Charities, Inc. GUIDELINES & AGREEMENT DOWN PAYMENT GIFT (NON-SELLER FUNDED)

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1 Charities, Inc. A Nonprofit, 501(c)(3), Charitable Public Benefit Corporation Investing In Your Community GUIDELINES & AGREEMENT DOWN PAYMENT GIFT (NON-SELLER FUNDED) JC REED CHARITIES JC Reed Charities is a non-profit, public benefit organization that provides gift funds to eligible households to use for home purchase down payment and closing cost assistance. Charitable organizations are allowed by the U. S. Department of Housing and Urban Development (HUD ) to provide such gifts, and various loan programs, such as FHA, have also adopted that allowance. Funds used to make the gift are derived from donations from the general public to fund this and other JC Reed Charities exempt purposes. To assure the gift does not appear to privately benefit anyone but the gift recipient; the buyers, lender and closing agent will not disclose to JC Reed Charities the names of the seller, real estate agent, or developer. JC Reed Charities solicits donations from the general public but will not accept donations or pledges that are contingent on the purchase of any home. This ensures JC Reed Charities is not beholden to any particular donors or other supporters whose interest may conflict with that of the eligible buyers JC Reed Charities is working to help. JC Reed Charities, Inc. does not discriminate because of age, sex, race, color, religion, gender, national origin, sexual orientation, disability or ethnicity, or other Federal or State protected status. THE GIFT The gift funds received by a qualified homebuyer require no repayment, no silent second mortgage, and no recapture penalties. The funds are a true gift given in response to the individual s needs, that is made without economic or other consideration being received by JC Reed Charities, and that does not proceed from any moral or legal duty. It is motivated by detached and disinterested generosity out of affection, respect, admiration, and charity in recognition that individuals and families need decent, safe and sanitary homes; however those who have an income below the HUD median in their community need help in becoming a homeowner. The gift funds are offered to qualified home buyers toward the purchase of a home currently located in Tennessee and in the future in any State where JC Reed Charities is Chartered by the Secretary of the State to operate. The non-seller funded gift will leave the buyer with all of the negotiating powers to obtain the best sales price possible and when the purchase is complete it leaves the homeowner with equity in their home. JC Reed Charities will give up to 4% of the negotiated sales price to be used for the eligible buyer s down payment and/or closing costs. Allowable Closing Costs and Fees: JC Reed Charities has adopted the FHA policy with respect to allowable fees and closing costs a borrower may pay for all loan types. The borrower may pay any and all reasonable and customary fees and costs normally charged in the market place. If JC Reed Charities, in its sole discretion, determines that the borrower has been charged a fee that is exorbitant or not customarily charged in the market place, the Originating Agent will be required to refund these fees to the borrower if the disallowed charge was paid from their funds or to JC Reed Charities if paid from the down payment gift.

2 ELIGIBLE RECIPIENTS - Household income is at or below 80% of the HUD median income for their community. - Buyer is required to show proof of and pay cash for the home inspection, earnest money, appraisal fee, 1 st year home insurance, and credit application fee (at least 1% of the negotiated home sales price). INELIGIBLE PERSONS - Directors, Officers, employees, major contributors and their family member(s) may not compete for JC Reed Charities supported Gifts and Grants. REQUIREMENTS BUYER - Complete the JC Reed Application/Enrollment for Home Purchase Down Payment Gift Assistance, and provide other such employment and financial history as required. Do not disclose the name of the Realtor, Seller or Developer to JC Reed Charities. - Buyer is required to show proof of and pay cash for the home inspection, earnest money, appraisal fee, 1 st year home insurance, and credit application fee (at least 1% of the negotiated home sales price). - Buyer (owner-occupant) is a first-time homebuyer. A first-time homebuyer is any person who has not occupied a home they owned, or currently own, as their principal residence during the past three years. A non-occupant or co-borrower(s) may assist buyer (owner-occupant) to qualify for the mortgage. - The buyer must qualify under a single-family, 1-4 unit loan which allows charitable organizations to provide gift funds with the purchase of a home. - The buyer must use the home as their principal residence. - Obtain an inspection of the home you wish to purchase by a State Licensed Home Inspector and provide a copy to JC Reed Charities and the Lender. - The buyer must provide proof to JC Reed Charities and the Lender of successful completion of an approved Homebuyer Education/Counseling course to help ensure the homebuyer is better equipped to sustain homeownership through debt management and knowing the responsibilities of an owner. JC Reed Charities prefers the use of the accredited HUD/FHA Counselors and Neighborworks America Certified Trainers. LENDER - Complete the JC Reed Registration form. Do not disclose the name of the Realtor, Seller or Developer to JC Reed Charities.

3 - Mortgage the buyer must qualify under a single-family, 1-4 unit loan which allows a charitable organization to provide gift funds with the purchase of a home, such as a FHA loan. The loan must not be an adjustable rate mortgage, must be assumable, and a borrower may pre-pay the mortgage principal without penalty. - Send JC Reed Charities and Buyer a Conditional Loan Pre-Approval Notice stating it is contingent upon receiving no more than a 4% Gift from JC Reed Charities. - Buyer is required to show proof of and pay cash for the home inspection, earnest money, appraisal fee, 1 st year home insurance, and credit application fee (at least 1% of the negotiated home sales price). - Receive proof from the buyer of successful completion of an approved Homebuyer Education/Counseling course. - Buyer (owner-occupant) is a first-time homebuyer. A first-time homebuyer is any person who has not occupied a home they owned, or currently own, as their principal residence during the past three years. A non-occupant or co-borrower(s) may assist buyer (owner-occupant) to qualify for the mortgage. - The buyer must qualify under a single-family, 1-4 unit loan which allows charitable organizations to provide gift funds with the purchase of a home. - The buyer must use the home as their principal residence. - Provide JC Reed Charities a copy of the Appraisal. - Require Seller to have the home inspected for termites and wood destroying mold. - Notify JC Reed Charities in writing when Loan has the Final Approval and the amount of the Gift expected to be wired to the Escrow/Closer. - Request gift funds (4% cap) from JC Reed Charities 48 hours prior to Close and notify Escrow/Closer of the request. - All other Underwriting issues will be left to the Lender. - Forward a Conformed Copy of the signed Final HUD-1 after Close (block the names of the Seller, Realtor or Developer). - Net Funds To Borrower - A Gift Recipient cannot receive any funds from the closing that exceed amounts that they paid in advance from their personal funds for earnest money, appraisal fees, home inspection, and credit report fees. All amounts from the Gift in excess of the amount the Buyer needed to Close MUST be returned to JC Reed Charities. It cannot be refunded to the Buyer or any other party to the transaction. If a grant or gift from an entity other than JC Reed Charities is included in the transaction, communicate and coordinate the refund between the other entity and JC Reed Charities. ESCROW/CLOSER - Read the Guidelines, sign the Acknowledgement and fax it to JC Reed Charities. - Do not disclose the name of the Realtor, Seller or Developer to JC Reed Charities.

4 - Provide JC Reed Charities with wire transfer information to receive gift funds 24 hours prior to Close. - Send confirmation to JC Reed Charities and the Lender the Gift Funds were received. - Net Funds To Borrower - A Gift Recipient cannot receive any funds from the closing that exceed amounts that they paid in advance from their personal funds for earnest money, appraisal fees, home inspection, and credit report fees. All amounts from the Gift in excess of the amount the Buyer needed to Close MUST be returned to JC Reed Charities. It cannot be refunded to the Buyer or any other party to the transaction. If a grant or gift from an entity other than JC Reed Charities is included in the transaction, communicate and coordinate the refund between the other entity and JC Reed Charities. JC REED CHARITIES - Confirm applicant s stated household income meets the HUD median income limits of at or below 80% of the median for the area in which they live. - Provide Lender and Escrow/Closer with a notification the buyer will receive gift funds. - Forward Lender the JC Reed Charities Registration and Conditional Pre-Approval Form. Forward the Escrow/Closer the Down Payment Gift Guidelines. - Upon written notification from the Lender 48 hours prior to the Close, wire transfer the requested amount of Gift funds to the Escrow/Closer 24 hours prior to Close. Request a confirmation of receipt of the funds be sent to JC Reed Charities and the Lender. SUGGESTION: - JC Reed Charities recommends that homebuyers seriously consider negotiating with the Seller to have them purchase a comprehensive 1 year Home Warranty for the benefit of the Buyer, have the home s roof inspected (if that is not included in the required home inspection paid by the Buyer ), and, as applicable, have the septic system inspected. If there is a well, the Lender will require the Seller to have it tested. PRE AND POST PURCHASE: - Pre-purchase, JC Reed Charities will conduct an interview with the potential buyer upon receipt of their Application/Enrollment to receive a gift for down payment and/or closing cost assistance to purchase a home. Some of the items to be discussed include: current living arrangements, program guidelines and requirements, review of application and financial history, requirement of homebuyer education, and assist with the completion of the FHA Pre-Qualification worksheets at FHA.GOV or the Ginnie Mae Calculation at GINNIEMAE.GOV. - Post-purchase, Each Quarter during the first year after purchase and annually for the subsequent four years, JC Reed Charities will send the buyer a questionnaire to complete and return. Items to complete will include: satisfaction with their home, satisfaction with their loan servicer, current employment status, and will request that the buyer contact JC Reed Charities for referrals to help them if there is a job loss or possibility of default. ***********

5 INTERNAL REVENUE CODE NONPROFIT ORGANIZATION REQUIREMENTS TERMS AND EXPENDITURE RESPONSIBILITY: To meet the expenditure responsibility requirements, each gift awarded is made subject to a commitment signed by the intended eligible recipient, the mortgage originator/underwriter, and the escrow/closing agent. Each agrees to the following: 1) to see that the gift is spent only for the purpose for which it is made, 2) to repay any amount not used for the purposes of down payment and/or closing cost assistance, 3) to keep records of receipts and expenditures and to make its books and records regarding the Gift Recipient s home purchase available to JC Reed Charities at reasonable times. VIOLATIONS OF EXPENDITURE RESPONSIBILITY: Gift funds that are used for purposes other than home purchase down payment and/or closing cost assistance for the benefit of eligible recipients may be in violation of your expenditure responsibility. If such violation is suspected, JC Reed Charities will withhold any further gift transfer for all clients you are processing to receive a Gift until the matter is resolved to our satisfaction. Upon examination, if it is determined that any part of the gift was used for improper purposes, JC Reed Charities will: 1) take all reasonable and appropriate steps to recover the gift funds, or 2) ensure the restoration of the diverted funds and the dedication of the other gift funds, if any, held by the vendor to the purposes of the gift, and 3) continue to withhold any further payments until JC Reed Charities has received the assurance that future diversions will not occur and will require the vendor to take extraordinary precautions to prevent further diversions from occurring. APPLICATION DEADLINES: **************************************** Applications are accepted throughout the year; however the process of review, meeting requirements and coordination between all parties can take up to 90 days. We suggest buyers submit their applications at least 90 days before they anticipate finalizing the purchase of their home. ***************************************

6 ACKNOWLEDGEMENT Instructions: Fill in the Buyer(s) name and property address where indicated, place your signature on the appropriate line, date it, and fax ONLY this Acknowledgement page to: JC Reed Charities Nancy Reed-Nevin, Executive Director FAX: I, the undersigned, affirm that: 1) I have received a copy of the Down Payment Gift Guidelines, 2) I have read and understand the Guidelines, and 3) I agree to comply with the Guidelines. PROPERTY ADDRESS: BUYER(S): Buyer Name Date: Buyer Signature Co-Buyer Name Date: Co-Buyer Signature LENDER: Name of Lender s Authorized Representative Date: Lender Signature ESCROW/CLOSER: Name of Escrow/Closer s Authorized Representative Date: Escrow/Closer Signature We will be happy to advise and assist you with the completion of your application and/or meeting other requirements relating to the home purchase down payment gift program. Questions and correspondence may be directed to the attention of Nancy Reed-Nevin, Executive Director, at the address and telephone numbers below, or at: nnevin@jcreedcharities.org.