Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page 603-i

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1 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page 603-i Table of Contents JUMBO PRODUCTS PRODUCT DESCRIPTION AND PRODUCT CODES Overview Wholesale Transaction Seller Responsibility FRM Product Description Jumbo Fixed Rate Mortgage FRM Product Codes ARM Product Codes Jumbo Adjustable Rate Mortgage ARM Summary ARM Product Disclosures LOAN DETAILS Overview Loan Product Parameters FRM/ARM Loan Parameters Primary Residence: Purchase and Rate/Term Refinance Second Home: Purchase and Rate/Term Refinance Primary Residence: Cash-Out Refinance (3) Second Home: Cash-Out Refinance (3) Investment Property: Purchase; Rate/Term (3) Escrow/ Impound Waiver Price Adjustments Loan Limits LTV/(H)CLTV Mortgage Credit Certificate (MCC) Negative Amortization Occupancy Prepayment Penalty Eligible States State Restrictions MSI State-Specific Guidelines DOCUMENTATION REQUIREMENTS Documentation Requirements Age of Documents T Verbal Verification of Employment GENERAL UNDERWRITING GUIDELINES Overview Underwriting Method Presentation Accessory Units Assets Bank Deposits Business Accounts

2 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page 603-ii Table of Contents, Continued Cash Value of life insurance Gift Funds Loans secured by borrower s assets Marketable Securities Retirement Accounts Sale of Real Property Trust Funds United States Saving Bonds Ineligible Sources of Funds (Assets) Verification of Foreign Assets Required Reserve Amounts (PITIA) Appraisal Requirements Specific Requirements based on Loan Amount and Median Home Price Multiples High Dollar Appraisal Addendum Appraisal Transfers Appraisal Transparency Report Borrowers Chain of Title Condominiums Construction to Perm Borrower in Construction Industry Credit Considerations Authorized User Accounts Bankruptcy, Foreclosure/Short Sale or Modification Charge-offs, Collections, Judgments, Public Records Credit History Credit Report Inquiries Disputed Trade lines Mortgage/Rental History Deed Restrictions Delayed Financing Conversion or Sale of Principal Residence Disaster Policy FICO (Credit) Scores Financial Reform ATR/QM Max DTI Income and Employment Automobile Allowance Borrower employed by a family member or party to the transaction Capital Gains Income Child Support, Alimony, Separate Maintenance Commission Income Employment Offers or Contracts Foreign Income Long-term Disability Rental Income Property Other than Subject Retirement, Social Security and Pension Income Salaried Borrowers Secondary Employment

3 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page 603-iii Table of Contents, Continued Self-Employed Borrowers Rental Income-Requirements for Investment Property Rental Income Qualifying Cash Flow Method: Baseline Method: Lease Agreements Inspections and Certifications Interested Party Contributions Large Deposits Liabilities Alimony, Child Support or Separate Maintenance Business Debt in Borrower s Name Court-Ordered Assignment of Debt Co-Signed Loans Debts Secured by Financial Assets Deferred Payments Including Student Loans HELOC Mortgage Assumptions Open-End (30-day) Accounts Payoff VS Paydown Multiple Mortgages to the Same Borrower Net Tangible Benefit Non-ARMS Length Transactions Non-Occupant Co-Borrower Property Located in a Newly Constructed Subdivision Qualifying Rate Property-General Requirements Property Types Property Flipping PUD Requirements Qualifying Payment Refinance Transactions Subordinate (Secondary) Financing Shared Private Amenities Temporary Buy Down Trailing Co-Borrower Water Supply Work Completion Escrows RESTRICTIONS Introduction Borrower Paid Fees High Cost and Higher Priced Mortgage Loans CLOSING DOCUMENTATION Description Late Charges State Specific Documents MERS

4 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Product Description and Product Codes REV (06/02/15) Jumbo Products Overview Wholesale Transaction Seller Responsibility FRM Product Description This product summary provides specific product-related criteria which are in addition to those guidelines provided in the Underwriting chapter of this Seller Guide. Should there be a conflict between the requirements contained in this product suite versus the guidelines contained in the Underwriting Chapter, the Seller should follow the criteria set forth in this product summary. Sellers should reference the MSI Underwriting Chapter or Fannie Mae/Freddie Mac Seller Guide for guidelines not specifically addressed in this Product Suite (or the Underwriting Chapter). The guidelines for this product are based on Fannie Mae Guidelines. The loans are manually underwritten and are not to be submitted to DU or LP. The MSI Mod Corr Jumbo Product must be: Closed in the name of MSI; Jumbo loans may not be closed in the Seller s name. o Note that the loan must be disclosed as a Table Funding Wholesale Product and the Yield Spread Premium must be properly disclosed. The loan must be submitted to MSI for a cursory review; the loan is then submitted for underwriting by a 3 rd party underwriter. That Underwriter s decision is final. All loans sold to MSI must meet the product parameters in effect at the time the loan is locked. Loans that do not meet the specific product descriptions outlined in this product summary are not eligible for purchase. Jumbo Fixed Rate Mortgage The Jumbo fixed rate mortgage (FRM) product has the option of a 10, 20, 15 or 30-year amortization term.

5 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Product Description and Product Codes, Continued FRM Product Codes CLAR (02/03/15) The following matrix outlines the applicable product codes for the Jumbo FRM product suite: Product Product Code Loan Term Jumbo Fixed Rate Mortgage Fully Amortizing 30-Year FRM Years 20-Year FRM Years 15-Year FRM Years 10-Year FRM Years Notes: See the Modified Correspondent Rate Sheet for pricing adjustments for loan terms. Assumable: FRM are not assumable. Important Note: The loan file must be uploaded to the MSI system using a Fannie Mae 3.2 file form prior to lock. Loans that are not uploaded are not able to be locked. ARM Product Codes Jumbo Adjustable Rate Mortgage The Jumbo adjustable rate mortgage (ARM) product has only a 30- Year amortization but offers the following options: 5/1, 7/1, and 10/1 LIBOR ARM. Product Product Code Loan Term Jumbo Adjustable Rate Mortgage (ARM)-Fully Amortizing 5/1 LIBOR 2/2/5 Caps Year 7/1 LIBOR- 2/2/5 Caps /1 LIBOR -2/2/5 Caps Notes: See the Modified Correspondent Rate Sheet for pricing adjustments. Assumable: May be subject to credit approval. Convertible: No See ARM Summary. Important Note: The loan file must be uploaded to the MSI system using a Fannie Mae 3.2 file form prior to lock. Loans that are not uploaded are not able to be locked.

6 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Product Description and Product Codes, Continued ARM Summary The following products are adjustable rate mortgages (ARM) that allow for a changing rate/payment over the life of the mortgage. Products included herein are: Fully Amortizing Jumbo ARM Products Product Margin Adjustment Caps Rate Fixed for Conversion Assumable 1 st Annual Lifetime (1) To FRM? 5/1 2.25% 2 % 2 % 5 % 60 Months No (2) 7/1 2.25% 2 % 2 % 5 % 84 Months No (2) 10/1 2.25% 2 % 2 % 5 % 120 Months No (2) Notes: Index - 1 Year LIBOR. The index is the average of interbank offered rates for one-year U.S. dollar denominated deposits in the London market ( LIBOR ), as published in the Wall Street Journal. The index figure is the most recent index figure from the Wall Street Journal that is available on the day that is 45 days before the interest rate change date. Floor: Margin (1.) Interest rate is fixed at close for the period noted, at the end of which time the rate changes annually thereafter. First interest rate change date is (for 5/1, 59 ; for 7/1, 83; and for 10/1, 119) months from first payment due date. Subsequent interest rate change dates are once every 12 months after the first interest rate change date. (2.) Assumable during the adjustable rate period by qualified Borrowers who meet investor guidelines. Fees are 1% of the outstanding principal balance plus any actual costs (e.g. credit report, mortgage insurance, appraisal fees) which are subject to change. ARM Product Disclosures ARM Disclosures are required in accordance with any federal, state, jurisdictional or regulatory requirements.

7 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Loan Details Overview Unless otherwise noted herein, the loan details noted herein apply to all loans in this product suite. Loan Product Parameters FRM/ARM Loan Parameters REV (8/21/15) Max (combined) Loan Amount (1) $750,000 $750,001 To $2 Million > $2 Million To $2.5 Million > $2.5 Million To $3 Million FRM and ARM Loan Parameters Primary Residence: Purchase and Rate/Term Refinance Minimum FICO = FRM 700; ARM 720 Market Class (4) Single Family (2) 1 75%/85% 80%/80% Maximum LTV/CLTV-(H)CLTV Attached Condo FICO < Unit 3-4 Unit 75%/75% 75%/75% 70%/70% 2 80%/80% 75%/75% 75%/75% 70%/70% 3 80%/80% 75%/75% 75%/75% 70%/70% 4 75%/75% 70%/70% 70%/70% 65%/65% 10 X MHP 70%/70% (5) 70%/70% (5) 70%/70% (5) 70%/70% (5) 1 80%/80% 75%/75% 75%/75% 70%/70% 2 80%/80% 75%/75% 75%/75% 70%/70% 3 80%/80% 75%/75% 75%/75% 70%/70% 4 75%/75% 70%/70% 70%/70% 65%/65% 10 X MHP 70%/70% (5) 70%/70% (5) 70%/70% (5) 70%/70% (5) 1 75%/75% 70%/70% 2 75%/75% 70%/70% 3 75%/75% 70%/70% 4 70%/70% 65%/65% 10 X MHP 70%/70% (5) 70%/70% (5) 1 70%/70% 65%/65% 2 70%/70% 65%/65% 3 70%/70% 65%/65% 4 65%/65% 60%/60% 10 X MHP 70%/70% (5) 65%/65% (5) Not Permitted (1.) Maximum combined loan amount applies when secondary financing exists (total of all loan/lines against subject property). Minimum loan amount is $1 over current Fannie/Freddie conforming limits. (2.) Detached/Attached, PUD, Detached Condo and Attached Condo with FICO 720 (3.) MHP = Median Home Price Located on the MSI Median Home Price matrix. Use the MHP LTV ratios when the combined loan amount exceeds 10 times the subject property s county-level MHP. See the MHP matrix at this link: MSI Jumbo Median Home Prices. (4.) See the Market Class Classification Matrix at this link: MSI Jumbo Market Classification (5.) Max LTV/CLTV is lesser of 10 times MHP or LTV/CLTV based on Market Classification.

8 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Loan Details, Continued Loan Product Parameters, Continued Max (combined) Loan Amount (1) $650,000 > $650,000 To $1.5 Million > $1.5 Million To $2 Million FRM and ARM Loan Parameters Second Home: Purchase and Rate/Term Refinance Minimum FICO = FRM 700; ARM 720 Market Class (4) Single Family (2) Maximum LTV/CLTV-(H)CLTV Attached Condo FICO < %/80% 75%/75% 2 80%/80% 75%/75% 3 80%/80% 75%/75% 4 75%/75% 70%/70% 10 X MHP 65%/65% (5) 65%/65% (5) 1 75%/75% 70%/70% 2 75%/75% 70%/70% 3 75%/75% 70%/70% 4 70%/70% 65%/65% 10 X MHP 65%/65% (5) 65%/65% (5) 1 70%/70% 65%/65% 2 70%/70% 65%/65% 3 70%/70% 65%/65% 4 65%/65% 65%/65% 10 X MHP 65%/65% (5) 65%/65% (5) 2-Unit Not Permitted 3-4 Unit (1.) Maximum combined loan amount applies when secondary financing exists (total of all loan/lines against subject property). Minimum loan amount is $1 over current Fannie/Freddie conforming limits. (2.) Detached/Attached, PUD, Detached Condo and Attached Condo with FICO 720 (3.) MHP = Median Home Price Located on the MSI Median Home Price matrix. Use the MHP LTV ratios when the combined loan amount exceeds 10 times the subject property s county-level MHP. See the MHP matrix at this link: MSI Jumbo Median Home Prices. (4.) See the Market Class Classification Matrix at this link: MSI Jumbo Market Classification (6.) Max LTV/CLTV is lesser of 10 times MHP or LTV/CLTV based on Market Classification.

9 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Loan Details, Continued Loan Product Parameters, Continued Max (combined) Loan Amount (1) $750,000 To $1.5 Million $1.5 Million To $2 Million Market Class (2) FRM and ARM Loan Parameters Primary Residence: Cash-Out Refinance (3) Minimum FICO = FRM/ARM 720 Single Family Maximum LTV/CLTV-(H)CLTV Attached/Detached Condo 1 70%/70% 70%/70% 2 70%/70% 70%/70% 3 70%/70% 70%/70% 4 65%/65% 65%/65% 1 65%/65% 65%/65% 2 65%/65% 65%/65% 3 65%/65% 65%/65% 4 60%/60% 60%/60% 2-Unit Not Permitted 3-4 Unit (1.) Maximum combined loan amount applies when secondary financing exists (total of all loan/lines against subject property). Minimum loan amount is $1 over current Fannie/Freddie conforming limits. (2.) See the Market Class Classification Matrix at this link: MSI Jumbo Market Classification (3.) Max Primary Cash Out = LTV/CLTV/HCLTV > 65% = $400,000; 65% = $500,000. Max Second Home Cash Out = $ (4.) See Reserves Requirements at this link: Required Reserve Amounts (PITIA) Max (combined) Loan Amount (1) Market Class (2) FRM and ARM Loan Parameters Second Home: Cash-Out Refinance (3) Minimum FICO = FRM/ARM 720 Single Family Maximum LTV/CLTV-(H)CLTV Attached/Detached Condo $650, %/70% 70%/70% > $650,000 To $1.5 Million > $ 1.5 Million To $2 Million 2 70%/70% 70%/70% 3 70%/70% 70%/70% 4 65%/65% 65%/65% 1 65%/65% 65%/65% 2 65%/65% 65%/65% 3 65%/65% 65%/65% 4 60%/60% 60%/60% 1 60%/60% 60%/60% 2 60%/60% 60%/60% 3 60%/60% 60%/60% 4 55%/55% 55%/55% 2-Unit Not Permitted 3-4 Unit

10 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Loan Details, Continued Loan Product Parameters, Continued Max (combined) Loan Amount (1) $2 Million FRM and ARM Loan Parameters Investment Property: Purchase; Rate/Term (3) Minimum FICO = FRM/ARM 740 Market Class (2) Single Family Maximum LTV/CLTV-(H)CLTV Attached/Detached Condo 1 60%/60% 60%/60% 2 60%/60% 60%/60% 2-Unit Not Permitted 3-4 Unit (1.) Maximum combined loan amount applies when secondary financing exists (total of all loan/lines against subject property). Minimum loan amount is $1 over current Fannie/Freddie conforming limits. (2.) See the Market Class Classification Matrix at this link: MSI Jumbo Market Classification (3.) See Reserves Requirements at this link: Required Reserve Amounts (PITIA)

11 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Loan Details, Continued Escrow/ Impound Waiver Price Adjustments Loan Limits LTV/(H)CLTV Mortgage Credit Certificate (MCC) MSI may permit escrow/impound waivers under the following guidelines: LTV 80.00% are eligible for escrow/impound waivers to MSI guidelines. Both taxes and insurance must be waived, no split waivers permitted. MI premiums must always be included in the escrow account, unless a single premium paid in full at closing. If an escrow account is established, any applicable flood insurance must always be escrowed. The tax payment rule applies in all cases, regardless of waiver of escrow. Note: Escrow waivers must be locked as escrow waivers and a price adjustment will apply. Price Adjustments may be applied against jumbo loans. All price adjustments are cumulative. See the Current Rates on for details. Maximum = See specific product matrices for loan amount maximums. Minimum = One dollar ($1.00) greater than the current Fannie Mae/Freddie Mac loan limits. LTV = Loan to Value. The loan amount divided by the lesser of the appraised value or the purchase price. CLTV = Combined Loan to Value. The combined loan amounts of any first and second liens divided by the lesser of the appraised value or purchase price. (H)CLTV = If the subordinate financing is in the form of a Home Equity Line of Credit (HELOC), the full credit line must be used to determine the HCLTV. Mortgage Credit Certificates are not permitted.

12 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Loan Details, Continued Negative Amortization Not Applicable. Occupancy Prepayment Penalty Owner-occupied single family primary residence permitted. See Condominiums for details. Owner-occupied, primary residence 2-4 unit properties permitted, see product matrices for details. Second Vacation single family unit permitted. See Condominiums for details. Investment (Non-Owner Occupied) property permitted. Not Permitted Eligible States See the state details in the matrix below. The Seller must be fully licensed or legally exempt to originate loans in the state. States in which MSI is permitted to Lend Alabama Iowa New Mexico Texas (1) Arkansas Kansas North Carolina Utah Arizona (1) Kentucky Nevada (1) Virginia California (1) Louisiana Ohio (1) Wisconsin Colorado Michigan Oklahoma Wyoming Florida (1) Minnesota Oregon Georgia Mississippi Pennsylvania Idaho Missouri South Carolina Illinois Montana South Dakota Indiana Nebraska Tennessee (1) See MSI State-Specific Guidelines for product /lending restrictions in these states.

13 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Loan Details, Continued State Restrictions State All Florida New York Nevada Texas MSI purchases loans on properties located only in specifically approved states. See Eligible States for details. The matrix below outlines additional geographic restrictions applied by MSI. MSI State-Specific Guidelines MSI product or underwriting guidelines and/or restrictions do not supersede any more-restrictive regulatory, state or local requirements. Seller is responsible to ensure that each loan originated, underwritten and closed is in full compliance with all regulatory, state or local guidelines and/or restrictions. No Condos Permitted. Not Permitted. No loans on properties located in Clark County Nevada. Home Equity Loans (Cash Out Refinance loans for primary (homestead) properties) are not acceptable for purchase.

14 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Documentation Requirements Documentation Requirements All loans must be fully documented for manual underwriting as required by Fannie Mae: Income 2 years income documentation with the expectation that the income will continue for a minimum of 3 years. Assets Assets must be properly sourced. The source of substantial increases in account balances or funds on deposit less than 90-days must be verified (and properly sourced). Age of Documents: Credit reports/documents must be dated within the prior 120 days from the Note Date. The Third Party Underwriter will pull an updated soft credit report within 10 days of the Note Date. Should the soft credit report reflect any derogatory credit or additional credit an updated report with a credit score is required. All income documentation must be dated within 30 days of the application date; all asset documentation must be dated within 45 days of the application date. o All income and asset documentation must be dated within 120 days of the Note Date. Appraisal: Must be dated within 120-days prior to Note Date. If outdated, a new appraisal must be ordered, recertification of value is not acceptable T MSI IRS 4506-T Requirements A 4506-T, signed by each borrower at application and closing is required. The Third Party Underwriter will order tax return transcripts for all borrowers (and businesses). Income reported on the transcript must support the income used to underwrite the loan. Any major discrepancies between the income verified in the file and the tax transcripts must be reasonable and supported by documentation in the loan file. Verbal Verification of Employment Verbal Verification of Employment required. See Underwriting/ Verbal Verification of Employment for details.

15 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page General Underwriting Guidelines Overview Underwriting Method Presentation Throughout the product suite references to the Underwriting chapter are indicated in the following manner, MSI/Credit this tells you to go to the MSI Underwriting chapter, Credit section. References in blue with an underline indicate a link within this chapter. Guidelines that are not provided in this product suite or in the Underwriting chapter default to the applicable Fannie Mae guidelines. Please refer to the Fannie Mae Seller Guide for full details. Jumbo Conventional All loans are manually underwritten and are not submitted to an AUS. MSI requires the approval of a third party underwriter for all Jumbo loans, the decision of the third party underwriter is final. MSI will perform only a cursory review of the loan submission for documentation completeness; MSI will not perform a preliminary underwriting review, the loan will be submitted to the third party underwriter for review. Due to the third party review, underwriting turn-time is greatly extended, please allow additional time. Notes: The loan file must be uploaded (Fannie Mae 3.2 File Format) into the MSI system prior to lock. If the loan does not pass the third party RESPA review, the loan is not acceptable. All loans must meet the guidelines outlined in this General Underwriting Guidelines section unless otherwise noted. The guidelines in this section are presented in alphabetical order. Accessory Units Defined as/examples of such properties include a house with a unit above a detached garage or a house with a guest apartment or basement unit. A single-family property that includes an additional unit is acceptable provided it conforms to the subject neighborhood and to the market. Comparables must include second units. Second unit must be incidental to the overall value and to appearance of the property. No rental income may be used to qualify the borrower.

16 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Assets The borrower must have sufficient assets to cover the minimum down payment, closing costs, and any required reserves. Requirements for certain asset types are detailed below. The source of assets must be seasoned for a minimum of 90 days prior to the date of loan application. Refer to the Fannie Mae Seller Guide(s) for additional information on eligible sources of borrower funds not addressed in this section. Acceptable Assets for Down Payment and Reserves Bank Deposits Business Accounts May not be considered as funds for Reserves. Requirements All deposits must be properly sourced. See Documentation Requirements. Two months bank statements reflecting a beginning and ending balance. Permitted for down payment and closing costs only as follows: When a borrower has insufficient personal liquid assets to qualify or close, but has sufficient verified funds in a 100% owned business, the business funds may represent an adequate source of down payment and reserves (post-liquidity) if both of the following conditions are met: Business average annual cash flow is greater than the amount to be withdrawn/reserves. Cash on company year-end balance sheet for each of the previous three years is greater than the amount to be withdrawn/reserves. This information is found on line 1 of the schedule L for the Partnership, S-Corporation and the Corporation. A three-year history of a balance greater than or equal to the amount being considered for reserves (postclosing liquidity) or down payment is required. Two years of the schedule L will show three years of cash on hand for the company. Full analysis of the business must consider the effect of the withdrawal of the assets and how it will impact the strength and viability of the business in the future. The following questions need to be considered: What is the pattern of company cash flows? Do we have declining gross or net income? Do we have concerns about the type of business? Is the business experiencing a downturn? Extreme care needs to be taken when considering business use of funds and in some cases even though a business is profitable, it may not be prudent to use the business assets in our transaction.

17 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Assets, Continued Acceptable Assets for Down Payment and Reserves Cash Value of life insurance May be considered as funds for Reserves. Gift Funds May not be considered as funds for Reserves. Requirements Document by providing a copy of the check from the insurer or a copy of the payout statement issued by the insurer. Permitted on primary purchase transactions only. Borrower must contribute a minimum of 5% from own funds. If the LTV is less than 80%, the entire down payment may be from the gift. Gift funds may not be used to meet reserve requirements. Donor must be an immediate family member, future spouse, or domestic partner living with the borrower. An executed gift letter with the gift amount, donor s name, address, telephone number and relationship is required. Evidence that sufficient funds to cover the gift are either in the donor s account or have been transferred to the borrower s account. Acceptable evidence is: A copy of the donor s check and the borrower s deposit slip. A copy of the donor s withdrawal slip and the borrower s deposit slip. A copy of the donor s check to the closing agent, or A settlement statement showing the receipt of the donor s check. When the funds are transferred at settlement, the loan file must include evidence that the donor gave the closing agent gift funds in the form of a cashier s check or other official good funds check. Gift of Equity is not permitted.

18 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Assets, Continued Acceptable Assets for Down Payment and Reserves Loans secured by borrower s assets May not be considered as funds for Reserves. Marketable Securities May be considered as funds for Reserves. Requirements Proceeds from a loan secured by financial assets such as automobiles, artwork, collectibles, real estate, or financial assets such as savings account, stocks, bonds, Certificates of Deposits, and 401(k) accounts may be used for down payment and closing costs. When a loan is secured by the borrower s financial assets, a monthly payment is not required to be considered in the DTI ratios. The monthly payment for loans secured by non-financial assets must be included in DTI ratios. If the loan does not require a monthly payment, an equivalent payment must be calculated and considered as a recurring debt. If the borrower is using the financial asset to satisfy reserve requirements, the asset must be reduced by the amount of the loan. The following documentation is required: The terms of the secured loan. Evidence that the party providing the loan is not a party to the transaction. Evidence that the funds have been transferred to the borrower. For Down Payment: Documented evidence of liquidation of the policy and deposit into escrow or bank account. For Reserves: 65% of investments in publicly traded stocks, bonds, mutual funds, certificates of deposit, money market funds,

19 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Assets, Continued Acceptable Assets for Down Payment and Reserves Retirement Accounts Disbursement from and IRA/401(K) Only 50% of the disbursement amount may be considered as funds for Reserves. Sale of Real Property May be considered as funds for Reserves. Trust Funds May be considered as funds for Reserves. United States Saving Bonds Vested amount may be considered as funds for Reserves. Requirements 60% of vested funds from individual retirement accounts (IRA/SEP/Keogh accounts) and tax-deferred retirement savings accounts (401(k) accounts) are acceptable sources of funds for down payment, closing costs, and reserves. The ownership of the accounts and the borrower's actual receipt of the funds realized from the liquidation of the assets must be verified if needed to complete the transaction. When funds from retirement accounts are used for reserves, documentation of the withdrawal of the funds is not required. 60% of IRA, SEP, Keogh and Annuity accounts. 60% of the vested amount of 401k plans. The terms and conditions under which funds may be withdrawn must be verified. In order to be used as reserves, retirement accounts must be vested and allow withdrawals regardless of the current employment status. See Underwriting/Sale of Personal Assets for assets other than real estate. Document sale of real estate with HUD-1/Closing Disclosure to document proceeds. Funds disbursed from a borrower s share of a trust account may be used for down payment, closing costs, and/or reserves provided the borrower has immediate access to the funds. The loan file must include the following: Written documentation of the value of the trust account from either the trust manager or the trustee. The conditions under which the borrower has access to the funds and the effect, if any, that the withdrawal of funds will have on trust income used in qualifying the borrower for the mortgage. For Reserves: 100% of borrower s share of trust assets. Borrower must have full access to the funds and a copy of the complete trust or trustee letter is required. Bonds must be liquidated and evidence of deposit into either escrow or the borrower s bank account. For Reserves, the Bonds are not required to be liquidated.

20 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Assets, Continued Acceptable Assets for Down Payment and Reserves Ineligible Sources of Funds (Assets) Verification of Foreign Assets Requirements Signature loan(s) Cash for which the source cannot be verified (cash on hand). Commission from sale of subject property. Salary advances Sweat equity (contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash). Unverified sources of funds Reverse mortgages 1031 Tax Deferred Exchange Unsecured loans, including credit card advances. Unsecured loans from an Employer assisted Homeownership benefit. Sale of an asset other than real property or publically traded securities. Deposits from an Individual Development Account (IDA) Funds on deposit in a Community Saving System. Funds that a non-u.s. Citizen with lawful residency recently deposited in a U.S. depository institution is acceptable subject to the following: Evidence of funds transfer from the country from which the borrower immigrated has been provided. Documentation to evidence that the funds belonged to the borrower before the date of the transfer is provided. The source(s) of all funds used for closing can be verified just as they would for a U.S. Citizen. Any required documentation that is in a foreign language must be translated to English.

21 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Assets, Continued Acceptable Assets for Down Payment and Reserves Required Reserve Amounts (PITIA) Requirements Primary Residence Max Loan Amt. Single Family 2-Unit 3-4 Unit $ 1 Million 12 Months 12 Months 36 Months > $1 Million to $2 Million > $2 Million 24 Months Second Home $ 1 Million 18 Months > $1 Million to $2 Million 12 Months 18 Months 24 Months > $2 Million 36 Months Investment $ 1 Million 24 Months > $1 Million to $2 Million 30 Months Notes: Loan Amount = the combined loan amount of all loans/liens against the subject property. PITIA = Principal/Interest/Taxes/Insurance/Association Dues Multiple Financed Properties: If a borrower has multiple financed properties, an additional 6 months of reserves (PITIA) for each additional financed property is required. (See Multiple Mortgages to the Same Borrower) If review of the credit report or other information indicates that the borrower has a balloon payment due within the next 12 months, available assets must be reduced by the amount of the payment. Assets not considered for Reserves: Cash Out proceeds from the subject loan Funds in which the borrower is not vested Funds that cannot be withdrawn under circumstances other that the account holder s retirement, employment termination, or death. Gift Funds Non-financial assets such as collectibles, coins, stamps, art work that would require appraisal and/or liquidation Business accounts/assets Stocks/notes/loans receivable from a privately held company Stock options and non-vested restricted stock Personal unsecured loans Interested Party Contributions. N/A

22 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Appraisal Requirements Rev 12/2015 General Requirements (see also Underwriting/Appraisal) Full appraisal on the applicable Fannie Mae/Freddie Mac URAR (Uniform Residential Appraisal Report) are required on all loans. All condo units must be on a condominium appraisal report (Fannie Mae Form 1073). The land value may not exceed 40% of the total value and must be consistent with other comparable homes in the area as supported by the comparables. The appraisal must include clear interior photos of the kitchen, bathrooms, and living/family room(s). All appraisals shall conform to the current Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation. All appraisals must be ordered from RELS. Client has the responsibility of signing up with RELS, as this is the only approved vendor currently. (877) is the direct contact phone number for RELS. Client has the responsibility for payment in full for any appraisal ordered through RELS.. Schedules and addenda are mandatory if applicable. Request for additional comps may apply All Appraisals may be subject to an additional Desk Review; the qualifying property value will be the lesser of the appraised value or the desk review. (Desk Reviews will not be requested until the loan is locked; the Desk Review fee is included in the Underwriting Fee.)

23 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Specific Requirements based on Loan Amount and Median Home Price Multiples REV (7/09/15) Combined Loan Amount CLTV Median Home Price Multiple $1 Million All 1 full certified Appraisal >$ 1Million $1.5 Million 80% 1 full certified Appraisal 4 X MHP >4 10 X MHP > 10 X MHP 1 full certified Appraisal 1 full certified Appraisal and a Residential Valuation Services Desk Review 1 full certified Appraisal and a Residential Valuation Services Desk Review 1 full certified Appraisal and a Residential Valuation Services Desk Review >$ 1.5 Million $2 Million 80% 1 full certified Appraisal and a Residential Valuation Services Desk Review 1 full certified Appraisal and a Residential Valuation >$ 2 Million 75% Services (RVS) Field Review > 75% Ineligible Ineligible Ineligible Notes: A full certified Appraisal is one prepared on form 1004/70, 2090, or 1073 (as applicable). No other forms of appraisal are permitted. Seller must notify the AMC that the appraisal must be completed by a certified appraiser and must confirm such upon receipt of the appraisal. The Residential Valuation Services Desk Review or Field Review will be ordered by the Third Party Underwriter. See Median Home Prices at this link: MSI Jumbo Median Home Prices.

24 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page High Dollar Appraisal Addendum A high dollar appraisal addendum is required when the total loan amount is greater than $2 Million and the property value is greater than $2.5 Million as evidenced by the purchase price or the owner s estimate of value stated on the application. The high dollar appraisal requirement is not based on the appraised value. The High Dollar Appraisal Addendum must include all of the following: A summary of sales located in the subject s immediate neighborhood even if the sales are not considered comparable by the appraiser and even if they are not used in estimating the subject s market value. Days on market (DOM) for each comparable sale. Marketing time required to realize the market value estimated for the subject property. Include a market analysis for all properties priced within 25% of the subject s estimated value that addresses each of the following three factors: In the selected price range, how many sales have occurred in the last 12 months? In the selected price range, how many properties are currently listed for sale? In the selected price range, how many properties have had listings expire or be withdrawn in the last 12 months? For purchase transactions, also include: Names and phone numbers of the listing and selling agents. Total listing period for the subject property (include list price decreases, if any). Appraisal Transfers Not permitted.

25 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Appraisal Transparency Report Borrowers MSI requires a copy of the Appraisal Transparency Report from the AMC in the loan file at time of delivery for underwriting. The following matrix outlines the applicable borrower types: Eligible Borrowers Loans are granted only to natural persons. Title must be held in individual names only. The following are permitted to the applicable MSI/agency underwriting guidelines: U.S. Citizens Permanent Resident Aliens & Non-Permanent Resident Aliens: Underwritten as U.S. Citizen must have a minimum of 2 year employment history in the US. Eligible for single family detached primary residence only. Ineligible Borrowers Possession by corporations or partnerships is not acceptable, including, but not limited to, the following: Co-Signer Non-Resident Alien Inter Vivos Revocable Trust Borrowers with diplomatic immunity S Corporations Life Estates Real Estate Syndication General Partnerships Foreign Nationals Non-profit organizations Non-Occupant Co-Mortgagors Land Trusts, including Illinois Notes: Each borrower must have a valid U.S. Social Security Card; a tax I.D. number is not acceptable. See the Underwriting Chapter for full details/requirements for: Permanent and Non-Permanent Resident Aliens o Jumbo loans permit also Visa status: O-1A; 0-1B; 0-2 Non-Purchasing Spouse Separated Borrowers: If the Borrower is legally separated, a copy of the recorded separation agreement detailing division of assets, liabilities and potential obligations is required. If there is no legal separation, a letter from the attorneys of both parties specifying the proposed settlement terms must be provided. If no documentation can be obtained to verify the division of assets and liabilities, the loan will generally be considered an unacceptable credit risk. If the Borrower states there are no plans for legal separation, no further documentation is necessary; he/she is legally married and qualified accordingly.

26 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Chain of Title Condominiums MSI requires a 24-month chain of title on all properties. The title commitment must document 24 months of property ownership. See Property Flipping. The project will be reviewed by the 3 rd party underwriter. Include a copy of the CC&R s and Bylaws for the condo project in the underwriting submission package. Include the appropriate fully completed HOA Certification: Condo HOA Certification; Jumbo 2-4 Unit Condo HOA Cert The 3 rd party underwriter will determine the additional documentation required. Florida condos are not permitted.

27 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Construction to Perm REV (8/21/15) General Guidelines: Permitted as a rate/term refinance when permanent financing pays off the construction financing within 180 days after property completion. The borrower must hold legal title to the lot and be named as the borrower on the construction loan. The property must be fully constructed and habitable at the time of loan closing. A certificate of occupancy from the applicable government authority is required. If the government authority does not require a certificate of occupancy, the loan file must include evidence that the certificate if not required. MSI does not permit Single Close Construction. The following specific requirements apply: Construction to Permanent Policy The LTV/TLTV/CLTV must be within the rate/term guidelines for the product. There is no requirement for the length of time the lot must be owned prior to the permanent financing. The LTV/TLTV/CLTV is determined by dividing the unpaid principal balance of the construction-to-permanent mortgage by the lesser of: The current appraised value for the property (both the lot and the improvements) or The total acquisition costs (which are the sum of the documented costs of the construction and the sales price of the lot). Acquisition cost must be documented. Closing costs and prepaids may be included in the Loan amount (subject to LTV/TLTV/CLTV limitations). The borrower may be reimbursed for actual cash investment into the property. Acquisition Cost Documentation: To document acquisition cost, the borrower must provide a purchase contract or construction cost statement (cost breakdown), signed by the builder and the borrower.

28 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Borrower in Construction Industry If the borrower is acting as his/her own builder (general contractor or sub-contractor) and his/her primary occupation is in the construction industry, the following must be met: Acquisition Cost Documented Acquisition cost must be fully documented, regardless of LTV/TLTV/CLTV. To document acquisition cost, the borrower must provide copies of receipts, bills, lien waivers, lot purchase agreement, etc., in addition to an itemized cost breakdown. The LTV/TLTV/CLTV will be based on the lesser of the documented acquisition cost or appraised value. The subject property must be an owner occupied primary residence. The borrower cannot receive cash back at closing that is not a direct verifiable reimbursement of expenses.

29 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Credit Considerations The matrix below outlines guidelines for certain credit considerations when underwriting the loan. Credit Report Requirements: The Credit Report must be obtained from either CoreLogic ; Credco ; or Equifax. If the Credit Report is not from one of these companies, the Third Party Underwriter will order a new credit report using one of the 3 companies and charge the Seller; pricing will be affected. Topic Authorized User Accounts Bankruptcy, Foreclosure/Short Sale or Modification Important Note: If LTV/CLTV is > 70%, loan is ineligible. Requirements Installment and Revolving credit: if the Borrower is an authorized user on the account, the debt must be considered in qualifying. Bankruptcy: Chapter 7: 7 years seasoning from discharge date. Chapter 13 discharged: 7 years seasoning from discharge date. Chapter 13 dismissed: 7 years seasoning from dismissal date. Foreclosure: No foreclosure/deed in lieu of foreclosure within the last 7 years. Short sale: No short sale within the last 7 years. Modification: Not permitted. The borrower must have reestablished a satisfactory credit history with a minimum of three trade lines and must show the ability to manage his/her financial affairs since the bankruptcy was completed, timed to the disbursement date of the new loan. No late payments of any kind during the 12 months prior to loan application. All major derogatory credit requires a letter of explanation from the borrower, indicating that the negative credit was due to unavoidable hardship.

30 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Credit Considerations, Continued Topic Charge-offs, Collections, Judgments, Public Records Credit History Credit Report Inquiries Requirements The Borrower must provide satisfactory explanation of any delinquent credit. The third party underwriter retains the right to refuse a loan based on review of derogatory credit. All of the following must be paid in full by or at closing: Judgments Charge-offs and/or collection accounts $500 Garnishments Liens Charge-offs and/or collection accounts < $500 are not required to be paid; however, the borrowers must provide a satisfactory explanation letter. Borrowers with garnishments must provide evidence that the garnishment has been released and there is no additional payment due. Borrowers with liens must provide evidence that the lien has been paid in full. Borrowers with current or previous past due child support must provide evidence that all past due payments are current unless the borrower is making the payments according to a court approved plan. In this case, the borrower must demonstrate that payments are current according to the plan. Minimum Trade lines: 3 active trade lines. 2 trade lines must be reported for a minimum of 24 months and one trade line must be reported for a minimum of 36 months. 24 months reported for all three trade lines is acceptable if none of the following has occurred: Bankruptcy Chapter 7, 11 or 13 Foreclosure Short sale or deed-in-lieu of foreclosure Loan Modification, unless the modification was lender initiated and the loan file includes evidence that the modification was not a result of a distressed situation. No major adverse credit reported in the last 24 months on any revolving or installment accounts. Major adverse credit is defined as 60 or more days past due. No public records within the last 24 months. Borrowers with a history of consumer credit counseling are not eligible. All credit inquiries reported within the prior 120 days must be investigated. The borrower must provide a written explanation for the inquiries that includes a statement that no additional debt was obtained as a result of those inquires.

31 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Credit Considerations, Continued Topic Disputed Trade lines Mortgage/Rental History Requirements If a borrower indicates that any significant information in the credit file is inaccurate such as reported accounts that do not belong to the borrower or derogatory information that is reported in error the credit information should be reviewed with the borrower, and the credit reporting agency should be provided with the information to confirm its accuracy. If the credit reporting agency confirms that the disputed information is incorrect and underwriting of the application needs to be completed before the credit files can be corrected, the credit score cannot be used in the underwriting of the application. The credit risk assessment must be based on a review of the borrower s traditional credit history. If there are multiple disputed trade lines or a dispute on a mortgage trade line, the borrower must provide a written explanation of the reason for the dispute. The aspect of the trade line such as balance, payment history, etc. that is being disputed is of particular concern when considering the impact to the borrower s overall credit profile. The third party underwriter is responsible for determining whether the borrower s explanation is reasonable and/or whether additional documentation is necessary to disprove the adverse information (e.g., canceled checks). 0 X 30 for the most recent consecutive 12 months for mortgage or rental. Mortgage History: In case of a recent refinance or account transfer, a combination of payment performance from multiple lenders for the same collateral may be used to complete the 12 month history requirement. For a recent purchase, a combination of payment performance from a prior property or rental payments may be used to complete the 12 month history. A gap in mortgage/rental payment history of up to six months is allowed by obtaining the most recent 18 month history and providing written documentation explaining the reason for the gap. Mortgage/rental history must be verified by the mortgage holder/servicer or credit bureau, or: Copies (front and back) of 12 months consecutive (one payment per month) mortgage payment cancelled checks. Bank statements or direct payment records showing one payment per month. Mortgage loan must be current at the time of closing.

32 Version 5/21/14 REV (12/7/15) Posted 12/7/15 Page Credit Considerations, Continued Topic Mortgage/Rental History, Continued Requirements Rental History: If the landlord is a management company, the management company must be listed in the local telephone directory and the file must contain a copy of the listing. If the listing is not available, 12 months of cancelled checks must be provided. If the landlord is a non-related individual, a direct verification is allowed provided proof of landlord ownership is established. All direct verifications must include the rental amount, payment history and length of payment history. If the landlord is related to the borrower, 12 months of cancelled checks must be provided. If cancelled checks are used, copies (front and back) of 12 months consecutive (one payment per month) rental payment cancelled checks are required. Deed Restrictions Not Permitted. Delayed Financing Conversion or Sale of Principal Residence Not Permitted If the current principal residence is pending sale but will not be sold (closed) prior to the closing of the subject property: Borrower s primary residence pending sale: Borrower must qualify with both current and proposed PITIA, and Reserve requirements are the greater of 6 month PITIA or the standard post-close reserves, for each property. See Required Reserve Amounts/ Multiple Properties. If the current property will not be sold, and is in a negative equity position, the following may be required to reduce the overall risk: Additional cash reserves to cover the negative equity of the departure residence, OR Pay down the lien on the departure residence to eliminate the negative equity. Borrower converting primary residence to a second home: Borrower must qualify with both current and proposed PITIA, and Reserve requirements are the greater of 6 month PITIA or the standard post-close reserves, for each property. See Required Reserve Amounts/ Multiple Properties.