Virginia Administrative Code › Title 13 - HOUSING › Agency 10 - VIRGINIA HOUSING DEVELOPMENT AUTHORITY › Chapter 40 - RULES AND REGULATIONS FOR SINGLE FAMILY MORTGAGE LOANS TO PERSONS AND FAMILIES OF LOW AND MODERATE INCOME › Part II - Program Requirements › Section 13VAC10-40-220 - Subordinate financing program

Current through Register Vol. 40, No. 24, July 15, 2024
A. The authority may make loans secured by
				  second deed of trust liens (second mortgage loans) to provide down payment and
				  closing cost assistance to eligible borrowers who are obtaining authority loans
				  secured by first deed of trust liens (first mortgage loans). Such first
				  mortgage loans must be financed by the authority; provided that the authority
				  may, in its discretion, permit such first deeds of trust to be financed by
				  other lenders, subject to such terms and conditions as the executive director
				  shall determine to be necessary to protect the financial integrity of the
				  subordinate financing program. Second mortgage loans shall not be available to
				  a borrower if the authority loan is being made under a buy-down
				  program.
B. The second mortgage
				  loans shall not be insured by mortgage insurance; accordingly, the requirements
				  of
				  13VAC10-40-120
				  regarding mortgage insurance shall not be applicable to the second mortgage
				  loan.
C. The requirements of
				  13VAC10-40-110
				  regarding calculation of maximum loan amount shall not be applicable to the
				  second mortgage loan. The principal amount of the second mortgage loan shall
				  not exceed the amount of the down payment plus closing costs, or such lesser
				  amount as may be set forth in specific program guidelines.
In no event shall the combined first mortgage loan and the
					 second mortgage loan and all other liens exceed (i) the amount allowed by the
					 guidelines of the applicable insurer, guarantor, or investor or (ii) the sum of
					 the lesser of the sales price or appraised value plus closing costs and fees to
					 be paid by a borrower.
Verified liquid funds may be required to be (i) contributed
					 by the borrower toward the down payment; (ii) contributed by the borrower
					 toward closing costs or prepaid items; or (iii) retained by the borrower as
					 cash reserves after closing. The first mortgage loan when combined with the
					 second mortgage loan and any other liens may not result in cash back to the
					 borrower.
D. If the
				  authority is not making the first mortgage loan, the authority may require
				  that, as a condition of financing the second mortgage loan, the first mortgage
				  loan meet the authority's requirements applicable to that first mortgage loan
				  program. With respect to underwriting, more stringent requirements or criteria
				  than those applicable to the first mortgage loan may be imposed on the second
				  mortgage loan if the executive director determines such more stringent
				  requirements or criteria are necessary to protect the financial integrity of
				  the subordinate financing program.
E. The second mortgage loan may be assumable
				  on the same terms and conditions as the first mortgage loan.
F. The authority may charge a higher interest
				  rate on a first mortgage loan that is accompanied by a subordinate financing
				  program second mortgage loan in order to protect the authority's interests and
				  the financial integrity of the subordinate financing program.
G. The same loan decision procedures
				  described in
				  13VAC10-40-170 will be
				  used for the subordinate financing.
Statutory Authority: §
												36-55.30:3
						of the Code of Virginia.