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11.5 FUNDED BUYDOWN ACCOUNTS
Funded buydown accounts are designed to reduce the borrower’s monthly payment during the initial years (temporary buydown) or the full life (permanent buydown) of the loan. Permanent buydowns are fully funded and paid for at loan closing. The interest rate is fixed and will not change for the life of the loan. Temporary buydowns are eligible when the following guidelines are met:
x The mortgage loan must be underwritten at the full note rate. Both the full note
rate and the initial buydown rate must be entered into GUS;
x Buydown funds may come from the seller, lender, or other third party;
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x Buydown funds may not come from the borrower;
x The buydown must not reduce the interest rate more than two percent below the
full note rate;
x The assistance may increase no more than one percent annually;
x The borrower must agree in writing that the temporary buydown funds will be
placed in an escrow with a financial institution supervised by a federal or state agency and paid directly to the lender each month to reduce the monthly mortgage payment;
x The buydown account must be fully funded at origination; and
x A copy of the executed escrow agreement must be retained in the lender’s
permanent loan file.