Regents Policy 5305: Policy on University of California Mortgage Origination Program

Approved July 2010
Amended November 14, 2013

Amended November 20, 2015
Amended November 17, 2016

A. ELIGIBILITY AND PARTICIPATION POLICIES

In all eligibility and participation policies described herein, it is understood that any appointee in a position specifically designated by the Regents as requiring Regents’ approval for compensation-related matters, must be approved for Mortgage Origination Program participation by the Regents.

All references to MOP loan eligibility, participation policies, and loan policies also apply to GP-MOP and 5/1-MOP loans unless otherwise described herein.

1. The eligible population for the Mortgage Origination Program (MOP) consists of full-time University appointees with positions in the following categories:

  • Academic Senate members;
  • Academic titles equivalent to titles held by Academic Senate members as specified in Section 105.1 and 103.3 of the Standing Orders of the Regents of the University of California or in successor Regents Policy;
  • Acting Assistant Professors;
  • Senior Management Group members;
  • UC Hastings College of the Law (UC Hastings) faculty members;
  • University or UC Hastings employees who will be appointed to any of these eligible categories effective no more than 180 days after loan closing;
  • Other appointees who have received required additional approvals to be eligible for participation.

2. From the eligible population, the Chancellor, Lawrence Berkeley National Laboratory (LBNL) Director, or the Dean of UC Hastings shall designate eligible individuals for participation in MOP based on each location’s determination of its requirements for recruitment and retention. Additionally, the President is authorized to approve individuals not in the eligible population defined in Section A.1 for participation in MOP, based upon the essential recruitment and retention needs and goals of the institution. The University of California Delegation of Authority (DA) 2587, dated July 18, 2015, delegates this authority from the President to the Chancellors, LBNL Director, Executive Vice President-Chief Operating Officer, and the Agriculture and Natural Resources Vice President for specific titles as outlined in an Appendix to the University of California Home Loan Program Corporation - Program Lending and Administrative Manual.

3. A minimum of 60% of funds allocated for MOP is designated for participants who are purchasing their first principal place of residence within a reasonable distance of their work location. These loans are further designated for participants who have not owned a principal place of residence within a reasonable distance of their work location within the 12-month period preceding the closing date of their MOP loan.

4. Up to 40% of the allocation is available to address essential recruitment or retention needs for otherwise eligible appointees for one or more of the following purposes (Limited Purpose loans):

  • to refinance existing qualifying housing-related debt secured on a participant’s principal residence, including related loan transaction expenses included in the prior loan balance or related to the MOP loan. MOP loans may not be used to pay off loans, secured or not secured, used for non-housing-related expenses or for any mortgages on other properties. For any debt secured on a participant’s principal residence that was incurred during the five years prior to loan closing, the participant must document the purpose and use of funds as qualifying housing-related indebtedness associated with the subject property.
  • to provide a new MOP loan to a current or prior MOP participant at the same work location; or
  • to provide a MOP loan to a participant who has owned a home within a reasonable distance of the work location within a 12 month period prior to the funding of a MOP loan.

5. MOP participation may continue for the term of employment by the University of California or UC Hastings, as long as the property securing the loan continues to meet the specifications outlined in Section B.1, it being understood that:

  • if the property securing the loan no longer meets the specifications outlined in Section B.1, the MOP loan shall be reviewed for appropriate disposition; and
  • if University or UC Hastings employment is terminated or, in the case of academic appointees, there is a permanent change to an appointment status not considered to be in full-time service to the University or UC Hastings, the MOP loan is to be repaid within 180 days of such date of separation or change in status, with the understanding that:
    • participation can continue when separation is due to disability or retirement under the provisions of the University of California Retirement Plan or other retirement plan to which the University or UC Hastings contributes on behalf of the participant; or
    • in the event of the death of the participant, participation can continue for a surviving spouse or surviving Domestic Partner or, in the absence of a surviving spouse or surviving Domestic Partner, for a surviving Eligible Child (as the terms Domestic Partner and Eligible Child are defined by the University of California Retirement Plan); or
    • in hardship cases, reasonable forbearance beyond the required repayment period may be granted, provided all other terms and conditions of the loan are satisfied.
B. MOP LOAN POLICIES

1. MOP loans shall be secured, using a recorded deed of trust for residences that are:

  • owner-occupied single-family residences, including planned unit development and condominium units, which may include one secondary unit that does not comprise more than one-third of the total living area of the home;
  • the principal place of residence for the participant, other than during absences for sabbatical leave or other approved leaves of absence;
  • used primarily for residential, non-income producing purposes; and
  • 50% or more participant-owned.

2. MOP loans may not be used for direct construction loans; however, MOP loans may be used to refinance commercial construction loans upon completion of a new residence or the completion of the renovation of an existing residence.

3. The maximum loan-to-value ratio (LTV) of a MOP loan is to be determined as follows:

  • for loans up to (including) $910,000 (indexed limit as of April 2016), the maximum LTV is 90% when the loan does not include any financing of closing costs and 92% with financing of documented closing costs;
  • for loans greater than $910,000 up to (including) the Indexed Program Loan Amount ($1,430,000 as of April 2016), the maximum LTV is 90%;
  • for loans greater than the Indexed Program Loan Amount, the maximum LTV is 80%; and
  • MOP loan amounts greater than the Indexed Program Loan Amount shall require the approval of the President and the concurrence of the Chair of the Finance and Capital Strategies Committee.

An increase to the 80% maximum LTV for loans in excess of the Indexed Program Loan Amount to no more than 85% may be approved upon recommendation by the President, with concurrence of the Chair of the Finance and Capital Strategies Committee. The value of the residence is, in all cases, defined as the lesser of the purchase price or current appraised value. The above dollar threshold amounts for determining the maximum LTV and for the Indexed Program Loan Amount reflect applicable levels in effect as of April 2016, which shall be adjusted annually each April, based upon any increases in the All-Campus Average Sales Price determined by the annual zip code study performed by the Office of Loan Programs.

4. The maximum term of a MOP loan shall be 40-years. Authorization by the Chancellor or other designated official is required when offering a loan with a term greater than 30 years.

5. The standard mortgage interest rate (Standard MOP Rate) will be equal to the most recently available average rate of return earned by the Short-Term Investment Pool (STIP) for the four quarters preceding the issuance of a loan commitment letter for the mortgage loan, plus an administrative fee component of 0.25%:

  • the Standard MOP Rate will be adjusted annually on the anniversary date of the loan;
  • the maximum amount of adjustment up or down of the Standard MOP Rate will be 1% per year;
  • for MOP and GP-MOP loans made on or after January 1, 2014, the overall cap on the adjustment of the interest rate over the term of the loan will be 10% above the initial interest rate for the loan;
  • effective with loans approved on or after February 1, 2017, the minimum initial Standard MOP Rate shall be 2.75%, and the annual rate adjustment on these loans will have a floor rate of 2.75%;
  • in the event a loan commitment letter is issued for a MOP or GP-MOP loan and the Standard MOP Rate subsequently decreases prior to the loan funding, the participant will receive the more favorable rate; and
  • the difference between the earnings of the UC-Owned MOP and GP-MOP mortgage portfolios versus the comparable earnings if the funds had been invested in STIP will be calculated monthly, with any earnings shortfall in the combined MOP and GP-MOP portfolios being covered by the Faculty Housing Program Reserve. The 5/1 MOP earnings will not be included in this calculation during the Fixed Rate Term, as defined in this document.  Following the Fixed Rate Term, the 5/1 MOP loans will be considered MOP loans for the purposes of the monthly calculation. Any earnings excess will be retained in the Faculty Housing Program Reserve. The Faculty Housing Program Reserve will reimburse STIP for any principal losses resulting from portfolio loan losses.

6. Each Chancellor, the LBNL Director, and the Dean of UC Hastings is authorized to designate eligible participants for participation in the Graduated Payment Mortgage Origination Program (GP-MOP) option, which provides for a reduction in the Standard MOP Rate in the manner described below:

  • the maximum rate reduction in the Standard MOP Rate is 3.0% and the minimum resulting mortgage interest rate for such loans shall be 2.75%;
  • the rate reduction amount will be decreased by a predetermined annual adjustment (ranging from 0.25% to 0.50%) until the mortgage interest rate equals the Standard MOP Rate;
  • for the time period in which the rate reduction is in effect for each GP-MOP loan, the work location shall provide for a monthly transfer of funds (from available funds, including discretionary funds, as well as unrestricted and appropriate restricted gift funds) to STIP or to a third-party investor, if the loan has been sold, to provide the same yield that would have been realized under the Standard MOP Rate; and
  • the President is authorized to approve an initial rate reduction greater than 3.0% and an annual adjustment amount outside the standard range of 0.25% to 0.50% based upon the essential recruitment and retention needs and goals of the institution.

7. Participants may request a 5/1 ARM product (5/1 MOP) that has a temporary fixed-rate period (Fixed Rate Term), after which the loan converts to a standard MOP loan.

  • The initial interest rate (Initial Rate) will remain fixed until the date that the 60th payment is due, resulting in a fixed payment amount for the first 60 monthly payments.
  • The minimum Initial Rate will be 3.25%.
  • The overall cap on the adjustment of a 5/1 MOP loan’s interest rate over the term of the loan will be 10% above the Initial Rate for the loan.
  • After the Fixed Rate Term, the interest rate will adjust to the Standard MOP Rate in effect at that time, subject to a 5% interest rate adjustment cap, and a 2.75% minimum interest rate.
  • After the Fixed Rate Term and the initial rate adjustment at the end of the Fixed Rate Term, the maximum annual adjustment is 1%.
  • The Fixed Rate Term is not renewable beyond 5 years.

8. The sum of monthly mortgage payments (principal and interest) of the MOP loan and all other loans secured by the residence may not exceed 40% of the participant's household income.

9. When administratively feasible, MOP loan payments shall be made by payroll deduction while on salary status.

10. MOP loans are not assumable.

11. MOP loans carry no prepayment penalty.

12. MOP loans carry no balloon payments.

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