Forms (13VAC10-40)

Chapter 40. Rules and Regulations for Single Family Mortgage Loans to Persons and Families of Low and Moderate Income

Part I
General

13VAC10-40-10. General.

This chapter applies to mortgage loans that are made or financed or are proposed to be made or financed by the authority to persons and families of low and moderate income for the acquisition (and, where applicable, rehabilitation), construction, refinancing, ownership, and occupancy of single family housing units.

In order to be considered eligible for a mortgage loan under the provisions of this chapter, the applicant must have a "gross income" (as determined in accordance with this chapter and the authority's origination guide) that does not exceed the applicable income limitation set forth in Part II (13VAC10-40-30 et seq.) of this chapter. Furthermore, the sales price of any single family unit to be financed hereunder must not exceed the applicable sales price limit set forth in Part II. The term "sales price," with respect to a mortgage loan for the combined acquisition and rehabilitation of a single family dwelling unit, shall include the cost of acquisition, plus the cost of rehabilitation and debt service for such period of rehabilitation, not to exceed three months, as the executive director shall determine that such dwelling unit will not be available for occupancy. In addition, each mortgage loan issued a mortgage credit certificate must satisfy all requirements of federal law applicable to mortgage credit certificates as set forth in 13VAC10-190.

Mortgage loans may be made or financed pursuant to this chapter only if and to the extent that the authority has made or expects to make funds available for such loans. The executive director is authorized with respect to any mortgage loan made or financed under the provisions of this chapter to waive or modify any provisions of this chapter where deemed appropriate by him for good cause, to the extent not inconsistent with the Virginia Housing Development Authority Act (§ 36-55.24 et seq. of the Code of Virginia).

All reviews, analyses, evaluations, inspections, determinations, and other actions by the authority pursuant to the provisions of this chapter shall be made for the sole and exclusive benefit and protection of the authority and shall not be construed to waive or modify any of the rights, benefits, privileges, duties, liabilities, or responsibilities of the authority or the mortgagor under the agreements and documents executed in connection with the mortgage loan.

The rules and regulations set forth in this chapter are intended to provide a general description of the authority's processing requirements and are not intended to include all actions involved or required in the originating and administration of mortgage loans under the authority's single family housing program. These rules and regulations may be supplemented by the authority's origination guide and other policies and rules adopted by the authority from time to time, to the extent such are not inconsistent with the provisions of this chapter.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 1.1, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 12, Issue 11, eff. February 5, 1996; Volume 19, Issue 25, eff. August 1, 2003; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-15. Definitions.

The following words and terms when used in this chapter shall have the following meanings, unless the context clearly indicates otherwise:

"Act" means the Virginia Housing Development Authority Act (§ 36-55.24 et seq. of the Code of Virginia).

"Applicant" means a person who has applied for an authority mortgage loan.

"Authority" means the Virginia Housing Development Authority.

"Borrower" means a person who has obtained an authority mortgage loan.

"Delegated lender" means an originating lender that has received approval from the authority to act in a delegated capacity to approve authority mortgage loans without prior review by the authority.

"Fannie Mae" means the Federal National Mortgage Association.

"Fannie Mae loan" means a mortgage loan made pursuant to the requirements of Fannie Mae.

"FHA" means the U.S. Federal Housing Administration.

"FHA loan" means a mortgage loan insured by FHA.

"First mortgage loan" means a mortgage loan that is in a first lien position.

"Freddie Mac" means the Federal Home Loan Mortgage Corporation.

"Freddie Mac loan" means a mortgage loan made pursuant to the requirements of Freddie Mac.

"Gross income" means the combined annualized gross income of all borrowers and nonborrower occupants taking title to a dwelling unit from whatever source derived and before taxes or withholdings.

"Median family income" has the meaning set forth in § 143(f)(4) of the Internal Revenue Code of 1986.

"Nondelegated lender" means an originating lender that has not received approval from the authority to act in a delegated capacity, such that authority mortgage loans must be submitted to the authority for approval.

"Origination guide" means the authority document prepared and revised from time to time, setting forth the accounting and other procedures to be followed by all originating lenders responsible for the origination, closing, and selling of mortgage loans under the applicable purchase agreements.

"Originating agents" means mortgage brokers, financial institutions, and other private firms and individuals and governmental entities approved by the authority for the purpose of receiving applications for mortgage loans.

"Originating lenders" means commercial banks, savings and loan associations, credit unions, private mortgage bankers, redevelopment and housing authorities, and agencies of local government approved by the authority to make mortgage loans pursuant to authority loan programs.

"Present ownership interest" means an ownership interest in a principal residence including:

1. A fee simple interest;

2. A joint tenancy, a tenancy in common, or a tenancy by the entirety;

3. The interest of a tenant shareholder in a cooperative;

4. A life estate;

5. A land contract, under which possession and the benefits and burdens of ownership are transferred although legal title is not transferred until some later time; and

6. An interest held in trust for the eligible borrower (whether or not created by the eligible borrower) that would constitute a present ownership interest if held directly by the eligible borrower.

Interests that do not include a present ownership interest include:

1. A remainder interest;

2. An ordinary lease with or without an option to purchase;

3. A mere expectancy to inherit an interest in a principal residence;

4. The interest that a purchaser of a residence acquires on the execution of an accepted offer to purchase real estate; and

5. An interest in other than a principal residence during the previous three years.

"Purchase agreement" means an agreement entered into between an originating lender and the authority containing such terms and conditions as the executive director shall require with respect to the origination and selling of mortgage loans to the authority.

"Rural Development loan" means the U.S. Department of Agriculture Rural Development mission area, and one of its agencies, the Rural Housing Service.

"Targeted areas" means those areas which are a qualified census tract or an area of chronic economic distress. A qualified census tract is a census tract in the Commonwealth in which 70% or more of the families have an income of 80% or less of the statewide median family income based on the most recent "safe harbor" statistics published by the U.S. Treasury. An area of chronic economic distress is an area designated as such by the Commonwealth and approved by the Secretaries of Housing and Urban Development and the Treasury under criteria specified in the tax code. Originating lenders will be informed by the authority as to the location of areas so designated.

"Tax code" means the Internal Revenue Code of 1986, as amended (26 USC § 1 et seq.).

"VA" means the U.S. Department of Veterans Affairs.

"VA loan" means a mortgage loan that is guaranteed by VA.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 35, Issue 14, eff. March 3, 2019.

13VAC10-40-20. Origination and servicing of mortgage loans.

A. The originating of mortgage loans and the processing of applications for the making or financing thereof in accordance with this chapter shall, except as noted in subsection L of this section, be performed through originating lenders. The servicing of mortgage loans shall be performed by the authority.

B. To be initially approved as an originating lender and to continue to be so approved, the applicant must meet the following qualifications:

1. Be authorized to do business in the Commonwealth of Virginia and be licensed as a mortgage lender or broker, as applicable, under the Virginia Mortgage Lender and Broker Act as set forth in Chapter 16 (§ 6.2-1600 et seq.) of Title 6.2 of the Code of Virginia (including nonprofit corporations that may be exempt from licensing when making mortgage loans on their own behalf under subdivision 4 of § 6.2-1602 of the Code of Virginia); provided, however, that such licensing requirement shall not apply to persons exempt from licensure under:

a. Subdivision 2 of § 6.2-1602 of the Code of Virginia (any person subject to the general supervision of or subject to examination by the Commissioner of the Bureau of Financial Institutions of the Virginia State Corporation Commission);

b. Subdivision 3 of § 6.2-1602 of the Code of Virginia (any lender authorized to engage in business as a bank, savings institution, or credit union under the laws of the United States or any state, and subsidiaries and affiliates of such entities which lender, subsidiary or affiliate is subject to the general supervision or regulation of or subject to audit or examination by a regulatory body or agency of the United States or any state); or

c. Subdivision 5 of § 6.2-1602 of the Code of Virginia (agencies of the federal government, or any state or municipal government, or any quasi-governmental agency making or brokering mortgage loans under the specific authority of the laws of any state or the United States);

2. Have a net worth equal to or in excess of requirements mandated by FHA or any other guarantor or investor, as applicable to the programs in which the originating lender participates, except that this qualification requirement shall not apply to redevelopment and housing authorities and agencies of local government;

3. Have a staff with demonstrated ability and experience in mortgage loan origination, underwriting, processing, and closing;

4. Have a physical office located in Virginia that is open to the general public during commercially reasonable business hours, staffed with individuals qualified to take mortgage loan applications, and to which the general public may physically go to make an application for a mortgage loan, unless the executive director determines that it is reasonable or necessary to waive or modify such requirement after taking into consideration current industry and market conditions;

5. Be eligible to, and have a staff qualified to (as set forth in subdivision 3 of this subsection), originate mortgage loans under all of the authority's single family mortgage loan programs (not including the Rural Development loan program), unless otherwise approved for originating lenders originating mortgage loans in underserved markets;

6. Have a fidelity bond and mortgage errors and omissions coverage in an amount at least equal to requirements mandated by FHA or any other guarantor or investor as applicable to the programs in which the originating lender participates and provide the authority a certificate from the insurance carrier naming the authority as a party in interest to the bond, or the policies or bonds shall name the authority as one of the parties insured. The policy's deductible clause must also meet the requirements mandated by FHA or any other guarantor or investor as applicable to the programs in which the originating lender participates;

7. Have a past history of satisfactory performance in the authority's and other mortgage lenders', insurers', guarantors', and investors' mortgage programs that, in the determination of the executive director, demonstrates that the applicant will be capable of meeting its obligations under the authority's programs, and provided further that, any applicant that has been previously terminated as an originating lender by the authority shall not be eligible to reapply for 24 months after the effective date of such termination; and

8. Meet such other qualifications as the executive director shall deem to be related to the performance of its duties and responsibilities.

The executive director may modify or waive any of the requirements in this subsection if he determines (i) that it is reasonable or necessary to do so after taking into consideration any mitigating factors and (ii) that the financial interests of the authority are adequately protected. In making this determination, the executive director may require such other requirements as he deems reasonable or necessary to adequately protect the financial interests of the authority.

In the event that the executive director determines that it is reasonable or necessary (after taking into consideration the number of existing originating lenders, the current and expected level of loan production and demand for mortgage loans, and the current and expected resources available to the authority to make mortgage loans) to cease approving additional originating lenders, the authority may at any time decline to accept further applications and to approve applications previously submitted.

C. Each originating lender approved by the authority shall enter into a purchase agreement with the authority.

Once the purchase agreement is executed, continued participation in the authority's programs shall be subject to the terms and conditions in the agreement.

D. Originating lenders shall maintain adequate books and records with respect to mortgage loans which they originate and sell to the authority, shall permit the authority to examine such books and records, and shall submit to the authority such reports (including annual financial statements) and information as the authority may require. The fees payable to the originating lenders for originating and selling mortgage loans shall be established from time to time by the executive director and shall be set forth in the origination guide.

E. The executive director shall allocate funds for the making or financing of mortgage loans in such manner, to such persons and entities, in such amounts, for such period, and subject to such terms and conditions as he shall deem appropriate to best accomplish the purposes and goals of the authority. Without limiting the foregoing, the executive director may allocate funds (i) to mortgage loan applicants on a first-come, first-serve or other basis, (ii) to originating lenders and state and local government agencies and instrumentalities for the origination of mortgage loans to qualified applicants, (iii) to builders for the permanent financing of residences constructed or rehabilitated or to be constructed or rehabilitated by them and to be sold to qualified applicants, or (iv) for permanent or interim construction or renovation financing of eligible properties to be sold to qualified applicants. In determining how to allocate the funds, the executive director may consider such factors as he deems relevant, including any of the following:

1. The need for the expeditious commitment and disbursement of such funds for mortgage loans;

2. The need and demand for the financing of mortgage loans with such funds in the various geographical areas of the Commonwealth;

3. The cost and difficulty of administration of the allocation of funds;

4. The capability, history, and experience of any originating lenders, state and local governmental agencies and instrumentalities, builders, or other persons and entities (other than mortgage loan applicants) who are to receive an allocation; and

5. Housing conditions in the Commonwealth.

F. In the event that the executive director shall determine to make allocations of funds to builders as described in subsection E of this section, the builder shall satisfy the requirements as the executive director shall establish with respect to builder qualifications.

G. The executive director may from time to time take such action as he may deem necessary or proper in order to solicit applications for allocation of funds. Such actions may include advertising in newspapers and other media, mailing of information to prospective applicants and other members of the public, and any other methods of public announcement that the executive director may select as appropriate under the circumstances. The executive director may impose requirements, limitations, and conditions with respect to the submission of applications as he shall consider necessary or appropriate. The executive director may cause market studies and other research and analyses to be performed in order to determine the manner and conditions under which funds of the authority are to be allocated and such other matters as he shall deem appropriate relating thereto. The authority may also consider and approve applications for allocations of funds submitted from time to time to the authority without any solicitation therefor on the part of the authority.

H. The executive director is authorized to prepare and from time to time revise an origination guide. Copies of the origination guide shall be available upon request. The executive director shall be responsible for the implementation and interpretation of the provisions of the origination guide.

I. The authority may from time to time (i) make mortgage loans directly to mortgagors with the assistance and services of its originating lenders, (ii) agree to purchase individual mortgage loans from its originating lenders upon the consummation of the closing thereof, and (iii) make mortgage loans directly to mortgagors in underserved markets. The review and processing of applications for such mortgage loans, the issuance of mortgage loan approvals, the closing and, if applicable, the purchase of such mortgage loans, and the terms and conditions relating to such mortgage loans shall be governed by and shall comply with the provisions of the purchase agreement, the origination guide, the Act, and this chapter.

J. If the applicant and the application for a mortgage loan meet the requirements of the Act and this chapter, the authority may issue a mortgage loan approval to the applicant for the financing of the single family dwelling unit. Such mortgage loan commitment shall be issued only upon the determination of the authority that such a mortgage loan is not otherwise available from private lenders upon reasonably equivalent terms and conditions, and such determination shall be set forth in the mortgage loan approval. The original principal amount and term of such mortgage loan, the amortization period, the terms and conditions relating to the prepayment thereof, and such other terms, conditions, and requirements as the executive director deems necessary or appropriate shall be set forth or incorporated in the mortgage loan approval issued on behalf of the authority with respect to such mortgage loan.

K. The executive director may, in his discretion, delegate to one or more originating lenders all or some of the responsibility for underwriting, issuing approvals for mortgage loans, and disbursing the proceeds without prior review and approval by the authority. If the executive director determines to make any such delegation, he shall establish criteria under which originating lenders may qualify for such delegation. If such delegation has been made, the originating lenders shall submit all required documentation to the authority at such time as the authority may require. If the executive director determines that a mortgage loan does not comply with any requirement under the origination guide, the applicable purchase agreement, the Act, or this chapter for which the originating lender was delegated responsibility, he may require the originating lender to purchase such mortgage loan, subject to such terms and conditions as he may prescribe.

L. The authority may utilize originating agents for the purpose of receiving applications for mortgage loans. To be approved as an originating agent, the applicant must meet the following qualifications:

1. Be authorized to do business in the Commonwealth of Virginia and be licensed as a mortgage lender or broker, as applicable, under the Virginia Mortgage Lender and Broker Act as set forth in Chapter 16 (§ 6.2-1600 et seq.) of Title 6.2 of the Code of Virginia (including nonprofit corporations that may be exempt from licensing when making mortgage loans on their own behalf under subdivision 4 of § 6.2-1602 of the Code of Virginia); provided, however that such licensing requirement shall not apply to persons exempt from licensure under:

2. Have the demonstrated ability and experience in the receipt and processing of mortgage loan applications; and

3. Have such other qualifications as the executive director shall deem to be related to the performance of its duties and responsibilities.

Each originating agent approved by the authority shall enter into such agreement as the executive director shall require with respect to the receipt of applications for mortgage loans. Originating agents shall perform the duties and responsibilities of originating lenders under this chapter as the authority may require in such agreement.

M. Originating agents shall maintain adequate books and records with respect to mortgage loans for which they accept applications, shall permit the authority to examine such books and records, and shall submit to the authority such reports and information as the authority may require. The fees to the originating agents for accepting applications shall be payable in such amount and at such time as the executive director shall determine.

N. In the case of mortgage loans for which applications are received by originating agents, the authority may process and originate the mortgage loans; accordingly, unless otherwise expressly provided, the provisions of this chapter requiring the performance of any action by originating lenders shall not be applicable to the origination and processing by the authority of such mortgage loans, and any or all of such actions may be performed by the authority on its own behalf.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 1.2, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 15, Issue 12, eff. January 28, 1999; Volume 16, Issue 19, eff. May 17, 2000; Volume 19, Issue 2, eff. September 20, 2002; Volume 24, Issue 7, eff. November 13, 2007; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

Part II
Program Requirements

13VAC10-40-30. Eligible persons and citizenship.

A. One person or multiple persons are eligible to be a borrower of a single family loan if such person or all such persons satisfy the criteria and requirements in this chapter. All references in this chapter to an applicant or borrower shall, in the case of multiple applicants or borrowers, be deemed to refer to each applicant or borrower individually, unless the provision containing such reference expressly refers to the applicants or borrowers collectively.

B. Each applicant for an authority mortgage loan must either be a United States citizen, a lawful permanent resident alien as determined by the U.S. Citizenship and Immigration Services or a nonpermanent resident alien provided the applicant has a social security number and is eligible to work in the United States. In addition, applicants must meet any stricter citizenship or residency requirements of the insurer, guarantor, or investor with respect to the applicable authority loan program.

C. Each applicant must be 18 years of age or older or have been declared emancipated by order or decree of a court having jurisdiction.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.1, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 12, Issue 11, eff. February 5, 1996; Volume 17, Issue 22, eff. June 20, 2001; Volume 19, Issue 25, eff. August 1, 2003; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-40. Compliance with certain requirements of the tax code.

A. The tax code imposes certain requirements and restrictions on the eligibility of mortgagors and residences for (i) the financing with the proceeds of tax-exempt bonds (as well as requirements and restrictions on the assumption of mortgage loans so financed); and (ii) the issuance of mortgage credit certificates.

B. The authority requires the following:

1. The mortgage revenue bond residence requirements;

2. The requirement that each applicant must not have had a present ownership interest in his principal residence within the preceding three years (the first-time homebuyer or three-year requirement); and

3. The mortgage revenue bond income requirements.

Notwithstanding the foregoing, certain authority loan programs described in 13VAC10-40-230, 13VAC10-40-250, 13VAC10-40-260, and 13VAC10-40-270 contain exceptions to the mortgage revenue bond requirements in this subsection.

C. In order to comply with these federal requirements and restrictions, as well as other authority requirements, the authority has established that certain procedures must be performed by the originating lender in order to determine such eligibility. The eligibility requirements for each borrower, the dwelling, and the procedures to be performed are described in this subsection. The originating lender will perform these procedures and evaluate each borrower's eligibility prior to the authority's approval of each loan. No loan will be approved by the authority unless all of the federal eligibility requirements are met as well as the usual requirements of the authority set forth in this chapter and the origination guide, unless the executive director determines that it is reasonable or necessary to waive or modify any such requirements and that the financial interests of the authority are adequately protected.

In addition to the three mortgage revenue bond requirements set forth in subsection B of this section, the executive director may apply some or all of the other tax-exempt bond requirements and restrictions set forth in the tax code to authority mortgage loans to enable the authority to effectively and efficiently allocate its current and anticipated financial resources so as to best meet the current and future housing needs of low and moderate income Virginians.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.2, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 19, Issue 25, eff. August 1, 2003; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-50. Eligible borrowers.

A. In order to be considered eligible for an authority mortgage loan, an applicant must, among other things, meet all of the following criteria:

1. Each applicant must not have had a present ownership interest in his principal residence within the three years preceding the date of execution of the mortgage loan documents (see subsection B of this section);

2. Each applicant must agree to occupy and use the residential property to be purchased as his permanent, principal residence within 60 days, or such longer amount of time as the executive director determines is reasonable in the case of a purchase and rehabilitation loan, after the date of the closing of the mortgage loan (see subsection C of this section);

3. Each applicant must have contracted to purchase an eligible dwelling (see 13VAC10-40-60, Eligible dwellings);

4. Each applicant must execute an affidavit of borrower (Exhibit E2) at the time of loan application; and

5. No applicant may receive income in an amount in excess of the applicable federal income limit imposed by the tax code (see 13VAC10-40-100, Maximum gross income).

B. An eligible borrower does not include any borrower who, at any time during the three years preceding the date of execution of the mortgage loan documents, had a present ownership interest in his principal residence. Each borrower must certify on the affidavit of borrower that at no time during the three years preceding the execution of the mortgage loan documents has he had a present ownership interest in his principal residence. This requirement does not apply to residences located in "targeted areas" (see 13VAC10-40-70, Targeted areas).

1. The present ownership interest limitation applies to any person who will execute the mortgage document or note and will have a present ownership interest in the eligible dwelling.

2. To verify that each eligible borrower meets the three-year requirement, the originating lender must obtain: (i) the fully executed affidavit of borrower (Exhibit E2) signed by all borrowers and nonborrower occupants taking title; (ii) a completed Uniform Residential Loan Application, Freddie Mac Form 65/Fannie Mae Form 1003 (Form 1003); and (iii) the credit report. If the originating lender is unable to confirm from the affidavit of borrower, Form 1003, or the credit report that the borrowers or nonborrower occupants taking title meet the three-year requirement, additional documentation may be required, such as three years of federal tax returns or tax transcripts, rent verification, and other reports.

If reviewing tax returns or tax transcripts, the originating lender shall examine the tax returns or tax transcripts particularly for any evidence that an eligible borrower may have claimed deductions for property taxes or for interest on indebtedness with respect to real property constituting his principal residence.

3. The originating lender must, with due diligence, verify the representations in the affidavit of borrower (Exhibit E2) regarding each eligible borrower's prior residency by reviewing any information including the Form 1003, a credit report, tax returns or tax transcripts, rent verification, and other reports for consistency and make a determination that on the basis of its review each borrower has not had present ownership interest in a principal residence at any time during the three-year period prior to the anticipated date of the loan closing.

C. Each eligible borrower must intend at the time of closing to occupy the eligible dwelling as a principal residence within 60 days (or such longer amount of time as the executive director determines is reasonable in the case of a purchase and rehabilitation loan) after the closing of the mortgage loan. Unless the residence can reasonably be expected to become the principal residence of each eligible borrower within 60 days (or such longer amount of time as the executive director determines is reasonable in the case of a purchase and rehabilitation loan) of the mortgage loan closing date, the residence will not be considered an eligible dwelling and may not be financed with a mortgage loan from the authority. Each eligible borrower must covenant to intend to occupy the eligible dwelling as a principal residence within 60 days (or such longer amount of time as the executive director determines is reasonable in the case of a purchase and rehabilitation loan) after the closing of the mortgage loan on the affidavit of borrower (to be updated at the closing of the mortgage loan) and as part of the attachment to the deed of trust.

1. A principal residence does not include any residence that can reasonably be expected to be used: (i) primarily in a trade or business, (ii) as an investment property, or (iii) as a recreational or second home. A residence may not be used in a manner that would permit any portion of the costs of the eligible dwelling to be deducted as a trade or business expense for federal income tax purposes or under circumstances where more than 15% of the total living area is to be used primarily in a trade or business.

2. The land financed by the mortgage loan may not provide, other than incidentally, a source of income to an eligible borrower. Each eligible borrower must indicate on the affidavit of borrower that, among other things:

a. No portion of the land financed by the mortgage loan provides a source of income (other than incidental income);

b. He does not intend to farm any portion (other than as a garden for personal use) of the land financed by the mortgage loan; and

c. He does not intend to subdivide the property.

3. Only such land as is reasonably necessary to maintain the basic livability of the residence may be financed by a mortgage loan. The financed land must not exceed the customary or usual lot in the area. Generally, the financed land will not be permitted to exceed two acres, even in rural areas. However, exceptions may be made to permit lots larger than two acres, but in no event in excess of five acres: (i) if the land is owned free and clear and is not being financed by the loan, the lot may be as large as five acres, (ii) if difficulty is encountered locating a well or septic field, the lot may include the additional acreage needed, (iii) local city and county ordinances that require more acreage will be taken into consideration, or (iv) if the lot size is determined by the authority, based upon objective information provided by the borrower, to be usual and customary in the area for comparably priced homes. The executive director may modify or waive such requirements if he determines that it is reasonable or necessary to do so and that the financial interests of the authority are adequately protected.

4. The affidavit of borrower (Exhibit E2) must be reviewed by the originating lender for consistency with each eligible borrower's Form 1003, credit report, tax returns or tax transcripts, rent verifications, and other reports, and the originating lender must, based on such review, make a determination that each borrower has not used any previous residence or any portion thereof primarily in any trade or business.

5. The originating lender shall establish procedures to (i) review correspondence, checks, and other documents received from each borrower during the 120-day period following the loan closing for the purpose of ascertaining that the address of the residence and the address of each borrower are the same and (ii) notify the authority if such addresses are not the same. Subject to the authority's approval, the originating lender may establish different procedures to verify compliance with this requirement.

D. Any eligible borrower may not have more than one outstanding authority first mortgage loan.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.2.1, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 12, Issue 11, eff. February 5, 1996; Volume 19, Issue 25, eff. August 1, 2003; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-60. Eligible dwellings.

In order to qualify as an eligible dwelling for which an authority loan may be made, the residence must:

1. Be located in the Commonwealth;

2. Be a single family detached residence, a single family attached residence, or one unit of a condominium meeting the requirements of the authority;

and

3. Be owned or to be owned by the applicant in the form of fee simple interest.

The authority may decline to finance more than 25% of the units in any one condominium project, planned unit development (PUD), or subdivision if the executive director determines that financing additional units would be detrimental to the authority's financial interests after taking into consideration the current and expected demand and supply of housing in the applicable geographic region.

The authority may finance a dwelling located on land owned by a community land trust, provided that (i) the first mortgage loan is secured by a leasehold estate on the property owned by the community land trust and a fee simple interest in the improvements on the property; (ii) the dwelling and the first mortgage loan meet all applicable insurer, guarantor, or investor requirements; and (iii) the term of the leasehold estate created by the ground lease must extend for at least five years beyond the maturity date of the first mortgage loan.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.2.2, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 19, Issue 25, eff. August 1, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-70. Targeted areas.

Mortgage loans for eligible dwellings located in targeted areas do not need to meet the three-year requirement described in 13VAC10-40-50 B.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.2.3, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 19, Issue 25, eff. August 1, 2003; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-80. Sales price limits.

A. The executive director shall, from time to time, establish the applicable maximum allowable sales prices. Each such maximum allowable sales price shall be expressed as a percentage of the applicable maximum purchase price permitted or approved by the U.S. Department of the Treasury pursuant to the federal tax code or as a dollar amount, which percentage or dollar amount may vary by loan program and geographic region as determined by the executive director, after taking into consideration such factors as he deems appropriate, including, without limitation, the following factors:

1. The current and anticipated financial resources available to the authority to make mortgage loans;

2. The current and anticipated financial resources available to potential applicants from sources other than the authority to finance mortgage loans;

3. The current and anticipated demand for mortgage loans;

4. The prevailing mortgage loan terms available to potential applicants; and

5. The current and anticipated need for targeted or subsidized lending in each region based upon financial conditions and the housing market in such region.

B. The executive director shall apply the factors in subsection A of this section to establish the maximum allowable sales prices that enable the authority to effectively and efficiently allocate its current and anticipated financial resources so as to best meet the current and future housing needs of the citizens throughout the Commonwealth.

The authority shall from time to time inform its originating lenders by written notification of the maximum allowable sales prices under this section expressed in dollar amounts for each area of the state, as established by the executive director. Any changes to the dollar amounts of such maximum allowable sales prices shall be effective as of such date as the executive director shall determine (subject to any exceptions for locked loans as the executive director may determine), and the executive director may implement any such changes on such date as he shall deem necessary or appropriate to best accomplish the purposes of the program.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.3, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 24, Issue 7, eff. November 13, 2007; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-90. Net worth.

To be eligible for authority financing, no applicant may have a net worth exceeding 50% of the sales price of the eligible dwelling. (The value of life insurance policies, retirement plans, furniture, and household goods shall not be included in determining net worth.) In addition, the portion of an applicant's liquid assets that are used to make the down payment and to pay closing costs, up to a maximum of 25% of the sale price, will not be included in the net worth calculation.

Any income producing assets needed as a source of income in order to meet the minimum income requirements for an authority loan will not be included in an applicant's net worth for the purpose of determining whether this net worth limitation has been violated. The executive director may modify or waive the net worth requirement if he determines that it is reasonable or necessary to do so and that the financial interests of the authority are adequately protected.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.4, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 19, Issue 25, eff. August 1, 2003; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-100. Maximum gross income.

A. As provided in 13VAC10-40-50 A 5, the gross income of an applicant for an authority mortgage loan may not exceed the applicable income limitation imposed by the U.S. Department of the Treasury. Because the income limits of the authority imposed by this section apply to all loans to which such federal limits apply and are in all cases below such federal limits, the requirements of 13VAC10-40-50 A 5 are automatically met if an applicant's gross income does not exceed the applicable limits set forth in this section.

B. Gross income is calculated by projecting gross income forward for the 12-month period beginning on the date of loan application. Typically, income such as bonuses, overtime, and commissions will be averaged for the most recent 12-month period. If information is unavailable for this period, the originating lender may average the past year and year-to-date bonuses, overtime, and commissions. This average multiplied by 12 will be added to current base salary to determine gross income. All such earnings must be included in gross income unless the employer documents that such earnings will not be continued. The following are included in gross income: base salary, overtime, part-time employment, bonuses, dividends, interest, royalties, pensions, Veterans Administration compensation, net rental income, alimony, child support, public assistance, sick pay, social security benefits, unemployment compensation, income from trusts, and income from business activities or investments.

C. The executive director shall, from time to time, establish the applicable maximum gross incomes. Each such maximum gross income shall be expressed as a percentage (which may be based on the number of persons expected to occupy the dwelling upon financing of the mortgage loan) of the applicable median family income or as a dollar amount, which percentage or dollar amount may vary by loan program and geographic region as determined by the executive director, after taking into consideration such factors as he deems appropriate, including, without limitation, the following factors:

1. The current and anticipated financial resources available to the authority to make mortgage loans;

2. The current and anticipated financial resources available to potential applicants from sources other than the authority to finance mortgage loans;

3. The current and anticipated demand for mortgage loans;

4. The prevailing mortgage loan terms available to potential applicants; and

5. The current and anticipated need for targeted or subsidized lending in each region based upon financial conditions and the housing market in such region.

D. The executive director shall apply the factors in subsection C of this section to establish the maximum gross incomes that enable the authority to effectively and efficiently allocate its current and anticipated financial resources so as to best meet the current and future housing needs of low and moderate income Virginians.

The authority shall from time to time inform its originating lenders by written notification of the maximum gross incomes under this section expressed in dollar amounts for each area of the state, as established by the executive director, and the number of persons to occupy the dwelling, if applicable. Any changes to the dollar amounts of such maximum gross incomes shall be effective as of such date as the executive director shall determine (subject to any exceptions for locked loans as the executive director may determine), and the executive director may implement any such changes on such date as he shall deem necessary or appropriate to best accomplish the purposes of the program.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.5, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 12, Issue 11, eff. February 5, 1996; Volume 14, Issue 11, eff. January 28, 1998; Volume 19, Issue 25, eff. August 1, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-110. Calculation of maximum loan amount.

A maximum of 100% or in the case of an FHA, VA, Rural Development, Fannie Mae, or Freddie Mac loan or a loan with private mortgage insurance, such other percentage as may be permitted by FHA, VA, Rural Development, Fannie Mae, Freddie Mac, or the private mortgage insurance provider of the lesser of the sales price or appraised value. However, the executive director may establish other percentages if the executive director determines that other percentages are necessary to protect the authority's financial interests or to enable the authority to effectively and efficiently allocate its current and anticipated financial resources so as to best meet the current and future housing needs of the citizens throughout the Commonwealth.

In the case of an FHA, VA, or Rural Development loan, the FHA, VA, or Rural Development insurance fees or guarantee fees charged in connection with such loan, and other costs as allowed by the applicable insurer or guarantor, may be included in the calculation of the maximum loan amount in accordance with applicable FHA, VA or Rural Development requirements. However, in no event shall this revised maximum loan amount, which includes such fees and closing costs, be permitted to exceed the authority's maximum allowable sales price limits set forth in this chapter.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.6, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 14, Issue 11, eff. January 28, 1998; Volume 17, Issue 22, eff. June 20, 2001; Volume 19, Issue 12, eff. January 24, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-120. Mortgage insurance requirements.

A. Unless the loan is an FHA, VA, or Rural Development loan, all borrowers are required to purchase at time of loan closing private mortgage insurance in such amount as required by the applicable investor or such other amount as required by the executive director. Such insurance shall be issued by a company acceptable to the authority. The originating lender is required to escrow for annual payment of mortgage insurance, unless an alternative payment plan is approved by the authority. If the authority requires FHA, VA, or Rural Development insurance or guarantee, the loan will be closed in the originating lender's name and purchased by the authority once the FHA Certificate of Insurance, VA Guaranty, or Rural Development Guarantee has been obtained. For assumptions of conventional loans (i.e., loans other than FHA, VA, or Rural Development loans), private mortgage insurance as described in this subsection is required unless waived by the authority.

B. The executive director may waive the requirements for private mortgage insurance in subsection A of this section for a loan having a principal amount in excess of 80% of the lesser of sales price or appraised value of the property to be financed if the executive director otherwise determines that the financial integrity of the program is protected by the financial strength of an applicant or the terms of the financing.

C. If the executive director determines it to be necessary to protect the authority's financial interests, the executive director may require that the company issuing such private mortgage insurance have a Moody's Investors Service Insurance Financial Strength rating not lower than Aa3 or a Standard & Poor's Ratings Services Financial Strength rating not lower than AA-.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.7, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 14, Issue 11, eff. January 28, 1998; Volume 16, Issue 19, eff. May 17, 2000; Volume 19, Issue 25, eff. August 1, 2003; Volume 20, Issue 3, eff. September 25, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-130. Underwriting.

A. In general, to be eligible for authority financing, an applicant must satisfy the following underwriting criteria, which demonstrate the willingness and ability to repay the mortgage debt and adequately maintain the financed property.

1. An applicant must document the receipt of a stable current income that indicates that the applicant will receive future income that is sufficient to enable the timely repayment of the mortgage loan as well as other existing obligations and living expenses.

2. Each applicant must possess a credit history that reflects the ability to successfully meet financial obligations and a willingness to repay obligations in accordance with established credit repayment terms.

3. Applicants with prior significant mortgage events (foreclosure, deed in lieu, or short sale) must meet the applicable insurer, guarantor, or investor requirements in addition to any additional requirements imposed by the executive director. The authority has complete discretion to decline to finance a loan when a previous foreclosure is involved.

4. The applicants must document that sufficient funds will be available for required down payment and closing costs. Sweat equity, the imputed value of services performed by an eligible borrower or members of the borrower's family (siblings, spouse, ancestors, and lineal descendants) in constructing or completing the residence, generally is not an acceptable source of funds for down payment and closing costs. Any sweat equity allowance must be approved by the authority prior to loan approval.

5. Proposed monthly housing expenses compared to current monthly housing expenses will be reviewed. If there is a substantial increase in such expenses, an applicant must demonstrate his ability to pay the additional expenses.

6. All applicants are encouraged to attend a home ownership educational program to be better prepared to deal with the home buying process and the responsibilities related to homeownership. The authority may require all applicants applying for certain authority loan programs to complete an authority approved homeownership education program prior to loan approval.

B. In addition to the requirements set forth in subsection A of this section, to be eligible for authority financing, an applicant must satisfy the specific underwriting criteria of the insurer, guarantor, or investor with respect to the applicable authority loan program. However, additional or more stringent requirements may be imposed (i) by private mortgage insurance companies with respect to those loans on which private mortgage insurance is required or (ii) by the executive director, in which cases such additional or more stringent requirements will apply.

C. The authority reserves the right to obtain an independent appraisal in order to establish the fair market value of the property and to determine whether the dwelling is eligible for the mortgage loan requested.

D. The FHA mortgage insurance premium fee, the VA funding fee, and the Rural Development guarantee fee can be included in the loan amount provided the final loan amount does not exceed the authority's maximum allowable sales price.

E. For the purposes of underwriting buy-down mortgage loans, the reduced monthly payment amount may be taken into account based on the applicable insurer, guarantor, or investor guidelines then in effect.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.8, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 14, Issue 11, eff. January 28, 1998; Volume 15, Issue 12, eff. January 28, 1999; Volume 17, Issue 22, eff. June 20, 2001; Volume 19, Issue 25, eff. August 1, 2003; Volume 20, Issue 3, eff. September 25, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-140. Loan assumptions.

A. The authority may from time to time, in its discretion, permit assumptions of all or some of its single family mortgage loans, subject to satisfaction of (i) the requirements of the insurer, guarantor, or investor with respect to the applicable authority loan program and (ii) the requirements of the tax code if the mortgage loan was funded with the proceeds of tax-exempt bonds; provided, however, that assumptions shall be permitted when required by the mortgage insurer, guarantor, or investor rules or applicable law.

B. If the authority permits an assumption, the authority will determine whether or not the applicable requirements in subsection A of this section for assumption of the loan have been met and will advise the originating lender of such determination in writing. The authority will further advise the originating lender of all other requirements necessary to complete the assumption process. Such requirements may include the submission of satisfactory evidence of hazard insurance coverage on the property, approval of the deed of assumption, satisfactory evidence of mortgage insurance or mortgage guaranty, submission of an escrow transfer letter, and execution of the programs disclosure and borrower affidavit (Exhibit E2) containing a recapture tax notice.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.9, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 12, Issue 11, eff. February 5, 1996; Volume 14, Issue 11, eff. January 28, 1998; Volume 19, Issue 25, eff. August 1, 2003; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-150. Loan term and owner occupancy.

A. No loan terms may exceed 30 years.

B. No loan will be made unless the residence is to be occupied by the owner as the owner's principal residence.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.10, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-160. Loan lock-in and fees.

A. Authority loans may be locked-in by originating lenders for specific borrowers and properties. The interest rate is locked-in after loan application and after the originating lender has determined that the borrower meets the eligibility requirements and guidelines for the loan program. No substitutions of borrower, property, or originating lender are permitted. A change in loan program may require the loan to be relocked-in at different terms.

B. Loans may be locked-in at an interest rate for different periods of time. The loan must close by the lock-in expiration date.

C. The originating lender may request extensions to the rate lock-in period, up to a maximum period of time. Lock-in extension requests must be submitted on or before the lock-in expiration date. Each extension may be subject to a fee. This cost will be deducted from the net price of the loan. Extensions will not be processed on expired lock-ins.

Unless otherwise stated in specific program guidelines, the originating lender may not earn compensation in excess of such amount set forth in the origination guide, including any points charged and the service release premium, on each loan. Any excess compensation must be applied as a lender credit to the borrower. In addition, the originating lender may collect fees for reimbursement of costs incurred, such as credit reports, appraisals, tax service fees, or flood certification fees, as applicable.

E. Unless otherwise stated in specific program guidelines, a service release premium will be paid to the originating lender by the authority at the time of purchase in such amount set forth in the origination guide. The premium will be for both first and second mortgages if applicable. This will be included in the net price of the loan when purchased by the authority.

F. For all loan programs, originating lenders are allowed to collect customary miscellaneous fees (i.e., underwriting, document review fees) that have been properly disclosed to the applicant at the time of loan application.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.11, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 15, Issue 12, eff. January 28, 1999; Volume 16, Issue 19, eff. May 17, 2000; Volume 19, Issue 25, eff. August 1, 2003; Volume 20, Issue 3, eff. September 25, 2003; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-170. Loan decision.

A. Nondelegated lenders or delegated lenders submitting loans for programs that are not eligible for the delegated process will submit loans to the authority for approval. Upon approval of an applicant, the authority will send a loan approval to the originating lender. If a loan is denied, the authority will send a notification to the originating lender.

B. Delegated lenders will approve the loan without prior review by the authority.

C. For mortgage loans to be made by the authority directly to borrowers in underserved markets, the authority will issue the loan approval or loan denial directly to the loan applicant.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.12, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 16, Issue 19, eff. May 17, 2000; Volume 19, Issue 25, eff. August 1, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 25, Issue 21, eff. June 5, 2009; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-180. Buy-down mortgage loans.

The authority may permit buy-down mortgage loan options. Such buy-down mortgage loan options must meet all applicable insurer, guarantor, or investor requirements.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.13, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-190. Property guidelines.

For each application the authority must make the determination that the property will constitute adequate security for the loan. That determination may be based in whole or in part upon a real estate appraisal's determination of the value and condition of the property, unless an appraisal is not required based upon the applicable insurer, guarantor, or investor program requirements. Such appraisal must be performed by an appraiser licensed in the Commonwealth of Virginia.

When the residence is located in an area experiencing a decline in property values as determined by the appraiser or the executive director based upon objective quantitative data, the executive director may establish additional requirements, including lower loan to value ratios, for such loan as determined necessary by the executive director to protect the financial interests of the authority.

All properties must be structurally sound and in adequate condition to preserve the continued marketability of the property and to protect the health and safety of the occupants. Eligible properties must possess features that are acceptable to typical purchasers in the subject market area and provide adequate amenities. Eligible properties must meet the property guidelines of the applicable insurer, guarantor, or investor.

In addition, manufactured housing, both new construction and certain existing, may be financed only if the loan meets the requirements of the applicable insurer, guarantor, or investor. Manufactured housing must also meet federal manufactured home construction and safety standards administered by the U.S. Department of Housing and Urban Development; be permanently attached to the land and anchored per manufacturer specifications or state and local building codes; and have the wheels, axles, and trailer hitches removed. In addition, the property must be assessed and taxed as real estate, and there must be evidence that the title has been surrendered to DMV and all personal property liens released. The authority may also impose other property requirements and offer other financing terms for manufactured housing, provided that the executive director determines that such property requirements and financing terms adequately protect the financial integrity of the program.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.14, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 12, Issue 11, eff. February 5, 1996; Volume 14, Issue 11, eff. January 28, 1998; Volume 17, Issue 22, eff. June 20, 2001; Volume 19, Issue 25, eff. August 1, 2003; Volume 20, Issue 3, eff. September 25, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-200. (Repealed.)

Historical Notes

Derived from VR400-02-0003 § 2.15, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 19, Issue 25, eff. August 1, 2003; repealed, Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-210. Condominium requirements.

A. For conventional loans, the originating lender must provide evidence that the condominium meets the eligibility requirements of either Fannie Mae or Freddie Mac, as determined by the loan program. The originating lender must submit evidence of eligibility to the authority.

B. For FHA, VA, or Rural Development loans, the authority will accept a loan to finance a condominium if the condominium is approved by FHA, in the case of an FHA loan; by VA, in the case of a VA loan; or by Rural Development, in the case of a Rural Development loan.

C. The executive director may impose additional condominium requirements if necessary to protect the financial interests of the authority. The executive director may waive any requirements in subsections A and B of this section if he determines that any additional risk as a result of such waiver is adequately compensated or otherwise covered by the terms of the mortgage loan or the financial strength or credit of the applicant.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.16, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 14, Issue 11, eff. January 28, 1998; Volume 15, Issue 12, eff. January 28, 1999; Volume 19, Issue 25, eff. August 1, 2003; Volume 20, Issue 3, eff. September 25, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-220. Subordinate financing program.

A. The authority may make loans secured by second deed of trust liens (second mortgage loans) to provide down payment and closing cost assistance to eligible borrowers who are obtaining authority loans secured by first deed of trust liens (first mortgage loans). Such first mortgage loans must be financed by the authority; provided that the authority may, in its discretion, permit such first deeds of trust to be financed by other lenders, subject to such terms and conditions as the executive director shall determine to be necessary to protect the financial integrity of the subordinate financing program. Second mortgage loans shall not be available to a borrower if the authority loan is being made under a buy-down program.

B. The second mortgage loans shall not be insured by mortgage insurance; accordingly, the requirements of 13VAC10-40-120 regarding mortgage insurance shall not be applicable to the second mortgage loan.

C. The requirements of 13VAC10-40-110 regarding calculation of maximum loan amount shall not be applicable to the second mortgage loan. The principal amount of the second mortgage loan shall not exceed the amount of the down payment plus closing costs, or such lesser amount as may be set forth in specific program guidelines.

In no event shall the combined first mortgage loan and the second mortgage loan and all other liens exceed (i) the amount allowed by the guidelines of the applicable insurer, guarantor, or investor or (ii) the sum of the lesser of the sales price or appraised value plus closing costs and fees to be paid by a borrower.

Verified liquid funds may be required to be (i) contributed by the borrower toward the down payment; (ii) contributed by the borrower toward closing costs or prepaid items; or (iii) retained by the borrower as cash reserves after closing. The first mortgage loan when combined with the second mortgage loan and any other liens may not result in cash back to the borrower.

D. If the authority is not making the first mortgage loan, the authority may require that, as a condition of financing the second mortgage loan, the first mortgage loan meet the authority's requirements applicable to that first mortgage loan program. With respect to underwriting, more stringent requirements or criteria than those applicable to the first mortgage loan may be imposed on the second mortgage loan if the executive director determines such more stringent requirements or criteria are necessary to protect the financial integrity of the subordinate financing program.

E. The second mortgage loan may be assumable on the same terms and conditions as the first mortgage loan.

F. The authority may charge a higher interest rate on a first mortgage loan that is accompanied by a subordinate financing program second mortgage loan in order to protect the authority's interests and the financial integrity of the subordinate financing program.

G. The same loan decision procedures described in 13VAC10-40-170 will be used for the subordinate financing.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from VR400-02-0003 § 2.17, eff. July 16, 1985; amended, Virginia Register Volume 2, Issue 3, eff. October 15, 1985; Volume 2, Issue 10, eff. January 21, 1986; Volume 2, Issue 18, eff. May 20, 1986; Volume 3, Issue 3, eff. December 10, 1986; Volume 3, Issue 23, eff. August 10, 1987; Volume 4, Issue 14, eff. March 16, 1988; Volume 5, Issue 3, eff. October 19, 1988; Volume 5, Issue 12, eff. March 1, 1989; Volume 5, Issue 21, eff. July 1, 1989; Volume 6, Issue 10, eff. January 16, 1990; Volume 7, Issue 10, eff. January 16, 1991; Volume 7, Issue 23, eff. July 18, 1991; Volume 8, Issue 6, eff. December 1, 1991; Volume 8, Issue 17, eff. April 23, 1992; Volume 9, Issue 20, eff. July 1, 1993; Volume 10, Issue 15, eff. March 16, 1994; Volume 10, Issue 21, eff. June 21, 1994; Volume 11, Issue 19, eff. June 1, 1995; Volume 15, Issue 12, eff. January 28, 1999; Volume 19, Issue 12, eff. January 24, 2003; Volume 19, Issue 25, eff. August 1, 2003; Volume 25, Issue 21, eff. June 5, 2009; Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-230. Mortgage loan programs funded by taxable bonds.

The executive director may establish mortgage loan programs funded by taxable bonds or other resources. 13VAC10-40-10 through 13VAC10-40-220 shall apply to such mortgage loan programs, with the following modifications:

1. The following requirements shall not apply: (i) the requirement as to maximum allowable sales price of the property to be financed; (ii) the requirement that each applicant shall not have had a present ownership interest in his principal residence within the preceding three years (the first-time homebuyer or three-year requirement); (iii) the net worth requirement; and (iv) the lot size restriction in 13VAC10-40-50 C 3.

2. The gross income of the applicants shall not exceed 120% of the applicable median family income without regard to household size, provided, however, that the authority may increase such percentage of applicable median family income, not to exceed 150%, if the executive director determines that it is necessary to provide financing in underserved areas identified by the executive director to persons with disabilities (i.e., physically or mentally disabled, as determined by the executive director on the basis of medical evidence from a licensed physician or other appropriate evidence satisfactory to the executive director), to applicants with a household size of two or more persons, or other similarly underserved individuals identified by the executive director.

3. At the time of closing, each applicant must occupy or intend to occupy within 60 days (or such longer amount of time as the executive director determines is reasonable in the case of new construction) the property to be financed as his principal residence.

4. The property to be financed must be one of the following types: (i) a single family residence (attached or detached); (ii) a unit in a condominium or PUD that is approved for financing by Fannie Mae or Freddie Mac or satisfies the requirements for such financing, except that the executive director may waive any of such requirements if he determines that any additional risk as a result of such waiver is adequately compensated or otherwise covered by the terms of the mortgage loan or the financial strength or credit of the applicants; or (iii) a doublewide manufactured home permanently affixed to the land.

5. The land, residence, and all other improvements on the property to be financed must be expected to be used by the borrowers primarily for residential purposes.

6. Mortgage insurance shall not be required, unless the executive director determines that it is reasonable or necessary to protect the financial interests of the authority.

7. The documents relating to requirements of the federal tax code governing tax-exempt bonds shall not be required.

8. For assumptions of loans, the requirements for (i) occupancy of the property as the borrower's principal residence and (ii) the income limit in this section must be satisfied.

9. The authority may accept an approval of an automated underwriting system if the executive director determines that such delegated underwriting system is designed so as to adequately protect the financial integrity of the loan programs funded by taxable bonds.

Except as modified in this section, all requirements, terms, and conditions set forth in 13VAC10-40-10 through 13VAC10-40-220 shall apply to the mortgage loan programs established pursuant to this section.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 11, eff. January 28, 1998; amended, Virginia Register Volume 15, Issue 4, eff. October 21, 1998; Volume 15, Issue 12, eff. January 28, 1999; Volume 16, Issue 19, eff. May 17, 2000; Volume 17, Issue 22, eff. June 20, 2001; Volume 19, Issue 12, eff. January 24, 2003; Volume 19, Issue 25, eff. August 1, 2003; Volume 20, Issue 3, eff. September 25, 2003; Volume 24, Issue 7, eff. November 13, 2007; Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-240. Down payment and closing cost assistance grants.

The authority may make or finance down payment or closing cost assistance grants in connection with authority first mortgage loans. Such grants must meet the applicable insurer, guarantor, or investor requirements applicable to the first mortgage loan in addition to any additional requirements imposed by the executive director. Any such grants made or financed by the authority are not loans and no repayment shall be required. The executive director may establish lower maximum income limits in connection with such grants that enable the authority to effectively and efficiently allocate its current and anticipated financial resources so as to best meet the current and future housing needs of low and moderate income Virginians.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-250. Government-sponsored enterprises programs.

A. The authority may make or finance mortgage loans pursuant to the requirements of Fannie Mae or Freddie Mac and may securitize and sell such mortgage loans to Fannie Mae or Freddie Mac, as applicable.

B. The following requirements shall not apply to government-sponsored enterprises programs: (i) the requirement that each applicant must not have had a present ownership interest in his principal residence within the preceding three years (the first-time homebuyer or three-year requirement); (ii) the maximum allowable sales prices in 13VAC10-40-80; and (iii) the net worth requirements in 13VAC10-40-90.

C. For the purposes of 13VAC10-40-100, gross income of applicants for Fannie Mae or Freddie Mac loans shall be determined in accordance with the requirements of Fannie Mae or Freddie Mac, as applicable.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-260. FHA, VA, or Rural Development streamline refinance program.

A. The authority may make or finance streamline refinance loans that refinance existing authority FHA, VA, and Rural Development loans pursuant to the requirements of FHA for streamline refinances, the requirements of the VA for interest rate reduction refinance loans, and the requirements of Rural Development for streamlined refinances, as applicable.

B. The following requirements shall not apply to streamline refinance programs: (i) the requirement that each applicant must not have had a present ownership interest in his principal residence within the preceding three years (the first-time homebuyer or three-year requirement); (ii) the maximum allowable sales prices in 13VAC10-40-80; (iii) the net worth requirements in 13VAC10-40-90; and (iv) the underwriting requirement regarding income verification set forth in 13VAC10-40-130 A 1.

C. The income limits for applicants for FHA, VA, or Rural Development streamline refinances shall in no event exceed 150% of the greater of the applicable area or statewide median family income.

D. The condominium approval requirement in 13VAC10-40-210 A is modified so that withdrawn FHA, VA, Fannie Mae, or Freddie Mac condominium approvals are acceptable.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-270. Real estate owned condo program.

A. The authority may make or finance mortgage loans on authority real estate owned (REO) condominiums pursuant to the loan program provisions set forth in 13VAC10-40-230 (mortgage loan programs funded by taxable bonds), except as altered by the provisions of this section.

B. The new mortgage requirement shall apply to REO condo loans (refinances are not permitted under this program).

C. For purposes of subdivision 2 of 13VAC10-40-230, the income limits for applicants for REO condo loans shall be (i) for applicants with a household size of one person, 120% of the greater of the applicable area or statewide median family income and (ii) for applicants with a household size of two or more persons, 150% of the greater of the applicable area or statewide median family income.

D. The requirement in subdivision 4 of 13VAC10-40-230 that a condominium unit must be approved by Fannie Mae or Freddie Mac or satisfy the requirements for their financing shall not apply.

E. The maximum loan amount for REO condo loans shall be 97% of the lesser of the sales price or appraised value.

F. The minimum credit score shall be 660 for all applicants, regardless of loan-to-value ratios.

G. The maximum debt ratios for REO condo loans shall be 35% and 45%.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

13VAC10-40-280. Reduced rate financing.

The authority may make or finance mortgage loans with an allocation of reduced rate funding to local governments, nonprofits, and housing industry partners to support special housing needs. Such reduced rate funding must meet the applicable insurer, guarantor, or investor requirements applicable to the first mortgage loan in addition to any additional requirements imposed by the executive director.

Statutory Authority

§ 36-55.30:3 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 35, Issue 14, eff. March 4, 2019.

Forms (13VAC10-40)

Uniform Residential Loan Application, Freddie Mac Form 65 /Fannie Mae Form 1003 (rev. 6/2009)

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