NSP Training Frequently Asked Questions
Qustions from the NOFA Training
4/24/2009
- If we're working with a homebuyer looking to purchase an REO, and they are seeking FannieMae or FHA financing, can the appraisal take into account any of the proposed rehab, or is the appraisal for mortgage financing purposes based on "as is"? Is the answer different for an FHA versus a FannieMae loan? I heard somewhere that FannieMae allows for pst-rehab appraisals.
The property appraisal must reflect the property condition when it is purchased with NSP funds and support the required discount. For our Acquisition Rehab program there will also need to be an as-improved appraisal which will reflect the property condition when it is sold to the homebuyer. If the homebuyer uses our internal loan to purchase, we can request the same appraiser complete the as-improved valuation at a discount. If a conventional or FHA mortgage is involved, the lender probably won't agree to use an appraisal ordered by a third party. It may be necessary to obtain an as-is appraisal for the NSP purchase, and then have the lender obtain the as-improved value for the loan.
If a homebuyer is going thru the project management program and purchasing the property from the lender, with additional money for the rehab, the appraisal will have to done on the as- is condition at purchase, and the as-improved value after rehab. This can be documented on one appraisal, as long as the repair specifications/contract are clear on the planned improvements. The as-is value will document the property value for NSP equity requirements, and the as-improved value will be used to support the full loan amount (purchase + rehab). If there is a conventional or FHA mortgage involved, the lender probably won't agree to use an appraisal ordered by a third party. It may be necessary to obtain an as-is appraisal for the NSP purchase, and then have the lender obtain the as-improved value for the loan.
4/13/2009
- Will Section 3 apply for NSP? We are not sure if this will be a requirement we need to monitor for.
Yes, Section 3 will apply to NSP. Here's the part of the Federal Register that says we have to certify that we will comply, that means everyone else has to as well...
6. Section 3. The jurisdiction certifies that it will comply with section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u), and implementing regulations at 24 CFR part 135.
4/10/2009
- Can Rio Arriba apply? From the presentation I understood we couldn't.
Unfortunately, you are correct. Rio Arriba cannot apply now, as the funding has to go to the top 10 counties first.
- On the application: Interest rate % - should we leave this blank?
Yes or insert “0%”
- Site information and building information – should we leave this blank?
We suggest you identify representative site as single family or multifamily…
- We are RFPing out our Contractor, Consultant, Architect, etc.- the application calls for a dollar amount – we will have a rolling (on call) list of multiple awardees. We have visited with them and have a very general idea of possible fees we don't know the exact fee. Should we put in the best guess?
Yes
- There are a couple of boxes to check one states Construction and another Construction/Perm. I'm assuming for the Acquisition-rehab we are to check the construction box and on the Project Coordinator application the Construction/Perm. But I've learned never assume anything- so this I'll ask.
If this is rental you will be doing acquisition, rehab and construction/permanent. If it is homeownership it is acquisition, rehab and resale (under other).
4/9/2009
- I am looking at the acquis/rehab grant---application format and instructions #9, and It says . . . "Single Family Schedules will be completed completely and accurately as limited by the information available.
Where are the schedules referenced in the instructions? The only schedule I have is H and that's for previous participation.
The schedules were inadvertently omitted from the application. The page has been updated to reflect addtional files. Updated Files
4/6/2009
- Do I need to give company names and license numbers for our subs? I currently have clients who are interested in foreclosures in my area, Tijeras, Cedar Crest and Moriarty.
Section III, Management Team, No.3 of the Application states: List Partners or Sub-contractors who will complete the work which you are not qualified to perform. Included in this list are the Partners or Sub-contractor employees and their qualifications. So yes, you need to provide a list of Subcontractors along with their license numbers. However, you are not restricted to using only those subcontractors on the list. Regarding having clients interested in foreclosures in your area, the homes have to be located in one of the Priority Counties noted in the NOFA. Tijeras and Cedar Crest would qualify as they are within Bernalillo County, whereas, Moriarty would not as Torrance County is not on the Priority County list.
- Are all of the NSP grant requests due by April 20 th ?
No, only the Acquisition/Rehabilitation NOFA has a submission deadline.
- On the amount of the grant request where the dollar amount should be do we do an average of 1 home or do we apply a large dollar amount if we think we are going to do 10 homes?
For the larger amount for 10 homes
Questions and Answers from NSP NOFA training
Q. Definition of “modest”
A. Appraised value that must be at or below the purchase price limit set by MFA.
Q. Appraisal guidelines?
A. The appraiser must be licensed and “Certified Residential” for SF and “Certified General” for MF. The Appraiser should also be doing appraisals for mortgage lenders in the area. Specific programmatic information is posted on the MFA web page, Neighborhood Stabilization Program, under “Other Links”.
Q. What happens if the appraisal that we order at purchase is different from the appraisal ordered by the lender?
A. It is possible that they would be different. What MFA is asking for is an “As is and as improved” value, or before and after rehab. The appraisal for the mortgage loan may be by a different appraiser and at a different time. The actual repairs will likely differ from the appraisers estimate. The appraisal for the purchase mortgage loan will reflect the improvements and any changes in market conditions.
Q. Could the same appraiser be used?
A. Yes.
Q. How do you suggest a non-profit protect itself from being sued by purchasers of homes for pre-existing conditions?
A. In general, the seller should sell the home in “as-is” condition and provide full disclosure of all improvements and warranties and of any inspections. For specific guidance and language for a purchase agreement, you should consult with your attorney.
Q. If costs are incurred and the house is found not good for purchase, will the costs be reimbursed under this program?
A. Yes, costs such as those for appraisals, and HERS ratings would be reimbursed. Many other costs such as surveys should be paid by the seller. Staff time would not be reimbursed.
Q. Would the developers fees be built into the cost of the house?
A. No, they are to be paid separately on the overall costs.
Q. Are housing counseling fees paid by NSP?
A. Yes, they are.
Q. What is the difference between Acquisition/Rehab and Program Management?
A. The difference is who is acquiring the home. Acquisition/Rehab has the homes purchased by an entity (a non-profit, government agency, etc.) from the lender or lender's agent, rehabilitated and sold to the homebuyer. Under Program Management, the home is purchased directly by the homebuyer from the lender or lender's agent, then rehabilitated.
Q. Could a “project manager” work with an acquisition/rehab subgrantee?
A. No, because the borrower/homebuyer has to buy the home from the lender or lender's agent.
Q. Is the family prohibited from selling their home if they have a $50K soft second for the rehab?
A. No, they can sell their home. However, the affordability restrictions mandated by the NSP program require repayment of the funds on a reducing balance over a number of years. The language states:
- If the original Principal amount of the Award is from $1 to $25,000, the Principal balance shall be reduced at a rate of Twenty Percent (20%) per year for five (5) years beginning on the fifth (6 th ) anniversary of the date of this Agreement.
- If the original Principal amount of the Award is from $25,001 to $50,000, the Principal balance shall be reduced at a rate of Twenty Percent (20%) per year for five (5) years beginning on the eleventh (11 th ) anniversary of the date of this Agreement.
Q. Do we have to provide a list of the homes that we want to work with up front, with our application?
A. We do not need a list of addresses but we need to know the area that you will be acquiring houses in. Y ou need to provide a rough estimate of what you can do, or what you think you can do under the program. Remember, the funds are spent on a first come, first served basis.
Q. Regarding selection of contractors, do we have to choose from a list you provide?
A. No, you can locate your own contractors, as long as you conform to your own procurement policies. If you can document your process, and it is a reasonable process, you should be OK.
Q. Will Davis/Bacon apply to this program?
A. Yes, it will apply if you are acquiring more than 8 units of rental houisng.
Q. Could a team be put together, an appraiser, housing counselor, contractor, etc. Do we have to bid out each one?
A. Yes, a team is acceptable, but how the members of the team are selected must be done in a reasonable manner.
Q. How much equity must the homebuyer have?
A. The homebuyer will pay $500 in earnest money which will go to closing costs and downpayment. The homebuyer will have a note and mortgage for less than the market value as based on the NSP appraisal. The homebuyer will have a forgivable note and mortgage for the rehab cost.
Q. What is the income limit for this program?
A. 120% of Area Median Income. The 2009 limits are posted on our web page, under NSP.
Q. Could a house draw from three separate activities, i.e., 1 st mortgage, DPA and $50K rehab?
A. Yes, that is possible.
Q. Would Section 184 tribal loan homebuyer counseling be acceptable for NSP?
A. The counseling entity must be HUD approved in New Mexico . 8 hours of homebuyer education is the minimum. The Pathways Home curriculum would be suitable for homes on trust lands, as long the counseling entity was HUD approved.
Q. What if the 25% reduction in the HERS rating costs more than $50K?
A. Be selective of what houses you purchase. If the rating cannot be achieved, or if it would cost more than $50K, don't buy the house.
Q. Has there been consideration given to waiving the HERS rating requirements?
A. MFA's intent with the HERS rating requirements is to make all homes purchased with NSP more energy efficient, as well as cheaper for the homebuyers to maintain. So, the answer is no, we will not waive the HERS rating requirements.
Q. What if the house has an initial HERS rating of 85?
A. If the house is a HERS 85 or better to begin with, no energy efficiency measure need to be taken. For those homes where the 25% reduction would require a final HERS rating of below 85, the final rating is not required to exceed 85.
Q. Is the cost of the HERS rating an allowable cost, and how much will you allow?
A. Whatever the charge is, within reason, will be allowed and reimbursed.
Q. Can the down payment assistance funding be used with other first mortgage products?
A. Yes, but there would be other qualification requirements that might eliminate the homebuyer.
Q. Can the NSP funds be used for principal reduction for a lower payment to help qualify homebuyers?
A. Yes, it can.
Q. Are there first-time homebuyer restrictions on NSP funds?
A. No, there are not.
Q. Would the $8K tax credit for first time homebuyers or IDAs count towards the six month “reserves” for the second mortgage need calculation?
A. No they would not.
Q. Under MFA's plan, is there funding available to demolish blighted houses?
A. No, that was not included as part of MFA's plan.
Q. When can we expect the Acquisition Rehab Award
A. Applications must be submitted by 5:00 PM on April 20, 2009 for consideration in the first round of awards. MFA anticipates internal approvals would be complete and the awards would be submitted to the MFA Board in Mid-June. If approved at the June Board meeting, Award Notices should be out by June 22, 2009.
