By Chris Waford, S.V.P Citizens Union Bank, Mortgage Division.

There are many misconceptions going around about how difficult it is to qualify for a mortgage loan in today’s environment.  Granted, qualifying for a mortgage loan in 2005 may have been somewhat easier than it is in 2013, but it cannot be further from the truth in believing that getting a mortgage loan today is “too hard” or “impossible”. 

Mortgage lenders are approving and closing mortgage loans at a record pace.  Low interest rates and consumer demand have propelled mortgage origination to an all time high in recent years, both locally and nationally.  Low to zero down payment loans still exist as they did prior to the 2007 mortgage meltdown.  Down payment assistance grants still thrive as they did in 2005.  Homeownership is more affordable now than any other time in my lifetime. And the means to achieve the homeownership dream is ten times easier then when I purchased my first home in 2001.

 So why are there so many misconceptions floating around about the difficulties in getting a mortgage loan today? 

 In my opinion, much of today’s false perceptions about qualifying for a home loan can be credited mostly to the “snap back” reaction by mortgage lenders in combating the mortgage crisis that struck our economy in 2007 and less to do with any new  qualification requirements implemented over recent years.  In fact, what I see is a swift return by lenders to the basics of underwriting that existed when I first entered the mortgage business in 1994.  These underwriting basics are commonly known as the “3 C’s of Lending”; Credit Reputation, Capacity, and Collateral Position.

 Today’s mortgage underwriting philosophy isn’t anything new but rather a revived effort by the mortgage industry to return to traditional underwriting guidelines that put equal weight on all three lending categories when evaluating risk associated in making a mortgage loan.  The most crucial thing the mortgage industry learned from the mortgage crisis is that all categories of the “3 C’s of Lending” are vital to limiting exposure from a mortgage loan going into default and no one criteria is more important than the other when it comes to evaluating risk in making home loans.  In the years leading up to the 2007 mortgage crisis, lenders moved away from valuing all three lending components equally, but rather valued one or part of the components as being more important than the others.  For example, in 2005 a borrower with a great credit score could practically borrow any amount of money regardless if the borrower lacked the necessary income documentation to support their ability to repay the loan.  Making mortgage loans strictly on a borrower’s credit reputation while ignoring the borrower’s capacity to repay the debt was reckless lending behavior which fueled part of what led to the mortgage crisis.

 Borrowers seeking mortgage financing in today’s lending environment can be well served in having some generalized knowledge about the “3 C’s of Lending” lenders evaluate when reviewing a borrower’s loan application for mortgage financing.  There are numerous factors and various degrees of calculations lenders compile and review during the loan process but in the end their main purpose is to determine if a loan request contains an acceptable risk in all three lending components of the “3 C’s of Lending”.

 Credit Reputation demonstrates to the lender the borrower’s willingness to repay their mortgage loan by carefully reviewing the borrower’s previous credit history found on the borrower’s credit report.  Often the credit reputation is scored by using a numerical scoring module known as the credit score.  A borrower’s credit score gives the lender an idea of the likelihood a borrower will default on their mortgage loan by reviewing their current and past credit performance.  Statistically, the higher the credit score the less likelihood a borrower will default on their mortgage.  Most lenders require borrowers to have a minimum credit score before loan approval will be granted.  Typically the minimum credit score a lender will consider is 620.

Capacity calculations are used by lenders to determine the borrower’s means and ability to repay their mortgage obligation in conjunction with their current financial responsibilities.  Lenders gather and review income documentation in order to determine if the borrower can afford the payments on the mortgage loan they are applying for.  Lenders calculate the percentage of the borrower’s income that will be used to repay the monthly mortgage payment with their current financial obligations, such as car payments and credit card payments.  The higher the percentage of income being used monthly to repay the mortgage payment with other financial obligations results in more risk that the borrower will default. 

 Collateral position is crucial in protecting a lender’s exposure to financial loss in the event a mortgage loan should go into default.  A lender carefully reviews the condition of the property, the value of the home, and the amount of cushion a lender may have in the form of an “equity” position.  The borrower’s property is typically the lenders last defense in repayment of the mortgage loan if a borrower should default, so it isn’t unusual for lenders to deny loans strictly due to weak collateral positions or inability for home appraisal to adequately support the home’s value.   Not all mortgage loans require borrowers to have down payments but those loans typically require mortgage insurance to offset the lender’s lack of equity position.

 Understanding the “3 C’s of Lending” and the role they play in receiving approval for a mortgage loan can greatly ease misconceptions about the difficulties in getting a mortgage loan in today’s environment.  I will admit that while the mortgage process is somewhat more intensive than it was in years past, the approval requirements are still more flexible than what they were when I first got into the mortgage business in 1994.  Lenders today are asking more questions and requesting more documentation from the borrowers than they did a few years back, but as far as it being “impossible to qualify for a mortgage loan today”?  That’s simply a myth and could not be further from the truth. 

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April is National Autism Awareness Month. Autism affects one in every 110 children in America. That’s 13 million families and growing, which is why CUB wants to help raise funds to benefit Autism Speaks, a national organization dedicated to researching Autism and Autism Spectrum Disorders and providing education and assistance to individuals and families impacted by Autism.

The whole month of April we will be raising money by selling support cards that will be displayed at all Citizens Union Bank locations. 

In April CUB employees dress up in blue jeans and blue shirts to heighten awareness. 
For more information about Autism and Light it up Blue go to: www.lightitupblue.org

For additional information about Autism go to:   www.autismspeaks.org

Thank you for your support!

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While our commitment to community is unmistakable, CUB goes one step further in supporting the towns and cities we serve. During the past year the bank made donations of more than $200,000 to nonprofit organizations. Our directors and employees also volunteered a total of more than 10,000 hours of their time to their respective communities. These volunteers sit on the community development boards of 65 nonprofit organizations. Charitable giving is an integral part of who we are.

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November 5, 2012

COMING SOON TO TAYLORSVILLE, KY!  -   LOVE MY NEIGHBOR, INC.

In a joint effort to greater serve the people of Spencer County, a group of local Churches and Citizens Union Bank (CUB) are joining together on a mission to launch a new community clothing and household goods store rightfully named, Love My Neighbor.

Love my Neighbor Inc. (LMN) is a non-profit organization which has been created and developed by four local partnering churches: First Assembly of God Taylorsville, Spencer Christian Church, First Baptist Church Taylorsville, and Redemption Hill Baptist Church.  The group remains hopeful, however, that other local churches will feel called to join the effort.  “From the very beginning, the commandment to love our neighbor has served as our common ground.  Our hope is that other churches in the community with that same desire, will feel welcome to join us on this mission,” Jason Cox, deacon from Redemption Hill Baptist Church stated.

LMN will offer clothing, household goods, and appliances at thrift store prices.  Offering the community quality used items at an affordable price will hopefully help local individuals and families who are hurting during tough economic times.  “What excites me most about Love my Neighbor is that it will bring our community together.  When we work together, there is no limit to what can be accomplished,” Doug Martin, pastor of Spencer Christian Church added.

For most stores, that is where the help typically ends.  Love My Neighbor, however, goes above and beyond the norm by offering extended help to local families who share a direct need with the store.  In the spirit of their namesake, LMN will simply give those needed items to an individual or families at no cost.  By doing so, people can independently shop but also know that there is a place within our community that they can turn to for help.  LMN will also be able to provide direct connections to customers who are interested in other programs and trainings which will be offered through the partnering churches.  Programs such as financial counseling, classes for cooking on a budget, and minor home repairs, just to name a few.

Community involvement from the beginning has been part of LMN’s plan and their representatives have been extremely thankful for CUB’s involvement, which has included the sponsorship of their local building.  CUB representative Sammy Crafton shared, “Citizens Union Bank is very excited to be able to help Love My Neighbor Inc. as it serves the needs of this community.  The hopes, needs, and dreams of many will be realized because of this organization.  Love My Neighbor Inc. and CUB will make a difference in this community.”

Love My Neighbor will be accepting donations from the local community, and they are excited that everyone in Taylorsville has a way to directly be involved.  As Pastor Chad Goodlett from Taylorsville First Assembly pointed out, “There are people in this county who have items stored in their homes that they no longer wish to use but do not want to throw them away or take them to Goodwill because they are in great shape.  Most of them wish they knew of someone that could really use it, and we will be able to serve as a community vehicle to help those people.”  Love My Neighbor hopes to be a place where everyone in the area can come and experience love, support, and a sense of community.

As Michael Waits, Director of Missions at First Baptist Church Taylorsville mentioned, “Spencer County is not exempt from having people that sometimes need a helping hand.  I believe that the community will come together to support this great endeavor and hope to see community churches building bridges with one another while working side-by-side to achieve the same goal and purpose.”

If you would like more information about Love My Neighbor, or would like to become directly involved with their organization, feel free to email lovemyneighborinc@gmail.com, or call one of the partnering churches above for more details.

Love My Neighbor Inc is also located on Facebook!

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NerdWallet’s Picks for Money Market Accounts at Community Banks

by NERDWALLET on JANUARY 22, 2013

The post NerdWallet’s Top Picks for Money Market Accounts at Community Banks appeared first on CUB: A Kentucky Community Bank.

The Shelby County Chamber of Commerce is pleased to announce its new officers for 2012‐2013.

The officers were elected by Chamber’s newly inducted Board of Directors at their November meeting.

• Candi Waford of Shelby Energy was elected to take the lead role as President of the Shelby County Chamber.

• Brian Webb of Citizens Union Bank was selected to assume the duties of President Elect.

• Shawn Adelsberger of Martinrea Heavy Stamping will continue to serve as Vice President.

• Hart Megibben of Megibben, Robinson & Chandler also joins the executive committee as Vice President.

• Gary Walls of Kentucky Perinatal Association continues to serve as part of the executive committee as Past President.

“We are fortunate to have such a strong board with leaders who are willing to step forward and direct the Chamber for the coming years,” said Shelley Goodwin, Executive Director. “The strength of the Chamber is reflected in the strength of our volunteer leaders. I am excited for the opportunities and improvements our members will see in the coming year.”

The Shelby County Chamber of Commerce has worked diligently to enhance business in the community for eighty‐six years. The Chamber provides a forum for networking, information, and opportunity, while developing a credible and cooperative membership, and serving as an advocate for business and community needs.

Contact: Shelley Goodwin

Telephone: 502.633.1636

Shelley@ShelbyCountyKyChamber.com

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USA Cares is a national 501(c)3 non-profit, charitable organization based in Kentucky, founded in 2003 and registered with the IRS.

Visit www.usacares.org for more information.

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CRA ranks all banks on their performance in meeting the needs of their community in three categories: Lending, Investments, and Services. CUB is one of a very few banks in the country to receive such a high rating.

The post “Outstanding” Community Reinvestment Act Rating appeared first on CUB: A Kentucky Community Bank.

We currently provide construction and bridge loan financing for these type projects.  The Affordable Housing Department provides financing for multifamily developments primarily in Kentucky and contiguous states.

A few of the developments we have financed recently include:

Parkside Apartments, Lexington, KY

Downtown Scholar House, Louisville, KY

Coventry Commons Apartments, Louisville, KY

Brook Street Apartments, Louisville, KY

St. Denis Senior Apartments, Louisville, KY

Hopewell Apartments, Paris, KY

Eminence Village Apartments, Eminence, KY

Beecher House Apartments, Somerset, KY

AFFORDABLE HOUSING GUIDE TO APPROVAL

In order for CUB to best serve our customers needs in a timely and decisive manner we need the following information during the various stages of the application process.

At the letter of intent stage, the following should be submitted to CUB:

• Letter of intent from equity
• Sources and Uses
• 15 year proforma
• Market Study
• Building costs and/or construction budget
• Resume(s) of development team

Once the project receives approval of tax credits and are ready to proceed with a formal loan request, the following will be required:

• Building plan or rendering
• Site plan
• Pictures of site
• Borrowing entity structure
• Copy of tax credit application and award letter
• Equity commitment letter with pay in schedule
• Two years financial statements and tax returns on all related entities
• Two years personal financial statement and tax returns of guarantors
• References of developer
• Updated Sources/Uses and proforma
• Appraisal

Once the project receives a loan approval from CUB’s loan committee, we will begin a commitment letter.  In order to release the commitment letter, the project’s financial structure must be finalized.  The commitment letter must be returned and signed by all applicable parties.

Once the commitment letter has been signed, a draft closing checklist will be provided to allow all parties to move toward a closing.

Asset Management

Asset management activities strive to maximize the value and return of Affordable Housing assets for all stakeholders. If CUB holds the permanent loan or is the tax credit investor, Asset Management will monitor the project during its initial fifteen year compliance period, life of the loan, or term of the investment. Once the project has been placed in service and stabilized, the project will be expected to maintain a minimum set of standards. They are as follows:

• Project must remain in full compliance of IRC §42, local, state, and federal regulations.
• Debt coverage ratio more than 1.10.
• Occupancy rate more than the break even rate.
• Taxes and insurance must remain current.
• Reporting requirements must be maintained according to loan and/or partnership covenants.
• Project must pass regularly scheduled site visits with minimal deferred maintenance.
• All commitments satisfied for replacement reserves or other restricted accounts.

Over the life of the project, capital improvements will need to be performed. If CUB is the managing agent for the replacement reserves, a minimum set of criteria will need to be observed in order to release funds. First, replacement reserve payments must stay current. The balance in the replacement reserve should not fall below six months of replacement reserve payments. In conjunction with the above principals, only certain capital improvements are allowed and the request must be submitted on the appropriate form with supporting documentation.  Please see the following links.

RR Guidelines(PDF)

RR Request Form(Excel File)

ABOUT THE LIHTC PROGRAM

The Low Income Housing Tax Credit (LIHTC or Tax Credit) program was created by the Tax Reform Act of 1986 as an alternate method of funding housing for low and moderate income households and has been in operation since 1987.  Each state receives tax credits based on the state’s population.  These tax credits are then used to leverage private capital into new construction or acquisition and rehabilitation of affordable housing.

The tax credits are determined by the development costs and are used by the owner.  However, often, because of IRS regulations and program restrictions, the owner of the property will not be able to use all of the tax credits, therefore many LIHTC properties are owned by limited partnership groups that are put together by syndicators.  In this manner, a variety of companies and private investors participate within the LIHTC program, investing in housing development and receiving credit against their federal tax liability in return.

Most states determine the amount of tax credit an individual project receives based on it qualified basis.  First, total project cost is calculated.  Second, eligible basis is determined by subtracting non-depreciable costs, such as land, permanent financing costs, rent reserves and marketing costs, etc.  If the development is located in a HUD designated high cost area (HCA), the eligible basis receives a 130% HCA adjustment.  These areas include both Qualified Census Tracts (QCT) and Difficult Development Areas (DDA).  Finally, to determine the qualified basis, the eligible basis is multiplied by the applicable fraction, which is the smaller of (1) the percentage of low income units to total units or (2) the percentage of square footage of the low income units to the square footage of the total units, to arrive at the qualified basis.

The qualified basis is multiplied by the federal tax credit rate, published monthly by the IRS, to determine the maximum allowable tax credit allocation.  For projects that are new construction or rehabilitation, which are not financed with a federal subsidy, the rate is approximately 9%.  For projects involving a federal subsidy (including projects financed more than 50% with tax exempt bonds) the rate is approximately 4%.  The 9% and 4% rates are used to determine a project’s initial tax credit reservation.  A project’s final (placed in service) tax credit allocation is based on actual project sources and uses of funds, the financing shortfall and the actual applicable federal rate.  The rate applicable to a project is the rate published for the month each building is placed in service or in an earlier month elected by the sponsor.  The allocation cannot exceed the initial reservation amount and may be reduced if an analysis determines that the maximum allowable amount would generate excess equity proceeds to the project.

CONTACT INFO

Tammy Thomas

First VP/Director of Affordable Housing

Direct Line:  502-647-7412

Fax:  502-647-7478

E-mail:  tht@cubbank.com

Brent Reece

AVP/Asset Manager

Phone:  502-647-7429

Fax:  502-647-7478

E-mail:  bar@cubbank.com

The post Affordable Housing Program appeared first on CUB: A Kentucky Community Bank.

The Main Street program works to build local businesses, support public-private partnerships and enhance economic development while preserving unique local architecture and existing community infrastructure. The program can document more than $3.5 billion reinvested in Kentucky since 1979. In 2010 alone, participating communities reported more than $465 million invested in downtowns, representing 720 net jobs in Main Street districts, 367 new businesses created, and 391 downtown buildings rehabilitated.

Read The Heritage Council’s Press Release

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