Code of Maine Rules › 94 - INDEPENDENT AGENCIES › 178 - ADAPTIVE EQUIPMENT LOAN PROGRAM FUND BOARD › Chapter 503 - KIM WALLACE ADAPTIVE EQUIPMENT LOAN PROGRAM UNDERWRITING GUIDELINES › Section 178-503-II - Underwriting Guidelines for the AELP II Program

Current through 2024-29, July 17, 2024
Section
				1.
STATEMENT OF PURPOSE
The founding intent and essential purpose of the Kim Wallace
				  Adaptive Equipment Loan Program ("AELP") is to provide financing for people
				  with a disability within the State of Maine for the purchase of adaptive
				  equipment or assistive technology that will help them live more independently.
				  Per program rule, a segment of the loan portfolio can be loaned out for the
				  purpose of assisting Mainers with disabilities to purchase used vehicles
				  without adaptations necessary to obtain or retain employment or employment
				  training, subject to limitations. The Board or any entity with which the board
				  is contracted to provide financial support services may award loans based on
				  the following program guidelines.
Section 2.
PROCEDURES and
				STANDARDS
Loan applications shall be processed, and program eligibility
				  will be determined according to the procedures and standards set forth in the
				  Kim Wallace Adaptive Equipment Loan Program Rule, 94-178 Chapter 501, ("the
				  Program Rule"). Where applicable, the definitions of terms contained in Section
				  1 of the Program Rule apply to the
				  terms as they are used in these underwriting guidelines. To the extent
				  consistent with the Act and Program Rule, the following underwriting guidelines
				  shall supplement the Program Rule.
Section 3.
LOAN INTEREST RATES
The interest rate for AELP II is 3.75% and is available to
				  all applicants who qualify for a loan pursuant to the Act, the Program Rule,
				  and these underwriting guidelines.
Section 4.
UNDERWRITING
				GUIDELINES
A.
Loan
				Periods
. The term of each loan shall be based on the applicant's
				circumstances and the useful life of the collateral: 
				
											Used vehicles without adaptations- up to 6
					 years
B.
Collateral.
Collateral will be required for all loans, AELP II
				will take a security interest in the vehicle being purchased. The value of the
				vehicle to be purchased will be determined using the official National
				Automobile Dealers Association (NADA) used car guide. If the purchase price of
				the vehicle does not meet the NADA value, then the loan will be denied. Under
				the AELP LL program, borrowers must use the purchased vehicle for the purpose
				of obtaining and retaining employment or employment training, subject to
				Section 7 of the program
				rule. Any misuse of the collateral will result in default.
C.
Loan Restrictions.
AELP II
				provides loans for the
purchase
of vehicle for consumers with
				disability who demonstrate a need for vehicle subject to the program rule.
				Under the AELP-II program, a co-applicant is not allowed. A vehicle purchased
				through AELP II may be no more than 10 years old at the time of
				purchase.
D.
Loan
				Limit
. The amount of a loan under AELP II shall not exceed the amount
				necessary to purchase the vehicle minus $800. The amount necessary to purchase
				the vehicle may include sales tax and, in the case of a purchase from or
				through a car dealer, the dealer's associated fees.
E.
Credit Worthiness and Capacity to
				Repay the Requested Loan
. The criteria discussed below seek to produce a
				reasonable expectation that the applicant will repay the loan in full. The
				three most important criteria for an AELP II loan are credit history,
				debt-to-income ratio, and capacity to repay.
When the applicant has a history of credit problems, the
				  applicant must be able to demonstrate that he or she has a workable plan to
				  deal with those problems. A pattern of adverse credit actions that cannot be
				  adequately explained and has not been adequately dealt with will result in a
				  decision not to approve a loan. Similarly, an applicant who does not have
				  adequate cash available to pay for a new loan after taking care of other
				  financial obligations will not be approved for a loan. If the applicant has
				  experienced a bankruptcy, he or she must be cleared from discharge for a
				  minimum of one year. The following criteria will be examined in underwriting
				  the loan application:
1.
Proof of Income
.
An applicant
				will be required to provide proof of his/her current income. Acceptable
				documentation includes, but is not limited to, copies of IRS income tax return,
				up to 3 pay stubs, W-2 form, child support, survivor benefits, an SSDI or SSI
				Award Letter.
2.
Timely Payment of Residence Expense
. If the
				applicant owns or rents his or her residence, he or she must demonstrate the
				payments to mortgage lender or landlord have been made in a timely fashion for
				the previous 12 months.
3.
Credit History.
Experian credit reports, as well
				as AELP and AELP II's previous lending experience with the applicant, if any,
				are the primary sources for determining the applicant's repayment habits.
				Provided the additional criteria below are met, AELP II will accept an Experian
				Credit reporting score of 0 (No Score) or 610 and higher. If the applicant has
				experienced any of the credit problems describe below within 12-month period
				preceding the application, the applicant must demonstrate resolution of the
				credit problem, or the loan application will be denied.
4.
Credit Problems Within the
				Past Twelve Months
a.
Delinquency with a creditor
. If the applicant has been delinquent
				with a creditor within the past 12 months, the applicant must adequately
				explain the reason for delinquency and provide satisfactory evidence that the
				delinquency has been cured. If any of the following items are on credit card
				report and designated as "not paid," evidence of full payment or a payment
				arrangement in place will be required: tax liens, civil judgments, levies, or
				child support obligations (both payments and receipts). If any of these items
				are on the credit report, but designated as paid, the applicant need not
				provide additional evidence of payment. If the applicant indicates the child
				support payments are being paid, and there is nothing on the credit report or
				other available data to suggest otherwise, then the applicant need not provide
				additional evidence.
b.
Collection Accounts
. Collection Accounts that are non- medical in
				nature are not permissible through the AELP II program unless the borrower can
				provide evidence that the account has been successfully disputed or
				cleared.
c.
Medical
				Collections
. Medical collections if related to the applicant's
				disability are excluded from the credit evaluation, but in all events the
				applicant must still demonstrate a positive discretionary income as described
				above including the outstanding medical collections.
d.
Education Loans
. Applicant
				must provide evidence of payment arrangements or deferment, including when re-
				payment will begin; education loans are generally not forgiven or discharged in
				bankruptcy.
e.
Mortgages
. If mortgage loans are being modified or refinanced,
				evidence from the lender must be provided. Mortgage foreclosures within 7 years
				of the application date are subject to review.
f.
Ability to Repay
. After
				careful examination of these credit issues, the AELP II program must be
				satisfied that the applicant has the capacity and credit worthiness to repay
				the requested loan in full. An applicant who lacks acceptable credit may
				reapply for a loan later should his/her financial circumstance
				change.
5.
Debt-to Income Ratio
.
AELP II requires documented
				proof of all income and debts. Up to a year of the most recent bank statements
				may be required to show all recurring debts. In the first instance, AELP II
				looks for a debt-to income ratio of less than 50%. "
Debt-to-income
				ratio"
as used here means the relationship of an applicant's fixed
				monthly debt to his/her monthly income. AELP II will accept a 50% or higher
				debt-to- income-ratio if, but only if, the applicant can adequately document
				sufficient cash flow to make loan payments after meeting all other outstanding
				obligations and expenses. That is, the applicant must document positive
				discretionary income after requested loan payment. The applicant's monthly AELP
				II loan payment will be included in the debt-to -income ratio
				calculation
6.
Discretionary Income.
"Positive Discretionary
				Income" means that the applicant has documented reliable income more than the
				applicant's monthly expenses, including all necessary and reasonable living
				expenses, all debts and expense obligation incurred, and the monthly payment
				obligations for the requested loan and/or device to be purchased. Applicants
				with a debt-to-income ratio of greater than or equal to 50% must demonstrate
				positive discretionary income at least 50% of the applicant's proposed loan
				payment. In calculating discretionary income, the following will be included in
				evaluation of income and expenses. Expenses include but are not limited to,
				groceries, medical bills, utilities (heat, sewer, water, phone, etc.),
				rent/mortgage, real estate taxes, auto/transportation costs, clothing,
				insurance, education, credit card payments, child support or alimony, and other
				miscellaneous debts or expenses. AELP II may require documentary proof for any
				or all these expenses. Income includes but is not limited to, all wages,
				salary, commissions, interests, pensions, and other sources of financial
				support such as employment - related disability benefits, Supplemental Security
				Income (SSI), Social Security Disability Income (SSDI) and Social Security
				retirement benefits.
7.
Credit Reports
.
Credit checks will be conducted
				on all applicants by using a recognized credit reporting agency.