PHFA Seller’s Guide

December 2022 Pennsylvania Housing Finance Agency ~ www.phfa.org

PENNSYLVANIA HOUSING FINANCE AGENCY

HOMEOWNERSHIP PROGRAMS

SELLER’S GUIDE

The Pennsylvania Housing Finance Agency (PHFA) was created by the General Assembly in 1972,

to provide affordable housing for older adults, families and individuals of modest means and persons

with disabilities. For ten years, this mission was carried out solely through rental housing programs.

In 1982, the first Homeownership Program was created, through which PHFA provides capital for

single-family, home purchase loans. The Homeowners’ Emergency Mortgage Assistance Program

(HEMAP) was created by Act 91 in 1983 as a foreclosure prevention program. Rental housing,

homeownership, and foreclosure prevention remain as PHFA’s core components.

Housing industry professionals are a key component of PHFA’s homeownership programs. This

group of experts includes housing counselors, real estate agents, builders, lenders, brokers,

appraisers, title agents, housing authorities, and nonprofit organizations. PHFA’s home loan products

can help these professionals stretch their customers’ dollars further and/or lower their monthly

mortgage payment. Together, PHFA and its housing partners ensure that eligible buyers can afford

to become and remain homeowners, and that they aren’t overwhelmed by the process.

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Table of Contents

PHFA Homeownership Programs Seller’s Guide

TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................................................................... 2

CHAPTER 1 - PARTICIPANT RELATIONSHIP .................................................................................................................... 8

A. DEFINITION OF “PARTICIPANT” ......................................................................................................................................................... 8

1. Participating Lender .................................................................................................................................................................... 8

2. Third Party Originator (TPO) ...................................................................................................................................................... 9

B. MASTER ORIGINATION AND SALE AGREEMENT ................................................................................................................................ 9

C. PARTICIPANT COMPENSATION AND ALLOWABLE FEES ..................................................................................................................... 9

1. Origination Compensation ........................................................................................................................................................... 9

2. Servicing Release Premium ........................................................................................................................................................ 10

3. Allowable Fees ........................................................................................................................................................................... 10

D. PARTICIPANT’S BASIC DUTIES AND RESPONSIBILITIES ................................................................................................................... 11

E. PARTICIPANT TRAINING ................................................................................................................................................................... 12

F. PARTICIPANT EVALUATION ............................................................................................................................................................. 12

1. Lender Score Card ..................................................................................................................................................................... 12

a. Pre-Closing Eligibility ................................................................................................................................................................................ 12

b. Loan Setup & Purchase ............................................................................................................................................................................... 12

c. Post Purchase .............................................................................................................................................................................................. 12

d. Pre-Closing Performance Premium............................................................................................................................................................. 13

G. CONTACT WITH PARTICIPANT ......................................................................................................................................................... 13

CHAPTER 2 – LOCK POLICY AND PIPELINE MANAGEMENT ....................................................................................... 14

A. LOCK POLICY .................................................................................................................................................................................. 14

1. New Lock Submission ................................................................................................................................................................. 14

2. Rate Publication and Lock Options ............................................................................................................................................ 14

3. Revisions to an Active Lock ........................................................................................................................................................ 15

a. Extension Policy ......................................................................................................................................................................................... 15

b. Relocks ....................................................................................................................................................................................................... 15

c. Changes ....................................................................................................................................................................................................... 15

d. Lock Cancellation ....................................................................................................................................................................................... 16

B. PIPELINE MANAGEMENT ......................................................................................................................................................... 16

1. Training for Pipeline Plus .......................................................................................................................................................... 17

a. Log In Screen .............................................................................................................................................................................................. 17

b. Forgot Password Link ................................................................................................................................................................................. 17

c. Request an Account Link ............................................................................................................................................................................ 17

d. Home Screen ............................................................................................................................................................................................... 17

e. My Account ................................................................................................................................................................................................ 17

f. User Accounts Admin ................................................................................................................................................................................. 18

g. My Administrators ...................................................................................................................................................................................... 18

2. Incomplete Locks ........................................................................................................................................................................ 18

3. Loan Extensions ......................................................................................................................................................................... 18

a. Loans Available for Extensions .................................................................................................................................................................. 19

b. Loans with Extensions ................................................................................................................................................................................ 19

4. Loan Setup .................................................................................................................................................................................. 19

5. Pipeline Loans (Loan Status) ..................................................................................................................................................... 19

6. Loan Details ............................................................................................................................................................................... 19

7. Reports & Notices ...................................................................................................................................................................... 20

CHAPTER 3 - FIRST MORTGAGE PRODUCTS ................................................................................................................. 21

A. PHFA-SPECIFIC GUIDELINES APPLICABLE TO ALL PRODUCTS ......................................................................................................... 21

1. Credit Score Requirement .......................................................................................................................................................... 21

2. Total Debt to Income Maximum ................................................................................................................................................ 21

3. Minimum Borrower Contribution ............................................................................................................................................... 21

4. Homebuyer Education ................................................................................................................................................................ 22

5. Automated Underwriting Systems .............................................................................................................................................. 22

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6. Loan Terms ................................................................................................................................................................................. 23

7. Loan Use .................................................................................................................................................................................... 23

8. Mortgage Insurance ................................................................................................................................................................... 24

a. Conventional Loans ................................................................................................................................................................................. 24

b. FHA Insured Loans.................................................................................................................................................................................. 24

i. FHA 203(k) loans ...................................................................................................................................................................................... 24

c. RD Guaranteed Loans ............................................................................................................................................................................ 25

d. VA Guaranteed Loans ............................................................................................................................................................................ 25

9. Co-Signers .................................................................................................................................................................................. 25

10. Non-Liable Co-Occupants ........................................................................................................................................................ 26

11. Subordinate loans ..................................................................................................................................................................... 26

a. Combination Loans.................................................................................................................................................................................. 26

12. Electronic Signatures .............................................................................................................................................................. 27

B. HFA PREFERRED™ PROGRAM ........................................................................................................................................................ 27

1. Overview..................................................................................................................................................................................... 27

2. Eligibility Requirements ............................................................................................................................................................. 27

a. Loan Purpose and Terms ............................................................................................................................................................................. 27

b. Borrower Eligibility .................................................................................................................................................................................... 29

i. First Time Home Buyer ............................................................................................................................................................................... 29

ii. Minimum Borrower Contribution ............................................................................................................................................................... 29

iii. PHFA Grant ............................................................................................................................................................................................... 29

iv. Homebuyer Education ............................................................................................................................................................................... 29

v. Income Limit .............................................................................................................................................................................................. 30

vi. Qualifying income ..................................................................................................................................................................................... 30

3. Property Eligibility ..................................................................................................................................................................... 31

4. Lender Instructions and Procedures .......................................................................................................................................... 32

a. Lender Compensation ................................................................................................................................................................................. 32

b. Locking of Funds ........................................................................................................................................................................................ 32

c. Underwriting Procedures ............................................................................................................................................................................ 32

d. DU Requirements ....................................................................................................................................................................................... 32

e. Manual Underwriting .................................................................................................................................................................................. 32

f. Appraisal Submission/UCDP

.................................................................................................................................................................. 33

g. Private Mortgage Insurance ........................................................................................................................................................................ 33

h. Closing Procedures ..................................................................................................................................................................................... 33

i. Submitting the Purchase Package ................................................................................................................................................................ 34

5. HomeStyle

Renovation Program ............................................................................................................................................. 34

C. KEYSTONE GOVERNMENT LOAN PROGRAM .................................................................................................................................... 37

1. Eligibility Requirements ............................................................................................................................................................. 38

a. Borrower Eligibility .................................................................................................................................................................................... 38

b. Property Eligibility ..................................................................................................................................................................................... 38

2. Lender Instructions and Procedures .......................................................................................................................................... 38

c. Underwriting and Closing Procedures ........................................................................................................................................................ 39

D. KEYSTONE HOME LOAN PROGRAM (KHL) ..................................................................................................................................... 39

1. Eligibility Requirements ............................................................................................................................................................. 39

a. First-time Homebuyer ................................................................................................................................................................................. 40

b. Income Limit .............................................................................................................................................................................................. 41

c. Purchase Price Limit ................................................................................................................................................................................... 42

d. Recapture Tax ............................................................................................................................................................................................. 43

2. No Refinances ............................................................................................................................................................................. 44

3. Loan Assumptions....................................................................................................................................................................... 45

E. KEYSTONE FLEX LOAN PROGRAM ................................................................................................................................................... 46

1. Eligibility Requirements ............................................................................................................................................................. 46

c. Income Limit ............................................................................................................................................................................................... 49

d. Qualifying Income ...................................................................................................................................................................................... 49

e. Purchase Price Limit ................................................................................................................................................................................... 49

f. Homebuyer Education ................................................................................................................................................................................. 49

2. Property Eligibility ..................................................................................................................................................................................... 49

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c. Underwriting and Closing Procedures ........................................................................................................................................................ 49

F. PURCHASE & IMPROVEMENT PROGRAM .......................................................................................................................................... 50

1. Mortgage Terms ......................................................................................................................................................................... 50

2. Eligibility Requirements ............................................................................................................................................................. 51

a. Eligible Buyers............................................................................................................................................................................................ 51

b. Eligible Properties....................................................................................................................................................................................... 51

c. Eligible Repairs & Improvements ............................................................................................................................................................... 51

3. Borrower Instructions ................................................................................................................................................................ 51

4. Lender Instructions and Procedures .......................................................................................................................................... 52

a. Application/Origination .............................................................................................................................................................................. 52

b. Underwriting/Processing............................................................................................................................................................................. 52

c. Closing the Loan and Selling it to PHFA .................................................................................................................................................... 53

d. Escrow Administration ............................................................................................................................................................................... 53

e. Funds Disbursement .................................................................................................................................................................................... 53

G. FHA/VA STREAMLINE REFINANCE PROGRAM ................................................................................................................................ 54

1. Overview..................................................................................................................................................................................... 54

2. FHA Guidelines .......................................................................................................................................................................... 54

3. VA Interest Rate Reduction Refinancing Loan (IRRRL) Guidelines .......................................................................................... 54

5. Subordinate Loans ...................................................................................................................................................................... 54

6. Additional PHFA Requirements ................................................................................................................................................. 55

7. Lender Instructions and Procedures .......................................................................................................................................... 56

d. Closing Procedures ..................................................................................................................................................................................... 57

e. Submitting the Purchase Package ............................................................................................................................................................... 58

CHAPTER 4 - ASSISTANCE PROGRAMS ......................................................................................................................... 59

A. KEYSTONE ADVANTAGE ASSISTANCE LOAN PROGRAM ................................................................................................................... 59

1. General Program Description .................................................................................................................................................... 59

2. Loan Terms and Usage ............................................................................................................................................................... 59

3. Eligibility Requirements ............................................................................................................................................................. 59

a. Liquid Asset Limitation .............................................................................................................................................................................. 59

ii. Homebuyer Education ................................................................................................................................................................................ 60

4. Lender Instructions and Procedures .......................................................................................................................................... 60

a. Locking of Funds ........................................................................................................................................................................................ 60

b. Underwriting Procedures ............................................................................................................................................................................ 60

c. Closing Procedures ..................................................................................................................................................................................... 60

d. Post-Closing ................................................................................................................................................................................................ 61

B. KEYSTONE FORGIVABLE IN TEN YEARS LOAN PROGRAM (K-FIT) ................................................................................................. 61

1. General Program Description .................................................................................................................................................... 61

2. Loan Terms and Usage ............................................................................................................................................................... 62

3. Eligibility Requirements ............................................................................................................................................................. 62

b. Homebuyer Education ................................................................................................................................................................................ 62

4. Lender Instructions and Procedures .......................................................................................................................................... 63

C. MORTGAGE CREDIT CERTIFICATE PROGRAM .................................................................................................................................. 64

1. Reissuance of Mortgage Credit Certificates............................................................................................................................... 64

D. HOMESTEAD .................................................................................................................................................................................. 65

1. Availability of Funds .................................................................................................................................................................. 65

2. Eligible Lending Areas ............................................................................................................................................................... 65

3. Borrower Eligibility ................................................................................................................................................................... 65

a. Homebuyer Education ................................................................................................................................................................................. 65

b. First-time Homebuyer ................................................................................................................................................................................. 66

d. Program Affiliation ..................................................................................................................................................................................... 66

4. Loan Features & Guidelines ...................................................................................................................................................... 66

5. Property Guidelines ................................................................................................................................................................... 67

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a. Lead-based Paint ......................................................................................................................................................................................... 67

b. Acquisition Cost ......................................................................................................................................................................................... 67

c. Existing Homes ........................................................................................................................................................................................... 67

d. Newly Constructed Homes ......................................................................................................................................................................... 68

e. Tenant-Occupied ......................................................................................................................................................................................... 68

6. Calculation of Assistance ........................................................................................................................................................... 68

7. Funding Procedures ................................................................................................................................................................... 69

8. Loan Documents ......................................................................................................................................................................... 69

E. ACCESS DOWNPAYMENT & CLOSING COST ASSISTANCE ................................................................................................................ 70

F. EMPLOYER ASSISTED HOUSING (EAH) ........................................................................................................................................... 70

1. Benefits to the Employee ............................................................................................................................................................ 70

2. Benefits to the Employer ............................................................................................................................................................. 70

3. Lender Instructions and Procedures .......................................................................................................................................... 71

F. ADDITIONAL ASSISTANCE PROGRAMS ............................................................................................................................................. 71

a. Affordable Housing Assistance Programs ............................................................................................................................................ 71

b. Section 8 Homeownership Vouchers .................................................................................................................................................... 72

CHAPTER 5 – SPECIAL PROGRAMS FOR PERSONS WITH DISABILITIES .................................................................. 73

A. ACCESS HOME MODIFICATION PROGRAM ....................................................................................................................................... 73

1. Program Description .................................................................................................................................................................. 73

2. Eligibility Requirements ............................................................................................................................................................. 73

a. Eligible Applicants ...................................................................................................................................................................................... 73

b. Eligible Loans ............................................................................................................................................................................................. 74

c. Eligible Home Modifications ...................................................................................................................................................................... 74

3. Lender Instructions and Procedures .......................................................................................................................................... 74

b. Underwriting ............................................................................................................................................................................................... 74

c. Closing and Post-Closing/Final Docs.......................................................................................................................................................... 75

i. Lender-Held Escrow .................................................................................................................................................................................... 76

ii. PHFA-Held Escrow .................................................................................................................................................................................... 77

B. ACCESS DOWNPAYMENT & CLOSING COST ASSISTANCE ................................................................................................................ 77

1. Eligible Applicants ..................................................................................................................................................................... 77

2. Mortgage Amounts ..................................................................................................................................................................... 78

3. Lender Instructions and Procedures .......................................................................................................................................... 78

a. Locking/Approval ....................................................................................................................................................................................... 78

b. Closing ........................................................................................................................................................................................................ 78

c. Post-Closing ................................................................................................................................................................................................ 79

CHAPTER 6 – PRE CLOSING RESULTS ........................................................................................................................... 80

A. ELIGIBLE RESULT ...................................................................................................................................................................... 80

B. INELIGIBLE RESULT .................................................................................................................................................................. 80

C. DENIAL RESULT ......................................................................................................................................................................... 80

CHAPTER 7 – PHFA DELEGATED UNDERWRITING AUTHORITY ................................................................................. 82

CHAPTER 8 - PROPERTY GUIDELINES ............................................................................................................................ 83

A. APPLICABILITY ................................................................................................................................................................................ 83

B. GENERAL PROPERTY STANDARDS ................................................................................................................................................... 83

C. PHFA OVERLAYS ............................................................................................................................................................................ 83

1. Appraisal Report ........................................................................................................................................................................ 83

2. Appraiser Standards ................................................................................................................................................................... 84

3. Acreage....................................................................................................................................................................................... 84

4. Address ....................................................................................................................................................................................... 85

5. Certifications .............................................................................................................................................................................. 85

a. Wood-Destroying Insects ............................................................................................................................................................................ 85

6. Condominiums ............................................................................................................................................................................ 85

7. Escrows for Incomplete Weather-Related items ......................................................................................................................... 86

8. Investment Properties ................................................................................................................................................................. 86

9. Knob and Tube Wiring ............................................................................................................................................................... 86

10. Lease Purchase......................................................................................................................................................................... 87

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11. Lot Equity ................................................................................................................................................................................. 87

12. Manufactured Housing ............................................................................................................................................................. 87

13. Mineral Rights .......................................................................................................................................................................... 89

14. Multiple Lots ............................................................................................................................................................................ 89

15. New Construction ..................................................................................................................................................................... 90

16. Private Roads ........................................................................................................................................................................... 91

17. Private Sewage Disposal/Septic Systems.................................................................................................................................. 91

18. Private Water Supply/Wells ...................................................................................................................................................... 91

19. Two-Unit Dwellings ................................................................................................................................................................. 92

20. Unheated Living Spaces ........................................................................................................................................................... 92

21. Vacant Property ....................................................................................................................................................................... 92

CHAPTER 9 – LOAN CLOSING .......................................................................................................................................... 93

A. GENERAL INFORMATION ................................................................................................................................................................. 93

B. FEES ................................................................................................................................................................................................ 94

C. NO CASH BACK ............................................................................................................................................................................... 94

D. UNIFORM CLOSING DATASET (UCD) .............................................................................................................................................. 94

E. TITLE INSURANCE ............................................................................................................................................................................ 94

F. MORTGAGE INSTRUMENT(S) AND ASSIGNMENT .............................................................................................................................. 94

1. Mortgage Instrument .................................................................................................................................................................. 95

2. Mortgage Assignment ................................................................................................................................................................. 95

3. Subordinate Mortgage(s)............................................................................................................................................................ 95

4. Certified Copies .......................................................................................................................................................................... 95

G. NOTE ............................................................................................................................................................................................... 95

1. First Payment Date .................................................................................................................................................................... 95

2. Endorsement ............................................................................................................................................................................... 96

3. Accuracy ..................................................................................................................................................................................... 96

4. Subordinate Loans ...................................................................................................................................................................... 96

H. CONSISTENCY OF BORROWER NAMES ............................................................................................................................................. 96

I. CO-SIGNERS ..................................................................................................................................................................................... 96

J. NON-LIABLE CO-OCCUPANTS .......................................................................................................................................................... 97

K. POWER OF ATTORNEY ..................................................................................................................................................................... 97

L. PHFA BORROWER FORMS ............................................................................................................................................................... 97

M. HOMEOWNER’S INSURANCE POLICY ............................................................................................................................................... 97

N. MORTGAGE INSURANCE PREMIUMS ................................................................................................................................................ 98

O. TAXES ............................................................................................................................................................................................. 98

1. Tax and Insurance Escrow ......................................................................................................................................................... 99

P. TRANSFER OF SERVICING ................................................................................................................................................................. 99

CHAPTER 10 - SELLING THE LOAN TO PHFA ............................................................................................................... 101

A. PERFORMANCE STANDARDS .......................................................................................................................................................... 101

B. PRELIMINARY LOAN SET-UP .......................................................................................................................................................... 101

C. SUBMITTING THE PURCHASE PACKAGE ......................................................................................................................................... 101

1. Purchase Submission Deadline ................................................................................................................................................ 101

2. Delivery .................................................................................................................................................................................... 102

3. Purchase Submission Checklist ................................................................................................................................................ 102

a. Execution of Legal Documents ................................................................................................................................................................. 102

4. Mortgage Modification Agreements ......................................................................................................................................... 102

5. 203K Escrow ............................................................................................................................................................................ 102

D. SERVICING PROCEDURES AND DOCUMENTS .................................................................................................................................. 102

1. Tax Certification....................................................................................................................................................................... 103

a. Insurance Policies ..................................................................................................................................................................................... 103

b. Condominium Insurance and/or Mine Subsidence Insurance ................................................................................................................... 104

c. Copy of MI Certificate .............................................................................................................................................................................. 104

d. Reporting to IRS ....................................................................................................................................................................................... 104

E. LOAN LEVEL NOTICES ................................................................................................................................................................... 104

1. Post Purchase Escrow Conditions ........................................................................................................................................... 104

2. Ineligible Purchase Submission ............................................................................................................................................... 104

3. Post-Purchase Conditions ........................................................................................................................................................ 105

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F. SUMMARY REPORTS ...................................................................................................................................................................... 105

1. Expiration of Lock Report ........................................................................................................................................................ 105

2. Deficient Loan Tracking Report ............................................................................................................................................... 105

CHAPTER 11 – FINAL DOCUMENT SUBMISSIONS ....................................................................................................... 106

A. PERFORMANCE STANDARDS .......................................................................................................................................................... 106

B. DELIVERY DEADLINE .................................................................................................................................................................... 106

1. Delivery .................................................................................................................................................................................... 106

C. FINAL DOCUMENT FILE ................................................................................................................................................................. 107

1. Mortgage .................................................................................................................................................................................. 107

2. Recorded Subordinate Mortgage.............................................................................................................................................. 107

3. Assignment ............................................................................................................................................................................... 107

4. Mortgage Insurance/Guarantee Certificate ............................................................................................................................. 107

5. Mortgage Modification ............................................................................................................................................................. 107

D. FINAL DOCUMENT CONDITIONS LETTER ....................................................................................................................................... 108

E. SUMMARY REPORTS ...................................................................................................................................................................... 108

1. Deficient Loan Tracking Report ............................................................................................................................................... 108

2. Loans Cleared for SRP Report ................................................................................................................................................. 108

CHAPTER 12 – INSURANCE REQUIREMENTS .............................................................................................................. 109

A. MORTGAGE INSURANCE ................................................................................................................................................................ 109

B. FLOOD INSURANCE ........................................................................................................................................................................ 109

1. PUD Homeowner’s Associations ............................................................................................................................................. 111

2. Condominiums .......................................................................................................................................................................... 111

a. Building Coverage .................................................................................................................................................................................... 111

b. Contents Coverage .................................................................................................................................................................................... 112

c. Unit Coverage ........................................................................................................................................................................................... 112

3. Preferred Risk Policy ............................................................................................................................................................... 112

4. Flood Determination ................................................................................................................................................................ 112

a. Manual Rechecks for Properties Located Partially in SFHA .................................................................................................................... 112

b. Manual Re-checks to Rule Out Discrepancies .......................................................................................................................................... 112

i. Assistance from NFDA .............................................................................................................................................................................. 113

ii. Assistance from FEMA ............................................................................................................................................................................ 113

C. HOMEOWNER’S INSURANCE .......................................................................................................................................................... 114

1. Term ......................................................................................................................................................................................... 114

2. Fire and Extended Coverage .................................................................................................................................................... 114

3. Other Hazards .......................................................................................................................................................................... 114

D. TITLE INSURANCE ......................................................................................................................................................................... 115

1. Schedule A ................................................................................................................................................................................ 116

2. Schedule B ................................................................................................................................................................................ 117

3. Endorsements ........................................................................................................................................................................... 118

CHAPTER 13 - PROGRAMS FOR HOMEOWNERS......................................................................................................... 119

A. HOMEOWNERS’ EMERGENCY MORTGAGE ASSISTANCE PROGRAM (HEMAP) .............................................................................. 119

B. PENNVEST ..................................................................................................................................................................................... 120

1. Benefits to You .......................................................................................................................................................................... 120

2. Borrower Continuing Responsibility ........................................................................................................................................ 121

3. Eligibility .................................................................................................................................................................................. 121

4. How to Apply ............................................................................................................................................................................ 121

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Chapter 1 - Participant Relationship

CHAPTER 1 - PARTICIPANT RELATIONSHIP

A. DEFINITION OF “PARTICIPANT”

The Pennsylvania Housing Finance Agency (“PHFA” or “Agency”) offers home loans with attractive

interest rates and fees to eligible homebuyers. These home loans are originated, processed, and

closed by a network of approved participating lending institutions. The loans and servicing rights are

then purchased by the Agency following settlement. PHFA loans may also be originated by approved

third party originators (generally, mortgage brokers) who obtain sponsorship from a participating

lender. A “Participant” is a lending institution which has been approved to participate in any of the

Agency’s Homeownership Programs.

1. Participating Lender

To be eligible as a participating lender, the company must be one of the following:

 A properly licensed and legally organized bank or savings and loan whose deposits are

insured by the Federal Deposit Insurance Corporation (FDIC), or a credit union with deposits

insured by the National Credit Union Administration (NCUA)

 A currently licensed Pennsylvania First Mortgage Banker

Lenders who wish to sell federally insured or guaranteed loans to PHFA must meet the following

applicable standards:

 For FHA insured loans, the lender must be approved by HUD as a Title II Supervised or Non-

Supervised Mortgagee and must have Direct Endorsement (DE) underwriting authority.

 For RD guaranteed loans, the lender must be approved by the United States Department of

Agriculture (USDA) for underwriting and servicing Guaranteed Rural Housing loans in

accordance with Section 1980.309 of FMHA Instruction 1980-D.

 For VA guaranteed loans, the lender must have Automatic Authority (aka Authority to Close

Loans on an Automatic Basis) from the United States Veterans’ Administration (VA); this can

be a Supervised Lender or a Non-Supervised Lender with Automatic Authority. The lender

must also have Lender Appraisal Processing Program (LAPP) approval.

Lenders may apply to become a PHFA Participating Lender at any time. Further information, as well

as the required documentation and agreements, is contained in the application.

Upon approval of the application, the final step is to complete PHFA’s training program, which is

conducted in person by PHFA staff at your site. For out of state organizations, PHFA may request

reimbursement for travel expenses incurred as part of the training.

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Chapter 1 - Participant Relationship

2. Third Party Originator (TPO)

To become approved as a third party originator (broker) of PHFA loans, the company must be both:

A currently licensed Pennsylvania First Mortgage Broker or Loan Correspondent; and a current

member in good standing of the Pennsylvania Association of Mortgage Brokers.

If the company meets the criteria above, take the following steps to become an approved

originator/broker:

1. Request and receive sponsorship from a current PHFA participating lender.

2. Complete the application and submit it to PHFA, Homeownership Programs, 211 North Front

Street, P.O. Box 8029, Harrisburg, Pennsylvania 17105-8029.

3. Execute the PHFA agreement, which is also executed by the lender. The agreement is

supplied to the lender by PHFA upon confirmation of the sponsorship.

4. Complete an in-person PHFA training program. Follow this link to see if there are any

sessions scheduled for your area. You may also call the Homeownership Programs

Department at 717.780.3871 to inquire about upcoming training opportunities.

B. MASTER ORIGINATION AND SALE AGREEMENT

The Master Origination and Sale Agreement (MOSA or the Agreement) sets forth the requirements

for maintaining status as an approved participant. The agreement also provides the terms and

conditions of sales of mortgage loans to the Agency and incorporates, by reference, the terms of this

Seller’s Guide. Participating lenders perform origination and selling functions as an independent

contractor and principal, not as an agent or representative of PHFA. From time to time, PHFA may

request participating lenders to execute a revised and updated version of the MOSA as a condition of

recertification and continued participating in the Agency’s Homeownership Programs. Once executed

by a participating lender and accepted by PHFA, the terms of any revised or updated MOSA shall

supersede and control over any version of the MOSA previously executed by the participating lender.

C. PARTICIPANT COMPENSATION AND ALLOWABLE FEES

1. Origination Compensation

The lender locks into the interest rate as well as the price that PHFA will pay for the loan. This price

includes the origination and the servicing release premium (SRP). The maximum a lender may retain

from the loan price is 103 percent of the loan amount. Additional compensation above 103 must be

provided to the borrower in the form of a credit towards their closing costs and shown as such on the

Loan Estimate and Closing Disclosure. This credit may not be used to fund any portion of the

borrower’s down payment. Borrowers may pay up to two bona fide discount points directly to the

lender in exchange for a lower rate. Bona fide discount points shall meet the definition and

requirements as set forth by the CFPB in Reg Z 1026.32 and 1026.43.

For HomeStyle

Renovation and FHA 203(k) loans, the prices shown on the rate sheet shall be

reduced by 100 basis points.

If the borrower is receiving an Access Modification Loan, PHFA shall pay the lender an extra $250.

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Chapter 1 - Participant Relationship

2. Servicing Release Premium

All loans are sold with servicing released to PHFA.

The lender locks into the interest rate as well as the price that PHFA will pay for the loan. This price

includes the origination and the servicing release premium (SRP). The maximum a lender may retain

from the loan price is 103 percent of the loan amount. Additional compensation above 103 must be

provided to the borrower in the form of a credit towards their closing costs or utilized towards a

refundable Single Lender Paid Mortgage Insurance Premium. Borrowers may pay up to two discount

points directly to the lender in exchange for a lower rate.

The loan price includes the SRP, and .625% will be withheld at the time of purchase and paid when

the file is cleared per the following schedule.

Regardless of when the loan was locked, the second portion of the SRP/loan price will be paid when

all post-purchase conditions* are cleared according to the schedule below.

 0.625% if cleared within 30 days

 0.50% if cleared within 60 days

 0.375% if cleared within 90 days

 0.25% if cleared within 120 days

 0.125% if cleared within 150 days

 0% if not cleared within 150 days

* Post-purchase conditions include all items on the purchase and final document letters and all

recorded documents. Conditions for escrow-related items do not reduce the 2

SRP payment.

Please allow up to seven (7) business days for PHFA to review and clear the conditions. The

calculation of the final SRP payment is based on the date we received the document(s) that cleared

the file, not the date we reviewed them. The additional SRP will be made in weekly batches

(calculated from the clear date) and sent via ACH. A Final SRP Payment Advice is posted on the

Pipeline Plus under the Reports & Notices section.

3. Allowable Fees

Participants may collect a $1,500 Administrative Fee, on all loans with the exception of the FHA and

VA Streamline Refinance programs where the Administrative Fee is $1,100, to cover overhead

expenses such as document preparation, underwriting and processing on loans locked on or after

April 1, 2023. They may also collect reasonable and customary charges incurred such as for the

credit report, appraisal, title search, recording fees, etc. No other overhead, financing or origination

fees may be charged to the borrower or seller. Except for the cost to record the Mortgage and a

reasonable Notary fee, no additional fees may be charged on a PHFA subordinate assistance loan

since it is done in conjunction with the PHFA first mortgage in order to help the borrower qualify for

the loan.

A $93.00 tax service fee payable to CoreLogic must be charged on loans with application dates on or

after July 1, 2016. It can be paid by the borrower or lender and must be reflected accurately on the

Loan Estimate and Closing Disclosure. PHFA deducts this amount from the purchase proceeds and

remits the funds to CoreLogic.

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Chapter 1 - Participant Relationship

Compensation and fees may be changed or eliminated at the discretion of the Agency.

D. PARTICIPANT’S BASIC DUTIES AND RESPONSIBILITIES

Participants are responsible for:

 selling at least 12 loans to PHFA per calendar year to ensure familiarity with the programs and

procedures

 ensuring compliance with all applicable state and federal laws and regulations

 ensuring compliance with the requirements set forth in this Seller’s Guide and the Agreement

 having adequate staff both in terms of numbers and experience/knowledge, and facilities to

originate and sell quality mortgage loans on a timely basis

 ensuring that staff is knowledgeable in all aspects of origination, processing, underwriting,

closing and selling mortgage loans as it relates to their respective job duties

 having fully documented written procedures and quality control measures in place

 protecting PHFA against fraud, misrepresentation or negligence by any parties involved in the

origination process

 communicating with each borrower all the requirements of the applicable home loan

program(s), the status of the mortgage loan application and answering questions pertaining to

PHFA’s programs

 completing PHFA’s annual recertification process within 120 days of the start of each new

year.

The lender must send PHFA written notice of any major organizational changes contemplated,

including:

 mergers, acquisitions, consolidations or reorganizations

 changes in ownership of over five percent (5%) by whatever means

 change in corporate name

 change in a savings and loan association’s charter from Federal to State or vice versa

 change to a banking association

 change in the Participant’s financial position (Copies of notifications to FNMA are acceptable.)

The lender must advise PHFA, in writing, of any changes to their primary business contact

information including main mailing address, phone/fax numbers, email addresses and ACH account

information within five (5) business days of the event.

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Chapter 1 - Participant Relationship

E. PARTICIPANT TRAINING

All pertinent staff of new participating lenders must complete a PHFA training course which covers

everything from PHFA loan origination to selling the loan. PHFA also offers a number of ongoing

resources to lenders and other real estate professionals including regional, on-site, and Web-based

training opportunities; e-mail and phone support; and, program brochures. The Web site is also a key

resource for participating lenders by providing current interest rates, program guidelines, forms,

updates, and other pertinent information. Additionally, PHFA is happy to provide participating lenders

with PowerPoint presentations for marketing and internal training purposes.

F. PARTICIPANT EVALUATION

Participants must demonstrate a proven ability to originate mortgage loans for sale in the secondary

market while maintaining quality control and management systems to evaluate and monitor the

quality of loan production in order to comply with PHFA procedures. They must also maintain

adequate staffing to originate and sell loans in a timely manner.

1. Lender Score Card

PHFA has implemented a Lender Score Card in order to assist in monitoring the quality of loans

being submitted. The report is posted to the Reports & Notices section of PHFA Pipeline Plus each

month and rates lenders on compliance, purchase and post purchase items over a six (6) month

period. The goal is to achieve and maintain a score of 80 percent or higher in each area with no

“Past Due” (p/d) or “Final” notices referenced in the comment section. An average six-month score

under 70 percent in any category signifies a need for training and is mandatory for any lender with an

average score under 60 percent in any category over the same timeframe. Training is available,

upon request, to any lender regardless of score.

a. Pre-Closing Eligibility

The First Time Approval measures the percent of loans submitted for compliance that were approved

on the initial review by PHFA staff. This section applies to all lenders.

b. Loan Setup & Purchase

The “% On Time Loan Setup” column provides the percentage of loans that were set up via PHFA

Pipeline Plus within seven (7) calendar days from closing. The “% On Time Purchases” column

measures performance in delivering complete loan packages to PHFA on time. The purchase

submission packages are to be submitted to the Agency and purchased, prior to the lock expiration

date. The “Pull Through %” column details a lender’s locked loan pull-through, observed by lock

expiration date, showing loans that were purchased as a percentage of total locked loans.

c. Post Purchase

The Post Purchase figures represent the percentage of loans purchased over the past 12 months

compared to the number of loans with outstanding exceptions. We also monitor to see that the FHA

loans are insured within 60 days after closing. If any loans fall into this category, the number of loans

will appear in the “# FHA Loans NOT Endorsed” column. The “# Past Due Notices” column

references any loans that may have an outstanding past due notice.

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Chapter 1 - Participant Relationship

d. Pre-Closing Performance Premium

At the close of each quarter, lenders with at least twelve loans purchased by PHFA in the previous

twelve months may qualify for a Pre-Closing Performance premium during the next quarter, provided

the combined average of the average quarterly Pre-Closing Eligibility percentage and the average

quarterly Pull Through percentage is greater than or equal to 70%.

If the combined average of the Pre-Closing Eligibility and Pull Through Percentages is at least 70% in

the most recently closed quarter, then any loan purchased in the following quarter which was

approved on its initial pre-closing review may qualify for an incentive of up to $75 in accordance with

the table below:

Combined

Average

Percentage

Pre-Closing

Performance

Premium

100

–

90%

$75

–

80%

$50

–

70%

$35

Any premium earned will be reflected on the Purchase Advice for any qualifying loan. The Pre-

Closing Performance premium is separate from and in addition to the compensation for loans

provided through a service release premium payment.

Please note: loans entered for purchase in PHFA's system at the end of a quarter will have the Pre-

Closing Performance premium calculated based on the quarter in which the loan is entered into the

system for purchase, not the date of the Purchase Advice or ACH payment.

G. CONTACT WITH PARTICIPANT

Each participant shall choose one staff person to serve as the primary contact for all matters related

to their business relationship with PHFA. A secondary main contact may also be chosen if desired.

The main contact is responsible to serve as the main liaison between the lending institution and

PHFA. Each new lender will identify this person on the Lender Information Sheet, which is provided

by PHFA when the lender is initially approved to participate in PHFA’s Homeownership Programs.

The lender may also identify key contacts for the various departments within their organization—

sales/originations, processing/underwriting, closing and escrow. The lender will also choose an

Administrator for the PHFA Pipeline PLUS, the online secure lender portal used to lock in loans and

track them through the pipeline. See Chapter 2 for details.

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Chapter 2 – Lock Policy and Pipeline Management

CHAPTER 2 – LOCK POLICY AND PIPELINE MANAGEMENT

A. LOCK POLICY

1. New Lock Submission

Lenders can lock each loan with PHFA once it is determined that the borrower is eligible for the

respective program and the property address has been determined. All loans must be locked prior to

submitting to PHFA for approval. The lock confirmation will be valid for the term of the lock-in and

counted in consecutive calendar days, including weekends and holidays.

The lock-in will establish the rate, price, lock period, and terms of the loan, subject to the terms and

conditions of the Master Origination and Sale Agreement and Seller’s Guide. Please note that the

price shown on the rate sheet and in Pipeline Plus does not include any applicable pricing

adjustments such as for FICO or the 203(k) program.

Having executed a best effort rate lock, the lender commits to using its best effort to deliver the loan

regardless of market conditions.

All new locks must be made through the PHFA secure lender website, PHFA Pipeline Plus.

2. Rate Publication and Lock Options

Rates and prices will be available each business day on the Pipeline Plus at approximately 10:00

AM. New locks will be accepted once daily rates are established, and up until midnight each day.

New locks will not be accepted over the weekend or on holidays. The PHFA holiday schedule is also

posted on the PHFA Pipeline Plus website.

Rates are subject to change at any time, at the discretion of the Agency. Once rates are published

each day, and in the event of an intraday rate change, an email notification will be distributed to all

participating lender staff that have a Pipeline Plus user account.

Lock-in terms may vary by product. See PHFA’s daily rate sheets for available options.

A complete loan package eligible for purchase by the Agency must be received by the lock expiration

date. A daily late fee of two basis points will begin to accrue on files that cannot be purchased within

seven calendar days from the expiration date. Please note the Agency requires four business days to

process loans for funding. Loans that cannot be purchased by PHFA within 30 days of the rate

expiration date will be subject to a worse case re-price. For additional delivery information, refer to

Chapter 10 of the Seller’s Guide.

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Chapter 2 – Lock Policy and Pipeline Management

3. Revisions to an Active Lock

a. Extension Policy

A request to extend the lock period of an active lock, which has not yet closed, must be received by

PHFA on or before the lock expiration date. Extension fees are as follows and are subject to change

at any time:

Calendar Days Cost (% of loan amount)

3 No cost (limited to once per loan)

7 0.125

15 0.250

30 0.375

A maximum of 33 days worth of extensions are allowable. Extension requests must be submitted via

PHFA Pipeline Plus. The lock will be extended upon request and the appropriate fee will be deducted

from the loan purchase funds. A fee will only be charged if the loan is closed and purchased. If its

determined an extension is no longer required, the extension fee should not be charged to the

borrower. If this occurs, lenders will be requested to reimburse the borrower for the unnecessary

charge. See Loan Extensions under Pipeline Management in this chapter for more information.

b. Relocks

For all relock requests, email seconda[email protected]. The Secondary Unit will advise whether a new

lock must be submitted as well as the terms that will apply. Relock requests made up to 59 days after

lock expiration will be subject to a worse-case relock and a relock fee of 37.5 bps. If lenders have a

lock that was previously canceled prior to the expiration date and needs to relock the same loan

before the initial lock would have expired, the loan will be subject to a worse-case relock and a relock

fee. Relock requests made 60 days or more after the lock expiration will be subject to current market

rates. A worse-case relock under the same program while the lock is currently active is not permitted.

Lenders have one business day from the time of the initial request to submit all required information.

Requests that remain incomplete after the initial request will be subject to worse case from the initial

lock, the initial change request, and when necessary information was received.

c. Changes

For all change requests, the lender should complete the Lock Desk Change Request Form (Form 6)

and submitted it to [email protected] to be processed. Lenders have one business day from the

time of the initial request to submit all required information. Requests that remain incomplete after the

initial request will be subject to worse case from the initial lock, the initial change request, and when

necessary information was received.

In the event of a change of products or loan types (e.g., Keystone Home Loan to Keystone

Government Loan), the original lock will be revised subject to worse case pricing based on the

original lock date, and the current lock expiration period will continue to be active. However, if the

borrower is switching from one of those programs to the Keystone Home Loan program, the borrower

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Chapter 2 – Lock Policy and Pipeline Management

will receive the KHL rate that was in effect at the time of the initial lock or the current KHL rate,

whichever is higher. In all scenarios, the lock expiration date will be based on the initial lock date.

In the event of a change within a program (e.g., Keystone Government to Keystone Government

Advantage), the rate quote will be based on the day of the original lock, and the current lock

expiration period will continue to be active.

In the event the borrower changes lenders before their original lock would have expired, the loan will

be subject to a worse-case relock and a relock fee of 37.5 bps (even if the original lock was canceled

by the first lender). The lock expiration date will be based on the initial lock date.

The Agency’s rate guarantee is made on the basis of a loan application and specific property. If a

change of property occurs, the lender must submit a cancellation request prior to submitting a new

lock registration. The subsequent application would be treated as a new loan for application and rate

lock purposes. Therefore, it would be subject to current market rates and applicable new lock

periods.

d. Lock Cancellation

Lenders are required to deliver a cancellation notice to the Agency as soon as it is determined that

the borrower will not qualify for the program or has withdrawn their application for consideration.

The lender should notify the Agency of cancellation immediately after making such determination or

having knowledge of such circumstances by requesting the lock cancellation online via the PHFA

Pipeline Plus system. In order to take advantage of this feature, administrators for each participating

lender must add the “Loan Cancellation Requests” menu option for each user that will be submitting

cancellations.

On loans not yet closed, the Agency will automatically cancel the lock on the day immediately

following the expiration date if an extension request has not been submitted by the lender. Lenders

should use extreme caution when monitoring their rate expiration pipeline, as a closed loan with an

expired lock will incur fees and ultimately may not be purchasable. Keep in mind this also applies to

files that have been submitted to PHFA for purchase but are ineligible for purchase. Furthermore, it is

important that the loan setup be completed via PHFA Pipeline Plus prior to the lock expiration date.

At the point when the lock has expired the link to submit the purchase package or complete the loan

setup will no longer display in the system. If you are unable to complete the loan setup due to an

expired lock, contact [email protected] to reactivate the lock. The loan setup must be completed

immediately to avoid further cancellations. See Chapter 10 for more information.

B. PIPELINE MANAGEMENT

The PHFA Pipeline Plus, located at lenders.phfa.org, is used to lock in loans with PHFA and then

monitor them from the time of lock through the post-closing process. The lender chooses an

employee to serve as the administrator of the online system. If desired, additional administrators can

be created. The administrator can then set up various staff members or approved third-party

originators with their own account for the various different options that Pipeline Plus has to offer.

Lenders are encouraged to review their list of online users and to update it at least annually, or

immediately in the case of a new hire or a terminated employee.

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Chapter 2 – Lock Policy and Pipeline Management

1. Training for Pipeline Plus

Upon being approved as a participating lender, PHFA will contact the lender to schedule training for

Pipeline Plus. Since most of the communications between PHFA and the lender are done through

this website, training is required prior to submitting your first lock. If you have been previously trained

on the old website but would like to be trained on the new Pipeline Plus, please contact the Agency at

717.780.3871.

Once an account is created by the administrator, the user can log into PHFA Pipeline Plus.

a. Log In Screen

The log in for PHFA Pipeline Plus is the user’s e-mail address and the password that was established

by the administrator.

b. Forgot Password Link

If you have forgotten your password for Pipeline Plus, click the Forgot Password link on the log in

page. You will be prompted to enter the e-mail address for your account and the security phrase

shown. An e-mail will be sent to you with a temporary password. You will be prompted to change

your password when you log in.

If your account has been suspended, you must contact your administrator or the Agency at

717.780.3871.

c. Request an Account Link

If you do not currently have an account for Pipeline Plus, you can request one by clicking the Request

an Account link. You will be required to select the name of your lending institution and enter some

basic information. An e-mail will then be sent to your lender’s administrator(s) requesting them to

create your account.

d. Home Screen

The Home Screen is the first screen you will come to upon logging in to PHFA Pipeline Plus. It will

include informative messages as well as the Lock Desk hours. Clicking the PHFA logo, while on any

screen in Pipeline Plus, will return you to the Home Screen. The drop down box in the upper right

corner of the screen is how you will navigate to the options you were assigned. The question mark

button, or help button, will provide you with Frequently Asked Questions for the section of Pipeline

Plus that you are currently on.

e. My Account

This section is where you can change your password and modify your contact information. It will

show what options you have been assigned as well as which reports and notices you have elected to

receive. Administrators can use the option to modify their own account as well.

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Chapter 2 – Lock Policy and Pipeline Management

Users can also manage their email subscription choices by selecting or deselecting the following

available options:

 PHFA News-Newsletters

 Program Updates-Program changes, Quarterly Updates

 Rates-Daily pricing information

 Training Opportunities-Webinar and/or In-Class announcements

f. User Accounts Admin

This is where administrators will create and maintain all of the user accounts for the lending

institution. Accounts can be edited or deleted. Deleted accounts can be restored; however all of the

previously assigned options will be removed upon restoration of the account and will need to be

reassigned accordingly.

This is also the area where administrators will establish who should view which reports and/or loan-

level notices. See Reports & Notices for more information.

NOTE: The set-up of general accounts used and checked by multiple users is not permitted. Every

user must be set up with their own unique e-mail address. For security purposes, no one should be

logging in using another user’s profile.

g. My Administrators

The My Administrators option will automatically be given to every user. This page identifies the

administrator(s) for your organization. Administrators have the ability to add, modify and delete user

accounts, as well as reactivate suspended accounts. They also now have the ability to assign

individual reports to each user. This was previously a function that had to be done by the Agency.

2. Incomplete Locks

There may be instances, while locking in funds via the Internet, where the lender is unable to

complete the input of the lock. As long as the first screen has been completed, the information will be

saved under the “Incomplete Locks” button for 30 days. Incomplete locks may only be completed by

the user who started it.

In the Incomplete Locks section, lenders can view which loans are incomplete and will be given an

option to restart, resume or delete the lock.

Please be sure to check the incomplete locks periodically, as the interest rate is not locked in until the

lock is fully completed.

3. Loan Extensions

Rate lock extension requests are submitted online via Pipeline Plus. The fee is netted from the loan

purchase funds. The option also displays a cumulative history of extensions. The administrator for

each lending institution provides authority to staff who need access to the “Loan Extension” menu

option.

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Chapter 2 – Lock Policy and Pipeline Management

See Extension Policy for more information.

a. Loans Available for Extensions

This section displays all active loans that have not yet been set up as closed in PHFA’s system. After

selecting a loan to extend, the requested number of days must be chosen. The requested fee will

populate and show the revised expiration date based on the selected number of days. There is also

a comment section for any special notes that you may want to make. The request will be submitted

to PHFA for processing when the “Save” button is clicked.

b. Loans with Extensions

This section displays all of the loans that have been extended along with the total number of

extensions on each loan. The “History” button displays a summary of the extension along with the

total number of days the loan has been extended and the total fee that will be netted from the loan

purchase funds. There are three statuses: Submitted (not yet processed by PHFA), Eligible and

Denied. The “Details” button provides the details of each extension request, including any

requestor/approval comments.

4. Loan Setup

The “Loan Setup” button is how lenders electronically submit the information after closing so that the

loan may be set up on PHFA’s servicing system.

See PRELIMINARY LOAN SET-UP in CHAPTER 10.

5. Pipeline Loans (Loan Status)

The “Pipeline Loans” button allows lender employees the ability to follow their PHFA loans without

having the ability to lock the loan. This screen gives a view-only snapshot of the current status of any

PHFA loan for that lender and should be given to any employee needing to check the loan status.

We strongly encourage lenders to use Pipeline Plus to look up loan status. The system is available

24/7 and enables lenders to track the progress of their loans at any stage of the pipeline.

The categories for Pipeline Loans are as follows: Not Yet Locked, Locked Only, Received Not

Reviewed by PHFA, Ineligible, Eligible Not Closed or Purchased, Eligible and Closed not Purchased,

Purchased with Outstanding Conditions, Waiting for Recorded Documents, Cleared for 2

SRP

Payment, Sold to PHFA and All Conditions Cleared, and Cancelled/Denied.

6. Loan Details

Lenders can select any loan under one of the categories to get the details of that particular loan. If

the status of a particular loan is not known, a Social Security search option is available. Hyperlinks to

loan-level reports are also available in the detail section. Users must have the proper authority to

view the reports.

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Chapter 2 – Lock Policy and Pipeline Management

7. Reports & Notices

The Reports and Notices option must be given to anyone that should receive summary reports and/or

loan-level notices. Once the option is given, the administrator can then give the user access to any of

the reports listed on the screen.

When retrieving a report, the user would select the Reports and Notices option. They will then have

to select the type of report they are looking for from the drop down list provided. The user will only

see a list of reports that they have been assigned to receive. A 12-month history for all instances of

that report will be available to view as a PDF document.

NOTE: The reports and notices available through Pipeline Plus are a snapshot of the loan taken at

the time the notice was generated. For the most up to date information on any loan, refer to the

Pipeline Loans section.

The reports currently available are listed below:

 Lock Confirmation

 Amended Lock Confirmation

 Cancellation of Lock(s) Report

 Expiration of Lock(s) Report

 Pre-Closing Package Review Results-Eligible

 Pre-Closing Package Review Results -Ineligible

 Pre-Closing Package Review Results-Denied

 Pre-Closing Package Review Report – Comments

 Pre-Closing Package Review Report - Evaluation

 Notification of Loan Purchase (Purchase Advice)

 Ineligible Purchase Package Review Results

 Post Purchase – Escrow Conditions

 Final Document Conditions

 Deficient Loan Tracking Report

 Final SRP Payment Advice

 Pull Through Report

 Lender Score Card

 Subordinate Payment Advice

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Chapter 3 - First Mortgage Products

CHAPTER 3 - FIRST MORTGAGE PRODUCTS

A. PHFA-SPECIFIC GUIDELINES APPLICABLE TO ALL PRODUCTS

Loans must comply with the respective program-specific eligibility criteria set forth in Chapters 3, 4

and 5, as well as all applicable federal guidelines depending on the loan type and program (FHA, VA,

RD, Fannie).

In situations where the borrower had a prior PHFA loan (including the HEMAP program) on which

they defaulted, PHFA may request additional documentation and/or deny their current application for

another loan, even though the borrower may otherwise meet the program guidelines. Lenders are

encouraged to submit such cases for a preliminary determination so it can be addressed early in the

process.

Borrowers who previously received a PHFA loan that resulted in a foreclosure, pre-foreclosure sale,

deed in lieu of foreclosure, or a write off by PHFA are not eligible for PHFA financing as long as the

event still appears in their credit history.

See Chapter 8 and Appendix I for PHFA property standards.

1. Credit Score Requirement

All borrowers on the file must have a middle credit score of at least 620, regardless of the AUS

finding. Where a borrower has two scores, the lowest one is used. If there are three scores, but two

are identical, the identical score would be used. For example, if the scores are 648,648, and 619, the

score used for qualifying purposes would be 648. Borrowers on government insured/guaranteed

loans with no credit score may still be eligible with sufficient documentation of nontraditional credit per

the applicable insurer/guarantor guidelines, as long as their total DTI does not exceed 43 percent.

2. Total Debt to Income Maximum

The total debt to income ratio (AKA back end ratio) may not exceed 45 percent for the Keystone

Home Loan and Keystone Flex (K-Flex)- government loan types and the Keystone Government (K-

Gov) programs. The total debt to income ratio may not exceed 50 percent for the HFA Preferred

and the Keystone Home Loan and Keystone Flex (K-Flex)- Conventional programs.

Maximum financing for PHFA loans to utilize downpayment and closing costs assistance programs

offered by the Agency must meet the following loan-to-value criteria: Conventional loans: 95% -97%;

FHA loans: 96.5%; RD and VA loans: 100% (DPA can only be used for closing cost assistance for

RD and VA loans).

3. Minimum Borrower Contribution

Borrowers obtaining an FHA-insured loan or a conventional loan with an LTV greater than 80 percent

must contribute the lesser of $1,000 or 1 percent of the loan amount, from their own verified funds.

Gifts and assistance programs may not be counted toward the minimum contribution requirement

regardless of the loan type/program. This is not applicable to refinance programs.

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Chapter 3 - First Mortgage Products

4. Homebuyer Education

All borrowers with a middle credit score below 680 (regardless of the first mortgage program) must

attend an in-person Homebuyer Education workshop or counseling session with a PHFA approved

counseling agency prior to closing. PHFA pays the counseling agency for this service; there is no

charge to the borrower except for the credit report. If both borrowers have credit scores below 680,

they both must attend counseling. The HFA Preferred product has different counseling

requirements—see Chapter 3 for details.

A Certificate of Completion for the borrowers should be included in the Pre-Closing package to PHFA.

If it is missing, it will appear as a purchase condition. The certificate must list a completion date of no

longer than one year from the date of application.

Under the HFA Preferred product, the lender should complete and the borrowers should sign the Pre-

Closing Counseling Referral (Form 63) and take it with them when they complete the counseling.

The HFA Preferred program also require at least one borrower to complete a homebuyer education

program, although it may be completed online if in person counseling is not required due to the credit

score; see the section in this chapter on those programs for further details.

Borrowers obtaining the Keystone Advantage Assistance Loan or the Keystone Forgivable In Ten (K-

FIT) Years Loan paired with any PHFA first mortgage loan must complete homebuyer education.

Both assistance loans also requires all borrowers with a middle credit score below 680 to attend an

in-person homebuyer workshop or counseling session with a PHFA approved counseling agency

prior to closing.

Any borrower with a credit score of 680 or higher may still participate in PHFA’s homebuyer education

program free of charge. This is highly recommended for any first time buyer, regardless of their credit

score.

The Fannie Mae Supplemental Counseling Information Form (Form 1103) is required for all loan

types with or without homebuyer education effective for loan applications taken on or after August 28,

2023. If the homebuyer education is not required to be completed for the transaction, please

complete the ‘Homebuyer Education and Housing Counseling’ section of the form appropriately. For

the ‘Language Preference’ section, the borrower is not required to select any of the language options

and may leave this section blank. There may be instances where the form in the loan file only

included the loan identifier information and the borrower’s name. This form may be included in the

PreClosing submission package. If omitted, this document will be required with the purchase package

submission to be eligible for loan purchase.

5. Automated Underwriting Systems

The Agency allows the use of, but does not require unless otherwise noted by a specific mortgage

program in this chapter, the following automated underwriting systems: Fannie Mae’s Desktop

Underwriter (DU); Freddie Mac’s Loan Prospector (LP); and Rural Development’s Guaranteed

Underwriting System (GUS). The lender is responsible for entering complete and accurate

information into the system and for submitting the correct findings report to the Agency in the pre-

closing package.

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Chapter 3 - First Mortgage Products

If the Findings Report generates a result of “Approve/Eligible” or “Accept” AND the ratios do not

exceed 45% back-end ratio for FHA, VA and RD loan types, PHFA will accept the findings as they

relate to the credit underwriting review of the file and the lender need not perform a manual review of

the credit (although the lender is responsible for ensuring the data is verified, accurate, and meets the

requirements that apply as a result of the loan type and program; i.e. FHA, VA, RD, Fannie).

The lender is responsible to ensure that the Purchase Submission package contains the

documentation needed to satisfy the findings report.

However, please note that the following documentation is still required regardless of the finding:

 Complete income verification and documentation;

 A standard, full interior and exterior appraisal (1004);

 Compliance with any applicable program-specific guidelines and documentation as outlined in

this chapter, as well as Chapters 4 and 5;

 Compliance with any applicable federal guidelines depending on the loan type (FHA, VA, RD);

If the Finding is a Refer or Caution (or similar risk classification), the lender must perform a manual

underwriting review of the file, and the loan must meet the applicable underwriting guidelines per the

loan type (i.e., FHA, VA, RD).

If a manual review is required or is chosen by the lender, the loan must meet the applicable program

guidelines depending on the program and insurance/guaranty.

6. Loan Terms

Each mortgage loan must be for a term of thirty (30) years, at the fixed interest rate specified on the

Pre-Closing Package Review Results-Eligible Notification with level monthly payment provisions. The

thirty-year term is both a minimum and maximum term. The loans may be prepaid in whole or in part

at any time without penalty.

7. Loan Use

All borrowers must occupy the mortgaged property as a principal residence within 60 days after

closing the mortgage loan. The borrower is not permitted to rent any portion of the property

subsequent to closing, except that the borrower may rent the property back to the previous owner for

up to, but no more than, 60 days following closing (with the exception of two units where the borrower

resides in one unit and rents the other one).

The property must be maintained as the principal residence of the borrower during the outstanding

term of the mortgage loan (unless the loan is assumed by a PHFA approved mortgagor).

PHFA will not purchase loans for residences which are primarily intended to be used as an

investment property, as a recreational home or in a trade or business. Any use of a residence in

trade or business which qualifies under Section 280A of the Internal Revenue Code of 1986 for a

deduction allowable for certain expenses incurred in connection with the business use of a home

shall not disqualify a residence from meeting the Principal Residence Requirement unless more than

15 percent of the total area of the residence is reasonably expected to be used.

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No part of the proceeds of the mortgage loan can be used to finance anything other than the

residence. Any land appurtenant to the residence which is not necessary to maintain the basic

livability of the residence, or items of personal property such as appliances (with the exception of the

stove, refrigerator, and any built-in appliances), furniture and the like which under Pennsylvania law

are not fixtures, may not be financed with the proceeds of the mortgage loan.

8. Mortgage Insurance

Loans with an LTV above 80 percent must carry mortgage insurance.

a. Conventional Loans

Conventional loans are eligible for sale to PHFA under the Keystone Home Loan Program (maximum

97 percent LTV), Keystone Flex Loan Program as well as the HFA Preferred™ loan program.

b. FHA Insured Loans

FHA insured loans are eligible for sale to PHFA under the Keystone Home Loan Program, Keystone

Government Loan Program and Keystone Flex Loan Program. Loans must adhere to all applicable

FHA underwriting guidelines (see www.fha.gov), as well as applicable PHFA-specific guidelines

contained in this chapter.

The lender must be approved by HUD as a Title II Supervised or Non-Supervised Mortgagee and

must have Direct Endorsement (DE) underwriting authority.

Non-occupant co-borrowers are not permitted on FHA insured loans under PHFA’s Keystone Home

Loan or HOMEstead programs. They are permitted with certain conditions under the Keystone

Government Program and Keystone Flex Loan Program.

The Agency will purchase both one and two unit properties (duplexes) under the FHA 203(b) loan

program. The Agency will also allow 223(e) and 203(k) loans. These loans must be reviewed and

approved by the lender’s Direct Endorsement Underwriter as eligible loans for FHA Insurance.

i. FHA 203(k) loans

In addition to meeting all FHA guidelines for 203K loans, the following PHFA requirements also apply:

 Owner occupied properties only (no investor loans).

 Properties must be at least 20 years old.

 The total acquisition cost of the property equals the purchase price of the home plus all

improvement costs. The total acquisition cost cannot exceed PHFA’s Purchase Price Limit if

applicable to the mortgage program.

 Improvements must be completed within 180 days of closing. Borrowers must occupy the

home within 60 days of the completion of the improvement.

 The Agency will purchase the loan prior to the improvement being completed, as long as the

home is habitable.

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 PHFA will hold the escrow funds, but the lender is responsible for ensuring all work is

completed per FHA guidelines and must request draws from PHFA when applicable using the

correct form. See Chapter 10 for further information on funding procedures related to the

203(k) escrow account.

 Unused escrow funds are not to be returned to the borrowers, but are to be applied to the

principal loan balance. (Note; should this occur, PHFA will not permit modification of the

monthly principal and interest payment.)

c. RD Guaranteed Loans

Rural Development (RD) guaranteed loans are eligible for sale to PHFA under the Keystone Home

Loan Program, Keystone Government Loan Program and purchase options under the K-Flex Loan

Program. RD guaranteed loans must also comply with all applicable RD underwriting guidelines (see

http://www.rd.usda.gov/pa), as well as applicable PHFA-specific guidelines contained in this chapter.

For RD guaranteed loans, the lender must be approved by the United States Department of

Agriculture (USDA) for underwriting and servicing Guaranteed Rural Housing loans in accordance

with Section 1980.309 of FMHA Instruction 1980-D.

d. VA Guaranteed Loans

VA guaranteed loans are eligible for sale to PHFA under the Keystone Home Loan Program,

Keystone Government Loan Program and Keystone Flex Loan Program. Loans must also comply

with all applicable VA underwriting guidelines (see www.va.gov), as well as applicable PHFA-specific

guidelines contained in this chapter.

The lender must have Automatic Authority (aka Authority to Close Loans on an Automatic Basis) from

the United States Veterans’ Administration (VA); this can be a Supervised Lender or a Non-

Supervised Lender with Automatic Authority. The lender must also have Lender Appraisal

Processing Program (LAPP) approval.

9. Co-Signers

Co-signers may be used as a compensating factor to offset high underwriting ratios provided that the

conditions below are met. A co-signer may not be used to compensate for a borrower’s derogatory

credit. In addition to the below parameters, the applicable insurer/guarantor guidelines must be

followed.

 The co-signer must be a relative (specifically brother, sister, child, parent, grandparent, aunt or

uncle, cousin, or legal guardian) OR the borrower’s spouse/significant other who will also

reside in the home;

 The co-signer is acting in the capacity solely for the purpose of providing additional security for

the mortgage loan;

 The co-signer has no other financial interest in the residence;

 The co-signer will execute the mortgage note and the Co-Signer’s Certification (Form 21). The

co-signer is NOT to execute the deed or mortgage.

 If the co-signer will live in the property being purchased, her/his income and assets must be

included for any applicable program-specific income limit and they must also meet the first-

time homebuyer requirement, if applicable to the program.

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 On Conventional loans, the borrower’s underwriting ratios cannot exceed 35/43 percent. With

the co-signers income and debts included, the underwriting ratios should not exceed 33/38

percent.

 On FHA loans, in order to qualify for a co-signer, a borrower’s underwriting ratios should fall

close to the 31/43 percent FHA ratios without the co-signer’s income and debts included. The

acceptability of a co-signer is determined by subtracting the total of all of the co-signer’s

monthly debt payments and monthly housing expenses from the co-signer’s gross monthly

income to arrive at a residual income which should be sufficient to permit the co-signer to

make the monthly mortgage payments in the event of a temporary or prolonged adversity.

 Co-Signers are not permitted on VA and RD loans.

 A co-signer is considered as a compensating factor only.

10. Non-Liable Co-Occupants

If the borrower’s spouse or other adult occupant will be listed on the deed, he or she must also be

listed on the mortgage, the assignment, the title policy, but not on the Note. The co-occupant’s

income would need to be included for any applicable program-specific income limit but may not be

used as qualifying income. Also, a credit report need not be run for the co-occupant. Please be sure

to provide a processor’s certification in the underwriting package with the name, date of birth and

social security number of the non-liable co-occupant. It must also be listed on Form 58 which is

submitted with purchase package.

11. Subordinate loans

See ADDITIONAL ASSISTANCE PROGRAMS in CHAPTER 4 and ‘Combination Loans’ in this chapter.

a. Combination Loans

Combination structured loans are acceptable under the Keystone Home Loan Program only, as long

as they meet the conditions set forth herein. The Agency will purchase the first mortgage only per the

normal policies and procedures. The second mortgage may be funded by the participating lender or

another mortgage lending institution. Acceptable combination structures are those utilizing the

combination of 80/10/10 or 80/15/5, where the first mortgage is 80 percent of the purchase price or

appraised value, whichever is less, the second mortgage is 10 or 15 percent of the same, and the

borrower is funding the ten or five percent downpayment.

The second mortgage must be a fully amortizing fixed rate loan for a minimum of 10 years and a

maximum of 30 years with no pre-payment penalty and no balloon payment. We will not accept

seconds that are amortized for one term but balloon in a shorter term. The interest rate cannot be

greater than three percent (3%) above the Agency’s first mortgage rate. The monthly payment must

be included in the housing expense ratio (PITI). Loans under this program must be underwritten

using an approved automated underwriting system and receive an Approve/Eligible or Accept rating.

If an automated underwriting system is not utilized, all borrowers on the loan must have a middle

FICO score of at least 660.

When submitting the Pre-Closing Package, provide a copy of the commitment letter for the second

mortgage to verify that the terms of the combination loan meet the above guidelines. Place this

documentation in the “verification of funds” section of the loan file as indicated on Form 51, the Pre-

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Closing Package Checklist. The PHFA Pre-Closing Package Review Results-Eligible Notification will

include a condition requesting a copy of the executed Note meeting our guidelines and proof that the

payment used to underwrite the loan remained the same. To satisfy this condition; attach a copy of

the executed Note to the PHFA Pre-Closing Package Review Results- Eligible Notification, per

number two of Form 58, the Purchase Submission Checklist. The CLOSING DISCLOSURE must

also reflect that the funds from the second mortgage were received.

12. Electronic Signatures

Electronic signatures are permitted on all documents for conventional loans per Fannie Mae

guidelines. For government insured/guaranteed loans, electronic signatures are permitted on all

documents as per the applicable agency guidelines (FHA, VA or RHS) EXCEPT for the Note and

Mortgage because Ginnie Mae does not allow electronic signatures on those documents.

B. HFA PREFERRED™ PROGRAM

1. Overview

The HFA Preferred™ program is a conventional loan product offered by the Pennsylvania Housing

Finance Agency. This program provide funding for eligible homebuyers to purchase or refinance a

home up to 97 percent (97%) of the purchase price or appraised value, whichever is less, with a

maximum combined loan to value (CLTV) of 105 percent (105%). The product offer a fully amortized

HomeReady® with a 30 year fixed rate term. Loans must meet HomeReady® program guidelines as

specified in the most current version of the Fannie Mae Selling Guide at www.fanniemae.com, except

as stated otherwise in this chapter of the PHFA Sellers’ Guide.

Under the HFA Preferred, loans with LTV ratios above 80 percent (80%) require Private Mortgage

Insurance from a Fannie Mae approved Mortgage Insurer. Loans with LTV ratios at or below 80

percent (80%) are eligible for the HFA Preferred program.

The HFA Preferred™ program is also available to eligible borrowers in conjunction with the Keystone

Advantage Assistance Loan programs (see Chapter 4) and/or the Access Modification program with

or without the Access Downpayment and Closing Cost Assistance program (see Chapter 5). When

the Access Modification program is utilized, the amount of the modifications should be entered in DU

on line e (Estimated Prepaid Items) and then the same amount would be listed on line j (Subordinate

Financing). PHFA-funded assistance is not permissible if PHFA is also the property seller.

In addition to the Agency’s programs, borrowers may also utilize Fannie Mae approved Community

Seconds

. The first mortgage plus any additional subordinate assistance loans must not exceed the

105 percent (105%) CLTV limit.

2. Eligibility Requirements

a. Loan Purpose and Terms

The loan may be used for a new loan on a property the borrower is seeking to purchase as a primary

residence.

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The loan amount may not exceed the current Fannie Mae standard loan limits. High cost areas do not

apply.

All borrowers must be purchasing the home as a primary residence (or refinancing a loan on their

primary residence).

LTV/CLTV

 Borrowers may finance up to 97 percent (95 percent for manufactured homes and loans

manually underwritten) of the purchase price or appraised value, whichever is less. The

maximum CLTV is 105 percent with an eligible Community Seconds

assistance loan as

evidenced by the completion of the Fannie Mae Community Seconds checklist that must be

submitted in the file (along with PHFA’s Affordable Housing Assistance Program checklist)..

 Loans with LTV ratios at or below 80 percent (80%) are eligible for the HFA Preferred program.

Limited cash out refinancing is available under the following terms:

 Cash back is limited to no more than $2,000 or two percent (2%) of the balance of the new

loan, whichever is less.

 Homebuyer education is not required on refinance transactions.

 Only the first mortgage and any subordinate liens used to purchase the property may be paid

off and included in the new mortgage, if there is sufficient equity to do so.

 Any subordinate financing not paid off may only be re-subordinated if it meets the Community

Seconds criteria and factored into the comprehensive risk assessment based on the CLTV,

HCLTV, and DTI ratios. If it does not meet the Community Seconds criteria, the borrower is not

eligible for a refinance under this program.

 Please note the K-FIT assistance loan is not eligible for re-subordination. Any unforgiven funds

must be paid off when refinancing with PHFA.

 For loans currently serviced by PHFA:

 The amount needed to pay off the borrower’s existing PHFA loan will be reduced by the

balance in the borrower's existing escrow account. The payoff statement used must

come directly from PHFA staff, as the one available to the borrower on the web will not

show the reduction. The calculation of the new loan amount would still be done

normally per the applicable program guidelines.

The lender will perform the standard escrow analysis to ensure sufficient funds are

collected to pay for any taxes and insurance due within the next 12 months, and will

also provide the initial escrow account disclosure statement.

 If the borrower’s existing loan is serviced by PHFA and includes a second PHFA closing

cost assistance loan, the second loan may be re-subordinated upon request, as long as

the CLTV does not exceed 105 percent (105%) of the home’s current value. The

subordinate financing must be entered into DU and factored into the DTI ratios if there is a

monthly payment. After the loan is approved by PHFA, forward the subordination

agreement to [email protected]. Please allow five to seven business days for PHFA to

complete the subordination agreement and send it to the requestor. The subordination

request should include the following:

1. Name of the borrower(s);

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2. Property Address;

3. Name and address of the staff person at the participating lender who should

receive the completed subordination agreement back from PHFA. (Please

note: a certified true copy of the subordination agreement that was sent by

the lender for recording must be submitted to PHFA in the purchase package

– see Form 58.)

 If the borrower has an existing second loan with PHFA that was not used in the

acquisition of the property (e.g., R&R, HEMAP), they are not eligible for a refinance

under this program.

 Borrowers seeking closing cost assistance from PHFA must be obtaining maximum financing,

depending on their credit score as detailed below (i.e., they must take the maximum amount of

cash out and use it towards closing costs and may then apply for PHFA assistance if still

needed). The maximum amount of the assistance is $6,000 or four percent (4%) of the loan

amount (versus sales price for purchase transactions), whichever is less.

b. Borrower Eligibility

i. First Time Home Buyer

There is no first time homebuyer requirement under these programs. The borrower may have an

ownership interest in another residential dwelling at the time of loan closing.

ii. Minimum Borrower Contribution

 Borrowers must contribute the lesser of $1000 or 1% from their own funds.

 The balance of the downpayment may come from an eligible Community Second, a gift, grant

or unsecured loan from a relative, domestic partner, fiancé/fiancée, or from a church, a public

agency, a municipality or a nonprofit other than a credit union.

iii. PHFA Grant

Borrowers obtaining the HFA Preferred

loan for purchase transactions may receive a PHFA Grant

of $500 that can be applied towards downpayment and/or closing costs. Borrower must comply with

the HFA Preferred

program guidelines and requirements to be eligible for the HFA Grant of $500.

These grant finds do not require repayment.

iv. Homebuyer Education

 All borrowers with middle credit scores below 680 must complete an in person homebuyer

education class or counseling session prior to closing, provided by one of PHFA’s approved

counseling organizations. Online courses will not be accepted for these borrowers.

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 For loans where all borrowers have a middle credit score of 680 or higher, a homebuyer

education class or counseling session must still be completed prior to closing; however, it need

be completed by only one borrower. The education or counseling session must be provided by

one of PHFA’s approved counseling organizations. Telephonic and online courses are also

acceptable for borrowers with a FICO of 680 or higher; acceptable online courses are those

provided by HomeView® or PHFA. In all cases, a copy of the counseling certificate(s) must be

included in the purchase package to PHFA.

 Homebuyer education provided by mortgage insurance providers are not permitted at this time.

 Homebuyer education is not required on refinance transactions.

 Buyers who complete pre-purchase counseling prior to executing the agreement of sale may

be eligible to receive a $300 credit that may be used towards closing costs if they obtain an

HFA Preferred™ program mortgage loan. Eligible borrowers must complete in person pre-

purchase counseling with a HUD approved counseling organization. Please refer to the PHFA

network of Approved Housing Counseling Agencies. Our list has been updated to reflect both

PHFA and HUD approved agencies.

 For the $300 pre-purchase credit, the Fannie Mae Form 1017 must be completed by the

counseling agency at the completion of counseling. The $300 credit will be funded by the

lender and reimbursed at loan purchase. A copy of Form 1017 and the completion certificate

must be included in the pre-closing package submission. If the completion certificate is

provided and counseling occurred prior to the borrower executing the agreement of sale,

PHFA will condition for the form to be submitted in the purchase package. The $300 credit

should be listed in the “Details of Transaction” on the mortgage application.

v. Income Limit

The income limit for this program is referenced in Appendix B. The total qualifying income can not

exceed 80% of the area median income for the area in which the property is located.

vi. Qualifying income

(a). The following additional sources of qualifying income may not be utilized even if permitted

under HomeReady guidelines:

 Non-borrower household Income

 Boarder income

 Rental income from accessory units

(b). Non-occupying Co-borrowers

Income from non-occupying co-borrowers is permitted under the following conditions:

 For loans that receive an Approve Eligible finding, the maximum LTV is 95% and the ratios

with the non-occupying co-borrower(s) cannot exceed 40/45. The occupying borrower’s

ratios alone cannot exceed 45/50.

 For manually underwritten loans, the maximum LTV is 90%, and the borrower’s own DTI

cannot exceed 43%. The maximum DTI with the non-occupying co-borrower(s) cannot

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exceed 36% if any of the credit scores are between 680 and 699 and 45% if all credit

scores are above 700.

 All income considered for qualifying is also considered in the income limit. Therefore, the

income of the non-occupying co-borrower(s) must be considered when determining

eligibility under the income limit.

 Occupant borrowers and non-occupying co-borrower(s) may have any ownership interest

in other real estate at the time of closing.

 The non-occupying co-borrower(s) must provide a statement that he/she understands

he/she is equally responsible with the primary borrower for the monthly mortgage

payments and that failure to make payments as scheduled will negatively impact the credit

history of both parties.

3. Property Eligibility

The following property types are not eligible under these programs: co-ops and two or more unit

properties. PUD’s are acceptable per Fannie Mae’s guidelines.

In addition to all applicable Fannie Mae standards, properties must meet PHFA’s guidelines as

described in Appendix I of the Sellers’ Guide (e.g., Wood Destroying Insect Certifications, Well

Certifications, etc). In the event of conflicting information, the stricter requirement shall prevail.

For condominiums, the project eligibility must meet Fannie Mae guidelines and must be warranted by

the lender. PHFA will not review and/or approve their acceptance.

The CPM must be used for all condo projects being reviewed under the Full Review process,

including projects with a Fannie Mae approval.

For loans under the CPM Expedited review process, a copy of the lender’s unexpired CPM

certification must be included in the pre-closing package.

For loans reviewed by the lender under a full review process, a signed warranty statement showing

the borrower’s name, property address, project name, project classification, effective and expiration

date must be included in the pre-closing package.

For loans under the PERS review process, a current copy of the Fannie Mae approved list from their

website that shows the name of the project and the expiration date must be included in the pre-

closing package. An updated copy of the approved list is required with the purchase submission to

PHFA to verify the project approval has not expired.

PHFA does not require copies of all the information and documentation obtained in the evaluation

and approval process of the condo project; however, the lender shall forward such documentation

upon request from PHFA and must therefore retain copies of the pertinent information.

Manufactured housing that meets PHFA and Fannie Mae guidelines may be eligible for financing up

to 95% LTV and 105%CLTV. Manufactured homes must be underwritten through DU; manual

underwriting is not eligible.

See Chapter 8 for property requirements.

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4. Lender Instructions and Procedures

a. Lender Compensation

See Chapter 1.

b. Locking of Funds

Lenders may lock a loan under the program by using the PHFA Pipeline PLUS. See Chapter 2 for

details.

c. Underwriting Procedures

Both programs are underwritten, closed and funded according to PHFA’s standard procedures as

outlined in the Sellers’ Guide and the Master Origination and Sale Agreement. Any exceptions to

standard procedures for this program are noted in this section.

The following PHFA-specific documents are not required:

 Mortgagor’s/Seller’s Affidavit (Form 3)

 Recapture Tax Notice (Form 4)

If the borrower is receiving a subordinate assistance loan from a source other than PHFA, a

completed Fannie Mae Community Seconds checklist and PHFA’s Affordable Housing Assistance

Program checklist must both be completed and submitted with the underwriting file to PHFA.

d. DU Requirements

When utilizing DU, on the “Additional Data” screen, select “HFA Preferred”.

Files must receive a DU recommendation of Approve/Eligible. Each DU findings report must reflect a

valid case file ID number that was assigned to the investor. (If you are interested in utilizing Desktop

Underwriter through PHFA’s portal, please contact us.)

Qualifying ratios, reserves and credit scores are determined by DU.

Lenders are required to comply with all the DU findings/requirements without exception. PHFA is not

able to make concessions or exceptions to the findings.

e. Manual Underwriting

Manually underwritten loans are limited to a maximum LTV of 95 percent. All borrowers must have a

minimum credit score of 680. The maximum back/total debt to income ratio (DTI) for borrowers with a

qualifying credit score between 680 and 699 is 36 percent. For borrowers with a credit score of 700 or

higher, the maximum back/total DTI is 45 percent. Borrowers with no credit scores or “thin” files are

not acceptable. No DU findings report is required for manually underwritten loans. PHFA is not able to

make concessions or exceptions to these requirements.

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f. Appraisal Submission/UCDP

Appraisals must be submitted directly by the participating lender to Fannie Mae through the Universal

Collateral Data Portal

(UCDP

). A copy of the Appraisal is still required to be sent to PHFA in the

Pre-Closing package per standard PHFA procedure. Along with the Appraisal, a copy of the Fannie

Mae ‘successful’ UCDP Submission Summary Report showing the Document File ID number must be

included in the pre-closing package.

Lenders who are not Fannie approved will need to register as a non-approved FannieMae

seller/servicer here: https://www.fanniemae.com/singlefamily/uniform-collateral-data-portal.

g. Private Mortgage Insurance

All loans under the HFA Preferred program with an LTV above 80 percent require private mortgage

insurance. The following insurers may be utilized:

 Arch Mortgage Insurance Company

 Essent Guaranty Inc.

 Enact Mortgage Insurance

 Mortgage Guaranty Insurance Company (MGIC)

 National Mortgage Insurance Corporation

 Radian Guaranty, Inc.

Coverage is required as follows unless the DU findings report indicates otherwise:

 18% for LTVs > 95% and <= 97%

 16% for LTVs > 90% and <= 95%

 12% for LTVs > 85% and <= 90%

 6% for LTVs > 80% and <= 85%

Eligible plans include:

 Monthly

 Zero Up Front Monthly

 Borrower Single Premium

 Borrower Split Premium

 Lender Single Premium

Under the Single and the Split borrower paid plans, the borrower may finance the up-front premium or

a portion of it in the first mortgage, or finance all or a portion of it in the subordinate “Advantage” loan.

Lender Paid Split and Monthly plans are not permitted.

Check with your MI representative for any specific payment remittance guidance, overlays, and/or

restrictions pertaining to this product. The lender is responsible for underwriting the file to the more

restrictive of the two guidelines; i.e., Fannie/PHFA’s or the MI company’s criteria.

h. Closing Procedures

See Form 53 and Chapter 9 for closing instructions.

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The Original instant title policy or Short Form Residential Policy must still be included with the

purchase package.

An Administration Fee no greater than $1,500 may be charged to cover the lender’s overhead

expenses on loans locked on or after January 3, 2017. No additional overhead fees such as doc prep,

underwriting, etc., may be charged. The normal and customary fees for expense items may be

charged; e.g., credit report, appraisal, etc.

i. Submitting the Purchase Package

Use Form 58 for submitting the Purchase Package.

All items listed on the DU findings must also be included within the purchase package. If items are

missing or unsatisfactory, an exception notice will be issued. Please note unresolved exceptions will

render the file ineligible for purchase until the satisfactory documentation has been submitted.

5. HomeStyle

Renovation Program

The Fannie Mae HomeStyle

Renovation mortgage is for eligible borrowers to include financing for

home improvements in a purchase or re-finance transaction of an existing home. This program is

limited to the HFA Preferred™ product.

a. Mortgage Terms

The interest rate is based on current Agency rates for the HFA Preferred

program, fixed with a 30

year term. Check the most current Rate Sheet for pricing.

The maximum mortgage amount cannot exceed 97 percent (97%) of the lesser of the purchase price

or the appraised value, with a maximum combined loan to value (CLTV) of 105 percent (105%).

Manufactured homes are limited to 95 percent (95%) and the maximum CLTV remains 105 percent

(105%). Loans must meet HomeReady

program guidelines as specified in the most current version

of the Fannie Mae Selling Guide at www.fanniemae.com, except as stated otherwise in this chapter

of the PHFA Sellers’ Guide.

b. Eligibility Requirements

i. Eligible Buyers

The HomeStyle Renovation loan must meet the current underwriting and eligibility guidelines for the

HFA Preferred™ program.

ii. Eligible Properties

The properties may be an existing owner occupied single family dwelling (attached or detached),

including Fannie Mae eligible condominium units, PUDs and manufactured homes.

iii. Eligible Repairs & Improvements

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The HomeStyle Renovation provides eligible borrowers to make renovations, repairs, or

improvements totaling up to 75 percent (75%) of the lesser of either: 1) the as completed appraised

value of the property; or 2) purchase cost plus rehab expenses.

The total funds for renovation on eligible manufactured homes are limited to the lesser of 50 percent

(50%) of the “as completed” appraised value, or $50,000.

The home improvement portion of the loan proceeds may only be used for necessary repairs,

alterations or improvements to substantially protect or improve the basic livability, energy efficiency,

or safety of the acquired property. Eligible repairs, alterations and/or improvements must be

permanently affixed to the property, and include such items as: roof repair/replacement, installation or

improvement of heating and/or air conditioning systems, renovation to kitchen and/or bath areas,

repairs/improvements to plumbing and/or electric systems, and the improvement of living space. Not

eligible: Luxury amenities such as: swimming pools, tennis courts, hot tubs/Jacuzzis, saunas or other

recreational or entertainment facilities.

All renovation work must be performed by a licensed contractor who is registered with the state, and

qualified to complete the work. If licensure is applicable, contractor must be licensed. Borrowers must

choose their own contractor to perform the needed renovation “Do it Yourself” work is not permitted.

All borrowers must be given the FNMA 1204-HomeStyle Renovation Consumer Tips Form.

All renovation work must be completed within 180 days (6 months) of closing. The borrowers must

occupy the property within 60 days (2 months) of closing.

c. Borrower Instructions

i. Determine what repairs are required and necessary

ii. Provide the lender with all estimates, specifications, firm contracts, etc. from qualified,

licensed and Pennsylvania-registered contractors. Lenders may utilize the standard Fannie

Mae Contractor Profile Report (FNMA form 1202) or a similar report to help with this

determination.

iii. Fund any cost overruns, unforeseen expenses, work not approved by the Lender and/or

PHFA, and the cost of any work that exceeds the “as approved” appraised value. Lenders

will collect these funds from borrowers at the loan closing.

iv. Borrowers may NOT act as their own contractors unless that is their trade or profession

and they hold all required licenses, registrations, and insurance coverage (in which case,

program funds are limited to materials only, not labor).

d. Lender Instructions and Procedures

i. Application/Origination

The locking process remains the same for the HomeStyle Renovation loans as it does for loans in

the other programs.

The lender is required to collect the current prescribed fees designated for the specific program,

plus any inspection fees (not to exceed the normal and customary amount, maximum of (2) two

inspections) for the work and any normal closing costs.

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ii. Underwriting/Processing

Analyze the construction contracts, estimates, etc. submitted by the borrower to determine the

credibility and legitimacy of the proposals for the required repairs/improvements.

To determine the maximum mortgage amount, the Fannie Mae HomeStyle Maximum Mortgage

Worksheet (FNMA form 1035) is to be completed and included in the pre-closing package. If the

repairs would inhibit the borrower from moving into the property right after closing, and they have

not exceed the allowable maximum of the “as completed” appraised value for the repairs, the

borrowers could include up to a maximum of six months of PITI payments in the escrow. The

payment reserves must be reflected on the maximum mortgage worksheet FNMA Form 1035.

Provide all repair/improvement information submitted by the borrower to the appraiser to

determine the “as completed” value of the property.

Provide a copy of the contract(s) with any specifications, estimates, drawings, etc. including a Lien

Waiver (FNMA Form 3739 or one equivalent); a completed/signed copy of a Renovation Loan

Agreement (FNMA Form 3731); the HomeStyle Renovation Consumer Tips Form (FNMA Form

1204) and the Contractor Profile Report in the Pre-Closing Package to PHFA using Form 51.

Please indicate on the top of Form 51 that it is a “HomeStyle Renovation Loan”.

iii. Closing the Loan and Selling it to PHFA

The lender will close the loan and PHFA will hold the renovation escrow. The Agency will

purchase the loan prior to the renovation/repairs being completed; however, all work must be

completed no later than 6 months from the closing date. All funds disbursed must be used for

home purchase and repair purposes. Unused funds will be applied to the principal loan balance. If

the borrower defaults under the terms of the mortgage loan before the work is completed, and that

default continues for at least 120 days, the lender may be required to repurchase the loan.

iv. Escrow Administration

PHFA will hold the escrow funds, administer the draws, and close the escrow account. All

HomeStyle loans sold to PHFA will have the escrow portion of the funds withheld by PHFA at the

time of purchase. PHFA will release funds to the lender upon receipt of the draw request Form 49

and a completed W-9 form for the appraiser and contractors completing the work. To request a

draw, the lender must submit the required documents via email to [email protected] or by

mail to PHFA to the attention of the Homeownership Purchase Department. Funds will be

transmitted to the lender via ACH to the same account set up to receive purchase proceeds.

v. Escrowed Mortgage Payments

An escrow for mortgage payments may be included as part of the renovation escrow and included

on the HomeStyle Renovation Maximum Mortgage Worksheet if the subject property is unable to

be occupied during the repairs. The maximum amount that may be escrowed is six payments. The

lender must submit Form 71 – Authorization Request for Escrowed Mortgage Payments to

[email protected] for each monthly payment to be applied.

vi. Funds Disbursement

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Unless otherwise agreed to in writing by PHFA, there is a maximum of two draws, and there are

two options available for the draw schedule:

 50/50. Under this option, a draw is released when half of the work has been completed and

then the final draw is made upon full completion. Two inspection fees may be provided to the

appraiser for the interim and final inspections (normal and customary amount to be charged for

inspections).

 25/75. At the borrower’s request prior to the work starting, an initial draw of up to 25 percent of

the escrow funds may be disbursed at or after closing to pay the contractor for materials,

based on invoices for materials purchased or vendor quotes for materials to be purchased.

The contractor must provide an invoice of the materials that were purchased or an estimate of

the materials to be purchased. The second draw is then disbursed when the job is fully

completed. Only one inspection fee may be provided to the appraiser for the final inspection.

PHFA will ACH the funds to the lender and the lender will remit the draws payable to the

borrower and the contractor or payable to the contractor but sent to the borrower, to be given

to the contractor. The funds will be given to the lender to payout upon a satisfactory inspection

by the appraiser and execution of Form 49 by the borrower (s), the contractor, and the

appraiser for each draw.

vii. Closeout Documentation

Following completion of the renovation repairs, the lender must obtain the following:

 A certification of completion stating that renovation was completed in accordance with the

submitted plans and specifications. The certification must be documented on the Appraisal

Update and/or Completion Report (Form 1004D) with all applicable signatures.

 Provide endorsement to update the title policy as of the date the renovations were completed

ensuring the absence of any mechanics’ liens. It is the lender’s responsibility to ensure that the

title to the property is clear of all liens and encumbrances.

 The lender must follow the Fannie Mae HomeStyle guidelines and procedures to administer

and complete the closeout paperwork. All closeout documentation must be submitted to PHFA

before the final payment is remitted & the account is closed.

C. KEYSTONE GOVERNMENT LOAN PROGRAM

The Keystone Government Loan Program provides first mortgage financing on loans insured by FHA

or guaranteed by RD or VA. Loans are underwritten using the guidelines of the respective federal

agency providing the insurance/guaranty. PHFA does not impose any additional guidelines except as

noted in this section.

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1. Eligibility Requirements

a. Borrower Eligibility

Borrower eligibility is determined by the respective federal agency guidelines. There are no PHFA-

specific income or purchase price limits by county. However, the maximum loan amount is $647,200.

Additionally, there is no first-time homebuyer requirement.

Borrowers with a middle or low credit score below 680 must complete a homebuyer education class

prior to closing, provided by one of PHFA’s approved counseling organizations.

Borrowers may be eligible for downpayment and/or closing cost assistance through the Keystone

Advantage Assistance Loan program (see Chapter 4).

Non-occupying co-borrowers are permitted on FHA-insured Keystone Government Loans under the

following conditions:

 For loans that receive an Approve or Accept finding, the ratios with the non-occupying co-

borrower cannot exceed 40/45. The occupying borrower’s ratios alone cannot exceed 45/50.

 For manually underwritten loans, the occupying borrower’s ratios alone cannot exceed 31/43.

 The non-occupying borrower must provide a statement that he/she understands he/she is

equally responsible with the primary borrower for the monthly mortgage payments and that

failure to make payments as scheduled will negatively impact the credit history of both parties.

b. Property Eligibility

Properties must meet the respective guidelines for the type of financing being obtained.

In addition, properties must meet PHFA’s guidelines as described in Chapter 8 and Appendix I of this

Sellers’ Guide (e.g., Wood Destroying Insect Certifications, Well Certifications, etc).

Owner occupied, one or two units.

2. Lender Instructions and Procedures

a. Lender Compensation

See Chapter 1.

b. Locking of Funds

Lenders may lock in a loan under the Keystone Government Loan program by using the PHFA

Pipeline PLUS. See Chapter 2 for details.

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c. Underwriting and Closing Procedures

Keystone Government loans are underwritten, closed and funded according to PHFA’s standard

procedures as outlined in the Sellers’ Guide and the Master Origination and Sale Agreement. Loans

must also comply with the guidelines of the respective federal government agency depending on the

loan type (FHA, RD or VA). Any exceptions to standard procedures for this program are noted in this

section. Use Form 51 for the underwriting package submission and Form 58 for submission of the file

for purchase.

See Form 53 and Chapter 9 for closing instructions.

The following PHFA-specific documents are not required:

 Mortgagor’s/Seller’s Affidavit (Form 3)

 Recapture Tax Notice (Form 4)

The Original instant title policy or Short Form Residential Policy must still be included with the

purchase package.

An Administration Fee no greater than $1,500 may be charged to cover the lender’s overhead

expenses on loans. No additional overhead fees such as doc prep, underwriting, etc., may be

charged. The normal and customary fees for expense items may be charged; e.g., credit report,

appraisal, etc.

D. KEYSTONE HOME LOAN PROGRAM (KHL)

Home purchase loans are available to qualifying homebuyers throughout the Commonwealth under

PHFA’s Keystone Home Loan Program. Both new and existing homes are eligible for Agency

financing. Because the Agency may use tax-exempt Mortgage Revenue Bonds (MRB’s) to fund

loans under the Keystone Home Loan program, the loans must comply with certain requirements as

set forth by the IRS and as described in this chapter.

Keystone Home Loans provides first mortgage financing on loans insured by the Pennsylvania

Insurance Fund (PHIF), FHA or guaranteed by VA or RD. KHL Conventional provides funding up to

97 percent (97%) of the purchase price or appraised value, whichever is less. This program would

follow the underwriting guidelines of the HFA Preferred™ program as outlined earlier except as stated

otherwise in this specific section.

1. Eligibility Requirements

All borrowers applying for a Keystone Home Loan must intend to occupy the property as their primary

residence within 60 days of closing and must complete a Mortgagor’s Affidavit (Form 3), to

acknowledge that they understand the program requirements and to attest that they meet them. The

lender is also required to sign this form to indicate it was explained to the borrower. At the time of

loan closing, the borrower must sign and date the Mortgagor’s Reaffirmation at Loan Closing page of

the Mortgagor’s Affidavit to indicate they still meet the program requirements. The Seller must

complete the Affidavit of Seller at closing (also part of Form 3) to verify compliance with the program

requirements.

The primary eligibility requirements for the Keystone Home Loan Program are listed below.

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a. First-time Homebuyer

The borrower and all other adults who intend to live in the home within 12 months from closing must

be first-time homebuyers. This is defined as someone who has not had an ownership interest in (not

listed on the deed of) their principal residence during the previous three years.

The first-time buyer requirement does not apply if the borrower is purchasing in a targeted county or

area. Target counties are indicated by a “T” in the listing of Purchase Price and Income Limits

(Appendix A). Please note that some non-target counties have targeted neighborhoods within them

as listed in the appendix. To determine the census tract of a specific property, visit www.ffiec.gov and

click on Geocoding/Mapping System.

Veterans (and their spouses, if applicable) do not need to meet the first-time homebuyer requirement

in non-target areas under the Keystone Home Loan Program. A veteran, for this purpose, is defined

as someone who served in active duty of the Armed Forces or Reserves and who was discharged or

released under conditions other than dishonorable. Veterans using this exception must sign

Addendum D of the Mortgagor’s Affidavit (Form 3) and provide a copy of their discharge papers.

Examples of “ownership interests” are:

 A fee simple interest

 A joint tenancy, tenancy in common or tenancy by the entirety

 The interest of a tenant-shareholder in a cooperative

 A life estate

 The interest of a purchaser under a land contract or installment sales agreement with a TERM

which exceeds 24 months under which the purchaser takes possession even though legal title

is not transferred until some later time

 An interest held in trust for the borrower (whether or not created by the borrower) that would

constitute as present ownership interest held directly by the borrower

 An ownership interest in a mobile home or other factory-made housing which was permanently

affixed to land owned by the borrower

Examples of interests which do not constitute “ownership interests” are:

 Ownership of a mobile/manufactured home on a rented lot

 A remainder interest

 A lease with or without an option to purchase

 A mere expectancy to inherit an interest in a principal residence

 The interest that a purchaser of a residence acquires upon the execution of a standard

purchase contract, without a right of possession

 An ownership interest in other than a principal residence during the previous three (3) years

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The Agency reserves the right to investigate or require further substantiation of the borrower’s

ownership status.

b. Income Limit

The gross annual income, (projected over the next 12 months) for all adults that intend to occupy the

home within one year from loan closing, must not exceed the Keystone Home Loan Program income

limit (as specified in Appendix A). All sources of income must be included, except for income

received by persons under age 18 and income received by dependents enrolled in a full-time

undergraduate program of at least 12 credits per semester.

The total Annual Household Income is to be completed at the time of application. If this income

increases after the date of application or the loan does not close within four (4) months of application,

the income must be re-certified. A new page two of the Mortgagor’s Affidavit (Form 3) must be

completed with the new income information and initialed by the borrower.

If the new Annual Household Income exceeds the Income Limit for the area in which the residence is

being purchased, the borrower is not eligible for the program.

For construction/permanent loans, income eligibility must be determined at the time of the

construction loan closing. For permanent loans (where there is a second closing), which are paying

off construction loans, income eligibility must be determined at the time the permanent loan closes to

pay off the construction loan.

Care must be exercised when determining household size, especially when there is a change

between the time of application and closing (for example, if it is determined that another adult will

reside in the property within 12 months from closing). Any changes to family size and household

income must be noted on the “Mortgagor’s Affidavit Reaffirmation at Loan Closing”. The loan cannot

close as a PHFA loan if the borrower is no longer eligible for the program.

The following sources of income must be included but are not limited to:

 Gross income, before any payroll deductions, of wages (including part-time income), salaries,

overtime, commissions, fees, tips and bonuses

 Net income from operation of a business or profession

 Income from trusts and investments

 Interest, dividends, royalties, net rentals and other net income from real or personal property

 Periodic payments from social security, annuities, insurance policies, retirement funds,

pensions, VA compensation, disability or death benefits and other similar types of periodic

payments

 Payments in lieu of earnings, such as unemployment and disability compensation, sick pay,

worker’s compensation and severance pay

 Public assistance income, where payments include amounts specifically designated for shelter

and utilities

 Periodic and determinable allowances, such as alimony and child support, and regular

contributions or gifts from persons not residing in the dwelling

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 All regular and special pay and allowances of members of the Armed Forces (whether or not

living in the dwelling) who are the head of the family or spouse

 Any employer-related benefit such as a company car (for which a $200 per month amount is

assigned), car allowance, etc.

 Any un-reimbursed employee expenses not paid by his/her employer as evidenced by the

borrower’s Federal Income Tax returns. An average monthly amount of un-reimbursed

expenses is to be calculated from the two most current years’ Federal Income Tax returns and

deducted from the borrower’s gross monthly income

The following can be excluded:

 Casual, sporadic or irregular gifts

 Amounts which are specifically for reimbursement of medical expenses

 Lump sum additions to family assets, such as inheritances, insurance payments (including

payments under health and accident insurance and worker’s compensation), capital gains and

settlement for personal or property losses

 Amounts of educational scholarships paid directly to the student or the educational institution,

and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees,

books and equipment, but in any such case only to the extent used for such purposes

 Special pay to a serviceman head of family who is away from home and exposed to hostile fire

 Relocation payments under Title II of the Uniform Relocation Assistance and Real Property

Acquisition Policies Act of 1970

 Foster child care payments (unless it is included in income used for qualifying)

 Payments received pursuant to participation in ACTION volunteer Programs

 Income from the employment of children (including foster children) under the age of 18 years

c. Purchase Price Limit

The purchase price of the prospective home cannot exceed the Keystone Home Loan Program

purchase price limit (See Appendix A). This includes all costs for a complete home and is also known

as the total acquisition cost. For two-unit properties, the purchase price may exceed the applicable

published limit by ten percent.

Use the following instructions when calculating the total acquisition cost for new construction to

ensure it meets the applicable PHFA limit:

 The appraised value of land owned outright for more than two years does not need to be

included.

 Include the cost of all items for a completed home, such as painting, decks, patios, walks,

driveways and final grading and seeding. The lender must be thorough when reviewing

construction contracts for new homes to be sure that all costs to complete the home are

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included in the purchase price and comply with the applicable PHFA limit. Any changes made

to the property during the progress of construction could make the mortgage loan ineligible for

the program if the cost of these changes added to the original purchase price calculation puts

the total cost over the Maximum Purchase Price for the area in which the home is being built.

This includes items that the borrower may pay for outside of the mortgage transaction. Also,

any improvements made to the property, other than maintenance, completed within one year

of the date of purchase must be considered part of the Purchase Price for Maximum Purchase

Price purposes. For example, if the plans include a deck which will be completed after closing,

it must be included in the purchase price calculation, even if it is to be paid separately by the

borrower.

Use the following instructions for Arms Length Transactions (buyer and seller not related) for new and

existing homes to ensure compliance with the purchase price limit:

 For loan transactions that are arm’s length the market value of the property may not exceed

110 percent of the Maximum Purchase Price for the area in which it is located.

 If a loan transaction involves a lot purchased within the last two years through an “Arm’s

Length Transaction”, the actual purchase price of the land is to be used in calculating the Total

Acquisition Cost.

Use the following instructions for Non-Arms Length Transactions (buyer and seller are related) for

new and existing homes to ensure compliance with the purchase price limit:

 The greater of the value determined by the cost approach (from appraisal) or the market value

(from appraisal) minus the appraised value of any land owned more than two years and not the

Purchase Price (from the Agreement of Sale/Construction Contract) is to be used to determine

if the loan is in compliance with the maximum applicable purchase price.

 Although the greater of the value determined by the cost approach or the market value

(collectively called “appraised value”) of the subject property is used for determining

compliance with the maximum purchase price, whichever is less of the appraised value or the

purchased price listed in the Agreement of Sale is to be used in the calculation of the Loan-to-

Value ratio.

 If a loan transaction involves a lot purchased within the last two years through a non-arm’s

length transaction, the “Estimated Site Value” from the “Cost Approach” section on the reverse

side of the appraisal and NOT the purchase price of the land is to be used in the calculation of

the Total Acquisition Cost (refer to Page 2 of Form 3). As a result, the total of the “Estimated

Site Value” plus the total construction costs is used to determine compliance within the

Maximum Purchase Price. However, the loan-to-value ratio is calculated by using whichever is

less of the “Estimated Site Value” OR the Purchase Price of the lot combined with the total

construction costs.

d. Recapture Tax

A Federal Tax known as “Recapture” became effective for all loans closed after January 1, 1991. As

enacted, a Borrower may be subject to this tax if the home is sold or disposed of within nine years of

the purchase. The tax would be payable with the Borrower’s Federal Income Tax Return for the year

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in which the home was disposed off. The maximum tax is 6.25 percent of the mortgage amount or 50

percent of the gain on the sale, whichever is less. There are other factors which affect the amount of

tax which may be due, including family size and income at the time of the disposition of the property.

The Notice to Mortgagor of Potential Recapture Tax (Form 4) must be completed by the

participant and then executed by the borrowers prior to or at the loan closing. The only

exception is a construction loan, in which case the recapture tax form is to be prepared by the lender

and signed by the borrowers when it converts to the PHFA permanent loan. The recapture tax

figures applicable at the conversion date are to be used. The completed form is to be included in the

Purchase Submission. PHFA will reimburse any borrower who ever has to pay a Recapture Tax

in connection with the sale of their home. This applies to all borrowers who make application for a

PHFA loan on or after January 1, 2004.

e. Pennsylvania Housing Insurance Fund (PHIF)

Conventional financing under the Keystone Home Loan program and Keystone Flex Loan Program

with an LTV above 80 percent require mortgage insurance. The Pennsylvania Housing Insurance

Fund (PHIF) is the only acceptable insurer for the KHL Conventional and K-Flex Conventional

programs at this time. A credit score of 660 or higher is required for PHIF coverage.

A manual review is not acceptable for KHL Conventional and K-Flex Conventional loans.

Pricing and coverage is required as follows:

LTV/%Coverage 660-679 680-699 700-719 720-739 740-759 760+

95.01% – 97.0%

35%

1.54 1.21 0.99 0.87 0.70 0.58

90.01% – 95.0%

30%

660-679 680-699 700-719 720-739 740-759 760+

1.28 0.96 0.78 0.66 0.53 0.38

85.01% - 90.0%

25%

660-679 680-699 700-719 720-739 740-759 760+

0.90

0.65

0.55

0.46

0.38

0.28

80.01% - 85.0%

20%

660-679 680-699 700-719 720-739 740-759 760+

0.38 0.28 0.25 0.23 0.20 0.20

The plan is a zero upfront monthly premium plan. The rate for years 2 through 10 is the same as the

first- year rate. For years 11 through term the premium rate is reduced to 0.20%.

To request PHIF coverage, use Form 51- Pre-Closing Package Checklist and mark the PHIF box at

the top of the document when submitting your Pre-Closing package for review. If the loan is eligible

for coverage, a mortgage insurance certificate will be generated and placed on the Pipeline Plus

system when the Pre-Closing submission is approved.

See Appendix G for additional PHIF guidelines.

2. No Refinances

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The loan must be a new loan on the property for the borrower. Thus, if the borrower has paid off a

previous permanent loan on the property or is seeking to refinance an existing permanent loan, the

borrower is not eligible.

3. Loan Assumptions

Assumptions are permitted only with the approval of the Agency, acting in its sole discretion, and

then, only if all requirements of the applicable sections of the Internal Revenue Code of 1986, as

amended, including the Income Limitation, Principal Residence Requirement, and Three-Year Non-

Homeowner Requirement and the Purchase Price Limitations are met with respect to the assumption.

It also provides for an acceleration of the mortgage loan if the mortgagor sells, rents or otherwise

transfers any interest in the property without prior approval of the Agency or fails to occupy the

premises as a principal residence.

The lender must make the borrower aware that when he or she seeks to sell his or her home, if he or

she offers a loan assumption, the household assuming the loan must:

 Occupy the residence as their principal residence

 Qualify under the “first-time” homeowner or “three (3) year” requirements (except in target

areas)

 Purchase the residence at a price that does not exceed the PHFA Maximum Purchase Price in

effect for an existing property at the time of assumption

 Have a current annual household income that does not exceed the Income Limit established

by PHFA in effect at the time of assumption.

 The amount assumed may not exceed the payoff amount.

When the assumption occurs, the residence is considered to be an existing property for PHFA

purposes, regardless of the fact that the home was considered new when the loan closed.

The lender must also inform the borrower that if they allow someone to assume their mortgage, both

the borrower and the assuming borrower may be subject to the Federal Recapture Tax, if the sale

occurs within nine (9) years following the original closing date.

i. Program Assumptions. When completing the Loan Estimate and Closing Disclosures, please

keep in mind that not all PHFA loan products are eligible for assumption. For more information,

please see the chart below:

Program

Assumable

HFA

Preferred

& HFA Preferred Risk Sharing

Keystone Government Loans (K

Gov)

FHA & VA Loans

Yes

Keystone Government Loans (K

Gov) RD Loan

Keystone Home Loans

(KHL)

Conventional,

FHA & VA Loans

Yes

Keystone Home Loans (KHL) RD loan

Keystone Flex Loans (K

Flex) Conventional, FHA & VA Loans

Yes

Keystone Flex Loans (K

Flex) RD Loans

Keystone Advantage Assistance Loan

Yes

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Keystone Forgivable in Ten Years Loan (K

FIT)

Yes

Renovate & Repair (R&R)

Pennvest

Homeowners Energy Efficiency Loan Program (HEELP)

Refinance to an Affordable Loan (REAL)

Homeowner’s Equity Recovery Opportunity (HERO)

Loans assumable under the Keystone Home Loan (KHL) program must meet the mortgage revenue

bond guidelines. KHL Conventional loans must also be approved by the Private Mortgage Insurance

Company if insurance is in place.

The Keystone Advantage Assistance Loan and K-FIT Loan can only be assumed when the first

mortgage program is assumable.

If the mortgage has an Mortgage Credit Certificate (MCC), only the loan gets assumed, not the MCC.

E. KEYSTONE FLEX LOAN PROGRAM

The Keystone Flex Loan Program provides funding for eligible homebuyers to purchase or refinance

a home throughout the Commonwealth. Under the Keystone Flex Loan Program, there are three

home loan products offered:

 Keystone Flex (K-Flex) with K-FIT (Purchase only)

 Keystone Flex (K-Flex) Purchase & Improvement (up to $30,000) with K-FIT (Purchase only)

 Keystone Flex (K-Flex) (Refinance only, available for all loan types except RD)

Both the purchase and refinance options available provide first mortgage financing on Conventional

loans insured by the Pennsylvania Housing Insurance Fund (PHIF), loans insured by FHA or

guaranteed by VA or RD. Loans are underwritten using the guidelines of the respective federal

agency providing the insurance/guaranty. K-Flex Conventional provides funding of 95 percent (95%)

to 97 percent (97%) of the purchase price or appraised value, whichever is less for purchase loans.

The Conventional loan option would follow the underwriting guidelines of the HFA Preferred

program as outline earlier except as stated otherwise in this specific section.

1. Eligibility Requirements

a. Loan Purpose and Terms

Both purchase loans, K-Flex with K-FIT and K-Flex Purchase & Improvement with K-FIT may be used

for a new loan on a property the borrower is seeking to purchase as a primary residence. Both

purchase products are paired with the Keystone Forgivable in Ten Years Loan Program, K-FIT which

provides eligible borrowers with a forgivable subordinate loan based upon five percent (5%) of the

lesser of the purchase price or appraised value with no maximum dollar amount (see Chapter 4 for K-

FIT program details). Borrowers seeking financing under the K-Flex with K-FIT or K-Flex with

Purchase & Improvement Loan Program must have a middle FICO score of at least 660.

The K-Flex with K-FIT loan program provides Conventional, FHA, VA and RD financing.

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The K-Flex Purchase & Improvement with K-FIT loan program provides Conventional financing only,

with up to $30,000 for homebuyers to purchase and improve a home within the same transaction (see

the Chapter 3 for Purchase & Improvement program details).

All borrowers seeking the refinance loan Keystone Flex must be refinancing their primary residence.

LTV/CLTV

 For both purchase options, K-Flex with K-FIT and K-Flex Purchase and Improvement (up to

$30,000) with K-FIT borrowers may finance 95 percent to 97 percent of the purchase price or

appraised value, whichever is less.

 Loans with LTV ratios at or below 94.99 percent (94.99%) are not eligible for financing under

these loan programs.

Under the Keystone Flex refinance option, limited cash out/rate and term refinancing is available

under the following terms:

 For Conventional loans cash back is limited to no more than $2,000 or two percent (2%) of the

balance of the new loan, whichever is less.

 For FHA loans cash back is limited to no more than $500.

 Homebuyer education is not required on refinance transactions.

 For Conventional loans, only the first mortgage and any subordinate liens used to purchase

the property may be paid off and included in the new mortgage, if there is sufficient equity to

do so.

 For Conventional loans, any subordinate financing not paid off may only re-subordinated if it

meets the Community Seconds criteria and factored into the comprehensive risk assessment

based on the CLTV, HCLTV, and DTI ratios. If it does not meet the Community Seconds

criteria, the borrower is not eligible for a refinance under this program.

Under the Keystone Flex, cash out refinancing is also available under the following terms:

 Conventional, FHA and VA loans may receive up to $10,000 of available equity of the subject

property.

 Loans must adhere to all applicable government entity guidelines.

For loans currently serviced by PHFA:

 The amount needed to pay off the borrower’s existing PHFA loan will be reduced by the

balance in the borrower's existing escrow account. The payoff statement used must

come directly from PHFA staff, as the one available to the borrower on the web will not

show the reduction. The calculation of the new loan amount would still be done

normally per the applicable program guidelines.

The lender will perform the standard escrow analysis to ensure sufficient funds are

collected to pay for any taxes and insurance due within the next 12 months, and will

also provide the initial escrow account disclosure statement.

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 If the borrower’s existing loan is serviced by PHFA and includes a second PHFA closing

cost assistance loan, the second loan may be re-subordinated upon request, as long as

the CLTV does not exceed 105 percent (105%) of the home’s current value. The

subordinate financing must be entered into DU and factored into the DTI ratios if there is

a monthly payment. After the loan is approved by PHFA, forward the subordination

agreement to [email protected]. Please allow five to seven business days for PHFA to

complete the subordination agreement and send it to the requestor. The subordination

request should include the following:

1. Name of the borrower(s);

2. Property Address;

3. Name and address of the staff person at the participating lender who should

receive the completed subordination agreement back from PHFA. (Please

note: a certified true copy of the subordination agreement that was sent by

the lender for recording must be submitted to PHFA in the purchase package

– see Form 58.)

 Borrowers may not obtain closing cost assistance from PHFA for the Keystone Flex refinance

program.

 Please note the K-FIT assistance loan is not eligible for re-subordination. Any unforgiven funds

must be paid off when refinancing with PHFA.

b. Borrower Eligibility

1. First Time Home Buyer

There is no first time homebuyer requirement under K-Flex loan programs. The borrower may have

an ownership interest in another residential dwelling at the time of loan closing.

2. Minimum Borrower Contribution

 Borrowers must contribute the lesser of $1000 or 1% from their own funds

 The balance of the downpayment must come from the Keystone Forgivable In Ten Years Loan

Program (K-FIT) for the K-Flex purchase options. Borrowers may also utilize an eligible

Community Second or acceptable assistance which meets the respective federal government

agency depending on the loan type. PHFA’s Affordable Housing Assistance Program checklist,

Form 5 must be submitted in the file for all non-PHFA administered funds.

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c. Income Limit

The income limit for this program is referenced in Appendix F. The total qualifying income can not

exceed the listed income for the area in which the property is located. Household income is not

calculated for the K-Flex Loan Program.

d. Qualifying Income

The Conventional loan option would follow the underwriting guidelines of the HFA Preferred

program as outlined earlier.

The Government loan option would follow the underwriting guidelines of the Keystone Government

Loan program as outlined earlier.

e. Purchase Price Limit

The maximum purchase price limit for this program in referenced in Appendix F. This includes all

costs for a complete home.

f. Homebuyer Education

Borrowers obtaining the Keystone Flex (K-Flex) with K-FIT and the Keystone Flex (K-Flex) Purchase

& Improvement with K-FIT loan program must complete homebuyer education. See Chapter 4,

Keystone Forgivable In Ten Years Loan Program (K-FIT) for details.

2. Property Eligibility

Properties must meet the respective guidelines for the type of financing being obtained. For

Conventional loans use Fannie Mae guidance.

In addition, properties must meet PHFA’s guidelines as described in Chapter 8 and Appendix I of this

Sellers’ Guide (e.g., Wood Destroying Insect Certifications, Well Certifications, etc).

Owner occupied, one or two units.

3. Lender Instructions and Procedures

a. Lender Compensation

See Chapter 1.

b. Locking of Funds

Lenders may lock in a loan under the Keystone Flex with K-FIT; Keystone Flex Purchase &

Improvement with K-FIT and Keystone Flex (refinance) loan programs by using the PHFA Pipeline

PLUS. See Chapter 2 for details.

c. Underwriting and Closing Procedures

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Keystone Flex loans are underwritten, closed and funded according to PHFA’s standard procedures

as outlined in the Sellers’ Guide and the Master Origination and Sale Agreement. Loans must also

comply with the guidelines of the respective federal government agency depending on the loan type

(FHA, RD or VA). For Conventional loans mortgage insurance coverage is provided through the

Pennsylvania Housing Insurance Fund (PHIF). See Appendix G for PHIF details. Any exceptions to

standard procedures for this program are noted in this section. Use Form 51 for the underwriting

package submission and Form 58 for submission of the file for purchase.

See Form 53 and Chapter 9 for closing instructions.

The following PHFA-specific documents are not required:

 Mortgagor’s/Seller’s Affidavit (Form 3)

 Recapture Tax Notice (Form 4)

The Original instant title policy or Short Form Residential Policy must still be included with the

purchase package.

An Administration Fee no greater than $1,500 may be charged to cover the lender’s overhead

expenses on loans locked. No additional overhead fees such as doc prep, underwriting, etc., may be

charged. The normal and customary fees for expense items may be charged; e.g., credit report,

appraisal, etc.

F. PURCHASE & IMPROVEMENT PROGRAM

PHFA’s Purchase & Improvement Program is designed for homebuyers to purchase and improve a

home within the same mortgage transaction. This program is limited to the Conventional Keystone

Home Loan and the Keystone Flex Purchase & Improvement with K-FIT loan program (97% LTV

maximum).

1. Mortgage Terms

The interest rate is based on the current Agency rates for the Purchase & Improvement Program,

fixed with a 30 year term. It is generally about 25 to 50 bps higher than the respective rate for the

Keystone Home Loan. Check the most current Rate Sheet for pricing.

The program is available with KHL conventional financing and K-Flex (Conventional) Purchase &

Improvement with K-FIT loan program only. The maximum mortgage amount cannot exceed 97

percent of the total acquisition cost or the “as completed” appraised value, whichever is less. The

total acquisition cost is defined as the total cost to purchase the property plus the costs of the repairs

and/or improvements.

The “total acquisition cost” cannot exceed the Maximum Purchase Price limit for the applicable county

under the applicable program.

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2. Eligibility Requirements

a. Eligible Buyers

All Purchase & Improvement loans must meet the current underwriting and eligibility guidelines for the

Keystone Home Loan and Keystone Flex Purchase & Improvement with K-FIT Loan Programs.

b. Eligible Properties

The property may be an existing owner occupied single family dwelling (attached or detached),

including condominium units. If the property is a two-unit residence, the borrower must intend to live

in one of the units.

c. Eligible Repairs & Improvements

The home improvement portion of the loan is limited to no more than $15,000 for the Keystone Home

Loan Program. Under the Keystone Flex Purchase & Improvement with K-FIT Loan Program the loan

is limited to no more than $30,000. If home inspection fees and construction inspection fees are

incurred and are to be financed they should be included in the home improvement portion of the

mortgage. They are not to be considered as closing costs.

The home improvement portion of the loan proceeds may only be used for necessary repairs,

alterations or improvements to substantially protect or improve the basic livability, energy efficiency,

or safety of the acquired property. Eligible repairs, alterations and/or improvements include such

items as: roof repair/replacement, installation or improvement of heating and/or air conditioning

systems, renovation to kitchen and/or bath areas, repairs/improvements to plumbing and/or electric

systems, and the improvement of living space. Energy conservation and solar energy improvements

are also eligible. Not eligible: Luxury amenities such as: swimming pools, tennis courts, hot

tubs/Jacuzzis, saunas or other recreational or entertainment facilities. Total rehabs are not eligible

under this program.

All repairs, alterations, or improvements must be completed by a contractor who is registered with the

state, and qualified to do the work. If licensure is applicable, contractor must be licensed. The

contract for the work must conform to section 1 of PHFA Form 50.

The purchase price of the home being financed plus the cost of the improvements to the home must

be equal to or less than the “as improved” appraised value. Improvement costs which exceed the

appraised value shall be the sole responsibility of the borrower.

All repairs, alterations or improvements must be completed within 90 days (3 months) of closing. The

borrowers must occupy the property within 60 days (2 months) of closing to comply with federal tax

law eligibility requirements.

3. Borrower Instructions

 Determine what repairs are required and ensure that they are completed within 90 days of

closing.

 Execute the Purchase & Improvement/Access Home Modification Program Acknowledgment

(Form 48) at time of application.

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 Provide the lender with all estimates, specifications, firm contracts, etc. from qualified, licensed

and Pennsylvania-registered contractors.

 Fund any cost overruns, unforeseen expenses, work not approved by the Lender and/or PHFA,

and the cost of any work that exceeds the “as approved” appraised value. Lenders will collect

these funds from borrowers at the Loan Closing.

 Execute Form 49 to ensure timely payments to contractors.

 Borrowers may NOT act as their own contractors unless that is their trade or profession and they

hold all required licenses, registrations, and insurance coverage (in which case, program funds

are limited to materials only, not labor).

4. Lender Instructions and Procedures

a. Application/Origination

The locking procedure remains the same for the Purchase & Improvement loans as it does for loans

in the other programs. This program is limited to the Conventional Keystone Home Loan program

and the Conventional Keystone Flex Purchase & Improvement with K-FIT Loan program.

The lender is required to collect the current prescribed fees designated for the specific program, plus

any inspection fees (not to exceed the normal and customary amount, maximum of (2) two

inspections) for the work and any normal closing costs.

Provide the borrower with Form 48 and Form 50 at the time of application and make sure they

understand the information on the forms.

b. Underwriting/Processing

Analyze the construction contracts, estimates, etc. submitted by the borrower to determine the

credibility and legitimacy of the proposals for the required repairs/improvements, and also that all

necessary information is included in the contract per Form 48 and Form 50.

If the amount of the repairs exceeds the maximum amount of $15,000 the lender will be responsible

to ensure that any additional funds secured by the borrower are obtained in a manner that will not

affect the priority of the PHFA lien or jeopardize the borrower’s ability to repay the mortgage.

Provide all repair/improvement information submitted by the borrower to the appraiser to determine

the “as completed” value of the property.

Provide a copy of the contract(s) with any specifications, estimates, drawings, etc including Form 48

in the Pre-Closing Package to PHFA using Form 51. Please indicate on the top of Form 51 that it is a

“Purchase & Improvement Loan”.

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c. Closing the Loan and Selling it to PHFA

The lender will close the loan and indicate on the escrow agreement (Form 65) who will hold the

repair escrow (the lender or PHFA). If PHFA is to hold the escrow funds, include a check for the total

escrow amount with the Purchase Submission Package. The Agency will purchase the loan prior to

the repairs being completed. If the cost of the work to be done exceeds the Improvement portion of

the borrowers’ Purchase & Improvement Loan, the borrowers must provide the additional funds

needed to the Lender at Loan Closing. The Lender must escrow these funds with the Improvement

escrow if they are holding the Escrow or remit them to PHFA if the Agency will hold the escrow.

Lenders should remit borrower funds with the Purchase Submission Package, and indicate on Form

58 or via a separate cover letter the amount of borrower funds sent.

All funds disbursed must be used for home purchase and repair/improvement purposes. Unused

funds will be applied to the principal loan balance.

d. Escrow Administration

There are two options available for choosing an Escrow Administrator.

1. The Lender may choose to serve as the Escrow Administrator, which includes holding the

escrow funds, administering the draws, ordering inspections and obtaining the completion

certificate using PHFA Form 49 and closing the escrow account.

2. The Lender may choose to have PHFA hold the escrow funds, administer the draws, order the

inspections and obtain the completion certificate and close the escrow account. If this option is

chosen, PHFA will still purchase the loan at the full Note amount. The lender will then submit a

check to PHFA with the purchase submission package for the amount of the improvements

minus any funds advanced at closing. If funds were advanced at closing, and PHFA will hold

escrow, lender must submit Form 49 in Purchase Submission Package with Initial Payment

column completed.

e. Funds Disbursement

Unless otherwise agreed to in writing by PHFA, there is a maximum of two draws, and there are two

options available for the draw schedule:

1. 50/50. Under this option, a draw is released when half of the work has been completed and

then the final draw is made upon full completion. This is the preferred method. Two inspection

fees may be provided to the appraiser for the interim and final inspections (normal and

customary amount to be charged for inspections).

2. 25/75. At the borrower’s request prior to the work starting, an initial draw of up to 25 percent of

the escrow funds may be disbursed at or after closing to pay the contractor for materials, based

on invoices for materials purchased or vendor quotes for materials to be purchased. The

contractor must provide an invoice of the materials that were purchased or an estimate of the

materials to be purchased. The second draw is then disbursed when the job is fully completed.

Only one inspection fee may be provided to the appraiser for the final inspection.

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Draws should be made payable to the borrower and the contractor or made payable to the contractor

but sent to the borrower, to be given to the contractor. The draws can be released upon a

satisfactory inspection by the appraiser and execution of Form 49 by the borrower (s), the contractor,

and the appraiser for each draw. A completed Form 49 signed by the appraiser must be submitted to

the Escrow Administrator upon final completion of all repairs/improvements; in addition to a

completed W-9 form for the appraiser and contractors completing the work.

G. FHA/VA STREAMLINE REFINANCE PROGRAM

1. Overview

The Streamline Refinance loan products allow eligible homeowners to refinance their existing FHA or

VA loan to a new FHA or VA loan to reduce their current monthly mortgage payment.

2. FHA Guidelines

The new FHA loan can include the outstanding principal balance (from the payoff statement) plus odd

day’s interest, minus the applicable refund of the UFMIP plus the new UFMIP, up to a maximum

amount of 97.75% of the original appraised value. One month of annual MI for the current payment

due on the existing loan may also be included. An itemized calculation of the new loan amount should

be written or typed on the payoff statement from the current servicing lender and included with the

pre-closing package submitted to PHFA.

Lenders must follow FHA’s guidelines in effect at the time of loan application for the streamline

refinance per the HUD Handbook 4000.1 (II A, Chapter 8, Section D). Also, see Appendix 1.0

‘Mortgage Insurance Premiums’, as the premiums differ depending on when the original loan was

endorsed.

3. VA Interest Rate Reduction Refinancing Loan (IRRRL) Guidelines

The new loan can only include the existing VA loan balance, allowable fees and charges, up to two

discount points, and the VA funding fee.

Lenders must follow VA’s streamline refinance guidelines in effect at the time of loan application per

VA Pamphlet 26-7, Revised -- Chapter 6, Section 1 and sections of chapters 5, 7 and 8 as they

pertain to the VA IRRRL’s requirements.

1. Ginnie Mae Guidelines

Streamline refinance borrowers must have made at least six consecutive monthly payments on the

loan being refinanced, beginning with the payment made on the first payment due date. The first

payment due date of the refinance loan may occur no earlier than 210 days after the first payment

due date of the initial loan being refinanced. This requirement applies to non-credit qualifying and

credit qualifying refinances.

5. Subordinate Loans

Both programs require that any and all subordinate loans must be re-subordinated or paid off by the

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borrower; they cannot be paid off with the new loan.

6. Additional PHFA Requirements

While the lender must follow the FHA or VA guidelines, lenders must also comply with the following

criteria for the loan to be eligible for sale to PHFA.

The non-credit qualifying option without an appraisal is acceptable, as long as a verbal VOE is

completed.

Owner-occupied, one or two unit, principal residences only. Both the existing loan and the new loan

must meet this requirement.

Loan terms are 30 year fixed rate only. Therefore, VA loans with an original term of 15 years are not

eligible.

Maximum loan amount is $647,200.

Real estate taxes and insurance (mortgage, homeowners & flood) must be escrowed regardless of

the LTV.

The loan being refinanced must be current at the time of closing.

For loans currently serviced by PHFA:

 The amount needed to pay off the borrower’s existing PHFA loan will be reduced by the

balance in the borrower's existing escrow account. The payoff statement used must come

directly from PHFA staff, as the one available to the borrower on the web will not show the

reduction. The calculation of the new loan amount would still be done normally per the

applicable program guidelines. Cash back to the borrower in excess of the amount allowed by

FHA or VA would need to be applied to the principal amount of the new loan. If the payoff

statement shows an ‘escrow advance’, that would need to be paid with the borrower’s own

funds. The lender will perform the standard escrow analysis to ensure sufficient funds are

collected to pay for any taxes and insurance due within the next 12 months, and will also

provide the initial escrow account disclosure statement.

 A copy of the homeowner’s insurance declaration page is required.

 If there is an existing PHFA subordinate loan, it will be re-subordinated only if the new loan will

be funded by PHFA. (PHFA will not re-subordinate a second loan if the PHFA first loan is

refinancing with another investor.)

After the loan is approved by PHFA, forward the request for the subordination agreement to

[email protected]. Please allow five to seven business days for PHFA to complete

the subordination agreement and send it to the requestor. The subordination request should

include the following:

1. Name of the borrower(s);

2. Property Address;

3. Name and address of the staff person at the participating lender who should receive the

completed subordination agreement back from PHFA. (Please note: a certified true

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copy of the subordination agreement must be submitted to PHFA in the purchase

package – see Form 58.)

 Please note the K-FIT assistance loan is not eligible for re-subordination. Any unforgiven funds

must be paid off when refinancing with PHFA.

Non-occupying co-borrowers cannot be added to the new loan. They are permitted only when they

were on the original FHA loan.

If a co-borrower is being removed, the loan must be underwritten and documented using FHA’s

‘Credit Qualifying Streamline Refinance guidelines without an Appraisal’.

See ‘Lender Instructions and Procedures’ for documentation requirements.

7. Lender Instructions and Procedures

a. Lender Compensation

See ‘Participant Compensation’ in Chapter 1.

The allowable Lender Administration Fee is $1,100 on these programs. No additional fees may

be charged except for the reasonable and customary third party fees and closing costs.

b. Locking of Funds

Lenders may lock a loan under the program by using the PHFA Pipeline PLUS. See Chapter 2 for

details. A premium priced option is available as noted above under ‘Lender Compensation’.

c. Underwriting Procedures

Except for loans categorized as High Priced Mortgage Loans, PHFA will accept the following

documents for a complete package. (FHA/VA Streamline Refinances that are HPMLs must be fully

underwritten and documented per the HPML/TILA requirements.)

1. For FHA loans, an abbreviated application with applicable FHA addenda, (abbreviated

application has all sections completed except for IV, V, VI and VIII (k)). However, fully

completed applications will also be accepted. For VA loans, a fully completed application is

required.

2. FHA Loan Underwriting and Transmittal Summary (FHA)

3. Signed statement by the veteran acknowledging the effect of the refinancing loan on the

veteran’s loan payments and interest rate (see VA chapter 6, Section 1, item Q for specific

details of statement) (VA)

4. VA Form 26-8923, IRRRL Worksheet (VA)

5. VA Form 26-8937, Verification of VA Benefits (if applicable) (VA)

6. A copy of the borrower’s current mortgage statement along with a credit supplement report

showing the payment history for the most recent 12 months.

7. A verbal verification of employment indicating the borrower(s) are currently employed.

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8. In lieu of an appraisal, a copy of the “Refinance Authorization Results” screen from FHA

Connection which shows the original endorsement date and the appraised value, as well as

the Refinance Authorization number assigned by FHA. The property value will be based upon

the value when home was originally purchased. (FHA)

9. For VA loans, provide a copy of the VA IRRRL case assignment screen print showing the new

VA loan number along with the original loan amount. (VA)

10. A copy of the current Deed.

11. A copy of a lien search or the marked up title commitment on the subject property. Any other

loans/liens against the property must be paid off, satisfied, or re-subordinated. PHFA will

condition for proof of this to be included in the purchase package when applicable.

Subordinate loans cannot be included in or paid off by the new loan.

12. HUD Limited Denial of Participation (LDP) List and General Services Administration (GSA) List

of Parties Excluded from Federal Procurement or Non-Procurement Programs must also be

documented.

13. Verification of Assets for instances where the borrower needs additional funds to cover closing

costs.

14. Loan Estimate and Closing Disclosure.

15. Life of Loan flood determination.

For borrowers utilizing the FHA Streamline Refinancing option in order to remove one or more of the

current borrowers from the loan, FHA Streamline Credit Qualifying Refinancing guidelines will apply.

VA guidelines for these situations are very specific, for eligibility requirements, review VA Pamphlet

26-7 Revised, chapter 1, section k.

For Credit Qualifying FHA Streamline Refinances, the lender must verify the existing borrower’s

income, credit and debt-to-income ratios. Therefore, additional items will need to be provided in the

loan file:

1. Credit report.

2. Income verification.

3. A full Loan Application (1003) with all sections completed.

In addition, these loans are to be underwritten using PHFA’s overlays (see ‘PHFA Requirements’

above), closed and funded according to PHFA’s standard procedures as outlined in the Sellers’ Guide

and the Master Origination and Sale Agreement. Any exceptions to standard procedures for this

program are noted in this section.

The following PHFA-specific documents are not required:

 Mortgagor’s/Seller’s Affidavit (Form 3)

 Recapture Tax Notice (Form 4)

d. Closing Procedures

See Form 53 and Chapter 9 for closing instructions.

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An original instant Title Policy or Short Form Residential Title Policy for the new loan must be

included with the purchase package.

An Administration Fee no greater than $1,100 may be charged to cover the lender’s overhead

expenses on loans. No additional overhead fees such as doc prep, underwriting, etc., may be

charged. Normal and customary charges for required third party fees may be charged.

See ‘Additional PHFA Requirements’ section above for information on how to handle the escrow

account for borrowers whose existing loan is serviced by PHFA.

e. Submitting the Purchase Package

Use Form 58 for submitting the Purchase Package.

If there is a subordinate loan, a true certified copy of the subordination agreement as sent for

recording will be required at the time of purchase (or proof of payoff). This is referenced on page 3 of

Form 58, item # 9.

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Chapter 4 - Assistance Programs

CHAPTER 4 - ASSISTANCE PROGRAMS

A. KEYSTONE ADVANTAGE ASSISTANCE LOAN PROGRAM

1. General Program Description

The Advantage assistance loan is available to buyers with a middle FICO of at least 660 who are

eligible for a PHFA first mortgage under either the Keystone Home Loan or Keystone Government

Loan programs, as well as the HFA Preferred mortgage program (see Chapter 3 for first mortgage

program details). Through Advantage, qualified homebuyers are able to borrow a portion of the funds

needed to cover their downpayment requirement (other than their minimum required contribution)

and/or closing costs associated with the purchase of their home.

2. Loan Terms and Usage

The maximum amount of assistance to eligible homebuyers will be based upon the lesser of the

purchase price or appraised value. Advantage assistance cannot exceed four percent or $6,000,

whichever is less. The minimum loan amount is $500. Funds must be used to help cover the

borrower’s minimum downpayment requirement and/or closing costs (reasonable and customary

costs that are typically paid by the buyer). Buyers purchasing a new home (never previously

occupied) are eligible for up to $6,000.

The Advantage loan is interest free but the principal is amortized over a term of 10 years. There is no

prepayment penalty for paying off the Advantage loan early.

Borrowers must be utilizing maximum PHFA financing. Any Advantage funds exceeding the

borrower’s downpayment requirement must be used to cover closing costs. Advantage funds may not

be used to fund down money in excess of the applicable minimum required depending on the loan

type. Additionally, they may not be used to finance the VA or RD guaranty fees or the FHA Upfront

Mortgage Insurance Premium since those items may be financed by the first mortgage. PHFA

guidelines as detailed in this Sellers’ Guide, as well as all applicable FHA, VA, or RD guidelines

apply, including loan to value and downpayment requirements.

The Advantage program may not be combined with any other PHFA assistance programs, with the

exception of the Access Modification Loan Program.

3. Eligibility Requirements

Buyers must meet the requirements of the applicable PHFA first mortgage program, as well as the

criteria below. Being a first time homebuyer is only required if it is applicable to the first mortgage

program.

a. Liquid Asset Limitation

The borrower’s liquid assets may not be greater than $50,000 after deducting the funds needed to

close on the loan. This includes cash and funds in checking and savings accounts, stocks, bonds,

certificates of deposit and similar liquid accounts. Funds from retirement accounts, such as 401(k)’s,

IRAs, and pension funds, will only be considered if they can be withdrawn without a penalty due to

the borrower meeting the age requirement and/or being retired.

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ii. Homebuyer Education

All borrowers with middle credit scores below 680 must complete an in person homebuyer education

class or counseling session prior to closing, provided by one of PHFA’s approved counseling

organizations. Online courses will not be accepted for these borrowers.

For loans where all borrowers have a middle credit score of 680 or higher, a homebuyer education

class or counseling session must still be completed prior to closing; however, it need be completed by

only one borrower. The education or counseling session must be provided by one of PHFA’s

approved counseling organizations. Telephonic and online courses are also acceptable for borrowers

with a FICO of 680 or higher; acceptable online courses are those provided by HomeView® or PHFA.

In all cases, a copy of the counseling certificate(s) must be included in the purchase package to

PHFA.

4. Lender Instructions and Procedures

a. Locking of Funds

The Advantage loan is locked simultaneously with the first mortgage by choosing the appropriate loan

product based on the loan type, lock period, and specific PHFA program.

b. Underwriting Procedures

For underwriting purposes, the lender must include the Advantage loan payment in the borrower’s

housing to income (front end) ratio. The payment is calculated using the full amount of the Advantage

loan at 0% interest with a ten year term. The findings report from a PHFA approved Automated

Underwriting System (AUS) must include the Advantage loan payment in the PITI.

The Advantage loan amount being requested must be indicated in the “Details of Transaction” section

of the mortgage application. The PHFA Pre-Closing Package Review Results will indicate whether

the Advantage loan was approved and if so, for how much.

c. Closing Procedures

The first mortgage closes in the lender’s name, but the subordinate Advantage loan closes in PHFA’s

name. Lenders are responsible for completing the Loan Estimate and Closing Disclosure for the

subordinate Advantage loan using industry-standard and compliant forms. The Advantage loan is

assumable under certain conditions. The late fee would be the same as for the first mortgage.

Except for the cost to record the Mortgage and a reasonable notary fee, no additional fees may be

charged on a PHFA subordinate assistance loan since it is done in conjunction with the PHFA first

mortgage in order to help the borrower qualify for the loan.

The Advantage loan must be recorded in second lien position. This will be verified post closing by

PHFA.

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The lender also prepares the Subordinate Mortgage and Note but uses PHFA’s forms for those

documents (Form 54 ADV and Form 55 ADV, respectively). The amount must be the actual

assistance being disbursed at closing and listed on the CLOSING DISCLOSURE, rounded to the

nearest dollar. The Subordinate Mortgage Instrument shall be recorded directly behind the first

mortgage instrument as a second lien. No assignment of the subordinate mortgage is required since

it closes in PHFA’s name.

At closing, the lender is to disburse only the actual amount of assistance needed, rounded off to the

nearest dollar, up to the amount initially approved by PHFA. Cash back to the borrower is limited to

$100 in excess of reimbursement of POC items.

d. Post-Closing

When the Agency purchases the first mortgage, it will also reimburse the lender for the actual amount

of funds used by the borrower under the Advantage loan as listed on the CLOSING DISCLOSURE.

The lender is to forward to the Agency the following executed subordinate mortgage documents in the

purchase package:

 Loan Estimate and Closing Disclosure

 Subordinate Mortgage Note (Form 54 ADV)

 Certified copy of the Subordinate Mortgage (Form 55 ADV) with evidence it was sent for

recording.

 A copy of any other subordinate Mortgage(s) with evidence it was sent for recording (for any

other downpayment/closing cost/rehab funds received for which a mortgage is recorded).

Please note that the Advantage loan must be recorded in second lien position.

The Closing Disclosure submitted with the SRP portion of the file (Page 4, Form 58) will be used to

verify the amount of funds that were used by the borrower. The lender is to forward the original

recorded mortgage document (Form 55 ADV) to the Agency within sixty days from the date of

purchase. The lender is also responsible to forward a copy of the recorded mortgage that was used

for any other downpayment/closing cost/rehab programs, if applicable. This will confirm that the

PHFA Advantage Mortgage was recorded in second lien position. The mortgages are to be attached

to a properly completed Form 30 and submitted to the Agency at the address referenced on the form.

B. KEYSTONE FORGIVABLE IN TEN YEARS LOAN PROGRAM (K-FIT)

1. General Program Description

The Keystone Forgivable in Ten Years Loan Program (K-FIT) is available to buyers with a middle

FICO of at least 660 who are eligible for a PHFA first mortgage under the Keystone Home Loan

Program and the purchase options under the K-Flex Loan Program (see Chapter 3 for first mortgage

program details). Through K-FIT, qualified homebuyers are able to borrow a portion of the funds

needed to cover their downpayment requirement (other than their minimum required contribution)

and/or closing costs associated with the purchase of their home.

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Chapter 4 - Assistance Programs

2. Loan Terms and Usage

The maximum amount of assistance to eligible homebuyers will be based upon the lesser of the

purchase price or appraised value. K-FIT assistance cannot exceed five percent (5%) of the lesser of

purchase price or appraised value with no maximum dollar amount. The minimum loan amount is

$500. Funds must be used to help cover the borrower’s minimum downpayment requirement and/or

closing costs (reasonable and customary costs that are typically paid by the buyer).

The K-FIT loan is forgiven on an annual basis over ten years at a rate of 10 percent (10%) per year.

Borrowers must be utilizing maximum PHFA financing. Any K-FIT funds exceeding the borrower’s

downpayment requirement must be used to cover closing costs. K-FIT funds may not be used to fund

down money in excess of the applicable minimum required depending on the loan type. Additionally,

they may not be used to finance the VA or RD guaranty fees or the FHA Upfront Mortgage Insurance

Premium since those items may be financed by the first mortgage. PHFA guidelines as detailed in

this Sellers’ Guide, as well as all applicable FHA, VA, or RD guidelines apply, including loan to value

and downpayment requirements.

The K-FIT program may not be combined with any other PHFA assistance programs, with the

exception of the Access Modification Loan Program.

3. Eligibility Requirements

Buyers must meet the requirements of the applicable PHFA first mortgage program, as well as the

criteria below. Being a first time homebuyer is only required if it is applicable to the first mortgage

program.

a. Liquid Asset Limitation

The borrower’s liquid assets may not be greater than $50,000 after deducting the funds needed to

close on the loan. This includes cash and funds in checking and savings accounts, stocks, bonds,

certificates of deposit and similar liquid accounts. Funds from retirement accounts, such as 401(k)’s,

IRAs, and pension funds, will only be considered if they can be withdrawn without a penalty due to

the borrower meeting the age requirement and/or being retired.

b. Homebuyer Education