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1 Page 1 of 70 Investor Library/BB&T Correspondent/BB&T Correspondent Lending/Non-Conforming/Jumbo Underwriting Guidelines (09/11/15)/4:1 INTRODUCTION 4:1 INTRODUCTION BB&T Correspondent Lending expects its Correspondents to be fully familiar with mortgage underwriting secondary marketing requirements, and to keep abreast of industry changes that impact residential mortgages. This section is designed for two purposes: To supplement information referred to in the Non-Conforming/Jumbo Product Description section. To clarify BB&T's exceptions, allowances and restrictions regarding specific underwriting issues. Investor Library/BB&T Correspondent/BB&T Correspondent Lending/Non-Conforming/Jumbo Underwriting Guidelines (09/11/15)/4:2 UNDERWRITING REQUIREMENTS 4:2 UNDERWRITING REQUIREMENTS All Non-Conforming/Jumbo loans, regardless of loan size, must be submitted to BB&T Correspondent Lending for manual underwriting and receive final underwriting approval from BB&T prior to loan closing. Loans must be documented according to the Non- Conforming/ Jumbo Underwriting Guidelines herein. Loans utilizing LP or DU validated/documented approvals are not eligible for delivery to BB&T Correspondent Lending. BB&T policy applies to Non-Conforming/Jumbo loan amounts unless otherwise specified. Questions regarding specific underwriting issues can be directed to BB&T Correspondent Lending Information Central (CLIC). ALL NON-CONFORMING/JUMBO LOANS MUST ADHERE TO BB&T CORRESPONDENT LENDING REQUIREMENTS STATED IN BB&T S CORRESPONDENT LENDING GUIDE. Investor Library/BB&T Correspondent/BB&T Correspondent Lending/Non-Conforming/Jumbo Underwriting Guidelines (09/11/15)/4:3 AGE OF CREDIT DOCUMENTS AND APPRAISALS 4:3 AGE OF CREDIT DOCUMENTS AND APPRAISALS Existing and New Construction Credit documents cannot be older than 120 days. Appraisals cannot be older than 120 days. If the effective date of the appraisal is more than 120 days before the note, the appraisal is outdated, and a new Full interior/exterior appraisal Freddie Mac 70/Fannie Mae Form 1004 is required. Investor Library/BB&T Correspondent/BB&T Correspondent Lending/Non-Conforming/Jumbo Underwriting Guidelines (09/11/15)/4:4 LTV/TLTV 4:4 LTV/TLTV Refer to BB&T's Price Adjustments and LTV Charts Properties located in the state of California are limited to maximum 80% LTV/TLTV Investor Library/BB&T Correspondent/BB&T Correspondent Lending/Non-Conforming/Jumbo Underwriting Guidelines (09/11/15)/4:5 MINIMUM CREDIT SCORE 4:5 MINIMUM CREDIT SCORE

2 Page 2 of 70 Minimum credit score requirement is 720/740. Reference the Price Adjustments & LTV Charts for minimum credit score requirements on specific product/loan types. RESCORING AND CREDIT REPAIR Legitimate corrections to a borrower s credit profile are acceptable, i.e. John Doe Jr. s derogatory credit is reflected on John Doe Sr. s credit report. In order to ensure the accuracy of the information, corrections should be made at the credit repository level. Any supporting documentation sent to the credit repositories along with all copies of credit reports should be maintained in the Correspondent s loan file and included with the file submission when delivered to BB&T Correspondent Lending. The use of credit repair vendors who assist borrowers to falsely repair their credit by the manipulation of data contained in the borrower s credit profile to improve credit scores for purposes of loan eligibility, pricing/fee improvement and creditworthiness is expressly prohibited by BB&T Correspondent Lending. It is at BB&T Correspondent Lending s discretion to determine if the credit history and credit scores are legitimate, acceptable and meet guideline requirements. Credit Score Indicator The term Loan Score refers to the overall score using the Agencies' "middle/lower, then lowest" credit score selection methodology. It is equivalent to Freddie Mac's Indicator Score and Fannie Mae's Representative credit score. Credit Score Selection The following criteria may be used to determine each individual borrower's Credit Score using the "middle/lower" method: If there are three valid scores for a borrower, the middle score (numerical middle of the three scores) is used. If there are three valid scores for a borrower but two of the scores are the same, the duplicate score is used. If there are two valid scores for a borrower, the lower of the two scores is used. If there is one valid score for a borrower, that score is used. Loan Score Selection After selecting the appropriate Credit Score for each borrower, the Loan Score must be determined. If there is more than one borrower, the lowest selected Credit Score among all borrowers is the Loan Score. When there is only one borrower, the selected Credit Score for that borrower is also the Loan Score. Investor Library/BB&T Correspondent/BB&T Correspondent Lending/Non-Conforming/Jumbo Underwriting Guidelines (09/11/15)/4:6 BORROWER ELIGIBILITY 4:6 BORROWER ELIGIBILITY CO-BORROWER/CO-SIGNER/GUARANTOR Non-occupant co-borrowers are acceptable. The non-occupant co-borrower must be a parent,

3 Page 3 of 70 legal guardian, child, grandparent or sibling to the occupant borrower. Maximum Debt-to-Income (DTI) cannot exceed 43% for the occupant borrower. LIVING TRUST Living Trusts also referred to as "inter vivos revocable trusts" or "inter vivos trusts" are allowed and must meet the following eligibility requirements: The trust is created by one or more Settlors (individual who creates a Living Trust) during his or her lifetime. The trust becomes effective during the lifetime of the Settlor(s), and Each Settlor retains the right during his or her lifetime to revoke or amend the trust. The Settlor(s) is also: The Trustee or one of the co-trustees, Occupies the property as either a primary residence or second home, and Is the primary beneficiary of the trust. Correspondent must submit a completed Living Trust Certification with the delivery package. The certification is available through the BB&T Correspondent Lending Guide NON-ARMS LENGTH TRANSACTIONS Non-Arms length transactions are purchase transactions in which there is a relationship or business affiliation between the borrower and the builder, developer, or seller. BB&T Correspondent Lending will allow non-arms length transactions for the purchase of newly constructed or existing properties secured by a primary residence, and existing properties secured by second homes. Investment properties are ineligible. If a borrower has a business affiliation (any ownership interest or employment) with the builder, developer or seller of the property, additional due diligence including, but not limited to, detailed information regarding unsold builder/developer inventory held individually and/or through his or her business (LLC s, DBA s, etc.) is required to determine the legitimacy of the transaction. LOANS TO BUILDERS/DEVELOPERS See "Non-Arms Length Transactions" section for details. BB&T Correspondent Lending will not fund loans where the builder/developer is purchasing or refinancing their current unsold inventory. USA PATRIOT ACT The Correspondent is required to comply with all aspects of the USA PATRIOT ACT. Due to the nature of the law and severity of penalties associated with non-compliance, BB&T strongly urges the Correspondent adopts procedures to insure that their staff fully complies with the requirements of the Act and that Correspondent files are properly documented. For additional information concerning the USA PATRIOT ACT, Correspondents should contact their regulatory agency or access information via the web at NON-U.S. CITIZENS BB&T has adopted the following policy for extending mortgage loans to non-u.s. Citizens. USA Patriot Act documentation is required in addition to the following guidelines. A permanent resident alien who is lawfully residing in the U.S. is eligible for a mortgage on the same terms as a U.S. Citizen. BB&T does not differentiate between U.S. Citizens and permanent resident aliens for general underwriting guidelines. Non-Permanent Resident Aliens are subject to additional requirements as stated below. All permanent resident aliens must provide their valid Permanent Resident Card.

4 Page 4 of 70 All non-permanent resident aliens must provide evidence of a valid, unexpired visa. Evidence must be included in closed loan file. Visas granting diplomatic immunity or Foreign Nationals are not allowed. BB&T requires sufficient documentation that the borrower is lawfully residing in the U.S., as permanent or non-permanent resident alien. A Social Security Number is required. Borrowers with an ITIN are not eligible Borrowers must qualify on U.S. credit; U.S. reported income, U.S. assets, and U.S. residency history. Non-Permanent Resident Aliens: must meet all requirements stated above, AND Maximum property values limited to $1,000,000, Requires a 5% LTV/TLTV reduction from maximum allowed financing for property and transaction type, LTV/TLTV may not exceed 75%. All guidelines herein regarding the determination and documentation for stable monthly income, adequate credit history, sufficient liquid assets and residency must be applied in the same manner to each borrower including borrowers who are non-permanent resident aliens. For non-permanent resident aliens who work for an International Organization (i.e., Red Cross, UNICEF, World Bank, etc.), BB&T will require a copy of the most recent year s tax transcript evidencing "no record of return filed". For these borrowers who do not report income to the IRS, BB&T will not allow their income to be "grossed up" for qualifying purposes. PROPERTIES CURRENTLY OR FORMERLY IN THE NAME OF AN LLC If a property is currently in the name of borrower's LLC or has been in the name of the borrower's LLC in the most recent six month period, as measured backward from the date of the initial application, it is not eligible for refinancing into the borrower's name. If there is an outstanding lien against the property, it also must be in the borrower's name for a minimum of six months in order to be refinanced. CREDIT REPUTATION/REQUIRED MINIMUM NUMBER OF TRADELINES The credit report must show a minimum of two (2) years established credit history. Additionally, each borrower must have a minimum of three (3) tradelines with 12 months satisfactory history. A prior mortgage or rental history which evidences no late payments during the past 24 months is required. See Section 4:7 Liability Assessment Standards for additional requirements. Non-traditional credit is not permitted. AUTHORIZED USER ACCOUNTS A tradeline for an account for which the Borrower is not the primary account holder, but is listed as an authorized user, may not be considered a Borrower s tradeline. FOREIGN CREDIT REPORTS Use of foreign credit reports is unacceptable. PAYMENT PLANS FOR UNPAID INCOME TAXES Loans where the Borrowers have payment plans for unpaid income taxes are ineligible for delivery to BB&T Correspondent Lending regardless of whether or not a tax lien exists. SIGNIFICANT ADVERSE OR DEROGATORY CREDIT/WAITING PERIODS Significant Derogatory Event Recovery Time Periods for Reestablishment of Credit Recovery Time Periods for Reestablishment of Credit

5 Page 5 of 70 with Financial Mismanagement with Extenuating Circumstances Foreclosure Deed-in-Lieu of Foreclosure Short Sale Charge-offs of Mortgage Debt Not allowed for Non- Conforming/Jumbo Loans Not allowed for Non- Conforming/Jumbo Loans Bankruptcy Chapter 7, 11 or 13 7 years (84 months) from the discharge or dismissal date 2 years (24 months) from the discharge or dismissal date. Multiple Bankruptcy Filings Not allowed for Non- Conforming/Jumbo Loans Not allowed for Non- Conforming/Jumbo Loans Other Significant Adverse or Derogatory Credit Information Not allowed for Non- Conforming/Jumbo Loans 2 years (24 months) from the most recent significant adverse or derogatory credit information. Collections and Chargeoffs (other than Charge-offs of Mortgage Debt) Collections (including medical) and chargeoffs in excess of $1,000 individually or collectively must be paid in full prior to or at closing. N/A Required Underwriter must explain on the Transmittal Summary the rationale supporting the determination that the financial mismanagement is unlikely to recur and the Borrower s credit reputation is acceptable. Mortgage file must contain all of the following documentation: (1) Evidence that the Borrower has reestablished an acceptable credit reputation per guidelines below. Written statement from the Borrower attributing the cause of the financial difficulties to outside factors beyond the borrower s control and are not ongoing and unlikely to recur, Third Party documentation confirming that the events related by the borrower in the explanation were an isolated occurrence and significantly reduced the borrower s income, and Evidence on the credit report and other credit documentation in the mortgage file of the length

6 Page 6 of 70 (2) Evidence on the credit report and other credit documentation in the file of the length of time since completion of the significant derogatory event to the date of the application and of completion of recovery time period requirement. of time since completion of the significant derogatory event to the date of the application, and of completion of the recovery time period requirement. Restructured Loan A restructured loan occurs when the terms of the original transaction have been changed resulting in absolute forgiveness of debt or a restructure of debt through modification or the origination of a new loan that results in: Forgiveness of a portion of principal and/or interest on either the first or second mortgage, OR Application of a principal curtailment by or on behalf of the investor to stimulate principal forgiveness, OR Conversion of any portion of the original mortgage debt to a "soft" subordinate mortgage, OR Conversion of any portion of the original mortgage debt from secure to unsecured. Not allowed for subject property currently owned by borrower. If one or more of the borrowers on the loan has entered into a restructured mortgage loan transaction for a property other than the subject property in the past, the loan is ineligible for delivery to BB&T. Re-establishing Credit After a Bankruptcy, the Borrower s credit will be considered reestablished if all of the following are met: The waiting period and the related additional requirements are met; and All credit reviewed must be reestablished traditional credit. Nontraditional credit files are not acceptable. Loans where the Borrowers have a history of Foreclosure, Deed-in-Lieu of Foreclosure, Short Sale, Short Refinance, Short Payoff and/or Restructured Mortgage are ineligible for delivery to BB&T. The credit report must show a minimum of two (2) years established credit history. Additionally, each borrower must have a minimum of three (3) tradelines with 12 months satisfactory history. A prior mortgage or rental history which evidences no late payments during the past 24 months is required. See Section 4:7 Liability Assessment Standards for additional requirements. Investor Library/BB&T Correspondent/BB&T Correspondent Lending/Non-Conforming/Jumbo Underwriting Guidelines (09/11/15)/4:7 EMPLOYMENT AND INCOME UNDERWRITING STANDARDS

7 Page 7 of 70 4:7 EMPLOYMENT AND INCOME UNDERWRITING STANDARDS INTRODUCTION It is the intent of BB&T to primarily purchase Qualified Mortgage loans as defined by Regulation Z and federally-related insurers and investors. For each loan, BB&T makes a reasonable and good faith determination that the Consumer(s)* will have a reasonable ability to repay the loan according to its terms. There are many factors that should be considered when reviewing a Consumer s employment and income, such as income stability, occupation, employment, tenure, opportunities for future income, educational background, and occupational training. The following standards explain the requirements for considering and verifying a Consumer s income and employment information, the types of income BB&T considers acceptable, and the methods for calculating certain types of income. Standards for the consideration and verification of the Consumer s current and expected debt obligations and other liabilities (including the monthly payments for this loan, any known simultaneous loans, and mortgage-related obligations) are provided in BB&T s Liability Assessment Underwriting Standards. *Hence forward references to Consumer and Borrower are interchangeable for purposes of this guide. GENERAL DOCUMENTATION REQUIREMENT Information relied on by BB&T during the qualification process generally must be verified using third-party records, which are records prepared or reviewed by someone other than the consumer or BB&T. Specific documents required and exceptions are listed below. Income relied on in qualifying the consumer must be verified pursuant to the requirements for each income source, as detailed in the following pages. STABILITY OF INCOME Stable effective income is the Consumer s verified gross monthly income from all acceptable and verifiable sources where there is no indication the income will not continue. For each income source used to qualify the Consumer, you must determine that both the source and the amount of the income are stable. In most instances, a two-year history of receiving income is required in order for the income to be considered stable and used for qualifying. When the Consumer has less than a two-year history of receiving income, a written analysis is required to justify the determination that the income that is used to qualify the Consumer is stable. Income may not be used in calculating the Consumer s income ratios if it comes from any source that cannot be verified, is not stable, or will not continue. A Consumer who has had different types of employment in the past may be considered to have stable income if the income amount has remained at a consistent or increasing level. When evaluating a Consumer who has changed jobs frequently, focus on whether the changes have affected the Consumer s ability to pay their obligations. For each income source used for qualifying, there should be a reasonable expectation that the income will continue for at least three years. DETERMINING THE NEED FOR FEDERAL INCOME TAX RETURNS Signed IRS Federal Tax Returns for the past two years are required for sources of income if the Consumer derives: Income from employment by a family member Rental income from an investment property Income from employment by interested parties to the property sale or purchase Income from temporary or seasonal employment or unemployment benefits Income from Capital Gains, royalties, real estate, or other IRS Form 1099 reported income

8 Page 8 of 70 Foreign income Interest and dividend income Income from sole proprietorships, limited liability partnerships, corporations, or any type of business structure that the Consumer has 25% or more ownership Tax Return Requirements Tax Returns filed by the consumer or a licensed CPA are acceptable. Base salaried consumers who have income other than salary income, i.e. rental income, royalties, etc.: The last two years personal tax returns including all schedules are required. Loans delivered to BB&T on or before April 15th are required to contain tax returns from the previous two calendar years. Self-Employed consumers: The last two years personal and business tax returns including all schedules are required. Loans delivered to BB&T after April 15th are required to contain tax returns from the previous two calendar years. Amortization may be added back when calculating income for the Self-Employed Consumer pursuant to the calculations on Income Analysis Form 91. If ANY income is from sources that must be documented by tax returns (i.e. rental income, pension income, interest income, trust income, dividend income, etc.), the most recent calendar year federal tax return is required. Federal tax return extensions are not allowed. Amended tax returns may require additional due diligence. IRS Form 4506-T IRS 4506-T and Official Tax Returns Transcripts are important tools for not only income qualification, but also fraud deterrence, documentation validation, and data integrity confirmation. By requiring this earlier in the process, BB&T hopes this will protect our valued clients, as well as BB&T s interest, by identifying issues prior to closing. IRS 4506-T Requirement The requirement for a completed, signed, and dated IRS 4506-T form applies to ALL loans. The 4506-T form is to be dated as of the date of loan application and at loan closing. The 4506-T form is required whether or not the consumers are employed. The 4506-T form is required whether or not the loan is income qualifying. Tax Transcripts The most recent available IRS tax return transcript requirement applies to every loan, regardless of the loan type or consumer s income source. The official tax return transcript is required on each consumer. The official tax return transcript is required even if tax returns are NOT required for loan qualification. In the absence of tax transcripts, the following documentation is required: Note: A licensed CPA must have filed the tax returns to be eligible for delivery to BB&T. If the Consumer filed the tax return but tax transcripts are not yet available, the loan is not eligible for delivery to BB&T. Salaried Consumers who have income relied on sources reported on tax returns - If the licensed CPA has filed tax return but tax transcripts are not yet available and underwriting date before April 15 th: Copy of tax transcript showing no record of return filed,

9 Page 9 of 70 Previous 2 years tax returns and tax transcripts, AND The filed tax return verified in one of the following ways: Officially stamped by the IRS as received Evidence that the return was electronically received, OR Evidence of a refund check or payment made. Self-Employed Consumer - If the licensed CPA has filed tax return but tax transcripts are not yet available and underwriting date before August 31 st: Copy of tax transcript showing no record of return filed, Previous 2 years tax transcripts, Previous years tax return, AND The filed tax return verified in one of the following ways: Officially stamped by the IRS as received Evidence that the return was electronically received, OR Evidence of a refund check or payment made. WAGE EARNER / EMPLOYED INCOME Stable monthly income may be income from primary and secondary employment, including base earnings plus consistent and documented secondary income, such as bonuses, commissions, overtime, additional part time employment, or seasonal employment. Salary and Hourly Income Salaried Wage Earners are defined as individuals who have less than a 25% ownership interest in the business from which they derive their salary. When a Consumer s primary employment is less than a typical 40-hour work week, evaluate the stability of that income when treating the income as regular, on-going primary employment (as opposed to part-time employment, which is discussed below). Gaps of employment that span one or more months must be explained. In particular: Indicate if Consumer was in school or the military for the recent two full years, providing evidence supporting this claim, such as college transcripts, or discharge papers. Allowances can be made for seasonal employment, if documented. Effective income for Consumers who disclose that they are planning to retire during the first three-year period must include the amount of Documented retirement benefits; Social Security payments; or Other payments expected to be received in retirement. A Consumer cannot be questioned about possible, future medical or maternity leave. In order to arrive at an accurate calculation of gross monthly income, the frequency of the payment must be determined: Weekly once per week Bi-weekly every other week Semi-Monthly twice per month Monthly once per month Annually one time per year

10 Page 10 of 70 Some Consumers annual salaries may be received over a time period of less than 12 months. It is important to determine how the Consumer is paid in order to accurately calculate income. Determine how often and how long the Consumer is paid and then determine monthly income based on the calculation above. For example, if a Consumer is paid 10 months of the year, multiply their monthly salary by 10 months and divide by 12. Obtain all of the following: Most recent year-to-date paystub or salary voucher documenting at least 30 days of income W-2 s for most recent two years Verbal Verification of Employment obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in the loan file Signed 4506-T and IRS Transcripts OR, obtain all of the following: Written Verification of Employment (VOE) form covering the most recent two years, which shows income and pay information Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in the loan file Signed 4506-T and IRS Transcripts Consumers Employed by a Family-Owned Business In addition to normal employment verification, a Consumer employed by a family-owned business is required to provide evidence that he/she does not own 25% or more of the business. Obtain one of the following: Copies of signed personal tax returns for the most recent two years; or A signed copy of the business tax returns for the most recent two years showing ownership percentage If it is determined that the Consumer owns 25% or more of the business, refer to the Self- Employed Income section. Newly Employed For a Consumer who has less than a two-year employment and income history, the Consumer s income may be used if documentation to support that the Consumer was either attending school or in a training program immediately prior to their current employment history is provided. Consumers Returning to Work after an Extended Absence Income may be considered when the Consumer is recently returning to work after an extended absence if the Consumer is employed in the current job for six or more months. Obtaining one of the following to document a work history prior to an absence from employment: W-2 s and Paystubs, or Written VOE form Current and previous employment documentation must support a two year work history. Note: Extended absence is defined as 6 or more months.

11 Page 11 of 70 Projected Income from Current Job Projected income is permitted from the following sources: Cost of Living adjustment Performance raises Bonus (refer to the bonus income section below) Written verification from the employer must be obtained, and income must be scheduled to begin within 60 days of loan closing. Projected Income from a New Job Projected income is acceptable for a Consumer scheduled to start a new job within 60 days of loan closing if there is a fully executed employment contract, or accepted offer letter, and verification that the Consumer will have sufficient income or cash reserves to support the mortgage payment and any other obligation between loan closing and the start of employment. Overtime/Bonus Income Overtime/bonus income can be used for qualification if the Consumer has received the income for the past two years and there is no indication it will not continue. An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized and there is no indication that overtime/bonus will not continue, the income must be based on the current stable earnings. If the trend is declining, the overtime/bonus income should not be considered for qualifying purposes unless there are significant documented compensating factors. Overtime/bonus income received for less than two years may be considered provided the income is received a minimum of 18 months and is stable or increasing. A 24-month average must be used for qualifying purposes. There must be no indication that overtime/bonus income is unlikely to continue. Obtain all of the following: Most recent year-to-date paystub or salary voucher documenting at least 30 days of income W-2 s for most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in the loan file Signed 4506-T and IRS Transcripts OR, obtain all of the following: Written VOE form covering the most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in the loan file Signed 4506-T and IRS Transcripts Commission Income Commission income can be used for qualification if the Consumer has received the income for the past two years and there is no indication it will not continue.

12 Page 12 of 70 An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized and there is no indication that commission income will not continue, the income must be based on the current stable earnings. If the trend is declining, the commission income should not be considered for qualifying purposes unless there are significant documented compensating factors. Commission income received for more than one year, but less than two years may be considered provided there are significant documented compensating factors. Employee-paid business expenses reflected on the Consumer s tax returns must be deducted from the Consumer s gross commission income when calculating income. Obtain all of the following: Most recent year-to-date paystub or salary voucher documenting at least 30 days of income W-2 s and/or 1099 s for most recent two years Signed individual federal tax returns for the most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Signed 4506-T and IRS Transcripts Or, obtain all of the following: Written VOE form covering the most recent two years Signed individual federal tax returns for the most recent two years Verbal VOE obtained no more than 10 Business days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Most recent paystub Signed 4506-T and IRS Transcripts Part-time / Second Job Income Part-time / second job income refers to employment taken to supplement the Consumer s income from regular employment. Part-time / second job employment is not a primary job and it is worked less than 40 hours per week. Part-time / second job income may be used if it can be verified as having been uninterrupted for the previous two years and is likely to continue. Consideration of the income trend should be determined by reviewing the hourly rate, and the number of hours worked. An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized, the income must be based on the current stable earnings. If the trend is declining, the income should not be considered for qualifying purposes unless there are significant documented compensating factors. Part-time income received for less than two years may be considered provided the income is received a minimum of 18 months and is stable or increasing.

13 Page 13 of 70 Obtain all of the following: Most recent year-to-date paystub or salary voucher documenting at least 30 days of income W-2 s for the most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Signed 4506-T and IRS Transcripts OR, obtain all of the following: Written VOE form covering two full years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Signed 4506-T and IRS Transcripts Seasonal Employment Seasonal income is considered uninterrupted and may be used to qualify the Consumer if it is documented that the Consumer has worked the same job for the past two years and expects to be rehired the next season. Unemployment compensation associated with seasonal employment may be considered qualifying income if the Consumer has a two year history of receipt and the unemployment compensation is likely to continue. Seasonal employment income and unemployment compensation must be reported on the Consumer s two most recent year s federal tax returns. Examples of seasonal employment include umpiring baseball games in the summer or working in a department store during the holiday shopping season. Note: The two year history need not be with the same employer. Obtain all of the following: Most recent year-to-date paystub or salary voucher documenting at least 30 days of income W-2 s for most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Proof of receipt of unemployment compensation for the most recent two years (if applicable) Signed 4506-T and IRS Transcripts OR, obtain all of the following: Written VOE form covering the most recent two full years for the seasonal employment Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Proof of receipt of unemployment compensation for the most recent two years (if applicable) Signed 4506-T and IRS Transcripts Tip Income Tips and gratuities may be used to qualify the Consumer if it is documented that the Consumer has received it for the past two years and there is no indication it will not continue. An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes.

14 Page 14 of 70 If the trend was declining, but has since stabilized, the income must be based on the current stable earnings. If the trend is declining, the tip / gratuity income should not be considered for qualifying purposes unless there are significant documented compensating factors. Tip income received for less than two years may be considered provided the income is received a minimum of 18 months and is stable or increasing. Obtain all of the following: Most recent year-to-date paystub or salary voucher documenting at least 30 days of income W-2 s for most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Signed 4506-T and IRS Transcripts OR, obtain all of the following: Written VOE form covering the most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file Signed 4506-T and IRS Transcripts Income while on Temporary Leave Temporary leave from an employer may encompass various circumstances. For example shortterm disability, family medical, maternity, and other temporary leaves with or without pay. Temporary leave is generally short in duration. Leave is no longer considered temporary when the Consumer does not intend to return to the current employer, or does not have a commitment from the current employer to return to employment.

15 Page 15 of 70 1) For the Consumer who is returning to their current employer after the first mortgage payment, use the income the Consumer is receiving for the duration of the temporary leave. In the event the income has been reduced or interrupted, use the monthly reduced income amount (may be zero) for the duration of the leave. Total qualifying income may not exceed the gross monthly income that will be received upon the Consumers return to current employer. Obtain all of the following: The Consumer must provide written confirmation of his or her intent to return to work and the agreed upon date of return as evidenced by documentation provided by the employer or a designee of the employer (e.g. third party administrator). Last year-to-date paystub or salary voucher received prior to temporary leave documenting at least 30 days of income W-2 s for most recent two years Evidence of the amount, duration and consistency of all sources of temporary leave income being used to qualify the Consumer that are being received during the temporary leave Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file. The employer s confirmation that the Consumer is on temporary leave is considered as employed. Signed 4506-T and IRS Transcripts OR, obtain all of the following: The Consumer must provide written confirmation of his or her intent to return to work and the agreed upon date of return as evidenced by documentation provided by the employer or a designee of the employer (e.g. third party administrator). Written VOE form(s) covering the most recent two years Evidence of the amount, duration and consistency of all sources of temporary leave income being used to qualify the Consumer that are being received during the temporary leave Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in loan file. The employer s confirmation that the Consumer is on temporary leave is considered as employed. Signed 4506-T and IRS Transcripts 2) For the Consumer who is returning to their current employer prior to loan closing, verify the Consumer s gross monthly income that will be received upon the Consumer s return to current employer. Note: Verification must confirm whether the consumer is returning to the same income level prior to the temporary leave. If the income will reduce, use the monthly reduced income amount. If the income is consistent or increasing, use the income received prior to the temporary leave. Obtain all of the following: Last year-to-date paystub or salary voucher received prior to temporary leave documenting at least 30 days of income W-2 s for most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note

16 Page 16 of 70 Date but prior to delivery to BB&T confirming the Consumer s return to current employer and recorded in loan file Signed 4506-T and IRS Transcripts OR, obtain all of the following: Written VOE form(s) covering the most recent two years Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T confirming the Consumer s return to current employer and recorded in loan file Signed 4506-T and IRS Transcripts SELF-EMPLOYED INCOME A Consumer who has an ownership interest of 25% or more in a business is considered to be selfemployed. Income from self-employment is considered stable and effective if the Consumer has been selfemployed for two or more years. An earnings trend must be established based on the previous two years tax returns. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized and there is no indication that the income will not continue, the income must be based on the current stable earnings. If the trend is declining, the income should not be considered for qualifying purposes unless there are significant documented compensating factors. If self-employed between one and two years, document that the Consumer has a two-year history of receipt of income at the same or greater level in the same or similar occupation in order to consider the income for qualifying purposes. The Consumer s tax returns must reflect at least one year of self-employment income. If self-employed less than one year the income from the Consumer may not be considered for qualifying purposes. The business s annual earnings must also be considered for the past two years. If the business shows a significant decline in income, then income earned by the Consumer from that business may not be considered. Obtain all of the following: Signed, dated individual tax returns, with all applicable tax schedules for the most recent two years For a Corporation, S-corporation, or Partnership, signed copies of business tax returns, with all applicable tax schedules (including K-1 s) for the most recent two years Year to date profit and loss (P & L) statement and balance sheet Verification of existence of the business through a third party source obtained no more than 30 Calendar Days prior to the Note Date or after the Note Date but prior to delivery to BB&T Completed Income Analysis Form 91, or comparable form. Signed 4506-T and IRS Transcripts Types of Business Structure Sole Proprietor A Sole Proprietorship is an unincorporated business that is individually owned and managed. The individual owner is personally liable for all debts of the business and has unlimited liability. There

17 Page 17 of 70 is no distinction between the owner s personal assets and the assets used in the business. The financial success or failure of this type of business depends solely on the owner s ability to obtain capital and to manage the various aspect of the business. The income, expenses, and taxable profits are reported on Schedule C of the Consumers individual IRS Form 1040 tax returns. Note: Loans subject to Schedule F Income will be considered on a case-by-case basis. If Schedule F Income is reflected on the IRS tax transcripts, the actual Schedule F must be reviewed for the existence of leases and true gross income. Schedule F income on the subject property indicates there may be non-residential use of the subject property and represents higher risk. Therefore, both the property and the income will be analyzed for acceptability. Any Schedule F income reflected on tax returns is not allowed as qualifying income if it is a gain. A loss will be deducted from qualifying income. S-Corporation An S-Corporation is a legal entity that has a limited number of stockholders and elects not be taxed as a regular corporation. Business gains and losses are passed on to the stockholders, but the corporation s stockholders may not be held personally or financially liable for the activities of the corporation. Income is reported on IRS Form 1120S, with each stockholder s share of the income reported on IRS Schedule K-1 (Form 1120) and reflected on Schedule E of the individual 1040 tax return. Review of the business tax returns is required to assess the viability of the business. Partnership A Partnership is a business owned by two or more individuals who share in profits, losses, and the responsibility for running the company. Each partner pays taxes on their proportionate share of the partnership s net income. Income is reported on IRS Form 1065 with the partner s share of the income reported on IRS Schedule K-1 (Form 1065) and reflected on Schedule E of the individual 1040 tax return. Review of the business tax returns is required to access the viability of the business. Corporation A Corporation is a State-chartered business owned by its stockholders. Ownership in a corporation is through shares of stock, but a corporation s stockholders may not be held personally or financially liable for the activities of the corporation. Income is reported on IRS Form 1120 and individual 1040 tax returns. Review of the business tax returns is required to access the viability of the business. Corporate compensation to officers, generally in proportion to the percentage of ownership, is shown on the IRS Form RENTAL INCOME Rental income may be used for qualification provided the Consumer has a 24-month history of managing rental properties and subject to the requirements below. Rental Income from Roommates or Boarders in a Single-Family Property Income from roommates in a single family property occupied as the Consumer s primary residence is not acceptable. Rental income from boarders, however, is acceptable, when a Consumer with disabilities receives rental income from a live-in personal assistant. There must be no indication that boarder rental income is unlikely to continue. The rental payments can be considered in an amount up to 30% of the total gross income that is used to qualify the Consumer.

18 Page 18 of 70 Obtain all of the following: of the boarder s history of shared residency (e.g., copy of driver s license, bills, bank statements, or W-2 forms) that shows the boarder s address as being the same as the Consumer s address of the boarder s rental payments for the most recent 12 months The Consumer s most recent tax return showing the rental income Signed 4506-T and IRS Transcripts Rental Income from Subject Property If rental income is derived from the subject property, the property must be a two- unit principal residence in which the Consumer occupies one of the units. Obtain all of the following: Operating Income Statement (Form 998) Single-Family Comparable Rent Schedule (Form 1007/Form 1000) or Small Residential Income Property Appraisal Report (Form 1025/Form 72) Signed, dated individual tax return including Schedule E for the most recent two years Copies of the current lease agreement(s) to substantiate the reported income Signed 4506-T and IRS Transcripts If the property was out of service for an extended period, the Schedule E will reflect the costs for renovation or rehabilitation as repair expenses and the Schedule E will confirm the number of days that the rental unit was in service. Copies of the current lease agreement(s) may be used for qualifying purposes. Note: The following scenarios do not require the tax return to validate the subject property rental income: Consumer is purchasing the property; or Consumer purchased the rental property during or subsequent to the last tax return filing Rental Income from Other Properties If rental income is derived from a property that is not the subject property, there are no restrictions on the property type. Obtain all of the following: Signed, dated individual tax return including Schedule E for the most recent two years Copies of the current lease agreement(s) to substantiate the reported income If the property was out of service for an extended period, the Schedule E will reflect the costs for renovation or rehabilitation as repair expenses and the Schedule E will confirm the number of days that the rental unit was in service. Copies of the current lease agreement(s) may be used for qualifying purposes. Note: The following scenario does not require the tax return to validate the subject property rental income: Consumer purchased the rental property during or subsequent to the last tax return filing Calculating Rental Income (or Loss)

19 Page 19 of 70 Individual Tax Return / Schedule E When Schedule E is used to calculate qualifying rental income on the Consumer s principal residence, add back any listed depreciation, interest, taxes, or insurance expenses to the net rental income / loss and divide the total by 12. If the figure is positive, this amount must be added monthly income; if the figure is negative, the amount must be included as a liability. The full amount of the mortgage payment (PITIA) must be included in the total monthly obligations. When Schedule E is used to calculate qualifying rental income on a property other than the Consumer s principal residence, add back any listed depreciation to the net rental income / loss and divide the total by 12. If the figure is positive, this amount must be added to the Consumer s total monthly income; if the figure is negative, the amount must be included as a liability. The mortgage payment for the rental property should not be included as a monthly obligation. Lease Agreements When current lease agreements are used to calculate qualifying rental income on the Consumer s principal residence, reduce the gross rental amount by 25% for vacancies and maintenance. This amount must be added to the Consumer s total monthly income. The full amount of the mortgage payment (PITIA) must be included in the total monthly obligations. When current lease agreements are used to calculate qualifying rental income on a property other than the Consumer s principal residence, reduce the gross rental amount by 25% for vacancies and maintenance. The full amount of the mortgage payment (PITIA) must be subtracted from this amount. If the figure is positive, this amount must be added to the Consumer s total monthly income; if the figure is negative, the amount must be included as a liability. The mortgage payment for the rental property should not be included as a monthly obligation. OTHER INCOME Alimony, Child Support, and Separate Maintenance Alimony, Child Support or Separate Maintenance may be considered effective income if payments are likely to be received consistently for at least three years. Check for limitation on the continuance of the payment, such as the age of the children (age must be < 15 years) from whom the support is being paid or the duration over which alimony is required to be paid. Note: Child support may be grossed up under the same provisions as non-taxable income sources. Obtain one of the following documenting the payment terms: Final divorce decree; or Legal separation agreement; or Court order or Voluntary payment agreement AND, obtain one of the following as evidence that payments have been received during the last 12 months*: Cancelled checks; or Deposit slips; or Bank or other account statements; or Tax Returns; or Court records * Periods less than 12 months may be considered provided timely payments have been received a