FHLMC Relief Refinance Open Access

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1 The Federal Housing Finance Agency (FHFA) Home Affordable Refinance Program ( HARP ) is designed to assist borrowers who have demonstrated an acceptable payment history on their existing Freddie Mac mortgage loan, but may not have been able to refinance to obtain a lower payment or move to a more stable product. Only Rate/Term Refinance transactions are eligible (E.G. Limited cash out refinance) paying off the existing first Freddie Mac mortgage, financing of closing costs, and no more than $250 cash back to borrower. Freddie Mac loan look up table: is provided for reference purposes only. LP will determine if the existing loan is eligible for the program. The existing loan must have been owned by Freddie Mac prior to June 1, Refer to Eligibility topic for additional requirements. FHLMC Relief Refinance Open Access Primary Residence Rate & Term Refinance Property Type LTV/CLTV Minimum Credit Score Max DTI 1 4 Unit 125%/125% %/105% % Second Home Property Type LTV/CLTV Minimum Credit Score Max DTI 1 Unit Only 105%/105% % Investment Property Property Type LTV/CLTV Minimum Credit Score Max DTI 1 4 Unit 105%/105% % 1

2 LP Open Access The new loan must have an application date on or before December 31, 2015 Maximum Loan Amounts Conforming Units Contiguous States Alaska, Hawaii 1 Unit $417,000 $625,500 2 Unit 3 Unit 4 Unit $533,850 $800,775 $645,000 $967,950 $801,950 $1,000,000 Super Conforming Maximum Super Conforming loan limits differ by County, but can never exceed these amounts. 1 Unit $625,500 $938,250 2 Unit $800,775 $1,000,000 3 Unit $967,950 $1,000,000 4 Unit $1,000,000 $1,000,000 2

3 TOPIC APPRAISAL REPORTS Updated 10/21/13 CRITERIA There are two options for Property Valuation requirements Option 1 Home Value Explorer HVE For the HVE to be valid, the following is required 1 2 Unit Attached or Detached dwelling, Unit in a Condo Project or PUD Property cannot be manufactured Home, dwelling on a leasehold Estate, or Super Conforming Loan Amount The Forecast Standard Deviation (FSD) from the HVE is 0.20 or less and the Confidence Score is H (High) or M (Medium) The HVE cannot be more than 120 days of age at the note date. Leaseholds must be evaluated by an appraisal (HVE not permitted) A fee of $50 is required for the use of the HVE PIA Option 2 New Appraisal Appraisal with an interior & exterior inspection that meets FHLMC requirements ASSUMPTIONS Reminder: Appraisal is subject to SPM disaster policy Not allowed AUTOMATED UW AUS is required All Loans must have a LP Open Access Accept approval Loan Prospector A Minus findings ARE NOT acceptable Addition or Deletion of Title Borrower(s) on the existing mortgage (or current borrower if the existing mortgage was assumed) must be identical to the borrower(s) on the new mortgage except: A Borrower obligated on the Note of the Mortgage Loan being refinanced may be omitted from the Note. A new Borrower may be added to the new loan, provided the existing borrower is retained. Non Occupying borrower may not be added to a primary residence. In ALL cases, at least one Borrower (s) from the Mortgage being refinanced must be retained Borrower Eligibility Borrower(s) on the existing mortgage (or current borrower if the existing mortgage was assumed) must be identical to the borrower(s) on the new mortgage except: A Borrower obligated on the Note of the Mortgage being refinanced may be omitted from the Note. A new borrower may be added to the new loan, provided the existing borrower is retained. Non occupying borrower(s) may not be added to a primary residence. In all cases, at least one Borrower(s) from the Mortgage being refinanced must be retained. Properties vested in trusts are permitted for all occupancy types in accordance with FHLMC Trust guidelines. 3

4 The Open Access Mortgage must result in at least 1 of the following: Borrower Benefit Reduction in the interest rate of the First Lien Mortgage Replacement of an ARM, Initial Interest Mortgage (or any Mortgage with an initial interest only period) or a Balloon/Reset Mortgage with a fixed rate, fully amortizing mortgage Reduction in the amortization term of the New Mortgage Loan (the new refinance Mortgage Loan may have a longer amortization term than the existing Mortgage if at least one of the other requirements is met), or Reduction in the monthly Principal and Interest Payment of the First Lien Mortgage Loan Prospector is unable to determine if FHLMC requirements are met, therefore the Underwriter must represent and warrant that the borrower is receiving a benefit from refinancing as stated in FHLMC guidelines. Buydowns Not Allowed Cash Back Borrower may receive cash back at closing $ Any excess cash representing the difference between the estimated and the actual payoff of the original loan plus closing costs and prepaid fees that is more than $250 must be applied as a principal curtailment to the new mortgage or a reduction in the actual loan amount. Cash Reserves /Assets As per LP findings and Relief Refinance Open Access requirements. Condo or PUD project reviews: Not required. Limited Reps & Warrants: UW is required to represent and warrant: Condo/PUD Approvals Property is not in a condominium hotel or motel or cooperative hotel or motel. Property is not in a houseboat project or a timeshare or segmented ownership project Insurance requirements are met If an appraisal report is obtained, and indicates the subject project consists of an in complete conversion and/or there is a presence of a rental office for unconverted apt. units, the project will not be eligible for Open Access regardless of LP findings. Condo/PUD type: Condo type V and PUD type E must be selected and accurately reflected on 1008 CREDIT All loans must have a LP Open Access findings Accept Each Borrower must have a minimum of 1 score > the Minimum Fico Score on page 1 of the matrix as required per LTV/CLTV LP performs its standard credit risk assessment for Open Access Loans LP will not apply FICO score requirement for Relief Refinance Open Access: UW must ensure the min FICO scores are met for applicable Product Matrix Loans with Bankruptcy, Foreclosure, Deed in lieu, and Preforeclosure Sales must comply with FHLMC waiting period and re establishment of credit requirements for significant derogatory credit events 4

5 DEED RESTRICTIONS None Allowed not even age restrictions DTI Ratios Maximum 50% DTI NO EXCEPTIONS Documentation All income used for qualifying must, at a minimum, be documented following FHLMC Guide Chapter 24, regardless of the documentation level returned by Loan Prospector. Please refer to the FHLMC Open Access Product Guide for full details. A Verbal Verification of Employment is required within 3 business days prior to the Note Date for employed borrowers. For self employed borrower, the Verbal Verification of employment must be obtained from a disinterested third party, such as verifying a phone listing or obtaining a copy of a business license within 3 business days prior to the Note Date ELIGIBILITY CRITERIA FOR OPEN ACCESS LOANS Have Application Received Dates on or after 12/1/2011 and on or before 12/31/2015 Have a FHLMC settlement date on or before 05/31/2009 Be a 1 st Lien, conventional Mortgage Currently owned by FHLMC Be seasoned for at least 3 months (measured from Note date of mortgage refinanced to Note date of New Loan) Open Access loan eligible: LP Open Access guidelines are posted in FHLMC Chapters B All Open Access requirements stated in product guide must be met including, but not limited to Acceptable LP and ExpressLoan findings, applicable MI messages, LTV/CLTV parameters, credit, income, appraisal and documentation criteria. The new loan amount must meet Rate/Term Refinance (E.G. Limited cash out refinance) criteria: ONLY paying off the existing first Freddie Mac mortgage, plus financing of closing costs, and no more than $250 cash back to borrower The UW must enter only the balance of the first mortgage being paid off with the new transaction on line d., Refinance of the Details of Transaction section of the loan application. This amount must match the balance of the mortgage being paid off, as shown on the payoff demand. Escrow shortages, delinquent property taxes, delinquent HOA dues etc. may NOT be included in the loan amount Open Access loan ineligible: o Any loan not meeting eligibility criteria herein stated o Loan products not specifically listed as being eligible o Loans secured by properties ineligible for SPM financing include, but not limited to: Coops, Manufactured Homes, etc. Eligible Property Types Single Family Detached Single Family Attached 1 4 units Site Condo Condos PUD INCOME DOC REQUIREMENT. Income & Asset documentation must meet the requirements of FHLMC B24.3, regardless of the documentation level returned by Loan Prospector AUS Refer to the Open Access Product Guide for Full Guidance & Requirements 5

6 GEO RESTRICTIONS Geographic restrictions may apply. Please refer to the Geographic Restrictions posted on SPM website. Texas A6 loans are not eligible HPML Not allowed Regardless of documentation level shown on the Loan Prospection AUS, all income & assets document must meet FHLMC B24.3 The below matrix is not all inclusive, Please refer to the Open Access Product Guide for full Guidance & Requirements. Employment Income (Primary or Secondary) Bonus Overtime Tip Income Automobile allowance Income/Asset Minimum Documentation Requirements YTD paystub, salary voucher or written VOE documenting at least 30 days of income, and Verbal VOE obtained either no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date INCOME & ASSET DOCUMENTS REQUIRED Self employed (all types; primary and secondary) Retirement income Survivor and dependent benefit income Long term disability income Social Security Supplemental Security Income Alimony Separate maintenance Child support Depository and non depository accounts (including, but not limited to, checking, savings, money market, stock, bond or retirement accounts) Complete signed individual federal tax return for the most recent year, and Verification of existence of the business through a third party source VOE obtained either no more than 30 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date A copy of the award letter, 1099 or other third party documentation showing income type, source, amount, or Most recent one month bank statement or other equivalent documentation evidencing receipt of the income Copy of the signed court order and evidence of receipt of the total court ordered amount for the most recent one month Obtain and maintain in the Mortgage file the most recent monthly or quarterly account statement. Note: Required to meet the requirements of Guide Sections 37.22(b) and 37.23(b) (e.g., investigate large deposits or increases in a balance, or provide proof of liquidation of funds) Ineligible Existing Mortgage Loans Restructured Mortgages of any kind are not allowed This includes any mortgage in which the original terms have been changed. Mortgage that is subject to a credit enhancement from FHLMC Mortgage that has been requested for repurchase, a repurchase alternative or a make whole Mortgage subject to a forbearance agreement, repayment plan, or modified from its original term 6

7 Ineligible Property Types Manufactured Homes Modular Homes Co Ops Condotels Hotel/Motel Condominiums Timeshare Geodesic Domes Working farms and ranches Unimproved Land Commercial Loan Term Fixed Rate Only 30 year Fixed T300OA & T300JOA 15 year Fixed T301OA & T301JOA MAX FINANCED PROPERTIES No Limit regardless of occupancy type as per LP Open Access guidelines MAXIMUM LOAN AMOUNT Mortgage Payment History Limited to the lesser of the Maximum Loan Amount Calculation or County Loan limit Maximum Loan Amount Calculation is: Unpaid Principal Balance as show on the payoff demand + Up to 15 days per diem on the existing loan + The lesser or (1) Actual Closing Costs, (2) 4% of the Unpaid Principal Balance of the Mortgage being refinanced, or (3) $5000 = Maximum New Loan Amount 0 X 30 Days last 12 months 2 X 30 Days AND 0 X 60 Days during the first 36 months AND current as of the 60 th month MORTGAGE INSURANCE (BPMI transfer/mod of M.I. cert) For an LTV ratio > 80% LTV, SPM will permit the assignment/transfer/modification of an existing Borrower Paid MI (BPMI), policy from the current loan to the new loan. If the existing Mortgage has mortgage insurance coverage, then the same percentage of coverage must be maintained for the refinance Mortgage on the entire unpaid principal balance If the existing Mortgage did not have mortgage insurance coverage, then no Mortgage insurance coverage is require for the new FHLMC Relief Refinance Mortgage Open Access Eligible MI is Borrower Paid Monthly ( BPMI ) ONLY Ineligible MI is Lender Paid MI (LPMI), Hybrid Paid MI ( HPMI ), Financed or single paid premium or MI certification from companies not deemed an SPM approved company will not be eligible. Eligible MI companies are Radian, UGI, Genworth, and MGIC ONLY The Loan Prospector Feedback Certificate will provide: (1) FHLMC Loan Number being refinanced and (2) Mortgage Insurance Certificate Number, mortgage insurer name, and amount of MI coverage see below sample 7

8 The LP finding does not provide the type of Mortgage Insurance present on the current loan. The Loan Originator is responsible to contact the individual company listed on the LP findings to ensure that the current policy consists of an eligible Borrower Paid (BPMI) Monthly BPMI premium rate on the old loan will be the same premium rate on the new loan. The monthly payment will be based on the new loan amount. The new loan amount may be higher or lower than the original loan amount. The MI cert must be accurately reviewed to ensure that the new loan is closed correctly to meet FHLMC requirements. This review includes correct loan amount, Borrower s name(s), MI cert #, monthly payment amount, type of MI coverage, MI Company, etc. The Loan Originator is Responsible for the following, PRIOR TO LOAN SUMBISSION: Verify/Validate the MI policy was issued by a SPM approved MI company Contact the MI company and obtain/confirm all of the following information: Existing policy is an active/valid policy, and Coverage type is Borrower Paid Mortgage Insurance (BPMI), and The BPMI policy is transferrable/eligible for modification, and Obtain the factors for the first 10 years and factors for remaining term Certify in the loan submission package that: MI Company was contacted and all the required information was confirmed with the issuing MI company The Originator s cert must include the exact and complete information for all 4 requirements stated above Express Loan must be ran with the MI company provided factors Note: The Mortgage Insurance Company may deny the request to modify or assign/extend the coverage due to any of the following reasons: (1) No active Certificate (2) Certificate cancelled for LTV drop (3) Eligible requirement stating one of the borrower s must be present on the current certificate (4) Current MI certificate is reported as delinquent (5) MI company is not the current MI provider. Please refer to the Product Guide for full information and requirements. Mortgage Proceeds The Proceeds of the Relief Refinance Mortgage Open Access must be used only to: Pay off the first Mortgage (amount including only the unpaid principal balance and interest accredit through the date of the Mortgage being refinance is paid off) Pay related Closing Costs, Financing Costs, and Prepaid/Escrow note to exceed the LESSER of 4% of the current unpaid principal balance (UPB) of the Mortgage being refinanced of $5000 Disburse cash to the Borrower not to exceed $ Maximum Principal Reduction is $250 (in addition to cash back of $250 for a total of $500 cash proceeds) If cash back > $500 ($250 cash back to borrower + $250 principal reduction), the loan amount must be recalculated, reduced, and loan documents re drawn at the lower amount. Under no circumstance may cash disbursed to the Borrower exceed the maximum permitted for the Relief Refinance Mortgage Open Access of $250 The process may not be used to pay off or pay down any junior liens. 8

9 NON Occupant CO BORROWERS Non occupant co borrowers are not permitted on Primary Residence transaction Principal Reductions Prepay Penalty Occupancy For all Relief Refinance Mortgage Open Access, in the event there are remaining proceeds from the Mortgage after the proceeds are applied as outlined above in Mortgage Proceeds, The excess amount must be applied as a principal reduction/curtailment to the new Mortgage, in an amount not to exceed $250 and clearly reflected on the HUD 1 Settlement Statement, or The Mortgage amount must be reduced. There are no prepayment penalties 1 4 Unit Primary Residence 1 Unit Second Home 1 4 Unit Investment Property Relief Refinance Mortgage Eligibility/ Ineligibility The Relief Refinance Mortgage must be a: Conventional 15 or 30 year fixed rate, fully amortizing Mortgage NOTE: If the Mortgage being refinanced is a fixed rate Mortgage, the new Relief Refinance Open Access Mortgage may not be an ARM The refinance mortgage may be a super conforming Mortgage Refer to Guide Sections B24.2(d) for a list of ineligible Relief Refinance Mortgages Open Access Significant Derogatory Credit (includes Bankruptcy, Foreclosure, & Short Sales) For Accept Mortgages, the significance of derogatory information has already been considered by Loan Prospector and the Borrower s credit has been deemed acceptable Applicable for Bankruptcy & Foreclosures Only!! If evidence of a short sale is disclosed on the credit report or contained elsewhere in the file, the loan must be downgraded to a manual underwrite and is ineligible. The Underwriter must manually check to verify the credit report reflects a payment history for all mortgage debt. If not adequately shown on the credit report, directly verify payment history for all mortgage debt for the most recent 12 months. 0x30 on all. SUBORDINATE FINANCING Existing junior liens must be re subordinated to the new refinance Mortgage & meet the requirements of the Guide Chapter 25 pertaining to secondary financing An increase in the current unpaid principal amount of any junior lien is prohibited to curtail the Relief Refinance Mortgage Open Access or to pay related Closing Costs, Financing Costs or Prepaids/Escrow. No new secondary financing is permitted 9