Home Loan Policy
Effective September 15, 2014
Washington and Lee University provides housing loans to full-time employees. These housing loans may be used to purchase, build, or improve a principal residence in the Lexington-Rockbridge County area subject to the terms and conditions outlined below. (The Treasurer may, upon receiving an appeal, approve as an exception a loan for a residence outside the Lexington-Rockbridge County area when, in his opinion, there are compelling personal circumstances.)
Before entering into any contract utilizing the Washington and Lee University Mortgage Program, contact Lori Oliver in the Treasurer's Office for a full list of requirements/options via email firstname.lastname@example.org or directly on 458-8740.
Apply for housing loans with a letter to the Treasurer. State the amount requested, the purpose of the loan (build, buy, improve), and the location of the premises. If the loan is to build a house, attach plans, specifications, and your contractor's bid estimate. If the loan is to buy an existing house, attach a copy of an executed purchase agreement. If the loan is to improve a house, describe the major elements of the project and attach your contractor's bid or estimate.
All Exempt Full-time employees will be eligible for the Home Loan Program immediately upon their start date of employment. The Treasurer can provide an exception to allow an Exempt hire to enter the program prior to their start date. Under such circumstances, the individual will be required to make timely cash payments until they become an official employee of the University and the mortgage can be deducted through payroll deduction.
Non-Exempt Full-time employees will be eligible for the Home Loan Program eighteen months following the date they begin full-time employment at the University.
Types of Loans
The University provides two types of loans: (a) loans to build or acquire a principal residence (Mortgage Loan), and (b) loans to improve a principal residence (Home Improvement Loan). They differ as to terms, amounts, debt to equity ratios and the number of each type of loan that an employee is entitled to take through the University.
The following terms and conditions apply to Mortgage Loans:
Amount of Loans
The University will loan to an eligible employee up to $300,000 to build or buy a principal residence. Spousal or Domestic Partner relationships, for which both individuals are eligible for a loan, may borrow jointly up to a total of $450,000 to buy or build a principal residence.
The borrower(s) must demonstrate sufficient income to support payments for the loan schedule. A basic requirement is that the monthly loan payment may not exceed 25 percent of the borrower's monthly salary. In cases where this requirement is not met, the Treasurer may approve an exception if additional ability to pay can be adequately demonstrated.
Number of Loans
Beginning September 15, 2014, any eligible employee will be allowed up to two mortgage loans during their time of employment subject to all other eligibility requirements. At no time, may an employee at the University have more than one outstanding Mortgage Loan through the University, and any Mortgage Loan through the University must be for the employee's primary residence.
Employees who currently hold a Mortgage Loan with the University or have been in the program in the past but no longer have a University Mortgage Loan, will be eligible for one additional Mortgage Loan subject to all other eligibility criteria.
Terms of Loans
For Mortgage Loans, the maximum term is 30 years. For purposes of establishing the interest rate, loans that have terms of more than 15 years will utilize the 30-year rate, and for those with terms of 15 years or less, the loan will utilize the 15-year rate. (Such loans are limited to one over the period of ownership of the property.)
Home Improvement Loans
The following terms and conditions apply to Home Improvement Loans:
Amount of Loans
The University will loan to an eligible employee up to 25% of the market value of the home's value (determined typically through an appraisal) up to a maximum of $75,000 to finance improvements to their principal residence. Spousal or Domestic Partner relationships, for which both individuals are eligible for a loan, may borrow jointly up to a total of $112,500 for such improvements subject to the amount not exceeding 25% of the home's value.
The borrower(s) must demonstrate sufficient income to support payments for the loan schedule. A basic requirement is that the monthly loan payments for Mortgage and Home improvement loans may not exceed 25 percent of the borrower's gross monthly salary. In cases where this requirement is not met, the Treasurer may approve an exception if additional ability to pay can be adequately demonstrated.
Number of Loans
There are no limitations on the number of Home Improvement Loans that an eligible employee can take through the University subject to i) the maximum amount of such loans within the program and ii) any such loan must be used for improvements to the employee's primary residence.
Terms of Loans
Home Improvement Loans cannot exceed a maximum term of 15 years.
Debt to Equity Ratio
For purposes of the program, the University recognizes that an employee may have other debt associated with their primary residence. In the case of that debt being only a University Mortgage Loan, then the combination of the Mortgage Loan and the Home Improvement Loan cannot exceed 90% of the home's market value as determined through appraisal or other approved means.
Should the employee have debt associated with his or her primary residence through other financial institutions, then the combination of the Home Improvement Loan and the other outstanding debt cannot exceed 75% of the home's market value as determined through appraisal or other approved means.
The following terms apply to both Mortgage Loans and Home Improvement Loans:
Interest rates on all loans will be quarter of a percent less than the interest rate charged by Lexington financial institutions for residential mortgage loans. The Lexington financial institution rate used will be the lowest quoted on a date as close as practical to either the date of approval of the loan or the date of closing. Locking in on an interest rate is not an option.
In certain circumstances, the IRS has deemed the differential between the rate that is utilized for the loans and the federal rate as determined may create compensation for the employee. In such circumstances, the University calculates the imputed interest cost and treats it as taxable compensation for the employee.
Payment; Security; Insurance
Loans will be amortized on a level-debt basis by payroll deduction. They must be secured by a first deed of trust to the University. Fire and extended coverage in at least the total amount of loans must be provided by the borrower, naming the University as an insured party.
Repayment of loans made jointly to a husband and wife both of whom are eligible for a loan will be made from the paychecks of either or both of the borrowers, as they request, so long as both are employed by the University. If one of the borrowers leaves the University's employ, debt service payments will be deducted from the paycheck of the borrower still employed. In the event of separation or divorce, both borrowers remaining in the University's employ debt service payments will be made equally from the paychecks of each employee unless W&L and the borrowers agree otherwise.
Termination of Employment
Upon termination of employment, an employee will be given sixty (60) days to satisfy the loan assuming that payments continue to be made. Should an employee be late making one or more payments, or default on any payment, the University will proceed to collect the loan in accordance with its terms, including the right to proceed with foreclosure in the event of default.
An employee who retires from the University in accordance with the age and service requirements for eligibility of retiree status should make arrangements with the Treasurer's Office to make payments directly to the University.
Loans not transferable; Acceleration
Loans are not transferable. If the property on which they are made is sold, transferred, or rented (except when the borrower is on leave or absence from the University) without the consent of the University, or should the borrower leave the employ of the University other than by death, retirement because of age or disability, or by leave of absence for a specified period, the entire principal and accrued interest on the loan will become due and payable sixty days from such occurrence, without notice, at the option of the University.
The University will not refinance any loans, internal or external, nor will the University provide a Mortgage Loan on a property in which the employee has unencumbered title with the exception of providing financing for the construction of a principal residence on land that the employee previously had acquired. University loans may be prepaid at any time in whole or in part at no penalty.
Right of First Refusal
The University has a policy which assures it the first right of refusal to purchase certain properties it has financed. The deeds of trust for those properties contiguous to University-owned property will incorporate the attached policy language.
Maximum Loan Limitations
The combination of Mortgage Loans and Home Improvement Loans cannot exceed $300,000 for an eligible employee or $450,000 for eligible spouses and domestic partners who are both employed by W&L.
Loans for a new residence
Additional loans may be made to acquire, construct, or improve a different principal residence to employees who have previously taken our home loans. The previous loan(s) must be satisfied before new loans will be granted and any such loans remain subject to the terms and limitations outlined herein.
Supplemental Rider for Construction Loans
In the case of a construction loan the following supplemental rider is required: if construction is not substantially complete within one year, the full amount of the loan would be payable within sixty days of the one year anniversary of the loan at a recomputed 100 percent plus half of any profit realized from the sale of the lot (profit defined as the positive difference between original purchase and sales prices).
Disbursement of construction loans
Loans to pay construction costs will be made in installments as agreed upon between the Treasurer and borrower(s), based on the builder's schedule. Interest will be payable monthly on the installments through the last day of the month in which the final installment is disbursed. Regular principal-and-interest debt service payments will commence on the last day of the next month. The University reserves the right to inspect the property and verify appropriate progress has been made commensurate with the disbursement being requested. Construction or Home Improvement Loans cannot be used to purchase equipment or tools needed for construction.
Appraisals; Inspections; Cost Verifications
The Treasurer may require an independent appraisal of property on which loans are requested. The cost of the appraisal is an expense of the borrower, normally collected at closing.
The Treasurer may arrange for an informal inspection of the property. The Treasurer will notify the borrowers of any concerns raised by the inspector about the state of the property and they must be addressed to the Treasurer's satisfaction before closing. In the case of construction or home improvement, the Treasurer reserves the right to withhold disbursement of funds until such time as the concerns are addressed.
Improvement loan limitations
Home improvement loans are to modify or upgrade living space, for structural or mechanical repairs, or for any other improvements which will clearly improve the property value.
Borrowers and their spouses or domestic partners must sign a promissory note and a deed of trust. The University also requires a title letter from a non-related attorney certifying that title records have been searched and no flaw in title to the property has been found.
Attorney's fees for those documents are for the borrower's account and may not be borrowed.
If there is no title impediment, the University does not require title insurance. If there is an impediment, title insurance may be required depending on the circumstances. The cost of such insurance is for the borrower's account and may not be borrowed.
Closings will be at the convenience of the borrower and the University.
RIGHT OF FIRST REFUSAL POLICY
The Washington and Lee University has implemented a policy whereby the University shall have the first right-of-refusal to purchase the home of employees who have taken advantage of University financing when such persons decide to sell their homes or are required to sell their homes in accordance with University policy. In this case, prior to marketing, contracting to sell, or selling the property to any third party, the employee shall declare his or her intent to sell the property in writing to the Treasurer of the University. A letter of submittal to the Treasurer declaring the intent to sell will suffice. The Treasurer shall then have seven (7) business days from the date of receipt of the employee's declaration letter to mail or hand deliver a response letter to the employee declaring the University's interest (or lack thereof) in purchasing the subject property. In the event the University fails to declare such interest or declares no interest to purchase the property within said seven (7) days, the employee may proceed to market and sell the property in any method that he or she desires and the University's right of first refusal lapses, subject to the conditions below. If a firm contract to purchase the property by a third party has not been entered into within six (6) months of the date of the employee's declaration letter, the University's first right of refusal re-emerges and the terms of this policy are reinstated. Similarly, if the University declares no interest or fails to respond to the employee's declaration letter, and a firm contract to purchase the property by a third party has not been entered into within six (6) months of the date of the employee's declaration letter, the University's first right of refusal re-emerges and the terms of this policy are reinstated.
Whenever the University declares its interest to purchase property consistent herewith, both the University and the employee must have the subject property appraised. The price to be paid to the employee by the University for the property, shall be the average of the two appraisals; provided, that there is not more than five percent (5%) difference between the two appraisal amounts. In the event that there is a difference of more than five percent (5%) between the two appraisal amounts, the employee and University shall have two options: (i) the employee and University may agree upon and share the cost of a third appraiser whose appraisal amount shall be binding upon the parties; or (ii) the employee and University may enter into negotiations with a price to be agreed upon within the range created by the first two appraisals.
The University shall have no liability for its failure to purchase any employees property upon which it has declared its interest to purchase when good cause exists therefore.