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05/02/2022

Version 12

All policy changes and updates are referenced below to the appropriate section of the CLG. These policy changes are effective 05/02/2022 unless otherwise noted.

To review the program guidelines changes made March 3, 2022, or earlier, please follow this link to the archived Correspondent Lending Guides. (You are also able to review the DPA Edge and Rate Advantage products guidelines from the archived March 3, 2022 guidelines.)

This announcement, and previous announcements, are available on the Announcements page of our website.

These updates apply to everyone using the Chenoa Fund program—correspondents and TPO.

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Announcements—Product Updates

For convenience, Chenoa Fund™ has combined its two FHA down payment assistance offerings into one product, which will allow for a soft, forgivable second or a repayable second depending on the borrower’s needs. The best of the Rate Advantage and DPA Edge products have been combined into this versatile, flexible down payment assistance product called Chenoa Fund™ DPA for FHA Loans. For a full grasp of what this product offers, please read chapter 5 (Summary of Products), but a brief summary of the Chenoa Fund™ FHA offering is provided below:

  • A single unified product offering and requirements with repayable and forgivable DPA options for FHA-insured loans
    • Repayable second mortgages have a 10-year term and an interest rate 2% above the first mortgage note rate
    • Forgivable second mortgages have a 30-year term, accrue no interest, and require no payments. Forgiveness conditions are determined by the DPA percentage
  • Both repayable and forgivable offerings can waive the income limit through a loan price adjustment
  • Reduced, lender- and borrower-friendly overlays that will help maintain responsible homeownership in all communities, particularly the underserved

In addition, the Correspondent Lending Guide and related matrices have undergone some reorganization to improve clarity.

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Existing Chenoa Fund™ DPA products offered for FHA Loans—the Rate Advantage and DPA Edge—will still be available for 60 days following the release of Chenoa Fund™ DPA for FHA Loans, even though they have been removed from these guidelines. (Please see our archived guidelines from March 3, 2022, for the guidelines specific to Rate Advantage and DPA Edge.) The last day the Rate Advantage and DPA Edge products will be offered will be July 1st, 2022.

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Announcements—Other Updates

CBCMA no longer requires an “attestation of no forbearance” on its delivery requirements.

Many borrowers and correspondents have been unable to request tax transcripts from the IRS due to current circumstances. As a temporary measure, when Chenoa Fund overlays would otherwise require tax transcripts we will instead accept stamped 1040s.

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Product Updates—Chenoa Fund™ DPA for FHA Loans

As noted above, Chenoa Fund™ now offers only one FHA product, the Chenoa Fund™ DPA for FHA Loans product. This product has both a repayable and a forgivable option and the ability to waive the AMI limit with a loan price adjustment. For a full review of the updates to this product, see chapter 5 (Summary of Products) in our Correspondent Lending Guide.

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A highlighted change related to the above, Chenoa Fund™ overlays for DTI have been removed for our FHA down payment assistance. We will accept DTI per AUS approval or a manual underwrite for FHA loans. (It should be noted that we have retained our payment shock requirement. See section 5.12 [DTI Requirements] and 5.13 [Payment Shock Requirements] for more details.)

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Other Product Updates

Section 5.13 (Payment Shock Requirements) has been further updated to clarify that borrowers in the 600–639 FICO band may exceed payment shock requirements if they have no present housing payment provided they meet the DTI limitations:

“Borrowers may exceed this payment shock requirement if their DTI scores are 31/45% or less; this also applies to borrowers with no present housing payment.”

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Section 5.14 (Present Housing Expense & Verification of Housing Payment) has been updated to clarify that a VOR is not required by Chenoa Fund, but that these guidelines only apply when a VOR is otherwise required:

“A VOR is not required by Chenoa Fund overlays. However, if required by AUS or a manual underwrite, all verifications of rent or housing expense must come from a third party source…”

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Section 5.29.16 (Flood Certificate) has been updated with a second sub-section that will contain existing FHA-specific information. In addition, the following will be added to that section:

“If flood insurance is needed, the policy must be written by the National Flood Insurance Program.”

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“Fees on the LE and CD should never reflect as payable to CBCMA, CBC Mortgage Agency, or Chenoa Fund, regardless of the section.” This line has been added to the following sections:

  • Section 5.23.1 (Fees to CBCMA)
  • Section 7.8 (Important Notice Regarding CBC Mortgage Agency Investor Delivery Fee and Clarification of Rate Sheets)
  • Section 7.15 (Closing Costs and Fees)

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A new sub-section has been added to section 5.29 (General Overlays). This section, 5.29.18 (Vouchers), states the following:

All Programs: Where relevant Agency guidelines allow, CBCMA will accept Section 8 vouchers.

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A new sub-section has been added, section 5.30.4 (Prepaid Interest Above 10 Days)

All Programs: In states where law or statute prevents the first payment on the second mortgage from being more than 45 (forty-five) days from the Note date, CBC Mortgage Agency will allow up to 16 (sixteen) days of prepaid interest.

This will allow for a different first payment due date between the second mortgage and the first mortgage.

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Chenoa Fund now allows for an interest credit of 10 days (which is in line with FHA guidelines) for all Chenoa Fund products. This affects the following sections:

  • 7.9 (Interest Credit Option): Loans disbursed on or before the tenth (10th) day of the current month may use an interest credit option.
  • 7.15.3 (Per Diem Interest and Interest Credits): Alternatively, the mortgagee may begin amortization up to ten (10) days prior to the disbursement date and provide a per diem interest credit.

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Section 7.21 (Documentation—General Requirements) has been updated to clarify that the soft pull must be done within 10 business days, while the verbal verification of employment must be done within 10 calendar days.

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Section 7.21.1 (Documentation—Further Requirements) had the following line deleted: “Fully executed Escrow Holdback Agreement”.

The post 22-05-02 Announcement—May 2 2022 Program Guidelines Update appeared first on Chenoa Fund - Down Payment Assistance.

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