for Lenders
Frequently Asked
Questions by Lenders
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The Connecticut Housing Finance Authority (CHFA) has
compiled the following FAQs to provide basic information to
CHFA-approved or prospective Participating Lenders who are
interested in learning about CHFA mortgage programs and
procedures.
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How will CHFA loans benefit my client-borrowers?
CHFA offers safe 30-year fixed-rate mortgages at
affordable, or below-market, interest rates. CHFA also
provides second mortgages to help pay for down payment and
closing costs. Finally, CHFA offers free homebuyer
education classes and financial counseling to CHFA borrowers
to guide them through the home-buying process.
How do I qualify as a “Participating Lender” of CHFA
programs?
In general, institutions eligible for
CHFA-Participating Lender status must have an actual “bricks
and mortar” office in Connecticut. They must also
demonstrate that they have a tangible net worth of at least
$500,000 (or an acceptable line of credit to this amount);
they are
Federal Housing Administration (FHA) - and
Veteran’s Administration (VA) - approved; they are
Federal
Deposit Insurance Corporation (FDIC) - or
Federal Savings
and Loan Insurance Corporation (FSLIC) - insured or have at
least 18 months of experience making mortgage loans on homes
in Connecticut; they have a sufficient number of trained
personnel to originate and close mortgage loans; they
maintain quality control systems and they comply with any
relevant state and/or federal laws, regulations and
licensing requirements.
Please note: An institution seeking
approval as a CHFA loan servicing company must only
demonstrate that it has a proven ability to service loans
like the kind for which it seeks approval and does not need
FHA or VA approval.
Criteria sheets are also available for
your information. (See, Section 2
Lender Guide and form,
Participating Lender- Criteria.)
How do I qualify as a “correspondent lender” of CHFA
programs?
In general, institutions eligible for
CHFA-correspondent lender status are required to submit
evidence to CHFA that demonstrates that they meet the same
criteria as a Participating Lender, with the exception that
they do not need FHA or VA approval and may have a tangible
net worth of at least $100,000. In addition, an institution
seeking approval as a correspondent-lender must submit a
letter from a sponsoring, CHFA-approved Participating Lender
with a tangible net worth of at least $1,000,000.
Criteria
sheets are also available for your information. (See, Section 2
Lender Guide and form,
Participating Lender- Criteria.)
How do I become a CHFA Participating Lender?
The CHFA
Lender-Approval process requires a prospective CHFA lender/
servicing company to submit documentation to CHFA that
establishes its qualifications based on the criteria
identified above. Specifically, the prospective CHFA
lender must submit a letter describing its organizational
structure, the location of its offices and the credentials
of its key personnel to CHFA. It must also submit copies of
approval letters from the
FHA and the
VA, (if it seeks
approval to originate and close CHFA loans), a copy of its
most recent audited financial statements as well as a copy
of its quality control plan. Finally, it must include three
professional references from other banks, mortgage companies
or Housing Authorities that attest to the institution’s
experience in and capacity to service home loans.
To
complete the approval process, an institution is also
required to attend CHFA lender training and to sign a
Participating Lender Agreement and/or a Servicing Agreement.
Once approved, lenders are placed in the CHFA vendor
system which enables them, among other things, to register
for loans and reserve funds on-line.
Does CHFA provide training classes for lenders?
Yes.
CHFA provides training for the sales origination staff of
newly CHFA-approved Participating Lenders once each month.
Please contact CHFA’s Single Family Underwriting Department
for further information on dates and times.
(See,
Lender
Calendar.)
How does CHFA compensate lenders for the loans?
Lenders
that originate and close CHFA home loans earn a 1%
origination fee of the amount of the mortgage. Lenders that
service CHFA loans earn 0.375 % every year, computed each
month on the unpaid principal balance.
Who is eligible for a CHFA loan?
Generally, CHFA
endeavors to assist new homebuyers to purchase their first
home. However, prior homeowners may qualify for a CHFA home
loan if they haven’t had an ownership interest in a home for
the last three years or if they propose to move to a home
located in a targeted area of the state.
Many CHFA loan
programs limit eligibility by household income and home
sales prices. An eligible borrower’s before-tax household
income can not exceed CHFA’s established
income limits and
the sales price of the home can not exceed CHFA’s
sales
price limits.
CHFA does not finance the purchase of
commercial property. Homes purchased with CHFA loans must
be the buyer’s year-round primary residence.
(See,
Section 3
Lender Guide.)
What property is eligible for a CHFA loan?
A dwelling
eligible for CHFA financing can be a single family
residence, a two- to four- family residence or a unit in an
approved condominium complex or planned unit development.
In the case of a two- to four-family residence, at least one
of the units must be owner-occupied and the building must
have been used as a residence for at least five years.
A newly constructed two-family
home located in a
targeted area may also be eligible for
CHFA financing. CHFA city, town or statewide
sales price
limits might also apply to homes eligible for CHFA
mortgages.
(See, Section 3
Lender Guide.)
Can a homebuyer obtain a loan to pay for down payment and
closing costs?
Borrowers that qualify for a CHFA first
mortgage and lack sufficient funds to cover the down payment
or closing costs may apply for a second mortgage of at least
$3,000 or up to 25% of the purchase price of the home under CHFA’s
Downpayment Assistance Program.
(See, Section 11
Lender Guide and
Downpayment Assistance Program.)
What’s the most a borrower can earn to qualify for a CHFA
mortgage?
Many CHFA mortgage programs use statewide, city
and town
income limits that establish ceilings on the total
household income of an eligible CHFA loan applicant.
However, there are no income limits if a homebuyer purchases
a home in a
targeted area.
(See, CHFA’s
Homebuyer
Programs for more details.)
How is “household income” calculated?
CHFA calculates
“household income” by counting all sources of before-tax
income from adults 18 or older in the household as long as
they are not full-time students.
The following may be
counted as sources of income for the purposes of calculating
“household income”; regular earnings; overtime; part-time
earnings; unemployment compensation; bonuses; dividend and
interest income; child support; commissions income; military
allowances; welfare payments; disability payments; pension;
annuity; retirement; and social security benefits; and
income for services in the military reserve or National
Guard.
(See, Section 3
Lender Guide.)
Is there a sales price limit on homes financed with CHFA
mortgages?
Many CHFA mortgage programs use city or town
sales price limits that establish ceilings on the purchase
price of a home eligible for CHFA financing.
(See, CHFA’s
Homebuyer Programs for more details.)
Are CHFA mortgage programs only for first-time
homebuyers?
No. While CHFA mortgage programs are intended
primarily to benefit first-time homebuyers, previous
homeowners that meet the other eligibility guidelines may
apply for a CHFA home loan as long as they have not had an
ownership interest in a principal residence for the past
three years. Previous homebuyers who intend to purchase a
home in a federally
targeted area of the state may also be
eligible for a CHFA loan.
(See, section 3.1
Lender Guide.)
Does CHFA require a home inspection?
No, CHFA does not
require a home inspection prior to a CHFA loan approval.
However, we encourage homebuyers to arrange for an
independent inspection of the home they intend to purchase
in order to ensure its structural and functional integrity
and that their interests are protected in their contract
with the seller.
Does CHFA require a home appraisal?
Yes. A property
eligible for a CHFA loan must be appraised, and if needed,
repaired to comply with relevant building codes and insurer
guidelines. The lender will order the appraisal and any
subsequent repairs that may be required must be completed
before the closing of the loan, except in the case where an
escrow has been established to pay for the repairs.
(See,
Appraisal Completion and section 3.2
Lender Guide.)
Do all CHFA loans have to be insured?
Yes, under most
CHFA loan programs federal mortgage insurance is required.
The mortgage must be insured either through the
FHA, the
VA,
or the RD.
However, no mortgage insurance is required when
a borrower makes a down payment of at least 20% on a newly
constructed home in a federally
targeted area.
In special
circumstances private mortgage insurance is permitted. The
borrower can qualify for private mortgage insurance (PMI)
when he puts 15% down on a home in a
targeted area and the
mortgage exceeds the
FHA loan limits but is within the CHFA
sales price limits for that area. There are also specific
loan programs geared to help with upfront home purchase
costs that allow PMI.
(See, Section 5.1
Lender Guide.)
What is the minimum down payment required for a CHFA
loan?
The minimum down payment of an
FHA-insured mortgage
is 3.5% of the purchase price of the home. In most
circumstances, no down payment is required for a
VA or
RD
guaranteed mortgage.
Does CHFA require borrowers to attend homebuyer classes?
Yes, some CHFA mortgage programs require borrowers to attend
either a three-hour or an eight-hour homebuyer course before
they close on their mortgage. (See,
CHFA Homebuyer
Programs.) CHFA offers these courses each month at various
locations throughout the state at no cost to homebuyers. A
lender must provide loan reservation numbers to borrowers
under mortgage programs that have homebuyer education
prerequisites.
(See,
Homebuyer Education schedule of
classes.)
Does a condominium qualify for CHFA financing?
Yes,
condominium units are considered “eligible dwellings” for
the purpose of most CHFA mortgage programs. However, a
condominium complex must first be approved by CHFA and be
placed on the
condominium list. Individual units within the
approved complexes may qualify for CHFA mortgages if other
eligibility requirements are met.
Since CHFA limits its
ownership interest in condominium complexes, a Participating Lender must determine whether any units remain available for
CHFA financing by consulting the eligible condominium
list. A lender may also request that a condominium complex
be added to the eligible condominium list on a borrower’s
behalf.
(See, Section 3.2
Lender Guide.)
How do I add a condominium to the eligible Condominium
List?
A lender that wishes to add a condominium complex to
the
eligible condominium list on behalf of a borrower-client
must provide specific documentation to CHFA, including, as a
preliminary application, a completed
condominium
questionnaire.
(See,
Condo - How to Add to List for a
checklist of the documentation that must be provided to
approve a condominium. See also, Section 3.2
Lender Guide.)
What is the Federal Recapture Tax and how does it work?
In rare circumstances, CHFA mortgage loans may be subject to
the
Federal Recapture Tax at the time the property is sold. The tax
might apply if a borrower sells his or her home within nine
years of the purchase date, makes a profit on the sale and
has an income that exceeds federal recapture tax limits at
the time of the sale. A Participating Lender is responsible
for informing CHFA borrower-clients about this tax and
providing them with specific related documentation at the
loan closing. (See,
Notice to Homebuyer and
Notice to
Mortgagor.)
(See, Section 2
Lender Guide.)
Are
co-signers allowed on CHFA loans?
No, co-signers are not
allowed. CHFA loans are only available to borrowers who
purchase a home they will live in year-round as their
primary residence.
(See, Section 5.1
Lender Guide.)
Is
there a minimum credit score to qualify for a CHFA home
loan?
CHFA does not require borrowers to meet a minimum
credit score. However, applications that require mortgage
insurance will be subject to the qualifying guidelines of
the insurer which may include a minimum credit score.
(See, Section 5.1
Lender Guide.)
What are CHFA credit
guidelines for qualifying for a loan?
CHFA lenders follow
the guidelines of the mortgage insurer of the loan to
determine whether a loan applicant is credit-worthy. A
lender will follow
Fannie Mae guidelines when a borrower has
20% or more towards a down payment and mortgage insurance is
not required.
CHFA loan applications are reviewed on a
case-by-case basis. Please note that an applicant that has
filed for bankruptcy in the past may still qualify for a
CHFA loan so long as two years have elapsed since his or her
debts were discharged, and credit has been re-established.
(See, Section 5.1
Lender Guide and
News and Announcements,
September 25, 2008.)
What are the requirements for Hazard
Insurance?
Homes financed by CHFA mortgages must be
insured against fire and other reasonable hazards. The
amount of coverage must cover the outstanding principal
balance of the loan and must be at least what the mortgage
insurer or guarantor requires. Lenders are required to
ensure that additional coverage is provided if a home is
vulnerable to hazards not covered by the initial policy and
must notify CHFA when this is the case.
(See, Section 6.3
Lender Guide for more specific information.)
Are there
standard documents that must be submitted with each loan
application?
Yes, lenders are required to submit standard
documentation in a specific sequence that verifies the
eligibility of the property to be mortgaged, the eligibility
of the applicant and that meet other insurance and/or
guarantor requirements. In addition to this standard
documentation, specialized forms may be required in
connection with specific loan programs.
(See, form
Processing Checklist and Section 5.5
Lender Guide.)
How
do I reserve loan funds?
CHFA-approved lenders are
provided with an ID and a secure password which enables them
to register loans and reserve funds through CHFA’s On-line
Loan Reservation System.
How long does a loan reservation
last?
All CHFA reservations expire after 120 days from the
date of the loan reservation. After 120 days, outstanding
loan reservations will be automatically canceled from the
system. CHFA also automatically cancels all outstanding
loan Commitments that have not been closed by the expiration
date on the Commitment Letter.
(See, News and Announcements,
October 29, 2008.)
When do the loan rates change?
Loan
rates change every Thursday by 11:30AM.
(See,
Interest
Rates.)
How do I change a loan after funds have been
reserved?
Only CHFA staff has the authority and capacity
to make a change to a loan that has been reserved and will
only do so if the change is found to be appropriate and
acceptable.
A lender who wishes to make a change on a loan
that has been reserved should contact the Single Family
Underwriting Department:
How do I check the
status of a loan?
A Participating Lender’s authorized
staff may check the status of a loan by accessing CHFA’s
Online Reservation System. Once in the system, the lender
is able to check the status of a loan by its CHFA Loan
Number and discover whether a loan reservation has been
accepted and whether a Commitment has been issued.
Can I
get an extension on a loan reservation or Commitment?
All
CHFA reservations expire after 120 days from the date of the
loan reservation and will automatically be canceled from the
system. However, lenders may request a loan extension
under mitigating circumstances by contacting the
Single
Family Underwriting Department.
(See,
News and
Announcements, October 29, 2008.)
Where do I send my
closed loans?
Lenders should send their closed,
service-released loans (except for DAP loans) to CHFA’s
Master Servicer, Bogman, Inc. For further information,
contact Bogman’s Customer Service Department at:
P.O. Box
17231
Baltimore, MD 21297-1231
877.482.1051 (toll-free)
www.bogmaninc.com
(See,
News and Announcements,
October 1, 2008, for specific mailing and communications
instructions.)
Where do I send my closed Downpayment
Assistance Program loans?
Lenders should fax or deliver
their closed Downpayment Assistance Program loans and
related documentation to the Connecticut Housing Investment
Fund (CHIF) within 24 hours of the loan closing.
Angela Zielke
Connecticut Housing Investment Fund (CHIF)
121
Tremont Street Hartford, CT 06105
860.233.5165 ext. 2041
FAX: 860.920.2041
(See,
DAP – Closing Procedures CHIF for
further information.)
How do I file an application for a Real
Estate Escrow Deposit Account?
All banks are required to complete a "Real Estate Escrow
Deposit Account Application" for each account that is
opened. You may request an application form by contacting
the CHFA Finance Department at (860) 571-4332.
Please remember to send a copy of the completed
application to:
CHFA Attention: Finance Department
999 West Street
Rocky Hill, CT 06067
Who do I contact if I have
questions?
For further information, please contact CHFA’s
Single Family Underwriting Department.
Mailing Address:
CHFA
Attn: Single Family Underwriting
999 West Street
Rocky Hill, CT 06067-4005
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