FHA Presentation

Bank of America Confidential – Internal Use Only 1

FHAVA

WANTSYOU!


Agenda

I. Welcome

II. Why FHA? - Why VA?

III. Market Opportunity

IV. Future of Government products

V. Q/A

Bank of America Confidential – Internal Use Only 3Bank of America Confidential – Internal Use Only

Changes and Reform in Government Lending

FHA/VA


New FHA

FHA has changed! In the last year, FHA has initiated significant efforts to align its business process with industry practice

Positive changes to the property inspection requirements for existing properties Elimination of “VC” sheets, Homebuyer Summary and adoption of the FNMA appraisal forms Termite Inspection requirement only when there are signs of active infestation or the appraiser notes the requirement on the appraisal Permitting “as is” appraisals allowing minor property conditions that generally result from deferred maintenance and are not health and

safety issues Well and Septic inspections are required only in certain circumstances

Borrower may have a non-occupant co-borrower to help qualify

FHA has eliminated the “allowable” and “non-allowable” closing costs The only fee the seller is required to pay is the Tax Service Fee

All FHA insured mortgages are assumable to qualified buyers

Bank of America has dedicated a new Fulfillment Center New Fulfillment Center is devoted to the processing, underwriting and closing of all government loans and in doing so, will provide

superior service to our customers and business partners

Funds to close Funds to close may be from a gift if the donor is the borrower’s relative, employer or labor union, a charitable organization, a

government agency or public entity or a close friend with a clearly defined and documented interest in the borrower


Why FHA?

Realtors are accepting FHA contracts now and the opportunity to grow FHA share is significant. Approximately 50% of FHA/VA volume is LMI and their origination helps meet BAC CRA goals. FHA insured products are safe loan options for FTHB borrowers and profitable to CRE.

What FHA has done for the customer…In 2006, FHA initiated significant efforts to align its business process with industry practice. By doing so it has streamlined its property inspection requirements for existing properties – eliminating a major barrier for many potential borrowers. Also:

FHA borrowers may have a non-occupant co-borrower to help them qualify.

FHA has eliminated the “allowable” and “non-allowable” closing costs – making it easier to process these loans. The only fee that a borrower may not pay is the Tax Service Fee.

Funds to close may be from a gift if the donor is the borrower’s relative; employer or labor union; a charitable organization; a government agency or public entity; a close friend with a clearly defined and documented interest in the borrower.

All FHA insured mortgages are assumable to qualified buyers.

FHA Products Available through Bank of America

FHA ARMs are available to help borrowers qualify for more home. FHA ARMs and Hybrid ARMs are available as:

1 Year 3 Year 5 Year 7 Year 10 Year

FHA Fixed Rate Mortgage Products30 Year Fixed Rate Fully Amortizing loan term15 Year Fixed Rate Fully Amortizing loan term

What is Bank of America doing for FHA customers?Bank of America has dedicated a new National Government Loan Center in Jacksonville, Florida - devoted to the processing, underwriting and closing of all government loans. This new Fulfillment Center is providing superior service to our customers and business partners.

Already there has been an increase in volume!

Already there has been an increase in customer delight!

From a Year over Year Perspective

• Customer delight scores are rising

• Kept Informed goal is improving

• Problem occurrences are decreasing

• Closings Met on time are increasing

What’s new with the FHA home inspection:

• FHA has eliminated the Valuation Conditions sheets, Homebuyer Summary, and has adopted the FNMA appraisal forms.

• Termite Inspections are now required only when there are signs of an active infestation or the appraiser notes the requirement on the appraisal.

• FHA is now permitting “as is” appraisals - allowing minor property conditions that generally result from deferred maintenance and are not health and safety issues.

• Well and Septic inspections will only be required in certain circumstances.


FHA Marketing Materials


Why VA?

Bank of America owns the Military Bank and is a brand of choice for consumer products, mortgage is an eligible product. Great way to reach out to eligible military personnel and help them leverage this important VA guaranty benefit Loan amounts up to $417,000 nationwide for eligible military service personnel with zero down payment

What VA has done for the customer…• 100% financing to qualified veterans on purchase transactions. Streamline refinances available.

• 100% financing of funding fee (equivalent to mortgage insurance).

• “Gross up” of non-taxable income allowed for qualifying ratios only.

• Alternative documentation options available.

• Cash-Out Refinance transactions up to 90% LTV

• Loan Limit up to $417,000--same as the conforming Loan Limit; plus up to $6,000 in Energy Efficient Improvements.

• Veteran's eligibility is re-usable if prior transactions release veteran from further liability—such as prior house sold.

• Active Duty and retired military personnel are eligible. Reserves and National Guard personnel would qualify for benefits based on VA guidelines..

VA Products Available through Bank of America

VA Fixed Rate Mortgage Products30 Year Fixed Rate Fully Amortizing loan term15 Year Fixed Rate Fully Amortizing loan term

What is Bank of America doing for VA customers?• We’re ready for VA fulfillment

• Customer delight is our goal

• Bank of America has dedicated a new National Government Loan Center in Jacksonville, Florida - devoted to the processing, underwriting and closing of all VA loans. This new Fulfillment Center is fully operational and dedicated to superior service for our MLO’s, customers and business partners.

VA loans represent a growth opportunity for retail mortgage loan officers

• Last year, VA guaranteed 157,870 mortgages

•88% of VA mortgages are fixed rate loans

• Bank of America owns the United States Military Bank and has BAC branches on 36 military installations and has 100s of other offsite military banking centers.

• Bank of America has over 350,000 checking, savings, and other consumer accounts with military personnel nationwide.


Profile of VA Borrowers

Source: MBA Residential Underwriting Conference November 2006


Military is one of the largest and most loyal affinity groups. One out of every 4 U.S. Households is part of this affinity group, with 75% (20MM) of these HHs residing in BAC footprint states

61

17

13

Military + PseudoAffinities

Education *

Unions **

* Education figure includes only the Top 10 U.S. Education-related organizations, including the PTA with 6.5 MM members

** Union includes only the AFL-CIO which has over 13MM members and 58 member unions

Military Segment Only – Geographic View

75%

25%Out of Footprint

In Footprint

Large U.S. Affinity Groups Millions

With Military Pseudo-Affinities included, approximately 50% of all U.S. HHs can be included within this affinity group (USAA model)

Military Affinity Relationships


Geographical Distribution of DoD Personnel and Veterans

DoD PersonnelArizona – 32,774

Arkansas – 9,220

California- 188,104

Idaho – 5,804

Illinois – 40,850

Iowa – 1,994

Kansas – 22,472

Missouri – 24,816

Nevada – 11,156

New Mexico – 18,539

Oklahoma – 45,469

Oregon – 3,993

TN / KY – 51,586

Texas – 152,214

Washington – 62,784

Connecticut – 6,749

DC- 27,425

Florida – 83,189Georgia – 98,604

Maine – 9,031

Maryland – 62,562

Massachusetts – 9,178

New Hampshire – 1,408

New Jersey – 20,594

New York – 32,599

North Carolina – 113,302

Pennsylvania – 28,200

Rhode Island – 7,088

South Carolina – 46,706

Virginia – 170,508

82% of DoD Personnel live in franchise states

76% of Veterans live in franchise states

VeteransArizona – 562,916

Arkansas – 281,714

California- 2,569,340

Idaho – 136,584

Illinois – 1,003,572

Iowa – 292,020

Kansas – 267,452

Missouri – 592,271

Nevada – 238,128

New Mexico – 190,718

Oklahoma – 376,062

Oregon – 388,990

TN / KY – 940,759

Texas – 1,754,809

Washington – 670,628

Connecticut – 310,069

DC- 44,484

Delaware – 84,289

Florida – 1,875,597Georgia – 768,675

Maine – 154,590

Maryland –524,230

Massachusetts – 558,933

New Hampshire – 139,038

New Jersey – 672,217

New York – 1,361,164

North Carolina – 792,646

Pennsylvania – 1,280,788

Rhode Island – 102,494

South Carolina – 420,971

Virginia – 786,359


FHA VACommunity

Accommodation

N/A Credit Flex

N/A Zero

Down

Neigh Champions

ACORNCommunity

Commitment

My Community Mortgage

Maximum Income

LimitNo No

80% Median or LICT

100% Median or

LICT

100% Median or

LICT

Conforming-No limit Non

Conf - 80% of LICT

By State, See

Product Summary

80% Median or LICT

100% Median or LICT

Home-Buyer

Education

Not Required

Not Required

Required

(Most cases)

Required

(1st time HB & ¾

unit)

Not Required

Required for 2-unit

Required, Prior to

Boarding App.

Required in some cases

(if applicable, prior to

boarding)

Not Required for 1-unit

Properties

Minimum Credit Score

No No620 Credit or 190

Custom

1&2 Units = 620;

3&4 Units = 660

660620 or higher Based on LTV

& # of UnitsNo

See Product Summary

No

Non Traditional

Credit

Accepted, if

available

Accepted, if

availableNot Accepted Accepted Accepted Accepted Accepted Accepted Accepted

Non Occupant

Co-Borrower Allowed

Yes

(ex. Kiddy Condo)

No No No No No

Yes, if combined income meets income limits

Yes, if cumulative

income meets income limits

Yes, with HomeChoice Option only

Ratio %

Housing

Increase

Review

No No No Yes YesBased on

credit scoreYes

Yes

Determines allowable ratios

No

Comparison: FHA/VA to Other LMI Products – Quick Reference


FHA VACommunity

Accommodation

N/A Credit Flex

N/A Zero Down

Neigh Champions

ACORNCommunity

Commitment


Minimum

Number of

Tradelines

No No Yes

No, but for NT credit,

see product

summary

Yes Yes Yes Yes Yes

Collections

Paid

Generally No, but

judgements must be

paid

Varies

Yes, depending on amount, type, credit

score and/or custom score





Yes, depending on amount, type, credit score

and/or custom score





Yes, depending on amount, type, credit score or DU

decision

Review of Valid vs.

Non-Valid

Credit Score

No No Yes Yes Yes Yes Yes Yes Yes

Credit History

Required?No* No Yes Yes Yes Yes Yes Yes Yes

Comparison: FHA to Other LMI Products – Quick Reference

* FHA - Neither the lack of credit history nor the borrower's decision not to use credit may be used as a basis for rejecting the loan application. We also recognize that some prospective borrowers may not have an established credit history. For those borrowers, and for those who do not use traditional credit, the lender must develop a credit history from utility payment records, rental payments, automobile insurance payments, or other means of direct access from the credit provider.


FHA VACommunity

Accommodation

N/A Credit Flex

N/A Zero

Down

Neigh Champions

ACORNCommunity

Commitment


Mtg Insurance Required

Financed Financed No - 80/20 LoanYes - over 80%

Yes - over 80%

Yes - over 80%

No NoYes - over

80%

Cash Out Availablen/a in Texas

Up to 95%

Up to 90%

Up to 95% depending on credit

scoreNo No No No No No

Reserves Required

Only on 3-4 Units if income used for

qualifying

No NoYes -

Min 1 month

Yes - must be

from own

funds

Yes - See Product

Summary. 1-2 units only, 3-4

units not allowed

No NoNo Most Cases

Assumable Yes Yes No No No No No No No

Manufactured Homes

AcceptableYes Yes No No No No Yes Yes No

Un-documented

IncomeNo No Comp Factor Only

Comp Factor Only

NoComp Factor

OnlyYes Yes

Comp Factor Only

Own other

Real Estate

At Closing

Yes Yes Yes

1 property

under special criteria

1 property

under special criteria

1 property under special

criteriaNo No No



FHA VACommunity

Accommodation

N/A Credit Flex

N/A Zero

Down

Neigh Champions

ACORNCommunity

Commitment


LTV-Maximum

CLTV

97.75% and

higher with DAP

100%100% and higher

with DAP

100% & Higher

with DAP

100%100% &

Higher with DAP

100% & higher

with Soft or Hard

2nd

100% and higher with DAP

100% 1-unit and higher with DAP

Energy

Efficient

Mortgage

Financing

Yes Yes No No No No No No No

Student Loans

Included in DTI

No, if payments deferred

12 months

No, if payments deferred

12 months

Yes Yes Yes Yes Yes Yes Yes

Ratios

31/43, higher

with comp factors

Ratios and

Residual Income

Up to 60% - See Product Summary

1&2 Units = 45/45%;

3&4 Units = 43/43%

33/41; 38/41; & 45/45% -

See Product

Up to 50/50; Based on

LTV; Credit Score & # of

Units

38/35% 45/45% if Housing Increase is less

than 25%

38/38%, 45/45%, 55/55% - See

Product Summary

Ratios determined by

DU in most cases

Landlord Education

2-4 Unit Properties

No No Yes YesN/A; 2-4 units not allowed

Yes, 1-2 unit properties

only allowedYes Yes Yes



FHA VACommunity

Accommodation

N/A Credit Flex

N/A Zero

Down

Neigh Champions

ACORNCommunity

Commitment


LTV on

4-unit property 97.75% 100% 80% 3-4 unit 95% 95% n/a 95% 95% 95%

Term 30 yrs 30 yrs Up to 40 yrsUp to 40

yrsUp to 40

yrsUp to 40 yrs

Up to 40 yrs

Up to 40 yrs Up to 40 yrs

3-4 Unit - Gift for down-payment?

Yes N/A Yes Partial Partial Partial Partial Partial Partial

Downpayment must be from own funds?

No* N/A No

$500 own funds;

3-4 units = 3% from own funds

n/a1unit – No;

2 units – 3%

1-2 unit $500;

3-4 units 2.5% from own funds

1-2 unit $500;

3-4 units 2.5%

1unit – No;

2-4 units – 3% from own

funds

Employer Restrictions

No No No No No Yes No No No

Streamline

Refinance

Yes, With or Without

QualifyingYes No No No No No No No


* Must have the 3% minimum investment that can come from a bona fide gift which includes certain DAP gifts.


Conclusion

• In conclusion, we clearly see a market opportunity in FHA and VA as complementary products to our Neighborhood Lending products

• FHA financing allows for many borrowers with challenged credit the opportunity to become homeowners.

•VA financing is the best way Bank of America to say “Thank You” to those who have served our country!

FHA Presentation

Documents

Transcript of FHA Presentation