House Key Opportunity Manual

HOUSE KEY MANUAL

Updated 07/31/2024

     
 
 
 
HOUSE KEY MANUAL                                                                                 i 
TABLE OF CONTENTS 
Click below to jump to a section or page. To search for specific terms, press CTRL+F. 
1 - INTRODUCTION................................................................................................................................ 1 
Washington State Housing Finance Commission ............................................................................. 1 
Introduction to Mortgage Revenue Bonds ......................................................................................... 1 
Benefits of the House Key State Bond Program ................................................................................ 2 
Purpose and Scope ............................................................................................................................... 2 
Process Overview ................................................................................................................................. 2 
Manual Updates & Revisions .............................................................................................................. 3 
Contacts for Questions ........................................................................................................................ 4 
Eligible Lenders ................................................................................................................................... 6 
Eligible Loan Originators .................................................................................................................... 6 
2 - TERMS AND CONDITIONS ............................................................................................................. 7 
Loan Types ........................................................................................................................................... 7 
Loan Amounts ...................................................................................................................................... 8 
Loan Underwriting .............................................................................................................................. 8 
Loan Term ............................................................................................................................................ 9 
New Financing ..................................................................................................................................... 9 
Total Debt to Income (DTI) Ratio ...................................................................................................... 9 
Credit Score ........................................................................................................................................ 10 
Verifications of Income ..................................................................................................................... 10 
IRS Form 4506-C ............................................................................................................................... 10 
Tax Returns ........................................................................................................................................ 10 
Credit Report ....................................................................................................................................... 11 
Tax Transcripts ................................................................................................................................... 11 
Payoff of Interim Financing ............................................................................................................... 11 
Interest Rate ........................................................................................................................................ 11 
Buydowns (Temporary) ...................................................................................................................... 11 
Buydowns (Permanent) ..................................................................................................................... 12 
Property Flipping ............................................................................................................................... 12 
Homebuyer Education ...................................................................................................................... 12 
Allowable Fees.................................................................................................................................... 12 

     
 
 
 
HOUSE KEY MANUAL                                                                                 ii 
Non Allowable Fees ........................................................................................................................... 13 
Mortgage Insurance ........................................................................................................................... 13 
Title Insurance ................................................................................................................................... 14 
Flood Insurance Policy ...................................................................................................................... 14 
Hazard Insurance Policy ................................................................................................................... 14 
Power of Attorney .............................................................................................................................. 15 
Escrow Holdbacks/Repair Escrow ................................................................................................... 15 
Interest Credits .................................................................................................................................. 16 
Reserve/Escrow Accounts ................................................................................................................. 16 
Prepayment Penalty ........................................................................................................................... 16 
Assumptions ....................................................................................................................................... 16 
Subordinate Financing ...................................................................................................................... 16 
Servicing ............................................................................................................................................. 17 
Quality Control ................................................................................................................................... 17 
Qualified Mortgage (QM) and Ability to Repay ............................................................................... 17 
Repeat Program Users ....................................................................................................................... 17 
3 - ELIGIBLE BORROWERS ................................................................................................................ 19 
Non Discrimination ........................................................................................................................... 19 
Eligible Applicants ............................................................................................................................. 19 
IRS Tax Code Compliance ................................................................................................................. 19 
Residency Type Requirements.......................................................................................................... 19 
Occupancy Requirement ................................................................................................................... 22 
First-Time Homebuyer Requirement ............................................................................................... 22 
Definition of Household Size ............................................................................................................ 22 
Calculation of Income ........................................................................................................................ 23 
Current Period ................................................................................................................................... 24 
Documentation of Income................................................................................................................. 24 
Maximum Total Annual Income ....................................................................................................... 24 
Examples of Income to Include or Not to Include........................................................................... 25 
Borrower/Co-Borrower .....................................................................................................................28 
Co-Signer/Guarantor.........................................................................................................................28 
Married Individual Taking Title in Separate Estate ........................................................................ 29 
4 - PROPERTY REQUIREMENTS .......................................................................................................30 

     
 
 
 
HOUSE KEY MANUAL                                                                                 iii 
In General ...........................................................................................................................................30 
Qualifying Single-Family Residences ...............................................................................................30 
Non-Qualifying Residences ...............................................................................................................30 
Manufactured Homes ........................................................................................................................ 31 
Eligible Land ...................................................................................................................................... 31 
Acquisition Costs ............................................................................................................................... 31 
New Construction .............................................................................................................................. 32 
Business Use of Home Restrictions .................................................................................................. 32 
Foster Care in Home .......................................................................................................................... 32 
Appraisals ........................................................................................................................................... 32 
Property/Home Inspections ............................................................................................................. 33 
Maximum Acquisition Cost ............................................................................................................... 33 
Target Areas ....................................................................................................................................... 34 
5 - RECAPTURE TAX ............................................................................................................................ 36 
Background ........................................................................................................................................ 36 
Application of Tax .............................................................................................................................. 36 
Refinancing ........................................................................................................................................ 36 
Borrower’s Responsibility ................................................................................................................. 37 
Lender’s Responsibility ..................................................................................................................... 37 
Commission’s Responsibility ............................................................................................................ 37 
6 - HOMEBUYER EDUCATION ..........................................................................................................38 
Policy ..................................................................................................................................................38 
Seminar Instructors ...........................................................................................................................38 
Instructors Who No Longer Work for a Participating Lender ....................................................... 39 
Seminar Format ................................................................................................................................. 39 
Seminar Curriculum ......................................................................................................................... 40 
Interpreters ....................................................................................................................................... 40 
Seminar Workbooks ......................................................................................................................... 40 
Commission Provided Materials ....................................................................................................... 41 
Seminar Arrangements ..................................................................................................................... 41 
Publicity .............................................................................................................................................. 42 
Online Course Homebuyer Education Policy .................................................................................. 42 
Disciplinary Action ............................................................................................................................ 43 

     
 
 
 
HOUSE KEY MANUAL                                                                                 iv 
Seminar Checklist .............................................................................................................................. 44 
7 - RESERVATION PROCESS .............................................................................................................. 46 
In General ........................................................................................................................................... 46 
Making a Reservation ........................................................................................................................ 46 
Length of a Reservation ..................................................................................................................... 46 
Extensions to Reservations ............................................................................................................... 46 
Changes to a Reservation .................................................................................................................. 47 
Expired Reservations .........................................................................................................................48 
Cancelled Reservations......................................................................................................................48 
Reservation Transfer .........................................................................................................................48 
Waiting List ........................................................................................................................................ 49 
Status of Loans ................................................................................................................................... 49 
On-Line Reservation System ............................................................................................................ 49 
8 - LOAN ORIGINATION & PROCESSING ........................................................................................ 52 
Documents Borrower Submits for a House Key Opportunity Loan ............................................... 52 
Processing a House Key Loan ........................................................................................................... 52 
Documents Prepared During Origination/Processing .................................................................... 55 
9 - PRE-CLOSING COMPLIANCE REVIEW & APPROVAL .............................................................. 56 
Purpose of Pre-Closing Compliance Review .................................................................................... 56 
Submission of Loan File .................................................................................................................... 56 
Where to Submit Files ....................................................................................................................... 56 
Review Procedure .............................................................................................................................. 56 
Checking Mortgage Loan Status ....................................................................................................... 57 
10 - LOAN CLOSING ............................................................................................................................. 58 
Compliance Approval ........................................................................................................................ 58 
Closing Documents ............................................................................................................................ 58 
Closing Documents (Commission Second Mortgages) ................................................................... 61 
Rate Lock Extension Fees ................................................................................................................. 62 
11 - POST CLOSING COMPLIANCE REVIEW & APPROVAL ........................................................... 63 
Submission of Mortgage Loan File ................................................................................................... 63 
Items Needed at Post Closing Compliance ...................................................................................... 63 
Where to Submit Files ....................................................................................................................... 64 
Review Procedure .............................................................................................................................. 64 

     
 
 
 
HOUSE KEY MANUAL                                                                                 v 
Checking Mortgage Loan Status ....................................................................................................... 64 
12 - LOAN PURCHASE & DELIVERY.................................................................................................. 65 
In General ........................................................................................................................................... 65 
Amortized Loan Balance ................................................................................................................... 65 
Timing and Delivery of Closed Loans ............................................................................................... 65 
Penalties Withheld From Funding ................................................................................................... 66 
Loan Package Delivery ...................................................................................................................... 66 
Wire/ACH Transfer Instructions ...................................................................................................... 66 
Loan Purchase Schedule/Funding.................................................................................................... 67 
Purchase Prices (Lender SRP) .......................................................................................................... 67 
Loan Suspensions (Curatives) .......................................................................................................... 67 
First Payment/Notice of Assignment ...............................................................................................68 
Hazard Insurance Premium ..............................................................................................................68 
Flood Insurance .................................................................................................................................68 
FHA Monthly Insurance Premiums .................................................................................................68 
Conventional Mortgage Insurance Premiums ................................................................................. 69 
Post-Closing Details of Origination Charges:  Items Payable in Connection with Loan .............. 69 
Final Documents ................................................................................................................................ 69 
Common Exceptions that Delay Purchase ....................................................................................... 69 
13 - DOWNPAYMENT PROGRAMS .................................................................................................... 71 
Downpayment Assistance Programs ................................................................................................ 71 
Program Description ......................................................................................................................... 71 
Maximum Income Limit, Loan Amount & Mortgage Details ......................................................... 71 
Program Eligibility ............................................................................................................................. 72 
Combined Loan to Value (CLTV) and Total Loan to Value (TLTV) ............................................... 72 
Reserves .............................................................................................................................................. 72 
Buydowns ........................................................................................................................................... 72 
Reservations ....................................................................................................................................... 73 
Income Calculation ............................................................................................................................ 73 
Calculating Downpayment Assistance Loan Amount ..................................................................... 74 
Needs Assessment Form ................................................................................................................... 74 
Cash Back ........................................................................................................................................... 75 
Closing and Delivering the Loan ....................................................................................................... 76 

     
 
 
 
HOUSE KEY MANUAL                                                                                 vi 
HUD Commitment Letter for FHA Loans........................................................................................ 77 
FHA Insurance Award Letter ............................................................................................................ 77 
Insurance Requirements ................................................................................................................... 77 
Payment Statement............................................................................................................................ 78 
Payoff of Second Mortgage ................................................................................................................ 78 
TRID Guidance .................................................................................................................................. 78 
OPPORTUNITY DOWNPAYMENT ASSISTANCE ............................................................................. 79 
Program Eligibility ............................................................................................................................. 79 
Mortgage Details ................................................................................................................................ 79 
Maximum Income Limit ................................................................................................................... 79 
Income Calculation ........................................................................................................................... 80 
14 - SPECIAL PROGRAMS ................................................................................................................... 81 
15 - FORMS ............................................................................................................................................82 
House Key Opportunity Program Forms .........................................................................................82 
18 - APPENDICES .................................................................................................................................84 
APPENDIX III ....................................................................................................................................84 
Fannie Mae HFA Preferred Product-9/5/2019 ...............................................................................84 
Freddie Mac HFA Advantage Product-12/05/2022 ........................................................................ 85 
APPENDIX IV .................................................................................................................................... 87 
 

HOUSE KEY MANUAL 1

1 - INTRODUCTION

Edited 03/01/2018

Washington State Housing Finance Commission

The Washington State Housing Finance Commission (Commission), established in 1983, is a

publicly accountable, self-supporting team dedicated to increasing housing access and

affordability and to expanding the availability of quality community services for the people of

Washington.

At the Commission, we feel good about what we do. We stabilize families; we ensure that the

elderly maintain their dignity; we finance opportunities for people with disabilities; we provide

affordable housing and facilities for community and we foster economic development – all at no

cost to the citizens of Washington. As a self-supporting agency, everything we do at the

Commission is without taxpayer money.

The Commission provides opportunities for homeownership utilizing proceeds from the sale of

Mortgage Revenue Bonds to purchase eligible below market interest rate mortgage loans,

through a statewide network of participating lenders.

The Commission performs program administration tasks, including tax requirement reviews

and has contracted with Idaho Housing and Finance Association (IHFA) to serve in the capacity

of Master Servicer.

Introduction to Mortgage Revenue Bonds

The Commission’s first mortgage “state bond” product is called the House Key Opportunity

Program (Program) and it is subject to regulation by the Internal Revenue Service Code (“the

IRS Code”). Operating procedures for the House Key Opportunity program and all

downpayment assistance programs can be found on our Website at http://www.wshfc.org.

When tax-exempt mortgage revenue bonds are used to finance below market interest rate

mortgage loans, certain criteria is required to retain the bonds’ tax-exempt status, including:

• Acquisition Cost Limits

• Income Limits

• First-time homebuyer requirements

• Owner occupancy requirements

HOUSE KEY MANUAL 2

Benefits of the House Key State Bond Program

The House Key State Bond program is designed for low and moderate-income households who

are first time homebuyers unless purchasing in a Targeted area. Advantages to Borrowers

include:

• Program advantages for Borrower:

– Qualifies for a larger mortgage.

– Flexible underwriting criteria.

– Manufactured homes available.

– Upfront Mortgage Insurance program available.

• Program advantages for Loan Originator:

– Builds customer loyalty.

– Stops the rate shoppers.

– Promotes community awareness and involvement.

• Downpayment assistance programs for downpayment and closing costs:

– Wraps closing costs into the loan.

– Combines with other community downpayment assistance programs.

– Allows higher Combined Loan-to-Value.

– Serves special populations (i.e., people with disabilities & rural).

Purpose and Scope

This Program Manual establishes the operating procedures for Mortgage Lenders and provides

detailed instructions for the performance of the written agreements between the Commission

and the Mortgage Lenders.

Process Overview

House Key Opportunity State Bond Loans are underwritten by Mortgage Lenders according to

the first mortgage product guidelines. Neither the Commission nor our Master Servicer re-

underwrites the loan for credit or property. The Mortgage Lender will also submit a Pre-Closing

Compliance Package to the Commission for approval prior to Loan Closing.

After the loan closes, the Mortgage Lender sends the purchase file to IHFA and a Post-Closing

File to the Commission for approval to purchase. Once all suspension conditions are cleared

and files are complete, IHFA purchases the loans and funds are sent to the Lender via wire

transfer.

HOUSE KEY MANUAL 3

House Key State Bond Loans:

From Origination to Closing to Purchasing by MASTER SERVICER

Manual Updates & Revisions

Lender Pre-Qualifies Home Buyer Per First

Mortgage Underwriting Guidelines and House

Key Compliance Guidelines.

Lender Reserves Funds On-Line at

https://lenders.wshfc.org/Bin/Display.exe/ShowSection after

Executed Purchase & Sale Agreement within lock period.

Lender Delivers Pre-Closing Compliance File to the

Commission for Review (Use Form 15.13) of 1) Income, 2)

Acquisition Cost, and 3) First-Time Buyer Status (non-

targeted areas).

Lender Approves Loan in Accordance

with First Mortgage Underwriting

Guidelines.

LOAN PURCHASED BY IHFA.

FUNDS SENT TO LENDER

VIA WIRE TRANSFER.

START

Lender Delivers Closed Purchase File to IHFA for

Reimbursement.

(Use IHFA Lender Delivery Checklist)

Loan Approved to Purchase by IHFA. Loan Purchase

Suspensions will be sent to the Mortgage Lenders.

Lender upload conditions to IHFA at

www.lenderwa.com

The Commission Issues Compliance

Approval in Accordance with

Guidelines.

Borrower Attends Homebuyer

Education Seminar Sponsored

by the Commission.

Lender Processes, Underwrites & Approves

Loan in Accordance with First Mortgage

Guidelines and applicable overlays.

Lender Delivers Post-Closing Compliance

File to the Commission.

(Use Form 15.21)

The Commission Approves Loan to Purchase.

Suspension Conditions Posted to Emphasys.

Lender Electronic upload Conditions to

Emphasys

Lender Closes and Funds Loans With

Minimum Contributions in Accordance with

First Mortgage Within Lock Period.

HOUSE KEY MANUAL 4

Revisions of, or supplements to, this Program Manual may be made from time to time. The

Commission will provide Mortgage Lenders with revised or additional pages along with

instructions for insertion into this Program Manual. Information contained in the House Key

Manual is subject to change. All program updates will be posted on the Commission’s Website.

It is the Mortgage Lender’s responsibility to monitor the Website on an ongoing basis for

current information.

Contacts for Questions

Commission Homeownership Division

04/04/2022

Toll Free: 1-800-767-4663

www.heretohome.org

Fax: 206-587-5113

homedocs@wshfc.org

Lisa DeBrock

Director

206-287-4461

Lisa.DeBrock@wshfc.org

Corinna Obar

Manager

206-287-4414

Corinna.O[email protected]

Dietrich Schmitz

DPA Program Administrator

206-287-4459

Dietrich.Sch[email protected]

Krystina Gillen

Program Compliance

Administrator

206-254-5358

Krystina.Gillen@wshfc.org

Christian Hayes

Program Compliance

Administrator

206-254-5360

Christian.Hayes@wshfc.org

Jenni Davidson

Program Compliance

Administrator

206-254-5377

Jenni.Da[email protected]

Robin Denning

Program Compliance

Administrator

206-254-5365

Robin.Denn[email protected]

Martina Maleski

Program Compliance

Administrator

206-287-4431

Martina.Males[email protected]

Joe Jen

Program Compliance

Administrator

206-287-4468

Joe.Jen@wshfc.org

Sarah Bruington

Program Compliance

Administrator

206-287-4446

Sarah.bruington@wshfc.org

Makena Ogata

Program Compliance

Administrator

206-287-4413

Makena.Og[email protected]

Carla Vanderpool

Program Compliance

Administrator

206-287-4457

carla.vand[email protected]

HOUSE KEY MANUAL 5

Heidi McMahon

Program Compliance

Administrator

206-287-4401

Heidi.mcmahon@wshfc.org

Randy Mentele

Homeownership Division

Admin Assistant

206-287-4412

Rand[email protected]

Rich Zwicker

Grant Program Administrator

206-287-4480

Rich.Zwicker@wshfc.org

Emily Northrup

Grant Program Administrator

206-287-4486

Emily.northrup@wshfc.org

Kathleen Komin

Homeownership Marketing

Manager

206-287-4449

Kathleen.kom[email protected]

Commission Address:

The Washington State Housing Finance Commission

1000 Second Avenue, Suite 2700

Seattle, WA 98104-1046

Commission EIN#: 91-1874730

Master Servicer:

Idaho Housing and Finance Association (IHFA)

Suspension Questions:

Bond Suspense Phone: 208-331-4870

Upload conditions to www.lenderwa.com

Leslie Asin, Loan Acquisition Supervisor, 208-331-4840 [email protected]

Rita Aafedt, Loan Acquisition Manager 208-424-7048 [email protected]

Idaho Housing and Finance

Association

565 W Myrtle St.

Boise, ID 83702

Borrower Payments:

HomeLoanServ

P.O. Box 7541

Boise, ID 83707

Correspondence:

HomeLoanServ

PO Box 7899

Boise, ID 83707

Overnight Address:

Idaho Housing and Finance

Association

Attn: Document Center

565 W Myrtle St.

Boise, ID 83702

Servicing Web site: www.homeloanserv.com

Customer Service Telephone Number: (800) 526-7145

Customer Service email: mortgag[email protected]

HOUSE KEY MANUAL 6

Eligible Lenders

Lending Institutions may become participating lenders by completing the required

documentation and submitting it to the Commission.

Only lenders who close a minimum of five Program Loans during a calendar year will be eligible

to appear on our Website, brochures and other marketing materials from the Commission.

Eligible Loan Originators

Lending staff employed by a participating Mortgage Lender who have completed training are

eligible to originate Program Loans. To remain eligible to instruct homebuyer education

seminars sponsored by the Commission, loan originators must close and have purchased by the

Commission one Program Loan during a one-year period.

HOUSE KEY MANUAL 7

2 - TERMS AND CONDITIONS

Edited 12/06/2023

Relevant Search Terms: first time homebuyer, FICO, overlay, underwriting guidelines, DTI

All House Key loans must be delivered to Idaho Housing and Finance Association.

All loans must be eligible for a Fannie Mae, Freddie Mac or Ginnie Mae pool.

Each House Key Program Mortgage Loan must satisfy the following terms and

conditions:

Loan Types

Edited 02/12/2020

Fixed rate FHA 203(b), Limited 203(k), 234 (c), HUD 184, VA, USDA Rural Development, and

Conventional loans listed below may be originated under the Program.

Fannie Mae Products

Special Feature Code(SFC)

HFA Preferred

DU Loan

782

127

Community Land Trust

054

Community Seconds

Manufactured Home

MH Advantage (Manufactured Home)

Freddie Mac Products

HFA Advantage Mortgage

118

235

859

Offering Identifier

HFA Advantage or

Home Possible Advantage for HFA’s

For Fannie Mae HFA Preferred or Freddie Mac HFA Advantage:

Borrowers with incomes at or below 80% AMI:

Fannie Mae’s conventional HFA Preferred loans and MH Advantage manufactured homes are

eligible up to 97% LTV/105% CLTV with 18% MI coverage, if conventional manufactured home

other than MH Advantage max 95% LTV/105% CLTV with 16% MI coverage, and no loan level

pricing adjustments. See Appendix III for more information.

Freddie Mac’s conventional HFA Advantage conforming loans are eligible up to 97% LTV/105%

CLTV with 18% MI coverage, with credit fee in yield specific to the HFA community and

elimination of credit fees in price. Manufactured homes are eligible under the program up to

95% LTV/95% CLTV. See Appendix III for more information on Freddie Mac’s HFA Advantage

loans.

HOUSE KEY MANUAL 8

Borrowers with incomes greater than 80% AMI, up to House Key program

income limits by county:

Higher interest rates apply, see current rate sheet. Standard MI coverage of 35% will apply to

97% LTV/105%CLTV.

Please see Appendix III for more information on Fannie Mae HFA Preferred and Freddie Mac’s

HFA Advantage loans.

Loan Amounts

Edited 12/6/2023

Current loan limits of $766,550, and up to $977,500 in high cost areas (King, Pierce and

Snohomish counties) permitted with no higher balance add-on fee. Maximum loan limit for

Freddie Mac HFA Advantage is $766,550.

Loan Underwriting

Edited 12/13/2022

For Fannie Mae HFA Preferred Desktop Underwriter (DU) showing Approve/Eligible findings.

DU must be used with Fannie Mae loans, LPA findings will not be accepted. Freddie Mac Loan

Prospector (LPA) with Accept recommendations are required. LPA must be used with Freddie

Mac’s HFA Advantage loans with Accept findings, DU findings not allowed. GUS with

Accept/Eligible findings are required.

Manual underwriting is permitted for FHA, VA, USDA and Fannie Mae HFA Preferred

Conventional loans in the following cases:

• The loan received an Approve/Eligible findings but requires a downgrade OR

Refer/Eligible or Refer w/Caution findings,

• Subject to the following requirements:

o Using Desktop Underwriter (DU) only for FHA, VA or Fannie Mae HFA Preferred

conventional loans. GUS must be used if USDA loan. In all cases lender must

follow agency guidelines.

Manual underwriting is not permitted for Freddie Mac HFA Advantage loan.

If none of the borrowers have a usable credit score, borrowers are not eligible for Freddie Mac’s

HFA Advantage program.

Manufactured homes are permitted for FHA, VA, USDA, Fannie Mae HFA Preferred and

Freddie Mac HFA Advantage Conventional loans, follow investor guidelines for LTV/CLTV.

Manual underwrite is allowed for FHA, VA and USDA manufactured homes, follow agency

guidelines.

HOUSE KEY MANUAL 9

Fannie Mae HFA Preferred conventional manufactured home loans must be underwritten by

DU as required in Fannie Mae’s selling guide. Per Fannie Mae, an MH Advantage sticker will be

affixed to homes that are designed to meet MH Advantage eligibility criteria.

Manual underwriting is not permitted for Fannie Mae HFA Preferred or Freddie Mac HFA

Advantage conventional manufactured homes.

Leasehold manufactured homes are not permitted under the program.

Homes in Community Land Trusts (CLTs) are not eligible under Freddie Mac’s HFA Advantage

conventional program.

FHA Limited 203K loans will be purchased by Idaho Housing and Finance Association prior to

the completion of repairs with the following parameters:

• May only be used for minor remodeling and non-structural repairs.

• The total rehabilitation cost must not exceed $35,000. There is no minimum

rehabilitation cost.

• All improvements to existing structures must comply with HUD’s Minimum Property

Requirements and meet or exceed local building codes.

• Time frame for completion of repairs not to exceed six months.

• Work completed must be on the 203K Limited Eligible Improvement/Repairs list.

• Follow FHA Handbook 4000.1, 203K Limited guidelines regarding reason, type of

improvements, time to complete, quality, and post-closing documentation.

• IHFA must handle all disbursements still owing post-purchase.

• Manufactured homes are not eligible under the program.

Loan Term

30 years/360 months, with amortizing payments.

New Financing

House Key Loans must be new loans. Payment or refinancing of other than the initial

acquisition cost of the property and related closing costs as part of the Mortgage Loan or within

the Mortgage Loan transaction is prohibited. Payoffs required by the underwriter must take

place either outside of escrow or be clearly identified in the closing statement as coming from

funds provided by the Borrower for that specific purpose.

Total Debt to Income (DTI) Ratio

Edited 04/03/2023

HOUSE KEY MANUAL 10

The total debt to income (DTI) ratio acceptable per AUS approve findings and underwriter loan

approval, unless further restrictions apply. (No exception).

Credit Score

Edited 06/30/2023

All borrowers with a credit score must meet the minimum representative credit score per agency

guidelines, unless further restrictions apply.

For Fannie Mae, A borrower with no credit score may be eligible, follow agency guidelines

subject to AUS findings and Mortgage Insurance approval.

For Freddie Mac HFA Advantage conventional program, if all borrowers lack credit scores, loan

can be submitted to Loan Product Advisor (LPA) for a decision provided LTV is not greater than

95% with Accept/Eligible findings. Manual underwriting is not permitted.

Use of non-traditional credit is permitted for FHA, VA, USDA and Fannie Mae Conventional

loans, if borrower(s) meets agency guidelines.

Verifications of Income

Edited 07/18/2019

Refer to Section 3 for documentation of income requirements under the program. Additionally,

follow applicable agency guidelines.

IRS Form 4506-C

Edited o2/04/2021

Completed, signed and dated IRS Form 4506-C is required. Follow agency guidelines.

Tax Returns

Federal tax returns for the last three years are required under the program.

HOUSE KEY MANUAL 11

Credit Report

Credit Reports for all borrowers are required under the program.

Tax Transcripts

Follow agency guidelines.

Payoff of Interim Financing

Program loans may be used to refinance new construction interim financing with a term not

exceeding two (2) years. Refinancing an existing loan utilizing Program funds is permitted only

under the following conditions:

• The construction loan (interim financing) cannot exceed 24 months.

• The construction financing cannot be contingent upon the Borrower’s qualification for a

Mortgage Loan, therefore, the Mortgage Lender’s construction financing rate is

independent. The permanent (take-out) financing will be at the Program rate.

• The Pre-Closing Compliance Review file requires a typed 1003 (unsigned) that reflects

the Program rate.

Interest Rate

The Commission announces the Mortgage Interest Rate via Program Announcements and the

Commission's Web site at http:\\www.wshfc.org. The Interest Rates may vary for each issue

and are subject to change.

Buydowns (Temporary)

Edited 7/31/2024

Temporary buydowns are permitted under the Program for loans serviced by Idaho Housing

and Finance Association. Lender is required to calculate and collect required funds, document

the file as required and notify the Commission at time of reservation via email to

[email protected]rg, include the borrower(s) full name, reservation number and the applicable

temporary buydown type (3-2-1, 2-1, or 1-0).

The 3-2-, 2-1 or 1-0 temporary buydown type is only allowed on conventional and FHA loans.

HOUSE KEY MANUAL 12

The 2-1 or 1-0 temporary buydown type is allowed on VA and RD loans.

A 1-1 temporary buydown is not permitted.

Buydown funds must be sent to the loan servicer at time of loan closing. Source of buydown

funds as allowed per agency guidelines. Commission downpayment assistance funds cannot be

used for the buydown.

Buydowns (Permanent)

Permanent rate buydowns are not permitted under the program.

Property Flipping

Follow specific investor guidelines (Fannie Mae, Freddie Mac, FHA, VA or USDA).

Homebuyer Education

All Borrowers to be listed on the Note and Deed of Trust must attend a Homebuyer Education

seminar that has been registered through the Commission and meets standards as set in the

Homebuyer Education Section of this Program Manual.

Allowable Fees

Origination and Discount Fees:

The Borrower may pay the total origination and discount fee permitted by the Program as listed

on the Website. The loan fee and discount points together cannot exceed the amount shown on

our Website except when using conventional mortgages with loan level pricing adjustments or

single premium MI programs. The seller is not obligated by Program guidelines to pay any fees

typically charged to the Borrower on any other loan program.

Other Allowable Fees:

The fees charged by the lender for loan processing, underwriting, document preparation, etc.

may not exceed $1,800. Any fees charged exceeding this amount will need to be refunded to the

appropriate party prior to purchase of the loan. Financing costs and other fees allowable by

FHA, VA, USDA Rural Development, Freddie Mac or Fannie Mae may be charged if such fees

are usual and customary settlement costs.

HOUSE KEY MANUAL 13

Fees

Idaho Housing and Finance Association will collect the following fees upon loan purchase:

Tax Service Fee $85.00

Flood Certification Transfer Fee $10.00

Electronic Upload Fee $40.00

Program Application fee for downpayment assistance (if applicable) $40.00

These fees will be netted out upon loan purchase.

Non Allowable Fees

The following fee is not allowable:

Amortization Schedule –available for free. If charged, the Mortgage Lender will be

required to provide evidence of a refund for the amount prior to loan purchase.

Furthermore, Mortgage Lenders cannot charge additional lender fees on any down

payment assistance program offered through the Commission.

Mortgage Insurance

All conventional Mortgage Loans with a loan-to-value exceeding 80% must have private

mortgage insurance coverage provided by a Fannie Mae or Freddie Mac approved mortgage

insurer.

Eligible plans include Monthly MI, Financed MI, Split Premium MI or Single Premium MI.

No Lender Paid MI.

The required percentage of MI coverage is determined by the type, term, and LTV of the loan.

All loans require standard MI Coverage according to loan type.

Single premium MI programs are acceptable under the House Key Program using the Fannie

Mae or Freddie Mac products listed in Section 2. The Lender must also verify that the loan

meets all of the mortgage insurance companies’ underwriting requirements prior to closing. All

single premiums must be disclosed on the Closing Disclosure statement and not reflected as an

increase to the rate. When using this option, the lender will pay the loan level pricing

adjustment to the mortgage insurance company at closing and obtain the Mortgage Insurance

Certificate for inclusion in the loan purchase file to be submitted to the Master Loan Servicer.

HOUSE KEY MANUAL 14

Title Insurance

The title policy must follow all guidelines for the underlying FHA, VA, Fannie Mae, Freddie Mac,

HUD, or USDA Rural Development mortgage. The title policy should reference the property

address.

Flood Insurance Policy

Edited 9/23/2019

A flood determination must be completed prior to each loan closing. Flood insurance is

required on all properties in a designated flood zone. If flood insurance is required on a loan,

the Mortgagor shall obtain the flood insurance. The Mortgagor’s property or portion of the

property may be located in a designated flood zone; however, the improvements (physical

dwelling/home) may be on an elevated site making flooding unlikely. In such cases, the

Mortgagor may request a Letter of Map Amendment (LOMA). If Federal Emergency

Management Agency (FEMA) issues the requested LOMA, the Mortgagor may terminate its

flood insurance. All Hazard and Flood Insurance policies must follow guidelines in accordance

with the underlying first mortgage underwriting guidelines.

A $10 transfer fee will be required.

Hazard Insurance Policy

Edited 9/23/2019

Hazard insurance coverage must equal the lesser of 100% of the insurable value of the

improvements as established by the property insurer or the unpaid principal balance of the first

and second (if applicable) mortgage loan amount, as long as it equals the minimum amount—

80% of the insurable value of the improvements—required to compensate for damage or loss on

a replacement cost basis.

The mortgagee clause on all mortgage policies, binders, and certificates of insurance must show:

HomeLoanServ, ISAOA/ATIMA

PO Box 818007

Cleveland, OH 44181

Fax: 888-218-9257

Email: insdocs8[email protected]om

Deductibles

The maximum hazard insurance deductible allowed is 5% of the face amount of the policy. For

Flood insurance the maximum allowable deductible is the maximum deductible available from

the NFIP (currently $10,000).

HOUSE KEY MANUAL 15

Power of Attorney

A Specific Power of Attorney is acceptable for the Borrower and Seller if the Specific Power of

Attorney references the property, and authorizes the attorney-in-fact to enter into a real estate

transaction and to mortgage the property.

The Power of Attorney must:

• indicate clearly that the mortgagor is appointing an attorney-in-fact;

• precisely identify who is being appointed;

• be signed and dated by the borrower;

• be notarized; and

• be recorded prior to, or concurrent with, the security instrument.

A complete legible copy of the Specific Power of Attorney must accompany the Post Closing

Compliance Review Mortgage Loan file.

Escrow Holdbacks/Repair Escrow

Edited 08/02/2019

Escrow repairs are permitted in accordance with all Commission loan program guidelines.

With the exception of VA loans, escrow will be allowed for outstanding minor repairs for

incomplete construction or for alterations and repairs that cannot be completed prior to loan

closing provided the subject property is habitable and safe for occupancy at the time of closing.

IHFA has no overlays with respect to the timeframe for completion of repairs for weather

related non-critical repairs.

“Approve/Eligible” or “Accept” findings required for a repair escrow: Minimum 620 credit

score.

Follow investor guidelines regarding reason, type of improvements, time to complete, quality,

disbursements, and post-closing documentation. IHFA will purchase the loans prior to

completion of repairs. Loans with outstanding escrow repairs must not impact IHFA’s ability to

deliver/sell the loan to Ginnie Mae, Fannie Mae or Freddie Mac.

The lender or designated escrow company will be responsible for managing and disbursing the

escrow funds. The lender shall deliver loans that were originated in accordance with the first

mortgage investor guidelines. The lender or designated escrow company will retain the escrow

funds until all improvements have been completed.

HOUSE KEY MANUAL 16

Lender to provide IHFA confirmation of all work completed and that escrow funds have been

released.

Interest Credits

Edited 6/30/2023

Interest credit allowed up to 5 days.

Reserve/Escrow Accounts

All Mortgage Loans must have a reserve/escrow account for the collection of hazard insurance,

taxes, mortgage insurance premiums and/or risk-based premium.

Prepayment Penalty

Mortgage Loans may be prepaid at any time without a penalty.

Assumptions

All first Mortgage Loans originated under the Program may be assumed by a qualified Borrower

meeting First-Time Homebuyer requirements and income and Acquisition Cost restrictions in

place at the time of the assumption. Such Mortgage Loans must continue to fully comply with

Section 143 of the Internal Revenue Code of 1986, as amended and continue to be insured or

guaranteed by FHA, VA, or RHS. Please note that conventional fixed rate mortgages are not

assumable per Fannie Mae and Freddie Mac guidelines.

Subordinate Financing

All subordinate financing closed in conjunction with a House Key Program Mortgage Loan must

meet the underwriting guidelines of the first mortgage type. It is the Mortgage Lender’s

responsibility to review the Program Description, Note and Deed of Trust for community

seconds compliance. The underwriter must show the name of the community second program

and verify the program is an approved community second program on the 1008 or HUD 92900-

LT.

Maximum CLTV is determined by the first mortgage loan type’s underwriting guidelines and is

subject to mortgage insurance availability as applicable.

HOUSE KEY MANUAL 17

Servicing

All Mortgage Loans must be sold servicing released to the Master Loan Servicer.

Quality Control

The Commission and IHFA from time to time at their sole discretion may request additional

documentation from Mortgage Lenders. The Commission will monitor Mortgage Lenders for

timely cancellation of reservations, total production levels, length of time to close and deliver

eligible Mortgage Loans, participation in Homebuyer Education, level of Borrower complaints,

compliance with Program Guidelines and other factors the Commission, at its sole discretion,

considers necessary to evaluate effective Program participation.

Qualified Mortgage (QM) and Ability to Repay

CFPB’s final rule includes an exemption from the rule’s requirements for HFA loans including

an exemption from the ability-to-repay. HFA loans will not have to comply with the three-

percent cap on upfront points and fees, nor will the degree of legal protection an HFA loan

receive vary by its APR.

Repeat Program Users

Borrowers who have previously benefitted from Commission programs:

If the Borrower wishes to use Commission programs (Home Advantage, MCC, or House Key

Opportunity) and has an outstanding Home Advantage or House Key Opportunity loan, the

Borrower must pay off the first and second mortgage in full prior to using another Commission

program loan.

If the Borrower has an outstanding MCC and wishes to use Home Advantage or House Key

Opportunity, the Borrower is no longer eligible for the MCC credit and must sign a notarized

affidavit stating the Borrower understands that the Borrower is no longer eligible for the MCC

credit and agrees to no longer claim the MCC credit.

If a Borrower’s current or prior home was financed through a Commission program loan and

is/was subject to a short sale, foreclosure, bankruptcy or deed in lieu, and the Commission

suffered or expects to suffer a loss, the Borrower is not eligible to obtain another Home

Advantage, House Key Opportunity or MCC Commission program loan until the down payment

HOUSE KEY MANUAL 18

assistance obligation and any unpaid amount, regardless of whether such amount was

discharged, is repaid to the Commission, and all other program requirements have been met.

HOUSE KEY MANUAL 19

3 - ELIGIBLE BORROWERS

Edited 10/31/2023

Non Discrimination

All applicants must be considered irrespective of age, race, color, religion, national origin, sex,

marital status or physical handicap.

Eligible Applicants

To be eligible for a House Key Opportunity loan, the applicant must be using one of the

following downpayment assistance programs: Opportunity, HomeChoice, ARCH East King

County, Bellingham, Veterans, Clark County or purchasers using community second programs

previously used with the House Key Opportunity first mortgage program.

Households purchasing never occupied new construction or in a community land trust (with or

without downpayment assistance).

IRS Tax Code Compliance

To be eligible for a Mortgage Loan, the applicant must satisfy the requirements of the IRS Code

described in this section. The Commission requires documentation that the loan applicant

meets these requirements and is eligible to receive a Mortgage Loan.

Residency Type Requirements

Edited 01/08/2024

In order to be named on the Note and/or Deed of Trust, a person must meet the guidelines

established by the loan type originated under the Program.

Documentation Required. The Commission requires the same documentation used to meet

the guidelines established by the loan type originated under the Program.

HOUSE KEY MANUAL 20

Eligible borrowers are either U.S Citizens or Non-U.S. Citizens as follows:

• U.S. Citizen:

The borrower must have a valid social security number and be a citizen of the United States or of

a U.S. Possession or Territory. Borrower(s) photo identification documents must also be

provided to review and ensure identity and compliance with the US Patriot Act.

• Non-U.S. Citizen:

Non-U.S. Citizens must be lawfully present in the United States (or otherwise meet the

requirements shown below under deferred action). The term “lawfully present” includes those

who have “qualified alien” status. A “qualified alien” is defined as an alien who, at the time the

alien applies for, receives, or attempts to receive a Federal public benefit, per section 101(a) of

the Immigration and Nationality Act {8 U.S.C. 1101 (a)}. The classifications of Non-United

States Citizens are described below:

 Permanent Resident Qualified Alien: An alien who is lawfully admitted for permanent

residence under the Immigration and Nationality Act, also known as a “permanent

resident.” Document legal residency and eligibility to work in the United States with

one of the following:

▪ A valid and current Permanent Resident Card (form I-551); or

▪ A passport or I-94 stamped “processed for I-551,” “temporary evidence of

lawful admission for permanent residence,” “valid through ___, “and

“employment authorized.” Passport must be valid and not expired. This

evidences that the holder has been approved for, but not issued, a

Permanent Resident card (form I-551).

**Conditional Permanent Resident Qualified Aliens documented legal residency and

eligibility to work in the United States with one of the following:

 A valid and current Conditional Permanent Resident Card (form I-551); or

 An expired Conditional Permanent Resident Card (form I-551) within the 48-month

extension period declared January of 2023, together with an I-751 that has been filed

and not denied; or

 An expired Conditional Permanent Resident card (form I-551) within the 48-month

extension period declared January 2023, together with an I-829 that has been filed

and not denied.

 Non-Permanent Resident Qualified Alien:

▪ An alien who is granted asylum under section 208 of the Immigration and

Nationality Act. Document legal residency and eligibility to work in the United

States with the following:

o A valid I-94 with class of Admission as 208 and stamped as “asylum

granted” (or a signed, stamped court decision indicating the immigration

judge has granted the asylum if the stamp on the I-94 has not yet

occurred); and

HOUSE KEY MANUAL 21

o A current, valid Employment Authorization Document (EAD) with a

category code A05 or a valid social security card.

▪ A refugee who is admitted to the United States under section 207 of the

Immigration and Nationality Act. Document legal residency and eligibility to

work in the United States with the following:

o A valid I-94 with Class of Admission as 207 and a refugee admission

stamp; and

o A current, valid EAD with category code A03.

▪ An alien who is granted conditional entry pursuant to section 203 of the

Immigration and Nationality Act. Document legal residency and eligibility to

work in the United States with the following:

o A current, valid family based, employment based or diversity visa (as

defined in Lawful Non-Permanent Qualified Resident chart); and

o For family based visa borrowers or spouses/children of employer

sponsored visa borrowers (as defined in Lawful Non-Permanent Qualified

Resident chart), a current, valid EAD.

▪ An alien who is a Cuban and Haitian entrant (as defined in section 501(e) of the

Refugee Education Assistance Act of 1980). These individuals are paroled into

the United States. Document legal residency and eligibility to work in the United

States with the following:

o I-94 with stamp showing Cuban/Haitian entrant (Status Pending); and

o A current, valid EAD A04 or C11.

▪ An alien who has been battered or subjected to extreme cruelty under section 431

of the Immigration and Nationality Act. Document legal residency and eligibility

to work in the United States with the following:

o A current, valid U1-4 or T1-4 visa; and

o A current, valid EAD.

▪ An alien who entered the United States unlawfully as a child but has since been

granted “deferred action” (AKA DACA) which defers removal action against the

individual for a period of time. This status is permitted only in FHA, VA and

Fannie Mae programs, per agency guidelines. Document legal residency and

eligibility to work in the United States with the following:

o A current, completed I-797 form showing approval DACA status or a print

out of the official approval from the USCIS online portal; and

o A current, valid EAD card with code C33.

▪ DACA status borrowers are not eligible for USDA and Freddie Mac HFA

Advantage loans.

▪ An alien with “Pending” asylum status is acceptable on conventional loans only.

Borrower(s) must provide a valid CO8 Employee Authorization card and an

Asylum Application receipt (or printout from USCIS status website), validating

borrower(s) status.

Lender is responsible to document legal residency and eligibility to work in the United States

with the required documentation in post package file to appropriate loan servicer, per investor

guidelines. If documentation is not acceptable loan may be subject to repurchase by the lender.

You may find the Residency and Eligibility guide here. If the authorization documentation (visa,

HOUSE KEY MANUAL 22

I-94, passport or EAD, as applicable), will expire within one year from the loan closing date and

a prior of renewals exist, continuation may be assumed.

Occupancy Requirement

All Borrowers must occupy the Single-Family Residence as their personal principal residence

within 60 days from the date the Mortgage Loan is closed. At no time can the Single-Family

Residence be used as an investment property, vacation or recreational home.

Documentation Required. At loan application, the Borrower(s) signs and the

Mortgage Lender has notarized the Addendum to Residential Loan Application whereby the

Borrower(s) attests that the Single-Family Residence intended to be purchased will be used as a

personal principal residence.

First-Time Homebuyer Requirement

The Borrower(s) must be a First-Time Homebuyer unless the Single-Family Residence is located

within a Targeted Area or the Borrower is a Veteran. A First-Time Homebuyer is defined as

someone who has not owned and occupied a primary residence at any time in the three years

preceding the closing of the Mortgage Loan. Please see Appendix IV for further information on

the Veterans Exception.

A Borrower may qualify if they owned other property such as vacation property, a recreational

vehicle, a mobile home (not affixed to real property and for which they paid no property tax or

claimed a mortgage interest deduction), or if they inherited property in which they did not

reside.

Documentation Required. The primary form of documentation is the federal income tax

returns for the last three years submitted by the Borrower at loan application. The Mortgage

Lender must examine the returns to determine that no mortgage interest or real estate tax

deductions were taken.

Definition of Household Size

Household size includes all persons who will permanently reside in the Single-Family

Residence.

Household size does not include:

• dependents that are claimed on tax returns, but will not permanently reside in the home.

Household size does include:

HOUSE KEY MANUAL 23

• non-borrowing co-habitants that will reside in the Single-Family Residence (income

must also be included in Annualized Gross Household Income for persons 18 years of

age or older);

• persons who are full-time household occupants regardless of age;

• children expected to be born to a pregnant woman;

• children in joint custody arrangements who are present in the household 50% or more

of the time;

• children who are away at school and who live at home during recesses.

Calculation of Income

The income calculation described below for the purpose of determining Program loan

eligibility for federal tax purposes is an entirely different process than the one used for credit

underwriting.

The income used for Program purposes is the anticipated (future) income for the 12 months

following Mortgage Loan closing. The income used to qualify the Borrower(s) for credit

underwriting may not exceed the income used to qualify for Program compliance. (Exception:

foster care payments may be used for credit underwriting even though they are excluded for

Program loan eligibility. See also “Examples of Income to Include or Not to Include” in this

Section.).

The household income of a Borrower is referred to as the Borrower's "annualized gross (before

any taxes or deductions) household income." Annualized Gross Household Income is defined as

the Borrower's gross monthly household income multiplied by 12. Gross monthly household

income is the sum of: monthly gross pay; any additional income from overtime, part-time

employment, bonuses, dividend, interest, royalties, pensions, IRAs. 401(k) plans, Veterans

Administration (VA) compensation, net rental income, etc.; and other income (such as alimony,

child support, public assistance, sick pay, social security benefits, unemployment compensation,

income received from trusts, and income received from business activities or investments.)

Income from all sources must be verified and included when calculating an applicant's gross

monthly household income. The income of all residents 18 years or older (related and

unrelated) must be included in the calculation of Annualized Gross Household Income and may

not exceed the Program limits established by the Commission at the time of loan closing. These

limits are located under the heading "Maximum Total Annual Income" in this section of the

Program Manual.

To determine Annual Gross Household Income for full-time employment, multiply

• hourly wages by 2080

• weekly wages by 52

• bi-weekly wages by 26

• semi-monthly wages by 24

• monthly wages by 12

HOUSE KEY MANUAL 24

To determine Annual Gross Household Income for less than full-time employment, multiply:

• hourly wages by the number of hours the person is expected to work per week x 52.

If a range of hours is given, you must use the highest number of hours. If this puts the

household over income, you may need to contact the employer and clarify.

If the hours are irregular, average the number of regular hours at current regular pay rate and

average the overtime hours times current overtime rate.

Current Period

Lenders must determine the household earnings for the "current period." The "current period"

begins with the pay period prior to the date of loan application and ends at loan approval.

Documentation of Income

Edited 07/18/2019

In order to accurately determine "current period" income, all income earners in the household

18 years of age or over must provide paycheck stubs or other earnings statement for each source

of income for each household resident 18 years of age or over preferably within the 30 day

period prior loan closing.

The purpose of these earnings statements is to accurately delineate the current household

earnings for a minimum of one pay period.

A full written Verification of Employment for the Borrower(s) and all income earners (regardless

if on Note and Deed of Trust) in the household 18 years of age or over from current employer(s)

is also required to verify pay raises, bonuses, overtime, and hours worked per week. Paycheck

stubs do not always provide this breakdown of information.

Mortgage Lenders must include a copy of the calculation if income is from a source other than a

monthly salary.

Maximum Total Annual Income

Edited 09/02/2022

To be eligible for a Program loan, an applicant's Annualized Gross Household Income must not

exceed the following Program income limits at the time of loan closing:

HOUSE KEY MANUAL 25

COUNTY

NON-TARGETED

TARGETED

1-2 persons

3 or more

persons

1-2 persons

3 or more

persons

Clark / Skamania

$110,000

$125,000

$120,000

$140,000

Pierce

$115,000

$135,000

$115,000

$135,000

Kitsap

$100,000

$115,000

$120,000

$140,000

King/Snohomish

$150,000

$175,000

$150,000

$175,000

All Other Counties

$100,000

$115,000

$120,000

$140,000

Examples of Income to Include or Not to Include

The following guidelines are provided as a general computational aid and may not apply to all

situations. Please call the Commission for assistance whenever in doubt as to the correct way to

calculate income.

1. Overtime: Income earned from overtime will be included if the Borrower has a history

of such income or if the income was earned during the "current period." The Mortgage

Lender must not include more overtime income in qualifying the Borrower for the

Mortgage Loan than is used in determining income for Program compliance.

To calculate overtime for compliance purposes, first consider the amount earned during

the "current period" and annualize it. If the Borrower claims that the overtime earned in

the "current period" is excessive or unusual, the Mortgage Lender may average the

number of hours of overtime worked during the previous two years. Multiply the

average monthly hours by the current rate of overtime pay and use that figure for

overtime earnings.

2. Bonus: The gross amount of a recurring bonus before any payroll deductions is to be

included in the income calculation when the following applies:

a) The bonus is part of a collective bargaining agreement and must be paid; or

b) The bonus is included in the computation of income by the employer; or

c) There is a history of bonuses.

If the information is available, the amount of the bonus income to be included for

compliance is the bonus paid or payable for the calendar year in which the loan is closed.

If there is a history of bonuses but the applicant does not know if a bonus is planned, nor

does the employer divulge its plans for a bonus nor the projected bonus amount, the

HOUSE KEY MANUAL 26

Mortgage Lender is to use an average of past years' bonuses to calculate income. A

bonus history for tax compliance purposes is to be considered one year or more.

3. Commissions: Income derived from commissions should be based on the "current

period" unless evidence is provided which justifies averaging the commissions. Under

normal conditions, an individual who earns income based on commissions expects that

his income will increase over time.

4. Military Pay: Include all regular pay, special pay, and allowances of a member of the

military (whether or not living in the Single-Family Residence). Do not include special

pay to a family member serving in the Armed Forces who is exposed to hostile fire.

5. Self-employment: The procedure for calculating Annual Gross Household Income for

self-employed applicants is the same as under FHA, VA or Fannie Mae underwriting

guidelines. As in standard underwriting, depreciation and depletion are to be added

back to determine annual income. Tax returns, a current financial statement, and a self-

employed cash flow analysis are required for all self-employment applicants. Two years

signed corporate or partnership tax returns are required in addition to personal returns.

In the case of negative income, self employment income is reflected as $0.00.

Many applicants who are employed by others are also self-employed. These applicants

derive their primary income from wages but also generate additional income from side

jobs or consulting. Mortgage Lenders should watch for all types of self-employment (i.e.,

1099 income received from an employer run through Schedule C, Form 2106, etc.)

6. Child Support: If a divorce decree states that child support is due to the applicant,

then child support must be added to the Annual Gross Household Income for

compliance purposes. Child support documentation is required. The only exception to

this rule is if the child support is scheduled to come to the applicant through the courts

or Department of Social and Health Services, and that agency provides written

verification that the funds have not been received for six months or more.

7. Alimony: Alimony or separate maintenance payments received by the applicant must

be taken into account in calculating income.

8. Periodic Payments – Payments received from social security, annuities, insurance

policies, retirement funds, pensions, disabilities, or death benefits, and other similar

types of periodic receipts, including a lump-sum amount or prospective monthly

amounts for delayed start of a periodic amount are included as income, except for

deferred periodic amounts from supplemental security income and social security

benefits that are received in lump-sum amounts or in prospective monthly amounts.

These amounts are not grossed up for compliance purposes.

9. Adoption Assistance Payments: Adoption assistance payments in excess of $480

annually per adopted child are excluded from gross monthly household income.

HOUSE KEY MANUAL 27

10. Foster Care Payments: Payments received for the care of foster children are excluded

from gross monthly household income. (See also “Foster Care in Home” in Section 4,

Property Requirements.)

11. Full-Time Student, 18 Years or Older: Exclude earnings in excess of $480 annually

for each full-time student 18 years or older from gross monthly household income unless

that person is the head of household, spouse or co-head.

12. Rental Property or Contract Income: Net rental income is to be included. The use

of standard underwriting criteria and procedures to document this income is acceptable.

Depreciation should be added back to the net rental income where applicable. The

standard vacancy factor for FHA, VA or Conventional loans is acceptable when

calculating net rental income.

Contract income must be included. If there is an underlying mortgage, the Mortgage

Lender may use the net amount in calculating Annualized Gross Household Income.

13. Gambling Winnings: Money from gambling is considered to be income. One time

gambling winnings should not be included as income and should be included when

determining income from assets (See Income from Assets)

14. Education Grants: All forms of student financial assistance (grants, scholarships,

educational entitlements, work study programs, and financial aid packages) are excluded

from annual income. This is true whether the assistance is paid to the student or directly

to the educational institution.

15. Car Allowance: Income received from employers for car allowance must be included

in Annualized Gross Household Income if the applicant has no accounting responsibility

to the company.

16. Moving Expenses: Moving expenses paid by the employer will not be considered as

income if documented by the employer as reimbursement only. Do not deduct from

income, any moving or relocation expenses not paid by the employer.

17. Capital Gains/Losses: Both the taxable and non-taxable portions of capital gains are

to be included as income if a history of this income exists. If the two year average results

in a gain, then it must be added to gross monthly household income, and losses are to be

disregarded. Losses cannot be used to reduce gross monthly household income.

18. 401(k): The funds that the applicant contributes to a 401(k) savings plan are not

taxable earnings and as such are not usually reflected in year-to-date earnings on pay

stubs.

These savings plans are voluntary and are actually a part of the applicant's earnings.

When the Mortgage Lender calculates earnings the savings contribution must be added

to the year-to-date figures.

HOUSE KEY MANUAL 28

19. Lump Sum Payments: Lump sum payments, including but not limited to,

inheritances, re-enlistment bonuses, lottery winnings paid in one payment, and

disbursements from insurance policies do not have to be included in Annualized Gross

Household Income. Lump Sum payments should be included when determining income

from assets (See Income from Assets). If the income is received in any other form other

than lump sum (i.e., monthly, quarterly, or annually) it must be treated as permanent

income and added to the Annualized Gross Household Income.

20. Inheritance and Trust Income: Income received from inheritances and trust funds

will be regarded in the same way as all other income. If the distribution is made from an

inheritance or trust fund in a lump sum, it will not be considered as part of Annualized

Gross Household Income. If the distribution is other than a lump sum (annual,

quarterly, or monthly), it will be added as part of Annualized Gross Household Income.

21. Income from Assets: Interest, dividend and royalty earnings are considered income.

The cash value of all assets (including 401(k)’s, pension, retirement, CD’s, annuities,

stock, etc.) must be verified and listed on the Loan Application. The cash value is the

total value less any penalties and fees for early withdrawal. Retirement accounts are

included as assets only if the money is accessible, even though a penalty may be assessed.

Do not include a retirement account if the funds are accessible only upon retirement.

If it is estimated that the applicant will have $5,000 or more in the cash value of their

assets at closing, after downpayment and closing costs, calculate the earnings at an

interest rate based on HUD’s passbook rate at the time the application is taken. Use the

higher of this calculation or the actual income earned.

22. Withdrawal of Cash or Assets: Withdrawal of cash or assets from an investment

(i.e. pensions and stocks) received as periodic payments should be counted as income

unless the applicant can document that the amounts withdrawn are reimbursement of

amounts originally invested. However, annuity or interest payments from an investment

are considered income (See Income from Assets.)

Borrower/Co-Borrower

For purposes of this Program, any person who signs the Mortgage Note, Deed of Trust and/or

takes title to the Single-Family Residence is considered a "Borrower/Co-Borrower".

Co-Signer/Guarantor

The Commission defines a co-signer as a person who signs the Note, may or may not take title to

the property, and is only responsible for payments if the primary Borrower does not make the

HOUSE KEY MANUAL 29

payments. The Commission will not accept non-occupant co-signer(s) or non-occupant co-

borrower(s).

Married Individual Taking Title in Separate Estate

The spouse of a Borrower does not have to take title to the property. However, the spouse's

income must be included on all Program documents and the spouse's tax returns for the past

three years, paystubs and full written VOE must be included with the pre-closing compliance

package regardless of occupancy.

If the Borrower is legally separated, the Mortgage Lender does not include the spouse’s income

and does not need their tax returns.

HOUSE KEY MANUAL 30

4 - PROPERTY REQUIREMENTS

Edited 12/13/2022

In General

Only one-unit Single-Family Residences located in the state of Washington may be financed

under the Program.

Qualifying Single-Family Residences

Edited 6/9/2020

One-unit single-family detached, attached, condos, PUD’s and manufactured homes that do not

violate the conditions in the Non-Qualifying Residences guidelines below and are acceptable to

FHA, VA, Rural Development requirements, Freddie Mac and Fannie Mae and the approved

Fannie Mae or Freddie Mac PMI provider, as applicable, are acceptable under the Program.

Accessory Dwelling Units (ADU) are accepted if not used for rental purposes with

documentation in the file and if they are appraised as a 1-unit property.

For FHA: Single-unit condominium project approval is acceptable under the program, follow

agency guidelines.

Homes in Community Land Trusts (CLTs) are not eligible under the Freddie Mac HFA

Advantage program.

Non-Qualifying Residences

Properties are not considered Single-Family Residences if they:

• Have an Accessory Dwelling Unit which is going to be used as a rental.

• Have excess land value. Qualifying land is the lesser of that necessary for basic livability

or two acres.

Non-qualifying properties include duplexes, triplexes, recreational, seasonal or other types of

vacation or non-permanent homes.

HOUSE KEY MANUAL 31

Manufactured Homes

The home must meet all underwriting guidelines established by FHA, VA, USDA, or Fannie Mae

HFA Preferred Conventional. No borrower contribution required. Manufactured homes are

eligible with Freddie Mac HFA Advantage conventional program up to 95% LTV/95% CLTV.

Eligible Land

The land on which the Single-Family Residence is located must be the lesser of the size required

to maintain basic livability or two (2) acres. Local zoning requiring more than two acres

supercedes the federal two-acre requirement. Homeowner Association requirements do not

supercede the federal two-acre requirement.

Acquisition Costs

Edited 10/10/2022

Sales price and Acquisition Costs may be different. Acquisition Cost includes the sales purchase

price of the home, plus any leasehold value, and any additional expenses assumed by the

Borrower or others (i.e. Mortgage Lender, Realtor, etc.) which are not typical borrower costs or

fees. Fees, or repairs paid for by the seller are not included in the Acquisition Cost. If any

repairs are to be paid for by the Borrower or others (i.e. Mortgage Lender, Realtor, etc.) prior to

closing or included in the settlement cost, those costs must be included in the Acquisition Cost.

Items of personal property sold by the seller to the Borrower at a cost which is higher than the

market value are included in the Acquisition Cost.

Example: The buyer and seller agree to a purchase price on the contract. They also

agree that the buyer will pay other fees normally charged to the seller (i.e., Realtor

commission or property excise tax) or that the buyer will pay for a new roof or other

repairs (whether required by the Mortgage Lender or not). In this example, the

Acquisition Cost is the sum of the purchase price plus the additional costs assumed by

the buyer basically for the benefit of the seller. The total cost of the commission or excise

tax, and/or the roof is added to the purchase price to equal the Acquisition Cost.

The total Acquisition Cost of the Single-Family Residence will be verified using the Purchase &

Sale Agreement, including all addendums and agreements, Appraisal and the Final Closing

Disclosure.

The total Acquisition Cost may not exceed the Program maximums for the county in which the

property is located. (See the end of this Section for the maximum income limits by county.)

HOUSE KEY MANUAL 32

New Construction

The total cost of construction must be included in the Acquisition Cost as documented by the

Purchase & Sale Agreement, including all addendum, construction contracts/breakdown,

appraisal and Final Closing Disclosure. The total Acquisition Cost must not exceed the

Acquisition Cost limit in effect at loan closing.

If the site has been owned by the Borrower(s) for at least two (2) years before the date on which

construction of the Single-Family Residence begins, the site cost may be excluded from the

Acquisition Cost. If the Borrower(s) own the land, the land may be used as down payment for

construction, but should remain in the name of the Borrower(s).

Business Use of Home Restrictions

No more than 15% of the square footage of the home being purchased may be used in connection

with a trade or business. With regard to all types of child care services, the Commission’s

guidelines dictate that the Borrower does not qualify if any one of the following criteria apply:

1. Income from child care is greater than 10% of the Borrower’s Annualized Gross

Household Income;

2. Child care is provided for more than one additional child outside of the provider’s own

children; or

3. The Borrower(s) is a licensed child care provider.

Foster Care in Home

House Key Mortgage Loan applicants who provide foster care to children in their home and

neither include foster care payments in their income nor take deductions for foster care costs

under current tax laws are eligible for a House Key Mortgage Loan. Applicants who meet this

definition must sign an Affidavit Regarding Foster Care Payments (15.6.3) as an

acknowledgment of these requirements. Eligibility is determined by the signing of this affidavit.

Applicants who provide foster care services and receive payments that must be included in their

income and/or take deductions for foster care costs under current tax laws may not be eligible

for a House Key Mortgage Loan. Please call the Commission to discuss potential eligibility for

the program on a case by case basis (See also Section 18, Appendix I).

Appraisals

Appraisals must be in compliance with FHA, VA, Fannie Mae, Freddie Mac or USDA Rural

Development guidelines. Appraisals must have interior and exterior inspections.

HOUSE KEY MANUAL 33

If the appraised value is less than the purchase price of the property, the Borrower(s) must

provide written acknowledgment they have received a copy of the appraisal and are aware they

are paying more than the current established value of the home. If the purchase price exceeds

the appraised value by more than $1,000, the Commission may require additional information

(i.e., narrative from the underwriter noting the differential, that the negative impact to the

Borrower has been appropriately addressed and that the transaction makes sense for the

Borrower(s).

Property/Home Inspections

All properties must have an home inspection unless a 1 year home warranty is provided by the

builder. The property must have a property inspection within the most recent 6 months.

The purpose of the inspection is to inform the Borrower of the existing condition of the property

so they may properly budget for future possible upgrades and/or replacement of noted

deficiencies.

The inspection must be completed by a licensed Washington State Home Inspector. Pest and

appraiser inspections cannot be used in lieu of property inspections.

Inspections must cover the entire home and any attached or detached structures on the property

which are given value by the appraiser. The full written inspection must itemize all areas

inspected and the results of the review.

A paid receipt of the inspection or similar documentation referencing the property address,

borrower(s) name and date of the inspection must be in the loan Pre-Closing Compliance file. A

copy of the inspection for the file is not necessary. In addition, any inspection required by the

appraiser must be included in the loan file.

Verbal inspections are not acceptable under the program.

Maximum Acquisition Cost

Edited 05/14/2024

The maximum Acquisition Cost for a Single-Family Residence must not exceed the following

amounts:

COUNTY

NON-TARGETED

TARGETED

Clark / Skamania Counties

$495,000

$550,000

Clallam

$345,000

$400,000

King /Pierce /

Snohomish Counties

$675,000

$750,000

HOUSE KEY MANUAL 34

Kitsap County

$410,000

$500,000

Island County

$400,000

$475,000

San Juan County

$410,000

$480,000

Whatcom County

$425,000

$500,000

Skagit/Thurston Counties

$390,000

$475,000

All other Counties

$345,000

$400,000

PAGES THAT FOLLOW PROVIDE MAPS OF TARGETED AREAS

“New”construction for purposes of applying the Acquisition Cost limit means residences

completed no more than 24 months prior to closing which have never been previously occupied.

Target Areas

Edited 3/22/2024

Target Area means the areas within the State which are set forth in the Program Manual as

Qualified Census Tracts. A Qualified Census Tract is an area which at least 70% of the

population of Washington makes 80% of the areas' median or an area of "chronic economic

distress” as designated and approved in accordance with the Internal Revenue Code of 1986.

The Code requires that the Commission make a portion of the funds available to finance Single-

Family Residences in the Target Areas for a period of at least one year. Those counties which

contain Target Areas are shown below:

COUNTY

CENSUS TRACTS

Adams

9503.01

Asotin

9603.00, 9604.00

Benton

0102.04, 0112.01, 0112.02, 0114.01

Chelan

9602.03, 9603.01, 9611.01

Clallam

0010.00, 0021.00, 9400.00

Clark

0410.05, 0411.11, 0411.13, 0412.07, 0413.13, 0417.00, 0418.00, 0427.00

Cowlitz

0005.02, 0006.01, 0007.05, 0011.00, 0013.00, 9800.00

Douglas

9501.02

Franklin

0201.01, 0202.01, 0203.00, 0204.02, 0204.04

Grant

0109.03, 0111.02, 0114.05

Grays Harbor

0002.01, 0010.00, 0012.00

HOUSE KEY MANUAL 35

Island

9707.00, 9709.00

Jefferson

9506.03

King

0091.00, 0112.00, 0260.03, 0265.00, 0290.04, 0295.06, 0303.13, 0308.01

Kitsap

0801.02, 0802.00, 0808.00

Kittitas

9751.02, 9751.03

Klickitat

9501.03

Lewis

9707.00, 9720.00

Mason

9602.01

Okanogan

9402.00, 9703.01, 9703.02, 9705.00, 9708.00

Pacific

9506.00, 9507.02

Pierce

0614.00, 0633.02, 0716.04, 0717.03, 0717.04, 0717.06, 0718.06, 0718.07, 0718.08,

0720.00, 0729.07, 0729.08, 9400.06

Snohomish

0402.00, 0419.04, 0419.06, 0514.01

Spokane

0002.01, 0002.02, 0003.01, 0003.02, 0004.00, 0012.00, 0014.00, 0015.00, 0016.00,

0020.00, 0024.00, 0025.02, 0026.00, 0032.00, 0040.01, 0040.02, 0111.04, 0112.03,

0117.02, 0130.02, 0138.00, 0145.00

Stevens

9410.00, 9509.00, 9511.00, 9514.01

Thurston

0105.10

Walla Walla

9205.00

Whatcom

0002.01, 0002.03, 0101.02

Whitman

0001.00, 0005.00, 0006.01

Yakima

0001.00, 0002.00, 0003.01, 0003.02, 0006.00, 0007.00, 0009.02, 0012.01, 0012.02,

0013.00, 0015.02, 0015.03, 0015.04, 0018.02, 0019.01, 0019.02, 0020.03, 0027.01,

9400.05, 9400.06, 9400.07, 9400.08

To access census tract information for a particular property go to the FFIEC.gov Geocoding

system website, at the top click the current year from the dropdown menu then input the

property address, city and state, then hit Enter. Compare the Tract Code to the Target Area list

on our website to determine if the property is in a target area or not.

HOUSE KEY MANUAL 36

5 - RECAPTURE TAX

Edited 03/01/2018

Background

The Internal Revenue Code of 1986 established the recapture tax requirement for all loans

closed after January 1991. The recapture tax requires certain borrowers to repay the

government a portion of their gain upon the sale of the home if they financed their home with a

mortgage loan from the proceeds of a tax-exempt bond.

Application of Tax

The recapture tax is assessed only under the following circumstances:

• The home is sold or otherwise disposed of during the first nine years of ownership;

• The Borrower’s income increases each year by 5 percent above the maximum federal

income limit at the time of purchase; and

• The Borrower realizes a gain upon the sale of the home.

Because all of these events must occur for any tax to be paid, it is unlikely that most Borrowers

will pay a recapture tax.

In the event that a recapture tax is due, it will be only a portion of the Borrower’s gain on the

sale of the home. The law states that the maximum recapture tax is either 50% of the gain on

the sale or 6.25% of the original loan amount, whichever is less.

Refinancing

If the Borrower refinances their loan which is subject to recapture tax, the refinancing does not

trigger the calculation of recapture tax because the property has not been disposed of or sold.

HOUSE KEY MANUAL 37

Borrower’s Responsibility

All Borrowers will need to complete IRS Form 8828, Recapture of Federal Mortgage Subsidy,

when they file their federal income taxes for the year in which the home is sold or disposed of.

This form calculates any recapture tax that may be due. Borrowers having specific questions

regarding the correct completion of this form should contact the IRS for assistance.

Lender’s Responsibility

At loan application, it is the Mortgage Lender’s responsibility to make the applicant aware of the

federally-imposed recapture tax by presenting to the applicant for signature the Notice to Buyers

(Form 15.7). This form is included in the Forms section of this Program Manual. A copy of this

form is provided to the applicant and the original form is submitted with the Pre-Closing

Compliance Review file.

A sample worksheet entitled Notice to Mortgagor of Information Regarding Potential Federal

Subsidy Recapture Tax (Form 15.10) should be attached to the applicant’s copy of the Notice to

Buyers form. This worksheet shows an example of how to calculate the recapture tax based on

the total amount of federal subsidy the Borrower receives.

At loan closing, the Mortgage Lender must have the Borrower(s) sign the Notice of Potential

Recapture Tax on Sale of Your Home (Form 15.14). This form, included in the Forms section of

this Program Manual, once duly executed is submitted with the Post Closing Compliance Review

loan file and a copy is provided to the Borrower.

If the Mortgage Lender does not sell the Mortgage Loan to the Commission, the Borrower must

be notified that the recapture tax provisions no longer apply. A Notice of Cancellation of

Recapture Tax form (Form 15.29) is provided in the Forms section of this Program Manual.

This form must be provided to the Borrower on the Mortgage Lender’s letterhead if the

Mortgage Loan is not purchased by the Commission.

Commission’s Responsibility

Within 90 days after loan closing the Commission will provide a notice to the Borrower detailing

the recapture tax calculation.

HOUSE KEY MANUAL 38

6 - HOMEBUYER EDUCATION

Edited 01/3/2023

Policy

All Borrowers listed on the Note and Deed of Trust need to complete a Homebuyer Education

Seminar registered through the Commission that meets the standards stated in this section.

Potential homebuyers must each have their own individual Completion Certificate before

reservation of funds for Commission Programs. If a reservation of funds is made before the

borrower(s) take a Commission sponsored homebuyer education course, the current reservation

will be considered invalid and will be subject to worse case pricing. No Exceptions.

Completion Certificates remain valid for two years and if lost can be re-issued so long as the

Commission’s database of seminar participants confirms attendance. Instructors will be limited

to teaching no more than 2 classes per week and no more than 1 class per day. Both instructors

are required to stay for the entire class time.

Seminar Instructors

All seminar instructors must complete the Commission’s Program and Homebuyer Education

Instructor training. Additionally, it is recommended that seminar instructors have a minimum

of two years residential mortgage lending experience. All seminars must be co-instructed by a

lending professional and a real estate professional who have attended the Commission’s

Program and Homebuyer Education Instructor training. Two exceptions exist:

• In outlying areas where there are no real estate professionals, real estate professionals

who have not attended Commission’s Program training may be invited as guest speakers

only. Advanced approval by the Commission is required.

• Nonprofit 501(c) 3 organizations conducting seminars are highly encouraged to include

Commission trained real estate professionals, but are not required to include them.

To remain eligible to teach our seminars, real estate professionals and nonprofit 501(c) 3

organizations need to annually co-instruct with a Commission trained lender at least one

Commission sponsored seminar. Mortgage loan originators need to annually close and have

purchased by the Commission a minimum of one Commission Program loan.

Seminar instructors have the option of teaching an in-person or virtual class. Hybrid classes are

not permitted.

HOUSE KEY MANUAL 39

Prior to registering your first virtual homebuyer education class, each instructor will need to

do the following:

• Virtual Class: Before you use Zoom (or another virtual classroom platform) the first

time for your classes, each instructor will need to email Corinna Obar and explain in

writing:

1. How you will gather contact and demographic information for each

attendee to be forwarded to us after the class;

2. How you will ensure that each attendee is present for the full 5 hours;

3. How you will ensure that each attendee receives their certificate.

Instructors Who No Longer Work for a Participating Lender

Previously Commission trained lending instructors who move to Non-Participating Commission

Programs lending institutions may temporarily continue to teach homebuyer education until

their new company is approved as a participating lender. If new lending institution is not

eligible to participate, you cannot teach our seminars. The instructor must receive permission

from the Commission in advance and must teach with a Commission trained real estate

professional or nonprofit. The Commission will not be able to publicize these seminars on our

Website.

Seminar Format

The Commission requires all seminars offered contain the following elements:

• free of charge

• open to the public.

• a total minimum seminar time of five hours of actual class time, plus breaks

• unbiased format

• effective coverage of ALL subjects listed under "Seminar Curriculum" located in this

section of the Program Manual.

Seminar instructors may coordinate guest speakers to present specific topics such as credit,

property inspections, etc. The purpose of the seminars is to present information in an unbiased

learning environment.

Instructors may place business cards at a central location. Sales presentations are

prohibited.

HOUSE KEY MANUAL 40

Seminar Curriculum

The Commission developed and utilizes homebuyer education minimum benchmark standards

as outlined in the National Industry Standards for Homeownership Education to ensure all

participants receive the necessary information to become informed homeowners. The below

standards apply to all Commission-sponsored Homebuyer Education seminars.

1. Advantages/Disadvantages of Owning a Home

2. Steps to Homeownership

3. The Players in the Homebuying Process

4. The Benefits of Getting Loan Pre-Qualified & Pre-Approved Before Searching for a Home

5. Shopping for a Lender

6. How Much Can You Afford? Risk Layering and Compensating Factors

7. Identifying Credit Issues and How to Address Them

8. How Much Money Will You Need?

9. Selecting a Loan Program and How Downpayment and Past Credit Affect Loan Choices

10. Secondary Market Explanation

11. Budgeting/Saving for the Downpayment and Closing Costs

12. How to Shop for a Real Estate Professional – Understanding Agency Representation

13. Selecting a Home and Negotiating a Purchase Price

14. The Importance of a Home Inspection

15. Commission program overview including Home Advantage, downpayment assistance

options, House Key program – Recapture Tax, Occupancy and Property Restrictions

16. The Loan Closing – What to Expect, Review Sample Loan Documents

17. Foreclosure Prevention and Early Delinquency Intervention

18. Home Maintenance

19. Consumer Protection Resources

20. Community Resources for Further Counseling or Other Assistance.

21. Fair Housing

22. Predatory Lending

23. How Going Green Saves Money

Interpreters

The Commission pays for the use of ASL interpreters if sufficient notice is given (6-8 weeks),

subject to cost and availability of funds.

Seminar Workbooks

The Department of Financial Institutions (DFI) provides free participant workbooks.

Instructors must coordinate directly with the DFI for delivery of seminar workbooks. Order the

books at this link.

HOUSE KEY MANUAL 41

Commission Provided Materials

The Commission's Participant Registration Forms, brochures, evaluation forms, and

Completion Certificates are required for use in all registered seminars. These documents are

provided by the Commission. When the instructors registered seminar is approved, the

Certificate, participant registration and evaluation forms will be emailed to the instructors

shortly after receiving class approval. The instructors are responsible for providing the required

participant registration and evaluation forms and certificate to each attendee. The certificate

must be signed by all instructors.

The instructors are responsible for having all required forms from the Commission in advance of

the seminar.

Additional handouts on a variety of homebuying topics as well as the Commission’s programs

are available upon request or on the Web site.

Seminar Arrangements

Edited 11/5/2020

Please see our instructor information page with links to registration form. Please register each

seminar online at the Commission website at least six weeks in advance. It is the instructor’s

responsibility to register and have their seminar approved by the Commission in advance. The

Commission cannot retroactively sponsor a class, no exceptions. It is the instructor’s

responsibility to check the Commission’s Website approximately one week after registration to

make sure all information is correct.

When a seminar’s date or location change, please cancel the first seminar and submit a new

online registration with the new information using the links under “Homebuyer Education

Seminar Set-Up for Instructors.” A new class number will be assigned to the new registration.

If the class has a time change or an instructor change, please submit a registration using the

UPDATE button.

At the seminar, please make sure all participants complete all questions on the Participant

Registration Form. If the seminar is an in-person seminar, please make sure all participants

write legibly with a ballpoint pen prior to issuing a completion certificate. Blue or black

ballpoint ink is recommended. Be sure the class control number and seminar date are correct.

At the end of the seminar, ask participants to complete the evaluation form. Return the routing

slip, completed evaluation forms and Participant Registration Forms to the Commission via

regular mail or via email to semsetup@wshfc.org.

Seminar participants are not to be contacted after the seminar unless you have written

permission from the participant to do so. Instructors should not be interfering with any existing

working relationships.

HOUSE KEY MANUAL 42

Issue a separate, signed and completed Completion Certificate to each individual participant

who completes the Participant Registration Form and finishes the 5 hours of classroom

instruction. Discard leftover Completion Certificates and evaluations. Seminar instructors

should inform participants of their need to provide a copy of their Completion Certificate to

their loan officer for Home Advantage or other Community Homebuyer type loans.

For additional help, please see the Seminar checklist at the end of this section when setting up a

homebuyer education seminar.

Publicity

The Commission maintains a Homebuyer Education Seminar Schedule and makes it available to

the general public. All seminars are posted to the seminar schedule on our Web site within 60

days of the seminar unless special circumstances exist and are pre-approved by the Commission.

Instructors are encouraged to also publicize seminars on their own. Usage of the

Commission’s logo is prohibited. A homebuyer education icon and mandatory disclaimer

have been developed for use by instructors. Please contact the Homeownership Manager for

further information on name and icon usage. Any advertising using our name and showing the

language “seminar sponsored by the Washington State Housing Finance Commission,” must be

approved by the Homeownership Manager prior to use.

Online Course Homebuyer Education Policy

Edited 09/01/2021

The homebuyer is highly encouraged to take a free virtual or in-person seminar as listed on our

Website. If the homebuyer is unable to take a virtual or in-person class, they can also take the

online self-study course offered on the Commission’s website. The loan officer will direct their

homebuyer to our website at www.ehomeamerica.org/wshfc. Each homebuyer will log into the

course individually by creating their own username and password. Upon successful completion

of the course, each homebuyer can print out a Certificate of Completion. The cost is $50.00 per

person and the course will take approximately 6-8 hours to complete. The loan officer will enter

the certificate number (s) into the reservation system. This course linked to our website is an

online course accepted by the Commission.

On-line eHomeAmerica Certificate of Completion issued by HomeSight, Community

Frameworks, NeighborWorks of Grays Harbor County or Homestead Community Land Trust

are acceptable by the Commission, provided each borrower has their own separate certificate

with a separate certificate number. These on-line courses may be at a higher cost and additional

requirements may be needed. The Commission does not accept any other certificates including

those from mortgage insurance companies, Framework and CreditSmart. There are no

exceptions to this policy.

HOUSE KEY MANUAL 43

Disciplinary Action

All Instructors have signed and agreed to the Commission’s “Standards of Performance” at

training. Instructors not following our “Standards of Performance,” ethical standards, policies,

and format will not be eligible to teach Commission sponsored homebuyer education seminars.

At the Commission’s sole discretion, we reserve the right at any time to permanently discontinue

sponsorship of a particular instructor’s seminar or to deny an instructor access to Commission

training programs based on their lack of adherence to our guidelines.

HOUSE KEY MANUAL 44

Seminar Checklist

6-8 WEEKS MIMINUM BEFORE SEMINAR

 Determine Seminar Location

 Schedule Seminar Date & Time

 Initiate Marketing Plan to Advertise Seminars.

 Forward marketing materials to Commission prior to distribution for approval when

using our name in advertising

 Select & Review Curriculum

 Determine Guest Speakers

 Register Seminar with the Commission on-line at

http://www.wshfc.org/sf/SemSetUp.html

 Check for Seminar Approval Email

 Check Commission Website within one week of registration for accuracy and notify

Commission of any changes to seminar

 Arrange for ASL Interpreters with Commission (if needed)

4-5 WEEKS BEFORE SEMINAR

 Order or Download Your Workbooks from DFI (minimum 4 weeks in advance)

 Start Your Agenda

 Practice Your Presentation

 Set up Internal Procedure to Register Participants

 Send Guest Speaker Confirmation Letter

1-3 WEEKS BEFORE SEMINAR

 Finish Seminar Agenda

 Follow up with Commission if you have not received your Commission provided

materials or download materials

 Prepare Additional Seminar Materials

 Arrange For Refreshments

 Confirm Guest Speaker

 Confirm Room Arrangements

 Follow Up With DFI if books have not been received

THE DAY OF THE SEMINAR

 Set up virtual equipment or the room, if applicable

 Check Your Audio Visual Aids

 Set Up Refreshments

 Set Out or email Participant Registration Forms

 Set Out or email Seminar Materials

 Bring “Care Package”, if applicable

 Set Out Business Cards, if applicable

HOUSE KEY MANUAL 45

AT THE SEMINAR

 Make Sure All Participants complete the Participant Registration Form

 Leave Time for Questions

 Make Participants Complete Evaluations

 Issue Completion Certificates when you receive a complete Participant Registration

Form

 Have Fun!

AFTER THE SEMINAR

 Follow Through with Any Questions or Requests for Information

 Send Thank You Notes to Guest Speakers

 Review Evaluation Forms and Make Modifications to future classes as Needed

 Return Evaluation Forms and Participant Registration Forms with Routing

Slip to the Commission via email to semsetup@wshfc.org or by mail.

 Discard Leftover Completion Certificates and Evaluations

 Originate House Key loans

 Plan Next Seminar

HOUSE KEY MANUAL 46

7 - RESERVATION PROCESS

Edited 09/12/2018

In General

House Key Opportunity Program funds may be reserved pursuant to a first-come, first-served

reservation system funded from a statewide pool of funds. Funds may be reserved once an

individual has a fully executed (signed by both buyer and seller) Purchase and Sale Agreement,

has demonstrated completion of a Commission sponsored Homebuyer Education seminar, has

completed a loan application with a Commission trained Mortgage Lender, and appears to meet

Program compliance.

Making a Reservation

The Mortgage Lender can reserve funds using the On-line Reservation System described in the

following pages of this section. Rate locks on a reservation may be made from 9:00 am – 4:00

pm Prevailing Pacific Time Monday through Friday excluding holidays.

The loan originator reserving funds must match the name of the loan originator on the

borrower(s) loan application.

Length of a Reservation

The length of the reservation will be announced with each program announcement. If the

complete Post Compliance Review Package is not received and approved by the Commission on

or before the expiration date, the reservation is automatically cancelled.

Extensions to Reservations

Edited 2/19/2021

An extension (either 7, 15, 22, 30, 45 or 60 days) to a reservation must be made electronically in

writing by 4:00 pm, prevailing Pacific Time, prior to the expiration of the lock and sent to

[email protected]rg for approval using the Rate Lock Extension Form provided on our Website

at http://www.wshfc.org/sf/HAforms.html. Extension fees are netted out at loan purchase.

HOUSE KEY MANUAL 47

Extensions will not be accepted via telephone, fax, or through an email to an individual

employee of the Commission. An extension will require approval by the Commission and will be

subject to market conditions. A fee of .09375% of the loan amount will be applied to 7 day

extensions. A fee of .18750% of the loan amount will be applied to 15 day extensions. A fee of

.28125% of the loan amount will be applied to 22 day extensions. A fee of .37500% of the loan

amount will be applied to 30 day extensions. A fee of .56250% of the loan amount will be

applied to 45 day extensions. A fee of .7500% of the loan amount will be applied to 60 day

extensions. Fees may be higher depending on market conditions. An acknowledgement of the

received email and approval will be sent back to the Lender on the same business day for all

extensions made prior to 4:00 pm PT and a condition with the appropriate fees will be posted to

the reservation system.

If the Lender fails to extend the lock prior to expiration of the reservation, the Commission will

automatically extend the lock and fees netted out at time of loan purchase. The Commission is

not obligated to purchase the loan if the lender fails to extend the lock prior to expiration of the

reservation.

Changes to a Reservation

Edited 11/16/2020

Changes to a loan reservation can be made by completing and submitting the “Reservation

Change Request” form found on our website to lockdesk@wshfc.org.

Changes can be made for the following reasons:

1. Increasing or decreasing the loan amount (subject to the availability of funds)

2. Increasing or decreasing the purchase price

3. Adding or deleting Borrower; however, one of the original Borrowers must remain with

the reservation.

4. Changing from one loan type to another (i.e., conventional to FHA).

5. Adding or changing Downpayment Assistance.

6. Request to change the rate and fee option corresponding to the date of original

reservation, if applicable

If there is a change in the property being purchased (or the lot number for new construction),

the Mortgage Lender must cancel the original reservation at the old address and re-register a

new reservation at the new address.

If a Pre-Closing Compliance file has already been submitted for the old address, please submit

new purchase and sale contract, loan application, and new Pre-Closing Compliance Review

Checklist with new WSHFC reservation number.

HOUSE KEY MANUAL 48

Expired Reservations

The Commission’s loan reservation policy authorizes the Lender to make a reservation for funds

on behalf of the borrower(s) for a set period of time (lock period). After completing the

reservation, the Lender may not cancel and re-reserve funds to obtain a lower interest rate. This

policy applies to both existing and expired loan reservations. Extensions to existing or expired

reservations are at the sole discretion of the Commission.

Extensions to an expired reservation will be based on original rate lock price plus appropriate

extension to bring the reservation current. Extension fees will apply.

In the event the purchase and sale contract is terminated, the Lender must cancel the loan

reservation immediately. If the borrower subsequently enters into contract for a different

property, the Lender may complete a new reservation for funds subject to current interest rates.

Duplicate reservations are not allowed.

Cancelled Reservations

Lenders can cancel their reservation on-line until a file is submitted for pre-closing compliance

approval and then afterwards by emailing homedocs@wshfc.org. Once a loan reservation is

canceled, the funds previously reserved through the Mortgage Lender for that Borrower must be

returned to the pool for use by the next applicant. If a lender needs to reserve funds for the

same property, the lender must wait at least 60 days from the date of cancellation in order to re-

reserve or the original lock will be reinstated and loan must be delivered within the original lock

period or extension fees will apply. The funds cannot be transferred to another of the Mortgage

Lender’s files.

Reservation Transfer

At the Borrower's option, a Mortgage Lender may request that a reservation be transferred to

the requesting Mortgage Lender from the Mortgage Lender who made the original reservation.

This can be done by submitting a letter from the Borrower to the Commission. The requesting

Mortgage lender must include a cover letter that outlines the situation and includes their

certification number, bank number, and branch number and a letter from the Borrower

requesting the transfer. This must be done prior to the original Mortgage Lender canceling the

reservation. Only one transfer per Borrower is allowed. A Borrower may not have more than

one reservation at any one time. A reservation may not be transferred to another borrower or to

another property.

HOUSE KEY MANUAL 49

Waiting List

Reservations received by the Commission after all Program funds have been allocated will be

placed on a waiting list. Mortgage Lenders are encouraged to use the waiting list to insure

applicants will be first in line for the next available funds and/or be moved up on the waiting list

as reservations are canceled or rejected. A wait list confirmation letter can be printed from the

system to show Borrower is on wait list.

Status of Loans

Mortgage Lenders can review status of loans on-line on a regular basis. See the Loan

Tracking Status section of this chapter for further information and instructions.

On-Line Reservation System

To access the On-line Reservation System, type in the following Internet address:

lenders.wshfc.org/Bin/Display.exe/ShowSection

Following are step-by-step instructions for entering data onto each screen of the On-line

Reservation system:

LOAN ORIGINATOR LOGIN SCREEN

1. System Login

2. User Name and Password

All loan originators registered with the Commission will receive a User Name and

Password from the Commission prior to being authorized to enter new reservations. All

other personnel, unless authorized in writing by the Mortgage Lender’s contact will

receive a User Name and Password to view the pipeline status of loans. For security

purposes, if prompted to change your password, the new password must be a minimum

of 3 characters with upper and lower case letters and numbers.

3. Login

If all of the information you have entered on the User Name and Password is correct,

click the Login button.

4. Clear

If the information you have entered on the User Name or Password is incorrect, move

back to the appropriate filed, clear and re-input the data.

On the next screen displayed, select the New Reservation tab to bring up program options

screen.

HOUSE KEY MANUAL 50

AVAILABLE 1

MORTGAGE OPTIONS

1. Select a 1

Mortgage Program by clicking on the + sign to expand available options.

2. Click on the appropriate 1

mortgage program option

3. Once you have selected your 1

mortgage loan type, you will be prompted to choose a 2

mortgage. If there is no 2

mortgage click on Continue Without Additional

Mortgage(s) to continue reserving only a 1

mortgage.

4. Click on the radio dial next to the applicable 2

mortgage program then click “Continue

With Additional Mortgage(s).

Loan Information Screen

All data for both 1

and 2

loan reservations are entered on one screen.

Fields marked with an * are required.

First Mortgage Section:

Lender Loan Number

Loan Type (select appropriate entry from the drop down box)

Loan Amount (use whole dollars only)

Loan Term (360 months only option from drop down box)

Interest Rate (will correspond with current day lock rates in drop down box)

Second Mortgage Section, if applicable:

Loan Amount (rounded down to nearest dollar).

Borrower Section:

1. First Name, Middle Initial and Last Name (IN ALL CAPS)

2. Borrower Social Security Number (No dashes)

3. Sex—M/F

4. Ethnicity

5. Marital Status

6. Borrower(s) email address

Current Address Section: This section is optional.

If you have a co-borrower check the appropriate box and complete required fields.

When all of the information is keyed, click on the Submit button at the bottom of the screen.

If information entered is incorrect there are two possible error codes you may receive:

Reservation is DENIED for the following reason(s).

HOUSE KEY MANUAL 51

Or if a required field (*) is missing data.

Confirmation of On-Line Reservation

Upon completion and submission of the reservation lender will receive a Reservation Accepted

confirmation. You may view or print the lock reservation.

Tracking Loan Status

All loans can be reviewed on line using individual Originator codes/passwords or by using back

office codes/passwords assigned to each Lender personnel.

Lenders may check the status of a loan. Choose the “Loan Status” tab from the menu bar. You

may search for the loan by using the WSHFC loan number, Lender Loan number, Borrower

name or social security number.

Once the loan have been found, choose the appropriate action from the Actions Menu.

View —This will provide you the loan details including loan terms, current status,

outstanding conditions and name of Commission file reviewer.

Reprint —This will allow lender to save or re-print the reservation confirmation

PDF Docs —Access all of the PDF documents available for the file. You may generate

the pre-closing checklist, FHA DPA Award and DPA Commitment Letters, 2

mortgage

Notes and Deed of Trust or program documents pertaining to the file. Check the

appropriate box of item to print and click “Generate Documents” tab.

eDocs —Section to upload files and conditions.

HOUSE KEY MANUAL 52

8 - LOAN ORIGINATION & PROCESSING

Edited 11/01/2023

The documents discussed below must be provided or received from the applicant at loan

origination in addition to any documents, forms and disclosures required by state or federal law.

Documents Borrower Submits for a House Key Opportunity Loan

 Copy of the Homebuyer Education Certificate for each borrower that will be

on the note and deed of trust.

 Copy of 3 years signed & dated Tax Returns (most current) and/or Statement

of Income Tax Filing (Form 15.12).

 Copy of recent paycheck stubs (minimum of 2 for each employed borrower)

and any other documents necessary to verify the borrowers’ current income.

 Addendum to Residential Loan Application (Form 15.6.1-3), signed and

dated by borrowers.

 Notice to Buyers (Form 15.7), signed and dated by borrowers.

 Provide Notice to Mortgagor Regarding Potential Recapture Tax (Form

15.10.1-5) to borrowers at application.

 Income and Household Members Disclosure (Form 15.8), completed,

signed and dated by borrowers.

Processing a House Key Loan

A House Key Opportunity loan is processed and underwritten in accordance with standard first

mortgage guidelines by the Mortgage Lender. The following sections address compliance

items reviewed by the Mortgage Lender during Origination and Processing prior to submitting a

pre-closing compliance file. Please review House Key Opportunity Manual. The following

sections are meant as a general guide to processing a House Key Opportunity loan and may not

be all-inclusive. The Commission’s EIN#: 91-1874730

HOUSE KEY MANUAL 53

RESIDENTIAL LOAN APPLICATION (FORM 1003)

❑ Verify that all income sources disclosed on the Loan application have been documented.

❑ Verify borrower’s marital status (if purchasing as Married, Separate Estate, the income

of the spouse must be documented and included in the Compliance Income).

❑ Verify that family size is consistent with reservation.

❑ Verify that child support and alimony income has been addressed or documented.

❑ Verify that borrower has not owned a primary residence in the last 3 years.

❑ Verify that you have the income issue addressed or documented for all occupants who

will turn 18 years old within the 12 months following loan closing.

CREDIT REPORT

❑ Verify no past mortgage(s) within the last 3 years if property is located in non-targeted

area. If mortgage appears, document Borrower has not occupied mortgaged property.

Verify borrower(s) has a minimum credit score allowed per agency guidelines, unless

further restrictions apply.

VERIFICATION OF EMPLOYMENT AND PAYCHECK STUBS

❑ Verify that you have a VOE and current paycheck stubs for all jobs currently held by the

borrowers or by additional occupants. Please see the Eligible Borrowers section for

calculation of household compliance income.

❑ The Verification of Employment (VOE) should provide start date, number of hours

worked, projected date and amount of next pay increase, bonus and overtime

information, hourly/monthly/yearly rate of pay and all year-to-date earnings

information.

❑ Verbal VOE’s are acceptable in lieu of written VOE’s if the employer is willing to verbally

verify all above-mentioned information.

❑ A minimum of two paycheck stubs must be provided for each employed borrower or

additional occupant and must be no older than 45 days.

❑ Verify that VOE and paycheck stub provide consistent information or explain

discrepancies.

HOUSE KEY MANUAL 54

TAX RETURNS

❑ Verify that you have signed and dated copies of complete federal income tax returns (US

or any other country) filed for the three tax years (photocopies of signatures and dates

are acceptable).

❑ Verify that you have complete returns, with all schedules included.

❑ Verify that all income sources disclosed on tax returns have been documented.

❑ Verify that all dependents on tax returns match loan application and reservation or

explain discrepancies and provide income documentation as necessary.

❑ Verify that you have 3 years of tax returns for spouse regardless of occupancy.

If the applicant has not yet filed a federal income tax return for the proceeding year, the

applicant(s) must sign the Statement of Income Tax Filing (Form 15.12) agreeing to provide a

signed copy of the return to the Mortgage Lender at such time it is filed. This form is located in

the Forms section of this Program Manual. The Statement of Income Tax Filing form may also

be used if the applicant(s) is not required by law to file a federal income tax return for any year

during the preceding three years.

If copies of the previously filed returns are not available at the time of loan application, the

applicant may request the required copies from the Internal Revenue Service on IRS Form

4506, Request for Copy of Tax Form.

In lieu of actual copies of the 1040 forms, the IRS Letter 1722 or Printout, issued by the Internal

Revenue Service will be accepted. However, for all years when a regular 1040 was filed, the IRS

Letter 1722 or Printout must indicate whether a Schedule “A” was filed and if so, if mortgage

interest was claimed by the taxpayer.

The only forms acceptable are 1040 Regular (both sides), 1040-A, 1040-EZ, or completed

telephonically filed returns with IRS confirmation number.

E-file Tax Declaration Form 8453 is not acceptable.

Printouts from the tax preparer’s computer are not acceptable.

Printouts from Credit Bureau links to the Internal Revenue Service are not acceptable.

APPRAISAL

❑ Verify that subject property is a single family a residence containing only 1 self-sufficient

unit. If manufactured, verify subject meets agency guidelines.

❑ Verify that the subject property does not have excess land value (the Program is

generally restricted to two acres or less).

❑ Verify that there is only 1 tax parcel number for the entire parcel.

HOUSE KEY MANUAL 55

REAL ESTATE PURCHASE AND SALE AGREEMENT

❑ Verify that the Purchase Price and Acquisition Cost is within the allowable County limits.

❑ Verify that the Agreement was signed and dated by Borrower(s) and Seller(s) prior to the

reservation of funds.

❑ Verify that there is only 1 tax parcel number for the entire parcel.

HOMEBUYER EDUCATION CERTIFICATE

❑ Required for all borrowers who will be listed on the Note and Deed of Trust.

❑ Verify that the certificate is a WSHFC issued certificate, signed by the instructors.

❑ Verify certificate issued within the last two years.

❑ Verify seminar completed prior to the reservation of funds.

(Note: If an applicant indicates they have lost their Certificate, the Commission can re-issue

one if attendance can be confirmed.).

Documents Prepared During Origination/Processing

 Down Payment Assistance Needs Assessment

If the borrower is using any of the Downpayment Assistance programs, the completed

Needs Assessment Worksheet must be completed and signed by the Lender’s

Underwriter prior to approval of the Pre-Closing file. All downpayment assistance

programs are based on need. See the Downpayment Program section of this manual for

further information.

HOUSE KEY MANUAL 56

9 - PRE-CLOSING COMPLIANCE REVIEW & APPROVAL

Edited 03/01/2018

Purpose of Pre-Closing Compliance Review

One of the principal reasons for the pre-closing compliance review process is to provide

Mortgage Lenders a level of assurance that, given no changes in the basic conditions of the

transaction, the Mortgage Loan is qualified for purchase by the Master Servicer.

This pre-closing review process is in place only as a service to Mortgage Lenders and does not

automatically guarantee that loans will be purchased. Additionally, if a loan is purchased and is

subsequently found not to meet Program requirements, the Commission has the authority to

request that the Mortgage Lender repurchase the Mortgage Loan.

Following is the procedure for Mortgage Lenders to use when submitting a Mortgage Loan for

approval to close:

Submission of Loan File

Once the Mortgage Lender obtains all items as listed on page 15.13.1 of the Pre-Closing

Compliance Review Checklist Mortgage, the Mortgage Lender is strongly encouraged to submit

the file early in the process to the Commission for review. If using downpayment assistance, all

items on form 15.13.2 are needed prior to final compliance approval. However, the file can

initially be submitted with the items on page 2 to follow. The Commission does not require full

loan approval by the Mortgage Lender prior to submitting the file for compliance review.

Files must be submitted in the order specified on the Pre-Closing Compliance Review Checklist

(Form 15.13). This Checklist is located in the Forms section of this Program Manual.

Where to Submit Files

Please upload Mortgage Loan file prior to closing electronically to Emphasys.

Please note: The Commission does not accept electronic “secured” files requiring passwords.

Review Procedure

Each Mortgage Loan file will be reviewed approximately within two business days by

Commission staff for compliance with Program requirements. The results of the review will be

posted at this link.

HOUSE KEY MANUAL 57

If a file is suspended, the loan stage will be updated to show as “Pre-Review/Incomplete” and

the suspense conditions will be posted on our on-line system. When the file is approved to close

the loan stage is updated to “Committed” and the Mortgage Lender can review and print our

loan approval and conditions from on-line system. The Commission’s on-line system interfaces

with the Master Servicer’s system eliminating the need for Mortgage Lenders to provide them a

copy of the approval.

Following acknowledgment of approval to close authorized on the Pre-Closing Compliance

Review File Checklist, Mortgage Lenders may close the Mortgage Loan.

The Commission reserves the right to return any file submitted for approval to close that lacks

adequate documentation or does not meet Program requirements.

Checking Mortgage Loan Status

Mortgage Lenders can access Mortgage Loan information using the On-line Loan Tracking

System Web site 24-hours a day at this link.

The Commission will assign log in for office staff to use for viewing and printing file status and

conditions.

Lenders may check the status of a loan. Choose the “Loan Status” tab from the menu bar. You

may search for the loan by using the WSHFC loan number, Lender Loan number, Borrower

name or social security number.

Once the loan have been found, choose the appropriate action from the Actions Menu.

View — This will provide you the loan details including loan terms, current status,

outstanding conditions and name of Commission file reviewer.

Reprint — This will allow lender to save or re-print the reservation confirmation

PDF Docs — Access all of the PDF documents available for the file. You may generate

the pre-closing checklist, FHA DPA Award and DPA Commitment Letters, 2

mortgage

Notes and Deed of Trust or program documents pertaining to the file. Check the

appropriate box of item to print and click “Generate Documents” tab.

eDocs — Section to upload files and conditions.

All conditions pertaining to both the first and second mortgage loans will be posted on the first

mortgage loan approval.

HOUSE KEY MANUAL 58

10 - LOAN CLOSING

Edited 06/17/2019

Compliance Approval

Once the Commission approves the Mortgage Loan for compliance, the Mortgage Lender may

close the loan.

All House Key loans must be delivered to Idaho Housing and Finance Association

(IHFA). Each loan must satisfy the following terms and conditions:

Closing Documents

In general, the Mortgage Lender must insure that all documents are properly executed and

notarized where necessary. To make a correction to a recordable document, the Mortgage

Lender must upload a letter to the Master Servicer stating the correction that is to be made, to

which document(s), and the Mortgage Lender's intent to re-record. Lenders will upload to the

Lender Connection portal at www.lenderwa.com.

Additional information is provided below to assist the Mortgage Lender in the proper manner in

which to complete documents and forms.

❑ NOTES AND SECURITY INSTRUMENTS

In General:

All mortgage loans must be closed using the most recent 1-4 family FHA, VA, Freddie

Mac or Fannie Mae instruments at the time of closing. Please review Deed of Trust for

completeness and accuracy. If not executed properly, this document will be returned to

the Mortgage Lender for re-recording.

USDA Rural Development Loans:

USDA Rural Development loans are to be closed using the most current FHA documents

with a 4% late charge or the most current conventional documents with a 5% late charge.

HOUSE KEY MANUAL 59

Document Endorsement:

The original First Mortgage Note for Fannie Mae or Freddie Mac Conventional

must be endorsed on the back side as shown below allowing space for additional

endorsements:

Pay to the Order of Idaho Housing and Finance Association without recourse

Lender Name (as it appears on the Note)

(Signature of Authorized Person)

Signatory’s Typed Name and Title

The original First and Second Mortgage Notes must be delivered to:

Idaho Housing and Finance Association

Attn: Document Center

565 W. Myrtle St

Boise, ID 83702

Signature and Name Affidavit required.

Return of Original Note:

If the original Note needs to be returned for any reason, it will be sent by overnight mail

at the Mortgage Lender's expense. After being corrected, it is to be returned by

overnight mail to IHFA.

❑ NOTES AND SECURITY INSTRUMENTS

The loan file must include a copy of the Deed of Trust/Mortgage. The copy must be

certified as a true and correct copy of the original, and must include a copy of any

appropriate, completely executed riders. Copies with live signatures or conformed

copies are not acceptable. Loans with secondary financing must also include a copy of

the Deed of Trust/Mortgage from the subordinate lien.

All corrections, additions, and deletions pertaining to loan items must be initialed by the

borrowers. If the Deed of Trust/Mortgage has already been sent for recording, the

Mortgage Lender may provide a good faith letter for correction.

❑ ASSIGNMENT OF DEED OF TRUST

All 1

Mortgage loans must be registered via the Mortgage Electronic Registration

System (MERS) in lieu of a standard Assignment of Mortgage.

HOUSE KEY MANUAL 60

Transfer to MERS using the following:

MERS ID : 1009670 Idaho Housing and Finance Association

HUD ID: 1010109998 Idaho Housing and Finance Association

❑ TAX-EXEMPT FINANCING FIRST MORTGAGE RIDERS

• Single-Family Deed of Trust Rider – FHA, VA & USDA

• Conventional Rider to Security Instrument

First Mortgage Riders must be included in purchase files sent to IHFA, as applicable.

❑ POWER OF ATTORNEY

IHFA will accept a Specific Power of Attorney that references the property, and

authorizes the attorney-in-fact to enter into a real estate transaction and to mortgage the

property. The Power of Attorney must:

• indicate clearly that the mortgagor is appointing an attorney-in-fact;

• precisely identify who is being appointed;

• be signed and dated by the borrower;

• be notarized; and

• be recorded prior to, or concurrent with, the security instrument.

❑ CLOSING DISCLOSURE

A copy of all Closing Disclosures with executed addendums and copy of the final stamped

Closing Disclosure for both the first and second mortgages must be included with every

loan file submitted to Lakeview Loan Servicing, LLC for purchase to confirm that the

loan has closed. The Closing Disclosure must contain the following:

• The box corresponding to the appropriate loan type should be checked.

• Names of borrowers that match the names on all legal documents.

• Name of property sellers and borrowers, as identified on the Title Policy.

• Property location that matches the Note, Deed of Trust, appraisal, and

application.

• Settlement date. This date may or may not be the same as on the Deed of Trust.

• Valid COC’s along with proof of receipt of all CD’s.

❑ AGGREGATE ESCROW DISCLOSURE STATEMENT

All Mortgage Loans must be closed following the Real Estate Settlement Procedures Act

(RESPA) guidelines. RESPA regulates the amounts which Mortgage Lenders may hold

in impound/escrow accounts established for the payment of real estate taxes and

HOUSE KEY MANUAL 61

insurance. RESPA requires impound/escrow accounts to be established using the

aggregate analysis method.

With the aggregate analysis method, the total disbursements of all items impounded

(such as property insurance, mortgage insurance, and property taxes) is calculated, and

then divided into 12 equal installments. The Mortgage Lender must also include an

additional 2 month reserve for all escrow items with the exception of MI.

When an escrow account is established at the time of loan closing, the Mortgage Lender

must provide the borrowers a disclosure, detailing the anticipated disbursements from

the impound/escrow account for the 12 months following the loan closing. The

disclosure also states the amount of the monthly impound/escrow payment that will be

made by the borrowers. If the exact amounts of the disbursements are not known at the

time of loan closing, the statement is to be prepared using the Mortgage Lender’s best

estimates. Although Mortgage Lenders have the option of analyzing the

impound/escrow account at closing or within 45 days of settlement Lakeview Loan

Servicing requires a copy of the initial escrow account statement.

❑ LOAN APPLICATION (1003)

The Master Servicer require a typed, signed Final 1003 in all purchase files.

❑ LOAN DISCLOSURE NOTICES

Loan disclosure notices must be provided, as applicable. A Notice of Assignment, Sale or

Transfer of Servicing (good-bye letter), and a First Payment Notification are required for

all Mortgage Loans. An interest rate disclosure is required for all VA Mortgage Loans.

Closing Documents (Commission Second Mortgages)

❑ DOCUMENTS REQUIRED ON OF ALL COMMISSION DOWN PAYMENT

ASSISTANCE AND SUBSIDY MORTGAGES

The Mortgage Lender must submit the following closed loan documents to the Master

Servicer:

• Original second mortgage Note closed in the name of the Washington State Housing

Finance Commission

• 2

Loan Deed of Trust, must be in the name of the Washington State Housing

Finance Commission

• Loan Estimate and Closing Disclosure for 2

loan

MERS is not permitted for Commission second mortgages.

HOUSE KEY MANUAL 62

Rate Lock Extension Fees

Rate lock extension fees are netted out at time of loan purchase.

HOUSE KEY MANUAL 63

11 - POST CLOSING COMPLIANCE REVIEW & APPROVAL

Edited 06/30/2023

Submission of Mortgage Loan File

After closing, and within the reservation period, Mortgage Lenders must submit the complete

Post Closing Compliance Review Mortgage Loan file to the Commission for final review and

approval for purchase by the Master Servicer.

Items Needed at Post Closing Compliance

1. A Copy of the House Key Opportunity Post-Closing Compliance Review File

Checklist (15.20.01)

2. A Copy of the Final Closing Disclosure for First and Second (as applicable)

❑ Verify Closing Disclosure(s) is marked as “Final.”

❑ Verify borrower did not receive cash back beyond what they have put into the

transaction and beyond allowed reserves requirement (if applicable).

❑ Verify loan amounts for first and second match loan reservation system.

❑ Verify appropriate master loan servicer fees have been collected.

❑ Verify Program Application Downpayment Assistance fee is collected on Closing

Disclosure for second mortgage (as applicable)

3. A Copy of the Final 1003 signed and dated by Borrower(s).

4. A Copy of the Executed Note and Deed of Trust for the 1

Mortgage.

5. A Copy of the Executed Note for Commission Downpayment Assistance

Program, as applicable.

❑ Verify Correct Commission Downpayment Assistance Program Note used.

6. A Copy of the Executed Commission 2

Mortgage Deed of Trust for the

following (as applicable):

❑ Opportunity, HomeChoice, Veterans, ARCH, Clark County and Bellingham.

❑ Verify Correct Commission Downpayment Assistance Deed of Trust used.

7. Copies of applicable House Key Opportunity forms on checklist.

8. Copies of Pre-Closing Compliance Approval Conditions, as applicable.

9. Original Signature for HOME Recapture Agreement on ARCH, and

Bellingham, mailed to the Commission.

HOUSE KEY MANUAL 64

Where to Submit Files

After closing, electronically upload the Post-Closing Compliance Review Checklist (Form 15.21)

file to Emphasys.

The Mortgage Lender may simultaneously deliver the Mortgage Loan package for purchase to

the Master Servicer when the Post Closing Compliance Mortgage Loan file is delivered to the

Commission.

Review Procedure

Each Mortgage Loan file will be reviewed within two business days of receipt by Commission

staff for compliance with Program requirements. The results of the review will be posted on the

Internet Web site at this link. The Commission's On-line Loan Tracking System interfaces with

the Master Servicer eliminating the need for Mortgage Lenders to provide them a copy of the

approval to purchase.

Checking Mortgage Loan Status

Mortgage Lenders may log on to the Internet Web site at this link. The Web site location is

available 24 hours a day. Lenders may check the status of a loan. Choose the “Loan Status” tab

from the menu bar. You may search for the loan by using the WSHFC loan number, Lender Loan

number, Borrower name or social security number.

Once the loan have been found, choose the appropriate action from the Actions Menu.

– View — This will provide you the loan details including loan terms, current status,

outstanding conditions and name of Commission file reviewer.

– Reprint — This will allow lender to save or re-print the reservation confirmation

– PDF Docs — Access all of the PDF documents available for the file. You may generate

the pre-closing checklist, FHA DPA Award and DPA Commitment Letters, 2

mortgage

Notes and Deed of Trust or program documents pertaining to the file. Check the

appropriate box of item to print and click “Generate Documents” tab.

– eDocs — Section to upload files and conditions.

HOUSE KEY MANUAL 65

12 - LOAN PURCHASE & DELIVERY

Edited 12/05/2022

Relevant Search Terms: SRP, service release premium, DPA

In General

The entire closed Mortgage Loan package should be reviewed for completeness and accuracy

before shipping to Idaho Housing and Finance Association (IHFA) for purchase. The loan must

be purchased by IHFA within 60 days of reservation.

Amortized Loan Balance

When Mortgage Loans are purchased, the loan servicer will determine the principal balance and

current escrow reserves, based on an amortized balance. IHFA will purchase loans on a non-

delinquent, normal payment, normal escrow disbursement status.

Timing and Delivery of Closed Loans

The closed mortgage loan package is to be received by IHFA within 10 days of loan closing.

1. Lenders must check the closed loan package to confirm all items listed on the Funding

Checklist are included in the package. Loans will not be funded if any of the items on the

checklist are missing or incorrect.

2. All First Mortgage loans purchased by IHFA will require mandatory registration

with MERS. No assignments will be accepted for first or second mortgages.

Lenders must transfer all applicable rights in MERS to IHFA immediately after

purchase.

3. Utilize the provided IHFA Delivery Checklist as found on the Commission’s Website at

http://www.wshfc.org/sf/HKforms.html

Upon completion of the closed loan file compliance review, the mortgage loan(s) will be funded

if the file is complete and is in compliance with all requirements. Closed loan packages will not

be funded until all required fundable documentation has been received and all compliance

issues cleared.

HOUSE KEY MANUAL 66

Penalties Withheld From Funding

Lenders must deliver the complete closed loan package to IHFA as soon as possible after loan

closing. A loan is considered to be in a fundable condition when a complete closed loan package is

delivered without errors or missing documents. Also, loans with delinquent payments will not be

purchased.

All loans must be purchased by IHFA within 60 days of the note date. Original notes will be

returned to the lender’s warehouse bank as requested by the lender for loans that will not be

purchased.

Loan Package Delivery

Idaho Housing and Finance Association:

Original Notes for the first and second (if applicable) mortgages must be delivered to the

following address by the expiration date:

Idaho Housing and Finance Association

Attn: Document Center

565 W Myrtle St.

Boise, ID 83702

Signature/Name Affidavit Required.

Loan packages must be delivered electronically at www.lenderwa.com. Please DO NOT mail

loan packages.

Wire/ACH Transfer Instructions

IHFA will wire all funds to the lender’s warehouse bank according to the wire instructions

provided by the lender.

Please use one warehouse bank per lender. If a second warehouse bank is needed, please

contact IHFA prior to loan purchase. Accommodations will be considered on a case by case

basis.

HOUSE KEY MANUAL 67

Loan Purchase Schedule/Funding

IHFA will purchase loans every day except on federal holidays. A purchase advice is generated

for each loan. Lenders can view the Purchase Advice at www.lenderwa.com on the day of

funding. The Purchase Advice will itemize the payments in the funding wire. Any fees due to

IHFA will be netted from the wired funds.

Purchase Prices (Lender SRP)

Borrower Points

Loan Sale by Lender

to Servicer

Net Compensation

to Lender

1.00

101.25%

2.25%

0.00

102.25%

2.25%

Amounts to be deducted from funding will consist of:

1. $85.00 Tax Service Fee

2. $10.00 Flood Certification Transfer Fee

3. $40.00 Electronic Upload Fee

4. $40.00 Program Application Fee for second mortgage (as applicable)

5. Extension fees assessed (as applicable).

Loan Suspensions (Curatives)

After a closed file review is done, suspense conditions are posted via Lender Connection. The

suspense conditions will list any documents needed to complete the file or any corrections that

need to be made to documents before the loan may be purchased.

Conditions required prior to loan purchase or separate follow up documentation must be

uploaded in Lender Connection.

The most common curatives occur for: a missing note; incorrect endorsement to the note;

incomplete copy of the Mortgage/Deed of Trust, missing Riders to the Mortgage/Deed of Trust;

missing final Closing Disclosures; missing or incomplete hazard policy/declaration page, tax,

mortgage insurance, or flood information.

In the event a loan is not purchasable the lender is required to prepare an Assignment of Deed of

Trust for the second mortgage for the master loan servicer to execute on the Commission’s

behalf.

HOUSE KEY MANUAL 68

First Payment/Notice of Assignment

Lenders are responsible for servicing the loan until purchased by the master loan servicer to

include the payment of all required escrow disbursements for each loan during the period from

closing to purchase.

The originating lender retains the loan servicing rights and benefits until the master loan

servicer purchases the loan. The originating lender will perform all servicing duties until that

time.

Servicing and benefits rights transfers to the master loan servicer at the time of loan purchase.

IHFA will send the borrowers a welcome letter with payment instructions at the time of loan

purchase.

IHFA assumes Seller will collect scheduled payments that have already become due. For Loans

purchased fewer than 15 days prior to the next payment due, IHFA will amortize down one more

payment so the scheduled purchase balance is lower than the current unpaid principal balance.

A pay history is required after two payments.

For scheduled balance Loans funded between the 1st and 15th day of the month, the Effective

Date of Transfer is the 1st day of the following month. For Loans funded after the 15th day of

the month, the Effective Date of Transfer is the 1st day of the second month following the Sale

Date. It is Seller's responsibility to continue servicing the loan and collecting payments up to

the Effective Date of Transfer and to forward all curtailments received during this time.

Hazard Insurance Premium

A copy of the Declaration Page showing the first annual premium is paid in full should be

included with the Loan Closing Package. IHFA will also accept a copy of the binder with the

policy number and paid receipt.

Flood Insurance

Please see Section 2 for additional information.

FHA Monthly Insurance Premiums

IHFA requires the lender to be responsible for all monthly MIP payments for the months the

lender is collecting the payment. IHFA will be responsible for making the monthly insurance

HOUSE KEY MANUAL 69

payment for loans purchased when the first payment due date on the Note is also the first

payment due to IHFA.

Conventional Mortgage Insurance Premiums

The first monthly mortgage insurance premium on a conventional loan is due at the time the

loan closes. Mortgage Lenders are responsible for the initial monthly premium.

Post-Closing Details of Origination Charges:

Items Payable in Connection with Loan

The Mortgage Lender must provide a breakout of all items payable by the buyer and seller as

shown on the Post Closing Review Checklist (15.20.1-2).

Final Documents

The lender is to submit the final mortgage loan documentation consisting of the original

recorded first and second mortgage DOT, title policy, MIC, etc., to IHFA within 90 days of loan

purchase. The Final Title policy and MIC to be uploaded to https://www.lenderwa.com. The

original recorded Deeds of Trust for the first mortgage and Down Payment Assistance Program

is to be delivered to IHFA also within 90 days of loan purchase.

Send Final Documents to:

Idaho Housing and Finance Association

Attn: Document Center

565 W. Myrtle Street

Boise, ID 83702

Common Exceptions that Delay Purchase

Edited 08/18/2021

1. The Borrower’s name must be typed under their signatures on the Note and Deed of

Trust. This includes 2

mortgages.

2. Incomplete packages are not acceptable. IHFA cannot purchase Mortgage Loans that

are incomplete. Please review the applicable checklist and upload a complete file.

Incomplete files slow up the purchase process.

3. When recorded documents require a correction, fax a letter of intent to re-record to

IHFA that includes the correction being made and to which documents. Do not wait for

the original document to be returned.

HOUSE KEY MANUAL 70

4. 1

Mortgage lien Notes must be endorsed and assigned to IHFA.

5. 2

Mortgages must be closed in the name of the Washington State Housing Finance

Commission. Do not endorse the 2

lien Notes to IHFA. Do not transfer the 2

mortgage Deed of Trust to MERS.

6. Marital status needs to be indicated on the Deed of Trust for both the 1

and 2

mortgages.

7. Separate Closing Disclosures are required for the 1

and 2

mortgages. Include payee

names and correct dates.

8. HUD Letter , FHA Award letter and WSHFC legal opinion letter are required in the file.

9. WA Right to Choose Insurance Provider and Borrower Consent to the use of Tax

Information must be in the file. Engineer Foundation Report/Structural Certification, as

applicable, must be in the file.

10. FHA Appraisal Logging Screen; Case Query, Informed Consumer Choice Disclosure;

Notice of Homebuyer; For Your Protection Get a Home Inspection and HUD 92900-LT

must in the file.

11. Appropriate “federal tax classification” box on W-9 checked.

12. AUS Red flag, UCDP SSR report, spouse’s credit report; include documentation verifying

balances.

13. FHA Clear CAIVRS

14. DPA documentation; 2

lien notes and award letters. Verify maturity dates, property

address are correct including zip codes, all match on the 1

and 2

Notes and DOTs.

15. Document evidence of down payment.

16. Provide copies of 2

lien Note and DOT.

17. 2

Lien Note and Deed of Trust sent to the incorrect servicer.

HOUSE KEY MANUAL 71

13 - DOWNPAYMENT PROGRAMS

Edited 10/10/2022

Relevant Search Terms: down payment assistance, downpayment assistance, DPA

Downpayment Assistance Programs

These guidelines apply to all downpayment assistance loans offered at the

Commission

Details for Opportunity Downpayment Assistance Program can be found in here.

Program Description

All downpayment assistance programs offered at the Washington State Housing Finance

Commission are community second mortgages and must be used in conjunction with a House

Key or Home Advantage first mortgage. Each Downpayment Assistance program offered at the

Commission receives funding from different sources including, but not limited to federal funds

(HOME, CDBG), state funds, city funds (housing levy) and the Commission’s Program

Investment Funds.

Additional guidelines per the individual program manuals also apply and are required as per

the source of funds for the downpayment assistance program.

Maximum Income Limit, Loan Amount & Mortgage Details

Please refer to the individual downpayment assistance manual for terms.

Downpayment assistance program loans are not assumable.

Minimum Loan amount of assistance is $1,000.

When the borrower is required to make payments, the late charge is 4%.

HOUSE KEY MANUAL 72

Program Eligibility

1. First Mortgage must be a House Key or Home Advantage FHA, Fannie Mae HFA

Preferred, Freddie Mac HFA Advantage, USDA Rural Development, VA, or HUD 184

Loan.

2. Income levels must meet the downpayment assistance programs’ requirements (see

limits in each manual); Please note: Income limits for the 1

mortgage will be different.

The Borrowers must meet both 1

and 2

and income limit guidelines.

3. The Borrowers must be a first time homebuyer (have not owned and occupied in the past

3 years) or purchase in a Targeted area of the state. Lender to provide 3 years tax returns

and current credit report for all borrowers.

4. The Borrowers must demonstrate a need for assistance with the exception of the Home

Advantage dpa program at 0% interest.

Combined Loan to Value (CLTV) and Total Loan to Value (TLTV)

FHA, HUD 184 – Cannot exceed 100% of FHA’s acquisition cost. FHA’s acquisition cost does

not include 2

mortgage fees.

Fannie Mae HFA Preferred or Freddie Mac HFA Advantage – CLTV up to 105%.

VA – Cannot exceed 100% of the lesser of sales price or Notice of Value, plus eligible closing

cost.

USDA Rural Development – Maximum LTV as per current USDA guidelines.

Reserves

The Borrower(s) may keep, but are not required to have up to 6 months PITI (including the

projected payment on the downpayment assistance loan if applicable) or $10,000 (whichever is

greater) in liquid checking and savings account after loan closing.

Buydowns

Lenders may not offer rates lower than the ones published on our Website and reserved on the

Emphasys system. Further buydowns are not allowed.

HOUSE KEY MANUAL 73

Reservations

Reservations for downpayment assistance loans are usually made on the Emphasys system at

the same time as the first mortgage loan reservation. Funds are reserved on a first-come, first-

served basis. Loan originators may reserve the maximum allowable amount per the program

guidelines for their borrower since cash to close cannot be exactly determined at loan

reservation. A reservation for downpayment assistance can be made on-line at any time prior to

submission of a pre-closing compliance package. Increases in the reservation amount are

subject to the availability of funds. If funds are not available, our Website will indicate if we are

taking a wait list.

Income Calculation

Edited 05/07/2023

The source of funding determines how income is calculated for the program. Please refer to the

correct downpayment assistance manual for the type of income used for the program.

Compliance Income

Please refer to the individual downpayment assistance manual to see if the downpayment

assistance program uses compliance income.

Current downpayment assistance programs using compliance income include ARCH and

Bellingham DPA.

The calculation used to determine compliance income is the same as the calculation used to

determine compliance income for the House Key first mortgage as shown in Section 3 of this

manual which uses future anticipated income for all household members age 18 or over. Please

contact the Commission if you need assistance calculating compliance income.

After the applicant’s income for the Second Mortgage has been calculated, refer to the Maximum

Income Limits chart in the individual downpayment assistance manual to determine if the

applicant is at or below the income limit.

Credit Underwriting Income

Please refer to the individual downpayment assistance manual to see if the downpayment

assistance program uses credit underwriting income.

Current downpayment assistance programs using credit underwriting income include

Opportunity, Veterans, HomeChoice and Clark County DPA.

HOUSE KEY MANUAL 74

When using Credit Underwriting Income, the income for the downpayment assistance program

is different than the income used to determine income for the House Key first mortgage which

uses household “Compliance” income as shown in Section 3 of the House Key Manual. For

downpayment assistance mortgages using Credit Underwriting Income only, income is

calculated according to the investor’s (FNMA, Freddie Mac, FHA, VA, or USDA) underwriting

guidelines. The lender should then refer to the Maximum Income Limit in the manual to

determine if the borrower is at or below the income limit.

A copy of the underwriter’s signed income worksheet or loan approval reflecting final income

figures must be included in the Pre-Closing Compliance Review File.

Calculating Downpayment Assistance Loan Amount

The downpayment assistance loan amount is the lesser of:

1. Amount of need as established by the Needs Assessment Form (based on maximum

financing or based on gap financing) calculated by the underwriter; or

2. Maximum loan amount per program

Needs Assessment Form

The underwriter will calculate the Needs Assessment Form. Form located in the Forms section

of the House Key Manual at underwriting approval to determine the exact amount of funds

needed. The Needs Assessment Form should be completed using a current VOD or bank

statements and should be adjusted as the borrower’s situation changes.

The underwriter will determine the down payment, closings costs, additional costs, and pre-

paids as shown on Needs Assessment Form. These figures should match 1003 and

underwriter’s loan approval. The underwriter determines the amount of cash required by the

Borrower to close the transaction. Stocks, bonds, IRA’s, 401(k)s, mutual funds, life insurance

policies, annuities liquid assets, and any other type of account causing a penalty in order to

access are not included in the calculation.

The Mortgage Lender will then subtract out seller and Mortgage Lender contributions. The

Mortgage Lender then determines liquid assets available to borrower in checking/savings

accounts. The Mortgage Lender will list out separately gift letters if gift has not already been

verified in checking account. The earnest money, lender deposits and paid out of closings

should be listed separately if the money has cleared the bank based on VOD or bank statement.

These figures should match the 1003 and underwriter’s loan approval.

Subtract the allowed liquid reserves from the total amount of verified assets available at

underwriting approval. If the amount is less than or equal to 0 enter “0” on Line F of Needs

Assessment Form.

HOUSE KEY MANUAL 75

The underwriter calculates the shortage of cash to close based on the total cash required to close

(Line E of Needs Assessment Form) from Total Assets Available to Close minus up to 6 months

PITI or $10,000 whichever is greater (Line F of Needs Assessment Form).

• Downpayment Assistance funds are used for downpayment, closing costs, and pre-paids.

• Downpayment Assistance funds cannot be used to buy either the first or second loan

down.

• Downpayment Assistance funds cannot be used to pay off bills or liens of the borrower.

If the borrower is required by underwriting to pay off bills in order to qualify, these items

must be paid by the borrower. Please provide a copy of the loan approval with the total

of the bills to be paid by the borrower as required by underwriting. This amount must

match the amount on the Closing Disclosure (as applicable).

• Downpayment Assistance funds cannot be used to replenish the Borrower’s bank

account if they do not have reserves in the bank after closing.

• Downpayment Assistance funds cannot be used to pay for repairs to property.

Furthermore, if Borrower chooses to pay for repairs from their own funds, escrow

holdbacks must be for an exact bid from contractor. In order to avoid cash back, escrow

cannot over collect borrower funds (i.e. 1/ ½ times). Please refer to Page 2.5 (Escrow

Holdbacks) and Page 4.2 (Acquisition Cost).

• Downpayment Assistance funds cannot be used to pay the difference between the sales

price and the appraised value.

• Downpayment Assistance funds cannot be used to pay for short sale negotiation fees,

attorney fees or any other similar fees.

In order to avoid cash back issues at closing, the Mortgage Lender should re-calculate the Needs

Assessment Form after receiving an estimated closing statement from the Escrow Company.

Adjustments should be made to the loan amount if necessary prior to releasing loan

documents. If in doubt, it is always a good idea to reduce the loan amount slightly than risk the

chance of the borrower receiving cash back.

On the Needs Assessment Form, if the borrower’s front-end ratio (PITI/Income) is less than

25% based on the appropriate income for the downpayment assistance program, the

underwriter will decrease amount of subsidy to bring up the front-end ratio to acceptable

assistance base levels for gap financing. The Borrower must qualify with the 25% ratio test in

order to be eligible for gap financing. If the borrower fails to meet the ratio test, then the

underwriter must proceed using the appropriate maximum loan-to-value (LTV) allowed for the

first mortgage type. In other words, on an FHA loan, the minimum downpayment is 3.5%.

Cash Back

The intent of the Downpayment Assistance Loan is to provide the funds necessary to close the

transaction and not to provide cash back to the borrower.

HOUSE KEY MANUAL 76

In no event will downpayment assistance funds result in cash back to the Borrower. Mortgage

Lender should advise Borrower upfront that if a check is presented to them at closing when

using a downpayment assistance mortgage funds, and the check exceeds the amount(s) that they

originally paid in to the transaction via required earnest money and lender deposits, that they

should refuse the check. The Borrower should also refuse the check if the amount of the total

refund plus their current liquid assets in the bank will result in more than 6 months PITI or

$10,000 whichever is greater in reserves.

In the event that there is a refund to the borrower at closing and the refund plus the Borrower’s

remaining liquid assets exceed 6 months PITI or $10,000 whichever is greater, the Lender may

apply the refund amount towards the principal balance of the 2

mortgage or lower the amount

of assistance and redraw the loan documents. If it is then determined that cash back was given

to the Borrower, the refund will need to come from the borrower, the Master Loan Servicer will

not purchase the Mortgage Loan unless the second mortgage note is lowered accordingly and

within the allotted time frames.

If using ARCH or Bellingham downpayment assistance, the borrower may not receive ANY cash

back at closing, including earnest money or funds paid in, as per HOME fund rules, excess funds

must be used to pay down the DPA loan.

Closing and Delivering the Loan

Program Application Fee

There is a $40.00 program application fee for all downpayment assistance loans. This amount

will be subtracted from the wire sent to loan closing. This fee must be disclosed on the second

mortgage Closing Disclosure.

Funding and Delivery

Edited 05/18/2020

Participating lenders fund the second mortgage at loan closing. The funding and delivery

procedures are as follows:

1. Second mortgage Notes and Deeds of Trust are originated under the Commission’s

name;

2. IHFA will purchase loans with a copy of the Deed of Trust with the original recorded

copies to follow.

3. Interim Interest is not collected at closing on downpayment assistance loans with

deferred payments.

HOUSE KEY MANUAL 77

HUD Commitment Letter for FHA Loans

Edited 04/24/2019

Per HUD ML #2013-14 dated May 9, 2013, the Washington State Housing Finance Commission

has, at or before closing, incurred a legally enforceable obligation to provide the funds for the

Borrower’s required Minimum Cash Investment. A Commitment Letter can be downloaded

from Emphasys by the originating Lender in compliance with FHA’s insurance requirements

applicable to secondary financing transactions. This letter can be downloaded electronically

from Emphasys by the Contact Name who reserved the funds in the Emphasys system after the

loan is “Committed”.

Per HUD ML # 19-06 dated April 18, 2019, required language has been added to the HUD

Commitment Letter for an FHA loan. You will find the Commission authorizing legislation here

and find the required opinion from the Commission’s legal counsel signed and dated within two

years of closing the transaction stating they reviewed our downpayment assistance programs

and concluded they are consistent with the Mortgagee Letter 19-06.

FHA Insurance Award Letter

The Commission has agreed to loan to the Borrower a Second Mortgage Loan on the terms as

shown on the Emphasys system. An Award Letter to satisfy the requirements of HUD

Handbook 4000.1 will be issued to the Borrower(s) by the Commission when the loan is

“Committed.”

Insurance Requirements

Hazard Insurance

Hazard insurance is required sufficient to cover both the first and second mortgages, or the

maximum insurable value of the property whichever is less. The policy must contain a

guaranteed replacement cost endorsement. Binder must indicate the first loan be payable to the

loan servicer using the standard Mortgagee clause as written in Section 2. Please refer to this

section for more information.

Title Insurance

Title insurance coverage is required for the first mortgage only. The second mortgage appears

as a lien of record in second position when the policy is issued. As title insurance is not required

for the second mortgage, the lender is not allowed to charge a title fee on the second mortgage.

HOUSE KEY MANUAL 78

Payment Statement

On the second mortgage, the Borrower receives a separate monthly statement from IHFA.

Payoff of Second Mortgage

All second mortgages are due and payable upon sale, refinance, early payoff of the 1

mortgage,

no longer occupy as primary residence or transfer of the property as shown in the note and deed

of trust for the downpayment assistance program, whichever comes first.

If the Borrower(s) refinances, the second mortgage must be paid off in full. The Commission

will not subordinate our second mortgages.

The Borrower(s) should contact IHFA on their first mortgage for payoff information and the

second mortgage as applicable.

TRID Guidance

Please follow your own company’s compliance guidelines for TRID and RESPA. The loan is

subject to repurchase if the loan is not eligible for pooling or is audited and found to not be in

compliance. As a courtesy to our lenders, we have Loan Estimates and Closing Disclosures if

your system is unable to generate them. You are also welcome to use your own forms as

applicable.

These forms are made available as a courtesy to our lenders to use at lender’s own discretion.

Please feel free to use these disclosures or those provided by your Lending Institution. The

Commission makes no representation regarding the accuracy or compliance of these forms with

regulatory requirements. Please check with your own company’s compliance department

regarding whether these forms satisfy your compliance requirements.

By using these forms, you are agreeing that the Commission and its employees assume no

responsibility for, and that you will hold the Commission and its employees harmless from, any

claims or expenses that may be related to or arise from any violation of law arising from your

use of these forms.

In most cases, a Loan Estimate and Closing Disclosure will be required on amortizing loans,

loans with deferred interest with an interest rate, and loans with deferred payments at 0%, but

that is up to your own company’s interpretation of TRID. If the Commission is uncertain

regarding the documentation presented we may request a letter from your corporate to verify

your loan closing documents meets TRID compliance guideline.

HOUSE KEY MANUAL 79

OPPORTUNITY DOWNPAYMENT ASSISTANCE

Edited 05/05/2021

Relevant Search Terms: downpayment assistance, down payment assistance, DPA

Please see Section 13: Downpayment Programs for all other terms and

conditions.

Program Eligibility

Eligible Borrowers who purchase within the state of Washington and meet the

guidelines below

Mortgage Details

• Interest Rate – 1% simple interest, payment deferred

• Loan Term – 30 years

• Maximum Loan Amount – up to $15,000

• Repayment – Due at the time of sale, transfer, refinance, early payoff of first mortgage,

no longer occupy as primary residence or 30 years, whichever comes first.

Lenders to determine need using Needs Assessment Form unless Borrower is a

Veteran. There is no assessment of need if Borrower is a Veteran.

On the Needs Assessment Form, the loan amount is based upon maximum financing for

first mortgage type. In other words, on an FHA loan, the minimum downpayment is 3.5%. The

Commission will not cover additional amounts toward downpayment. The Borrower must

qualify with the 25% ratio test in order to be eligible for gap financing. Please see this section.

Maximum Income Limit

Edited 4/22/2024

To be eligible, an applicant’s income must not exceed the following limits:

COUNTY

1-2 PERSONS

3 OR MORE

PERSONS

King/Snohomish

$88,800

$110,950

HOUSE KEY MANUAL 80

Clark/Kitsap/Pierce/Skamania/Thurston/Whatcom

$75,550

$94,400

All Other Counties

$63,950

$79,900

Income Calculation

This downpayment assistance program uses Credit Underwriting Income for the

Opportunity DPA 2

mortgage. Please see this section of the manual.

A copy of the underwriter’s signed income worksheet or loan approval reflecting final income

figures must be included in the Pre-Closing Compliance Review File.

HOUSE KEY MANUAL 81

14 - SPECIAL PROGRAMS

Edited 06/30/2023

HomeChoice DPA

Veterans DPA

ARCH East King County DPA

Bellingham DPA

Clark County

HOUSE KEY MANUAL 82

15 - FORMS

Edited 11/01/2023

House Key Opportunity Program Forms

ORIGINATION

Name of Form

Date of Form

Page Number

DPA Legal Counsel Letter

04/18/19

Addendum to Residential

Loan Application

11/02/23

15.6.1-4

Notice to Buyers

04/25/08

15.7

Income and Household

Members Disclosure

03/06/17

15.8

Notice to Mortgagor of

Information Regarding

Potential Federal Subsidy

Recapture Tax

04/27/01

15.10.1-5

Adjusted Qualifying Income

Table

05/17/24

15.10.5

Statement of Income Tax

Filing

03/06/17

15.12

PRE-CLOSING COMPLIANCE

Name of Form

Date of Form

Page Number

Pre-Closing Compliance

Review Checklist

11/01/23

15.13.1-2

LOAN CLOSING

Name of Form

Date of Form

Page Number

Notice of Potential Recapture

Tax on Sale of Your Home

06/01/99

15.14

Conventional Rider to

Security Instrument

04/25/08

15.16

Single-Family Deed of Trust

Rider FHA, VA or USDA

07/25/18

15.17.1-2

HOUSE KEY MANUAL 83

POST CLOSING COMPLIANCE

Name of Form

Date of Form

Page Number

Post-Closing Compliance

Review Checklist

07/17/23

15.20.1-2

PURCHASE & DELIVERY

Idaho Housing and Finance Association

Name of Form

Date of Form

Washington Housing Delivery Checklist

12/14/22

CANCELLATION

Name of Form

Date of Form

Page Number

Notice of Cancellation of

Recapture Tax

02/16/05

15.29

HOUSE KEY MANUAL 84

18 - APPENDICES

Edited 06/30/2023

APPENDIX III

Fannie Mae HFA Preferred Product-9/5/2019

Under HFA Preferred, the following requirements will apply to all FNMA loans delivered

to Fannie Mae:

• 100% of Fannie Mae’s Adverse Market Fee applies as applicable.

• No additional Loan-level price adjustment (LLPA).

• Maximum Loan to Value (LTV) of 97% in all markets (subject to mortgage insurance

availability).

• MH Advantage manufactured home, Maximum Loan to value (LTV) 97% in all markets

(subject to mortgage insurance availability).

• If manufactured home other than MH Advantage, Maximum Loan to Value (LTV) 95% in all

markets (subject to mortgage insurance availability).

• Maximum Combined Loan to Value (CLTV) up to 105% with Community Seconds (subject to

mortgage insurance availability).

• Maximum allowable total expense (DTI) ratio per AUS approval.

• Minimum credit score per agency guidelines for DU underwritten loans, unless other

restrictions apply.

• Per Fannie Mae guidelines, Borrowers may own no more than two financed properties,

including the subject property. Follow agency guidelines.

• Borrower Paid Monthly MI, Upfront, or Split MI allowed. Seller Paid MI allowed. Financed

Single Premium (97% max LTV).

Borrowers with incomes at or below Fannie Mae’s 80% AMI:

Charter Minimum coverage are as follows:

– 18% - 95.01 – 97% LTV

– 16% - 90.01 – 95% LTV

– 12% - 85.01 – 90% LTV

– 6% - 80.01 – 85% LTV

Borrowers with incomes great than Fannie Mae’s 80% AMI up to House Key

income limits by county:

Minimum coverage are as follows:

– 35% - 95.01 – 97% LTV

– 30% - 90.01 – 95% LTV

– 25% - 85.01 – 90% LTV

– 12% - 80.01 – 85% LTV

HOUSE KEY MANUAL 85

• Please update DU to include HFA Preferred as an option within the Community Lending

screen.

• Click Additional Data in the navigation bar.

• Locate the Community Lending Information section.

• Select HFA Preferred (Special Feature Code (SFC) 782) in the Community Lending

Product field.

• If you are using a Community Seconds mortgage, select Yes in the Community Seconds field

(Special Feature Code (SFC) 118). Otherwise, select No.

• Special Feature Code (SFC) for manufactured home is 235, it it’s a MH Advantage

manufactured home Special Feature Code (SFC) 859 must also be used.

• If you are using a Community Seconds mortgage, you must select the appropriate options

from the Community Seconds Repayment Structure drop-down list.

• When you are finished entering the necessary data for HFA Preferred (782) and other

required fields on the Additional Data page, click Submit.

All loans subject to approval as per Mortgage Insurance guidelines as applicable. Please see

Fannie Mae Special Feature Codes (SFC) in Section 2.

Freddie Mac HFA Advantage Product-12/05/2022

Under HFA Advantage, the following requirements will apply to all Freddie Mac loans

delivered to Freddie Mac:

• Credit fee in yield specific to the HFA community and elimination of credit fees in price for

HFAs.

• Maximum Loan to Value (LTV) of 97% in all markets (subject to mortgage insurance

availability).

• Maximum Combined Loan to Value (CLTV) up to 105% with Affordable Seconds (subject to

mortgage insurance availability).

• Manufactured homes are eligible with Freddie Mac HFA Advantage up to 95% LTV/95%

CLTV.

• Homes in Community Land Trusts (CLTS) are not eligible under the Freddie Mac HFA

Advantage program.

• Maximum allowable total expense (DTI) ratio per AUS approval

• Minimum credit score per agency guidelines for LPA underwritten loans, unless other

restrictions apply.

• Per Freddie Mac guidelines, the occupant Borrowers may not own more than two financed

residential real estate properties, including subject property as of the Note date.

• Borrower Paid Monthly MI, Upfront, or Split MI allowed. Seller Paid MI allowed. Financed

Single Premium (97% max LTV).

Borrowers with incomes at or below Freddie Mac’s 80% AMI

Charter Minimum coverage are as follows:

– 18% - 95.01 – 97% LTV

– 16% - 90.01 – 95% LTV

– 12% - 85.01 – 90% LTV

– 6% - 80.01 – 85% LTV

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Borrowers with incomes greater than Freddie Mac’s 80% AMI up to House Key

income limit by County:

Minimum coverage are as follows:

– 35% - 95.01 – 97% LTV

– 30% - 90.01 – 95% LTV

– 25% - 85.01 – 90% LTV

– 12% - 80.01 – 85% LTV

• The “Offering Identifier” field in Loan Product Advisor (LPA) must show HFA Advantage or

Home Possible Advantage for HFA’s.

• If you are using an Affordable Second mortgage, you must select the appropriate option for

the Affordable Second that does not require a payment within 60 months can be entered in

the “Total Gift Fund” field.

• When you are finished entering the necessary date for HFA Advantage LPA findings must

show “Accept”.

All loans subject to approval as per Mortgage Insurance guidelines as applicable. Please see

Section 2.

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APPENDIX IV

Veterans Exception

Section 103 of the Heroes Act of 2008 contains a permanent exception to the first-time

homebuyer requirement for borrowers who are veterans. To be eligible for the exception,

the veteran borrower must meet the following requirements:

1. The borrower must be a veteran as defined in 38 U.S.C. section 101, which

generally includes anyone who has served in the military and has been

discharged or released under conditions other than dishonorable (or who has re-

enlisted but could have been discharged or released under conditions other than

dishonorable). (Please see the definition of a veteran for purposes of this

exception beginning with paragraph #7 below.)

2. The veteran borrower can only use this exception one time.

3. The exception also applies to the spouse of a veteran borrower.

4. The IRS requires that the Commission makes a good faith effort to insure that the

House Key mortgage loan meets all of the federal tax law requirements.

Obtaining a copy of the veteran borrower's honorable discharge papers meets this

requirement. If the veteran borrower is still in the armed forces, having re-

enlisted, other documentation to prove compliance may be provided. The

veteran borrower must also certify in a separate signed and notarized affidavit

that he/she meets the exception requirements and has not previously used the

exception.

5. The term "veteran" means a person who served in the active military, naval, or air

service, and who was discharged or released therefrom under conditions other

than dishonorable.

6. The term "discharge or release" includes:

a) retirement from the active military, naval, or air service, and

b) the satisfactory completion of the period of active military, naval, or air

service for which a person was obligated at the time of entry into such service

in the case of a person who, due to enlistment or reenlistment, was not

awarded a discharge or release from such period of service at the time of such

completion thereof and who, at such time, would otherwise have been eligible

for the award of a discharge or release under conditions other than

dishonorable

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7. The term "active duty" means:

a) full-time duty in the Armed Forces, other than active duty for training;

b) full-time duty (other than for training purposes) as a commissioned officer of

the Regular or Reserve Corps of the Public Health Service

• on or after July 29, 1945, or

• before that date under circumstances affording entitlement to "full

military benefits".

c) full-time duty as a commissioned officer of the National Oceanic and

Atmospheric Administration or its predecessor organization the Coast and

Geodetic Survey

• on or after July 29, 1945, or

• before that date

– while on transfer to one of the Armed Forces, or

– while, in time of war or national emergency declared by the President,

assigned to duty on a project for one of the Armed Forces in an area

determined by the Secretary of Defense to be of immediate military

hazard, or

– in the Philippine Islands on December 7, 1941, and continuously in

such islands thereafter.

d) service as a cadet at the United States Military, Air Force, or Coast Guard

Academy, or as a midshipman at the United States Naval Academy; and

e) authorized travel to or from such duty or service.

8. The term "active duty for training" means:

a) full-time duty in the Armed Forces performed by Reserves for training

purposes;

b) full-time duty for training purposes performed as a commissioned officer of

the Reserve Corps of the Public Health Service

• on or after July 29, 1945, or

• before that date under circumstances affording entitlement to "full

military benefits";

c) in the case of members of the Army National Guard or Air National Guard of

any State, full-time duty under section 316, 502, 503, 504, or 505 of US Code

Title 32, or the prior corresponding provisions of law;

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d) duty performed by a member of a Senior Reserve Officers' Training Corps

program when ordered to such duty for the purpose of training or a practice

cruise under chapter 103 for a period of not less than four weeks and which

must be completed by the member before the member is commissioned; and

e) authorized travel to or from such duty.

The term does not include duty performed as a temporary member of the

Coast Guard Reserve.

9. The term "active military, naval, or air service" includes:

a) active duty;

b) any period of active duty for training during which the individual concerned

was disabled from a disease or injury incurred or aggravated in line of duty;

and

c) any period of inactive duty training during which the individual concerned

was disabled:

• from an injury incurred or aggravated in line of duty; or

• from an acute myocardial infarction, a cardiac arrest, or a cerebrovascular

accident occurring during such training.

10. The term “inactive duty training” means:

a) duty (other than full-time duty) prescribed for Reserves (including

commissioned officers of the Reserve Corps of the Public Health Service) by

the Secretary concerned under section 206 of US Code Title 37 or any other

provision of law;

b) special additional duties authorized for Reserves (including commissioned

officers of the Reserve Corps of the Public Health Service) by an authority

designated by the Secretary concerned and performed by them on a voluntary

basis in connection with the prescribed training or maintenance activities of

the units to which they are assigned; and

c) training (other than active duty for training) by a member of, or applicant for

membership (as defined in section 8140 (g) of US Code Title 5) in, the Senior

Reserve Officers’ Training Corps prescribed under chapter 103 of US Code

Title 10.

In the case of a member of the Army National Guard or Air National Guard of

any State, such term means duty (other than full-time duty) under sections

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316, 502, 503, 504, or 505 of U.S. Code Title 32, or the prior corresponding

provisions of law. Such term does not include

• work or study performed in connection with correspondence courses,

• attendance at an educational institution in an inactive status, or

• duty performed as a temporary member of the Coast Guard Reserve.