Program HomeStyle Renovation Fixed Rate Program Wholesale and Correspondent Lending

Product Summary: Conforming fixed rate, fully amortizing mortgage for primary residence, 2nd home, and investment properties. Purchase, rate and term refinance are permitted. Targeted purpose is to provide borrowers with financing to improve their current home or renovate a home they are interested in acquiring.

Advantages:

  • Allows you to differentiate yourself with realtors and borrowers.
  • Product is not widely available from all lenders in the market.
  • Realtors and loan officers can be paid out at initial closing, does not have to wait for renovation completion.
  • Provides realtors with a solution for the potential buyer that says “I like the house but….”
  • Allows you to provide solutions for your consumers that like their home, but want to upgrade.
  • Expert help from Fidelity Bank Mortgage (FBM) Builder Services Division.
  • Fidelity will administer the construction draws after the loan is closed and purchased from your company.

Key program points and product information.

  • DU driven loan approvals. (LP not eligible)
  • Previously used contractor list available. You have the ability to add other contractors with the approval of FBM’s Builder Services Group.
  • Fidelity Bank Mortgage will purchase the loan prior to completion of required renovations assuming standard purchase requirements are met by the correspondent.
  • All loans must be prior approved by Fidelity Bank Mortgage Underwriting prior to closing. (Delegated underwriting is not available)
  • Servicing to be retained by Fidelity Bank Mortgage.
  • Allow a minimum of 5 business days for underwriting by Fidelity Bank Mortgage’s Builder Services Group.
  • Realtors and loan officers paid out at closing.
  • Expect 60 days from contract to closing. (No short contracts)
  • Renovations must be completed within 12 months of the closing date
  • Please note, this document provides a general overview of the FNMA’s guidelines. Additional restrictions not published in this product description may apply.
  • Guidelines are accurate as of day of publication and subject to change without notice.

General Overview

  • Single Close, fixed rate product
  • After closing, renovation funds will be held in interest bearing escrow account administered by FBM Builder Services Group for the benefit of the borrower
  • Cost of renovation is established based on plans and specifications provided prior to submission to underwriting.
  • Costs will include a 10% contingency reserve that will be included in the loan amount.
  • Loan amount can include up to 6 mortgage payments (PITI) for the loan during the renovation if the subject cannot be occupied during the renovation.
  • Contractor must request reimbursement from FBM Builder Services Group at pre-determined milestones in the project by providing a specific request
  • FBM Builder Services Group, or our designee, will perform property inspections prior to disbursement of any funds.
  • After completion any remaining funds will returned to the borrower for the documented acquisition of supply costs not previously submitted or applied to the principal of the loan as a curtailment. Borrower can request additional repairs or improvements to fully utilize any unused funds with documented receipts.
  • Maximum renovation amount of 50% of the “After Completed Value”, $5K minimum repair
  • Structural repairs/improvements allowed
  • Luxury items permitted (swimming pool, hot tub, fences, etc.)
  • 4th party loans are not permitted
  • Additional information and sample documents available at Select “reference material” then choose “HomeStyle Renovation Product”

Occupancy:

  • Owner occupied primary residence (1-4 units)
  • Second home (1 unit)
  • Investment property (1 unit)

Eligible Property Types:

  • Single family detached or attached
  • 1-4 unit principal residence
  • PUD
  • Condominium

Unacceptable Property Types:

  • No cooperatives
  • No manufactured homes
  • No unique properties (log homes, geodesic dome homes, etc…)
  • No leasehold property

Maximum Loan Amount: $417,000 (including rehabilitation costs)

  • See Homestyle Renovation Maximum Loan Amount Work Sheet to determine loan amount for your transaction.
  • High –cost loan areas will have increased loan limits specific to the FNMA’s guidelines for the market
  • High-cost loan areas will have a maximum LTV of 90% if the higher loan limit is used.

Eligibility Matrix Loan Amount & LTV Limitations

Primary Residence-Purchase and Limited Cash-Out Refinance

Transaction Type / Number of Units / Maximum LTV, CLTV, HLTV
Principal Residence
Purchase
Limited Cash-Out Refinance / 1 Unit / FRM: 95%
2 Units / FRM: 85%
3-4 Units / FRM: 75%
Second Homes
Purchase
Limited Cash-out Refinance / 1 Unit / FRM: 90%
Investment Property
Purchase / 1 Unit / FRM: 85%
Limited Cash-Out Refinance / 1 Unit / FRM: 75%

Note: For purposes of this product, the LTV calculation is determined by the transaction type:

  • Purchase money transactions the LTV is determined by dividing the loan amount by the lesser of the “as completed” appraised value or the sum of the purchase price of the property plus the total rehabilitation costs.
  • For refinance transaction, the LTV ratio is determined by dividing the original loan amount by the “as completed” appraised value of the property.

Limited Cash-Out Transactions

  • Loan amounts may include payoff of first mortgage, subordinate financing used in the initial acquisition of the property, closing costs, prepaid, points and allowable renovation costs only.
  • Any excess funds after completion of renovation are applied to loan balance as a curtailment
  • Excess funds can also be used to reimburse borrower for any documented expenses paid out of pocket.
  • Value of sweat equity cannot be reimbursed.

Pricing

Pricing must be obtained through the “Price My Loan” system within Fidelity’s LQB system available on Rate sheets do not necessarily reflect the most current price. Rates are subject to change without notice.

Prices are based on the base price for conforming conventional products.

  • A 1 point negative adjustment for this product applies
  • All other standard conforming conventional LLPA’s apply based on the loan’s characteristics
  • It is highly recommended that the broker/correspondent have FBM Builder Services project approval in place prior to locking the loan.
  • Clients are encouraged to lock loans for a 60 day lock period for this product

Underwriting

The underwriting of this product will be done by Fidelity Bank Builder Services Underwriting Group. Files will be submitted via LQB as normal. However, underwriters you are not familiar with may contact you regarding your submissions.

Borrower Requirements:

Borrower must be a homebuyer or homeowner.

For profit, non-profit, and government organizations are not permitted.

Qualifying Ratios:Driven by DU findings

Term:30 or 15 years only.(Fixed rate only).

Number of Financed Properties: If subject is second home or investment, borrower is limited to 4 financed properties including the borrower’s principal residence.

*note: joint ownership in in residential real estate is considered the same as total ownership of an individual property.

Income Documentation:

  • Standard agency documentation in accordance with DU findings.
  • Tax Transcripts are required for all income used in qualifying.

Seller Contribution

3% Maximum toward closing costs (regardless of LTV)

Contingency Reserve

10% is required to be included in each contractor’s estimate

Contractors

  • Must be approved by Fidelity Bank Builder Services or selected from Fidelity Bank’s approved contractor list
  • All work must be completed by a state licensed contractor

FBM Builder Services

  • Prior to obtaining a clear to close, FBM Builder Services Group must approve project, final loan amount, and contractor. Please note, we recommend this occur prior to submission to underwriting.

Appraisals

Note: Appraisals must be ordered through the Fidelity Bank Mortgage appraisal desk at .

  • Appraisals can only be accepted from appraisers with a demonstrated experience of appraising properties for the renovation product.
  • This applies to both correspondent and broker transactions
  • Appraisal order form is available on the website under wholesale lending/forms
  • Submit completed form to Fidelity Bank
  • Appraisal report will establish an “as completed” value. (value after renovations completed)
  • Appraiser must be provided with plans and specifications that are prepared by a registered, licensed, or certified general contractor, renovation consultant or architect.
  • Upon completion, appraiser is required to perform a final completion inspection and complete the HomeStyle Completion Certificate (FNMA Form 1036)
  • FNMA Collateral Underwriter Summary Report or Fidelity access to report for correspondent loans is required.
  • Appraisal fees are approximately$100 higher for this product than the standard appraisal fee structure. Please refer to fee schedule for actual fees. (available on
  • Appraisals for this product may take an additional 2-3 days, please plan accordingly.
  • It is recommended that if you are located in an area not adjacent to a major metropolitan area that you submit a list of 3 appraisers experienced in appraising construction perm properties to our appraisal desk
  • Appraisals should be completed “subject to“ the completion of the project.

Energy Report Requirements

  • If loan will be used to finance any energy related improvements, a Home Energy Rating System (HERS) energy rater must provide a written report.
  • Allowed for 1 unit properties only
  • Appraiser must be provided with energy report prior to appraisal inspection

Contractor Requirements

  • It is recommended that a borrower be provided with the FBM Wholesale Contractor List for their geographic market to obtain estimates. (This list is posted on lionbankdirect.com under the reference material tab, Homestyle Renovation product)
  • These contractors are not recommended by FBM
  • These contractors have been previously approved by FBM
  • Borrower must select their own contractor. If not on FBM Wholesale Contractor List, contractor must be submitted with applicable approval documentation.
  • The borrower is not required to use anexisting FBMcontractor that is on the Wholesale Contractor List.
  • It is recommended that the borrower be provided the FBM cover letter along with the list of previously approved contractors for the market location of the subject property
  • Licensed contractors can be submitted to the FBM Builder Service Group for approval prior to loan registration or loan underwriting.
  • Contractor and plans should be submitted to FBM Builder Service Group as early in the process as possible. (we recommend prior to the loan file submission for underwriting)
  • If contractor is not currently on FBM Approved For Use list the following documentation should be submitted to FBM Builder Services group as soon as possible:
  • Builder Questionnaire
  • W-9 form
  • Builder’s state general contractors license
  • Evidence of general liability insurance with at least $1mil in coverage
  • A specific plan for the subject is not required in order to have contractor approved.
  • Borrowers that are licensed contractors cannot be their own contractor and obtain this loan
  • Borrower and contractor must sign and complete construction contract. (FNMA provides a model form 3734)
  • There can be only 1 general contractor per project

Plans and Specifications of Renovation

  • Copies must be provided to appraiser prior to inspection
  • Plans must fully describe all work that is to be completed
  • Plans must specify an estimated completion timeline for various “phases” of project
  • Any changes after original submission require the submission of Homestyle Renovation Change Order Request (FNMA form 1200) must be submitted to the FBM Builder Services Group

Documentation

Disclosures:

Standard mortgage application (1003) and disclosures are required for this product. This includes but is not limited to a Loan Estimate, Right To Receive An Appraisal, Home Loan Tool Kit, List of Homeownership Counseling Centers, signed intent to proceed, Privacy Notice, e-sign consent if applicable, Fair Lending Notice, Credit Score Notice, ECOA, Closing Disclosure etc…

Additional documents required to be issued to the borrower upfront at or prior to initial application:

  • Borrower acknowledgment (Fidelity Specific form available on lionbankdirect.com/ reference material/Homestyle Renovation)
  • Consumer Tips (FNMA form available on lionbankdirect.com)
  • Rehab Draw Process Disclosure (Fidelity Specific form available on lioinbankdirect.com)

Disclosure OfFees

Clients should disclose a HomeStyle Renovation loan much the same way a standard conforming loan would be disclosed.

  • Origination charges (Box A)
  • Discount points
  • Borrower paid compensation
  • Origination fee
  • Admin/Underwriting fees
  • Services You Cannot Shop For (Box B)
  • Appraisal
  • Credit report
  • Flood cert
  • Inspection fee
  • Tax service
  • Title update fee (required for this product at time of completion of the project)
  • Services You Can Shop For (Box C) typically include:
  • Title fees
  • Settlement fees
  • Title insurance fees
  • Other costs (Box E)
  • Taxes should be based on the current property assessment not the expected improved assessment.
  • Recording Fees
  • Transfer fees
  • Prepaid Escrow Accounts (Box F)
  • Homeowners Insurance (based on coverage for the improved property after renovation)
  • MI
  • Taxes (* Note: projects that will add square footage to the subject will require an updated tax estimate from the settlement agent and the new estimate will be used in loan qualifying)
  • Other
  • Owners Title (Optional)

Fidelity will collect the standard admin/underwriting fee at time of closing (broker loans) or loan purchase (correspondent loans)

Broker loans

$795 admin fee

$295 Construction admin fee (Box A Fee)

$89 tax service

$11 flood certification

$10 GRMA fee (if applicable)

Mini-Correspondent (Fidelity prepares closing package)

$595 admin fee

$295 renovation admin fee (Box A Fee)

Life of loan flood cert provided by client

Non-Delegated (Client prepares closing package)

$495 admin fee

$295 renovation admin fee (This would be a box A Fee)

Life of loan flood cert provided by client

Delegated- not available for this product

Other fees to be disclosed to the borrower that cannot be shopped for:

In addition to the standard fees typically disclosed (appraisal, credit report, flood cert, etc)the following additional fees should be disclosed:

  • 5 inspection fees @ $120 per inspection ($600 total) payable to Fidelity Bank (Box B Fee)
  • $150 final appraiser inspection fee (Box B Fee)
  • $150 title update fee will be required (Box B Fee)

Documentation Required For Underwriting

  • Complete disclosure package
  • DU Findings
  • Flood certification
  • Standard income and asset documentation per DU
  • Standard mortgage credit report
  • Completed 1008 and 1003
  • Appraisal (not required for initial approval)

Underwriting Documents Specific to This Product

  • Borrower acknowledgement (Fidelity Form specific for the HSR product)
  • Borrower signed FNMA HomeStyle Renovation Consumer Tips( FNMA Form 1204)
  • Construction renovation loan approval (Internal FBM document prepared by Builder Services Group)
  • Maximum Mortgage Worksheet (approved by FBM Builder Services group)
  • Signed Renovation Contract (between borrower and contractor)
  • Normally includes draw schedule
  • Normally includes detailed cost estimate of project
  • Plans ( provided by contractor)
  • Construction permit or completed application for permit (contractor should provide)
  • Rehab draw process disclosure (Fidelity Bank Form)

New Builder/Contractor Checklist

If contractor is not on Fidelity’s approved contractor list the following must be submitted prior to underwriting

  • Builder documents (Fidelity Bank forms)
  • W-9 form for builder/contractor
  • Proof of liability insurance ($1 mil minimum per incident)
  • State contractor license (valid and current)

Homeowners Insurance or Builders Risk Insurance

Insurance Requirements

Property insurance coverage is required for HomeStyle Renovation loans. Although, the property insurance requirement for most home renovation loans initially is based on the “As Is” value of the property, the amount of coverage must be increased if necessary following the completion of the renovation or construction work to ensure that FNMA’s standard coverage requirement is met. In some cases Builder’s Risk Insurance will also be required, i.e. addition of square footage. This requirement will be determined by the scope of work to be completed.

Property/Real Estate Tax

The lender must base its’ calculation of real estate taxes for borrower qualification on no less than the current assessed value. However, in some circumstances the borrower must be qualified using the projected real estate taxes, i.e. addition of square footage. In these cases the lender must use a reasonable estimate of the real estate tax based on the completed improvements.

Closing and Funding

  • Correspondents can opt to have FBM prepare the closing documents under our mini-correspondent program. Please refer to the applicable fees.
  • All loans must close in the client’s nameas a correspondent or Fidelity Bank Mortgage for broker transactions.
  • All loans must close in the name of an individual and cannot close in a trust.
  • For correspondent loans, renovations cannot begin until the loan is purchased by Fidelity Bank Mortgage
  • Standard closing package documentation including but not limited to:
  • Closing instructions signed by settlement agent
  • Standard FNMA Multistate Fixed Rate Single Family Note (FNMA form 3200 revised 1/01) or applicable state specific Fixed Rate Note as applicable.
  • State specific security instrument with construction loan rider (FNMA form 3737)
  • Multistate Investor rider to security instrument assignment of rents (FNMA form 3738)
  • FHA Multistate Rehabilitation Loan Rider
  • Title policy ( with correct)
  • MERS registration is required for all correspondent loans.
  • Any applicable loan estimates or change of circumstances
  • Tax information sheet
  • Final 1003
  • Patriot act identification
  • W-9
  • USPS
  • ATR certification
  • Evidence of acceptable homeowners insurance or builder risk insurance as applicable.
  • Acknowledgment of receipt of appraisal
  • Initial acknowledged closing disclosure (dated at least 3 business days prior to closing)
  • 4506 signed at closing
  • Prepaid finance charge breakdown
  • Itemization of lender/seller credit
  • Final signed CD
  • Sellers signed CD if a purchase transaction
  • Escrow agreement
  • Termite waiver if applicable (or inspection)
  • Survey wavier if applicable (or actual survey if applicable)
  • Occupancy statement
  • Flood insurance acknowledgement
  • Your credit score disclosure
  • Notice to home loan applicant
  • Borrower’s ATR Certification
  • Notice of right to cancel (refinance only)
  • Verbal VOE dated within 5 days of closing
  • Good-Bye letter (can be issued post purchase copy should be in file submitted for purchase)
  • Verbal VOE dated within 5 days of closing
  • Documents required that are specific to the Homestyle Renovation product to be signed at closing
  • Rehabilitation Loan Agreement(FNMA form 1208)
  • Multistate Construction Loan Agreement (FNMA 3735) and all applicable exhibits
  • Property Description
  • Schedule of advances
  • Request for advance
  • Multistate construction contract FNMA form 3734
  • FNMA Rehabilitation loan Rider Assignment of Rents (FNMA form 1212)
  • FNMA Rehabilitation Loan Rider (FNMA form 1214)
  • Loan Age:

Loan can be no more than 30 days old from the note date as of the date of purchase by Fidelity Bank Mortgage