Originating Chase REO Properties- FHA Financed

·        FHA Case number assignment

o       Assigned the same as a standard FHA loan.

o       FHA Case number is valid for 6 months. As is the FHA appraisal.

·        Residency - Must be primary residence – note: HUD does not require First Time Homebuyer course.

·        Seller Contributions

o       Maximum seller contribution is limited to 6% of the sales price. 

o       May be used to pay closing costs, prepaids or discount points.

o       Exclusive of seller participation in down payment assistance programs

·        Sales price

o       File must establish the foreclosure cost that Chase took the property back (e.g. Sheriff's sale).   If that original cost is less than half the new sales price, we must order a 2nd full FHA appraisal

§         Example- Chase foreclosed and acquisition cost back was $100,000. If new sales price is $200,000 or greater, a 2nd full FHA appraisal is required. If the new sales price is less than $200,000, a 2nd appraisal is not mandatory, but u/w discretion is involved if any additional supporting information is required.

§         If unable to establish acquisition cost back (e.g. only have warranty deed for $100 transfer). 2nd full FHA appraisal is mandatory.

·        Appraisal- Ordered at the time the time FHA case number is assigned.

o       Must be FHA approved appraiser

o       Date of appraisal inspection (i.e. date on URAR) MUST be on or after date of FHA case number assignment.

o       Utilities must be checked and be considered operating satisfactory. Either the appraisal or a home inspection can confirm condition.

o       If original appraisal was not completed FHA, then

§         Check to see if appraiser is on FHA roster, if yes, assign appraiser w/ case number and have appraiser reinspect property under FHA guidelines and update inspection date on URAR.

§         If appraiser is not FHA approved, must order new appraisal using FHA approved appraiser

·        Credit documents- Same as standard FHA loan (Credit report, income, assets)

·        Disclosures

o       Same as standard FHA loan with exception that Amendatory Clause is not required. 

o       If using Chase form C-, the Real Estate Certification section must be signed by all applicable parties, but the amendatory clause section can be left blank. 

o       If RE cert is on contract of sale, then form C- is not necessary.

·        Repairs & Escrow holdbacks

o       Do not require cosmetic repairs* – if called for by appraiser, U/W should waive – (see repair addendum below)

o       If FHA appraisal requires health and safety related repairs, a 30 day escrow may be established.

o       Minimum amount of escrow is $500

o       Maximum amount of escrow is $5,000. If >$5,000, loan must go as 203(k) (Chase does not currently originate this product).

o       Must be completed on HUD 92300

o       Withhold 1.5X repair costs (funds can be from buyer or seller)

o       Maximum 30 day repair period (exceptions for longer periods are subject to u/w discretion)

o       FHA appraiser or FHA fee inspector will complete final inspection when repairs are done

·         Closing documents - same as standard FHA loan. Power of Attorney only available for closing documents (exception for active military may be made for initial application documents).

REPAIR ADDENDUM

Below are a few examples of repairs NOT required to be addressed by HUD

• Appliances – NOT REQUIRED including refrigerator, dishwasher, or stove. However, if stove is gas hook-up, gas hook-up must be addressed and meets local code.
• Missing handrails
• Cracked or damaged exit doors that are otherwise operable
• Cracked window glass
• Defective paint surfaces in homes constructed post 1978
• Minor plumbing leaks (such as leaky faucets)
• Defective floor finish or covering (worn through the finish, badly soiled carpeting)
• Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage
• Rotten or worn out counter tops
• Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed post- 1978
• Poor workmanship
• Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)
• Crawl space with debris and trash
• Lack of an all weather driveway surface
• Swimming pools - not required to be filled

Below are a few examples of repairs that ARE required to be addressed by HUD

• Inadequate access/egress from bedrooms to exterior of home
• Leaking or worn out roofs (if 3 or more layers of shingles on leaking or worn out roof, all existing shingles must be removed before re-roofing)
• Evidence of structural problems (such as foundation damage caused by excessive settlement)
• Defective paint surfaces both interior/exterior for homesconstructed prior to or in 1978
• Unfinished or unprotected wall coverings

Inspection Requirements - FHA no longer mandates automatic inspections for the following items and/or conditions in existing properties: 

·        Wood Destroying Insects/Organisms unless there is evidence of active infestation.

·        Well (individual water system) unless there is evidence of:

o       Corrosion of pipes (plumbing)

o       Areas of intensive agriculture within ¼ mile

o       Coal mining or gas drilling operations within ¼ mile

o       Dump, junkyard, landfill, factory, gas station, or dry cleaning operation within ¼ mile

o       Unusually objectionable taste, smell or appearance of well water

·        Septic unless there is evidence of system failure

·        Flat and/or unobservable roof