OHFA Contracts - July 10th Deadline
July 8, 2009
This Alert serves as a reminder to the June 16th OMBAlert which read:
On Friday June 12, 2009 all Ohio Housing Finance Agency approved participating lenders received via email the latest version of several contract documents from OHFA along with a request to execute those contracts and return them by July 10, 2009.
***This ALERT is intended to bring to your attention several key points***
First, your OMBA leadership has worked closely with OHFA representatives and the OHFA Master Servicer, US Bank, for almost two years in the drafting of language contained in these documents that previously had raised concerns among many members. Although OHFA and US Bank embraced almost all of the recommendations OMBA offered to this project, several significant recommendations in regard to repurchase language were rejected.
Second, the OHFA email referenced an approximate two year period since the OHFA Lender Participation Agreement information was updated. While this statement is accurate, it does not fully address the significant change that took place in the summer of 2007. At that time, a new and completely overhauled Mortgage Origination and Sale Agreement was delivered to participating lenders for execution. That agreement, however, contained language that laid the groundwork for a significant change in OHFA’s contractual approach to the program that had been in place for over twenty-five years. Specifically, the new approach was to require lenders to execute several contracts as follows:
Mortgage Origination and Sale Agreement- This document is intended to serve as a form of a “master agreement” to be executed in order to participate in any program sponsored/offered by OHFA.
Program Origination and Guidelines- Separate guidelines will be developed and required to be executed for each specific program OHFA sponsors/offers to a lender.
Product Term Sheets- These will be developed as program/product specific rules to be applied to each separate product OHFA offers from time to time.
Each of these documents are cross referenced with respect to contractual obligations of the originating lender, but only the main Mortgage Origination and Sale Agreement was distributed for signature in 2007.
Third, the documents distributed on Friday represent the first time that participating lenders have received all three completed documents that fully reflect the lender’s contractual obligations under any of the OHFA programs. Furthermore, the documents distributed on Friday June 12th contain several features worth noting:
1) The Master Origination and Sale Agreement contains several changes/revisions from the document distributed in 2007.
2) Two Separate Program Origination Guidelines were distributed for the first time as they relate to the First Time Homebuyer Program and the Homebuyer Tax Credit Advantage program.
3) Three Separate new Product Term Sheets were distributed for the first time.
Finally, OMBA members that currently participate in the First Time Homebuyer Program are encouraged to pay particular attention to these new contracts where the OMBA leadership was not successful in conveying to OHFA and the Master Servicer that alternative wording and less punitive repurchase terms would be appropriate due to 1) the unique nature of the loan terms and the borrowers’ qualifications 2) the limited revenue generated by the program at the time of origination 3) the high LTV’s of the product 4) the lack of industry alternatives to resell the loan in the marketplace and 5) by definition, the borrowers lack of homeownership experience.
Those particular areas of concern are located in the following contract documents and sections.
1) Mortgage Origination and Sale Agreement- Article V, section 5.02 (c), (g) and (h), page 6, 7 and 8.
OMBA was successful in the elimination of repurchase for first payment default, but the new provisions in 5.04 requiring the repayment of the SRP for the early payoff of a mortgage or the repayment of the SRP and an Administrative Fee in the case of an early payment default should be noted.
2) Program Origination Guidelines – First Time Homebuyer- Article IV, section 4.20 and Homebuyer Tax Credit Advantage- Article II.
Your OMBA leadership encourages each member that participates in any of the Ohio Housing Finance Agency programs to review these contracts as you would with any investor and to recognize the changes in your institution's contractual obligations from your previous participation in the program.
For questions, please contact the following OMBA officers via email:
| Jeff Steed- President OMBA | Jeff Brader-Vice President OMBA |
| J-Steed@Schmidt-Mortgage.com | Jeff@Concordmg.com |
Sincerely,
The OMBA Board of Trustees