Neighborhood Advantage FAQs
Do approved WHEDA lenders need to complete a separate application and Loan Origination Agreement to do the Wisconsin Neighborhood Advantage loans? 
Yes. State statutes require that WHEDA maintains a strict firewall between its mortgage revenue bond (MRB) lending and other lending programs. As a result, any lender participating in the Wisconsin Neighborhood Advantage must sign a separate agreement.
How is the Wisconsin Neighborhood Advantage Origination Agreement different from the Origination Agreement already in place with WHEDA?
There are no material differences between the agreements. Only the loan program name is different.
Are the representations and warranties the same under both agreements?
Yes. The language is the same; however, due to the nature of the Wisconsin Neighborhood Advantage, lenders are taking on the risk of loan repurchase if rehabilitation work is not completed in a timely fashion. This loan requires rehabilitation work to be completed within 90 days of closing. WHEDA has some flexibility with this requirement and will work with lenders to get the rehabilitation work completed in a time frame that is satisfactory to the homeowner.
What is the lender compensation with the Wisconsin Neighborhood Advantage?
Lenders can charge an origination fee of 1.5% or $900, whichever is greater. WHEDA will pay a servicing released premium (SRP) of 0.50%. The lender may charge miscellaneous fees, not to exceed $500, for document preparation, application, processing ,etc. The lender may also recover out-of-pocket costs incurred for the appraisal, credit report, rate lock, etc.
What is "NSP" and why is it important to the Wisconsin Neighborhood Advantage?
The Neighborhood Stabilization Program (NSP) was created as part of the federal Housing and Economic Recovery Act (HERA) signed into law on July 31, 2008. NSP is a $4 billion community program designed to address an increase in foreclosed and vacant single family properties. As the administrator of NSP funds, HUD identified the Wisconsin Department of Commerce as the direct grantee for the state. As a sub-grantee, WHEDA was awarded NSP funds for the creation of an acquisition-rehabilitation loan for foreclosed homes. In addition to funding mortgages, NSP funds under Wisconsin Neighborhood Advantage will also provide down payment and closing cost assistance to low income borrowers.
The Wisconsin Neighborhood Advantage is unique in that it leveraged a private investment to create a mortgage financing program. WHEDA’s unique creation of a loan loss reserve, paired with private dollars, represents an 8:1 leverage ratio – three times what other NSP programs have been able to leverage.
If WHEDA cannot access the bond market, how is it able to fund Wisconsin Neighborhood Advantage loans?
WHEDA is selling Neighborhood Advantage loans on a cash basis to investors. In order to make the forward sale possible, WHEDA is funding and holding each loan until such time that they can be sold to an investor under terms and conditions agreeable to the investor. WHEDA is not using bond proceeds to fund these loans.
Why must a buyer using a loan with NSP funds be required to pay less than full value for a property?
The NSP program requires that a foreclosed, vacant property be purchased at a discount of 1% of the “as is” appraised value. To meet this federal regulation, the Wisconsin Neighborhood Advantage loan requires the maximum purchase price to be 99% of the “as is” appraised value.
There is one exception to this rule. If a foreclosed home was acquired and rehabbed and is now offered for sale by a non- profit or municipality that used NSP funding for the acquisition or rehab work, this house can be purchased at the full purchase price.
Why are there two property values that the appraiser must provide?
The appraiser must provide an "as is" value and a "subject to completion" value. The "as is" value is used to determine the maximum initial purchase price of the property. The "subject to completion" value is used to determine the value of the property after completion of repairs.
What is the minimum amount of money the buyer has to contribute to the loan transaction?
A household using the Wisconsin Neighborhood Advantage must have $1,000 of their own money in the loan transaction. Earnest money can be applied to this amount if needed.
What are the fees a buyer must pay upfront?
The initial fees that the borrower must pay up front include:
- Earnest money
- Home inspection
- Lender application fee, which typically includes the cost of ordering preliminary information
The total amount of fees for the loan are disclosed on the Good Faith Estimate that the lender provides no later than 3 business days from the date of loan application.
The rate lock fee and preapproval fee may be prepaid by the lender and then is due at closing from the borrower.
Will this loan product work with an Individual Development (IDA) Account?
Yes. IDA customers are good candidates for the Wisconsin Neighborhood Advantage because they have already started to save money for home ownership.
Will there be down payment and closing cost assistance funds available?
- Yes. 3% of the purchase price of the property will be provided from NSP funds to help cover closing costs.
- Borrowers earning 50-120% of county median income (CMI), are eligible for down payment funds up to 20% of the purchase price with a maximum of $35,000.
- Borrowers earning less than 50% CMI, are eligible for down payment funds up to 50% of the purchase price with a maximum of $50,000.
- The Wisconsin Neighborhood Advantage also allows traditional assistance such as HOME, ADDI, CDBG, HCRI or AHP funds to cover down payment and closing costs.
- Gifts from relatives or an employer are also acceptable.
The Wisconsin Neighborhood Advantage requires eight hours of face-to-face home buyer education from a HUD-approved agency. How are the counseling agencies being paid for this requirement?
The counseling agency will be paid with NSP funds by a sub-grantee bringing NSP funds for down payment assistance or repairs to the transaction. That sub-grantee may be a non-profit or a municipality. Educational fees may vary by sub-grantee, with most averaging about $500. If WHEDA is the sub-grantee of down payment or closing cost assistance, WHEDA will pay $500 for the pre-purchase home buyer education directly to the counseling agency in all Wisconsin Neighborhood Advantage transactions. For all transactions, WHEDA will pay $400 for post-purchase education. These payments will be reflected on the HUD-1 Closing Statement.
When do I order the HQS Inspection?
First you must have a signed and accepted offer to purchase including the addendums (Exhibit 5 and 6).
Once the borrower has been preapproved the HQS Inspection should be performed. The HQS inspector should prepare a Scope of Work and an estimate for repair cost. The applicant should then secure bids for the repairs. When the lender receives the inspection, Scope of Work and cost estimates for the repairs, they should forward all documentation to the appraiser and to WHEDA for the Environmental Review.
If the transaction requires repairs, who will handle the repair escrow account and oversight?
If the funds for the repairs are coming from the loan proceeds, the lender or title company will handle the escrow and provide oversight to the project work. If the funds for repairs are from a non-profit or municipality using NSP, HOME or ADDI funds, the non-profit or municipality will provide the oversight and handle the escrow funds.
What are the program’s qualification ratios and how do they compare with FHA and Fannie Mae programs?
The program requires a single qualifying ratio of 45%. This ratio is more flexible than FHA and Fannie Mae programs, which typically require a maximum debt-to-income ratio of 41% in conjunction with a monthly housing expense-to-income ratio.
Why use Wisconsin Neighborhood Advantage over an in-house loan product?
There are several advantages to use this product:
- The loan is a 30-year-fixed rate, while many in-house loans for foreclosed properties are adjustable rate loans.
- Job loss mortgage payment protection is a value added benefit
- In this current credit market, very few portfolio products offer financing for acquisition-rehab transactions.
- NSP funds are forgivable. This means that as long as the borrower remains in the home, a portion of the funds are forgivable each year.
- Because of the minimum down payment requirement, private mortgage insurance guideline restrictions are not applicable
How will a borrower’s credit be affected if the bank pulls a credit report and then NCHS’s underwriters pull a report?
If the bank pulls an in-file credit report and then lets WHEDA pull the full report, there is no adverse impact on a borrower’s credit score. WHEDA will provide the lender with the full credit report with all preapprovals.
What are the critical deadlines to complete the loan transaction?
The following needs to be completed within 90 days of a WHEDA loan preapproval:
- The borrower has to identify a property and have an accepted offer to purchase
- The lender has to send the complete loan package to WHEDA
What are the critical deadlines to meet after the loan closes?
- All loan documents must be sent to WHEDA within 15 days of closing.
- The approved work order repairs must be completed within 90 days of closing.
What Fees do I need to disclose on the Good Faith Estimate?
Fees may vary depending on the property location and vendor selection. Below are estimated borrower fees that must be disclosed.
Lender Fee - the greater of 1.5% of the loan amount or $900
Job Loss Protection - $150
Appraisal - $375
Pre-purchase Education - $500
HQS Inspection Fee - $500
Settlement/Closing Fee - $300
Title Insurance - $200
Flood Determination - $16
Recording Fee - $50
Assignment of Mortgage/Rider - $13
Miscellaneous Fees not to exceed - $500