Buy Down/HOEPA – Lender Conditions

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  • #49731
    jlands
    Member

    Hi,

    After receiving my COC today, I believe that the maximum buyer contribution amount was miscalculated and inaccurately included the seller’s contribution to our buy-down. As far as I was aware, the seller’s contribution is completely separate from the buyer’s contribution and buys down the interest rate on TOP of the buyer’s funds, even if the buyer contributes the full amount. Is this no longer the case?

    My MC says due to us being NON-Priority members, the max we get thanks to HOEPA is 6.5% of the purchase price. BUT should it not be 6.5% of the purchase price is the max the BUYER’s can buy down, and our seller can give another 1%?

    BOA kicked us back with lender conditions stating: NACA TO PROVIDE A CHANGE OF CIRCUMSTANCE TO LENDER’S INBOX/ CURRENT TERMS REQUIRE BANK PAID POINTS TO REMEDIATE HOEPA VIOLATION/ LENDER CALCULATION PROVIDED TO NACA 7/3/ NACA TO RESTRUCTURE LOAN AND SUBMIT COC SO LOAN REGISTRATION CAN BE COMPLETED –

    but I’m just not sure how this is a problem? Any advice, Tim Trumble and company?

    For more data, this is what the COC says:
    Purchase price: $420000
    Discount points total: 6.5
    Final Rate: 1.875%
    Buy Down (Buyer): $ 22,300
    Buy Down (Seller):$ 5,000

    When I believe it should say:
    Final Rate: ~1.625%
    Buy Down (Buyer): $ 27,300
    Buy Down (Seler): $ 5,000
    …. right? Thank you!

    #49733
    Nelsont
    Member

    It sounds to me 6.5% total.

    Also I wouldn’t say the buyer and seller contributions are completely separate. For a conventional loan the maximum a seller can contribute in my area is 3% regardless of whether the money goes to closing or down payment or naca buy down points. This 3% includes other contributions such as grants from first time homebuyer programs. There is also I believe a limit to member buy down points. I think it’s 7. So in order to get down to 1.625 or lower in my area the only possible way is to have seller contributions and hope it doesn’t equal more than 3% of purchase price. I think.

    But based on my experience like I stated initially I would imagine it’s 6.5% max including 1% from the seller which means 5.5% max from the buyer. Hope you get it all straightened out!

    #49736
    jlands
    Member

    Thank you for your response, Nelsont

    “It sounds to me 6.5% total.” — And that would make sense, but then why on my initial bank app did it let me get to 6.5% as the buyer previously? (the interest rate said 6.5% BEFORE the seller agreed to concede funds to buy it down) I would hate to learn that it’s 6.5% max for the buyer UNLESS you get seller contributions.

    #49744
    Nelsont
    Member

    The only thing I can think of is the language is not straightforward. Your MC would be the best person to answer this. But being a non priority member especially is $4000 really going to break the bank and be the reason you can’t settle?

    #49781
    southflorida
    Member

    My understanding is that the seller contribution limit is 10% of loan amount and not directly related to the buyer’s funds

    #49784
    Nelsont
    Member

    For a conventional loan my state caps the total contribution amount including seller, broker discounts/refunds, and monies not counted as grants gifts equities or income at 3%…total…there are less strict limits for fha va and other loans in my state but of course you wouldn’t be going through naca.

    #50046
    jlands
    Member

    Update: Apparently for Non-Priority members, the total contribution to buy down the interest rate is 6.5% of the purchase price. That’s the information my MC has stuck to, so that’s what we’re going with. So instead of putting $27,300 (6.5%) and having the seller contribution on top to equal a total of $32,500 (7.7%) of a buy-down, we will have to contribute $22,300 and the seller’s contribution will round it out to $27,300.

    It isn’t the end of the world, just disappointing. BUT, with any little bit of luck, this house will still be ours within a couple of weeks! Literally. Two weeks from today is the last day of the contract. *Fingers crossed*

    #50047
    Nelsont
    Member

    What point are you at in the contract?

    Unfortunately as I found out nearing the end of my contract normally your contract close date dictates to the bank what they need to try to meet. With naca your contract close date is simply a guideline that is only there because it’s required. Naca will dictate the close date and will provide with the date to close on your closing disclosure.

    If you have your CD and it says 2 weeks that may happen. Once you get your CD you still have to get your clear to close and then your clear to close final which will contain the final closing disclosure. The final CD will contain your exact close date which may or may not be the same as your initial close date in the CD you got a week earlier. In my case it was but the cash to close was different.

    Plan 3 weeks minimum to close from the time you sign your bank app. I think the timeline is 11 business days from signing to receive your final CTC. Good luck with everything!

    #50076
    southflorida
    Member

    @jlands If you still can, try to talk to the office manager or someone else, your buydown funds dont have to do with the seller contribution, at least in my case, I gave the maximum allowed from my funds for interest buydown and the seller contributed about 6%.

    #50081
    jlands
    Member

    @Nelsont: Before I start, congrats on closing!

    As for us, wesubmitted our bank app 7/1. Our MC informed us today (7/19) that although our contract close date is 8/1 (after a 45 day escrow) we may not be able to close prior to 8/7.

    Here’s the why: I’ve provided a contract stating that I will begin new employment on 8/7/19, along with having my soon-to-be-employer complete and turn in a VOE. The lender left a “note” (NOT a condition) that the loan “may not close” til the 7th. My MC says that means no matter what happens we will not be closing before then. We assume it’s because I won’t actually start my job until that day, and they want the verbal VOE to happen after I’ve started.

    We’ve sent in a request for an extension to our close date to the seller’s agent. We would HATE to lose our earnest money, or have to pay the seller a fee for every day we’re past the close date. It’s disappointing and scary, but as always we will continue to move forward.


    @SouthFlorida
    ,

    Thank you for the advice! I will continue to attempt to escalate the matter, but so far my numerous voicemails and emails to the office manager, member services, office managers of other offices, online support, etc. have gone ignored.. I’ve seen what people say on here, I’ve read the handbook, and I’ve googled HOEPA, and nowhere does it say that Non-priority members can only have 6.5% contributed in total, but the only person’s opinion who matters is my MC, apparently. lol but 🙁

    #50104
    rbm2kid
    Member

    So I’m in the same predicament as jhands and I really need some help. Sowehave been approved for a $30k grant and were hoping to use it for interest reduction. Now we are being told Since we are st 83% MSA we are only allowed to buy down 5% of our loan on a 200k house. First when did it change from 100 MSA to 80? Next could we still use the grant for principle deduction? We can afford the payment but it would make us house poor so is there another way we could use all of the 30k to reduce our payment?

    #50112
    jlands
    Member

    @Rbm2kid

    I’m sorry you’re also getting the short end of the stick when it comes to your buy-down, but in the big scheme of things you’ll still come out a winner with the NACA mortgage. As for your grant, my MC told me that anything used after the 6.5% total buy-down would go to principal reduction. While reducing the principal is not as cost-effective as buying down the interest rate, according to my math, that would still be a very large reduction in principal for you, which could potentially make the house affordable. (5% of 200,000 = $10,000, and you’d still have $20,000 leftover to reduce the principal).

    Also, please note that my MC said things are different for priority members (of which I am not, and she has been very vocal in reminding me that). So your mileage may vary.

    #50114
    living20057
    Member

    @rbm2kid during my purchase workshop they said they moving from 100 to 80 MSA. They are trying to lessen the number of people using it. It seems like if you came into the program when it was a 100 MSA, you should be grandfathered in, because you have been planning your numbers around that.

    Does the grant come with certain rules? Can you use for buydown and other closing costs – HOI, escrow taxes, and interest.

    #50115
    Nelsont
    Member

    I could be wrong but, I’m pretty sure because there are no “closing costs” and no “down payment” any funds from any source beyond your MRF will be used to buy down the interest rate up until the max and beyond that is principal reduction.

    #50117
    rbm2kid
    Member

    Thanks for all the suggestions. We should be able to use it for closing cost as well but for us that’s only about 2000. We started the program in 2017 and had to pay back dues when we actually decided to actively work with NACA so maybe we could ask about the grandfathered thing? @Ttrumble if your out there can you weigh in on the situation

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