ATTM B - SC HOMEBUYER PROGRAM MANUAL (BOND).pdf

SC State Housing Finance & Development Authority

SC Housing Homebuyer Program and Delivery Manual

June 8, 2020

SF-098 SC Housing Homebuyer Program Manual Rev. 06.08.20

Contents Introduction

General Borrower Eligibility Requirements

Sales Price and Income Limits

Occupancy

First-Time Homebuyer Eligibility Requirements

General Loan Eligibility Requirements

Lender Regulatory Compliance

Fees and Costs

Loan Terms

Maximum LTV and CLTV

Loan Types

Loan Purpose

Eligible Properties

Loan Application Procedures

Loan Reservation and Rate Lock

Lender Online User ID

Lender Online Access

Rate Lock Expiration – Existing Construction

Extended Rate Lock– New Construction Only

Electronic Signatures

E-Sign Requirements

Allowable E-Signature Documents

Non-Allowable E-Signature Documents

Quality Control/Audit Requirements

Down Payment Assistance

Forgivable DPA

Processing & Underwriting Procedures

Underwriting Responsibility

Changes Prior to Closing

Compliance Underwriting File Submission Procedures

Underwriting Guidelines

Automated Underwriting Guidelines

SC Housing Federal Tax Transcript Requirements

SC Housing FHA, VA and RHS Underwriting Overlays

SC Housing Conventional Underwriting Overlays

Other Underwriting Requirements (All Loan types)

Compliance Underwriting – Household Income

Income Included in Household Income

Income Excluded from Household Income

Computing Household Income

Loan Closing Requirements and Procedures

SC Housing Certificate of Eligibility

Closing Conditions

Fees and Costs

Flood Certification

Insurance Requirements

Mortgagee Information

Mortgage Riders

Property Tax

Re-verification of Employment

Survey

Termite Inspection/ Soil Treatment

HVAC Inspection

Title

Closing with Power of Attorney

Name Affidavits

Recapture Tax

Loan Delivery Procedures

Review of the Mortgage Loan

Uniform Closing Dataset (UCD) Requirements

Delivery of Closed Loan Funding Package

Funds to Lender from Servicer at Purchase

Fees to Servicer from Lender – Net Funding

Late Delivery

Incomplete Delivery

Age of Note at Time of Purchase

Servicing Package

Final Documentation

Contact Information

Introduction The Mortgage Division of SC Housing offers a variety of mortgage loan programs. Each Program offers specific loan types and loan delivery requirements. All programs may be combined with the Down Payment Assistance (DPA) Programs.

This manual provides general information about the SC Housing Homebuyer Program.

Lenders must consult the specific Program Guide to determine which loan types are available and other program-specific information.

General Borrower Eligibility Requirements Borrower must meet credit and underwriting criteria established by HUD/FHA, Department of Veterans Affairs (VA), USDA/RHS, Fannie Mae or Freddie Mac. In addition the borrower must meet the following requirements which are based on applicable federal and state regulations.

• Borrower must be an individual only

• Borrower must have a Social Security Number, a Tax ID Number is not acceptable

• Borrower(s) must have been employed for at least 12 consecutive months

• Borrower(s) and all household occupants must be US citizens or properly documented

Permanent Resident Aliens

Permanent Resident Aliens: For borrowers holding a “Green Card” (an Alien Registration Receipt Card, INS Form I-551), the loan is eligible under the same guidelines/terms as a loan made to a U.S. citizen. A copy of the front and back of the state issued ID/ driver’s license, Social Security and the Green Card must be included in the file. An approved Green Card application will not be acceptable.

Sales Price and Income Limits Borrower must meet Sales Price and Income Limits as stipulated in the applicable Sales Price and Income Limit chart located in Lender Online. These limits are county and program-specific.

The methods used to calculate Household Income for compliance are different from those used to calculate income for credit underwriting. Household Income is generally the current or projected gross income from all sources and includes the income of anyone 18 years of age or older who will reside in the home at the time of closing. Lenders must calculate income using the procedures outlined in the “Compliance Underwriting – Household Income” section of this Manual.

SC Housing may revise the Household Income that was calculated by the lender after a complete analysis of the income is performed.

The sales price of the home being purchased cannot exceed the sales price limit as stipulated in the applicable Sales Price and Income Limit chart located in Lender Online.

Household Income and Sales Price Limits are subject to change. SC Housing will issue Announcements prior to any changes in the Sales Price and Income Limits.

Occupancy Borrower must take ownership of and occupy the property as a full-time, principal residence within 60 days after loan closing. Borrower must notify the lender and SC Housing, if he/she ceases to occupy the property as a full-time, principal residence.

Married borrowers who are separated, but not legally divorced, who apply for a loan as a single person must provide evidence that they have been separated for six months prior to loan application.

Purchases for use as a rental, recreational, seasonal, vacation or second residence are not permitted.

First-Time Homebuyer Eligibility Requirements Borrowers purchasing property in the following non-targeted counties must not have had an ownership interest in another property within the three years prior to loan closing, other than a mobile home that is not attached to real property.

Aiken Greenville Lexington Richland Anderson Greenwood Oconee Spartanburg Charleston Lancaster Pickens York

Borrowers purchasing properties in targeted counties cannot have an ownership interest in another property to include a mobile home that is taxed as real property, at the time of loan closing. Unimproved land is allowed.

No borrower OR adult household occupant can have an ownership interest in another principal residence, second home or investment property at the time of loan closing.

(Borrowers are allowed a maximum of four (4) weeks ownership in a timeshare unit.)

The First-Time Homebuyer requirement for non-targeted counties will be waived for the following:

• Single Parents

• Veterans

• Individuals or Families with Disabilities

Single Parent - Must be an unmarried, head of household, custodial parent (or legal guardian) of at least one minor child OR of at least one dependent.. If the borrower is currently married, a separation agreement or evidence that the couple has lived apart for at least six months prior to loan application must be provided.

Veteran - Must have served on active duty in the U.S. Armed Forces (other than active duty for training) and received a discharge other than dishonorable within the past 25 years.

Individuals or Families with Disabilities – Borrower or spouse must be permanently 100% disabled/handicapped as determined by SSDI/SSI OR be the custodial parent or legal guardian of a least one dependent (regardless of age) that is permanently 100% disabled/handicapped as determined by SSDI/SSI.

The following are not permitted under any SC Housing Program:

• 1031 Exchange

• Trusts of any kind including, but not limited to, revocable and irrevocable trusts

• Life Estates

General Loan Eligibility Requirements Lender Regulatory Compliance

• Any mortgage loan transaction originated and submitted to SC Housing must comply with all applicable federal, state, local and governing regulatory agency laws, rules and regulations including, but not limited to: Fair Housing Act

• Graham-Leach-Bliley Act (GLBA) – Regulation P

• Fair Credit Reporting Act (FCRA) – Regulation V

• Equal Credit Opportunity Act (ECOA) – Regulation B

• Home Mortgage Disclosure Act (HMDA) – Regulation C

• TILA-RESPA Integrated Disclosure Rule – (TRID)

• Mortgage Acts and Practices – Advertising rules (MAP) – Regulation N

• Homeowners Protection Act (HOPA)

• Appraiser Independence Requirements (AIR)

• Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)

• Bank Secrecy Act (BSA)

• Dodd-Frank Wall Street Reform Act – to include Prohibition of Unfair, Deceptive, or

Abusive Acts or Practices (UDAAPs)

Fees and Costs See Program Guide for origination, SRP and allowable fees.

Loan Terms SC Housing offers a 30 year term mortgage.

Maximum LTV and CLTV See Program Guide for maximum LTV and CLTV.

Loan Types Conventional, FHA, VA and Rural Housing Service (RHS) loans - for delivery to and servicing by SC Housing

Loan Purpose

• RHS and VA - Purchase Money Transactions ONLY

• FHA and Conventional – Purchase Money Transactions and Take-Out Loans (Property must be new construction, not previously occupied and less than one year old. The original construction loan term cannot exceed 24 months.)

SC Housing does not provide financing for construction/permanent (one-time closing), refinance, or FHA 203K transactions.

Eligible Properties Properties must be located in South Carolina and must be owner-occupied, single-family primary residences. All properties must be supported by comparable sales used in the appraisal report. Size of the subject property should not exceed 5 acres in size and the site value cannot exceed 40% of the total appraised value.

In addition, the full value of the land may be financed by the Loan only if documentation is provided verifying that such land is needed to reasonably maintain the basic livability of the residence and does not provide a source of income to the mortgagor.

The property itself may not be used to conduct a trade or business and the property may not be an investment property. The movement of people and/or materials onto the property is indicative of the property being used as a trade or business. Examples of residential property business use which are not acceptable include:

a) car repair;

b) child care;

c) hair styling;

d) merchandise distribution

e) farming

Home-based businesses may be acceptable. Examples of acceptable homebased businesses include:

a) Sales positions requiring some record keeping and telephoning at the home; but no storage or distribution of goods; and

b) Production of craft items involving only a small area in the house.

Lender must furnish evidence that all appraisers are licensed and have the appropriate approvals from the applicable mortgage insurer. In addition all appraisals performed must be in compliance with the Appraisal Independence Requirements (AIR) established under FIRREA

(Financial Institutions Reform, Recovery, and Enforcement Act) of 1989. If requested, lender agrees to provide evidence of such.

SC Housing will not purchase loans containing multiple land parcels.

FHA Eligible Property Types:

• Single Family (1 unit) Townhomes

• Condominiums (must be on the FHA Approved Condominium List)

• Any form of manufactured housing, other than true off-frame modular is not eligible for delivery to SC Housing

• Off-Frame Modular Housing (requires SC Housing prior approval)

• Properties may be located in a PUD if the PUD complies with HUD/FHA Requirements.

VA Eligible Property Types:

• Single Family (1 unit)

• Townhomes

• Condominiums (must be on the FHA Approved Condominium List)

RHS Eligible Property Types:

• Single Family (1 unit) Only (no townhomes, condominiums, modular housing or houses with pools)

• All property addresses must be verified through the USDA RHS – Rural Housing Property Eligibility Website to determine if the property is in an acceptable area. The website is located at http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do.

Conventional Eligible Property Types

• Single Family (1 unit)

• Townhomes

• Condominiums (must comply with Fannie Mae requirements for conventional loans) –

Lender must run all projects through Fannie Mae Condo Project Manager)

• Properties may be located in a PUD, if the PUD complies with Fannie Mae Requirements

Appraisal A full appraisal and all applicable addendums are required. All appraisals must be AIR and UAD compliant. All appraisals must be uploaded to the UCDP portal for both Fannie Mae and Freddie Mac. SC Housing does not honor or accept any Fannie Mae Property Inspection Waiver (PIW) issued in DU Findings or Freddie Mac Automated Collateral Evaluation Waiver (ACE) issue in LPA findings.

Property Standards All loans purchased by SC Housing must be secured by property that is safe, decent, sanitary, structurally sound and functionally adequate to meet the present and foreseeable housing needs of the applicant. Property should be compatible with surrounding properties and should http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do not pose a specific physical or environmental risk, which could endanger the health and or safety of the occupants.

Private Wells – If the subject property has a private well as its water source and reference is made in the appraisal report to issues concerning water quality, SC Housing will require that the lender obtain and inspection from a local or county health inspector as to the safety and adequacy of the water source. This certification must be dated within 30 days of closing. This test must comply with all the requirements of the mortgage insurer.

Septic Systems - If the subject property is on a private or public septic system and reference is made in the appraisal report to issues concerning the quality of the system or possible contamination, SC Housing will require that the lender obtain and inspection.

If the property is new construction, served by a private septic system and reference is made to issues concerning the quality, the system must be tested by a licensed plumbing contractor or local government health or building inspector. The inspector must certify to the adequacy and proper functioning of the septic system as of the date of inspection and that it does not contaminate the water source to the subject property.

For existing properties, the septic system must be tested by a licensed plumbing contractor or local government health or building inspector prior to Loan approval, if:

(i) the appraiser suggests that problems may exist with the septic system, and/or

(ii) the property is guaranteed by USDA/RD. The inspector’s certification as to the adequacy of the septic system must be dated within 30 days of the Lender’s Underwriting approval.

Swimming Pools – Properties with indoor pools are not eligible. All outdoor swimming pools must be fully functional at the time of closing and documented by the appraiser.

Loan Application Procedures Loan Reservation and Rate Lock Loans are locked with SC Housing by reserving funds in the Lender Online web portal. Interest rates are subject to change without notice and are posted in Lender Online.

Lender Online User ID To obtain a Lender Online User ID contact your company’s Lender Online Administrator (preferred method) or e-mail: mortgage.production@schousing.com.

Lender Online Access Lender Online may be accessed by logging in directly at https://lol.schousing.com.

mailto:mortgage.production@schousing.com https://lol.schousing.com/

After logging in to Lender Online, follow the screen prompts and mandatory input fields to enter the loan details. The Reservation Accepted form, which is SC Housing’s rate lock, may be printed for the lender’s records.

Rate Lock Expiration – Existing Construction SC Housing offers a 60 day lock for existing construction. Loans must close within 60 days of reservation/rate lock. Rate locks may be extended at the discretion of SC Housing, subject to a .125% extension fee. If the rate lock expiration date falls on a weekend or official SC Housing holiday, the expiration date becomes the next business day.

Extended Rate Lock– New Construction Only SC Housing offers an Extended Rate Lock with Float Down Option at no additional cost to the borrower or lender for new construction properties.

• Reservation/Rate Lock will be for 120 days

The Float-Down Option allows the borrower to float down to SC Housing’s current rate ONE TIME ONLY during the construction period. The Float Down can be requested anytime during the lock period, up to 15 days prior to closing. The interest rate will not automatically be reduced when SC Housing’s rates change.

TILA-RESPA Integrated Disclosures (TRID)

General Information

• The lock expiration date needed for the Loan Estimate is the Reservation Expiration

Date field found on the Reservation Accepted form.

• All liens must be closed in the lender’s name and assigned to SC Housing at delivery.

• Lenders must be able to service second mortgages until purchased by SC Housing.

• Lenders will be responsible for sending Goodbye Letters in accordance with RESPA regulations.

• Re-disclosed LEs, along with the appropriate changed circumstance documentation, must be submitted with the loan file for purchase.

o Once a CD has been issued and a correction to a LE has been requested, lender may provide corrections on the Closing Disclosure

First Mortgage and DPA Disclosures

• Lenders will be responsible for completing, delivering and documenting all required TRID disclosures.

• Lenders are required to provide first payment letters for both mortgage loans at the time of closing.

• The only allowable closing costs for the DPA loan is the fee required to record the mortgage.

• The final Closing Disclosure must be signed by all parties at closing.

Electronic Signatures

E-Sign Requirements The use of e-signatures is voluntary. SC Housing will purchase loans with documents that have been delivered and signed in compliance with UETA, ESIGN and agency guidelines, including those established by the Federal Housing Administration (FHA), USDA’s Rural Housing Service (RHS), and the U.S. Department of Veteran’s Affairs (VA), Fannie Mae and Freddie Mac, in addition to SC Housing’s requirements listed below:

• The lender must obtain the advance, written consent of the borrower to receive and sign documents electronically;

• Evidence of such written authority must be maintained by lender;

• Lenders cannot permit borrowers to sign blank or incomplete documents;

• E-signatures and the accompanying dates must be clearly visible on all e-signed documents;

• Loan documents containing e-signatures must contain watermarks or serial numbers

(or be accompanied by the LOS transaction log) and must be generated from a LOS/e-signature vendor that is compliant with UETA and ESIGN. Lenders are responsible for vetting their e-signature vendor.

• Lenders shall not divulge personally identifiable information (PII) and documents transmitted electronically shall be in compliance with all federal and state privacy statutes and regulations as well as SC Housing privacy policies.

Allowable E-Signature Documents Lenders may submit the following documents containing e-signatures:

• Initial Loan Application and Addendums

• Loan Estimate and other early disclosures

• Sales Contract

• FHA Real Estate Certification

• Amendatory Clause

• Appraisal

• Conditional Commitment (form HUD-92800.5B)

• Final Loan Transmittal (form HUD 92900-LT or Fannie Mae 1008)

• SF-026 Seller Certification

• SF-029 Applicant Counseling Worksheet

• SF-064 Patriot Act Disclosure

Non-Allowable E-Signature Documents SC Housing will not accept e-signatures on any of the following documents:

• Closing Documents – wet signatures are required on all closing documents, to include o Note o Mortgage o Deed o Closing Disclosure and all addendums

• Final Application and Addendums

• Power of Attorney - for either the borrower or seller

• Documents that require notary or witness signatures

• IRS and Social Security Administration documents

• Any document with a voice or audio signature

• SF-021 Declaration of Citizenship Status

• SF-025 Borrower Affidavit

Quality Control/Audit Requirements Lenders utilizing e-signatures must review their quality control plans to ensure they meet all SC Housing requirements and must ensure adequate oversight of their e-signature process.

Lenders are required to audit their e-signature process annually and provide the findings to SC Housing in the annual lender recertification package. A lender’s e-signature authority may be subject to suspension if the lender fails to comply with SC Housing’s e-signature requirements.

Down Payment Assistance See Program Guide for availability, interest rates and dollar amounts available for specific programs.

When Down Payment Assistance (DPA) is available in conjunction with a first mortgage it may be used for down payment, closing costs and/or prepaid items. The DPA is Forgivable.

See Sales Price and Income Limit chart in Lender Online for qualifying income and home price limits.

Homebuyer Education is required on all loans.

Home Buyer Education may be completed by a HUD Certified or Approved Counseling Agency and must be completed by at least one borrower on the loan prior to approval by SC Housing.

Home Buyer Education certificates may also be obtained by completing any approved MI company’s web based training course. See Mortgage Insurance Requirements section for approved MI companies.

Acceptable forms of counseling include HUD-approved face-to-face and various online courses.

For a list of HUD approved counseling agencies visit http://www.consumerfinance.gov/find-a-housing-counselor/

If the borrower sells the property before the end of the applicable ten (10) or twenty (20) year period, dependent on income limits at the time approval, the remaining DPA balance must be paid in full at the time of sale.

http://www.consumerfinance.gov/find-a-housing-counselor/

If the borrower owns but no longer occupies the property before the end of the applicable period, SC Housing must be notified of the change in occupancy status. Failure to occupy the property constitutes default. The remaining DPA balance must be paid in full no later than 30 days after notice is given to the borrower.

Forgivable DPA SC Housing offers a second mortgage with either a ten (10) year or twenty (20) year term (based on Household income) to cover the down payment and closing cost. Borrowers who are at or below 80% AMI will receive the 10 year term and those borrowers above 80% AMI will receive a 20 year term. The interest rate is zero and there are no monthly payments. The borrower must occupy the subject property for the term (10 or 20 years) of the lien for the assistance to be fully forgiven.

Processing & Underwriting Procedures Underwriting Responsibility For all loans delivered to and serviced by SC Housing, the lender is responsible for all underwriting related to credit quality and insurer requirements. Lenders will originate, process, underwrite, close and insure mortgages in accordance with the SC Housing Mortgage Purchase Agreement (“Agreement”), as may be amended from time to time.

Although borrower eligibility related to Household Income and other program-specific guidelines (Compliance Underwriting) is determined at the sole discretion of SC Housing, lenders are expected to review all borrower eligibility requirements and make a good-faith effort to submit only eligible applications. The lenders underwriter must issue a final loan approval before submitting to SC Housing.

Changes Prior to Closing It is the lender’s responsibility to notify SC Housing of any changes to the loan that take place after initial application and reservation. This includes changes that occur following SC Housing loan approval, but prior to loan closing. Any change is subject to review and prior approval by SC Housing.

Changes requiring review include, but are not limited to:

• Changes (increase or decrease) in the loan amount. Increases will be subject to funds availability and SC Housing reserves the right to cancel any reservation if the loan amount changes more than one (1) percent.

• Changes to the subject property address. Subject property address changes other than those required to correct clerical errors are not permitted.

• Changes in marital status. If the borrower marries, separates or divorces prior to loan closing, the spouse’s income must be added to or deleted from Household Income, as applicable. The lender must obtain this information prior to closing and submit documentation to SC Housing. Increased Household Income cannot exceed the Program income limitations. Household Income that has decreased must still meet lender guidelines for mortgage qualification. (See “Compliance Underwriting – Household Income” section of manual for more information.)

• An increase in the PITI of more than 2% (excluding HOA and any 2nd or 3rd mortgage payment) that occurs after SC Housing has issued loan approval.

Compliance Underwriting File Submission Procedures Prior to submitting files to SC Housing for compliance underwriting the lender should verify the following:

• Lender Request for Determination of Eligibility has been completed, all items listed on the form have been included in the file, and the file has been stacked according to the checklist.

• Lender’s underwriter has fully approved the loan.

• Data reported on the HUD Form 92900-LT, 1008, VA Loan Analysis, DU or GUS findings, must all agree with credit report and final application is accurate and corresponds with all documentation in the loan file.

• All forms that require signatures have been signed, dated and notarized where appropriate.

• All IRS transcripts as required by SC Housing for borrowers and wage-earning occupants 18 years of age and older, have been included.

Additional Submission Information:

• Files received with missing documents or those that contain multiple errors may be returned to the lender for correction and resubmission.

• SC Housing does not accept files without the electronic color appraisal.

• SC Housing makes every effort to review all files within five to seven business days following submission. However, these timeframes may be extended during periods of high volume, such as month-end.

Loan files that have been approved by the lender must be submitted to SC Housing using our e- Docs portal located in Lender Online. The file should include all exhibits as outlined in the Lender Request for Determination of Eligibility Checklist (SF-022) and all other exhibits as required by the applicable AUS. Please do not provide additional documentation not listed on the applicable checklist.

When submitting a conventional loan, it is the lender’s responsibility to upload the complete appraisal to the UCDP Portal for both Fannie Mae and Freddie Mac. The delivery confirmation (SSR) must be provided with the appraisal upload.

Underwriting Guidelines The following guidelines apply to all Programs that are delivered to and serviced by SC Housing.

For available loan types and program-specific guidelines, please refer to the applicable Program Guide.

Automated Underwriting Guidelines FHA loans must be underwritten in compliance with HUD/FHA automated TOTAL Scorecard requirements and receive an Approve/Eligible recommendation through Desktop Underwriter (DU) or an Accept Risk class recommendation through Loan Product Advisor (LPA). VA loans must be underwritten in compliance with Department of Veterans Affairs (VA) automated underwriting requirements and receive and Approve/Eligible recommendation through Desktop Underwriter or an Accept Risk class recommendation through Loan Product Advisor (LPA). RHS loans must be underwritten in compliance with all USDA/RHS automated underwriting requirements and receive an Accept/Eligible recommendation through Guaranteed Underwriting System (GUS). Conventional loans must be underwritten in compliance with Fannie Mae automated underwriting requirements and receive an Approve/Eligible through DU or through Freddie Mac automated underwriting requirements and receive an Accept Risk class recommendation through Loan Product Advisor (LPA).

For AUS-approved loans, SC Housing no longer has additional overlays for student loans or , collection accounts.

SC Housing Federal Tax Transcript Requirements For all loan types, IRS tax transcripts are required for all borrowers and wage earning occupants, 18 years of age and older, that will be living in the property. Lender must provide the most recent 3 years transcripts for properties located in Non-Targeted counties. For properties located in Targeted Counties, lender must provide the most recent year’s IRS tax transcripts.

Transcripts for the previous tax year are generally not available from the IRS until 60 days after the date of filing. If a loan application is received by SC Housing after June 15th, but before the transcript is available from the IRS, SC Housing will accept a copy of the previous year’s federal tax return, along with evidence that the tax transcript for that year is not yet available. This exception applies to all wage-earning occupants 18 years of age and older. SC Housing will not accept extensions filed with the IRS in lieu of the previous year’s transcript or tax return.

When tax returns are submitted they must be dated and signed by all borrowers and must include all schedules, W-2s, 1099s and K-1s and figures must match. If a borrower or wage earning occupant 18 years of age or older was not required to file a tax return, an Affidavit of Non-Taxpayer must be in the file. In all cases, SC Housing reserves the right, for any reason, to request federal tax returns in addition to transcripts.

Tax Liability – All Loan Types Any borrower, spouse, or other interested party who will hold title to the property, who has unpaid, unsatisfied, and/or unreleased federal or state tax liabilities (either unpaid balances or liens) are ineligible for SC Housing Programs. Any lien must be resolved prior to approval and evidence to support the satisfaction of the liability or release of the lien must be included in the loan file. We may accept established repayment plans on files with unpaid tax liability up to $3,000.00.

SC Housing FHA, VA and RHS Underwriting Overlays

Credit Scores Borrowers must have a minimum credit score of 620 for FHA loans and a 640 for VA and USDA/RHS. All borrower(s) must have a minimum of two trade lines with activity within the last six months. Alternative trade lines, authorized user accounts and student loans that are in income based deferment or deferred with no payments are not acceptable trade lines.

Mortgage Insurance

• FHA loans must be Direct Endorsement (DE) approved and HUD/FHA insured.

• VA loans must be VA be VA Automatic Approved (LAPP/SAR) and insured by the

Department of Veterans Affairs (VA).

• RHS loans must have a Conditional Commitment and Loan Note Guarantee issued by

USDA/RHS.

SC Housing Conventional Underwriting Overlays

Homebuyer Education

• The homebuyer education certificate of completion must be submitted with the MI application and the eligibility loan file.

• The homebuyer education certificate of completion must be dated within one year of the loan reservation with SC Housing.

• MI companies have company-sponsored Homebuyer Education courses available on line. Other acceptable forms of counseling include HUD-approved face-to-face and online courses. For a list of HUD approved counseling agencies visit

Condominiums The condominium project must meet all applicable insurer requirements and must be Fannie Mae or Freddie Mac approved. All Fannie Mae condo projects must be verified through Fannie Mae Condo Project Manager system. Evidence of Project approval must be delivered to SC Housing at the time of underwriting submission.

Credit Scores Consult applicable program guide for credit score requirements. All borrower(s) must have a minimum of two trade lines with activity within the last six months. Alternative trade lines, authorized user accounts and student loans that are in income based deferment or deferred with no payments are not considered acceptable trade lines.

Mortgage Insurance All MI must be borrower paid monthly and must be issued by an approved MI Company. See program guide for approved companies and coverage requirements.

Other Underwriting Requirements (All Loan types)

Bankruptcy – All Loan Types

• Chapter 13 – 3 years from discharge date

• All other Chapters, to include 7 & 11 – 4 years from discharge date

Foreclosure

• FHA/VA/USDA – 4 years from date of title transfer

• Conventional – 7 years from date of title transfer

Lenders must comply with SC Housing timing requirements, in addition must meet all insurer requirements for previous bankruptcy or foreclosures.

Any borrower who has a previous foreclosure on an SC Housing loan is ineligible to participate again in any SC Housing program.

Cash Back to Borrower at Closing Cash back to borrower at the time of loan closing cannot exceed the borrower’s documented contribution (e.g., earnest money deposit, credit report fee, appraisal fee).

Interested Party Contributions See Program Guide for maximum contributions by interested parties.

Minimum Borrower Cash Contribution/Reserve Requirements None

Compliance Underwriting – Household Income There is a clear distinction between credit and compliance underwriting. Credit underwriting evaluates a borrower’s ability to repay the loan, while compliance underwriting evaluates whether a borrower meets applicable State and/or Federal requirements, such as maximum limits on Household Income and Sales Price. All references in the following sections to “Household Income” refer to the income used for compliance underwriting.

The methods used to calculate Household Income are different from those used to calculate income for credit underwriting. Household Income is generally the current (or projected) gross income from all sources and includes the income of anyone 18 years of age or older who will reside in the home at the time of closing or within the 12-month period immediately following loan closing. Borrowers must meet Household Income limits.

See Sales Price and Income Limit charts located in Lender Online.

The following are guidelines to aid the in computing Household Income for compliance with Program Household Income limits. These guidelines apply to all loans delivered to and serviced by SC Housing.

Income Included in Household Income Lenders should ask borrowers to disclose all sources of income for all occupants 18 years of age or older who will reside in the home at the time of closing or within the 12-month period immediately following loan closing. This includes, but is not limited to, the following:

• All forms of income from current full-time or part-time jobs

• Alimony

• Annuities

• Auto Allowance

• Bonus

• Business Income

• Child Support

• Commission

• Disability or Death Benefits

• Dividends and Interest

• Education Benefits Used for Subsistence

• Inheritance Received on a Regular, On-going Basis

• Insurance Benefits Received on a Regular, On-going Basis

• Monetary Contributions Received from Persons not Living in the Property on a Regular, On-going Basis

• Overtime

• Pensions

• Public Assistance (Welfare, Food Stamps, AFDC or other forms)

• Rental Income

• Royalties

• Severance Pay

• Separate Maintenance (required by Separation Agreement)

• Shift Differential

• Sick Pay

• Social Security Benefits

• Special Pay and Allowances from the Armed Forces (excluding hazardous duty pay)

• Tips

• Trusts

• Unemployment Benefits

• VA Compensation

• Worker’s Compensation - if received on a regular, on-going basis

Income Excluded from Household Income The following types of income can be excluded when determining Household Income:

• Educational scholarships paid directly to the student or to the educational institution

• Amounts paid by the federal government to a Veteran for use in meeting the costs of tuition, fees, books and equipment

• Amounts that are specifically for reimbursement of business and/or educational expenses

• One-time sign-on bonuses

• Lump sum additions to family assets, such as inheritance, insurance payments (including payments under health and accident insurance and workmen’s compensation), capital gains, and settlement for personal or property losses

• Payments received for the care of foster children

• Sporadic or irregular gifts

• Amounts that are specifically for, or in reimbursement of, medical expenses

Temporary or one-time income may be excluded if the occupant earned the income during the current year only, has no prior history of the earnings and the earnings will not continue after loan closing. A statement must be obtained from the employer confirming that the income will not continue.

The income of an estranged spouse may be excluded for occupants who are separated, but not legally divorced and who apply for a loan as a single person, only if satisfactory documentation can be provided to show they were separated for at least six months prior to loan application.

Several types of Household Income are described in the “Computing Household Income” section. The descriptions are not exhaustive and there are other types of income that should be included in Household Income. Contact SC Housing with specific questions.

Computing Household Income Household Income includes the income of anyone 18 years of age or older who intends to occupy the residence within the 12-month period immediately following loan closing (“occupant”), regardless of their relationship to the borrower. This includes payments received by adults on behalf of minors. All Household Income must be considered when determining compliance with Household Income Limits. Any changes in the employment or earnings status of occupants between the time of application and the time of loan closing must be reported to SC Housing.

The lender should review all employment verification documentation (e.g., lRS federal tax transcripts, tax returns, W-2s, paystubs, etc.) to substantiate income calculations from all sources of income. When there are inconsistencies between current income, year-to-date or past income, the lender must document and explain the inconsistencies so that the income which most accurately represents the occupant’s income can be used to project income for the 12-month period following loan closing.

When an occupant has not been employed for a total of 12 months during the past year, income should be averaged by the applicable number of months. If an occupant has changed jobs, received an increase or decrease in rate of pay, or change in pay structure, it may be necessary to calculate compliance income using only year-to-date income. These types of exceptions to compliance income guidelines must be noted and documented. Even if an occupant’s current income cannot be used to qualify for financing, it should be verified and considered for inclusion in Household Income.

I. Salaried Income The lender must include all borrowers and wage earning occupant’s over the age of 18, using current income (full-time and part-time) from all sources when calculating Household Income.

Standard FHA, RHS and Fannie Mae income documentation may be used.

NOTE: SC Housing reserves the right to request additional documentation to clarify income, up to and including a full written Verification of Employment.

For the benefit of the borrower and for qualifying purposes, the lender and SC Housing underwriting may calculate income in one of the following methods;

a. If an employer verifies on VOE, a specific hourly rate and a specific number of hours worked per week, or provides a monthly salary, then those figures should be used to calculate current base income if supported by past year and year-to-date earnings. If the employer does not verify a specific hourly rate and/or a specific number of hours worked per week, and that information cannot be obtained from the occupant’s pay stub, the current income should be calculated by averaging past year and year-to-date earnings from the same employer.

b. In the event that a borrower has income from multiple sources (i.e.; base, OT, shift differential, bonus, vacation, sick, holiday, etc.) Lender may take from the borrower/occupant’s pay-stub, the current YTD total earnings and calculate by averaging past year and year-to-date earnings as long as they are from the same employer.

Lenders and UW are encouraged to take the most conservative approach when calculating income for salaried borrowers.

II. Commission Income Commission income for an occupant who earns greater than 25 percent of total earnings as commission (or a “guaranteed” draw) should be calculated as it is for a self-employed occupant, by averaging the past two years and year-to-date income. (See Section VII. Self-Employment Income).

Commission income for an occupant who earns less than or equal to 25 percent of his total earnings as commission, should be calculated by averaging the past year plus year-to-date commission income and adding it to the occupant’s base earnings.

III. Bonus and Overtime Income Current income for an occupant who earns bonus and overtime income should be calculated by averaging the past year and year-to-date income.

IV. Dividends and Interest Income Current dividend and interest income should be calculated by averaging the past year and year-to-date dividend and interest income. Tax transcripts and 1098’s may be used to verify dividend and interest income received for the prior year. The occupant should furnish copies of bank statements or other documentation to substantiate year-to-date dividend and interest income.

V. Child Support and Alimony Income A copy of the occupant’s Order of Separate Maintenance and Support, Separation Agreement, Divorce Decree, Court Order or Administrative Order (child support) should be submitted and the amount of child support and/or alimony indicated in the legal document should be included in Household Income.

In the event there is no legal document verifying child support, or the payments received have been variable and do not adhere to the legal document ordering payment, the issue of child support must be explained in writing and signed/dated over a HUD 1010 warning by the occupant. An email explanation is not acceptable. The occupant should furnish documentation of the actual amount of child support received for the past 12 months with bank statements, court records or agency records. The actual amount of child support received during the past 12 months should be averaged to determine child support.

VI. Social Security Income Social Security income should be verified based on the benefit letter from the Social Security Administration. Social Security income includes payments received by adults on behalf of minors for their own support. Social Security Income cannot be grossed up for program compliance purposes.

VII. Self-Employment Income - IRS Tax Transcripts/Federal Tax Returns The guidelines below address IRS tax transcript and federal tax return requirements for the calculation of self-employed income. In general, IRS tax transcripts are required rather than tax returns. However, transcripts for the previous tax year are generally not available from the IRS until 60 days after the date of filing. If a loan application is received by SC Housing after June 15th, but before the transcript is available from the IRS, SC Housing will accept a copy of the previous year’s federal tax return along with evidence that the tax transcript is not yet available. SC Housing will not accept extensions filed with the IRS in lieu of the previous year’s transcript or tax return.

When tax returns are submitted they must be dated and signed by all borrowers and must include all schedules, W-2s, 1099s and K-1s. If a borrower or wage earning occupant 18 years of age or older was not required to file a tax return, an Affidavit of Non-Taxpayer must be in the file. In all cases, SC Housing reserves the right, for any reason, to request federal tax returns in addition to transcripts.

If a borrower indicated at the time of application that he was not currently self-employed, but the federal tax return or transcript from the past year indicates that the borrower was previously self-employed, the borrower must provide a signed statement certifying the date that he was last self-employed.

VIII. Self-Employment – More Than 2 Years Tax transcripts for the past two years must be submitted. Income for an occupant who has been self-employed for more than two years will be calculated by averaging the net income reported on the previous two years’ federal income tax returns and year-to-date net income.

Depreciation and depletion are to be added back to net income. Year-to-date income must be documented by a profit and loss statement that is current through the most recent quarter. A profit and loss statement will not be required if no more than three months have passed since the end of the last fiscal year reported on the most recent tax return. Year-to-date profit and loss statements must be signed by all taxpayers. The profit and loss statement must reflect the business name, address, tax ID and period covered. The profit and loss statement may be self-prepared.

EXAMPLE:

2017 net earnings (plus depreciation) from Schedule C (12 month period) $ 33,000.00 2018 net earnings (plus depreciation) from Schedule C (12 month period) + 38,000.00 2019 net YTD earning (plus depreciation) from P&L (9 months) + 36,000.00

$33,000 + $38,000 + $36,000 = $107,000.00 $107,000.00 divided by 33 months = $3,242.00 $3,242 x 12 months = annual income of $38,904.00

NOTE: If the self-employed income calculation is a negative income figure, the lender should treat the sum as a $0 for the purpose of calculating Household Income. Negative income cannot be used to reduce total Household Income.

IX. Self-Employment Income - Less than 2 years A tax transcript for the previous year must be submitted. Income for an occupant who has been self-employed for less than two years will be calculated by averaging the reported net income from the previous year and year-to-date net income. Depreciation and depletion are to be added back to net income. The year-to-date income must be documented by a profit and loss statement that is current through the date of application. The year-to-date profit and loss statement must be signed by all tax payers. The profit and loss statement may be self-prepared.

NOTE: If the self-employed income calculation is a negative income figure, the lender should treat the sum as a $0 for the purpose of calculating Household Income. Negative income cannot be used to reduce total Household Income.

X. Self-Employment Income – Partnership or Corporation In addition to personal tax transcripts, two years’ partnership or corporate IRS tax transcripts must be submitted if the occupant owns a 25% or greater share of a partnership or corporation.

A year-to-date profit and loss statement will be required if more than three months have passed since the end of the last fiscal year reported on the most recent tax return. The profit and loss statement for a partnership or corporation may not be self-prepared and must be signed and dated.

NOTE: For partnerships and S-Corps, the total depreciation and/or depletion to be added back will be calculated based on the number of partners or percent of ownership. Depreciation and/or depletion should be divided among the partners or owners to determine the amount to be added back to income.

XI. Future Income If an occupant has accepted future employment that is scheduled to begin after the loan closing, the income should be verified and included in Household Income. All future income must begin within 60 days of closing. SC Housing will require that the borrower provide the lender with a 30 day paystub that must be delivered to SC Housing Post-Closing, prior to the purchase and delivery of funds to the lender.

Examples:

• A teacher who has received a contract and will begin employment in the new school year (or who has accepted a teaching position mid-year)

• A full-time student not employed at the time of application, but who has received and accepted an offer of employment.

• A physician who will begin residency after the date of loan closing.

Loan Closing Requirements and Procedures SC Housing Certificate of Eligibility Upon receipt of the SC Housing Certificate of Eligibility, the lender may close the loan in accordance with the conditions stated on the Certificate of Eligibility. The lender will fund the first and second mortgages. All loans must be closed and funded by the lender, prior to the rate lock expiration date stated in the Certificate of Eligibility.

The borrower name(s), address, interest rate, loan amount and term of loan on the Certificate of Eligibility must agree with all closing documents. Changes to any of these items must be approved by SC Housing before loan closing. Failure to obtain prior approval will result in SC Housing refusing to purchase the loan.

Closing Conditions All conditions on the Certificate of Eligibility must be submitted in the final loan delivery package to SC Housing. .

Fees and Costs See Program Guide for origination, SRP and allowable fees. Recording fees may be collected on DPA loans.

Flood Certification All loans delivered to SC Housing must contain an acceptable Life of Loan Flood Certification. If a property is located in a Special Flood Hazard Area and requires flood insurance an acceptable insurance application/binder must be included in the final loan delivery file. The lender must also provide evidence that the flood certification was transferred to SC Housing at closing.

Insurance Requirements The lender must document that the borrowers have sufficient property insurance coverage for Homeowners, Wind/Hail, Flood and HO-6, as required by HUD/FHA, VA, USDA/RHS or Fannie Mae. Documentation must include:

• Borrower’s Name

• Subject Property Address

• Loss Payee Clause – as specified in the Certificate of Eligibility

• Effective Date of the Policy, including amendments to the declarations page if applicable - must be on or before the closing date.

• The policy must cover a 12 month period.

• Premium Amount – must match the premium shown on the final Closing Disclosure (or on the paid receipt)

• Dwelling Coverage (including deductible amount)

Insurance Deductibles Lender must ensure that the appropriate deductibles for insurance coverage do not exceed the limits as established by SC Housing or those required by GSE, if lower:

FHA, USDA, VA and Conventional Hazard The greater of 2.5% or $2500 Wind and…