Ability To Repay (ATR) Creditors must determine that borrowers have a reasonable ability to repay a loan based on consideration and verification of

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2 Ability To Repay (ATR) Creditors must determine that borrowers have a reasonable ability to repay a loan based on consideration and verification of factors indicative of a consumer s credit capacity, including: income/assets, employment status, monthly housing payment (PITI, HOA s and any subordinate financing), other debt obligations, DTI and credit history. Qualified Mortgage Loan must meet standards set forth by the Consumer Financial Protection Bureau (CFPB) Depending on the APR, and whether it passes the HPML test, QM can be classified as Safe Harbor QM or Rebuttable Presumption QM Temporary QM & HUD QM Temporary QM & HUD QM loans are loans that are originated and closed in compliance with Agency Guidelines (i.e. Fannie Mae, FHA, USDA, VA) HPML A higher priced mortgage loan (HPML) is defined as a loan that exceeds the average prime offer rate (APOR) for a comparable transaction as of the date the interest rate is set by 1.5% or more for loans secured by a first lien. Under Temporary QM HPML rules apply to owner-occupied and second home transactions. HUD QM defines a higher priced mortgage loan as a loan where the APR exceeds the APOR by 1.15% plus the applicable annual MIP rate.

3 Q: Effective January 10, 2014, will Planet Home Lending purchase both QM and Non-QM loans? A: Planet Home Lending will purchase loans that meet Temporary QM and HUD QM requirements. Planet Home Lending will not purchase non-qm or General QM loans. Q: Will Planet Home Lending purchase Temporary/HUD QM loans that fall into Rebuttable Presumption? A: Yes. Q: Will Planet Home Lending purchase QM loans that meet the balloon or small creditor guidelines? A: No.

4 Q: Will Planet Home Lending purchase non-qm loans? A: Non-QM loans will not be purchased. Q: Will Planet Home Lending purchase a loan if it falls within the definition of HPML? A: Yes, Planet Home Lending will purchase conventional, FHA and VA, fixed rate, non-streamline programs that fall within the definition of HPML. Q: Will the Planet Home Lending Seller Guide be updated to define standards for the DTI computation? A: Temporary QM/HUD QM loans must meet Agency guidelines (Fannie Mae, FHA, VA, and USDA). As is our current policy, conventional and government loans with an Approve/Eligible or Accept AUS Finding, DTI is subject to AUS Findings. Manually underwritten government loans, the maximum DTI is subject to Agency and Planet Home Lending guidelines.

5 Q: Will Planet Home Lending require specific disclosures? A: No, we will not mandate specific disclosure forms. However, Sellers are responsible to ensure all applicable disclosures required under the ATR and QM provisions of the Dodd-Frank Act are provided. Q: What third party vendor does Planet Home Lending utilize for compliance? A: ComplianceEase. Q: Will Planet Home Lending test for Higher Priced Mortgage loans (Section 35)? A: Yes, we will test for HPML through Compliance Ease. Q: Will Planet Home Lending purchase High Cost/High Fee Loans (Section 32) that have an Approve/Eligible Finding? A: No, we will not purchase High Cost loans.

6 Q: Will the ATR/QM provisions require changes to the MLPA? A: No change to the MLPA is required. All updates will be referenced in the Seller Guide and Announcements. Q: Will Planet Home Lending purchase Rebuttable Presumption QM loans and will there be a price adjustment? A: Planet Home Lending will purchase Temporary/HUD QM loans that fall under Rebuttable Presumption. There is no price adjustment. Q: Is Planet Home Lending buying QM loans that do not fall into the Safe Harbor category? A: Planet Home Lending will purchase Temporary/HUD QM loans that fall under both Safe Harbor and Rebuttable Presumption.

7 Q: What items are required to be submitted with a closed loan? A: Planet Home Lending requires the following: Lender Fee Worksheet QM and HOEPA Loan Detail Worksheet Affiliate Disclosure Worksheet, if applicable Lender QM/HOEPA Points & Fees Test Results Copy of Undiscounted Lender Rate Sheet, if applicable Bona Fide Discount Point Worksheet, if applicable Lender Rate Lock Confirmation with Borrower Appraisal Acknowledgment Form Right to Receive a Copy of Appraisal(s)/Valuation(s) Appraisal Waiver, if applicable Appraisal(s)/Valuation(s) Delivery to Borrower Documentation Homeowner Counseling Disclosure NMLS ID is provided for both the loan originator and loan originator s company on the loan application, Note and Security Instrument Planet Home Lending does not mandate the use of specific forms; Sellers may utilize their own forms

8 Q: Will Planet Home Lending require a specific income and debt worksheet with explanations to document the DTI analysis or may the Seller use their own when submitting files for purchase? A: Planet Home Lending will not mandate the use of a specific income and debt worksheet.

9 Q: Will Planet Home Lending purchase a loan with borrower paid single premium or split premium mortgage insurance? A: Yes, subject to the requirements detailed in Chapter 4 Mortgage Insurance in the Planet Home Lending Seller Guide Q: What are the changes to Planet Home Lending s current credit/underwriting guidelines? A: There are no changes to current guidelines

10 Q: Will Planet Home Lending require a Points and Fees Test on all loans? A: Yes, we will require a Points and Fees Test on all loans. Q: Is an Underwriting Fee included in the Points and Fees test? A: Yes, the Seller s Underwriting Fee is included in the 3% Points and Fees Test. Q: Is FHA s financed UFMIP counted in the Points and Fees Test? A: No. FHA UFMIP is not included in the Points and Fees Test. Q: Are escrows for taxes and insurance included in the Points and Fees Test? A: No, escrows for taxes and insurance are not included.

11 Q: An FHA refinance that requires a full month interest in the payoff, is it considered a prepayment penalty and included in the Points and Fees Test? A: No, FHA monthly interest accrual is not considered a prepayment penalty. As such, it is not included in the Points and Fees Test. Q: Will bona fide discount points be included in the 3% Points and Fees test? A: Planet Home Lending will follow QM Points and Fees test and allow a maximum of two bona fide discount points. The Seller must document the two points charged were used to permanently buy down the rate. Excess discount points, above 2%, or any discount points deemed not bona fide must be included in the Points and Fees Test.

12 Loan origination fees Commitment fees Lock fees Included Upfront conventional MI paid by the borrower Excess discount points (greater than 2% bona fide) OR Any non-bona fide discount points Fees paid to the Seller s affiliate and retained by the Seller Finance charges other than interest paid to the lender broker or affiliate Points and Fees Test Prepaid interest Excluded Upfront and monthly FHA MIP VA funding fee USDA guarantee fee Fees normally not considered APR fees under Truth-in-Lending/Reg Z Escrows for taxes and insurance Bona fide 3 rd party charges, provided no portion of the fee retained by the lender, broker, or affiliate Compensation paid by the Lender to the loan originator/employee

13 Owner Occupied Second Home Investment Federal HPML Test X Existing Federal and State Tests X X X QM 3% Points and Fees Test X X Included: Non-business purpose investment property* Excluded: Business purpose investment property* QM APR Testing X X Included: Non-business purpose investment property* Excluded: Business purpose investment property* Non-business purpose investment property which the borrower occupies 14 calendar days in a year. Business purpose investment property is defined as a property which the borrower occupies < 14 calendar days in any year.

14 Q: What options are available if a loan fails the Points and Fees Test? A: If discovered prior to close, reduce the fees to comply with Points and Fees Test. If discovered after close, there is no cure and the loan is ineligible for purchase. Q: Will Planet Home Lending allow for any "cures" on loans with ATR/QM issues? A: As of this time, the CFPB and the Agencies have not issued any guidance on how to cure errors after loan closing; consequently Planet Home Lending will not allow any cures and/or purchase any loan with errors or compliance related issues.

15 Fannie Mae FHA VA USDA Program ATR Requirement Met Maximum Loan Amount DTI Max QM Points and Fees Test QM APR Threshold Conforming, High Balance, HomeStyle and DU Refi Plus *Approve/Eligible* Finding from DU. Planet Home Lending Overlays must be applied Standard including FHA 203(k) Full and Streamlined *Approve/Eligible* Finding from DU/Total Scorecard or *Refer* Finding and Downgraded to manual underwrite subject to FHA guidelines Planet Home Lending Overlays must be applied. Streamline Standard IRRRL Must be manually underwritten to FHA guidelines. Planet Home Lending overlays must be applied *Approved/Eligible* Finding from DU/Total Scorecard or *Refer* Finding, or Downgraded to manual underwrite subject to VA guidelines Planet Home Lending overlays must be applied Must be manually underwritten to FHA guidelines. Planet Home Lending overlays must be applied Purchase and Non-Purchase Streamlined Refi *Accept/Eligible* Finding from GUS, or *Refer/Eligible* (requires manual underwrite) Planet Home Lending overlays must be applied Streamlined Refi Must be manually underwritten to USDA GRH guidelines. Planet Home Lending overlays must be applied 30 Years 30 years 30 years 30 years 30 years 30 years Per DU Findings Except: DU Refi Plus max 45% regardless of DU Findings if an HPML, and HPML max 50% regardless of DU Findings Loan amount $100,000 maximum is 3% of total loan amount Loan amount $60,000- $99,999 maximum $3, % above the APOR *Approve/Eligible* Findings: Per DU/Total Scorecard Findings Manual underwrite: 43% 43% Loan amount $100,000 maximum is 3% of total loan amount Loan amount $60,000-$99,999 maximum $3,000 *Approve/Eligible* Findings: Per DU/Total Scorecard Findings Manual underwrite: 41% 41% Loan amount $100,000 maximum is 3% of total loan amount Loan amount $60,000-$99,999 maximum $3,000 GUS Accept : 45% Manual underwrite 41% unless USDA waiver received than max. 43% 41% unless USDA waiver received than max. 43% Pilot Must be manually underwritten to USDA GRH guidelines. Planet Home Lending overlays must be applied N/A Loan amount $100,000 maximum is 3% of total loan amount Loan amount $60,000-$99,999 maximum $3, % plus Annual MIP above the APOR 1.5% above the APOR 1.5% above the APOR

16 Conventional*, VA, and USDA FHA PASS HPML And PASS QM APR TEST Loan Eligible Appraisal Delivery Waiver Eligible Loan Eligible Appraisal Delivery Waiver Eligible Yes Yes Yes Yes FAIL HPML And FAIL QM APR TEST Yes Va manual underwrite (*Refer* or manual downgrade). Max 41% DTI USDA manual underwrite or streamlined refinance. Max 43% DTI Ineligible USDA Pilot Refinance No Yes FHA manual underwrite (*Refer* or manual downgrade). Max 43% DTI No FAIL HPML And PASS QM APR TEST N/A as threshold is the same. Results will be either. Pass/Pass or Fail/Fail (see applicable category above for eligibility) N/A Yes FHA manual underwrite (*Refer* or manual downgrade). DTI > 43% exception basis only No PASS HPML And FAIL QM APR TEST N/A as threshold is the same. Results will be either. Pass/Pass or Fail/Fail (see applicable category above for eligibility) N/A Owner-occupied Yes Second home Yes Yes As a reminder, all QM loans must pass the 3% Points and Fees Test. The 3% Points and Fees Test is independent of the QM APR Test. * Includes Fannie Mae HomeStyle and FHA 203(k) Full Consultant and Streamlined.

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