Leveraged Loan Program

1
Leveraged Loan Program
In Partnership with Guam Housing Corporation
Chamorro Land Trust Commission
2
General Overview

• Definition
• Advantages
• Purpose
• Eligibility Requirements
• Income Limits
• Loan Features
• Dollar for Dollar versus Leveraging
• Prequalify Example without Leverage
• Prequalify Example With Leverage

• Dollar for Dollar Financing
• Leveraging Power
• Borrowers Benefits
• Exceptions
• Target Market
• Guam Housing Benefits
• Guam Housings Implementation Plan
• Conclusion

3
Definition

• A joint financing concept between USDA Rural
  Development and a participating lender.
  
• The combined resources enable the borrower to
  purchase a home.
  
• Separate financial agreements are made by each
  lender, each lender remains responsible for
  underwriting its loan
  

4
Advantages

• Loans that can be leverage receive a processing
  priority
  
• For some applicants combining the agency loan
  with a loan from other lender may be the only way
  to make homeownership possible

5
Purposes

• Purchase existing homes
• Purchase existing homes with repair
• New Construction
• Finance closing fees, with the exception of
  homeowners insurance

6
Eligibility Requirements

• Does not own a home or who has inadequate
  housing
  
• Will be owner-occupant
• Has acceptable credit history
• Meets qualifying housing debt ratio
• no more than 29 for very low-income applicants
• no more than 33 for low-income applicants
• Meets qualifying total debt ratio
• no more than 41 of income may be spent on
  housing plus all other debts
  
• Is a U.S. Citizens or a permanent resident alien
• Is unable to obtain conventional or guaranteed
  financing
  

7
Income limits

• Low Income
• 1 Person 35,300
• 2 Person 40,300
• 3 Person 45,350
• 4 Person 50,400
• 5 Person 54,450
• 6 Person 58,450
• 7 Person 62,500
• 8 Person 66,550
• Income limits as of March, 3,
  2005
  
• Subject to change

8
Loan Features

• Maximum loan amount 180,500. Amount may also be
  limited to applicants repayment ability and the
  appraisal value of the property
  
• Agency loan term is typically 33 years
• Private or Public lenders term up to 30 years
• Fixed rate for both loans
• No required down payment. Applicants with
  savings over 7,500 may be required to use funds
  to reduce the loan amount
  
• No restriction on housing design. In-ground
  swimming pool cannot be financed
  
• Properties which can be subdivided into two or
  more adequate sites cannot be financed

9
Dollar for Dollar versus Leveraging

• Assuming 100,000 Loan ( Dollar for Dollar)
• 100,000 _at_ 6.0 for 30 Years 605.00 Principal
  and Interest
  
• Assuming 100,000 loan ( With Leveraging _at_
  20/80)
  
• 20,000 _at_ 6.0 for 30 Years 121.00 Principal
  and Interest
  
• 80,000 _at_ 1 for 33 Years 238.18 Principal and
  Interest
  
• Total 359.18 PI
• Monthly Savings 245.82 or 41
• 20,000 _at_ 6.0 for 30 Years 121.00 Principal
  and Interest
  
• 80,000 _at_ 2 for 33 Years 277.91 Principal and
  Interest
  
• Total 398.91 PI
• Monthly Savings 206.09 or 34

10
Dollar for Dollar versus Leveraging (contd)

• Assuming 100,000 Loan ( Dollar for Dollar)
• 100,000 _at_ 6.0 for 30 Years 605.00 Principal
  and Interest
  
• Assuming 100,000 loan ( With Leveraging _at_
  20/80)
  
• 20,000 _at_ 6.0 for 30 Years 121.00 Principal
  and Interest
  
• 80,000 _at_ 3 for 33 Years 321.04 Principal and
  Interest
  
• Total 442.04 PI
• Monthly Savings 162.96 or 27
• 20,000 _at_ 6.0 for 30 Years 121.00 Principal
  and Interest
  
• 80,000 _at_ 4 for 33 Years 367.35 Principal and
  Interest
  
• Total 488.35 PI
• Monthly Savings 116.65 or 19

11
Prequalify Example No Leverage
12
Prequalify Example With Leverage
13
Dollar for Dollar Financing

• Guam Housing Funds available to lend
  (5,000,000)
  
• Assuming the Average loan is 100,000 than the
  funds available will yield the following
  
• 5,000,000/ 100,000 50 units

14
Leveraging Power

• Guam Housing Funds Available to lend
  (5,000,000)
  
• 3,500,000/ 20 Leverage 17,500,000
  Available
  
• Assuming the Average loan is 100,000 than the
  funds available will yield the following
  
• 17,500,000/ 100,000 175 units
• Note 1.5 MM will be for Dededo

15
Borrowers Benefits

• In the event of a natural disaster or other
  property damage to the home in cases where
  adequate hazard insurance was not available, the
  borrower may be eligible for deferred loan
  payments up to 24 months
• In the event the borrower working hours are
  reduced, than the borrower may be qualified for
  an adjusted payment on its loan
  
• If a borrower was laid of due to economic reasons
  similar to the 9-11 tragedy than borrower can
  request for a deferment of payment up to 2 years
  
• This only applies towards section RHS 502
  loans only
  

16
Exceptions

• Leverage Financing program not applicable to
  Dededo due to population density as of 2000
  Census
  

17
Target Markets

• All properties in Guam except Dededo proper
• Land for the landless properties
• Chamorro Land Trust Properties
• Set aside escrow Guaranty account
• Utilize enabling statute that Guarantees loans
  for Chamorro land trust recipients

18
Guam Housing Benefits

• Assist in carrying out organizational mission
• Stimulate neighborhood revitalization
• Increase supply of safe, affordable housing
• Leverage financing avails 100 financing for
  Borrowers

19
Guam Housing CorporationImplementation Plan

• Board Resolution Approving the following
• RHLP
• Escrow Guaranty Account
• Rural Home Loan Partnership Agreement
• Homeownership Partnership Initiative
• Potential Project list for Fiscal Year 05
• Submit spreadsheet to forecastyour activity for
  each subsequent fiscal years
  

20
Conclusion

• Guam Housing Corporation achieves their
  organizational mission, expand their capacity.
  
• RHS stretches limited funds, secures help in
  marketing and administering the program
  
• Most importantly, applicants qualify for home
  financing, avoid private mortgage insurance,
  build a credit history, and receive homeownership
  education and counseling services