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:
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 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.