Jun 28, 2013 13-18

DPA Funding Process and Documentation of Permissible Sources

DPA Funding Process and Documentation of Permissible Sources of Down Payment Assistance (“DPA”) for the required Minimum Cash Investment on an FHA-Insured Mortgage Loan

Background:

On May 9, 2013, HUD issued Mortgagee Letter 2013-14 (“ML 2013-14”), which sets forth the documentation that a mortgagee must provide to demonstrate eligibility for FHA mortgage insurance on loans where a borrowers Minimum Cash Investment is provided directly by a Federal, State or local Government, agency or Instrumentality.

Housing NM, as an Instrumentality of the State of New Mexico (“Government Entity”), is considered a permissible source of funding for providing all or part of the borrowers required Minimum Cash Investment on an FHA-Insured mortgage loan.   

In order to establish that the borrower’s Minimum Cash Investment was provided by a permissible source, HUD is requiring the mortgagee to document that the DPA grant or loan provided by Housing NM is in compliance with ML 2013-14.

DPA Funding Process:

Effective July 1, 2013, Housing NM will continue to directly fund all forms of DPA at loan closing. Participating Lenders will continue to follow established policies and procedures related to Housing NM wire transfers of DPA funds at loan closing.

Documentation:

Effective July 1, 2013, Housing NM will provide the Participating Lender with documentation demonstrating that the DPA provided by Housing NM is in compliance with the requirements of ML 2013-14. The documentation will be provided to the Participating Lender at the time of Compliance Approval of the first/second mortgage loan and will be either a;

• DPA Mortgage Loan Commitment Form for DPA secured through a Note/Mortgage/ Deed of Trust. This would include the Mortgage Booster, Payment$aver, Helping Hand and Smart Choice DPA programs, or a;
• DPA Grant Commitment Form for DPA provided through a grant. This would include the Mortgage$aver Plus grant and the HERO DPA grant.

Housing NM will complete the appropriate DPA Commitment Form on behalf of the borrower, basedon the type of DPA provided and will provide the completed form directly to the Participating Lender at the time of DPA Compliance Approval. The Participating Lender will be responsible for including the appropriate DPA Commitment Form, as well as any required supporting documentation, in the FHA Endorsement Binder