Welcome to the Webinar NSP Demystified

1. Welcome to the Webinar NSP Demystified Phone Use during the Webinar Please mute phone during the webinar, use (*6) To un-mute phone use (#6) Type all of your questions in the chat box Grantees- Direct your questions to Doug Ellis All Others- Direct your questions to Monica Spradlin Our Program will begin shortly…..

2. NSP Demystified Presented By: Virginia Department of Housing & Community Development CheriL Miles

3. Meet the NSP Team From Left to Right: Chris Thompson, Kiera Johnson, Denise Ambrose, Roxanne Marrs-Shears, Cheri Miles, Lisa Atkinson, Joanne Peerman, Doug Ellis & Monica Spradlin

4. What is NSP?Neighborhood Stabilization program • Virginia was awarded $38.7 million dollars to help stabilize neighborhoods hard hit by foreclosures. • NSP purchases foreclosed homes, rehabs them & then resells them to Low, Middle, Moderate Income (LMMI) borrowers. • To date we have: • purchased 218 foreclosed homes • Resold over 80homes to NSP borrowers

5. Virginia NSP- Who is DHCD? • DHCD is a state agency • DHCD does not purchase properties directly • DHCD does not rehab properties directly • DHCD does not sell properties directly • DHCD does work with Grantees • Who are our 21 NSP Grantees: • Local Government Units • Non Profits • Housing Authorities • Community Development Corporations

6. Unraveling the Mystery The foreclosed home is purchased using NSP Grant Funds. The home is rehabbed using NSP Grant Funds and/or leveraged funds from another source. The home will not be sold until all rehab is complete

7. How are NSP Homes Sold? NSP Sales Price = Acquisition + Rehab (no profit) • The home is marketed to an LMMI borrower • Housing Counseling Programs • Local Government/ Teachers • Local Industries • Realtors/ MLS

8. What is allowed under NSP? • The Virginia NSP program allows the homes to be resold using a variety of first trust mortgages, with the following guidelines • All mortgages must be 30 year fixed rate loans • No prepayment penalties • No predatory or subprime lending • No negative amortization • First trust liens may be VA, FHA, VHDA, Conventional, USDA or Habitat.

9. Questions

10. Qualifying the Borrower

11. NSP Qualification Forms • TCR- Tracking & Completion Report • Sample in your packet • Provided by Grantee/Housing Counselor • NSP Sales Price • Subsidies • Closing Cost Assistance • First Trust Loan Amount • 2nd DOT • DHCD NSP Underwriting Explanation Letter • Sample in your packet • Provided by DHCD • Outlines each category of NSP Assistance

12. The Housing Counselor and the Loan Officer Qualifying the borrower • Intake • The clients meets the Housing Counselor • Program explained • Housing Counselor determines qualification per NSP • TCR is completed (sections A,B,C) • Subsidies are determined • Backing Into a Loan Amount • Counselor requests UW explanation letter from DHCD Community Rep (Doug/Monica)

13. The Housing Counselor completes this form….. TCR- Tracking & Completion Report

14. The Housing Counselor and the Loan Officer Pre Approval • Application • The Client visits the Loan Officer • Client provides all documents necessary for pre- approval • Complete the pre approval • Housing Counselor provides • TCR • First Trust Loan Amount required • UW explanation letter

15. Questions

16. NSP Assistance DHCD Match & Subsidy

17. Housing Counselor Determines Subsidy Qualification NSP Subsidy- How does it Work • NSP Subsidy- Monies left in the deal • Subsidies are based on LMMI income levels • Grant funds • 0% Interest • No payments • Forgiven after affordability period 5-15/yrs • Up to $14,999- 5 Years • $15,000-$39,999- 10 Years • $Over 40,000- 15 Years

18. DHCD Match Funds • NSP has a required acquisition discount of 1% under the as is appraisal. • The harder the Grantee negotiates with the REO the more the monies are left in the deal (additional subsidy) • Acquisition Cost/As Is Appraisal = DHCD Match TCR – Section A DHCD Match can never exceed 10% of discount

19. NSP Subsidy- How much do they get? • The subsidy is provided to the homebuyer at closing in the form of a Deed of Trust/Note. • Subsidy = % x NSP sales price

20. Exercise #1 Determining the first trust loan amount TCR- Part A, B, and C

21. Complete the TCR - Determine the Borrowers Loan Amount- Line 37 • As Is Appraisal $197,000.00 • Acquisition Price $195,030.00 • NSP Dollars $195,030 • Leveraged Dollars $0.00 • Rehab Dollars $ 32,700.00 • NSP Dollars $ 32,700 • Leveraged Dollars $0.00 • Client AMI 51-80% • Borrowers Down Pymt $ 500.00

22. The Borrowers Loan Amount – Line 37 $179,734.00

23. Questions

24. NSP Closing Cost Assistance This training reflects the new policy change regarding closing cost effective 3/8/11

25. TCR- The closing costs calculations are found in section D NSP Homebuyer Closing Cost Assistance- • NSP offers up to $8,000 in closing cost assistance per home. • The Closing Cost Assistance is reported as NSP Paid Closing Costs on the HUD-1 and forgiven at closing. • The Closing Costs assistance must match line 103 on the HUD-1 (NTE $8,000)

26. TCR- Section D Closing Cost Calculation

27. Questions

28. NSP Deed of Trust Calculating NSP DOT & Forgiven Subsidy

29. How we calculate the NSP DOT • DHCD prefers the NSP DOT to be in 2nd place • We will consider 3rd in some instances • The NSP DOT includes: • NSP Subsidy • DHCD Match Funds The NSP Grantees are provided templates for the NSP DOT/NOTE and in most instances will prepare these documents for closing

30. NSP Forgiven Subsidy • DHCD allows 3.5% of the NSP sales price to be forgiven at closing. • This reduces the CLTV • Brings NSP in line with some secondary marketing requirements • The 3.5% is subtracted from the total assistance PRIOR to determining the NSP DOT

31. TCR- 2nd DOT Calculation TCR- 2nd DOT Calculation

32. Questions

33. Exercise #2 Calculating the full Assistance TCR – Part E

34. Complete Sections D & E • GFE Closing Costs $7,843.00 • Enter the estimated costs • HUD-1 Closing Costs $8,074.00 • Reenter the costs with prelim HUD-1 figure • Line 103 on the HUD-1

35. Grantees Remember • Grantees: • Adjust the TCR once the HUD-1 draft is available and submit to DHCD for closing approval • Grantees: • Adjust the TCR with the final HUD-1 figure prior to submitting the final closing package to DHCD.

36. Loan Closing

37. Days Leading Up to Closing • Underwriting • File is approved with conditions • Notify Borrower • Schedule Closing Date • Title Company/ Lender Set Closing Date • Send NSP Closing Instruction Letter- Sample in Packet • Notify Borrower • Communicate • Grantee & DHCD • Closing Date • Prelim HUD-1 minimum of 24 hours in advance

38. Day Before Closing • Grantee/Title Company complete the NSP DOT/ NOTE • Remember: The NSP DOT contains the DHCD Match and Subsidy • Prelim HUD-1 is provided to Grantee/DHCD for review and sign off • **Client can not walk away with monies from the sale**

39. Day of Closing • All players need to be available • Title company • Lender • Grantee • DHCD • Borrower • TCR overrides and revisions may occur the day of closing…DHCD strives to turn them around quickly as to not delay closing

40. Questions

41. HUD-1

42. HUD-1 Borrower’s Side Seller’s Side

43. HUD-1 • The NSP 2ndDOT • NSP Paid Closing Costs • NSP Forgiven Subsidy • The gross proceeds to seller (Line 603) are reduced • DHCD/Grantee do not send additional funds to closing

44. Questions?

45. Thank you for attending. • Chris Thompson- Program Manager • Chris.Thompson@dhcd.virginia.gov • Cheri Miles – Policy Analyst • Cheri.Miles@dhcd.virginia.gov • Monica Spradlin- Community Representative • Monica.Spradlin@dhcd.virginia.gov • Doug Ellis- Community Representative • Douglas.Ellis@dhcd.virginia.gov