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h. Section 247 Single Family Mortgage Insurance on Hawaiian Home Lands
(11/07/2023)
i. Definition
FHA insures Mortgages made to Native Hawaiians to purchase or refinance one- to four- family dwellings located on Hawaiian Home Lands, which are owned by the State of Hawaii, Department of Hawaiian Home Lands (DHHL) and leased to Native Hawaiians for 99 year lease terms.
ii. Eligibility Requirements
(A) Borrower Eligibility
(1) Native Hawaiian
A Borrower must be a native Hawaiian who is at least 18 years of age and certified as eligible to hold a Hawaiian Home Lands Lease, or possesses a lease of Hawaiian Home Lands issued under Section 207(a) of the Hawaiian Homes Commission Act, 1920, that has been certified by DHHL as being a valid current lease, and not in default.
Native Hawaiian means a descendant of not less than 50 percent part of the blood of the races inhabiting the Hawaiian Islands before January 1, 1778 (or, in the case of an individual who succeeds a spouse or parent in an interest in a lease of Hawaiian Home Lands, such lower percentage as may be established for such succession under Section 209 of the Hawaiian Homes Commission Act, 1920, or under the corresponding provision of the constitution of the State of Hawaii adopted under Section 4 of the Act entitled, “An Act to provide for the admission of the State of Hawaii into the Union,” approved March 18, 1959). 12 U.S.C. § 1715z-12(d)(1).
(2) Principal Residence
The Property must be the Borrower’s Principal Residence (leased land condominiums and townhomes are allowed).
(3) Co-Borrower
DHHL may be a co-Borrower on the Mortgage.
(B) Mortgaged Property Location
The mortgaged Property must be located within the Hawaiian Home Lands covered under a homestead lease issued under Section 207(a) of Hawaiian Homes Commission Act, 1920, or under the corresponding provision of the Constitution of
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the State of Hawaii adopted under Section 4 of the Act entitled “An Act to provide for the admission of the State of Hawaii into the Union,” approved March 18, 1959 (73 Stat. 5).
iii. Required Documentation
(A) Certificate of Eligibility
Certificates of Eligibility are issued by DHHL and certify that the Borrower possesses a homestead lease in good standing (not canceled or in default).
The Mortgagee must verify and obtain documentation that the Borrower has a Certificate of Eligibility for an existing Hawaiian Home Lands lease issued by DHHL, or possesses a lease of Hawaiian Home Lands issued under Section 207(a) of the Hawaiian Homes Commission Act, 1920 (42 Stat. 110).
Obtaining a Certificate of Eligibility
To obtain a Certificate of Eligibility, the Mortgagee must submit a Request for Certification of Eligibility form to the DHHL. DHHL will issue the Certification of Eligibility to the Mortgagee.
(B) Copy of Homestead Lease
The Mortgagee must obtain a recorded copy of either (1) the original homestead lease issued by DHHL that identifies the proposed Borrower as the lessee; or (2) the original homestead lease plus documentation of the chain of succession or assignment of the homestead lease to the Borrower and DHHL’s consent to each and every transfer of the homestead lease. If the lease was issued prior the development of the Hawaii State recording system, the Mortgagee must provide written confirmation from DHHL or provide other evidence that the lease was validly issued to the lessee.
The Mortgagee must document all amendments to the original homestead lease. All homestead lease documents must bear evidence of having been recorded at the DHHL.
(C) DHHL Mortgage Insurance Program Rider
The Mortgagee must obtain an executed copy of the DHHL Mortgage Insurance Program Rider. The Mortgagee must certify and document that the rider has been recorded in DHHL’s recording system.
(D) DHHL Consent to Mortgage
The Mortgagee must obtain a “Consent to Mortgage” executed by the Chairman of the Hawaiian Homes Commission and recorded with DHHL. Mortgagees can obtain
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this form by writing to the Department of Hawaiian Home Lands, Attn: Loan Services Branch.
iv. Appraisal
Mortgagees are required to obtain an appraisal for both Existing and New Construction with the cost approach to value developed. The sales comparison and income approaches to value may be excluded when the approaches are not necessary for credible results and the basis of the exclusion is explained.
The following statement may be included on the applicable Fannie Mae Form 1004/Freddie Mac Form 70, Uniform Residential Appraisal Report (URAR): “This appraisal has been completed for FHA mortgage insurance purposes, per HUD instructions for DHHL Properties.” For more information on appraisal requirements, refer to the Appraiser section.
v. Origination
(A) Loan-to-Value Limits for Cash-Out Refinances
The maximum LTV ratio for refinance loans is 75 percent.
The maximum LTV may be increased to 85 percent when the Borrower is paying off an existing Mortgage and all remaining proceeds are used for documented home improvements.
Cash-out refinancing for the purpose of debt consolidation is not allowed.
(B) Mortgage Insurance Premium
The Mortgage Insurance Premium (MIP) payment on a Section 247 Mortgage is a one-time upfront MIP of 380 Basis Points (bps).
Annual or periodic MIPs are not assessed on Section 247 Mortgages.
vi. Underwriting
For refinance transactions, for the purpose of consolidating debt, the Mortgagee must include all debt, including those being paid off through the refinance, when calculating the Borrower’s debt ratio.
vii. Closing
(A) Lien Position
The Section 247 Mortgage must give rise to a valid and secured interest in the mortgaged Property. However, the lien is not required to be in first position.
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(B) Recordation
The Mortgage must be recorded in DHHL’s recording system upon closing of the Mortgage. The documents must not be recorded at the State of Hawaii Bureau of Conveyances or filed with the Office of Assistant Registrar of the Land Court. Recordation at either of these offices does not effectuate a lien on the Hawaiian Home Lands lease.
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