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Link to Manna, Inc

 

Guide for Professionals Serving
Low to Moderate-Income People

 

MANNA MORTGAGE IS YOUR RESOURCE FOR
LOW TO MODERATE-INCOME PERSONS

 

 

WHAT IS MANNA MORTGAGE?

Manna Mortgage is a nonprofit mortgage loan company dedicated to helping low and moderate-income persons obtain low-cost mortgages with good terms for homes in Washington, DC.

 

Manna Mortgage is a member of the national nonprofit Neighbor Works Network, approved to offer the loan programs of Neighborhood Housing Services of America (NHSA), a nonprofit mortgage investor.

 

Manna Mortgage is a subsidiary of Manna, Inc., a nonprofit builder of quality, affordable homes in the District of Columbia for over 25 years.  Manna, Inc. also provides low and moderate-income residents with homebuyer and financial literacy education.

 

HOW IS MANNA MORTGAGE SPECIAL?

1. Manna Mortgage has DC’s foremost expertise in loan solutions for low and moderate-income homebuyers and homeowners.

2. Our mission is to serve the needs of low and moderate-income borrowers:

  • By providing individually-designed loan packages;

  • By providing reasonable rates and fees;

  • By educating our borrowers fully about their loan terms and fees and the steps in the loan process.

3. Manna Mortgage requires homeownership education and predatory lending alerts for all borrowers.

4. Our staff is wholly salaried with no incentives to promote particular loan types or higher loan amounts.

5. Manna Mortgage has inherited a 25-year legacy of competence, service, integrity, and caring from its parent, Manna, Inc.

 

WHAT IS MANNA MORTGAGE’S EXPERTISE?

 

1. Providing prompt and reliable mortgage approvals and processing, and utilizing the industry’s most advanced automated underwriting, qualification and analysis tools.

2. Building continuing professional relationships with the leadership and staff of nonprofit, for-profit and government entities serving low and moderate-income persons.  These include:

  • Organizations administering DC’s Home Purchase Assistance Program (HPAP), Employer Assisted Housing Program (EAHP), and DC Metropolitan  Police Housing Assistance Program (MPHAP);

  • Nonprofit and for-profit housing developers building low to moderate-income housing;

  • Realtors and Realtists;

  • National bank conventional lenders;

  • Real estate attorneys and settlement agencies.

3. Knowing the low-cost loan programs that are available.

4. Structuring “layered” first and subordinate mortgage financing, often including three or more mortgages, to obtain a loan package with the most appropriate terms and most reasonable costs for each homebuyer.

5.  Knowing the DC benefits available to eligible low and moderate-income borrowers, including DC’s first-time homebuyer tax credit of up to $5000,  DC’s 5 year property tax abatement program, and the DC recordation and transfer tax credits toward closing costs of up to 2.2% of the purchase price.

6. Helping prospective borrowers and homebuyers to improve their credit standing over time to allow them to be considered seriously for purchase or refinance loans.

7. Presenting each borrower’s income, assets, debt and credit in the best light to mortgage underwriters. 

 

RESOURCES AND METHODS TO MEET YOUR BORROWERS’ MORTGAGE NEEDS

 

MAXIMIZING BUYING POWER

1. Use first mortgages with ratios as high as 50% or more.

2. Use second mortgages with payments deferred for five years at no interest on HPAP loans, or deferred until sale on EAHP and MPHAP loans.

3. Use second mortgages to avoid mortgage insurance (MI) on the first mortgage, reducing the total payment.

4. Use lender-paid mortgage insurance by paying MI as part of the interest rate in order to lower the overall loan payment. This thereby converts the non-deductible MI payment into a tax-deductible interest payment. Usually the total payment is less even  without the tax deductibility of the added interest.

5. Use a non-occupant or occupant co-borrower to enhance borrower qualifying power.

6. If eligible, use the DC Property Tax Abatement to drop property taxes and lower housing costs for five years.

7. Consider, carefully and selectively, adjustable and interest-only loans to lower payments.  Borrowers must understand the loan and plan for potential rate increases.

 

 

MINIMIZING CASH NEEDED TO BUY

1. Finance the purchase with 0-3% down payment using:

  • 0% down payment mortgages approved through automated and manual underwriting programs.   

  • 3% down payment mortgage programs through nonprofit and conventional national lenders

2. Use DC down payment and closing-cost-assistance second mortgages to reduce cash to close, and reduce first mortgage loan-to-value to improve first mortgage terms:

  • DC Home Purchase Assistance Program (HPAP) second Mortgages of up to $70,000 plus up to $7,000 in closing costs are based on income, family size, first time homebuyer status and DC residency.  Down payments are $500, payments are waived for 5 years, after which borrowers can pay principal-only for 40 years.

  • The DC Employer Assisted Housing Program (EAHP) offers $10,000 deferred-payment second mortgages for government employees with up to $1500 in closing cost credit depending on savings;

  • DC Metropolitan Police Housing Assistance Program (MPHAP) includes the EAHP benefits. In addition, eligible police officers may receive an annual income tax credit of $2,000 and a partial property tax credit, each for five years.

3. Assure that eligible purchasers obtain a closing cost credit equal to 2.2% of the sale price through the DC exemption from transfer taxes. With a correct contract provision, the standard 1.1% purchaser-paid recordation tax is waived and an amount equal to the seller-paid transfer tax of 1.1% is credited to the buyer.  The maximum sales price for the credit is $264,000. 

4. Finance closing costs through a seller contribution of up to 3% or more of the purchase price, which must be written into the purchase contract.

5. Obtain payment of closing costs by an increase

in the first mortgage interest rate which compensates the lender for paying some or all closing costs.

6. Obtain gift funds for down payment and closing costs from relatives or close friends. Consult Manna Mortgage before the transfer of any gift funds as there are specific steps to assure the gift is not classified as borrowed.

7. Have borrowers participate in savings plans with nonprofit organizations, such as Manna, Inc., offering Individual Development Accounts, which match savings for home buying.

 

ADDRESSING CREDIT CHALLENGES

1. Use loan programs with low or no minimum credit score thresholds, if the borrower is eligible.

2. Use loan programs that modestly adjust the interest rate to account for credit or debt risk rather than charging high points and high fees.

3. Refer persons to Manna, Inc. for credit counseling, to correct reporting errors, to take action to improve credit scores, to learn to build a good credit history, to save, and to improve personal financial management.

 

OBTAINING FAIR AND AFFORDABLE REFINANCE MORTGAGES

1. Advise homeowners that the high equity in DC homes often can allow them to get low-cost, low-fee refinances, even with low income and less than

perfect credit.

2. Explain to homeowners how they can lower their payments, do home improvements, consolidate debts, and accomplish other goals by refinancing.

3. Advise borrowers of the availability of loans with good rates and reasonable fees without needing to use high-fee and high-rate sub-prime lenders.

4. Explain refinance loan types, including:

  •   A "No Cash Out" Refinance of an existing mortgage with a new mortgage. All closing costs can be included in the new loan up to 97% of current value;

  •   A "Cash Out" Refinance of an existing mortgage plus new money up to 90% of current value;

  •   A 1st  or 2nd mortgage “home equity loan,” usually at a variable rate. It can be drawn from or paid down in whole or in part at any time. Fees are very low. Monthly payments go down as the loan balance drops;

  •   A loan for home repairs. DC offers three 2nd mortgage and grant repair programs.

 

ALERTING CLIENTS TO MORTGAGE BORROWING HAZARDS

 

Let Manna Mortgage alert your clients to common loan hazards.
Our advice to clients includes:

 

1. Preview the “good faith estimate” of ALL costs.  Understand all loan terms before signing any papers.

2. Don’t pay a lender more than $400 before settlement. This covers the appraisal and credit report.

3. Do not sign papers under pressure. Most costs will not change much if you wait a few days to sign!

4. Know that there is no such thing as a free    refinance! Costs can be $1800 to $2500. “Hiding“ costs in the loan amount does not eliminate them. Know how many months or years it will take with   your monthly savings to pay for the refinance costs.

5. Know the long term cost of funds from a “cash-out” refinance. Repayment could take up to 30 years.

6. Avoid undesirable loan terms such as short   adjustable rate loans, balloon loans, long prepayment penalties and expensive life and disability insurance. Avoid loans with very high rate increases in 2 to 3 years, forcing a costly new refinance.

7. Ask an impartial mortgage expert to review your proposed loan in detail.