See below announcement from AZ housing.
Currently, clients are utilizing down payment assistance programs to help get into their homes with little to no money down.
Down Payment Assistance program utilize higher rates than a traditional mortgage to help offset the grant money being paid.
Many lenders are soliciting these borrowers right after closing to lower their rate.
This is a smart tactic, but it makes the program unsustainable as the higher rate is helping pay for the grant.
If they are immediately being paid off, the program is losing money.
Effective on all new Home Plus reservations after January 2nd – the grant will be a silent 2nd completely forgivable after 3 years.
This will create a combined loan to value likely over 100%, preventing lenders from coming in to immediately refinance the down payment assistance loans.
It will also create a higher mortgage balance between the two loans which will affect consumers trying to sell within 2 years.
HOW CAN YOU USE THIS TO YOUR ADVANTAGE:
Once the silent 2nd goes into effect, it will be difficult for borrowers using down payment assistance to refinance shortly after closing.
But, they can still do this if they act fast.
Once the silent 2nd goes into effect, borrowers will likely have to remain in a higher down payment assistance rate for a lot longer because of the higher combined loan to value and rate pricing is worse when you have 2 loans.
Speed up your home search and get under contract in December and you can still utilize the non repayable grant.
REGGIE GREEN / BRANCH MANAGER AT FAIRWAY INDEPENDENT MORTGAGE – MCCORMICK RANCH
480-206-5577 / TEAMGREEN@FAIRWAYMC.COM
The HOME Plus program will be making a change in the delivery of our down payment assistance.
Effective, January 2, 2018 on all new HOME Plus reservations the assistance provided will be in the form of a three-year, no interest, no payment, deferred soft second mortgage, forgiven monthly at a rate of 1/36 over the term of the lien.
This change is being driven by our master servicer, US Bank. And while this communication is strictly for the HOME Plus program, if you use other DPA programs in the State, serviced by US Bank, I expect you will receive similar communication in the near future.
The change will:
(1) Provide you further protection from “poaching” lenders and any associated claw back or EPO issues.
(2) Allow us to maintain our current lender compensation structure.
(3) Hopefully increase our “approved eligible” decisions. Many of my peers in other States experienced an increase in approval decisions when they changed their assistance from a grant to a community second.
All supporting documents connected with the new soft second mortgage will be embedded in our HTS Emphasys-Lender Online system and accessed and generated in the same manner that our current program documents are. We will require the deed of trust associated with the soft second mortgage to be recorded, which depending on the County is usually less than $75. ALL other program fees will remain the same.
The HOME Plus process flow will not change.
Updated HOME Plus Program Guidelines and sample documents we be available in the next few days. I will also keep the lines of communication open to insure a smooth transition into the new assistance method.
As always, I appreciate your interest in the HOME Plus program and value the partnerships we have cultivated. If you have any questions, just let me know.
Office 602.771.1091 | Cell 602.319.9620
Lender Online https://lenders.housing.az.gov