Homeownership Set-aside Programs

Funding for the 2010 HSP will be $5.6 million compared to $1.7 million in 2009. RFHP, TOP, Rural Disaster Assistance and Mortgage Refinancing Programs are funded from the same pool on a first-come, first-served basis. Six monthly offerings in 2010 beginning March 1. March and April funding available will be $1.1 million. For May, June, July and August, the amount available each month will be $838,000.

Some guidelines have been expanded for 2010:

• The difference between the maximum allowable mortgage rate has been increased from 150 basis points to 200 basis points, above the posted Freddie Mac rate.
• Maximum allowable loan discount points have been increased from 1.5 to 2.0 points. However, the maximum loan discount points apply to fees paid by the buyer and seller combined.
• Maximum lender fees have been increase 2.5 % to 3.0%. However, the maximum lender fees applies to fees paid by the buyer and seller combined.
• The maximum allowable front ratio is 38%.

If funding requests exceed the amount of funds available on the first day of any of the monthly HSP offerings, requests will be chosen using a random selection process. If funding falls within the allotment, requests will be considered on a first-come, first-served basis. All funding requests submitted on the first day of the offering will have an equal chance of being approved. The time of submission the first day of each monthly offering does not impact whether a request is selected.

Members are restricted to a maximum of $50,000 in set-aside funds for the first two months of the HSP. The maximum increases by $25,000 per month beginning in May.

Mortgage Refinancing Program (MRP) – This is a new authorized use of set-aside funds. Funds can be used to assist in refinancing first mortgages at risk of foreclosure by providing funding for closing costs and principal reduction.

Some details about the MRP:

• Eligible loans. A loan is eligible to be refinanced with AHP direct subsidy if the loan is secured by a first mortgage on an owner-occupied unit that is the primary residence of the household, and the loan is refinanced under an eligible targeted refinancing program.
• Eligible uses. Members may provide the AHP direct subsidy to:
• reduce the outstanding principal balance of the loan by no more than the amount necessary for the new loan to qualify under both the maximum loan-to-value ratio and the maximum household mortgage debt-to-income ratio required by the eligible targeted refinancing program; or
• pay loan closing costs.
• Eligible lender participants. A household must obtain its refinancing loan through a member participating in an eligible targeted refinancing program.
• Counseling. Prior to enrollment in an AHP set-aside refinancing program, a household must obtain counseling for foreclosure mitigation and for qualification for refinancing by an eligible targeted refinancing program through the National Foreclosure Mitigation Counseling program or other counseling program used by a State or local government or housing finance agency.
• Sunset. The MRP shall expire on July 30, 2010, unless the program is extended by the Federal Housing Finance Agency.
• Eligible targeted refinancing program is defined as a program offered by the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Agriculture (USDA), the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), a State or local government, or a State or local housing finance agency for the limited purpose of refinancing (i.e., paying off) first mortgages on primary residences for households that cannot afford or are at risk of not being able to afford their monthly payments, as defined by the program, in order to prevent foreclosure.

HSP funds can only be provided to members to assist homebuyers whose first mortgage loan or permanent financing is being originated by an FHLBank member. This does not preclude a member from selling a loan they have originated. HSP funds can no longer be provided to a member to pass through to a homebuyer whose permanent financing is not being provided by an FHLBank member. The only exceptions are loans originated by a USDA direct loan or bona fide nonprofit lenders.

Members must still submit HSP Agreements in order to submit disbursement requests; however, there are no registration deadlines. HSP Agreements will be accepted from members at any time during the year.

The no more than $250 cash back at closing requirement will also be monitored very closely. If final closing statements show cash back to the borrower in excess of $250 at closing, FHLBank will require the member to remedy the cash back to borrower in excess of $250 by credits to the borrower's loan principal or other adjustments.

Members are still discouraged from submitting requests for disbursement of HSP funds after they have closed the loan to the borrower. An increasing number of members are finding out that they have closed their loan for a borrower that does not meet HSP requirements. 

Disbursement requests that do not include all required information and documentation cannot be processed.

HSP Program Description
The Homeownership Set-aside Programs (HSP) are down payment assistance programs designed to help first-time homebuyers in rural areas, homebuyers with a disability and existing homeowners in rural federally declared disaster areas purchase a home. FHLBank stockholders are eligible to access HSP funding to assist first-time homebuyers in areas you serve. FHLBank HSP is available in six monthly offerings beginning in March. 

Eligible homebuyer requirements:

• No cash back in excess of $250 at closing;
• Have an income that is 80 percent or less of the area median, based on income of all household members age 18 and over;
• First-time homebuyer in a rural area or first-time homebuyer with a disabled household member in rural or urban area or existing homeowner in rural federally declared disaster area; 
• Complete a homebuyer education/counseling program prior to receiving the funds except for existing homeowners in rural disaster areas;
• Provide a minimum down payment of $500; and
• Have an income not based on a temporary condition (such as a full-time student).

The maximum HSP subsidy per household in 2010 is $4,000, and the maximum amount each stockholder can request is $50,000 during March and April. However, due to the first-come, first-served structure of the program, members are not guaranteed access to the maximum allowable HSP subsidy of $50,000. The maximum is increased to $75,000 on May 1, $100,000 on June 1, $125,000 on July 1, and $150,000 on August 1 and for the remainder of the funding year. The maximum allowable per member is subject to the availability of funds.

For a complete description of the requirements of the program, download the 2010 AHP Implementation Plan in the right sidebar.

Homebuyers can use HSP funds for down payment, closing cost and rehabilitation assistance on a home that is outside the urbanized area of the central city of a Metropolitan Statistical Area (MSA) in Colorado, Kansas, Nebraska and Oklahoma. Contact HCD staff at 866.571.8155 if you are unsure if the property is located in a rural area. Be prepared to provide a street address for the property in question. HSP funds may also be used for down payment, closing cost and rehabilitation assistance for purchase of homes by borrowers with a disabled household member. HSP funds may be used to assist existing homeowners with the cost of repairing or reconstructing damaged property located within rural federally declared disaster areas.

To be approved for any HSP funding, a stockholder must submit a completed and signed HSP Agreement prior to submission of disbursement requests. Interested stockholders that do not participate in the first round can register to participate in any subsequent round. All stockholders are eligible to participate. However, any stockholder not in compliance with the requirement to provide retention or other monitoring documents for previous HSP or AHP programs or other AHP compliance issues may be precluded from participating.

Funds will be disbursed on a case-by-case basis for specific households beginning March 1. Disbursement requests will not be accepted before the first day of each monthly offering period. Members are encouraged not to close HSP loans prior to disbursement of funds.

To verify income eligibility, download the FHLBank Topeka Income Calculation Guidelines and the applicable Mortgage Revenue Bond Income Limits from the right side bar. Income qualification must be based on the income of all members in the household age 18 and over. Participants cannot be qualified based upon the borrower income only. To draw down the reserved funds, complete the Disbursement Request Form along with all required supporting documentation shown on Section F of the Disbursement Request Form, including the AHP Note and Subordinate Mortgage. Disbursement Request Form Instructions and Checklist can also be printed.

All HSP reservations and disbursements are subject to the requirements of the Federal Housing Finance Board Office of Supervision Advisory Bulletin dated March 24, 2005 (see sidebar) and AHP regulations that became effective Jan. 1, 2007. The bulletin and regulations prohibit cash back at closing in excess of $250 on the closing statement and prohibits assistance to full-time students and other borrowers lacking a sufficient current income to support the loan for the home being purchased. HSP assistance is also subject to compliance with the FHLBank Topeka income calculation guidelines (see sidebar).

To view homebuyer education providers in your area, click on the link to your state in the Homebuyer Education area in the right sidebar.

Questions?
Call 866.571.8155, and ask for your state's contact listed below.

Kansas and Oklahoma Members
Utika Scales, AHP specialist - homeownership  |   Utika.Scales@fhlbtopeka.com

Colorado and Nebraska Members  
Terri Smith, AHP specialist - homeownership  |  Terri.Smith@fhlbtopeka.com

HSP Documentation
Use the side bar links at the right to download HSP documentation.

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