Issue Date 2/24/11 Effective Date As Noted WPA

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1 Changes and Other Topics Purpose This communication: Adds an MSI overlay to Streamline Refinances. Addresses the Mortgagee Letters and Clarification for Trusts and POA s. Clarification for Eligible Borrowers. Revises MSI Reserve Requirements. Streamlines Due to increased default incidence in connection with the streamline product, MSI is instituting the following control to mitigate its risk while preserving the basic spirit and intent of the program: Effective 3/01/11 for all Streamline Refinance Loans without an Appraisal submitted to MSI for Underwriting and/or purchase (of a closed loan): MSI will run an AVM for each and every streamline refinance loan without an appraisal either at underwriting (if MSI underwrites) or prior to funding/purchase. To expedite underwriting or purchase/funding, Sellers may provide MSI with an AVM from an acceptable source (MSI will post a list on the Web Site) OR provide a 2055/exterior only to validate value. DO NOT INCLUDE THE AVM OR 2055 IN THE INSURING PACKAGE TO. If AVM shows that the property has a lesser value of 10% or more: If MSI underwrites the file, we will require a 2055 Exterior to validate the value of the property. If the value of the property is not supported, MSI will deny the loan as submitted. Note: Neither the AVM or the 2055 are submitted with the insuring package. If MSI did not underwrite the file, MSI reserves the right to deny purchase of the loan if the value (within variance) is not supported. Mortgagee Letter Reminder: Effective for Case Numbers assigned on/after 4/18/11: will increase the Annual Mortgage Insurance Premiums by 25 basis points. will implement controls regarding the issuance and automatic cancellation of case numbers. Please see for full details. MSI will update our guidelines in the Seller Guide as appropriate. WPA Page 1 of 5

2 Mortgagee Letter Effective Immediately, as clarifications. In this Announcement, MSI will address only the clarification of existing guidelines as included in ML MSI will update the Government Product Suite accordingly. Next week, MSI will address revisions (new guidance) made within ML MSI will implement those revisions with case numbers issued on/after 4/01/11 to ensure compliance within s requirements. Please see for full details. See MSI Summary Matrix for ML for MSI implementation details. MSI Summary Matrix for ML Topic Current Status of Refinance Mortgage Subordinate Loans Streamline Refinances- TOTAL Streamline Refinances - Seasoning Summary For all refinances, the mortgage being refinanced must be current for the month prior in which they close. For all no cash out refinance loans, if there is a subordinate loan on the subject, the entire lien must be re-subordinated (if the lien is a HELOC, the entire credit limit must be included) and calculated within the CLTV/TLTV of the subject. Reminder: MSI does not permit the use of TOTAL scorecard for Streamline Refinance. (MSI has never permitted the use of TOTAL scorecard for Streamline Loans.) On the date of the Case Number Assignment: The mortgagor must have made at least six payments on the -insured mortgage that is being refinanced, and At least six full months must have passed since the first payment due date of the refinanced mortgage, and At least 210 days have passed from the closing date of the mortgage being refinanced. For example, if the case number on the mortgage being refinanced was closed on or before December 1, and if mortgagor s first payment on that mortgage was due on January 1, the mortgagee may request assignment of an case number for the refinancing mortgage no earlier than July 1. WPA Page 2 of 5

3 MSI Summary Matrix for ML-11-11, Continued MSI Summary Matrix for ML Topic Cash Out Refinance- Acceptable Payment History Cash Out Transaction- Pay off of Land Contracts or Properties Subject to Ground Rents Summary The refinancing mortgagee must document that the mortgagor has an acceptable payment history. The payment history is acceptable if the mortgagor: Is current and Has made all payments on the mortgage being refinanced within the month due for the previous 12 months. For mortgages with more than 6 months and less than 12 months of payment history, the mortgagor must have made all payments when due. Mortgages with less than 6 months of payment history are not eligible for a cash-out refinance. MSI has not addressed this subject in our Seller Guide. Therefore, as a clarification to Guidelines, effective for loans with Case Numbers issued on/after 3/01/11: The following transactions are limited to an LTV/CLTV of 85.00% (maximum LTV for Cash Out Refinances): Loan transactions which pay off an existing land contracts (even if there is no cash out at closing). Loan transactions which refinance subject properties subject to ground rents. Important Note: MSI will address the rest of the topics in ML identified as new guidance in our Announcement next week. MSI will implement all new guidance topics in ML with case numbers assigned on/after 4/01/11. Trusts and POAs Reminder (Effective Immediately and MSI will add to the Seller Guide.) MSI cannot accept a Power of Attorney signature to close when closing in the name of a Trust. Eligible Borrowers Reminder (Effective Immediately and MSI will add to the Seller Guide.) MSI accepts only natural persons as borrowers. The only exception to this rule are acceptable Trusts (Inter Vivos and IL Land Trusts). Life Estates or other such entities are not natural persons and are not acceptable exceptions for MSI. WPA Page 3 of 5

4 Reserves To ensure compliance with investor guidelines MSI must revise our reserve requirements. Topic Type of Change Summary Reserves REV Underwriting Effective for all conventional loans underwritten on/after 2/25/11, the following new reserve requirements must be applied to both Freddie and Fannie loans, regardless of AUS. Primary Residence-single family Per DU or LP Primary Residence 2-4 Units (CLAR) Borrowers must have 6 months PITI regardless whether or not rental income is used to qualify. Second Home Borrowers must have 2 months PITI for the subject property and an additional 2 months PITI for each second home or 1-4 investment property financed by the borrower. Current Residence pending sale or conversion to second home or investment (CLAR) Borrower(s) must have 6 months PITI in reserves for the both the new Primary residence and the current Primary residence pending sale / being converted. The required reserves can be reduced to 2 months PITI in reserves for each property (the new primary residence and current Primary residence pending sale / being converted) if all of the following requirements are met: LTV/TLTV/HTLTV for pending sales / being converted is less than or equal to 70%. The value of property pending sale / being converted must be supported (see Seller Guide for full details.) WPA Page 4 of 5

5 Effective Date As Noted. Seller guide The Seller Guide and any other applicable posted documents will be updated within 2 business days of the effective date of each topic. Questions If you have questions, contact your Account Executive. WPA Page 5 of 5