FHA Good Neighbor Program: Cops, Teachers, And Firefighters

I know little about this program TODAY but expect to by December 1, 2008. This came in from one of my investors:

FHA Good Neighbor Next Door

The Good Neighbor Next Door Sales Program is designed to help revitalize specific neighborhoods by encouraging law enforcement officers, firefighters, EMT’s and teachers to purchase HUD-acquired single-family homes through discounts of up to 50% off the purchase price and requiring as little as a $100 downpayment.

Program Rules

The borrower must be employed as a law enforcement officer, teacher, firefighter or EMT at the time he/she submits a bid to purchase a home through the program and at the time of closing on the purchase of the home. He/she must also certify to his/her good faith intention to continue employment in the same capacity for at least one year following the closing date.

The borrower(s) must not have owned any residential property during the year prior to the date a bid is submitted on the home being acquired through the Good Neighbor Next Door Sales Program. The borrower(s) must also never have previously purchased a home under the Good Neighbor Next Door Sales Program (or under the Officer Next Door Program or similar programs).

The program participant must be the borrower and must qualify for the mortgage. It is not acceptable for a spouse or other parties to qualify for the mortgage in their name or names only.

The property must be owner-occupied as the borrower’s sole residence for a minimum of 36 months.

• HUD will require certification annually that the borrower is in compliance with the program’s occupancy requirements.

• The HUD property disposition contractor will contact the borrower on a yearly basis to verify occupancy.

• HUD will consider exceptions to the 36 month owner-occupancy term if it determines that a move is necessary to prevent hardship.

Eligible Properties

• Single-family detached homes

• Condominiums

• Planned Unit Developments (PUDs)

Note: Only single-unit properties acquired by HUD located in HUD-designated revitalization areas (except occupied properties), those located in Asset Control Areas, or those that HUD has determined will be sold through an alternative sales method, will be available to eligible participants under the Good Neighbor Next Door Sales Program.

Credit Requirements

• The credit and underwriting standards for officers, firefighters, EMTs and teachers are no different than those for other owner-occupant purchasers.

• Where there is a co-borrower, whether a spouse, another relative, or an unrelated person, and whether that co-borrower will be occupying or not, the same standards apply.

• If a non-owner occupant is added on any REO transaction they must be added using an “Addendum to ADD Purchaser” which would indicate “A purchaser that will not be living in the property(added for financial reasons only)”

Down Payment

• $100 down payment option is available for law enforcement officers, firefighters, EMTs or teachers, but only if utilizing FHA insured financing.

Purchase Price/Contract

• Participant(s) must submit bids through a participating real estate broker.

• Eligible participants in the Good Neighbor Next Door Sales Program are entitled to a discount against the sales price at settlement. The percentage discount to be applied will be listed on Line 8 of the sales contract.

Closing Costs

• Seller will not pay any closing costs, prepaids or selling broker commissions.

• Participant(s) are wholly responsible for paying their closing costs

• Participant(s) may finance closing costs into the loan, but only when using an FHA-insured mortgage under this program.

Calculating the Mortgage Amount

For the purposes of mortgage calculation, the sales price should be calculated according to the following formula:

Contract Sales Price (from Line 3 of REO Sales Contract) minus the discount (from Line 8 of REO Sales Contract) equals the Discounted Sales Price .

Note: The program allows for the cost of rehabilitation of the property to also be financed into the loan with an FHA-insured 203(k) mortgage under this program, however, Countrywide does not support the 203(k) program.

Subordinate Financing of second Lien by HUD

To participate in the Good Neighbor Next Door Sales Program, the borrower must agree to sign a second mortgage and Note in the name of HUD. This second mortgage will be for in the amount of the difference between the list price of the home and the discounted selling price. This lien will remain in effect for three calendar years from the occupancy start date. The lien will be forgiven on a pro rata basis over this three year period.

Resources

Refer to the following website for additional program information: http://www.hud.gov/offices/hsg/sfh/reo/goodn/main.cfm