1. (a) CalHome Recipients shall develop and employ Mortgage Assistance Program Underwriting Guidelines that have been submitted to and approved by the Department as addressing the following underwriting topics:

   1. (1) establish front and back-end ratios used to qualify the borrower;
   2. (2) what criteria will be used to determine the credit worthiness of the borrower;

   3. (3) requirements for the first mortgage:

      1. (A) Borrower shall obtain the maximum first lien mortgage loan with a term and interest rate from a mortgage lender consistent with affordable housing costs as defined in each program's guidelines.
      2. (B) Mortgage loans shall not include provisions for negative amortization, principal increases, balloon payments or deferred interest

   4. (4) financing subordinate to the CalHome Program loan:

      1. (A) fees and/or charges for subordinate financing shall be reasonable loan origination fees for first mortgage financing as determined by the Department to be consistent with industry standards;
      2. (B) there must not be a balloon payment due before the maturity date of the CalHome Program loan;
      3. (C) all subordinate financing provided shall defer principal and interest payments for the term of the CalHome Program loan;

2. (b) Prior to close of escrow, the Recipient shall ensure that an appraisal has been obtained which meets the following requirements:

   1. (1) the appraisal shall be prepared by a State-licensed, residential property appraiser;
   2. (2) the appraisal shall use the sales of comparable properties approach to determine value; and
   3. (3) maximum appraised home values at time of purchase or upon completion of acquisition/rehabilitation work shall not exceed the appraised value limit established by the Department and published in the NOFA.
3. (c) Cash out of escrow to borrowers are limited to the amount deposited into escrow by the borrowers and not needed for any lender-required minimum down-payment.
4. (d) Recipients must obtain title insurance in the amount of the Cal-Home Program loan at close of escrow.

5. (e) Fire insurance (and flood insurance where applicable) requirements are as follows:

   1. (1) Recipient must require borrowers to maintain insurance on the property in an amount at least equal to the replacement value of the improvements; and
   2. (2) Recipient must be named as additional loss payee on the policy.

Note: Authority cited: Sections 50406(n) and 50650.2, Health and Safety Code. Reference: Sections 50650.3(b) and 50650.7, Health and Safety Code.

History

1. New section filed 9-29-2003; operative 9-29-2003 pursuant to Government Code section 11343.4 (Register 2003, No. 40).