Sep 6, 2023 2023-14

Recent Trends and Updates on Housing NM Programs

We would like to take this opportunity to address several trends and updates.

Housing NM programs are designed to serve low to moderate income borrowers. Housing NM takes willful misrepresentations or omissions surrounding borrowers’ income or eligibility seriously.

The Internal Revenue Service along with other Federal Agencies dictate program requirements especially as it pertains to income and purchase prices, among others. Housing NM’s ability to issue Mortgage Revenue Bonds is the primary reason we can offer interest rates that are currently below local market rates.

Income considerations:

Historically, notable borrower cash assets have been a rare occurrence, however, we have seen an increase in files with increased cash assets or with increased income complexity.  We ask that you remain patient as we work through navigating the files. We always put our best efforts forward but must follow the IRS and Bond Counsel guidance. Unfortunately, not all applicants will meet program guidelines.

The most recent impact on household income centers around cash and cash equivalent income where assets exceed $5,000 and the borrower’s wages are close to the income limits.  No two accounts or borrower situations are identical, as a result we can only offer general guidance on this matter.  If you encounter a scenario that you are unsure of, please reach out to us.

1. An asset is defined as an item of value that may be turned into cash, like a savings account. Since interest is earned on these accounts, the interest income is income that must be counted toward household income.  Examples include but aren't limited to the following: Checking, Savings, Broker Accounts, and IRA’s.

        The Asset Test consists of two parts:

• Does the “cash value” of the asset(s) exceed $5,000. “Cash value” is defined as the market value [1]less reasonable expenses incurred when converting or selling. This includes but is not limited to Penalties for premature withdrawal, broker, and legal fees.

Example:

Borrowers have a Certificate of Deposit in the sum of $5,000 paying 4%. The penalty for early withdrawal is three months of interest. In the example below, the face value less the 3 months interest comes to $4,950, which is less than $5,000.

Calculation of income when assets exceed $5,000. The annual income included as household income will be the greater of the actual income or a percentage of the assets based on the current 0.06% [2]passbook savings rate adopted for use by HUD.

Example:

Cash Asset Type                                                     Cash Value                              Actual Yearly Income

Checking Account (noninterest bearing)               $455                                                        $0

Savings Account (interest at 2.5%)                         $6,000                                                     $150

Stocks[3] (not paying dividends this year)                 $3,000                                                     $0

 Total                                                                       $9,455                                                     $150

In this example, cash assets equal $9,455, which is greater than $5,000. Therefore, it is necessary to compare the actual income from assets to the imputed income from assets.

Imputed income calculation- The total cash value of assets ($9,455) is multiplied by 0.06% to determine the imputed income from assets. (0.06/100) =0.0006 x $9,455 = $5.64. Since $150 (actual income) is greater than the imputed income from assets ($5.64), $150 would be used in the income calculation. Please note these figures are already annualized.

Trends leading to longer review timeframes:

1. Loan submittal quality continues to decline. Clean quality file submissions assure that Housing NM can maintain, if not exceed, the published 3-day review timeframe.  In cases where the loans for the FirstHome program conditions exceed seven and loans for the HomeForward program exceed three, the file review will immediately stop. An entirely new upload for the loan file will be required and will be treated as a new file. The review timeframe will start over as if it were a new file submittal. Conditions are reviewed in the order that they are received. When uploaded correctly, conditions are automatically added to the reviewer’s queue.
   • Only provide the necessary documents outlined in the Compliance Manual or what has been requested by Housing NM staff.
2. Checking for status updates including emails on loans falling in the published timeframe are prohibited. These requests take staff away from reviewing files. Our goal remains to get loan decisions to you in a timely manner.  
3. The PowerLender Portal [4]is updated daily and displays the date of loan submittals the team is reviewing. Files are reviewed in the order that they are received.  If a file submitted prior to the posted day and is absent of communication that file is under a special review.  In that situation, a member of management can reach out to the Housing NM Director or Assistant Director of Homeownership for a status update. Emails alerting staff, unless requested, are unnecessary and slow the file review.
4. System administrators are granting access to Housing NM’s system without prior program training as required.  This is leading to excessive conditions that cause closing delays.
5. We will no longer process expedited loans or condition reviews. For the past several years, initial loan reviews have been completed prior to the three-day time frame. Conditions continue to remain within the published time frame. Most of the time files have been reviewed before an expedited request is processed.
6. Altering any Housing NM program document which is made available through the lender portal is strictly prohibited.  This includes, but is not limited to, the following: Rate locks, Compliance Approvals, or any program specific documents. If identified, Housing NM at its sole discretion may choose not to purchase the loans.   

Should you have questions please contact a member of the Homeownership Department at 505.843.6880.

Thank you for participating in Housing NM programs.

[1] Note the borrower(s) is not actually required to convert assets to cash. This is simply a required step to determine the amount of cash that could be received. This is a required step to determine the income.

[2] The passbook savings rate is subject to change without prior notice or as adopted by HUD.

[3] Stock account calculations will vary due to the multitude of ways accounts structured and handled. 

[4] Log in credentials are not required to view these dates.