On December 5, 2012, HUD published an interpretive rule that provides guidance regarding permissible sources of down payment and closing costs assistance used in conjunction with an FHA insured mortgage loan. The interpretive rule states that down payment and closing costs assistance may be provided, “…..directly by a Federal, State or Local Government in conjunction with their respective homeownership programs”.
MFA has historically provided down payment and closing costs assistance through a reimbursement mechanism, where the Participating Lender funds the DPA on behalf of and in the name of MFA. HUD has previously indicated that this method of funding is acceptable and that the reimbursement process could be considered a “direct” source of funding for down payment and closing cost assistance.
However, HUD has recently narrowed their interpretation of “directly” to only include down payment and closing cost funds provided by MFA through a wire transfer or other such mechanism at the closing table (i.e. a table funded transaction).
Therefore, effective January 25, 2013, MFA will be table-funding all forms of down payment assistance directly, via a wire transfer, at loan closing.
Revised Down Payment Assistance Funding Procedure:
Participating Lenders will be required to verify the loan amounts in MFA’s system and complete the Second Mortgage/Grant Funding Wire Request Form (“Wire Request Form”), for each loan closing and submit to MFA at least 48 hours before the scheduled loan closing. The completed Wire Request Form, located on MFA’s website under the “Lender/Realtor” tab, should also include the following:
- A copy of the wire instructions for the Title Company
- A copy of the Settlement Statement (HUD-1)
Once MFA receives the completed Wire request Form and applicable documentation, MFA will set up the wire for closing.
After the loan/grant is closed and funded, the Participating Lender should ship the closed loan file to MFA and the Master Servicer as usual.
Documentation of DPA funding
The Participating Lender should include a copy of the Wire Request Form, the title company wire instructions and the down payment assistance wire verification in the first mortgage closed loan file that is delivered to the Master Servicer for purchase. HUD is requiring this documentation as proof that the down payment assistance funds were provided directly by MFA.
Thank you for participating in MFA’s program. Should you have any questions, please contact a member of the MFA Homeownership Department at 1-800-444-6880 or 505-843-6881.