FAQ for DPP Plus Advantage

FAQ for DPP Advantage®

		Program Description
		DPP® Consumer Center
		DPP Advantage® Consumer Center
		Participating Institutions

Downpayment Plus Advantage® Consumer FAQ

1. What is the Downpayment Plus Advantage® Program?

2. Who is eligible to receive a Downpayment Plus Advantage grant?

3. What Illinois lending institutions are participating?

4. What is the maximum grant amount that may be awarded to eligible borrowers?

5. How does a borrower obtain a grant?

6. What are the eligible uses of grant funds?

7. How is household income determined?

8. What types of properties are eligible?

9. Are there limitations on the type of first mortgage?

10. How is household size determined?

11. What are the requirements for home buyer counseling?

12. Are there any other program restrictions?

13. Under what circumstances can counseling costs be paid by the Downpayment Plus Advantage grant?

14. Can a mortgage securing the promissory note/repayment agreement for a Downpayment Plus Advantage-funded grant be subordinated to a home equity loan at a later date?

15. What is the applicable retention period for the grant?

16. What happens to the junior mortgage if the borrower refinances the first mortgage?

17. Under what circumstances must the grant be repaid?

18. How is the grant amount to be repaid calculated?

Downpayment Plus Advantage Program
Questions & Answers

1. What is the Downpayment Plus Advantage Program?
The Downpayment Plus Advantage program is a down payment and closing cost assistance program for low and moderate income home buyers who are participating in homeownership programs offered by non-profit organizations that provide mortgage financing directly to the homebuyer, such as Habitat For Humanity affiliates. It is funded as a set-aside through the Affordable Housing Program (AHP) of the Federal Home Loan Bank of Chicago (FHLB).

The program provides up to $4,000 of downpayment and closing cost assistance for households with annual incomes of 80% or less than area median, adjusted for household size. The subsidy provided is in the form of a 5 year forgivable grant that is accessed through a FHLB of Chicago member participating financial institution that is enrolled in the Downpayment Plus® program. The funds are made available on a first come-first served basis. The assistance is provided at the time that the homebuyer closes on his/her loan.

2. Who is eligible to receive a Downpayment Plus Advantage grant?
The program is available to homebuyers with a combined annual household income at or below 80% of the median household income of the area where the property is located, adjusted for family size. To see if you may qualify, please use our "Do You Qualify" web tool.

The purchaser's mortgage financing must be provided by a non-profit organization that provides mortgage financing directly to the homebuyer.

Homebuyers must complete a pre-purchase homebuyer or homeowner counseling program that provides comprehensive financial literacy education, including information that alerts borrowers to potential predatory lending practices.

ITIN holders who have filed Federal Income Tax returns for at least the two preceding years, who are able to document consistent earnings, and who have met the borrower requirements listed above, are eligible to receive DPP Advantage assistance. Providing DPP Advantage assistance to ITIN holders is at each participating institution's discretion. ITIN holders whose income is used to qualify the household for the first mortgage financing must meet FHLB of Chicago ITIN requirements.

3. What Illinois lending institutions are participating?
For a list of Illinois institutions that are participating in the program, go to the List of Illinois Participating Financial Institutions.

4. What is the maximum grant amount that may be awarded to eligible borrowers?
The maximum grant is $4,000 per property. The borrower may not use the DPP Advantage® program with any other FHLB of Chicago affordable housing program subsidies.

5. How does a borrower obtain a grant?
The Borrower:

	Contacts an Illinois Participating Financial Institution approximately 90 days prior to closing;
	Provides an executed purchase contract for the property, evidence of income eligibility and evidence of homebuyer counseling;
	Completes pre-purchase homebuyer counseling.

The Member DPP® Participating Institution:

	Determines that the homebuyer is income-qualified for a grant;
	Makes a grant reservation with the Illinois League of Financial Institutions approximately 90 days before the loan closing;
	Ensures that the borrower successfully completes an approved homebuyer counseling program;
	Verifies that the Settlement Statement is properly completed;
	Disburses the grant funds at closing when the homebuyer closes on the first mortgage;
	Ensures the home is subject to a legally enforceable deed restriction meeting program requirements;
	Forwards required documentation to the Illinois League of Financial Institutions.

6. What are the eligible uses of grant funds?
Eligible Uses:

	Downpayment assistance
	Closing Costs
	Costs required by lender to be paid in advance; items must be detailed on the Settlement Statement
	Escrow Reserves deposited with the lender
	Rehabilitation costs directly associated with acquisition
	Homeownership counseling costs if they meet eligibility requirements (see Question 13)

7. How is household income determined?
Income eligibility is based on the household's total annual income for the current year. The income of each household member age 18 years and older is included in the household's total income. The income calculated must include all year to date earned income, plus potential income for the remainder of the year. The FHLB of Chicago no longer accepts household income as determined by its members' underwriting standards. Please contact the administrator for further details.

8. What types of properties are eligible?
Owner-occupied one- or two-unit properties are eligible for grants. The property must be the borrower/grant recipient's primary residence. If a property is not located in Illinois, it must be in the primary service area of the participating member. The property can be attached, detached or condominium.

Mobile homes and property sold on land contract are also eligible. A mortgage lender who offers mortgage financing for the purchase of a mobile home may include a Downpayment Plus Advantage grant provided the mobile home is located on property that is either owned by the household, or for which the household has a lease or rental agreement for a minimum of one year. Grant funds may also be used to assist borrowers who convert a land contract for deed to a regular mortgage loan.

9. Are there limitations on the type of first mortgage?
First mortgage financing must be provided by a non-profit community-based organization.

The first mortgage loan term must be a minimum of 5 years. On adjustable rate mortgages, the initial interest rate lock period must be a minimum of 5 years.

Home purchases financed with interest-only first mortgages are not eligible for DPP Advantage assistance.

The rate of interest, points, fees and any other charges for all loans made in conjunction with the DPP Advantage subsidy shall not exceed a reasonable market rate of interest, points, fees, and other charges for loans of similar maturity, terms and risk.

10. How is household size determined?
Household size is based upon the number of people who will reside in the home being purchased. Divorced or separated borrowers who have joint custody of their children should include the children in their household count, even though the children may only live in the household on a part-time basis. Borrowers who do not have custody should not include the children in their household count. Full-time students who are not considered dependents and are not living at home while attending school should be included in the borrower's household count.

11. What are the requirements for homebuyer counseling?
The lender is required to certify that the borrower has completed a homebuyer counseling program provided by, or based on one provided by, an organization recognized as experienced in homebuyer or homeowner counseling and as approved by the administrator of the program. Counseling must provide comprehensive financial literacy education, including information that alerts borrowers to potential predatory lending practices. The organization may be your bank or may be an outside party. If the participating institution (your bank) provides the counseling, a fee cannot be charged for the service. (Visit the HUD web site for a list of HUD approved counselors. )

12. Are there any other program restrictions?
The borrower may not use the DPP Advantage program with any other FHLBC Affordable Housing Program subsidies.

The homebuyer must not receive more than $250 cash back at closing. If the homebuyer receives more than this amount, the grant amount will be reduced by the excess.

The first mortgage loan term must be a minimum of 5 years. On adjustable rate mortgages, the initial interest rate lock period must be a minimum of 5 years.

Reimbursement for homebuyer counseling costs may not exceed $600 per household.

All reserved funds must be drawn by March 31, 2009.

13. Under what circumstances can counseling costs be paid by the Downpayment Plus Advantage Grant?
Counseling costs may be paid with the Downpayment Plus Advantage grant if:

	The costs are incurred in connection with counseling provided by an organization other than the participating institution to homebuyers who actually purchase a DPP-assisted unit; and
	The cost has not been covered by another funding source, including the participating institution; and
	The cost to be covered by the DPP Advantage grant does not exceed $600 per household; and
	The cost is identified on the Settlement Statement (HUD-1).

14. Can a mortgage securing the promissory note/repayment agreement for a Downpayment Plus Advantage-funded grant be subordinated to a home equity loan at a later date?
A mortgage used to secure the promissory note/repayment agreement for a downpayment plus-funded grant can be subordinated to a home equity loan.

15. What is the applicable retention period for the grant?
Grants are subject to a 60-month retention agreement to ensure that the property is retained as affordable housing. The retention period commences on the date the loan is closed. If the grant recipient owns and occupies the home as their primary residence for the full term, the grant is totally forgiven at the conclusion of the retention period.

16. What happens to the junior mortgage if the borrower refinances the first mortgage?
The DPP Participating Institution has a number of options and can choose one of the following:

	Agree to subordinate the junior mortgage that secures the DPP Advantage grant to the refinanced first mortgage. No grant amount would have to be repaid.
	Transfer the retention agreements to the new lender on the same terms and timetable. The new lender must be a member of the FHLB of Chicago and execute a DPP Program Agreement with the FHLB of Chicago to ensure repayment. No grant amount would have to be repaid.
	Collect the unforgiven portion of the grant when the new loan is closed if neither of the first two options is chosen.

17. Under what circumstances must the grant be repaid?
The borrower must repay a pro-rata portion of the grant to the DPP Participating Institution in any of the following circumstances:

	The borrower sells the property prior to the end of the retention period to a non income-eligible purchaser, and realizes a net gain on the sale. Repayment is waived if the borrower realizes no net gain on the sale.
	The mortgage is refinanced and the retention agreement no longer applies to the property.
	The borrower is no longer using the property as a primary residence.

The FHLB of Chicago must be given notice of any sale, refinancing, foreclosure or change in owner-occupied status occurring prior to the end of the retention period. In the case of a foreclosure, the obligation to repay any subsidy is terminated after foreclosure.

18. How is the grant amount to be repaid calculated?
The DPP grant is forgiven on a pro-rata basis over a 60 month period. Forgiveness of the grant is based on the number of full months the owner occupied the property as their primary residence. A month is calculated from the exact date of the loan closing to the corresponding date one month later. No forgiveness will be recognized for partial months.

In the case of a sale, a pro rata share of the DPP Advantage grant shall be repaid to the FHLBC from any net gain realized upon the sale of the unit.

In the case of a refinancing, a pro rata share of the grant shall be repaid to the FHLBC unless the unit continues to be subject to a legally enforceable retention agreement.

In the case of a foreclosure, the obligation to repay any subsidy is terminated after foreclosure; documentation of the actual foreclosure must be provided.

"Downpayment Plus", "DPP", "Downpayment Plus Advantage", "DPP Advantage" and "MPF" are registered trademarks of the Federal Home Loan Bank of Chicago.

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