1) Correspondent Lending Seller Guide Updates and Revisions

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1 ANNOUNCEMENT TO: FROM: SUBJECT: CORRESPONDENT SELLERS BOB KALLIO, SVP UPDATES AND REVISIONS TO: 1) SELLER GUIDE 2) PRODUCT PROFILES 3) TEXAS SECTION 50(A)(6) REFINANCE ELIGIBILITY MATRIX AND SUMMARY GUIDELINES DATE: JUNE 11, ) Correspondent Lending Seller Guide Updates and Revisions Please be advised of the following updates and revisions to the Correspondent Lending Seller Guide. Unless otherwise specified; under Change Summary below; all changes are effective immediately as of June 11, Updated Correspondent Lending Seller Guide is posted on Correspondent Lending website. Identity Theft Prevention Program (Removed) 54 & 307 Change Summary: Removal of the Identity Theft Prevention Program section. This topic is addressed in Representations & Warranties and other sections of the Seller Guide. Correspondent must provide a copy of its Identity Theft Prevention Program to LenderLive upon TPO approval, and must notify LenderLive if there are any substantive modifications to the Program. Fee Schedule 68 Change Summary: 1) Per announcement dated 6/1/15; LenderLive is increasing Administrative fee by $25; from $250 to $275 for Delegated and Non-delegated registrations/commitments created on or after 6/15/15. 2) "Denied or Cancelled/Withdrawn" fee for Non-delegated clients is corrected to reflect "N/A." Effective with registrations/commitments created on or after 6/15/2015, Administrative fee is increasing from $250 to $275 Delegated Submissions Change Summary: Removal of reference to Loan File Checklist & Submission Form. LenderLive will require the new Loan File Submission Form; for registrations/commitments created on or after 7/1/15; with each closed loan file delivery. Loan File Submission Form will replace Loan Stacking Form. Form is available under Forms, Tools and Job Aids link of Correspondent Lending website. Each Mortgage Loan File submission must be accompanied by a completed Loan File Submission Form Loan File Checklist & Submission Form; available under available under Forms section of Tools and Job Aids tab of Correspondent Lending website. 1 Page

2 2 Submission Forms 70 Change Summary: Removal of reference to Loan File Checklist & Submission Form. LenderLive will require the new Loan File Submission Form; for registrations/commitments created on or after 7/1/15; with each closed loan file delivery. Loan File Submission Form will replace Loan Stacking Form. Form is available under Forms, Tools and Job Aids link of Correspondent Lending website. LenderLive requires each Mortgage Loan File to be delivered with a completed Submission Form either Loan File Submission Form Loan File Checklist & Submission Form or Prior Approval Submission Form; as applicable. Submission Forms include lists of minimum required documentation. Files are expected to be organized and neatly arranged in a manner which supports the lender s operation. Credit File Documentation Requirements 71 Change Summary: Removal of reference to Loan File Checklist & Submission Form. LenderLive will require the new Loan File Submission Form; for registrations/commitments created on or after 7/1/15; with each closed loan file delivery. Loan File Submission Form will replace Loan Stacking Form. Form is available under Forms, Tools and Job Aids link of Correspondent Lending website. Credit loan file must include the following documentation: Applicable Submission Form; either Prior Approval Submission form for Non-delegated loans or Loan File Submission Form Loan File Checklist & Submission Form for Delegated loans Compliance Report/Certification or Test Results 73 Change Summary: Updates to LenderLive's recommendations for Compliance Reports. LenderLive strongly recommends that all Delegated and Non-delegated Correspondents utilize a third party Compliance Report/Certification tool or compliance tool integrated with their loan origination system to validate adherence to regulatory compliance requirements. At a minimum, LenderLive suggests all files to be documented with certification of compliance for the following regulations: The loan is not a High Cost Mortgage under HOEPA (and is not a High Cost loan under state or local regulations) Identification of a Federal and/or State High Cost or Higher Priced Mortgage Loan transaction Truth in Lending Act, including ATR and QM requirements GSE Points & Fees testing Notice of Right to Cancel (if applicable) The report/certification should clearly evidence compliance with these regulations. While the scope of the report/certificate is limited, Correspondents are reminded of the compliance Representations and Warranties outlined in this Guide. LenderLive asks clients to submit the results of the compliance tool in the file; as part of the Credit File submission. If Correspondent s compliance tool is integrated with the loan origination system, Correspondent may provide print screen of compliance results or satisfactory documentation to demonstrate that the loan meets the above listed requirements it is not necessary to provide the results. As a reminder, Correspondent Sellers are responsible for delivering loans in compliance with all Federal, State, and loan program requirements. Loans that do not meet requirements may be subject to repurchase. 2 Page

3 3 Change Summary: New requirements for completion of HPML "Yes" or "No" checkboxes on updated Prior Approval Loan File Submission Form. Recommendation for delivery of Compliance Report also added to submission form. LenderLive will require the updated Prior Approval Loan File Submission Form for loans with registrations/commitments created on or after 7/1/15. Non-delegated: HPML Determination (New) 74 Correspondent must complete Higher Priced Mortgage Loan (HPML) section of Prior Approval Loan File Submission Form. LenderLive will rely Correspondent's Yes or No checkbox response/selection to the question which asks, Is this transaction a HPML? LenderLive will depend on Correspondent's Yes or No response/selection to determine whether the transaction must be underwritten as a HPML. It is the Correspondent's responsibility to complete this section accurately. If HPML status changes after LenderLive issues an underwriting decision, Correspondent is responsible for notifying LenderLive about any changes; for possible re-underwriting; prior to closing. Other Regulatory Compliance Disclosures 102 Change Summary: Removal of reference to Loan File Checklist & Submission Form. LenderLive will require the new Loan File Submission Form; for registrations/commitments created on or after 7/1/15; with each closed loan file delivery. Loan File Submission Form will replace Loan Stacking Form. Form is available under Forms, Tools and Job Aids link of Correspondent Lending website. Refer to Regulatory Compliance portion this Guide, the Loan File Checklist and the Loan File Submission Form & Submission Form for additional information. The Loan File Checklist and Loan File Submission Form & Submission Form can be used as a job aid/tool guide, but are is not intended to be a complete list of all required documents, including Regulatory Compliance documents. Loan File Checklist and Loan File Submission Form & Submission Form are is available under Tools and Job Aids tab of Correspondent Lending website. Loan File Checklist & Submission Form 113 Change Summary: Removal of reference to Loan File Checklist & Submission Form. Loan File Checklist is offered as a job aid/tool. Checklist is available under Forms, Tools and Job Aids link of Correspondent Lending website. Correspondents may use LenderLive s Loan File Checklist & Submission Form as a job aid/tool to reference when preparing Mortgage Loan Files and trailing final documents for delivery to LenderLive. Note that the Loan File Checklist is not intended to be relied upon as a stand-alone Guide. It is not an exhaustive or all-inclusive list of required documentation. Refer to this Guide, Product Profiles, applicable Regulatory and Agency or Non-Agency guidelines for complete requirements. Loan File Checklist & Submission Form is available under Forms, Tools and Job Aids tab of Correspondent Lending website. 3 Page

4 4 Loan File Submission Form (New) 113 Change Summary: New section added regarding the requirement for Loan File Submission Form to be delivered with each closed loan file submission. Loan File Submission Form will replace Loan Stacking Form. Form is available under Forms, Tools and Job Aids link of Correspondent Lending website. Each closed loan file submission must be accompanied by a completed Loan File Submission Form. The form is available under Tools and Job Aids tab of Correspondent Lending website. Insurance Premium Paid Through Date Change Summary: Correction of timeframe for Correspondent's responsibility to pay insurance premiums; from 45 to 60 days. This requirement applies to all registrations/commitments created on or after 7/1/15. The following applies to all insurance policies: Correspondents are responsible for payment of any insurance premiums due within days following Mortgage Loan purchase. If evidence of payment is not found in the Mortgage Loan file and the insurance premium is due within the 60 day period, LenderLive will place a condition on the Mortgage Loan. LenderLive will not purchase the Mortgage Loan until the condition is satisfied. The Correspondent is responsible for any penalties assessed on payments that are due within days of Mortgage Loan purchase. Title Insurance Requirements Title Insurance Endorsements Table Change Summary: LenderLive is adding the following requirement to title policies because creditors' rights exclusion language limits coverage by reason of federal bankruptcy, state insolvency or similar creditors' rights laws. This requirement applies to all registrations/commitments created on or after 7/1/15. Title policies may not include the creditors rights exclusion language that ALTA adopted in 1990, as amended Change Summary: Adding the option for Correspondents to furnish state equivalent of title endorsement for Environmental Protection. ALTA Environmental Protection Endorsement or state equivalent ALTA Short Forms of Title Change Summary Additional requirements and guidance for Short Forms of Title. LenderLive will also accept the following ALTA Short Forms of Title: Short Form Residential Loan Policy providing coverage equivalent to the most recent ALTA Standard form and does not materially impair protection to LenderLive, its successor or assigns, or In states in which standard ALTA forms coverage are, by law or regulation, not used, the state-promulgated standard or short form which provides same coverage as the equivalent ALTA form, provided that those forms do not materially impair protection to LenderLive, its successors or assigns, or 4 Page

5 5 Change Summary: Clarification of SSR requirements and new guidance regarding FHA's Electronic Appraisal Delivery (EDA) portal. LenderLive requires the following for all Fannie Mae and Freddie Mac Mortgage Loans with appraisals: UCDP, SSR, and FHA EAD Requirements for GSE and FHA Mortgage Loans with Appraisals The appraisal must be uploaded by the Correspondent to the Uniform Collateral Data Portal (UCDP ) Upload must be successful and receive a successful finding SSR must be included in the Mortgage Loan Delivery package for all GSE Mortgage Loans o SSR contains a summary of the appraisal submission(s) for each Mortgage Loan, the status of the submission(s), and a Document File Identifier (Doc File ID.) An appraisal must be submitted to the UCDP and receive a "successful" status on the SSR before the Mortgage Loan is delivered to LenderLive by LenderLive to the GSE For Mortgage Loans in Fannie Mae Mortgage Loan Programs, the Fannie Mae Appraisal Findings Detail Report (AFDR) (message report) must be included in the Mortgage Loan Delivery package See Product Profiles for requirements on Mortgage Loans delivered into programs other than Fannie Mae, Freddie Mac and FHA Note: If the SSR indicates that the appraiser s (or supervisory appraiser s) work is not eligible for sale to Fannie Mae, or is subject to 100% review, then the loan is not eligible for sale to LenderLive. See Fannie Mae Appraiser Quality Monitoring (AQM) UCDP Messages section of this Guide for additional information For FHA Mortgage Loans, appraisal reports may be uploaded to the FHA Electronic Appraisal Delivery (EAD) portal for all case numbers assigned before June 27, Loans with case numbers assigned on and after June 27, 2016 must be updated to the EAD portal in compliance with ML and the Single Family Housing Policy Handbook. Flip or Rapid Resale of Property within 90 days after Prior Sale Date Change Summary: Enhancement of policy to allow property flips; within 90 days after prior sale date; in which value is supported. If subject property had a prior sale within 90 days previous to the purchase contract date of the subject transaction, then the Mortgage Loan is not eligible for sale to LenderLive unless except in the following situations: Property was acquired by a relocation agency in connection with the relocation of an employee, and then resold to someone who is not an employee or affiliate of the original employee s company, or Resale by a lender when property is obtained through foreclosure or deed in lieu of foreclosure, or Resale of a property obtained through an inheritance or as part of the property settlement in a divorce agreement, or Any increase in value is substantiated/supported by bona fide and verified improvements since the property was acquired by the property seller in which any increase in sales price over the seller's acquisition costs is representative of the market given the improvements to the home, or Sale of property that the property seller acquired at below market value after purchasing as a result of a distress sale (i.e. REO sale, short sale, tax lien sale, bankruptcy trustee's sale, etc.), where any increase in the sales price over the property seller's acquisition cost can be clearly shown to be a result of the difference (if any) in the market's reaction to distress sales and typical arms-length market sales Transactions within 90 days of the prior sale which meet the exceptions listed in this section must also meet the requirements set forth directly below in the Flip or Rapid Resale of Property Less Than 180 Days after Prior Sale Date section of the Guide in order to be eligible for purchase by LenderLive. 5 Page

6 6 Additional Requirements for FHA Flip Transactions 181 Change Summary: FHA/HUD discontinued Property Flipping Rule Waiver effective with sales contracts executed after 11:59 PM, December 31, For additional information, refer to: In addition to any requirements of LenderLive, Correspondents must ensure that FHA loans with purchase contract dates less than 90 days subsequent to a prior sale of the subject property meet all requirements of FHA and HUD Property Flipping Rule Waiver; during its effective period; insofar as it remains in effect, and any other FHA guidelines and requirements that apply. Refer to 24 CFR a(b)(2) for details. Mortgage Loan Purchase: Amortization Dates for Servicing Released Loans (New) Change Summary: New section added to specify amortization dates for servicing released loans. Wires for servicing released Mortgage Loans wired on or after the 13th calendar day of any month will have an effective transfer of servicing date as the 1st day of the 2nd month following the month in which the Mortgage Loan is purchased by LenderLive. Therefore, if a Mortgage Loan has a scheduled payment on any date prior to the effective date of the transfer of servicing following the Purchase Date, then that principal portion of such payment will be subtracted from the remaining principal balance when determining the principal balance that is purchased by LenderLive, i.e. the Mortgage Loan will be amortized. Mortgage Loans purchased on the 12th calendar day of the month or earlier will have an effective transfer of servicing date as of the 1st day of the month following the month in which the Mortgage Loan is purchased by LenderLive. When determining the principal balance that is purchased by LenderLive, it will be calculated based on the Correspondent receiving any payments contractually due through the Purchase Date and the resulting principal balance of the Mortgage Loan that would correspond to having received such payments due, if any. LenderLive will pay interest on Mortgage Loans from the interest paid-through-date up to, but not including, the Purchase Date for Mortgage Loans that are not amortized. If the Mortgage Loan has been amortized, LenderLive will deduct from the proceeds, interest from the Purchase Date through the purchased interest paid-through date. Interest will be calculated using a 12 month schedule of 30 days each. Change Summary: Correction of cut-off dates. For amortized Mortgage Loans with an escrow/impound account for taxes, insurance, etc., LenderLive will deduct from the purchase price the escrow/impound amount corresponding to the principal payments amortized. Purchase of Mortgage Loans with Escrows/Impounds Page

7 7 Change Summary: Adding reference to another section of Seller Guide. Correspondents must ensure their underwriting standards recognize a variety of factors when evaluating a borrower s ability to repay a loan, including (but not limited to) an assessment of the borrower s debts and all liabilities that may affect the borrower s ability to fulfill the mortgage payment obligation. All debts of the borrower incurred or closed up to and concurrent with the closing of the subject mortgage must be disclosed on the final 1003 loan application and included in the qualification for the subject mortgage loan. Undisclosed Liabilities and Requirement for Gap Credit Report Furthermore, the Correspondent must review and evaluate the inquiries section of the borrower s credit report to determine if the borrower has received additional credit that is not reflected in the credit report or disclosed on the loan application. If additional credit was obtained, a verification of that debt must be provided and the borrower must be qualified with the monthly payment. Borrower(s) must disclose all liabilities for accurate qualification and their ability to pay their current and future obligations. If LenderLive determines; during post-purchase review or audit; that any debts were not adequately disclosed on the application nor included in the debt-toincome ratio such that loan would not have met LenderLive s eligibility requirements, the mortgage loan may be subject to re-purchase. Correspondents must have adequate internal controls and processes in place to evaluate borrower liabilities. Refer to Gap Report section of this Guide, below, for additional information. 7 Page

8 8 Change Summary: Section is updated to remove the Gap Report overlay. Instead, LenderLive highly recommends use of a Gap Report. Furthermore, section is updated to include purpose of Gap Report and clarify LenderLive's expectations. Gap Reports (also known as LQI Reports, Undisclosed Debt Monitoring Reports or Credit Refresh Reports) are intended to identify any changes in a borrower s credit report (excluding credit scores) between original credit report pull date and pre-funding. In general, Gap Reports help mitigate the risk of closing loans with undisclosed debts/liabilities by identifying the following differences between the prior credit report and Gap Report: New inquiries New tradelines Recent utilization of existing bank cards and revolving accounts Other material changes to credit Gap Credit Report For Agency Mortgage Loans LenderLive highly recommends that Correspondent Sellers must obtain a an updated credit report Gap Credit Report within10 days of mortgage Note date; prior to closing/funding of the transaction. Non-Agency programs may require a Gap Report. Refer to specific Product Profiles and/or Non-Agency Program Eligibility and Underwriting Guidelines for additional guidance, as applicable. At minimum, Correspondents are expected take the following action with new information obtained after original credit report is pulled, as applicable: Address new inquiries and/or public records must be addressed Explain material discrepancies from the prior credit report must be explained Correspondent must Re-underwrite the Mortgage Loan if there are any new debts or liabilities; pursuant to loan program guidelines It is important to note that a Gap Report is not a new credit report with credit scores. If a new credit report, with credit scores, is obtained during the course of origination, the loan must be re-underwritten according to the new credit report; pursuant to loan program guidelines. It is not necessary to obtain a Gap Report for noncredit qualifying transactions, such as FHA Streamlines and VA IRRRLs. Assets and Reserves Calculation Worksheet 224 Change Summary: Elimination of requirement for use of LenderLive's Asset Reserves and Calculation Worksheet. Lenders, however, must continue to furnish full and detailed explanation/breakdown of how the lender calculated assets/reserves. A full and detailed explanation/breakdown of how the lender calculated assets/reserves; including, but not limited to earnest money deposit, liquid assets, non-liquid assets, etc.; must be included in every Mortgage Loan file. The explanation/breakdown may be documented on Uniform Underwriting and Transmittal Summary form 1008 (or FHA/VA/USDA equivalent); applicable Agency forms; and/or separate worksheets used by the Correspondent Seller. Regardless of the method used, the explanation/breakdown must be detailed, clearly documented and evidenced in the Mortgage Loan file. Furthermore, Correspondent Sellers are responsible for reviewing applicable guidelines and documentation to ensure assets are properly documented. 8 Page

9 9 Change Summary: Elimination of requirement for lender to use of LenderLive's Income Calculation Method Worksheet. Lenders, however, must continue to furnish full and detailed explanation of how the lender calculated stable monthly qualifying income. A full and detailed explanation of how the lender calculated stable monthly qualifying income must be included in every Mortgage Loan file. The income calculation method may be defined on any of the following documents/forms: Income Calculation Method Worksheet Uniform Underwriting Transmittal Summary form 1008; or FHA, VA or USDA equivalent, as applicable Applicable Agency forms, including but not limited to: o Fannie Mae Comparative Income Analysis form 1088 for self-employed borrowers o Fannie Mae Cash Flow Analysis form 1084 for self-employed borrowers o Fannie Mae Rental Income Worksheet forms 1037, 1038 or 1039 o Freddie Mac Income Analysis form 91 for self-employed borrowers o Freddie Mac Operating Income Statement form 988 for 1-4 unit investment properties or 2-4 family owner occupied property Separate worksheets used by Correspondent Seller Regardless of the method used, the explanation/breakdown must be detailed, clearly documented and evidenced in the Mortgage Loan file. Furthermore, Correspondent Sellers are responsible for reviewing applicable guidelines and documentation to assess whether income is reasonable and properly documented. Identity of Interest and Non Arms-Length Transactions; Overview and Description Change Summary: LenderLive no longer allows financing to owners or employees of Correspondent, Correspondent s affiliate, subsidiary or its third-party originator. This requirement applies to all registrations/commitments created on or after 7/1/15. Mortgage Loans for transactions with identity of interest or non-arm s length characteristics are not eligible for sale to LenderLive if they are secured by second homes or investment properties. Those characteristics include: Sales of properties between family members or business associates Sales of properties involving a business entity (partnership, LLC, corporation, etc.) and an individual who is an officer or principal in the business entity Sales of properties involving the builder/developer of the property and an employee or affiliate of the builder/developer Sales of properties where a Gift of equity is involved Loans to owners or employees of Correspondent, Correspondent s affiliate, subsidiary or its third-party originator are not eligible (See also General Borrower Eligibility) Limit of 1 loan secured by a primary residence for each owner or employee Additional Mortgage Loan Program specific requirements may apply. See the applicable Product Profile or Non-Agency Program Eligibility and Underwriting Guidelines for additional restrictions or requirements 9 Page

10 10 Change Summary: LenderLive no longer permits financing to owners or employees of Correspondent, Correspondent s affiliate, subsidiary or its third-party originator. This requirement applies to all registrations/commitments created on or after 7/1/15. Unless specified differently in Product Profiles and/or Non-Agency Mortgage Loan Program Eligibility and Underwriting Guidelines, LenderLive only purchases Mortgage Loans made to natural persons and eligible Trusts. Other than eligible Trusts, no Borrower on the Note or party with a security interest on the Deed may be: General Borrower Eligibility Corporation Limited Liability Company (LLC) Partnership or other business entity that is not a natural person Real Estate Syndications Deceased at the time the Mortgage Loan is purchased by LenderLive Foreign Politically exposed or have diplomatic immunity A Non-Resident alien Foreign National Owner or employee of Correspondent, Correspondent s affiliate, subsidiary or its third-party originators for Second Homes and Investment Properties only (See Identify of Interest in this Guide section) Higher Priced Mortgage Loans Eligibility 241 Change Summary: LenderLive will purchase certain HPML transactions subject to specific requirements set forth in the Correspondent Lending Seller Guide and Product Profiles. LenderLive will not purchase certain a Higher Priced Mortgage Loans (HPML) as defined in the 2008 REG Z Amendments unless it is a FHA Fixed Rate product, as designated in the Product Profiles. These FHA Fixed Rate HPML mortgages must comply with all requirements under REG Z including the underwriting and consumer protection requirements. Refer to Product Profiles to determine whether eligibility of HPMLs. 10 Page

11 11 Change Summary: LenderLive will purchase certain HPML transactions subject to specific requirements set forth in the Correspondent Lending Seller Guide and Product Profiles. Correspondents must ensure the loan complies with all state and federal laws, including Regulation Z and Home Mortgage Disclosure Act (HMDA) amendments, as well as underwriting and consumer protection requirements. This includes, but is not limited to, items such as Additional requirements are as follows: HPML Eligibility Requirements Validation of repayment ability, Verification of income and assets, Submission of the rate spread (difference) as required by Regulation Z, HMDA, and any other local or state statutes. This may be evidenced by a providing a screenshot of the results from the Federal Financial Institutions Examination Council s FFIEC Rate Spread Calculator or results from Mavent, ComplianceEase or similar compliance testing software for the rate spread, and Escrow accounts for taxes and insurance premiums are required on any transaction with an application date on or after April 1, 2013, secured by a principal residence deemed to be an HPML. This includes adding state specific escrow disclosures where required. The escrow requirement is a minimum of 60 months Note: For condominium Mortgage Loans, if the Homeowners Association (HOA) maintains a master policy insuring the unit (meeting LenderLive Credit Policy requirements), only the tax portion is required to be escrowed. The loan must be a Qualified Mortgage An escrow account must be established for taxes and insurance premiums (including flood insurance) on any transaction secured by a principal residence o Escrow account must be established for a minimum of 60 months o Note: For condominium loans, if the Homeowners Association (HOA) maintains a master policy insuring the unit (meeting LenderLive Credit Policy requirements), only the tax portion is required to be escrowed A full internal/external appraisal is required A second appraisal is required if the property was: o Acquired by the seller 90 or fewer days prior to the consumer s agreement to purchase the property and price has increased by more than 10% o Acquired by the seller between 91 and 180 prior to the consumer s agreement to purchase the property, and price has increased by more than 20% No waiver of appraisal waiting periods prior to closing is permitted Prepayment Penalty is not permitted (Note that LenderLive does not purchase loans with Prepayment Penalties regardless of HPML status) Loan must receive DU Approve/Eligible or LP Accept/Eligible result Borrower must meet minimum Residual Income requirements that mirror VA requirements PITI reserves as required by product guideline and/or AUS findings Follow Agency requirements for qualification of ARMs 11 Page

12 12 Change Summary: Removal of Ineligible Loans section. LenderLive will purchase certain HPML transactions subject to specific requirements set forth in the Correspondent Lending Seller Guide and Product Profiles. Ineligible Loans (Removed) 243 Due to the requirements set forth under Regulation Z and HMDA amendments for HPMLs, as well as certain Agency requirements, the following are not permitted on any HPML: Loans with a prepayment penalty (LenderLive does not purchase loans with prepayment penalties, regardless of HPML status) Any loan that is subject to any interest or payment adjustment or reset during the first 7 years (7/1 ARMs are eligible) LenderLive Transfer of Servicing Reference Guide Change Summary: New address for Correspondents to provide samples of Goodbye Letters for approval by LenderLive. Goodbye Letters: For the first few letters sent, the Correspondent must have the letters prior approved by LenderLive Servicing Group before mailing to Borrowers in order to confirm that terms and contact information meet LenderLive requirements. Forward sample letters to LS_loanboarding@lenderlive.com servicing@lenderlivemortgage.com. Transfer of Servicing Borrower Notification Requirements Goodbye Letter Change Summary: Updating title of "Mortgage Loan Purchase: Amortization Dates" section referenced below to "Mortgage Loan Purchase: Amortization Dates for Service Released Loan."...The Notice provided by the Correspondent and Purchaser (LenderLive) must contain the identical Transfer Dates. The Transfer Date is always the 1st and no other day of the month may be used. See the Mortgage Loan Purchase: Amortization Dates for Service Released Loans portion of Guide for further information on how servicing transfer dates are determined Page

13 13 Change Summary: Clarification of Right of Rescission document requirements and removal of references to H8 and H9 forms. Correspondent Seller is responsible for ensuring that the proper and enforceable Right of Rescission/Notice of Right to Cancel form is used.... Correspondent must mail or deliver two copies of a Right of Rescission/Notice of Right to Cancel to each consumer entitled to rescind the transaction. The consumer has until midnight of the third business day to rescind. For this purpose, a business day includes Saturdays. Sundays and Federal holidays are not considered business days. The rescission period does not begin until all consumers receive the Right of Rescission/Notice of Right to Cancel and all other required disclosures. Correspondent Seller is responsible for ensuring that the proper and enforceable Right of Rescission/Notice of Right to Cancel form is used. There are two different versions of the Notice of Right to Cancel form. The H-8 form is used when the refinance is being completed with a different lender; the H-9 form is used when the refinance is being completed with the original lender. Correspondent must use the rescission form that most accurately describes what is occurring in the transaction: H-9 Rescission Model Form (refinancing with original creditor) - Applies when a creditor that has a prior lien on the borrower's home extends additional credit that is also secured by the home H-8 Rescission Model Form (general) - Applies to a loan from a creditor with no prior lien on the borrower's home Right of Rescission / Notice of Right to Cancel Right of rescission documents must be signed and dated correctly by all borrowers and all parties on title any other individuals with an ownership interest in the property or with an interest in the home, even if the individuals do not sign the Mortgage Note. Right of rescission documents must be signed and dated the same day as the TIL is signed and the Security Instrument are is notarized. If the stated rescission expiration date is not at least 3 full days after the date the TIL is signed and the Security Instrument is notarized, a new rescission must be issued with a revised expiration date allowing for the full 3 days. New rescission must be issued if the stated cancellation date is not within 3 full days after the date the TIL and Security Instrument are notarized. LenderLive will suspend for a new rescission period to be opened and disclosed to the borrower(s) if any of the following circumstances apply: Right of Rescission document is not signed by all applicable parties Dates on Right of Rescission document are missing or incomplete The borrowers did not receive a full 3 days after settlement to exercise their right to rescind Incomplete or incorrect information appears on the Right of Rescission document Funds disbursed prior to rescission period ending Incorrect model form utilized for disclosure If a new Right of Rescission document is necessary, the new rescission notice must have current dates. Waivers of the rescission period are not permitted. The rescission period takes place after the MDIA waiting periods are satisfied. LenderLive does not allow waivers for MDIA waiting periods. 13 Page

14 14 Higher Priced Mortgage Loans (TILA ) 339 Change Summary: Adding reference to another section of Seller Guide. See Higher Priced Mortgage Loans Eligibility section of this Guide for additional allowances and restrictions. Higher Priced Mortgage Loans (TILA ); Requirements (Moved & Revised) 339 Change Summary: Notification regarding revision and movement of the section. This section has been revised and moved to Higher Priced Mortgage Loans Eligibility section of this Guide. Assessment of Borrower Ability to Pay 342 Change Summary: Clarification of requirements for borrower Ability to Repay. Correspondent must may utilize debt ratios and or disposable income. For certain loans, such as terms of seven years or less or increases in principal balance, no presumption of compliance is available. Correspondent may refer to Regulations Z s Appendix Q to Part 1026 Standards for Determining Monthly Debt and Income for additional guidance on completing this assessment. Refer to applicable Product Profile for additional requirements and/or restrictions. 14 Page

15 15 2) Product Profile Updates and Revisions Please be advised of the following updates and revisions to impacted Product Profiles listed below. Unless otherwise specified; under Change Summary; all changes are effective immediately as of June 11, Updated Product Profiles are posted on Correspondent Lending website. Impacted Product Profiles Product Profile Section Heading Change Summary (in blue) and Specific Updates/Revisions (in red) Fannie Mae - DURP Fannie Mae - High Bal Fannie Mae - Standard FHA - Streamline Refi FHA Freddie Mac - Open Access Freddie Mac - Standard Freddie Mac - Super Conf Borrowers: Eligible Change Summary: Addition of reference to LenderLive Correspondent Lending Seller Guide for Inter Vivos Revocable Trust and Power of Attorney eligibility requirements. Inter Vivos Revocable Trust and Power of Attorney: Refer to Seller Guide for eligibility requirements Fannie Mae - High Bal Fannie Mae - Standard Freddie Mac - Standard Freddie Mac - Super Conf Condominiums / PUDS Change Summary: Clarification regarding LenderLive's requirement for Condominium project eligibility. Unless LenderLive grants Correspondent Sellers with specific approval to conduct Full Reviews or other types of reviews, all Condominiums require Fannie Mae Limited Reviews OR Freddie Mac Streamline Reviews; as applicable. See Correspondent Seller Guide for approval process.. Must follow [Agency] published Condominium Eligibility Guidelines - See Resources below for a link to the guidelines LenderLive only accepts projects approved via Limited/Streamline Reviews; in accordance with [Agency] guidelines Lender Full Review and other types of reviews are not allowed unless Correspondent is granted specific approval from LenderLive... Florida Condos are allowed in accordance with [Agency] requirements with the exception of newly converted condo projects (see ineligible section): PERS is required for new condo projects [Fannie Mae only] Established review allowed [Freddie Mac only] LenderLive only allows projects approved via Limited/Streamline Reviews; in accordance with [Agency] guidelines Primary Residence up to 75% Second Homes up to 70% Investment Property not eligible Lender Full Review and other types of reviews are not allowed unless Correspondent is granted specific approval from LenderLive Condominium Investment Property is not eligible [Freddie Mac only] 15 Page

16 16 Impacted Product Profiles Product Profile Section Heading Change Summary (in blue) and Specific Updates/Revisions (in red) Fannie Mae - DURP Fannie Mae - High Bal Fannie Mae - Standard FHA - Streamline Refi FHA Freddie Mac - Open Access Freddie Mac - Standard Freddie Mac - Super Conf Credit Change Summary: 1) New requirement for a borrower letter of explanation regarding credit report inquiries. 2) Removal of Gap Report as an overlay. Instead, LenderLive highly recommends use of a Gap Report. 3) Section is updated to include purpose of Gap Report and clarify LenderLive's expectations. Gap Reports do not apply to noncredit qualifying programs such as FHA Streamlines and VA IRRRLs. Borrower letter of explanation is required for recent credit report inquiries made within in the previous [90 days for Fannie Mae; 120 days for Freddie Mac; and 90 days for FHA] Correspondents are responsible for determining that all debts incurred or closed by the borrower, up to and concurrent with settlement on the subject mortgage loan, are disclosed on the final loan application that is signed by the borrower at closing. These debts must be evaluated and included in the qualification for the subject mortgage loan; pursuant to [Agency] requirements Gap Credit Report is highly recommended required within 10 days of mortgage Note date; prior to closing/funding of the transaction New debts, liabilities, inquiries and/or public records must be addressed according pursuant to [Agency] requirements Material discrepancies from the prior credit report must be addressed pursuant to [Agency] requirements Note: A Gap Report is also known as a LQI Report, Undisclosed Debt Monitoring Report or Credit Refresh Report). It is intended to identify any changes in a borrower s credit report (excluding credit scores) between original credit report pull date and pre-funding. It is not intended to pull new credit scores Fannie Mae - DURP Fannie Mae - High Bal Fannie Mae - Standard Freddie Mac - Open Access Credit Change Summary: Removal of overlays for Current Housing Payment. Current Housing Payment; applicable when the payment for the primary residence for any borrower is not reported on credit (i.e., renting primary and the subject is Second Home or Investment Property): When the payment is not reported on the credit report, provide third party verification of payment amount If living rent free, a rent free letter from landlord or person obligated on lease required Fannie Mae - High Bal Fannie Mae - Standard Freddie Mac - Standard Freddie Mac - Super Conf Derogatory Credit Change Summary: Replaced derogatory event waiting period requirements matrices with the following statements: Fannie Mae All transactions require a DU Approve/Eligible decision regardless of which timeframe for derogatory credit is met; standard or extenuating circumstances. Refer to Fannie Mae Selling Guide for additional requirements Freddie Mac All transactions require a LP Accept decision. Regardless of the LP Accept decision, if there is any evidence of a Short Sale disclosed on the credit report or contained elsewhere in the mortgage file, refer to the Freddie Mac Seller Guide to for seasoning requirements 16 Page

17 17 Impacted Product Profiles Product Profile Section Heading Change Summary (in blue) and Specific Updates/Revisions (in red) Fannie Mae - High Bal Fannie Mae - Standard Employment / Income Documentation Change Summary: Including additional information regarding credit document flexibilities, allowed by Fannie Mae, for transactions with Mortgage Credit Certificates (MCCs). Note: Because the MCC is transaction specific, it does not have to comply with the Allowable Age of Credit Documents policy (See Fannie Mae Selling Guide B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information. Fannie Mae - Standard FHA Freddie Mac - Standard High Cost / Higher Priced Mortgage Loans Change Summary: Updates to requirements for Higher Priced Mortgage Loans. LenderLive will not purchase High Cost Loans LenderLive will purchase Higher Priced Mortgage Loans (HPML) that comply with all state and federal laws, including Regulation Z and Home Mortgage Disclosure Act (HMDA) amendments, as well as underwriting and consumer protection requirements. Additional requirements are as follows: Submission of the rate spread (difference) as required by Regulation Z, HMDA, and any other local or state statutes. This may be evidenced by a providing a screenshot of the results from the Federal Financial Institutions Examination Council s FFIEC Rate Spread Calculator or results from Mavent, ComplianceEase or similar compliance testing software for the rate spread, The loan must be a Qualified Mortgage An escrow account must be established for taxes and insurance premiums (including flood insurance) on any transaction secured by a principal residence o Escrow account must be established for a minimum of 60 months o Note: For condominium loans, if the Homeowners Association (HOA) maintains a master policy insuring the unit (meeting LenderLive Credit Policy requirements), only the tax portion is required to be escrowed A full internal/external appraisal is required A second appraisal is required if the property was: o o Acquired by the seller 90 or fewer days prior to the consumer s agreement to purchase the property and price has increased by more than 10%. See Property Flipping Policy section of this document for additional information Acquired by the seller between 91 and 180 prior to the consumer s agreement to purchase the property, and price has increased by more than 20% No waiver of appraisal waiting periods prior to closing is permitted Prepayment Penalty is not permitted (Note that LenderLive does not purchase loans with Prepayment Penalties regardless of HPML status) Loan must receive DU Approve/Eligible or LP Accept/Eligible (FHA requires TOTAL Scorecard); as applicable Borrower must meet minimum Residual Income requirements that mirror VA requirements PITI reserves as required by product guideline and/or AUS findings Follow Agency requirements for qualification of ARMs (if applicable) HPMLs not permitted for high balance FHA loans 17 Page

18 18 Impacted Product Profiles Product Profile Section Heading Change Summary (in blue) and Specific Updates/Revisions (in red) Fannie Mae - DURP Fannie Mae - High Bal FHA - Streamline Refi Freddie Mac - Open Access Freddie Mac - Super Conf High Cost / Higher Priced Mortgage Loans Change Summary: Higher Priced Mortgage Loans not permitted for high balance or non credit qualifying transactions. LenderLive will not purchase High Cost Loans LenderLive will not purchase High Priced Mortgage Loans (HPMLs) Fannie Mae - High Bal Fannie Mae - Standard FHA Freddie Mac - Standard Freddie Mac - Super Conf Loan Purpose Change Summary: Clarification regarding requirements for documenting purpose of Cash Out for HMDA reporting. Cash Out 1003 must clearly document purpose of Cash Out (i.e., home improvement, debt consolidation, etc.) under "Purpose of Refinance" section. Otherwise, a Cash Out Purpose Letter, from borrower, is required to explain how the funds will be used. Information is required for HMDA reporting purposes 18 Page

19 19 Impacted Product Profiles Product Profile Section Heading Change Summary (in blue) and Specific Updates/Revisions (in red) Fannie Mae - High Bal Fannie Mae - Standard Freddie Mac - Standard Freddie Mac - Super Conf Property Flipping Policy Change Summary: Restrictions apply to flips/ rapid resale of property within 90 days after prior sale date. Previously, this section was included in LenderLive Correspondent Lending Seller Guide only. Flip or Rapid Resale of Property within 90 days after Prior Sale Date If subject property had a prior sale within 90 days previous to the purchase contract date of the subject transaction, then the Mortgage Loan is not eligible for sale to LenderLive unless: o Property was acquired by a relocation agency in connection with the relocation of an employee, and then resold to someone who is not an employee or affiliate of the original employee s company, or o Resale by a lender when property is obtained through foreclosure or deed in lieu of foreclosure, or o Resale of a property obtained through an inheritance or as part of the property settlement in a divorce agreement, or o Any increase in value is substantiated/supported by bona fide and verified improvements since the property was acquired by the property seller in which any increase in sales price over the seller's acquisition costs is representative of the market given the improvements to the home, or o Sale of property that the property seller acquired at below market value after purchasing as a result of a distress sale (i.e. REO sale, short sale, tax lien sale, bankruptcy trustee's sale, etc.), where any increase in the sales price over the property seller's acquisition cost can be clearly shown to be a result of the difference (if any) in the market's reaction to distress sales and typical arms-length market sales Properties that involve a re-sale occurring within the last 180 days and have a non-arms length relationship between the buyer and seller are prohibited. The time frame is established by seller's date of acquisition as the date of settlement on the seller's purchase of that property and the execution of a sales contract to another party Lenders must pay particular attention and institute extra due diligence for those loans in which the appraised value is believed to be excessive or where the value of the property has experienced significant appreciation in a short time period since the prior sale. LenderLive believes that one of the best ways lenders can reduce the risk associated with excessive values and/or rapid appreciation is by receiving accurate appraisals from knowledgeable, experienced appraisers LenderLive recommends an additional value product to support the subject appraised value in instances of greater than 20% appreciation Refer to Flip or Rapid Resale of Property Less than 180 Days after Prior Sale Date section of LenderLive Seller Guide for additional requirements/restrictions 19 Page

20 20 Impacted Product Profiles Product Profile Section Heading Change Summary (in blue) and Specific Updates/Revisions (in red) Fannie Mae - DURP Fannie Mae - High Bal Fannie Mae - Standard Rental Income Calculation Change Summary: Addition of overlay for transactions that require rental income for qualification purposes. This requirement applies to all registrations/commitments created on or after 7/1/15. When the borrower does not have a history of owning rental property, follow the Fannie Mae requirements If rental income is being used to qualify and the borrower has acquired more than one investment property in the last 12 months; A minimum of one-year prior landlord experience is required OR 2-months reserves in addition to the minimum FNMA reserve requirements (for each property) can be used to offset the lack of landlord experience 20 Page

21 21 3) Texas Section 50(a)(6) Refinance Eligibility Matrix and Summary Guidelines Updates and Revisions Please be advised of the following updates and revisions to Texas Section 50(a)(6) Refinance Eligibility Matrix and Summary Guidelines. Unless otherwise specified; under Change Summary below; all changes are effective immediately as of June 11, The updated Texas Section 50(a)(6) Refinance Eligibility Matrix and Summary Guidelines document is posted on Correspondent Lending website. Section Heading Change Summary (in blue) and Specific Updates/Revisions (in red) Change Summary: Removal of signature requirements for owners on application. Borrowers: Eligible Non-Borrowing Spouse A married borrower may not create a lien against the property unless his/her spouse consents to the lien by signing the following: o Texas Home Equity Notice o Security Instrument o Federal Truth-in-Lending (TIL) Disclosure Statement o Right of Rescission Notice o Discount Point Disclosure o Acknowledgment of Fair Market Value o o Premium Pricing Disclosure All owners must sign the application and the Notice Concerning Equity Loan Extension of Credit (English or Spanish) document The signing of this both of these documents starts the 12 day Cooling Off Period 21 Page