TABLE OF CONTENTS. PRODUCT DESCRIPTION Page # Product Description 3

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1 TABLE OF CONTENTS PRODUCT DESCRIPTION Page # Product Description 3 ELIGIBILITY Occupancy 3 Property Types: Eligible & Ineligible 3 imum Loan Amounts 3 Assumability 3 Buydowns 3 Prepayment Penalty 3 Cash Reserves 3 Ratios 4 Texas Cash-Out Refinance Transaction 4 Adjustable Rate Information 4 Borrower s Qualifications 4 Underwriting 5 5 Eligible Borrowers 5 Interest Only Option Feature 5 Documentation Requirements 5 Cash-Out Definitions 5 Mortgage Insurance 6 Seller/Interested Party Contributions 6 Secondary Financing 6 Subordinate Financing 7 Non-ARMs Length Transactions 7 Non-Borrowing Spouse 7 1

2 TABLE OF CONTENTS ELIGIBILITY (Cont ) Page # Source of Funds to Close 7 Appraisal Requirements 7 PROGRAM MATRICES Purchase, Rate/Term Refinance & Cash-Out Refinance Transaction 8 2

3 PRODUCT DESCRIPTION OCCUPANCY Fixed Rate: 15, 20 or 30-Year term Adjustable Rate: 5/1 ARM Fixed for 5-Years, then converts to 1-Year LIBOR ARM Interest Only Options available Purchase Rate/Term Refinance Stated Income/Stated Asset Program: T yr. or 20 yr. Fixed, T yr. Fixed Fixed Rate Interest Program: T6350i Owner Occupied Second Homes Investment Properties PROPERTY TYPES Eligible Properties o 1-Unit only (Attached and Detached) o PUD (Attached and Detached) o Low or High-Rise Condo meeting FNMA guide Ineligible properties o 2-4 Units o Manufactured Housing o Co-Ops o Factory Built Housing MAXIMUM LOAN AMOUNT Conforming loan limits apply ASSUMABILITY Not Allowed BUYDOWNS Not Allowed PREPAYMENT PENALTY None CASH RESERVES Not Required 3

4 RATIOS imum ratios allowed are determined by the automated approval TEXAS CASH-OUT Loans subject to Article XVI Section 50 (a) (6) of the Texas Constitution must be made in accordance with Texas law and are subject to the following restrictions: imum 80% ADJUSTABLE RATE INFORMATION A6351 and 6351i (for Interest Only Option) Index: The index is the average of one-year London Interbank Offering Rates (LIBOR). 1-year LIBOR. First Adjustment Cap: 5% maximum first-time adjustment (up or down). Subsequent Adjustment Cap: Each subsequent adjustment may change the interest rate by no more than 2% up or down. Lifetime Cap: The lifetime cap is 5% over the initial note rate. Floor: The margin 2.25% Payment Adjustment Date: The interest rate is fixed for the first 60 months; thereafter, the interest rate will adjust annually. o The first payment adjustment date will be the first of the month following the interest rate adjustment, and every 12 months thereafter. Conversion Option: None ARM Plan Code: IA6351 and IA6351i (Interest-Only Option) BORROWER QUALIFICATION Qualify at Note rate 4

5 UNDERWRITING CREDIT EILIGIBLE BORROWER Automated Approval must be obtained by our Underwriter. Minimum : 680 See page 6 for additional details of restrictions for imum s: Must receive an Accept result. In addition, the credit report must show that the borrower has all of the following: history covering a minimum of 24-Months. Minimum of three (3) tradelines, one of which must be currently open and not a collection or charge off. (All three (3) trade lines need not have been open for 24-Months) At least one (1) of the tradelines must have had activity in the last 6-months. Self-Employed Borrowers are allowed on both Fixed and ARM products Fannie Mae Guidelines for Non-citizens Non-Occupant co-borrowers not allowed INTEREST ONLY OPTION FEATURE Allowed on the 30-Year Fixed product (T6350i) for the first 10- years. Allowed on the 5/1 LIBOR ARM product (A6351i) for the first 5-years. Qualify at the Interest-Only payment DOCUMENTATION REQUIREMENTS IRS Form 4506 required on all loans Stated income and assets are allowed and must be deemed reasonable and consistent with the borrower s occupation. Income, assets, and employment information must be provided on the 1003, but do not have to be verified. A VOE is not required (except for the verbal VOE at time of funding). CASH OUT DEFINITION Follow FNMA Announcement defining Limited Cash-Out and Cash-Out on this conforming loan balance product. 5

6 MORTGAGE INSURANCE Delegated through Radian Insurance LTV Ranges 15, 20 Year Term 25, 30 Year Term 5/1 ARM % 12% coverage 25% coverage % 6% coverage 12% coverage SELLER/INTERESTED PARTY CONTRIBUTIONS Occupancy Owner Occupied Second Home LTV > 90% < 90% and 75% < 75% > 90% < 90% and 75% < 75% imum Seller Contributions 3% 6% 9% 3% 6% 9% Investment All LTVs 2% SECONDARY FINANCING Allowed with the following restrictions: imum 80% LTV when there is Secondary financing Secondary financing must be provided by an institutional investor Community Secondary are not allowed 6

7 SUBORDINATE FINANCING Per Fannie Mae guidelines NON-ARMSLENGTH TRANSACTION Not allowed 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 SOURCE OF FUNDS TO CLOSE Fannie Mae Guidelines and as stated on the 1003 No Documentation required NON-BORROWING SPOUSE The Security instrument must be signed by Non-borrowing spouse where required by state law to create a valid lien. For owner-occupied refinance transactions, the TIL and Right of Rescission must be signed in addition to the Security instrument APPRAISAL REQUIREMENTS A full appraisal Report is required unless the AUS certificate indicates one of the following property valuation types: Form 1075, 2055, or 2095 Exterior-Only Inspection* Form 2075 Property Inspection Report*. Property Inspection Waiver (FNMA)*- no inspection report or appraisal is required, but an additional fee may be assessed. Cooperatives are not eligible for the waiver. *Allowed only on credit scores greater than or equal to

8 Purchase and Rate/Term Refinance Owner Occupied Second Homes Investment Properties 90%/90% 1, %/90% 1, %/75% 2, imum 80% LTV when there is Secondary financing. Pricing add-ons may apply. Refer to rate sheet. 2 Investment properties are not eligible for the Interest Only option. properties. 3 Cooperatives are not allowed on the Interest Only Option, second homes or investment properties Cash Out Refinance Owner Occupied Second Homes Investment Properties 70%/70% Not Allowed Not Allowed 1 Cash out not allowed with Interest Only Option 8