MEMO # TO: Wholesale Broker & Select Partner Clients DATE: October 30, 2018

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1 MEMO # TO: Wholesale Broker & Select Partner Clients DATE: October 30, 2018 RE: CMG Credit Policy and Guideline Updates EFFECTIVE: As Noted Below CMG FINANCIAL CREDIT POLICY AND GUIDELINE UPDATES Topics Covered in this Announcement: All In One Update: 801-MBI Non-Borrower Access All In One Enhancement: 801-WAB Now Available in New York & Massachusetts AlI In One Eligibility Matrix Enhanced: 801-WAB 21 Day Lock Option for Agency Purchase Transactions Now Available in CLEAR Home Possible and Home Possible Advantage Updates Retiring HARP and Scheduled Release of New High LTV Refinance Product Options Clarification: FHA/VA Manufactured Homes Addendum Clarification: FHA Gift Funds ALL IN ONE UPDATE: 801-MBI NON BORROWER ACCESS Summary: The 801-MBI product now allows non-borrowing authorized users access to features of the All In One Loan account. The account access terms are as follows: Once the loan has closed and the AIO account is set up by the investor, borrower(s) may submit a request that a non-borrower be provided account access as an authorized signer, including the issuance of a VISA card. This request may be made submitted via the AIO Visa Authorized Signer Form directly to the investor (Contact the Customer Service Department Directly to Request). The following apply: The borrower is responsible for all charges made or allowed to the All In One account by the authorized signer. Authorized signer may have access to All In One Account information. Before adding an authorized signer, the borrower(s) must let the authorized user know that the investor will report All In One Account performance to the credit reporting agencies in the authorized signers name If the investor asks for information about the authorized signer, the borrower must obtain their permission to share their information with the investor and for the investor to share it as allowed by applicable law. Notes: The borrower may cancel an authorized user card by written notice to Merchants Bank of Indiana

2 Effective Date: Immediately, guidelines have been updated and reposted. ALL IN ONE ENHANCEMENT: 801-WAB NOW AVAILABLE IN NEW YORK & MASSACHUSETTS Summary: Effective Monday, October 29, 2018, transactions for properties in New York and Massachusetts were eligible, subject to the below additional considerations: New York: Minimum AIO Line of Credit Amount of $250,000 Loan must pass New York High Cost ComplianceEase audit. CMG will perform ComplianceEase test at submission and prior to docs to ensure compliance. Subject to 5% LTV reduction Massachusetts: 1) Massachusetts Loans Subprime Mortgage Loan Rule (ARM Products): Conforming loan amounts (Based on the line of credit amount): the AIO fully-indexed rate (Index + Margin) may not exceed 3% over the 30-year treasury rate, as of the 15 th (or next business day if the 15 th falls on a weekend) of the preceding (prior) month the application was taken. Non-Conforming loan amounts (Based on the line of credit amount): the AIO fully-indexed rate (Index + Margin) may not exceed 4% over the 30-year treasury rate, as of the 15 th (or next business day if the 15 th falls on a weekend) of the preceding (prior) month the application was taken. S. Treasury Rate Look-Up: Example: AIO Application date: October 1 Loan Amount (Line Amount): $410,000 AIO Fully indexed rate (Index + Margin): 5% 30-year Treasury Rate value as of September 17 th : 3.13% Formula for testing Subprime status: 3.3% + 4% = 13% Result: AIO loan application passes state Subprime Mortgage test and can close 2) Massachusetts Loans Refinancing within 60 months (Net Tangible Benefit): If refinancing a primary or second home within 60 months, MA requires a borrower s interest test which verifies net tangible benefit (NTB). The NTB form included in the loan documents must be signed/dated by the borrower(s) on or before closing. In addition: The AIO Loan APR at time of closing may not exceed 1% over the Prime Rate Index as published in the Wall Street Journal. Prime Rate Index Look-Up:

3 Example: Previous mortgage closing date: April 10, 2016 AIO Application Date: October 1, 2018 Net Tangible Benefit Test Required: Yes AIO APR: 5% Current Prime Rate Index value: 25% Formula for testing Net Tangible Benefit: 5.25% + 1% = 25% Result: AIO loan application passes state Net Tangible Benefit test and can close 3) Massachusetts Loans High Cost Test: Loan must pass Massachusetts High Cost ComplianceEase audit. CMG will perform ComplianceEase test at submission and prior to docs to ensure compliance. Effective Date: Monday, October 29, Guidelines have been updated and reposted on Monday. ALL IN ONE MATRIX ENHANCED: 801-WAB Summary: Effective immediately, the All In One product 801-WAB has expanded loan options. The product now allows for purchase, rate/term & cash out transactions to 80% LTV to $1.0MM with a 700 FICO score. Please see the grid below for complete details. The minimum credit score is now 700. A second full appraisal is required for loan amounts greater than $1,000,000. Guidelines have been updated and reposted. (1) Properties in New Jersey and New York are subject to a 5% LTV reduction. Effective: Immediately 21 DAY LOCK OPTION FOR AGENCY PURCHASE TRANSACTIONS NOW AVAILABLE IN CLEAR Summary: Effective Friday, October 26, 2018 a 21 day lock option in CLEAR for agency purchase transactions for all loan statuses was available. The loan no longer has to be in an approved status to lock for 21 days. Non-Agency products and all refinances still require the loan to be in approved status for the 21 day lock option to be available. Effective: Friday, October 26, 2018 HOME POSSIBLE & HOME POSSIBLE ADVANTAGE UPDATES Summary: With Bulletin Freddie Mac released upcoming changes for the Home Possible and Home Possible Advantage programs. Effective October 29, 2018, CMG will align with the following Freddie Mac updates:

4 Non-occupant Borrower(s): Non occupant borrowers will be permitted on Mortgages secured by 1-unit properties when the LTV/TLTV/TLTV/HTLTV ratio is less than or equal to 95%. When income from a non-occupant borrower is being used to qualify for the loan, the total qualifying income (i.e., total income from all occupying and non-occupying borrowers) must not exceed the Home Possible income limits. Additionally, the liabilities for the nonoccupant must be included in the debt-to-income (DTI) ratio. Funds used to qualify for the Mortgage may come from the occupying and/or the non-occupying Borrower. Ownership of other property: Permitting ownership of other property without any restrictions. Secondary financing: Permitting standard secondary financing, including HELOCs, for a Mortgage with a TLTV/HTLTV ratio of less than or equal to 97% (when the TL TV ratio is greater than 97%, the secondary financing must be an Affordable Second) 5/1 ARMs for Mortgages secured by 3- to 4-unit properties. Currently not permitted - Freddie will now permit this product for Home Possible Mortgages with LTV/TLTV/HTLTV ratios less than or equal to 75%. At a future date, CMG does plan on releasing high balance Home Possible products. Once released, high balance loan amounts will be permitted with an LTV/TLTV/HTLTV ratio less than or equal to 95%. Please watch for future updates. In addition, at a future date, CMG will retire the Home Possible Advantage product codes and align with Freddie in merging the Home Possible and Home Possible Advantage into one product offering. At this time, LTVs exceeding 95% will continue to require the use of the Home Possible Advantage product codes. Effective Date: As noted above. For the 10/29/2018 updates, the Home Possible matrices have been updated and reposted. Link: Freddie Mac Bulletin RETIRING HARP AND SCHEDULED RELEASE OF NEW HIGH LTV REFINANCE PRODUCT OPTIONS Summary: The HARP products (DU Refi Plus & LP Open Access) are scheduled to be retired at the end of Both Fannie and Freddie have High LTV products that will provide refinance opportunities to borrowers with existing Fannie Mae/Freddie Mac mortgages who are making their mortgage payments on time but whose LTV ratio for a new mortgage exceeds the maximum allowed for standard limited cash-out refinance options. CMG is scheduled to release these products before the end of the year so please watch for future updates. Loans under the new product options will need to meet several eligibility criteria and are not eligible to be closed until January 2019 at the earliest. Once released, the new products will be limited in scope in terms of eligibility with highlights as noted below: The loan being refinanced must be a first-lien, conventional mortgage loan, owned or securitized by Fannie Mae or Freddie Mac. The loan being refinanced must have a note date on or after October 1, At least 15 months have passed between the Note Date of the mortgage being refinanced and the Note Date of the high LTV refi mortgage. Borrower Benefit Borrowers must benefit from the refinance in at least one of the following ways: Reduced monthly principal and interest payment Lower interest rate Shorter amortization term More stable mortgage product, such as moving from an adjustable-rate mortgage to a

5 fixed-rate mortgage Borrowers must be current with their payments and have: No 30-day delinquencies in the most recent six months, and No more than one 30-day delinquency in the past 12 months. The mortgage being refinanced must not have been previously delivered to the agency as a HARP Product. Effective Date: Watch for CMG to release the new High LTV Refinance product options prior to the end of HARP products will also be retired at the end of This announcement is to provide clarity regarding CMG s plans to release this new product option and guidelines. CLARIFICATION: FHA/VA MANUFACTURED HOME ADDEDUM Summary: The FHA/VA Manufactured Home addendum is updated to clarify that attached decks, patios, and porches are eligible with copy of building permit/engineer s cert. Effective Date: Immediate, guideline addendum has been s updated and reposted. CLARIFICATION: FHA GIFT FUNDS Summary: In lieu of providing a Donor's Bank Statement for an FHA Transaction that requires a full 30 day statement, a Donor's 1 day transaction history/online printout if the funds are wired from the Donor's account to the Title/Escrow agent/attorney directly is acceptable. The 1 Day Transaction history/online printout will need to show the following: Donor's name Account number Transaction history showing 1 day history with NO large deposits and the money being wired to Title Available balance The transaction history typically shows the day before the gift was wired from donor's account to title/escrow/attorney. In addition, there is no change to the following that are also required: Fully executed Gift Letter (from FHA eligible gift donor) Title receipt showing Donor's funds - escrow receipt Proof of the wire transfer Note: The alternative donor bank statement documentation is only for funds wired for closing. Effective Date: Immediately Contact Your Account Executive or Client Success Expert 2018 CMG Financial, All Rights Reserved. CMG Financial is a registered trade name of CMG Mortgage, Inc., NMLS# 1820 in most, but not all states. CMG Mortgage Inc. is an equal opportunity lender, licensed by the Department of Business Oversight

6 under the California Residential Mortgage Lending Act No Offer of credit is subject to credit approval. For more information on our company, please visit To verify our complete list of state licenses, please visit licensing and Not intended to serve as a business solicitation in Massachusetts. For Wholesale and Mortgage Professionals only Crow Canyon Road Suite 400 San Ramon, CA Unsubscribe here.