Underwriting Guidelines. Full Doc, Self-Employed Solutions, Asset Utilization and Foreign National

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1 Underwriting Guidelines Full Dc, Self-Emplyed Slutins, Asset Utilizatin and Freign Natinal Published & effective as f 11/07/2016

2 CONTENTS Sectin PROGRAMS Overview Eligible Prducts Interest Only Restrictins Underwriting Lan Amunts Minimum FICO Maximum LTV/CLTV Seller Cncessins (Interested Party Cntributins) Escrws - Impund Accunts Secndary Financing Seasning (Lan and Dcument) Fees Brrwer Statement Of Occupancy Autmatic Payment Authrizatin (ACH) Ability t Repay/ Qualified Mrtgage Prepayment Penalty Alternative Lan Review/AUS State and Federal High Cst Lans Listing Seasning legal Dcumentatin Assumability... 4 Sectin PROPERTY ELIGIBILITY Appraisals Minimum Square Ftage Persnal Prperty Appraisal Review Ineligible Prperty Types: Acreage Limitatins State Eligibility Prperty Flipping Title Vesting & Ownership Leasehld prperties Texas Prperties Limitatins n Financed Prperties Disaster Areas Appraisals Cmpleted Prir t Disaster Appraisals Cmpleted After Disaster Event Disaster Event Occurs Cndminiums Ineligible Prjects General Prject Criteria Nn-warrantable cndminium prjects Re-certificatin f prjects Sectin TRANSACTION TYPES Nn-Arms Length And Interested Party Transactins Nn-Arm s Length Transactin... 12

3 Interested Party Transactin Eligible Nn-Arm s Length And Interested Party Transactins Nn-Arm s Length And Interested Party Restrictins Sectin Cash Out Sectin BORROWER ELIGIBILITY Nn-Occupant C-Brrwers First Time Hme Buyers Residency U.S. Citizen Permanent Resident Alien Nn-Permanent Resident Alien Freign Natinal Inter Vivs Revcable Trust ineligible brrwers Sectin CREDIT Credit Reprts Lan Integrity & Fraud Check Credit Inquiries Husing Histry Cnsumer Credit Cnsumer Credit Histry Timeshares Cnsumer Credit Charge-Offs and Cllectins Cnsumer Credit Cunseling Services Judgment r Liens Incme Tax Liens Bankruptcy Histry Freclsure Seasning Shrt Sale / Deed in Lieu Seasning Frbearance r Mdificatin Credit Scre Tradelines and Grade Determinatin Standard Tradelines Limited Tradelines Obligatins nt appearing n credit reprt Husing and Mrtgage related Obligatins Current Debt Obligatins, Alimny, and Child Supprt Payment Shck Additinal Credit Criteria Sectin ASSETS Dcumentatin Optins Reserves Dwn Payment Surcing Gift Funds Asset Dcumentatin Sle Prprietr Assets/Business Funds Sectin INCOME Incme Analysis Incme Wrksheet... 24

4 Emplyment/Incme verificatin Stability f Incme Earnings Trends Debt t Incme Rati Residual Incme Dcumentatin Optins Full Dcumentatin Restrictins Full Dc Incme Dcumentatin Self-Emplyed Slutins (24 Mnths Bank Statements) Restrictins Self-Emplyed Slutins Dcumentatin Self-Emplyed Slutins Incme Analysis Self-Emplyed Slutins Express (12 Mnths Bank Statements) Restrictins Self-Emplyed Slutins Express Dcumentatin Self-Emplyed Slutins Express Incme Analysis Asset Utilizatin Restrictins Asset Utilizatin Incme Calculatin Asset Utilizatin Incme Dcumentatin Assets Eligible fr Depletin Assets Ineligible fr Depletin Freign Natinal Freign Natinal Prgram Specific Dcumentatin Requirements Freign Natinal Credit Freign Natinal Incme Freign Natinal Assets EXHIBIT A: Occupancy Certificatin EXHIBIT B: Autmatic Debit Payment Agreement (ACH) FORM EXHIBIT C: Ability-T-Repay Brrwer Cnfirmatin Other Obligatins EXHIBIT D: Nn-Occupant C-Brrwer Certificatin EXHIBIT E: Cndminium Prject Questinnaire EXHIBIT F: Develper / builder questinnaire EXHIBIT G: Alternative Lan Review Frm EXHIBIT H Freign Natinal Brrwer Cntact Frm... 49

5 SECTION PROGRAMS OVERVIEW LanStream prgram guidelines are structured t guide its twards making cmmn sense lending decisins n lans t brrwers wh may have limited access t credit. These brrwer s situatins generally require the underwriter t cnsider alternative frms f dcumenting incme and/r cmpensating factrs which ffset risk indicated by a recent credit event r elevated debt-t-incme rati. The brrwer s ability t repay must be prven in all instances. Lan Stream Mrtgage has a zer-tlerance plicy as it relates t fraud. Lan Stream fllw the current established fraud and identity prcedures n every lan in an effrt t prevent and detect fraud (including, but nt limited t, Scial Security number verificatin, verbal verificatins f emplyment, prcessing f 4506-T, etc.) Lans cntaining fraudulent dcumentatin r infrmatin will immediately be declined and frwarded fr further review. If there is any determinatin f riginatr invlvement, the riginatr will be made inactive and the apprpriate agencies ntified. Lan Stream Mrtgage will als pursue brrwer fraud t the fullest extent f the law ELIGIBLE PRODUCTS The fllwing lan prducts are allwed: Fully Amrtizing Qualifying Ratis are based n PITI payment with the principal and interest payments amrtized ver the lan term 5/1 LIBOR: (2/2/5 Cap Structure) Qualifying Rate: Qualify brrwer(s) at the greater f the Fully-Indexed Rate r Nte Rate + Initial Cap (2%). 7/1 LIBOR: (5/2/5 Cap Structure) Qualifying rate (All Dc Types): qualify brrwer(s) at the greater f the fully-indexed rate r Nte Rate. 15 Year Fixed 30 Year Fixed Interest-Only Qualifying Ratis are based n PITI payment with the principal and interest payments amrtized ver the scheduled remaining lan term at the time f recast after the interest nly perid has expired. 5/1 LIBOR: (2/2/5 Cap Structure) Qualifying rate (All Dc Types): qualify brrwer(s) at the greater f the fully-indexed rate r Nte Rate. Interest-Only Perid: 10 Year Interest-Only Perid fllwed by 20 Year Amrtizatin 7/1 LIBOR: (5/2/5 Cap Structure) Qualifying rate (All Dc Types): qualify brrwer(s) at the greater f the fully-indexed rate r Nte Rate. Interest-Only Perid: 10 Year Interest-Only Perid fllwed by 20 Year Amrtizatin 30 Year Fixed Qualifying rate (All Dc Types): qualify brrwer(s) at the Nte Rate. Interest-Only Perid: 10 Year Interest-Only Perid fllwed by 20 Year Amrtizatin 1 11/7/2016

6 1.3 - INTEREST ONLY RESTRICTIONS A, A-, and B+ Grades Only Primary Residences Only (See Investr Slutins Guidelines fr Interest-Only ptins n Business Purpse lans) Maximum LTV/CLTV: 80% Minimum FICO: Full Dcumentatin: 660 Self-Emplyed Slutins, Self-Emplyed Slutins Express, and Asset Utilizatin: 680 Freign Natinal nt eligible UNDERWRITING The Underwriter is required t perfrm a manual underwrite f the credit file and dcument the file based upn the criteria cntained in this manual. Unless therwise stated, Fannie Mae definitins, dcumentatin and underwriting guidelines prevail and shuld be fllwed LOAN AMOUNTS Minimum: $100,000 Maximum: $2,000,000 (2 appraisals required and LTV reductins apply fr lan amunts abve $1mm) MINIMUM FICO 600 See LSM Matrices fr Grade Determinatin MAXIMUM LTV/CLTV 90 / 90 See LSM Matrices fr LTV/CLTV maximum by dcumentatin type SELLER CONCESSIONS (INTERESTED PARTY CONTRIBUTIONS) LTV equal t r greater than 75%: max 4% LTV less than 75%: max 6% All seller cncessins must be prperly disclsed in the sales cntract, appraisal, lan estimate and clsing disclsure and be cmpliant with applicable federal, state and lcal law. Interested party cntributins include funds cntributed by the prperty seller, builder, real estate agent/brker, mrtgage lender, r their affiliates, r any ther party with an interest in the real estate transactin. Interested party cntributins may nly be used fr clsing csts and prepaid expenses, and may never be applied t any prtin f the dwn payment r cntributed t the brrwer s financial reserve requirements. If a seller 2 11/7/2016

7 cncessin is present, bth the appraised value and sales price must be reduced by the cncessin amunt fr LTV/CLTV calculatins ESCROWS - IMPOUND ACCOUNTS Escrw funds/impund accunts are required t be established fr all lans.. Escrws may be established fr funds cllected by the lender, riginatr r servicer as required t be paid under the security instrument. Escrw funds include, but are nt limited t, taxes, insurance (hazard, fld, and mrtgage) premiums, special assessments, grund rents, water, sewer, etc SECONDARY FINANCING Secndary financing must be institutinal. Lenders must emply reasnable underwriting plicies and prcedures designed t determine whether the brrwer has applied fr anther credit transactin secured by the same dwelling. Existing secndary financing must be subrdinated and recrded r refinanced. HELOC CLTV must be calculated at the maximum available line amunt unless the brrwer can prvide dcumentatin the line f credit is past its draw perid SEASONING (LOAN AND DOCUMENT) Underwriting and brrwer credit dcuments may nt be mre than 90 days seasned at the Nte Date. The Appraisal shuld be dated n mre than 120 days prir t the Nte Date FEES Underwriting fee: $1295 Cnd Prject Apprval fees: Established: $135 New: $ BORROWER STATEMENT OF OCCUPANCY Brrwer must acknwledge the intended purpse f the subject prperty ( Primary Residence r Secnd Hme ) by cmpleting and signing the apprpriate sectins f the Occupancy Certificatin fund in EXHIBIT A f this guide AUTOMATIC PAYMENT AUTHORIZATION (ACH) It is recmmended that the brrwer execute an assignable Autmatic Debit Payment Agreement (ACH) Frm, and include either a cpy f a vided check r savings accunt depsit frm. The ACH frm shuld include the bank ruting number, accunt number, and type f accunt, similar t Exhibit B. An executed Autmatic Debit Payment Agreement (ACH), frm a U.S. Bank, alng with either a cpy f a vided check r savings accunt depsit frm is required fr transactins invlving a Freign Natinal. 3 11/7/2016

8 ABILITY TO REPAY/ QUALIFIED MORTGAGE LSM nly allw lans under the NANQ Prgram that meet the CFPB s requirements under its Ability-t-Repay (ATR) / Qualified Mrtgage Rule, including lans that meet the general ATR requirements and certain qualified mrtgage lans with rebuttable presumptin liability prtectin, as prescribed by the applicable regulatin. Each lan delivered fr purchase must include a cmpleted ATR Brrwer Cnfirmatin frm, available in the frms sectin f the system. See EXHIBIT C: Ability-T-Repay Brrwer Cnfirmatin fr an example in the exhibits sectin f this guide PREPAYMENT PENALTY Nt allwed ALTERNATIVE LOAN REVIEW/AUS A manual underwrite is required. The Underwriter Apprval and the Underwriter s determinatin f Ability t Repay is required as part f the credit file. The file must als include ne f the fllwing as evidence the brrwer is nt eligible fr financing thrugh a GSE r Gvernment lan prgram n full incme dcumentatin lans; an AUS Findings with a Refer r Apprve/Ineligible respnse r a cmpleted Alternative Lan Review Frm, Exhibit G may be prvided t verify GSE r Gvernment prgram ineligibility STATE AND FEDERAL HIGH COST LOANS Nt allwed LISTING SEASONING Fr all cash-ut refinances, prperties previusly listed fr sale shuld be seasned at least 6 mnths frm the listing 1.20 LEGAL DOCUMENTATION Available Fannie Mae security instruments, ntes, riders/addenda, and special purpse dcuments can be utilized fr lan dcumentatin. In the case when Fannie Mae desn t ffer current dcumentatin, such as interest nly, a dcument vendr shuld be utilized fr frms ASSUMABILITY Fixed Rate Ntes Are nt assumable. Adjustable Rate Ntes May be assumable based upn the nte, in general Fannie Mae Ntes cntain an assumable clause. In any case, the verbiage in the Nte and Clsing Disclsure must match. 4 11/7/2016

9 SECTION PROPERTY ELIGIBILITY See Sectin 5.0 in the Seller Guide fr additinal requirements related t Appraisals and Prperties APPRAISALS Full Interir / Exterir appraisal required. Fannie Mae/Freddie Mac Frms 1004/70, 1025/72, 1073/465 r 2090 must be used. All Fannie Guidelines apply t appraisal prcess and value determinatin, in additin, an Appraisal Management Cmpany must be utilized fr appraiser selectin. The Appraisal shuld be dated n mre than 120 days prir t the Nte Date. After a 120-day perid, a new appraisal is required. Re-certificatin f value is nt acceptable. Nt eligible: Prperties fr which the appraisal indicates cnditin ratings f C5 r C6 r a quality rating f Q6, each as determined under the Unifrm Appraisal Dataset (UAD) guidelines. LSM will cnsider if issue has been crrected prir t lan funding with prper dcumentatin MINIMUM SQUARE FOOTAGE SFR: 700 sq. ft. Cnd: 500 sq. ft. 2-4 units: 400 sq. ft. per individual unit PERSONAL PROPERTY Any persnal prperty transferred with a prperty sale must be deemed t have zer transfer value, as indicated by the sales cntract and the appraisal. If any value is assciated with the persnal prperty, the sales price and appraised value must be reduced by the persnal prperty value fr purpses f calculating the LTV/CLTV/HCLTV APPRAISAL REVIEW LSM APPROVED AMC S PrTeck Valuatin Services Clear Capital CreLgic Valuatin Slutins APPRAISAL REVIEW PRODUCTS An enhanced desk review prduct, either an ARR frm PrTeck r CDA frm Clear Capital, is required n all transactins. In lieu f an enhanced desk review prduct a field review r secnd appraisal frm a LSM Apprved AMC is acceptable. The surce f the Appraisal Review Prduct may nt be the same AMC used fr the appraisal. If the Appraisal Review Prduct reflects a value mre than 10% belw the appraised value a secnd appraisal is required. 5 11/7/2016

10 SECOND APPRAISAL A Secnd Appraisal frm a LSM Apprved AMC is required when any f the fllwing cnditins exist. When a secnd appraisal is prvided, the transactins Appraised Value will be the lwer f the tw appraisals. Lan Amunt exceeds $1,000,000 The transactin is a flip as defined in the Prperty Flipping sectin f this guide As required under the Appraisal Review Prducts sectin f this guide INELIGIBLE PROPERTY TYPES: Mixed Use prperties; Vacant land r land develpment prperties; Prperties nt readily accessible by rads that meet lcal standards; Prperties nt suitable fr year-rund ccupancy regardless f lcatin; Agricultural prperties including: farms, ranches, rchards; Manufactured, Mbile r Mdular Hmes; Cnd-htels r c-p/timeshare htels; A prject that includes registratin services and ffer rentals f units n a daily, weekly r mnthly basis. Cperative share lans; Barding huses r bed/breakfast prperties; Prperties with zning vilatins; Dme r gedesic hmes; Assisted living facilities; Hmes n Indian reservatins; Lg hmes; Hawaii prperties lcated in lava znes 1 and/r 2; Husebats ACREAGE LIMITATIONS Maximum 10 acres; N truncating allwed STATE ELIGIBILITY DC, MD, and NJ restrictins Maximum LTV/CLTV: 80% Minimum FICO: 660 (Des nt apply t Freign Natinal qualifying with freign credit) 6 11/7/2016

11 2.5 - PROPERTY FLIPPING Fr prperties purchased by the seller f the prperty within 12 mnths f applicatin date where the cntract price exceeds the sellers acquisitin price by 10% r mre, additinal requirements apply: Secnd appraisal required frm a LSM Apprved AMC; Prperty seller n the purchase cntract must be the wner f recrd; Increases in value shuld be dcumented with cmmentary frm the appraiser and recent cmparable sales. Sufficient dcumentatin t validate actual cst t cnstruct r renvate (e.g., purchase cntracts, plans and specificatins, receipts, invices, lien waivers, etc.) TITLE VESTING & OWNERSHIP Ownership must be fee simple. Title must be in the Brrwer s name at time f applicatin fr refinance transactins and n clsing date fr all transactins. Acceptable frms f vesting are: Individuals Jint tenants Tenants in cmmn Inter Vivs Revcable Trust Land trusts and IRA s are nt allwed LEASEHOLD PROPERTIES In areas where leasehld estates are cmmnly accepted and dcumented via the Appraisal, lans secured by leasehld estates are eligible fr purchase. The mrtgage must be secured by the prperty imprvements and the brrwer s leasehld interest in the land. The leasehld estate and any imprvements must cnstitute real prperty, be subject t the mrtgage lien, and be insured by the lender s title plicy. Seller must prvide dcumentatin and Leasehlds must meet all FNMA eligibility requirements (i.e. term f lease) TEXAS PROPERTIES Nt Allwed LIMITATIONS ON FINANCED PROPERTIES Maximum f twenty (20) financed prperties including subject lan; LSM s expsure t a single brrwer shall nt exceed $3,000,000 in current UPB r six (6) prperties; All financed prperties, ther than the subject prperty, require an additinal tw (2) mnths PITI in reserves fr each prperty. Ttal reserve requirement is nt t exceed twenty-fur (24) mnths 7 11/7/2016

12 DISASTER AREAS The fllwing guidelines apply t prperties lcated in FEMA declared disaster areas, as identified by reviewing the FEMA web site at In additin, when there is knwledge f an adverse event ccurring near and arund the subject prperty lcatin, such as earthquakes, flds, trnades, r wildfires, additinal due diligence shuld be used t determine if the disaster guidelines shuld be fllwed APPRAISALS COMPLETED PRIOR TO DISASTER An interir and exterir inspectin f the subject prperty, perfrmed by the riginal appraiser if pssible, is required. The appraiser shuld prvide a statement indicating if the subject prperty is free frm any damage, is in the same cnditin frm the previus inspectin, and the marketability and value remain the same. Inspectin reprt must include phtgraphs f the subject prperty and street view. Any damage must be repaired and re-inspected prir t purchase APPRAISALS COMPLETED AFTER DISASTER EVENT Appraiser must cmment n the adverse event and certify that there has been n change in the valuatin. Any existing damage ntated frm the riginal reprt must be repaired and re-inspected prir t purchase DISASTER EVENT OCCURS AFTER CLOSING BUT PRIOR TO LOAN PURCHASE Lan is ineligible fr purchase until an update r inspectin frm the riginal appraiser is btained. Appraiser must cmment n the event and certify that there has been n change t the value. Guidelines fr disaster areas shuld be fllwed fr 90-days frm the disaster perid end date r the date f the event, whichever is later CONDOMINIUMS Fannie Mae eligible prjects and Nn-Warrantable prjects allwed; LSM prject expsure maximum shall be $3,000,000 r 15% f prject whichever is lwer; Brrwer prject/unit cncentratin limit: tw (2) units See LSM Prduct Matrix belw fr additinal LTV/CLTV and Nn-Warrantable prject limits and guidelines INELIGIBLE PROJECTS A prject subject t the rules and regulatins f the U.S. Securities Exchange Cmmissin. Cndminium Htel - Cndtel Cndminium Prject in which any unit wner r the hmewners assciatin is a party t a revenue-sharing agreement with either the develper r anther third-party entity. Cndminium prject where the unit is nt the lessee s residence. Prjects that are managed and perated as a htel r mtel, even thugh the units are individually wned. Prjects with the names that include the wrds htel, mtel, resrt, r ldge. 8 11/7/2016

13 A prject that includes registratin services and ffer rentals f units n a daily, weekly r mnthly basis. Htel r mtel cnversins (r cnversins f ther similar transient prperties.) Resrt type prject Timeshare r Prjects that restrict the wner s ability t ccupy the unit. New Cnd cnversin cmpleted less than 2 years. Husebat prject Manufactured hme prjects Assisted living facilities r any prject where unit wners cntract in advance fr a lifetime cmmitment frm the facility t care fr them regardless f future health r husing needs. Any prject in which a single entity wns mre than 20% f the ttal number f units. Prjects that have 5-19 Units, ne wner is allwed t wn tw units. Multi-family units where single deed has wnership f mre than ne r all f the units. Where mre than 35% f ttal square ftage in the prject r in the building that the prject is lcated in is used fr nn-residential purpses. A Cmmn-interest apartment A prject in which individuals have an undivided interest in a residential apartment building and land, and have the right f exclusive ccupancy f a specific apartment unit in the building. The prject r building is ften wned by several wners as tenants-in-cmmn r by a hmewners assciatin. Fragmented r segmented wnership Ownership is limited t a specific perid n a recurring basis i.e. Timeshare Any prject where the develper (r its affiliates) wns the Cmmn and/r Limited Elements and leases the elements back t the HOA Nn-cnfrming zning (can t be rebuilt t current density). Prject units sld with excessive Seller cntributins that may affect the value f the subject prperty. Any prject that requires Private Transfer Fees as a part f the transactin and that fee des nt benefit the assciatin Prject in litigatin, arbitratin, mediatin r ther dispute regarding safety, sundness r habitability. Prject with adverse envirnmental issue(s) invlving safety, sundness r habitability. Prjects that are nt well managed r in pr physical r financial cnditin. Excessive special assessments; Lw Reserves; Neglected Repairs GENERAL PROJECT CRITERIA Prject has been created and exists in full cmpliance with applicable lcal jurisdictin, State and all ther applicable laws and regulatins Prject meets all FNMA Insurance requirements fr prperty, liability and fidelity cverage Brrwer must carry H06 cverage fr replacement f such items as flring, wall cvering, cabinets, fixtures, built-ins and any imprvements made t the unit. HOA t cnfirm Prject dcuments d nt give a unit wner r any ther party pririty ver the rights f the 1st mrtgagee. Prjects that are FNMA Warrantable may be reviewed and apprved by LSM Due Diligence Cnd Partner. Nn-Warrantable Prjects require Prject Apprval by LSM Due Diligence Partner. Prject ID must be requested prir t uplad f Prject dcuments. Send t: cndprjectreview@lsmrtgage.cm with the prject name and address t btain ID. 9 11/7/2016

14 NON-WARRANTABLE CONDOMINIUM PROJECTS Maximum LTV/CLTV: 75% Maximum Lan Amunt: $1,000,000 Nt Available fr lans graded C Require Prject Apprval by LSM Diligence Partner NOTE: Stacking f risk is nt allwed (Only 1 Nn-Warrantable factr per prject) SINGLE OWNER/ INVESTOR ENTITY CONCENTRATION: Maximum f 20% f prject wned by any Single Owner / Investr Entity. Maximum f 2 units wned by any Single Owner / Investr Entity if the prject has fewer than 10 units. NEW PROJECTS A Prject is cnsidered New if any f the fllwing apply: prject is nt fully cmpleted r is subject t additinal phasing r annexatin, Fewer than 90 percent f the ttal number f units in the prject have been cnveyed t wners ther than the develper, r cntrl f the hmewners assciatin has nt been turned ver t the unit wners. New Cndminium Prjects that meet all the fllwing requirements are eligible fr purchase. Subject legal phase and any prir legal phases where units have been ffered fr sale are substantially cmplete. Substantially cmplete means that a certificate f ccupancy r its equivalent has been issued and all units in the subject unit building are cmplete. OCCUPANCY: A minimum f 50% f the ttal number f units in the prject are cnveyed r under cntract t purchaser ther than develper r successr as Primary r secnd hme OR a minimum f 50% f the units in subject phase plus all prir legal phases must have been cnveyed r under cntract as Primary r Secnd Hme. Develper must be respnsible fr assessments n unsld units built but nt yet clsed. BUDGET: A minimum f 10% f the assciatins annual budget must prvide fr funding f replacement reserves fr capital expenditures and deferred maintenance. Budget must reflect adequate funding fr insurance deductible DELINQUENT ASSESSMENTS: Delinquent assessments greater than 60 days can nt exceed 15% f the ttal number f units Cmmercial space up t 35% f building space allwed when pre-sale exceeds 70%. Otherwise limited t 25%. Cmmercial entity can nt cntrl HOA. REQUIRED DOCUMENTATION FOR NEW PROJECT APPROVAL NEW PROJECTS Cmpleted Cnd Prject Questinnaire and Develper/Builder Questinnaire, r similar., fund in Exhibit E and Exhibit F f this guide. Current Annual Budget Current Balance sheet (dated within the last 60 days), 10 11/7/2016

15 Evidence f current HOA/Prject Insurance in cmpliance with FNMA guidelines FNMA Warranty f Prject Presale signed by Develper/Builder as Authrized Rep (frm1029) FNMA Final Certificatin f Sustantial Prject Cmpletin cmpleted by Develper (frm1081) FNMA Warranty f Cndminum Prject Legal Dcuments (frm 1054) r cmprable Lenders Warranty Prject legal dcuments: Declaratins, ByLaws and any Amendments Schedule f utstanding lan inf Letter frm cnstructin lender stating financing is in gd standing Evidence there are n cntractr liens utstanding Prject marketing analysis: sales and marketing plan Phts f subject prject including site, imprvements, facilities/amenities, parking and same n 2 t 3 cmparable prjects PERS preliminary Apprval, if applicable ESTABLISHED PROJECTS Established Prjects, as defined by FNMA, which meet all the fllwing requirements are eligible fr purchase. OCCUPANCY: There is n wner-ccupancy requirement if the subject unit will be Owner Occupied. If prperty will be used as an Investment prperty, a minimum f 30% f the ttal number f units in the Prject must be cnveyed t wners wh ccupy their unit as a Primary Residence r Secnd Hme. The Prject may nt have delinquencies greater than 15%, the Prject Reserve Fund must represent a minimum f 100% f Prject s annual budget and Appraisal must supprt rental market. If prject des nt meet the abve requirements nn-wner ccupied limited t 49%. BUDGET AND RESERVE FUND BALANCE: A minimum Reserve Fund balance f 30% f annual budget must be in place. A minimum f 10% f the assciatins annual budget shuld prvide fr funding f replacement reserves fr capital expenditures and deferred maintenance. If nt, a lwer percentage f annual incme may be cnsidered if the appraisal ntes n majr repairs and Reserve Fund balance supprts a lwer allcatin as fllws: 7% t 9.99% requires a Reserve Fund balance f 50% f annual budget 5% t 6.99% requires a Reserve Fund balance f 75% f annual budget 3% t 4.99% requires a Reserve Fund balance f 100% f annual budget DELINQUENT ASSESSMENTS: Delinquent assessments greater than 60 days may nt exceed 15% f the ttal number f units in the prject. 30 day delinquency up t 20% may be allwed as nnwarrantable if HOA Reserve Fund represents 120% f its annual budgeted incme. Cmmercial space limited t 35% f building space. Cmmercial entity can nt cntrl HOA. REQUIRED DOCUMENTATION FOR ESTABLISHED PROJECT APPROVAL Established Prject Certificatin Current Annual Budget Current Balance sheet (dated within the last 60 days) Evidence f current HOA/Prject Insurance in cmpliance with FNMA guidelines 11 11/7/2016

16 RE-CERTIFICATION OF PROJECTS Prjects must be recertified every 6 mnths r at expiratin f the Prject Budget r Insurance, whichever is earlier. Dcuments Required: Prject Apprval Certificatin Frm Current Annual Budget Current Balance sheet (dated within the last 60 days Evidence f current HOA/Prject Insurance Any Amendments, Supplements etc t the Prject Legal dcuments SECTION TRANSACTION TYPES NON-ARMS LENGTH AND INTERESTED PARTY TRANSACTIONS NON-ARM S LENGTH TRANSACTION A nn-arm's length transactin ccurs when the brrwer has a direct relatinship r business affiliatin with subject prperty Builder, Develper, r Seller. Examples f nn-arm s length transactins include family sales, prperty in an estate, emplyer/emplyee sales and flip transactins. When the prperty seller is a crpratin, partnership r any ther business entity it must be ensured that the brrwer is nt an wner f the business entity selling the prperty. A nn-arm s length transactin is nt intended t bail ut a family member wh has had difficulties making their mrtgage payment. A thrugh review f the title reprt in these cases is required as well as the payment histry pattern (VOM n the Seller s mrtgage) INTERESTED PARTY TRANSACTION A Cnflict-Of-Interest Transactin ccurs when the brrwer has an affiliatin r relatinship with the Mrtgage Brker, Lan Officer, Real Estate Brker r Agent, r any ther interested party t the transactin. In the case f the Mrtgage Brker, Lan Officer, r Real Estate Brker/Agent extra due diligence must be exercised. Fr example the seller s real estate agent fr the subject prperty may nt act as the lan fficer fr the brrwer(s) purchasing the same subject prperty. An examinatin f the relatinship amng the Mrtgage Brker, Title/Escrw Cmpanies, Appraiser and any ther party t the transactin must be clsely examined. A Letter f Explanatin regarding the relatinship between the parties is required ELIGIBLE NON-ARM S LENGTH AND INTERESTED PARTY TRANSACTIONS Buyer(s)/Brrwer(s) representing themselves as agent in real estate transactin Cmmissin earned by buyer/brrwer cannt be used fr dwn payment, clsing csts, r mnthly PITIA reserves Seller(s) representing themselves as agent in real estate transactin Renter(s) purchasing frm Landlrd 24 mnths cancelled checks t prve timely payments required 12 11/7/2016

17 A VOR is nt acceptable Purchase between family members Full Dcumentatin nly Gift f Equity requires a gift letter and the equity gift credit is t be shwn n the CD Must prvide a 12-mnth mrtgage histry n existing mrtgage securing subject prperty cnfirming Family Sale is nt a freclsure bailut NON-ARM S LENGTH AND INTERESTED PARTY RESTRICTIONS Primary Residences nly Brrwer t prvide cancelled check verifying the earnest mney depsit Cash-Out refinances nt allwed Maximum LTV/CLTV: 80% Fr-Sale-By-Owner (FSBO) transactins must be arms-length Emplyer t emplyee sales r transfers nt allwed Prperty trades between buyer and seller nt allwed SECTION CASH OUT All cash-ut transactins shuld be f benefit t the brrwer. Cash-ut prceeds cannt be used fr required reserves. Lans nt eligible fr cash-ut: Prperties listed fr sale in the past 6-mnths. See LSM Matrices fr cash-ut limits. Cash-Out Seasning is defined as the difference between applicatin date f the new lan and prir financing nte date r date f purchase. If Cash-Out Seasning is less than (12) mnths the transactin prperty value is limited t the lwer f the current appraised value r the prperty s purchase price + dcumented imprvements. Cash-Out Seasning f at least six (6) mnths is allwed. Cash-Out Seasning f less than six (6) mnths is allwed with the fllwing restrictins: The new lan amunt can be n mre than the actual dcumented amunt f the brrwer's initial investment in purchasing the prperty plus the financing f clsing csts, prepaid fees, and pints n the new mrtgage lan (subject t the maximum LTV, CLTV, and HCLTV ratis fr the cash-ut transactin based n the current appraised value). The surces f funds fr the purchase transactin are dcumented (such as bank statements, persnal lan dcuments, r a HELOC n anther prperty). At least ne f the fllwing must exist N mrtgage financing was used t btain the prperty. The riginal purchase transactin is dcumented by a settlement statement, which cnfirms that n mrtgage financing was used t btain the subject prperty. (A recrded trustee's deed (r similar alternative) cnfirming the amunt paid by the grantee t trustee may be substituted fr a settlement statement if a settlement statement was nt prvided t the purchaser at time f sale.) /7/2016

18 The preliminary title search r reprt must cnfirm that there are n existing liens n the subject prperty r the existing lien being refinanced was taken ut after the prperty was btained as evidenced by a cpy f the nte. The mrtgage being refinanced was used t purchase the prperty and has an riginal term f 24 mnths r less as evidenced by a cpy f the settlement statement and riginal nte. If the surce f funds used t acquire the prperty was an unsecured lan r a lan secured by an asset ther than the subject prperty (such as a HELOC secured by anther prperty), the settlement statement fr the refinance transactin must reflect that all cash-ut prceeds be used t pay ff r pay dwn, as applicable, the lan used t purchase the prperty. Any payments n the balance remaining frm the riginal lan must be included in the debt-t-incme rati calculatin fr the refinance transactin. The lender has dcumented that the brrwer acquired the prperty thrugh an inheritance r was legally awarded the prperty thrugh divrce, separatin, r disslutin f a dmestic partnership. SECTION BORROWER ELIGIBILITY NON-OCCUPANT CO-BORROWERS Allwed fr Full Dc nly, c-brrwers must be immediate family members. Nt allwed fr Freign Natinal brrwers. Brrwer and C-Brrwer must cmplete and sign a Nn-Occupant C-Brrwer Certificatin substantially similar t the frm fund in Exhibit D f this guide. Occupying brrwer(s) must have a DTI rati f 55% r less. Excluding incme/debs f nn-ccupant brrwer FIRST TIME HOME BUYERS The fllwing requirements apply t first time hme buyer transactins: Primary residence nly Minimum 600 credit scre Minimum 6 mnths f reserves 12-mnth rental histry required reflecting 0x30. Rental histry is nt required fr brrwers living rent free (See the Husing Histry sectin f this guide fr restrictins n brrwers living rent free) Payment shck limited as fllws: >36% DTI <=36 DTI Credit Scre >= 620: 300% current husing Payment shck nt applicable Credit Scre < 620: 200% current husing Payment shck nt applicable FTHB with gift funds: 150% current husing Payment shck nt applicable Payment Shck = (Prpsed Husing Payment /Present Husing Payment) * /7/2016

19 Seller shuld use prudent judgment in evaluating any payment shck implicatins and the ability f the Brrwer t repay the new mrtgage lan. Payment shck exceeding acceptable limits will be reviewed case by case and must be accmpanied by a dcumented histry f saving which supprts the brrwer s ability t handle the increased payment RESIDENCY Eligible: Ineligible: U.S. Citizen Permanent Resident Alien Nn-Permanent Resident Alien Freign Natinal (Secnd Hmes Only) Applicants pssessing diplmatic immunity Brrwers frm OFAC sanctined cuntries Plitically expsed brrwers Any material parties (cmpany r individual) t transactin listed n HUD s Limited Denial f Participatin (LDP) list, the federal General Services Administrative (GSA) Excluded Party list r any ther exclusinary list. Refer t Fannie Mae guidelines fr all definitins f eligibility status U.S. CITIZEN Eligible withut guideline restrictins PERMANENT RESIDENT ALIEN An alien admitted t the United States as a lawful permanent resident. Lawful permanent residents are legally accrded the privilege f residing permanently in the United States. Acceptable evidence f permanent residency include the fllwing: Alien Registratin Receipt Card I-151 (referred t as a green card). Alien Registratin Receipt Card I-551 (Resident Alien Card) that des nt have an expiratin date n the back (als knwn as a green card). Alien Registratin Receipt Card I-551 (Cnditinal Resident Alien Card) that has an expiratin date n the back, and is accmpanied by a cpy f the filed INS Frm I-751 (petitin t remve cnditins). Nn-expired freign passprt that cntains a nn-expired stamp (valid fr a minimum f three years) reading Prcessed fr I-551 Temprary Evidence f Lawful Admissin fr Permanent Residence. Valid until [mm-dd-yy]. Emplyment Authrized. Eligible withut guideline restrictins NON-PERMANENT RESIDENT ALIEN An alien admitted t the United States as a lawful temprary resident. Lawful nn-permanent residents are legally accrded the privilege f residing temprarily in the United States. Legal Status Dcumentatin 15 11/7/2016

20 Visa types allwed: E-1, E-2, E-3, EB-5, G-1 thrugh G-5, H-1, L-1, NATO, O-1, R-1, TN NAFTA Visa must be current and may nt expire fr a minimum f 3 years fllwing the clse date. When applicable, valid emplyment authrizatin dc (EAD) required fr US emplyment if nt spnsred by current emplyer. Guideline restrictins: Maximum LTV/CLTV: 75% Full Dcumentatin nly Minimum Grade: B+ Nn-Occupant C-Brrwers nt allwed Gift Funds nt allwed US credit requirements detailed under the CREDIT sectin f this guide shuld be utilized. If adequate depth f US credit cannt be established the Freign Natinal Qualifying Freign Credit sectin f this guide may be used FOREIGN NATIONAL A Freign Natinal is a nn-resident alien wh is nt authrized t live r wrk in the U.S r hlds a wrk Visa that is indicative f a mre temprary residency than thse required t meet Nn-Permanent Resident Alien requirements. A Freign Natinal may peridically visit the U.S. fr varius reasns including vacatin and/r business. In rder t be eligible, the brrwer must live and wrk in anther cuntry and be a legal resident f that same cuntry. They may nt purchase prperty intended fr use as a primary residence. Fr the purpses f this guide, Freign Natinal brrwers are eligible fr Secnd Hme transactins nly. See the Investr Slutins Guidelines fr Investment Prperty lan eligibility. See the FOREIGN NATIONAL Sectin f this guide fr all requirements fr this Brrwer type INTER VIVOS REVOCABLE TRUST An inter vivs revcable trust is permitted when the trust has an wnership interest in the subject prperty fr all transactin types. The fllwing requirements shuld be fllwed. Nt all requirements may be addressed, Fannie Mae requirements shuld be fllwed if these guides are silent. The trust must be established by ne r mre natural persns, slely r jintly. The primary beneficiary f the trust must be the individual(s) establishing the trust. The trust must becme effective during the lifetime f the persn establishing the trust. If the trust is established jintly, there may be mre than ne primary beneficiary as lng as the incme r assets f at least ne f the individuals establishing the trust will be used t qualify fr the mrtgage. The trustee must include either: The individual establishing the trust (r at least ne f the individuals, if 2 r mre); r An institutinal trustee that custmarily perfrms trust functins in and is authrized t act as trustee under the laws f the applicable state. The trustee must have the pwer t hld the title and mrtgage the prperty. This must be specified in the trust. One r mre f the parties establishing the trust must use persnal incme r assets t qualify fr the mrtgage. The fllwing dcumentatin is required: 16 11/7/2016

21 The trust was validly created and is duly existing under applicable law, Attrney's Opinin Letter frm the brrwer's attrney verifying all f the fllwing: The trust is revcable, The brrwer is the settler f the trust and the beneficiary f the trust, The trust assets may be used as cllateral fr a lan, The trustee is: Duly qualified under applicable law t serve as trustee, The brrwer, The settler, Fully authrized under the trust dcuments and applicable law t pledge, r therwise encumber the trust assets. A cmplete cpy f the trust dcuments certified by the brrwer t be accurate, r a cpy f the abstract r summary fr jurisdictins that require a lender t review and rely n an abstract r summary f trust dcuments instead f the trust agreements must be prvided in the lan file. The Attrney needs t als verify that the trust has nt been revked, mdified, r amended in any manner that wuld cause the representatins t be incrrect INELIGIBLE BORROWERS Irrevcable Trust Land Trust Brrwers with diplmatic immunity r therwise excluded frm U.S. jurisdictin SECTION CREDIT CREDIT REPORTS Fannie Mae guidelines shuld be utilized fr prcessing and dcumenting all required credit reprts and determining brrwer s credit eligibility. 5.2 LOAN INTEGRITY & FRAUD CHECK Data integrity is crucial t quality lan file delivery and mitigatin f fraud risk. All lans must be submitted t an autmated fraud and data check tl (i.e. FraudGuard, DataVerify, etc.). A cpy f the findings reprt must be prvided in the lan file alng with any dcumentatin reslving any deficiencies r red flags nted CREDIT INQUIRIES Creditr must btain verificatin frm brrwer in the frm f a signed statement attesting that their current bligatins are accurate. Additinally, any credit inquiries listed n the reprt within 90 days f the reprt date must be explained, if new credit was extended brrwers must prvide dcumentatin n the current balance and payment; if n credit was extended brrwer must state the purpse f the inquiry. The Brkers/MLO must infrm brrwers that they are bligated t infrm the lender f any new extensin f credit, whether unsecured r secured, that takes place during the underwriting prcess and up t the cnsummatin f the lan /7/2016

22 5.4 - HOUSING HISTORY Mrtgage/rental histry is required fr all LSM NANQ prgrams. If a brrwer s mrtgage r rental histry is nt reprted n the credit reprt, alternative dcumentatin shwing the mst recent 12-mnth histry (cancelled checks, mrtgage/rental statements including payment histry, etc.) must be prvided. Brrwers wh live rent free r withut a cmplete 12-mnth husing histry are allwed with the fllwing restrictins DTI may nt exceed 36% Full dcumentatin nly Primary Residence nly Fur (4) mnths f reserves added t the therwise applicable requirement 10% minimum brrwer cntributin Any available prtin f a 12-mnth husing histry must be paid as agreed. Brrwer mrtgage and/r rental histry may reflect lates based n Dcumentatin Optin and grade criteria, see matrices fr requirements. All husing lates must be cured at the time f applicatin and remain paid as agreed thrugh clsing. Husing lates exceeding 1x60x24 require a letter f explanatin frm the brrwer. The situatin causing the delinquency must be adequately dcumented as reslved. The new husing payment must be cnsidered when determining if the situatin is adequately reslved. See LSM Grade Determinatin Matrix fr grade specific restrictins CONSUMER CREDIT CONSUMER CREDIT HISTORY If a shrt sale, deed in lieu f freclsure, r freclsure has ccurred within the last 12 mnths, n mre than a 1x30x6 is allwed n each revlving debt accunt and n mre than a 1x30x12 is allwed n each installment debt accunt. All accunts must be current at applicatin and remain paid as agreed thrugh clsing TIMESHARES Timeshare bligatins will be treated as a cnsumer installment lan CONSUMER CREDIT CHARGE-OFFS AND COLLECTIONS Individual cllectin and nn-mrtgage charge-ff accunts equal t r greater than $250 and accunts that ttal mre than $2,000 must be paid in full prir t r at clsing. Medical cllectins may remain pen with a max cumulative balance f $10,000 Cllectins and charge-ffs that have expired under the state statute f limitatins n debts may be excluded. Evidence f expiratin must be dcumented /7/2016

23 Charge-ffs and cllectins nt excluded by the abve bullet pints must be paid r may stay pen if using ne r a cmbinatin f bth f the fllwing: Payments fr pen charge-ffs r cllectins are included in the DTI (Subject t prgram DTI restrictins) Reserves are sufficient t cver the balance f the charge-ffs r cllectins and meet reserve requirements CONSUMER CREDIT COUNSELING SERVICES Brrwers currently participating in Fannie Mae apprved credit cunseling services are acceptable if mst recent 12 mnths paid as agreed, and the CCCS administratr prvides a letter allwing brrwer t seek new mrtgage financing JUDGMENT OR LIENS All pen judgments, garnishments, and all utstanding liens must be paid ff prir t lan clsing INCOME TAX LIENS All incme tax liens (federal, state, lcal) must be paid ff prir t lan clsing BANKRUPTCY HISTORY Bankruptcies are allwed as lng as they have been settled. Evidence f bankruptcy reslutin is required. Bankruptcies reslved in the last 48 mnths require a letter f explanatin frm the brrwer. The situatin causing the bankruptcy must be adequately dcumented as reslved. The new husing payment must be cnsidered when determining if the situatin is adequately reslved. If multiple bankruptcies exist in this time frame each must be addressed in the explanatin. See LSM Grade Determinatin Matrix fr grade specific restrictins FORECLOSURE SEASONING Freclsures cmpleted in the last 48 mnths require a letter f explanatin frm the brrwer. The situatin causing the freclsure must be adequately dcumented as reslved. The new husing payment must be cnsidered when determining if the situatin is adequately reslved. If multiple freclsures exist in this time frame each must be addressed in the explanatin. In the case f a freclsure which was included in Bankruptcy, the seasning timeline will start frm the earlier f a) the date f discharge f bankruptcy and b) the freclsure cmpletin date. Re-established credit f at least 2 tradelines paid as agreed fr 12 mnths is required r the freclsure date will be used. Active freclsures are nt allwed. See LSM Grade Determinatin Matrix fr grade specific restrictins SHORT SALE / DEED IN LIEU SEASONING Shrt Sales and Deed in Lieu f Freclsures cmpleted in the last 36 mnths require a letter f explanatin frm the brrwer. The situatin causing the Shrt Sale / Deed-In-Lieu must be adequately dcumented as reslved. The new 19 11/7/2016

24 husing payment must be cnsidered when determining if the situatin is adequately reslved. If multiple Shrt Sales and/r Deed-In-Lieu exist in this time frame each must be addressed in the explanatin. In the case f a shrt sale/deed-in-lieu which was included in Bankruptcy, the seasning timeline will start frm the earlier f a) the date f discharge f bankruptcy and b) the shrt sale/deed-in-lieu cmpletin date. Re-established credit f at least 2 tradelines paid as agreed fr 12 mnths is required r the cmpletin date will be used. Shrt Sale r Deed-In-Lieu currently in prcess are nt allwed. See LSM Grade Determinatin Matrix fr grade specific restrictins FORBEARANCE OR MODIFICATION Frbearance r lan mdificatins are treated as a shrt sale / deed in lieu fr grading and pricing purpses. Fr the Credit Grades f B, B-, and C, where the husing event can be settled, the delinquency prceeding the husing event can be ignred. Servicing retentin related interest rate mdificatins are excluded frm the seasning requirement. A letter r explanatin frm the brrwer addressing the situatin that made frbearance r mdificatin necessary must be prvided. The current husing payment histry alng with the new husing payment must be cnsidered when determining if the situatin is adequately reslved CREDIT SCORE Decisin Scre: Minimum f 1 brrwer with 2 credit scres. Use lwer f 2 r middle f 3 credit scres generated; Fr multiple brrwers: Full Dc: Use the Decisin Scre fr the primary wage earner if that incme represents a minimum f 55% f ttal husehld incme. Otherwise use the lwest Decisin Scre amngst all brrwers wh will be n Nte and Title All Other Incme Dcumentatin Optins: Use lwest Decisin Scre amngst all brrwers wh will be n Nte and Title TRADELINES AND GRADE DETERMINATION STANDARD TRADELINES All Grades A minimum f three (3) tradelines per credit reprt; At least ne tradeline shuld be active fr mst recent 24 mnths; and tw tradelines shuld have reprted within the last 12 mnths. The fllwing are nt acceptable t be cunted as a tradeline: nn-traditinal credit as defined by Fannie Mae, any liabilities in deferment status, accunts discharged thrugh bankruptcy, authrized user accunts, charge-ffs, cllectin accunts, freclsures, deed in lieu f freclsure, shrt sales, r pre-freclsure sales LIMITED TRADELINES If Standard Tradelines requirements are nt met and the brrwer has a valid credit scre per the Credit Scre sectin f this guide the fllwing restrictins apply: Max grade f B 20 11/7/2016

25 Max LTV/CLTV f 75% A 10% dwn payment has been made by the brrwer frm their wn resurces Primary residences nly Nt allwed fr Self-Emplyed Slutins Express and Asset Depletin dc types OBLIGATIONS NOT APPEARING ON CREDIT REPORT HOUSING AND MORTGAGE RELATED OBLIGATIONS Husing and mrtgage-related bligatins include prperty taxes, premiums and similar charges that are required by the creditr (i.e., mrtgage insurance), grund rent, and leasehld payments. All prperties wned by the brrwer must be fully dcumented in this regard. These bligatins must be verified using reasnably reliable recrds such as taxing authrity r lcal gvernment recrds, hmewner s assciatin billing statements, infrmatin btained frm a valid and legally executed cntract CURRENT DEBT OBLIGATIONS, ALIMONY, AND CHILD SUPPORT The Underwriter may use a credit reprt t verify a brrwer s current debt bligatins, unless the underwriter has reasn t knw that the infrmatin n the reprt is inaccurate r disputed. Obligatins that d nt appear n the credit reprt, such as alimny and child supprt, must be dcumented thrugh ther methds accrding t Fannie Mae guidelines PAYMENT SHOCK Payment shck shuld nt exceed 300% f the brrwer s current husing payment unless DTI is less than r equal t 36%. If payment shck exceeds this limit the underwriter must prvide justificatin f brrwer s ability t handle the increased payment. NOTE: See additinal payment shck restrictins in the First Time Hme Buyers sectin f this guide. Payment Shck = (Prpsed Husing Payment /Present Husing Payment) * ADDITIONAL CREDIT CRITERIA Inquiries Recent inquiries within 120 days f the credit reprt date must be explained by the brrwer. New debt/liabilities A verificatin f all new debt/liabilities must be prvided and brrwer shuld be qualified with the additinal mnthly payment. Gap credit Prir t funding, LSM s will cnfirm there are n new brrwer debt bligatins. This can be cnfirmed via brrwer affidavit and / r a new credit reprt. Refer t Credit Inquiries sectin abve. Fr Freign Natinal credit criteria see the Freign Natinal Credit sectin f this guide LSM reserves the right t request a newly prcessed credit reprt pre-lan clsing t cnfirm n new debt/liabilities have been added /7/2016

26 SECTION ASSETS THE FOLLOWING APPLY TO ALL TRANSACTIONS UNLESS OTHERWISE STATED DOCUMENTATION OPTIONS Varius frms f dcumentatin are acceptable depending n brrwer asset type. Assets and reserves shuld be calculated and dcumented t Fannie Mae guidelines unless therwise specified in LSM guidelines. Fannie Mae guidelines prevail where this guide is silent regarding surces and types f assets as well as asset types nt eligible t be included. Fr Freign Natinal brrwers see the Freign Natinal Assets sectin f this guide RESERVES The LSM lan prgram includes minimum reserves as utlined n the LSM Prduct matrices; Additinal Reserves - Each financed prperty in additin t the subject prperty, will increase the applicable reserve requirement by tw (2) mnths PITI n the subject prperty t a maximum requirement f 24 mnths (Additinal reserves based upn the PITI f the subject prperty); Reserves must be surced and seasned accrding t Fannie Mae guidelines; Prceeds frm a cash-ut refinance cannt be used t meet the minimum reserve requirements. Prceeds frm 1031 Exchange cannt be used t meet reserve requirements DOWN PAYMENT SOURCING Dwn payment assets shuld be surced and seasned fr 60 days t Fannie Mae guidelines with dcumentatin prvided in the lan file. Lenders must require that the brrwer state the surce f the dwn payment and prvide verificatin. If the lender determines that the surce f the dwn payment is anther extensin f credit, the underwriter must then cnsider that lan as simultaneus secndary financing. Refer t Secndary Financing sectin abve GIFT FUNDS Unless therwise specified, Gift Funds are acceptable if ONE f the fllwing applies 1. A 5% dwn payment has been made by the brrwer frm their wn resurces % Gift Funds are allwed fr NANQ-Full Dc lans nly, with a maximum LTV f 75%. Brrwer(s) must meet bth reserve and residual incme requirements. Fannie Mae guidelines shuld be used fr dnr relatinship t brrwer(s), dcumentatin, prf f funds, and evidence f receipt; Gift funds may nt be used t meet reserve requirements. Gift f Equity allwed fr Primary Residence nly. Must meet all ther guidelines fr Gift Funds ASSET DOCUMENTATION In additin t dcumenting minimum PITI reserve requirements, all brrwers must disclse and the Underwriter must verify all ther liquid assets. Fannie Mae guidelines prevail regarding surces and types f assets as well as assets which are nt eligible fr clsing csts and/r reserves /7/2016

27 Accunt Statements shuld cver mst recent 60-day perid; Bank statements must be dated within 30 days f lan applicatin date; Stcks/Bnd/Mutual Funds - 100% f stck accunts can be cnsidered in the calculatin f assets fr clsing and reserves; Vested Retirement Accunt funds 60% may be cnsidered fr clsing and/r reserves; Nn-vested r restricted stck accunts are nt eligible fr use as dwn payment r reserves. Any assets which prduce incme r are used as incme already included in the incme calculatin are nt eligible fr use as dwn payment r reserves. When bank statements are used, large depsits must be evaluated. Large depsits are defined as any single depsit that represents mre than 75% f the mnthly average depsit balance. Large depsits need t be surced based upn Sectin 6.3 f this guide. An example f hw t identify a large depsit fllws: Mnth 1depsits $1,000 $1,500 Mnth 2 depsits $2,500 $5,000 Ttal depsits equal $10,000 r a mnthly average f $5, % f the mnthly average is $3,750. The $5,000 depsit frm mnth 2 needs t be surced/seasned. Assets held in freign accunts may be used as a surce f funds t clse and t meet applicable reserve requirements. These funds must be transferred t a U.S. dmiciled accunt in the brrwer s name at least ten (10) days prir t clsing. Dcumenting Assets Held in Freign Accunts: Assets must be verified in U.S. Dllar equivalency at the current exchange rate via either r the Wall Street Jurnal cnversin table. A cpy f the tw (2) mst recent statements f that accunt. If the funds are nt seasned a minimum f sixty (60) days, a letter f explanatin is required alng with the infrmatin t cmprise a sixty (60) day chain f funds SOLE PROPRIETOR ASSETS/BUSINESS FUNDS Business funds may be used fr dwn payment, clsing csts and fr the purpses f calculating reserves. The brrwer must be listed as sle wner f the accunt and the accunt needs t be verified per requirements in Sectin 6.3 f this Guide. If Business funds are used, the brrwer must be the sle prprietr r 100% wner f the business (r all brrwers cmbined wn 100%). The seller must determine that the withdrawal f funds will nt have a negative impact n the business by ne f the fllwing methds based upn the incme dcumentatin. Full Incme Dcumentatin The seller must perfrm a business cash flw analysis t cnfirm that the withdrawal f funds fr this transactin will nt have a negative impact n the business. The seller shuld utilize FNMA Frm 1084 r a similar cash flw analysis frm t shw the business can supprt the withdrawal f the funds. Self-Emplyed Slutins - 24 Mnth Business Bank Statement (May use ne f the fllwing methds) 23 11/7/2016

28 Business Expense Cverage: Using the mst recent business bank statement(s) used fr incme dcumentatin perfrm the fllwing calculatin; Statement(s) Ending Balance - Transactin Dwn Payment - Transactin Clsing Csts - Prgram Required Reserves +Fund Available frm Persnal Accunt(s) Funds Available fr Business Expense Cverage Funds Available fr Business Expense Cverage must be a psitive number and reflect a minimum f 2 mnths f average expenses as reflected n the P&L; r The balance sheet fr the business must reflect psitive wrking capital. Wrking capital is the difference between the current assets less current liabilities. The result represents the maximum amunt f business funds available t use twards dwn payment, clsing cst and reserves. SECTION INCOME INCOME ANALYSIS THE FOLLOWING APPLY TO ALL INCOME DOCUMENTATION OPTIONS UNLESS OTHERWISE STATED IN THE SPECIFIC SECTION OF THE GUIDELINES INCOME WORKSHEET The lan file must include an Incme wrksheet detailing incme calculatins. Incme analysis fr brrwers with multiple businesses must shw incme/ (lss) details separately, nt in aggregate EMPLOYMENT/INCOME VERIFICATION Mst recent tw (2) years incme dcumentatin is required fr all incme/dcumentatin types unless therwise nted; If any brrwer is n lnger emplyed in the psitin disclsed n the Frm 1003, LSM will nt allw STABILITY OF INCOME Stable mnthly incme is the Brrwer's verified grss mnthly incme which can be reasnably expected t cntinue fr at least the next three years. The Seller must determine that bth the surce and the amunt f the incme are stable; A tw-year histry f receiving incme is required in rder fr the incme t be cnsidered stable and used fr qualifying; When the Brrwer has less than a tw- year histry f receiving incme, Seller must prvide written analysis t justify the stability f the incme used t qualify the Brrwer; While the surces f incme may vary, the Brrwer shuld have a cnsistent level f incme despite changes in the surces f incme /7/2016

29 EARNINGS TRENDS When analyzing brrwer earnings, year ver year earnings trends must be incrprated int the brrwer s incme calculatin in accrdance with Appendix Q t Part 1026 f Regulatin Z Standards fr Determining Mnthly Debt and Incme. YTD incme amunt must be cmpared t prir years earnings using the brrwer s W-2 s, signed federal incme tax returns, r bank statements. Stable r increasing: Incme amunt shuld be averaged; Declining but stable: If the trend was declining, but has since stabilized and there is n reasn t believe that the brrwer will nt cntinue t be emplyed at the current level, the current, lwer amunt f variable incme must be used; Declining: If trend is declining, the incme is nt eligible DEBT TO INCOME RATIO MAX 36% TO 50% SUBJECT TO LSM MATRICES. The Debt-t-Incme ( DTI ) rati is calculated and reviewed fr adherence t Fannie Mae guidelines and inclusin f all incme and liability expenses. See mst recent prgram matrix fr applicable details RESIDUAL INCOME Residual Incme is the amunt f mnthly incme remaining nce a brrwer has paid all mnthly debt bligatins. Residual Incme = Grss Mnthly Incme minus ttal mnthly debt. Minimum Residual Incme Requirements are calculated using the table belw plus $250 fr the first dependent and $125 fr each additinal dependent. Occupancy Maximum LTV Minimum Residual Incme Primary Residence 90 $1,750 Primary Residence 80 $1,250 Secnd Hme 80 $2, DOCUMENTATION OPTIONS Varius frms f dcumentatin are acceptable depending n brrwer incme type. Incme shuld be calculated and dcumented t Fannie Mae guidelines, unless therwise specified within LSM guidelines. Fannie Mae guidelines prevail regarding surces and types f incme as well as incme nt eligible t be included. A Fannie Mae Frm 1084 r Freddie Mac Incme Analysis wrksheet shuld be included and delivered as part f the credit file. DOC TYPE SUMMARY Full Dc Self-Emplyed Slutins Self-Emplyed Slutins Express Asset Utilizatin Min FICO /7/2016

30 Max LTV/CLTV Incme Dcumentatin 2 years W2s / Tax Returns 24 mnths Persnal Bank Statements OR Business Bank Statements 12 mnths Persnal Bank Statements Amrtized Liquid Assets and 2 years W2s / Tax Returns Tax Returns Required Yes N N Yes (If Appendix Q Incme is used) 4506-T Required Yes N N Yes (If Appendix Q Incme is used) Emplyment Freign Natinal W2 r Self Emplyed Eligible fr 2 nd Hme Self Emplyed Only Self Emplyed Only W2 r Self Emplyed NA NA NA FULL DOCUMENTATION Full Dc is available t brrwers wh are able t prve 24 mnths f incme in accrdance with Appendix Q f Regulatin Z. This dcumentatin ptin is available t brrwers wh have experienced recent credit events and allws fr higher LTVs fr brrwers with clean pay histries. This ptin allws fr DTIs that exceed 43% (up t 50%) with apprpriate residual incme and reserves as cmpensating factrs. Lans exceeding a 43% DTI will be cnsidered Nn-QM. Lans with DTIs less than r equal t 43% will be QM with Rebuttable Presumptin if all required cnditins are met RESTRICTIONS See LSM Matrices fr acceptable credit grades, max LTV and DTI; Minimum 500 credit scre FULL DOC INCOME DOCUMENTATION If any Brrwer has applied fr a tax return extensin, a cpy f the extensin shuld be included in the credit file and the prir tw years f tax returns included in the credit package; Salaried Brrwers: 1 Specifically, under the Cnsumer Financial Prtectin Bureau s Ability-t-Repay/Qualified Mrtgage Rule the lan must: (i) have a term that des nt exceed 30 years, (ii) prvide fr regular peridic payments that are substantially equal, except fr the effect that any interest rate change after cnsummatin has n the payment in the case f an adjustable-rate mrtgage and d nt result in negative amrtizatin, deferral f principal repayment, r any balln payment (e)(2)(i)-(ii). In additin, the ttal pints and fees payable in cnnectin with the lan cannt exceed 3% f the ttal lan amunt where the lan amunt is greater r equal t $100, C.F.R (e)(2)(iii) /7/2016

31 A cmpleted Request fr Verificatin f Emplyment (Frm 1005 r Frm 1005(S)), r the brrwer s recent paystub (reflecting 30 days f pay and YTD earnings) and IRS W-2 frms cvering the mst recent tw-year perid A verbal VOE frm each emplyer Frm 1003, mst recent tw years f tax returns (including all statements and, schedules), A signed and executed 4506-T. Self Emplyed Brrwers: Frm 1003, mst recent tw years f tax returns (including all schedules), YTD P&L and balance sheet, and K-1 s (n all crpratins and Schedule E business entities) fr prir tw years. A signed and executed 4506-T is required. Verify the existence f the business and ensure the business is active with the fllwing; a letter frm either the businesses tax prfessinal certifying 2 years f self-emplyment in same line f business, r regulatry agency r licensing Bureau; alng with either a phne listing and/r business address using directry assistance r internet search. Underwriter must cnsider the financial strength f a self-emplyed brrwer's business OTHER SOURCES OF INCOME The fllwing surces f incme must be verified in accrdance with Appendix Q: Bnus* Cmmissin* Overtime* Part-time/Variable (uninterrupted and stable fr past tw years*) Retirement Scial security Investment and Trust Military r gvernment assistance Child supprt and alimny Rental Incme: shuld be dcumented thrugh Schedule E f the brrwer s tax returns. If prperty has nt previusly been rented, then incme will be calculated based n the lwer f the lease agreement r 1007 times 75% fr single unit prperty r 70% fr 2-4-unit prperty. * An earnings trend must be established and dcumented in accrdance with Appendix Q. A perid f mre than tw years must be used in calculating the average vertime, bnus, and cmmissin incme. If either type f incme shws a cntinual decline, written justificatin n the incme wrksheet must be prvided, r incme shuld nt be used. Fr Part-time emplyment a minimum tw (2) year histry is required hwever a shrter perid, f n less than twelve (12) mnths, may be cnsidered case-by-case if psitive factrs are present t ffset shrter histry SELF-EMPLOYED SOLUTIONS (24 MONTHS BANK STATEMENTS) The Self-Emplyed Slutins prgram is available t self-emplyed brrwers nly and allws the use f 24 mnths f bank statements t dcument self-emplyment incme. Incme dcumented thrugh the Self-Emplyed Slutins methd may be cmbined with ther incme surces that are dcumented as Full Dc but nt assciated with selfemplyment, such as a spuse emplyed as a wage earner. When wage incme is cmbined with Self-Emplyed Slutins, a tax return is nt required fr the full incme dcumentatin, as this wuld invalidate the bank statements. The 4506T is still required, hwever, bx 8 shuld be checked t verify the W /7/2016

32 Self-Emplyed Slutins lans will be cnsidered Nn-QM RESTRICTIONS See LSM Matrices fr acceptable credit grades, max LTV and DTI; Nn-ccupant c-brrwers nt allwed; Minimum 600 credit scre; Primary Brrwer must be Self-Emplyed SELF-EMPLOYED SOLUTIONS DOCUMENTATION Persnal Accunts Accunt reflecting persnal incme and expenses. Business Accunts Accunt in the name f the business reflecting nly business incme and expenses. C-mingled Business and Persnal Accunts Single accunt reflecting bth persnal/business incme and expenses. Verify the existence f the business and ensure the business is active with the fllwing; a letter frm either the businesses tax prfessinal certifying 2 years f self-emplyment in same line f business, r regulatry agency r licensing Bureau; alng with either a phne listing and/r business address using directry assistance r internet search; Mst recent 24 mnths f PERSONAL bank statements; Mst recent 3 mnths f BUSINESS bank statements. Verify the existence f the business and ensure the business is active with the fllwing; a letter frm either the businesses tax prfessinal certifying 2 years f self-emplyment in same line f business, r regulatry agency r licensing Bureau; alng with either a phne listing and/r business address using directry assistance r internet search; Verify that the brrwer is 100% wner f the business; 24-mnth Prfit and Lss Statement (P&L) prepared by a CPA r Licensed Tax Preparer, matching the time perid cvered by the bank statements; Mst recent 24 mnths BUSINESS bank statements Verify the existence f the business and ensure the business is active with the fllwing; a letter frm either the businesses tax prfessinal certifying 2 years f self-emplyment in same line f business, r regulatry agency r licensing Bureau; alng with either a phne listing and/r business address using directry assistance r internet search; Verify that the brrwer is 100% wner f the business; 24-mnth Prfit and Lss Statement (P&L) prepared by a CPA r Licensed Tax Preparer, matching the time perid cvered by the bank statements; Mst recent 24 mnths PERSONAL r BUSINESS bank statements. Verificatin f self-emplyed businesses by a third-party surce must be btained prir t fund. Tax returns and 4506-T are nt required fr the prgram. If Tax returns and/r Transcript are prvided the lan will be ineligible fr the Self-Emplyed Slutins Prgram; SELF-EMPLOYED SOLUTIONS INCOME ANALYSIS In additin t the factrs described in the Incme Analysis sectin f this guide, lenders shuld cnsider the fllwing: PERSONAL Bank statement review: 28 11/7/2016

33 Incme shuld be calculated based n a 24 mnth average f ttal depsits minus any incnsistent depsits nt justified. Qualifying incme may nt exceed the incme indicated n the initial Pattern f depsits and payment shuld be cnsistent; Expectatins f changes in depsit pattern must be cnsidered; Incme dcumented separately but cmingled must be backed ut f depsits. BUSINESS & CO-MINGLED Bank statement review: P&L Revenue must be supprted by the prvided bank statements. Ttal depsits per bank statements, minus any incnsistent depsits, must be n mre than 5% belw revenue reflected n P&L. The bank statements and P&L must cver the same time perid; Qualifying incme is the lwer f the Net Incme indicated n the P&L and the incme indicated n the initial 1003 Expenses must be reasnable fr the type f business; Pattern f depsits and payment shuld be cnsistent; Expectatins f changes in depsit pattern must be cnsidered; Incme dcumented separately but c-mingled must be backed ut f depsits. Nn-sufficient funds (NSF) r negative balances reflected n the bank statement must be cnsidered. Overdraft prtectin (Fees) assciated with a pre-arranged link t a savings accunt r line f credit must als be cnsidered unless ne f the fllwing cnditins exist Overdraft prtectin frm a depsitry accunt: Occurrences may be excluded if statements fr the linked accunt cnfirm that (a) the linked accunt balance at the time f the transfer exceeded the amunt f the verdraft transfer, (b) the linked accunt s balance did nt reprt as zer r negative at any pint during the statement perid f the transfer, and (c) the linked accunt did nt itself receive verdraft prtectin prceeds during the statement perid f the transfer. Overdraft prtectin frm a line f credit: Occurrences may be excluded if statements fr the linked accunt cnfirm that (a) the line s credit limit was nt exceeded during the statement perid f the transfer and (b) a payment amunt which equals r exceeds the sum f all verdraft prtectin ccurrences analyzed in the statement perid is made within 30 days after the statement clse date. Occurrences included in the analysis are subject t the fllwing tlerances Up t five (5) ccurrences in the mst recent twelve (12) mnth time perid is acceptable if there are zer (0) ccurrences in the mst recent three (3) mnth time perid. Up t three (3) ccurrences are allwed in the mst recent twelve (12) mnth time perid if there are ne (1) r mre ccurrences in the mst recent tw (2) mnth time perid. Exceptin requests fr tlerance deviatins must include (a) a letter f explanatin frm the brrwer utlining the reasn fr the ccurrences and an explanatin f hw and when the issue leading t the ccurrences was rectified, and (b) additinal cmpensating factrs utlined by the underwriter supprting the viability f incme. Underwriter must cnsider the financial strength f a self-emplyed brrwer's business SELF-EMPLOYED SOLUTIONS EXPRESS (12 MONTHS BANK STATEMENTS) The Self-Emplyed Slutins prgram is available t self-emplyed brrwers nly and allws the use f 12 mnths f bank statements t dcument self-emplyment incme. Incme dcumented thrugh the Self-Emplyed Slutins methd may be cmbined with ther incme surces that are dcumented as Full Dc but nt assciated with self /7/2016

34 emplyment, such as a spuse emplyed as a wage earner. When wage incme is cmbined with Self-Emplyed Slutins, a tax return is nt required fr the full incme dcumentatin, as this wuld invalidate the bank statements. The 4506T is still required, hwever, bx 8 shuld be checked t verify the W-2. Self-Emplyed Slutins lans will be cnsidered Nn-QM RESTRICTIONS See LSMs Matrices fr acceptable credit grades, max LTV and DTI; Maximum DTI 36% Nn-ccupant c-brrwers nt allwed; Minimum 660 credit scre; Primary Brrwer must be Self-Emplyed. Limited t sle prprietr and 100% business wners First-time Hmebuyer nt allwed SELF-EMPLOYED SOLUTIONS EXPRESS DOCUMENTATION PERSONAL Accunts BUSINESS Accunts C-mingled Business and Persnal Accunts Verify the existence f the business and ensure the business is active with the fllwing; a letter frm either the businesses tax prfessinal certifying 4 years f self-emplyment in same line f business, r regulatry agency r licensing Bureau; alng with either a phne listing and/r business address using directry assistance r internet search; Mst recent 12 mnths f PERSONAL bank statements; Mst recent 3 mnths f BUSINESS bank statements Nt Available Nt Available Verificatin f self-emplyed businesses by a third-party surce must be btained prir t fund. Tax returns and 4506-T are nt required fr the prgram. If Tax returns and/r Transcript are prvided the lan will be ineligible fr the Self-Emplyed Slutins Prgram; SELF-EMPLOYED SOLUTIONS EXPRESS INCOME ANALYSIS In additin t the factrs described in the Incme Analysis sectin f this guide, the underwriter shuld cnsider the fllwing: PERSONAL Bank statement review: Incme shuld be calculated based n a 12 mnth average f ttal depsits minus any incnsistent depsits nt justified. Qualifying incme may nt exceed the incme indicated n the initial Pattern f depsits and payment shuld be cnsistent; Expectatins f changes in depsit pattern must be cnsidered; 30 11/7/2016

35 Incme dcumented separately but cmingled must be backed ut f depsits. Nn-sufficient funds (NSF) r negative balances reflected n the bank statement must be cnsidered. Overdraft prtectin (Fees) assciated with a pre-arranged link t a savings accunt r line f credit must als be cnsidered unless ne f the fllwing cnditins exist Overdraft prtectin frm a depsitry accunt: Occurrences may be excluded if statements fr the linked accunt cnfirm that (a) the linked accunt balance at the time f the transfer exceeded the amunt f the verdraft transfer, (b) the linked accunt s balance did nt reprt as zer r negative at any pint during the statement perid f the transfer, and (c) the linked accunt did nt itself receive verdraft prtectin prceeds during the statement perid f the transfer. Overdraft prtectin frm a line f credit: Occurrences may be excluded if statements fr the linked accunt cnfirm that (a) the line s credit limit was nt exceeded during the statement perid f the transfer and (b) a payment amunt which equals r exceeds the sum f all verdraft prtectin ccurrences analyzed in the statement perid is made within 30 days after the statement clse date. Occurrences included in the analysis are subject t the fllwing tlerances Up t five (5) ccurrences in the mst recent twelve (12) mnth time perid is acceptable if there are zer (0) ccurrences in the mst recent three (3) mnth time perid. Up t three (3) ccurrences are allwed in the mst recent twelve (12) mnth time perid if there are ne (1) r mre ccurrences in the mst recent tw (2) mnth time perid. Exceptin requests fr tlerance deviatins must include (a) a letter f explanatin frm the brrwer utlining the reasn fr the ccurrences and an explanatin f hw and when the issue leading t the ccurrences was rectified, and (b) additinal cmpensating factrs utlined by the underwriter supprting the viability f incme. Ensure the business is active and dcument and verify any business licensing (as applicable). Underwriter must cnsider the financial strength f a self-emplyed brrwer's business ASSET UTILIZATION The Asset Utilizatin lan prgram is an ptin fr an underwriter t use a Brrwer s liquid assets t augment incme fr lan and prduct qualificatin purpses RESTRICTIONS See LSM Matrices fr acceptable credit grades, max LTV and DTI; Nn-ccupant c-brrwers nt allwed; Minimum 680 credit scre; Cash ut transactins nt eligible ASSET UTILIZATION INCOME CALCULATION Asset Utilizatin Incme: Ttal Assets Eligible fr Depletin, less dwn payment, less ut f pcket clsing csts less required reserves, times 70% divided by 360. Tw Incme Calculatins shuld be perfrmed n lans utilizing Asset Depletin: Max Appendix Q DTI is 55%: 31 11/7/2016

36 Incme must be calculated and dcumented in cmpliance with Appendix Q f Regulatin Z. This incme calculatin and dcumentatin requirement is cnsistent with that used fr LSM s NANQ prgram; Brrwers wh have reached retirement age (at least 59 ½) are nt subject t the maximum Appendix Q DTI. Max DTI including Asset Depletin Incme Calculatin is 43%: Asset Depletin Incme (as calculated abve) can be added t Appendix Q incme when calculating DTI ASSET UTILIZATION INCOME DOCUMENTATION All individuals listed n the asset accunt(s) must be n the Nte and Mrtgage; Assets cnsidered fr this prgram must be verified with mst recent 3 mnths f accunt statements r a VOD. Assets must be seasned 120 days; Incme ther than Asset Utilizatin must be dcumented in accrdance with the NANQ prgram including tax returns and 4506-T ASSETS ELIGIBLE FOR DEPLETION Assets must be liquid and available with n penalty; Surce and types t Fannie Mae guidelines; Additinal dcumentatin may be requested t validate the rigin n the wealth: Marketable securities (i.e. CD s, mney market accunts); Checking; Savings; Stcks; Bnds; Mutual Funds; Retirement Assets: Eligible if the brrwer is f retirement age (at least 59 ½) ASSETS INELIGIBLE FOR DEPLETION Equity in Real Estate; Privately traded r restricted/nn-vested stcks; Retirement Assets: Ineligible if the brrwer is nt f retirement age (at least 59 ½); Any asset which prduces incme already included in the incme calculatin FOREIGN NATIONAL A Freign Natinal is a nn-resident alien wh is nt authrized t live r wrk in the U.S r hlds a wrk Visa that is indicative f a mre temprary residency than thse required t meet Nn-Permanent Resident Alien requirements. A Freign Natinal may peridically visit the U.S. fr varius reasns including vacatin and/r business. In rder t be eligible, the brrwer must live and wrk in anther cuntry and be a legal resident f that same cuntry. They may nt purchase prperty intended fr use as a primary residence. Fr the purpses f this guide, Freign Natinal brrwers are eligible fr Secnd Hme transactins nly. See the Investr Slutins Guidelines fr Investment Prperty lan eligibility /7/2016

37 A cmplete 1003 lan applicatin is required n all lan files reflecting brrwer s full name, address including flat, flr, unit r huse number, street name, city, prvince/state alng with a pstal cde. In additin, t assist credit vendrs in cntacting the brrwer, the Freign Natinal Brrwer cntact frm (Exhibit H) must be cmpleted FOREIGN NATIONAL PROGRAM SPECIFIC DOCUMENTATION REQUIREMENTS Visa types allwed: B-1, B-2, H-2, H-3, I, J-1, J-2, 0-2, P-1, P-2, TN NAFTA, Laser Visa The fllwing are required as evidence the brrwer is in the U.S legally Cpy f the brrwers valid and unexpired passprt (including phtgraph) Cpy f the brrwer s valid and unexpired visa (including phtgraph) OR an I-797 frm with valid extensin dates and I-94. Brrwers frm cuntries participating in the State Department s Visa Waiver Prgram (VWP) are nt required t prvide a valid visa. Participating cuntries can be fund at If a nn-u.s. citizen is brrwing with a U.S. citizen, Freign Natinal dcumentatin requirements still apply. All parties invlved n transactin must be screened thrugh exclusinary lists, must be cleared thrugh OFAC's SND list, search f Specially Designated Natinals & Blcked Persns List may be cmpleted via US Department f Treasury: Brrwers frm OFAC sanctined cuntries are ineligible Individuals with Diplmatic immunity nt eligible All brrwers must cmplete IRS frm W-8BEN Dcuments signed by Brrwers utside f the United States must be ntarized by a U.S. embassy r cnsular fficial. The certificate f acknwledgment must meet the standard ntarial requirements and must include the embassy r cnsular seal. Pwer f Attrney (POA) is nt allwed. An executed Autmatic Debit Payment Agreement (ACH) frm a U.S. Bank, alng with either a vided check r savings accunt depsit frm is required fr transactins invlving a Freign Natinal. Clients shuld utilize a frm similar t EXHIBIT B f this guide that includes the bank ruting number, accunt number, and accunt type in t the ACH frm FOREIGN NATIONAL CREDIT QUALIFYING U.S. CREDIT Fr Freign Natinal Brrwers with a valid Scial Security number a credit reprt shuld be btained. Requirements fund in the CREDIT sectin f this guide apply. Brrwers nt meeting these requirements may prceed under the Qualifying Freign Credit requirements detailed in this guide. Guideline restrictins: Qualifying U.S. Credit Maximum LTV/CLTV: 75% Full Dc nly Secnd Hme nly Nn-Occupant C-Brrwers nt allwed Gift Funds nt allwed 33 11/7/2016

38 Minimum Grade: B+ Minimum Credit Scre: 600 QUALIFYING FOREIGN CREDIT Freign Natinal Brrwers withut Qualifying U.S. Credit (Including brrwers withut a valid Scial Security Number and brrwers with r withut an Individual Tax Identificatin Number) must prvide evidence f three (3) active and pen tradelines with a 2 year histry. N dergatry credit histry is permitted. ANY cmbinatin f the fllwing is acceptable t arrive at the tradeline requirement. Tradelines evidenced via a U.S. credit reprt; AND/OR Tradelines evidenced via internatinal credit reprt if a U.S. credit reprt cannt be prduced r des nt prvide a sufficient number f tradelines; AND/OR Tradelines evidenced via credit reference letters frm verified financial institutins in the brrwer s cuntry f rigin if a U.S. credit reprt and/r internatinal credit reprt is nt available r the cmbinatin f the credit reprts des nt prvide a sufficient number f tradelines. A minimum f 1 reference letter must be frm an internatinally knwn financial institutin. Each letter f reference must state the type and length f the relatinship, hw the accunt is held, payment amunt, utstanding balance and status f accunt including a minimum 12 mnth payment histry. A single reference surce may prvide verificatin f multiple accunts. Individual accunt detail must be prvided. The letter must mentin the brrwer by name. Name, title & cntact infrmatin f the persn signing the letter must be included. Currency must be cnverted t U.S. Dllars and signed and dated by certified translatr. All dcuments must be translated int English. Guideline restrictins: Qualifying Freign Credit Maximum LTV/CLTV: 70% Full Dc nly Secnd Hme nly (See the Investr Slutins guide fr investment lan ptins) Nn-Occupant C-Brrwers nt allwed Gift Funds nt allwed Minimum Grade: B+ (N returned scre results in a B+ grade) Minimum Credit Scre: 620 (when available) HOUSING HISTORY Evidence f a 2-year husing histry (mrtgage and/r rental) with 0x30x24 is required. Husing histry may be included as 1 f the required tradelines fr a Qualifying U.S. Credit transactin if it is included n the U.S. credit reprt r may be used as 1 f the required tradelines fr a Qualifying Freign Credit transactin if it is included n the U.S. credit reprt, the internatinal credit reprt, r verified in accrdance with credit reference letter requirements. Withut verifiable husing histry, including brrwers wh live 34 11/7/2016

39 rent free, DTI may nt exceed 36% and brrwer must add fur (4) mnths f reserves t the therwise applicable requirement FOREIGN NATIONAL INCOME Brrwers with US surced incme must cmply with all NANQ Full Dc guidelines. Freign Natinal Salaried/Wage Earners qualifying n nn-us incme surces must prvide: Paystubs cvering a minimum f 30 days (which include YTD incme) and ne (1) f the fllwing 1) W-2 equivalent r 2) Tw (2) years tax returns frm brrwer cuntry f rigin; OR A letter frm emplyer n cmpany letter head prviding current mnthly salary, YTD earnings and ttal earning fr the past 2 years. Letter frm emplyer must be n cmpany letterhead, including address and cmpany web address, Emplyer t be independently verified (LexisNexis, D&B, Ggle, ther). All dcs must be translated by an independent certified translatr; AND Tw (2) years tax returns frm the brrwers cuntry if residence (if applicable) Freign Natinal Self-Emplyed brrwers qualifying using nn-us incme surces: Must be self-emplyed fr a minimum f 2 years evidenced by a letter frm the brrwer s CPA r lcal equivalent (the Accuntant ) n Accuntant letterhead. The letter must include incme figures fr each f the last 2 years and YTD incme. A business license (where required) and rganizatin dcuments shuld be prvided. A cpy f the Accuntant s current license is required. The Business & Accuntant must be independently verified. All dcuments must be translated by an independent certified translatr. Tw (2) years tax returns frm the brrwers cuntry if residence (if applicable) Incme frmcuntries sanctined by OFAC is nt allwed. Care must be taken in assessing incme frm a nn-us surces. If incme declining r incnsistent, and cannt be islated t a nn-recurring instance then the lwest annual incme shuld be used. The INCOME sectin f this guide prevails unless therwise mentined FOREIGN NATIONAL ASSETS RESERVES A minimum f twelve (12) mnths f reserves are required. Withut verifiable husing histry, including living rent free, the brrwer must have an additinal fur (4) mnths f reserves; Each financed prperty in additin t the subject prperty, will increase the applicable reserve requirement by tw (2) mnths PITI; ASSETS HELD IN FOREIGN ACCOUNTS Assets held in freign accunts may be used as a surce f funds t clse and t meet applicable reserve requirements. These funds must be transferred t a U.S. dmiciled accunt in the brrwer s name at least ten (10) days prir t clsing. Dcumenting Assets Held in Freign Accunts: 35 11/7/2016

40 Assets must be verified in U.S. Dllar equivalency at the current exchange rate via either r the Wall Street Jurnal cnversin table. A cpy f the tw (2) mst recent statements f that accunt. If the funds are nt seasned a minimum f sixty (60) days, a letter f explanatin is required alng with the infrmatin t cmprise a sixty (60) day chain f funds. See the Asset Dcumentatin sectin f this guide fr eligible surces and types f assets The ASSETS sectin f this guide prevails unless therwise mentined /7/2016

41 EXHIBIT A: OCCUPANCY CERTIFICATION 37 11/7/2016

42 EXHIBIT B: AUTOMATIC DEBIT PAYMENT AGREEMENT (ACH) FORM Autmatic Payment Authrizatin Frm Yu must attach a vided check r a savings depsit slip Yes, I wuld like t enrll in the free* mnthly Autmatic Payment Prgram Name: Street Address: City, State, Zip Cde: Mrtgage Lan Number: Daytime Phne Number: Financial Institutin Name: Accunt Ruting Number: Evening Phne Number: Financial Institutin Phne Number: Checking Savings Accunt Number: *Please nte that yur financial institutin may assess a fee fr this transactin. Please specify the payment date mst cnvenient fr yu, which must be within the applicable grace perid. If a payment date is nt specified, r yur lan is a daily simple interest lan, payments will be deducted n yur current lan due date. Deduct my payment n the f each mnth. I wuld like additinal funds deducted and applied tward reducing my utstanding principal balance. Please deduct an additinal $ per mnth. I hereby authrize, including its successrs and/r assigns, t initiate transfers frm my checking r savings accunt at the financial institutin indicated abve fr the purpse f making my mnthly mrtgage payment. I authrize the amunt f each transfer t include my regularly scheduled payment including principal, interest and escrw items, reimbursement f crprate advances, ptinal insurance as applicable and the csts f any services I request. I understand that, in accrdance with the terms f my mrtgage nte and/r adjustments in my escrw fr taxes and insurance, my payment may change frm time t time as set frth in my lan dcuments. Yu are hereby authrized t change the amunt f the draft frm my checking r savings accunt, prvided that yu ntify me f the new payment amunt at least 10 days prir t the draft date. I agree that the payment change ntice prvided t me under the Adjustable Rate Mrtgage Prvisins f the Truth-in- Lending Act and/r escrw analysis frm shall cnstitute ntice f payment change as required by the Electrnic Funds Transfer Act and Federal Reserve Bard Regulatin E. I HEREBY AGREE TO THE TERMS AND CONDITIONS IN THIS FORM. Brrwer's Signature Date 38 11/7/2016

43 C-Brrwer's Signature Date EXHIBIT C: ABILITY-TO-REPAY BORROWER CONFIRMATION CUST_NUM Imprtant Ability-t-Repay Ntice Date: Applicatin N.: This Imprtant Ability-t-Repay Ntice is being prvided t each brrwer prir t the signing f the lan dcuments. Brrwers are nt required t sign this ntice befre the federal Lan Estimate disclsure has been prvided. In reviewing yur credit applicatin, [Insert Name f Lender] has r will cnsider and verify the fllwing infrmatin as it relates t yur ability t repay this lan accrding t its terms as required by applicable law: (1) yur current and reasnably expected incme and/r assets (ther than the value f the dwelling and any attached real prperty); (2) yur current emplyment status (t the extent that emplyment incme is relied n t determine repayment ability); (3) the mnthly payment fr principal and interest n the lan; (4) the mnthly payment n any simultaneus lan that [Insert Name f Lender] knws r has reasn t knw will be made; (5) the mnthly payment fr mrtgage-related bligatins (e.g., prperty taxes, certain insurance premiums, fees and special assessments fr cndminiums, and hmewners assciatin, grund rent, and leasehld payments); (6) yur current debt bligatins, alimny, and child supprt; (7) yur mnthly debt-t-incme rati and/r residual incme; and (8) yur credit histry. Belw and in the attached Applicatin Frm (Unifrm Residential Lan Applicatin n Fannie Mae Frm 1003) is the infrmatin that [Insert Name f Lender] has r will verify and cnsider in making this lan, as required by applicable law: Emplyment and Incme Verified Surce Tax returns (Federal r State) IRS Frm W-2s Payrll statements Financial institutin recrds Emplyment-related recrds frm yur emplyer (r ther verificatin f emplyment) Gvernment agency recrds relating t benefits r entitlements Other Other Other Ttal Mnthly Incme: Estimated Mnthly Incme frm Assets: Husing Expenses 39 11/7/2016

44 Verified Expense Mnthly Amunt Mnthly Mrtgage Payment Simultaneus Lan Mrtgage Payment Prperty Taxes Hmewners Assciatin Dues r Maintenance Insurance Premiums Other Other Debts Verified Debt Obligatin Mnthly Amunt Installment lans Installment lans Installment lans Revlving charge accunts Real estate lans Student lans Autmbile lans Other Other Other Obligatins Verified Obligatin Mnthly Amunt Alimny Child supprt Cntingent liabilities (e.g., mrtgage assumptins, c-signed bligatins) Other Other 40 11/7/2016

45 The infrmatin listed abve and in the Attachments was prvided by yu in yur applicatin and interview, and/r in third-party recrds and ther dcuments (such as credit reprts and tax recrds). Based n its cnsideratin f this infrmatin, [LanStream] has made a reasnable and gd faith determinatin that yu have the reasnable ability t repay this lan accrding t its terms. [LanStream] wants t make sure that the infrmatin listed abve is crrect and cmplete. [LanStream] is in the business f making lans and cllecting lan payments it has n desire t make a lan that cannt be repaid under the terms f the agreement. By yur signature(s) belw, yu are cnfirming that: Brrwer(s): (1) Yu have read and understand this Imprtant Ability-t-Repay Ntice, and the infrmatin listed abve is crrect and cmplete; (2) Yur current r reasnably expected incme r assets (ther than the value f the dwelling and any attached real prperty) is/are cnsistent with the infrmatin listed abve; (3) Yur current emplyment status is cnsistent with the infrmatin listed abve and/r attached; (4) Yur current husing expenses, debts, and ther bligatins (including alimny and child supprt payments) are cnsistent with the infrmatin listed abve; (5) Yu have nt applied fr r pened any new credit accunts, defaulted n any credit accunts, filed fr bankruptcy, r had any judgments entered against yu by a curt; (6) Yur living expenses (including expenses fr fd, clthing, gasline, health care, and ther recurring nndebt bligatins) are cnsistent with the infrmatin listed abve and in the attached Mnthly Living Expenses Wrksheet; and (7) Yu have nt experienced any ther changes frm the time yu signed r therwise cmpleted the infrmatin listed abve and in the attached Applicatin Frm and Mnthly Living Expenses Wrksheet that wuld reduce yur reasnable ability t repay this lan accrding t its terms. / / / / (Signature) DATE (Signature) DATE 41 11/7/2016

46 EXHIBIT D: NON-OCCUPANT CO-BORROWER CERTIFICATION 42 11/7/2016