and she also manages our go-to webinar platform. And then Ken Willis, he's our Senior Vice President and Director. Anytime we announce our programs, you'll see some correspondence from him.
55:21
If you have any questions, feel free to use the question chat, and we will open that up.
55:43
Well, it appears, we do not have questions.
55:46
If you do after here's our contact information.
55:49
If it's something that you realized that you wanted to ask previously, we're happy to talk offline, as well, and we really look forward to working with you. This is a partnership. We really try to make sure we train the best we can and answer all your questions. We try to streamline any processes to make things a lot smoother for both organizations and provide the best customer service that we can.
56:14
​Thank you so much and have a nice rest of your day.