TABLE OF CONTENTS PRODUCT DESCRIPTION

Transcription

1 TABLE OF CONTENTS PRODUCT DESCRIPTION Page # Product Description 3 Marketing Features 3 ELIGIBILITY Amortization Terms 3-4 ARM Plan Codes, Assumability 4 Prepayment Penalty 4 Underwriting Methods & Delegation 4 Mortgage Insurance Requirements 5 Adjustable Rate Information 5-6 Interest-Only Option Feature 6 Eligible Mortgagor(s) 7-8 Occupancy 8 Eligible Property Types/Ineligible Property Types/Property Limitations 9 Geographic Restrictions 9 Texas Cash-Out Refinance Transaction 10 Minimum/imum Loan Amounts 10 Transaction Types 10 Subordinate Financing 11 Temporary Buy-downs 11 Contributions by Interested Parties/Concessions 11 Number of Loans per Borrower 11 Limitation on Real Estate Owned 11 Age of Documents 12 UNDERWRITING Credit History 12 Trade-line Requirements 12 Debt Ratios 12 Installment/Student Loans 12 Revolving debts/income/assets 13 Gifts 13 Payment Shock

2 TABLE OF CONTENTS Reserve Requirements 14 Housing History 14 Revolving/Installment Credit 14 Judgments, Liens, Charge-offs, Collections, Consumer Credit Counseling/Bankruptcies/Foreclosures 14 Re-Established Credit, Credit Score Determination 15 Derogatory Credit, Limited/No Credit History, Past due Accts 15 Employment History 15 Full/Alt, Stated Income, No Ratio, No Doc criteria PROPERTY/APPRAISAL Appraisal Requirements 17 Homes Listed for Sale, Land Value 17 Acreage, Rural Properties 18 Condo Project Determination 18 Non-Warrantable Condominiums Condo conversions Condo-Hotels 20 Leasehold, Zoning, Water Supply, Septic 21 Private Roads, Multiple Dwellings 21 CLOSING Escrows/Impounds 21 EXHIBITS - Product Matrices Borrower Paid M.I. >80% LTV Primary Residence Purchase & Rate-Term Refinance 22 Borrower Paid M.I. >80% LTV Primary Residence Cash Out Refinance 23 80% LTV Primary Residence Purchase & Rate-Term Refinance 24 80% LTV Primary Residence Cash Out Refinance 25 80% LTV Second Home Purchase & Rate-Term Refinance Cash Out Refinance 26 80% LTV Second Home Cash Out Refinance 27 80% LTV Investment Purchase 28 80% LTV Investment Refinance 29 80% LTV Non-warrantable Condos (Primary, Second Home, and Investment Purchase & Rate-Term) 30 80% LTV Condo-Hotel (Primary, Second Home or Investment Purchase & Rate-Term Refinance 31 2

3 PRODUCT DESCRIPTION MARKETING FEATURES AMORTIZATION TERMS A 30-Year Conforming and Non-Conforming conventional 6-Month LIBOR ARM mortgage product. The loan is fixed for the first 6-Months and then rolls into a 6-Month LIBOR ARM for the remainder of the loan term. A 30-Year Conforming and Non-Conforming conventional 3/1, 5/1, 7/1 or 10 year LIBOR ARM mortgage product. The loan is fixed for the first 3, 5, 7 or 10 year and then rolls into a 1-Year LIBOR ARM for the remainder of the loan term. This product is Prime in credit requirements with a minimum Credit Score of 640 required (see product matrices for minimum applicable credit scores). Refer to product matrices for complete LTV, loan amount & Credit Score parameters Four (4) documentation styles: Full/Alt, Stated, No Ratio and No Doc Loans to $2MM 100% CLTVs on Full Doc & Stated Income Interest-Only option is available 95% Stated Income loans with a 680 Credit Score 90% Stated Income loans with a 660 Credit Score Program #A616: 30-Year Term/Amortization. The loan is fixed for the first 6-Months then adjusts into a 6- Month LIBOR ARM. Program A616i: 30-Year Term/Amortization. The loan is fixed for the first 6-Months then adjusts into a 6- Month LIBOR ARM. The A616i allows for Interest-Only Payments. Program #A631: 30-Year Term/Amortization. The loan is fixed for 3-Years then adjusts into a 1-Year LIBOR ARM. Program #A631i: 30-Year Term/Amortization. The loan is fixed for 3-Year then adjusts into a 1-Year LIBOR ARM. The A631i allows for Interest-Only payments. Program #A651: 30-Year Term/Amortization. The loan is fixed for 5-Years then adjusts into a 1-Year LIBOR ARM. Program #A651i: 30-Year Term/Amortization. The loan is fixed for 5-Year then adjusts into a 1-Year LIBOR ARM. The A651i allows for Interest-Only payments. Program #A671: 30-Year Term/Amortization. The loan is fixed for 7-Years then adjusts into a 1-Year LIBOR ARM. Program #A671i: 30-Year Term/Amortization. The loan is fixed for 7-Year then adjusts into a 1-Year LIBOR ARM. The A671i allows for Interest-Only payments. Program #A611: 30-Year Term/Amortization. The loan is fixed for 10-Years then adjusts into a 1-Year LIBOR ARM. Program #A611i: 30-Year Term/Amortization. The loan is fixed for 10-Years then adjusts into a 1-Year LIBOR ARM. The A671i allows for Interest-Only payments 3

4 ARM PLAN CODES 6 Month/6 Month LIBOR ARM o IA616 o IA616i (Interest-Only option) 3/1 LIBOR ARM o IA631 o IA631i Interest-Only option) 5/1 LIBOR ARM o A651 o A651i (Interest-Only option) 7/1 LIBOR ARM o A671 o 671i (Interest-Only option) 10/1 LIBOR ARM o A611 o 611i (Interest-Only option) ASSUMABILITY Not allowed PREPAYMENT PENALTY Loan programs are offered without a Prepayment Penalty and with a 3-Year Pre-Payment Penalty. See rate sheet for details. Prepayment Option: 36-Month Prepayment Penalty The Prepayment Penalty is a soft penalty. The Note Holder will waive the penalty if the prepayment is in connection with the sale of the property to an unrelated Third Party. The penalty is 6-Months interest if any prepayment is made within any 12-Month period that exceeds twenty (20) percent of the original principal amount of the loan. Texas Refinance Requirements: Loans subject to Article XVI Section 50 (a) (6) of the Texas Constitution are not permitted. UNDERWRITING METHODS AND DELEGATION Traditional Underwriting or ExpressLoan TM Underwriters are delegated to $1,000, Loans > $1,000, to $1,500,000 require a second underwrite/counter signature from the Regional Operations Manager. Loans > $1,500,000 must be submitted to the investor for prior underwriting approval. 4

5 MORTGAGE INSURANCE Mortgage Insurance is required on all loans with an original LTV of greater than 80%. Coverage requirements are as follows: o For properties other than Non-warrantable Condos: Coverage: 30 Year % 12.00% % 25.00% % 30.00% o For Non-warrantable Condos: MI COVERAGE for Non-Warrantable Condos LTV MI Coverage % 30% % 25% % 20% Notes: M.I. companies will issue certificates on a case by case basis only Financed single premium (FSPMI) and/or Lender Paid premium is not allowed ADJUSTABLE RATE INFORMATION Index o 6-Month LIBOR o 1-Year LIBOR First Adjustment Cap o 6 Mo/6 Mo ARM A616 & A616i: The first adjustment may change the previous interest rate by no more than 1% up or down. o 3/1 ARM A631 & A631i: The first adjustment may change the previous interest rate by no more than 2% up or down. o 5/1 ARM A 651 & A651i: The first adjustment may change the previous interest rate by no more than 5% up or down. o 7/1 ARM A671 & A671i: The first adjustment may change the previous interest rate by no more than 5% up or down. o 10/1 ARM A671 & A611i: The first adjustment may change the previous interest rate by no more than 5% up or down. Subsequent (Periodic) Adjustment Cap o 6 Mo/6 Mo A616 & A616i: Each subsequent adjustment may change the interest by no more than 1% up or down. o 3/1 ARM A631 & 631i: Each subsequent adjustment may change the interest by no more than 2% up or down. o 5/1 ARM A651 & 6531i: Each subsequent adjustment may change the interest by no more than 2% up or down. o 7/1 ARM A671 & 671i: Each subsequent adjustment may change the interest by no more than 2% up or down. o 10/1 ARM A671 & 671i: Each subsequent adjustment may change the interest by no more than 2% up or down. Continued on next page 5

6 Continued from previous page Lifetime Cap o 6 Mo/6 Mo ARM A616 & A616i: The lifetime cap is 6% over the initial Note rate. o 3/1 ARM A631 & 631i: The lifetime cap is 6% over the initial Note rate. o 5/1 ARM A651 & 651i: The lifetime cap is 5% over the initial Note rate. o 7/1 ARM A671 & 671i: The lifetime cap is 5% over the initial Note rate. o 10/1 ARM A671 & 671i: The lifetime cap is 5% over the initial Note rate. Interest Rate Floor o The rate floor is the margin 2.25% First Interest Rate Change Date o Five (5) months from the first payment due date. o Thirty-five (35) months from the first payment due date. o Fifty-nine (59) months from the first payment due date. o Eighty-three (83) months from the first payment due date. o One hundred nine-teen (119) months from the first payment due date Subsequent Interest Rate Change Date o Every 6-Months after the first interest rate change date. o Once every 12-Months after the first interest rate change date. Conversion to Fixed Rate o Not allowed Qualifying rate for A616/A616i LIBOR ARM product only: o LTV/CLTV > 75%, qualify at Note Rate + 2% o LTV/CLTV < 75%, qualify at the Note Rate INTEREST- ONLY FEATURE Interest-Only Feature Available on the following programs: o A616i, A631i, A651i, A671i and A611i Payments of Interest-Only are allowed for the first 10-Years. The Interest-Only monthly payment is calculated each month based on the current balance. If borrower makes voluntary prepayments of principal during Interest-Only Period, the subsequent monthly payments will be based on the lower principal balance. Fully amortizing for the remaining 20-Year term. No negative amortization. o Interest Only Requirements: A minimum credit score of 640 is required for any Doc Type (No additional Credit Score requirements) Use the Interest-Only payment, along with all appropriate monthly tax and insurance escrows, HOA dues, etc. to qualify. When Mortgage Insurance is required, constant renewal premiums are required o Texas Refinance Requirements: Loans subject to Article XVI Section 50 (a) (6) of the Texas Constitution are not permitted. 6

7 ELIGIBLE MORTGAGOR Non-Occupant/ Co-Borrower Not permitted Corporations and Partnerships o Not Allowed Non-Borrowing Spouse: o The Security instrument must be signed by Non-borrowing spouse where required by state law to create a valid lien. Non-Arms Length Transactions: o Non-Arms Length transactions are generally not acceptable. o Occurs when a personal or business relationship exists between the borrowers and the builder or seller. These transactions include: o Family sales or transfers o Corporate sales or transfers o Mortgagors employed in the real estate or construction trades who are involved in the construction, financing, or sale of the subject property o Some transactions involving principals or a seller or other vendor (such as an appraiser, settlement agent, title company, etc.) who is involved in the lending process of the subject property o If borrowers are purchasing a property from a builder who is purchasing the borrowers existing residence Non-Arms length transactions with a family member: o Are generally acceptable if the family member or relative is the borrowers spouse, child, parent, or any other individual related to the borrowers by blood, adoption, or legal guardianship. o An executed purchase or sales agreement between the purchaser and the family member is in the loan file. o The source and ownership of funds for the down payment, closing costs, and reserves are well documented in the loan file. o The appraised value of the property is well supported, particularly for gifts of equity or gifts of more than 20% of the LTV. U.S. Citizens Permanent Resident Aliens: o Made under the same terms as a U.S. citizen (All Doc types are allowed). o Must hold acceptable evidence of permanent residency issued by the U.S. immigration and Naturalization Service (I.N.S). Proof of permanent residency acceptable documents: Alien registration receipt card I-151 (referred to as a Green Card ) Alien registration receipt card (Resident Alien card) I-1551 that does not have an expiration date on the back (also referred to as a Green Card ) Alien registration receipt card (Conditional resident alien card) I-551 that has an expiration date on the back, as long as it is accompanied by a copy of a filed INS form I-751. An unexpired foreign passport that contains an unexpired stamp reading processed for I-551. Temporary evidence of lawful admission for permanent residence. Valid until (mm-dd-yy). Employment authorized. Non-Permanent Resident Aliens: Allowed (except for Condo Hotel transactions) based on the following: o Non-Permanent resident alien transactions are eligible and can be made under the same terms as a U.S. citizen as long as (1) one borrower is a U.S. citizen or Permanent Resident alien. o The Non-Permanent resident Alien borrower must meet all of the following requirements: Two years employment in the U.S. Two years credit history Two years residence history Established asset base in the U.S. Funds from outside the U.S. are not acceptable. Income and residency in the U.S. must be likely to continue for at least three years. Continued on next page 7

8 Continued from previous page. OCCUPANCY o All files must contain evidence the borrower is lawfully permitted to reside in the United States. Borrowers with one of the following Visa status are generally considered lawful non-permanent resident aliens: H-1B, H-2A, H-2B, H-3, L-1, E-1, G and TN or TC NAFTA series. Borrower must meet all other borrower eligibility requirements If all borrowers on the transaction are Non-Permanent Resident aliens, the following restrictions apply: Full Doc: Owner-Occupied or Second home transactions loan Amount $1,000,000 Purchase & Rate- Term Refi max LTV/CLTV of 90/90% Cash Out LTV/CLTV of 70/70% Stated/No Ratio: loan amount $750,000 Owner Occupied Purchase & Rate-Term Refi max LTV/CLTV of 90/90% Second Home Purchase & Rate-Term Refi max LTV/CLTV of 75/75% Investment property NOT allowed Cash Out is NOT allowed No Doc: loan amount is $650,000 Owner Occupied Purchase and Rate-Term Refi max LTV/CLTV of 90/90% Investment property NOT allowed Second Homes NOT allowed Cash Out is NOT allowed Owner-Occupied Primary Residences: o U.S. Citizens o Permanent resident aliens o Non-permanent resident aliens Owner-Occupied Second/ Vacation Homes o U.S. Citizens o Permanent resident aliens Non-Owner Occupied Homes o U.S. Citizens o Permanent resident aliens 8

9 ELIGIBLE PROPERTY Attached/Detached Single Family (1-4 unit) Warrantable Condominiums: Low Rise no restrictions, High Rise with LTV s <= 80% Condo conversions Non-Warrantable Condos Condotels (also known as Condo-Hotels) Attached/Detached PUD Rural Properties (limited to 90% max LTV), see page 18 for additional details Refer to Non-warrantable Condominiums and Condo-Hotel Property Section and specific matrices for specific property eligibility details. INELIGIBLE PROPERTY PROPERTY LIMITATIONS Houseboats Dwellings containing more than 4 units (E.G. 5 plex) Timeshares or segmented ownership projects Vacant land Properties located in a coastal barrier resource system, federally declared wetlands or other federally protected areas. Properties that are landlocked Properties which represent an illegal use under zoning regulations Properties that are subject to hazards, noxious odors, etc. Properties on Native American Reservations Properties with less than 750 square feet (600 square feet for condos) Coops Manufactured Homes and other Factory Built Housing not eligible Properties over 10 acres Log Homes, Earth Homes, Geodesic Domes, Timeshares Agricultural/Commercial or Industrial Zoning Mixed-Use Properties Properties without full utilities and/or not accessible year round Refer to Non-warrantable Condominiums and Condo-Hotel Property Section and specific matrices for specific property eligibility details. Condos o LTVs > 80% must be Primary Residence or Second Homes. o LTVs < 80% are available for Primary Residence, Second Homes and Investment Properties. GEOGRAPHIC RESRICTIONS All state in which lender is licensed Loans in Alaska are not permitted 9

10 TEXAS CASH-OUT Loans subject to Article XVI Section 50 (a) (6) of the Texas Constitution are not eligible for financing under this program. MAXIMUM/MINIMUM LOAN AMOUNT $30,000 minimum loan amount $1,500,000 maximum loan amount See attached matrices for loan amounts as they relate to LTV and Credit Score TRANSACTION TYPES Purchase transactions: Must adhere to standard FNMA guidelines except as noted in the Program Matrix. Rate/ Term Refinance: o imum cash back to the borrower is limited to 2% of the loan amount, not to exceed $2,000. o Reasonable and customary closing costs may be included in the loan amount. Generally, the cost should not exceed 5% of loan amount. o The LTV is based on the current appraised value. o A refinance that includes the payoff of a second lien with less than 12 months seasoning will be considered cash back to the borrower with the following exceptions: o A refinance of a first mortgage and subordinate lien that were recorded simultaneously will be treated as a rate/ term refinance, as long as the HUD-1 shows proceeds were applied to the purchase of the property with evidence of no cash back to the borrower. o The subordinate lien was used for documented home improvements o When a second lien in the form of an equity lien of credit is being paid off, the previous 12-Month history should be reviewed and if total draws exceed $2,000 during the 12-Month period, it is considered cash-out. o If the unseasoned Second lien is subordinated to the new loan, is considered a Rate/term refinance. Cash-Out Refinance: o o imum cash-out is based on LTV see program matrix. If the borrower has taken equity out of the property within the last 12-Months, either through a First lien or Subordinate lien(s) on the subject property, that cash is considered when determining the maximum cash-out limitations. If the borrower has owned the property for less than 12-Months, the LTV is based on the lesser of the original purchase price plus documented cost of improvements, or the current appraised value. *Note: All transactions/files with Subordinate financing must include a copy of the note and Deed of trust. Additionally, any subordinating Jr. Lien must be documented with an acceptable Subordination agreement. 10

11 SUBORDINATE FINANCING Seller carry backs are not permitted. o Refer to the program matrix for CLTV limitations. Subordinate financing terms: o Requires monthly payment terms of at least Interest-Only; no negative amortization. o If not fully amortized, must have at least 5-Year maturity. o No interest rate buy down and secondary financing. o Subordinated financing not paid off in a refinance transaction must be subordinated and must not have negative amortization potential. *Note: All transactions/files with subordinate financing must include a copy of the note and Deed of trust. Additionally, any subordinating Jr. Lien must be documented with an acceptable subordination agreement. TEMPORARY BUYDOWNS Not available CONTRIBUTIONS BY INTERESTED PARTIES Primary Residence : o LTVs > 90%, the maximum contribution is 3% o LTVs < 90%, the maximum contribution is 6% Second/ Vacation home: o LTVs > 80%, the maximum contribution is 3% o LTVs < 80%, the maximum contribution is 6% Investment Property: o 2% for investor transactions *Note: Contributions by interested parties are not permitted for No Doc loans with LTV s > 80%. NUMBER OF LOANS TO ONE BORROWER The number of loans to one borrower is limited to a maximum of four (4) loans, or loans having an aggregate balance of $2 million or more. LIMITATIONS ON REAL ESTATE OWNED A borrower may have up to 19 financed properties, including the subject property and a primary residence. Joint Ownership is considered total ownership Commercial properties of five (5) or more units are excluded from limitations. 11

12 AGE OF DOCUMENTS UNDERWRITING Credit documentation may not be over 120 days old for existing construction and 180 days old for new construction (with the exception of W-2 and tax returns). Appraisals require a re-certification of value after 120 days for existing construction and 180 days for new construction (the appraisal my not be over 12-Months old). Credit History: o A 24-month credit history is required. o At least one (1) revolving, installment or mortgage trade-line must be rated for 24 months. o Borrowers who own their property free and clear are subject to exception approval. Housing History: 12 month housing history is required. Verification of Rent (VOR): o A VOR is acceptable from professional management companies or private parties for Full, Stated and No Ratio loan documentation. No Doc loans require canceled checks if paid to private parties. o Borrowers with less than a 12-Month residential housing history will be considered case-by-case subject to a loan exception. Trade-line Requirements o Three (3) open and active traditional trade-lines (not including housing) with 12-Months history are required. o Open and Active Trade-lines Defined: Full Doc & Stated Income: Trade-lines must be open and active for a minimum of 12-Months. There must be activity on a minimum of three (3) trade-lines (not including housing) within the last 12-Months. No Ratio & No Doc: Trade-lines must be open and active for a minimum of 12-Months. There must be activity on a minimum of three (3) trade-lines (no including housing) within the last 6- Months. The activity requirement is measured by comparing the date of last activity with the credit report date. Collections, judgments, charge-offs, repossessions, foreclosures, bankruptcy payment plans, and consumer credit counseling do NOT count as trade-lines. Alternative credit is not acceptable. If not filing joint, each applicant borrower must meet the above tradeline requirements. Deferred Student Loans: o Not considered as an active trade-line o Payment can be excluded with evidence of a minimum of 12-Months deferral. Debt Ratios: o imum debt ratio is 50%. Installment Debts: o Included as monthly obligation if more than 10 payments remain. o All auto lease payments are included as monthly obligation regardless of the number of payments remaining on the lease o Debts secured by a financial asset are not included as an obligation (401K, Keogh, etc). o Alimony/Child support with more than ten (10) payments remaining. Note: Time shares are considered installment debts vs. mortgage/real estate obligations. Continued on next page. 12

13 (Continued from previous page) Revolving Debts: o Included as monthly obligation regardless of the number of payments remaining. o The monthly payment verified on the credit report may be used as the payment in calculating the total debt ratio. o If the payment amount is not verified on the credit report, the payment disclosed by the borrower or 5% of the outstanding balance can be used. o Accounts must be current at the time of closing. o If revolving debts are being paid off, the debts will not be calculated into the qualifying Debt to Income ratio. o Cash-Out proceeds can be used to pay off revolving debt and will not affect qualifying ratios. Income: o Use standard FNMA Documentation guidelines for Full Doc loans. o Stated Income loans: Income must be reasonable to borrower s employment. Assets: o Use standard FNMA documentation guidelines for Assets (except on No Doc loans where assets are not disclosed or verified). o Assets must be reasonable to borrower s stated income. Gifts: o Acceptable under the following: Donor must be family member or a person with a significant prior relationship. Gift letter is obtained indicating the amount of the gift, date gift will be given, donor s name and address, relationship to borrower, and that no repayment is expected. Borrower makes required contribution toward down payment from own savings funds. The funds are verified in either the borrower or donor s account. Document transfer of funds from donor to borrower. Stated Income with an LTV /CLTV < 70% on Owner-Occupied Properties Full Doc: Second Homes with an LTV/CLTV < 80% o Unacceptable under the following: All Condo-Hotel transactions All Refinance transactions Investment Properties No Ratio Loans % CLTVs Reserve requirements with CLTVs over 95% Cash to close for CLTVs over 95% Standard Payment Shock guidelines: o 150% for LTVs > 80% o 200% for LTVs < 80% o Full Doc loans: Payment shock calculation is not required o Stated Income loans with credit scores > 720: Payment shock calculation is not required. Payment Shock calculation o o How payment shock is calculated: PITI payment for new loan subtracted by current housing expense divided current housing expense (multiplied by 100 and stated as a percent). Example: New PITI payment $2,500, current payment $1,000. Calculation: $2,500 $1,000/$1,000 = 1.50 multiplied by 100 = 150%. Continued on next page. 13

14 (Continued from previous page) Reserve Requirements - 2-Months PITI for all transaction except the following requiring 6-Months PITI: o Second Homes with LTVs > 80% o Condo-Hotels (Condotels) > 75% LTV o Investment Properties o Stated Income loans with LTVs > 80% o No Ratio loans with LTVs > 80% o Stated Income loans CLTV s > 95% with a combined loan amount greater than $850,000. o When trailing spouse income is used to qualify. o Note: Proceeds from Cash Out Refinances may be used to meet cash reserve requirements. Proper underwriting due diligence must be exercised for Stated Income transactions to ensure the income and assets are reasonable for the Borrower s profession. Reserve Requirement Exceptions (Not applicable to Condo-Hotels ; o 2-Month s PITI, in lieu of 6-Months PITI, may be allowed with compensating factors (subject to exception pricing) on the following: All Doc types: 680 credit score to 90% LTV All Doc types: 700 credit score to 95% LTV Housing History: o 0x30 (no lates) in the last 12-Months. 1x30 in months is acceptable. Revolving /Installment Credit: o Credit scores greater than or equal to Not a factor in loan decisions. o Credit scores less than 660: 30-Day revolving lates up to 3x30 in the last 12-Months will not be a factor in loan decisions. More than three 30-Day lates in the last 12-Months requires a corporate exception approval. o 1x60 or greater within the last 12-Months will be subject to corporate exception approval. o Any installment lates within the last 12-Months will be subject to corporate exception approval. Judgments, Liens, Charge-offs, Collections: o Minor collections under $500 per occurrence to a $1,000 aggregate are acceptable within the last 24- Months (from filing date). o Judgments, Liens, Charge-off s, Collections older than 24-Months will be allowed subject to the following restrictions: Up to four (4) incidences allowed. Five (5) or more are not allowed. Up to $5,000 aggregate. Greater than $5,000 is not allowed. Any deviations from these restrictions are subject to a corporate exception approval. A full credit explanation is required. Must be paid prior to close. Consumer Credit Counseling: o Must be fully completed for a minimum of 2-Years. Bankruptcies: o Must be fully discharged for a minimum of 4-Years with good re-established credit (see definition below). o Obtain copies of the bankruptcy petition, schedule of debts and discharge. o Letter of explanation from the borrower. Foreclosure/Deed in Lieu: o Must be completed for a minimum of 5-Years prior to application with good reestablished credit (see definition below). o Mortgages with 120-Day late payments will be treated the same as a Foreclosure. o Foreclosures that were started but now satisfied will be treated the same as a Foreclosure. Continued on next page 14

15 Continued from previous page Re-Established Credit: o Use Trade-line Requirements on Page 12. Three (3) open and active trade -lines with 12-Months history from the credit report date. o No credit derogatory trade-lines in last 24 months after Bankruptcies or Foreclosures. Determining the Credit Score: o Select the credit score for each borrower by using the following process The lower score of two (2) repositories; or The middle score of three (3) repositories o Once the score is selected for each borrower, it is used for loan qualification as follows: For Full Doc Loans-the primary borrower s score is used. For Stated Income, No Ratio, or No Doc loans, the lowest selected score among all borrowers is used. o A primary borrower is defined as the borrower with the highest verified income. A non-occupant coborrower cannot be considered the primary borrower. If more than one (1) score is supplied from the same repository, use the lower score o All borrowers must have at least a 620 minimum credit score even if the primary borrower s score is used. o Refer to the Program Matrices for specific credit score requirements relating to LTV, CLTV and loan amount. Limited or No Credit History: o Not permitted Derogatory Credit: o Requires Credit Explanation Past Due Accounts: o Must be paid current or paid off at closing. Employment History: o Both salaried and self-employed borrowers must have a consecutive 2-Year history of employment. Job changes are acceptable as long as they are within the same line of work. o Documentation Types: Full/ Alternative Documentation Stated Income No Ratio Documentation No Doc Documentation Full/ Alternative Doc criteria: o Salaried Borrowers: 1003 application Written Verification of Employment (VOE) or; Two (2) pay-stubs (the most recent and one no older than 30-Days from note signature date), and 2- Years most recent W-2 s o Non-Salaried Borrowers: 2-Years tax returns, including all schedules, and YTD P & L, and; Current balance sheet. IRS 4506 is required o Employed by Relative: 2-Years tax returns. o Assets: Verification of deposit (VOD) with 2-Months average balances, or 2-Months most recent bank statements. Continued on next page 15

16 Continued from previous page Stated Income criteria: o Income stated on 1003 o Verbal VOE at time of closing. o Must have 2-Years continuous employment with same employer or an established and consistent source of income for two (2) continuous years. o Self-Employed borrowers require 2 years in same business & location. Exceptions to be reviewed on a case-by-case basis. o Passive income 1 used to qualify must be sourced and 3 years remaining term verified o Income must be reasonable for employment stated. o Income must be reasonable in relation to the verified assets. o Fixed-income borrowers allowed. o CPA certification or copy of business license for all S.E. borrowers. o IRS Form 4506 is not required. o Assets: VOD with 2-Months average balances or 2-Months most recent bank statements. Bank statements can NOT show income from automatic deposits No Ratio Documentation criteria: o No reference to income on 1003 o Employment information must be provided o Debt Ratios are not calculated o Verbal VOE with NO reference to income. o Must have 2-Years continuous employment with same employer or an established, consistent source of income for 2-Years. o Self-Employed borrowers require 2 years in same business & location. Exceptions to be reviewed on a case-by-case basis. o Passive income* used to qualify must be sourced 3 years remaining term verified o Fixed income borrowers allowed. o CPA certification or copy of business license for Self-employed borrowers. o IRS Form 4506 is not required. o Assets: VOD with 2-Months average balances, or 2-Months most recent bank statements. Statements can NOT show income from automatic deposits. No Doc Documentation criteria: o No reference to employment or income on 1003 or documentation in the loan file. o No debt ratios are calculated. o Daytime and evening telephone numbers are required for all borrowers. o IRS Form 4506 is not required. o Assets: No listing or verification of assets. 1 Note: PASSIVE INCOME (also known as Unearned Income) is defined as income that may not readily verifiable by an outside, independent third party source. Examples include: Dividend/interest income Trust income, Child support, alimony or separate maintenance Foster care Unemployment, disability, social security and other retirement income Rental income* Installment sales or land contract income * Although rental income is considered Passive Income, it is treated differently for Stated and No Ratio doc types. Sourcing and proving three year continuance is not needed for rental income, however the schedule of real estate must be completed in its entirety and the stated rental income must be reasonable. 16

17 PROPERTY/APPRAISAL Documentation Appraisal Forms: o Appraisal must be prepared for our company or approved broker only. If issued in another institutions name, must request an assignment. o Appraiser s license number must appear on appraisal. o Refer to Age of Documents section page 12. Required Appraisal Forms: 1 Unit Detached: Use the URAR FNMA Form 1004 and statement of limiting conditions and Appraisers certification (FNMA form 1004B). PUD: FNMA Form 1004 SFR Investment Properties: If the income is necessary for qualifying purposes, the following forms are required: Single-Family comparable Rent Schedule (FNMA Form 1007) Operating Income Statement (FNMA Form 216) Condos: Use the Appraisal Report Individual condominium or PUD unit (FNMA Form 1073) with statement of limiting conditions and Appraisers Certification (FNMA Form 1004B) 2-4 Units Properties: Use the Small Residential Income Property Appraisal Report (FNMA Form 1025) with the statement of limiting conditions and Appraisers Certification (FNMA Form 1004B). In addition, if income is necessary for qualifying purposes, an Operating Income Statement (FNMA Form 216) must be completed. o Subject to Repairs, Alterations or Conditions : The original Appraiser must complete and submit the Satisfactory Completion Certificate (Form 442) with a photo of the completed property. All Appraisals: o Three (3) photos: of front view, street scene and rear view. o Exterior building sketch showing dimensions and calculations. o Location map locating subject and comparables. o One (1) photo for each comparable. Statement of limiting conditions (Form 439). o Obtain a thirty-six (36) month chain of title that show transfer price and frequency. Appraisal Requirements - All Documentation Types: o Loan Amounts and Combined loan amounts (The total of the 1 st and 2 nd mortgage) $1,000,000: One (1) full appraisal is required. o Loan Amounts and Combined loan amounts (The total of the 1 st and 2 nd mortgage) > $1,000,000: Two (2) full appraisals are required. We must order the second appraisal from a national appraisal company. HOMES LISTED FOR SALE LAND VALUE Properties currently listed for sale, or listed within the past 6-Months are not eligible for refinance transactions. Case by case exceptions include: o Cash-Out is not allowed o Proof of canceled listing o Satisfactory letter from borrower detailing change in intention to sell. o The Lender s exception approval. The land value should not exceed 35% of the property value. If the land value exceeds 35%, the appraiser must include the reasons, state whether the land value is consistent with other homes in the area, and show evidence in the comparables. 17

18 ACREAGE Acceptable up to 10 acres. RURAL PROPERTIES Any Property indicated on the Appraisal as rural must comply with the following criteria: 10 Acres maximum 90% max LTV The primary use must be residential, not agricultural or otherwise providing a source of income. The site must be typical for surrounding properties with similar uses. If the subject contains excess acreage, the loan amount may be adjusted. The subject property must be within reasonable commuting distance to a metropolitan area. The subject property must be accessible by public roads and highways. The present use must be the highest and best use for the property. The condition, quality and use of outbuildings may be considered in determining the market value of the property. If the subject property contains nonresidential outbuildings which are not typical amenities, the loan amount may be adjusted. CONDO PROJECT DETERMINATION In order to accurately establish applicable program criteria, the determination for the project s warrantable or non-warrantable status must be made. NON-WARRANTABLE CONDOMINIUMS Refer to product matrices for maximum LTV s, CLTVs, Loan Amounts and Doc Types Loans can be originated in condominium projects that do not comply with the standard condominium warranties for minimum pre-sale requirements for maximum investor concentrations. Guides and requirements are as follows: o Purchase and Rate/Term only: Cash-out Refinances are not allowed o Full Documentation or Stated Income allowed o Owner-Occupied, Second Homes or Investment Properties o No one single entity may own more than 10% of the total number of units in the project o Our (closing lender s) total exposure limited to a maximum of 20% of the total project o Project s commercial space is limited to 15% of the gross square footage. Additional requirements are: Commercial use of the property must operate separately from the residential use The appraisal must support that mixed-use condos are common for the area If the commercial space is on the top floor, the business must have a separate elevator that is only for the commercial use. o High-rise projects (>4 stories) may be acceptable on a case-by-case basis (Continued on next page) 18

19 (Continued from previous page) o o o Pre-sale requirements are as follows: 33% of a legal phase 50% of the total number of units must be complete 50% of the common area and facilities within the project must be completed. Investor concentration: 70% of the units sold if the LTV is 80% or below 40% of the units sold if the LTV is above 80% Ineligible Projects. In addition to the ineligible property characteristics listed in page 9, ineligible non-warrantable condo projects include, but are not limited to the following characteristics Projects with less than ten (10) units (may be approved on a case-by-case basis) Condotel Houseboats Live-work type condominiums (usually used for artist s studio, workshops, factories or galleries Timeshare or segmented ownership project Multi-dwelling unit condominium. (A condo project that permits an individual to hold title to more than one dwelling unit with ownership of all units evidenced by a single deed of trust or mortgage). Project that is in litigation Non-conforming zoning project Kiddie condominium Own your own property. (Can be identified by the legal description giving the borrower the right to occupy a given unit, instead of actual ownership of the unit). CONDOMINIUM CONVERSIONS Projects currently under conversion or ones which have been converted within the past three years must meet the following requirements: o All rehabilitation work required for conversion must be completed in a workmanlike manner and be 100% complete. All common elements and facilities must be fully complete. o At least 70% of the total units in the project must have been conveyed or under contract to be sold to owner-occupant primary residents. o Primary residences or Second Home purchases only. o No one entity may own more than 10% of the total number of units in the project o Our (Closing Lender s) total exposure limited to a maximum of 20% of the total project o Unit owners must have sole ownership, interest in and rights to use all project facilities and common elements. The project must be covered by all applicable insurance coverage. o Control of the HOA must be turned over to the unit owners (no seasoning required) The appraisal must reflect market acceptance of condo conversions (I.E. comps must also be condo conversion) 19

20 CONDOTELS (CONDO-HOTELS) Defined: A Condotel is a project that has a rental or registration desk, short-term occupancy, food and telephone services and daily cleaning services. It is operated as a commercial hotel, even though the units are individually owned. Please refer to product matrices for maximum LTV s, CLTV s, Loan Amounts, Purposes, Occupancies and Doc Types. Full Documentation loans only Cash-Out Refinances are not allowed Non-permanent resident aliens, foreign nationals and non-occupant co-borrowers (on owner-occupied primary residence only) are not allowed Gift funds are not allowed Minimum six months cash reserves are required except if the LTV is less than or equal to 75%, then two months reserves are required. All Condotels are priced and underwritten to Investment Property guidelines subject to product matrix restrictions The following requirements apply: o The appraisal must specify that Condotels are common for the area and that resale marketing time is not over 6 months and that the market supports strong rental activity o Rental income from the Condotel may not be used to qualify the borrower in calculating the DTI o 75% of the units must be sold, closed or under contract for sale o The Condotel must have been in operation for a minimum of 2 years o Minimum square footage of the unit is 600 square feet o Commercial space is limited to 15% o Project must have a minimum of 20 units o Voluntary rental pools are acceptable only for 2 nd Homes and investment properties, mandatory rental pools are not acceptable o No one entity may own more than 10% of the total number of units in the project o Our (Closing Lender s) total exposure is limited to a maximum of 20% of the total project. o Condotel conversions are not acceptable. (E.G. properties originally constructed for use as hotels or motels are not acceptable) o Units must be separately metered. o The project must carry a minimum of $1,000,000 liability insurance policy Ineligible Condotels: In addition to the ineligible property characteristics listed in page 9, ineligible Condo-Hotel projects include, but are not limited to the following characteristics: o Condotel conversions o Less than 75% of the units are sold, closed or under contact for sale o Projects in operation less than 2 years o Unit is less than 600 sq ft o Commercial space exceeds 15% o Total number of units is less than 20 o A single entity owns more than 10% of the total number of units in the project o Projects that do not have separately metered utilities o Projects with mandatory rental requirements 20

21 LEASEHOLD MULTIPLE DWELLINGS ZONING Use FNMA guidelines Additional residential dwellings (guest house, carriage house, in-law unit, etc) must comply with local zoning regulations and be typical and common within the neighborhood. Any value for the additional dwelling must be supported by comparable sales. Industrial, agricultural or commercial zoning is not allowed. WATER SUPPLY Properties using alternative water supplies are acceptable provided the appraiser demonstrates that such water supply is typical for the immediate area. SEPTIC SYSTEM Septic tanks are acceptable provided the appraiser demonstrates typical for the immediate area. MULTIPLE DWELLINGS PRIVATE ROADS Additional residential dwellings (guest house, carriage house, in-law unit, etc) must comply with local zoning regulations and be typical and common within the neighborhood. Any value for the additional dwelling must be supported by comparable sales. CLOSING Property must have legally appropriate ingress and egress. Additionally, comps should have similar access. Escrows: o Please refer to state specific requirements. o Must conform to RESPA and reflected on the HUD-1. o Escrow Holdbacks/ Withholds: Evaluated on a case-by-case basis and subject to management approval. EXHIBITS See attached matrices for loan amounts, LTV and Credit Score parameters. 21

22 BORROWER PAID M.I. LTV > 80% MATRIX PURCHASE & RATE-TERM TERM REFINANCE > 80% LTV- Borrower Paid MI Doc Type Occupancy Units LTV CLTV Loan Amount Credit Score Full Primary % 95% $450,000 90% 90% $500, % 85% $650,000 FNMA 90% 90% Limits Full Second Home 1 90% 90% $400, Full Investment % 90% Stated, No Ratio, No Doc Stated, No Ratio, No Doc Primary 1-2 FNMA Limits % 95% $450, % 90% $500,000 85% 85% $650,000 Second Home 1 90% 90% $400, Condos: LTVs >80% must be Primary Residence or Second Homes

23 BORROWER PAID M.I. LTV > 80% MATRIX CASH-OUT REFINANCE / DEBT CONSOLIDATION > 80% LTV- Borrower Paid MI Doc Type Full Occupancy Units LTV CLTV Primary 1-2 Loan Amount 95% 95% $450,000 90% 90% $500,000 85% 85% $650,000 Cash-Out Credit Score $150, Full Second Home 1 90% 90% $400,000 $150, Stated, No Ratio, No Doc Stated, No Ratio, No Doc Primary % 95% $450,000 $150, Primary % 90% $500,000 $150, Primary % 85% $650,000 $150, Second Home 1 90% 90% $400,000 $150,

24 LTV PRIMARY RESIDENCE 1-4 Units PURCHASE & RATE-TERM REFINANCE 80% LTV- No MI required Full Documentation CLTV Loan Cash Out LTV CLTV Stated Income Loan Cash out 80% 100% $1,000,000 N/A 80% 100% $1,000,000 3 N/A 75% 90% $1,500,000 N/A 80% 100% $800,000 N/A 70% 90% $2,000,000 N/A 75% 90% $1,000,000 N/A 70% 80% $1,500,000 N/A 65% 65% $2,000,000 Note: Unless otherwise stated, minimum Credit Score is 640 LTV CLTV PRIMARY RESIDENCE 1-4 Units PURCHASE & RATE-TERM REFINANCE 80% LTV- No MI required No Ratio No Doc 3 Loan 80% 100% $650,000 4 Cash out LTV CLTV Loan Cash out 80% 100% $800,000 5 N/A 80% 80% $650,000 N/A 80% 95% $650,000 75% 90% $750,000 N/A 70% 70% $750,000 N/A 70% 80% $1,000,000 N/A 60% 60% $850,000 N/A 65% 65% $1,500,000 N/A 55% 55% $1,000,000 N/A 1. Primary Residence, Cash-Out refinances are permitted in Texas with the following restrictions: Single-Family Dwelling, maximum 80% LTV/CLTV, maximum loan amount $650, Minimum Credit Score of 680 is required if the CLTV is > 80% and Secondary Financing is present. 3. Minimum Credit Score of 680 is required. Refer to guidelines for any additional requirements for 1 st and 2 nd combinations. 4. Minimum Credit Score of 680 is required and available for 1 unit properties only. 5. Minimum Credit Score of 700 is required and available for 1 unit properties only. Note: Unless otherwise stated, minimum Credit Score is

25 PRIMARY RESIDENCE 1-4 Units CASH OUT REFINANCE 1 80% LTV- No MI required Full Documentation Stated Doc LTV CLTV Loan Cash out LTV CLTV Loan Cash out 80% 100% $650,000 $250,000 80% 90% $650,000 $300,000 80% 90% $750,000 $350,000 75% 80% $850,000 $400,000 75% 80% $1,000,000 $400,000 70% 80% $1,000,000 $500,000 65% 65% $1,250,000 $500, Primary Residence, Cash-Out refinances are permitted in Texas with the following restrictions: Single-Family Dwelling, maximum 80% LTV/CLTV, maximum loan amount $650, Minimum Credit Score of 680 is required if the CLTV is > 80% and Secondary Financing is present. 3. Minimum Credit Score of 680 is required. Refer to guidelines for any additional requirements for 1 st and 2 nd combinations. 4. Minimum Credit Score of 680 is required and available for 1 unit properties only. 5. Minimum Credit Score of 700 is required and available for 1 unit properties only. Note: Unless otherwise stated, minimum Credit Score is 640 PRIMARY RESIDENCE 1-4 Units CASH OUT REFINANCE 1 80% LTV- No MI required No Ratio No Doc 2 LTV CLTV Loan Cash out LTV CLTV Loan Cash out 80% 90% $400,000 $200,000 80% 80% $400,000 $200,000 75% 75% $650,000 $250,000 70% 70% $650,000 $250,000 70% 70% $750,000 $250,000 60% 60% $750,000 $250,000 60% 60% $1,000,000 $300,000 50% 50% $1,000,000 $300, Primary Residence, Cash-Out refinances are permitted in Texas with the following restrictions: Single-Family Dwelling, maximum 80% LTV/CLTV, maximum loan amount $650, Minimum Credit Score of 680 is required if the CLTV is > 80% and Secondary Financing is present. 3. Minimum Credit Score of 680 is required. Refer to guidelines for any additional requirements for 1 st and 2 nd combinations. 4. Minimum Credit Score of 680 is required and available for 1 unit properties only. 5. Minimum Credit Score of 700 is required and available for 1 unit properties only. Note: Unless otherwise stated, minimum Credit Score is

26 SECOND HOME 1 PURCHASE & RATE-TERM REFINANCE 80% LTV- No MI required Full Documentation Stated Income LTV CLTV Loan Cash out LTV CLTV Loan Cash out 80% 90% $750,000 N/A 80% 90% $650,000 N/A 75% 75% $1,000,000 N/A 75% 90% $750,000 N/A 70% 70% $1,500,000 N/A 70% 70% $1,000,000 N/A 1 Second Homes limited to 1 unit properties only Note: Unless otherwise stated, minimum Credit Score is 640 SECOND HOME 1 PURCHASE & RATE-TERM REFINANCE 80% LTV- No MI required No Ratio No Doc LTV CLTV Loan Cash out LTV CLTV Loan Cash out 80% 80% $500,000 N/A 80% 80% $400,000 N/A 75% 75% $650,000 N/A 70% 70% $500,000 N/A 70% 70% $850,000 N/A 60% 60% $750,000 N/A 1 Second Homes limited to 1 unit properties only Note: Unless otherwise stated, minimum Credit Score is

27 SECOND HOME 1 CASH OUT REFINANCE 80% LTV- No MI required Full Documentation Stated Doc LTV CLTV Loan Cash out LTV CLTV Loan Cash out 80% 90% $500,000 $300,000 80% 90% $500,000 $250,000 75% 75% $750,000 $350,000 75% 80% $650,000 $300,000 70% 75% $1,000,000 $400,000 70% 75% $1,000,000 $400,000 1 Second Homes limited to 1 unit properties only Note: Unless otherwise stated, minimum Credit Score is 640 SECOND HOME 1 CASH OUT REFINANCE 80% LTV- No MI required No Ratio 2 No Doc 2 LTV CLTV Loan Cash out LTV CLTV Loan Cash out % 80% $400,000 $250,000 80% 80% $400,000 $150,000 75% 75% $650,000 $300,000 70% 70% $450,000 $200,000 65% 65% $850,000 $400,000 55% 55% $650,000 $250,000 Second Homes limited to 1 unit properties only Minimum required Credit Score is 700 Note: Unless otherwise stated, minimum Credit Score is

28 INVESTMENT PROPERTY 1-4 Units PURCHASE & RATE-TERM REFINANCE 80% LTV- No MI required Full Documentation Stated Doc LTV CLTV Loan Cash out LTV CLTV Loan Cash Out 80% 90% $650,000 N/A 80% 90% $500,000 N/A 75% 75% $800,000 N/A 75% 90% $650,000 N/A 70% 70% $1,000,000 N/A 70% 70% $1,000,000 N/A 1 2 Minimum 680 Credit Score Required Minimum 700 Credit Score Required Note: Unless otherwise stated, minimum Credit Score is 640 INVESTMENT PROPERTY 1-4 Units PURCHASE & RATE-TERM REFINANCE 80% LTV- No MI required No Ratio No Doc 1 LTV CLTV Loan Cash out LTV CLTV Loan Cash Out 80% 80% $450,000 N/A 80% 80% $400,000 N/A 70% 70% $500,000 N/A 70% 70% $450,000 N/A 65% 65% $750,000 N/A 65% 65% $650,000 N/A 1 2 Minimum 680 Credit Score Required Minimum 700 Credit Score Required Note: Unless otherwise stated, minimum Credit Score is