Home Equity Line of Credit S Year Term Stated Income/Stated Assets

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1 TABLE OF CONTENTS PRODUCT DESCRIPTION Page # Product Description 3 Adjustable Rate Information 6 ELIGIBILITY Occupancy 3 Underwriting Methods 3 Documentation Requirements, Transaction Types 3 Eligible Property Types 4 Ineligible Property Types 4 Eligible Properties by Occupancy 4 Eligible Borrowers 5 Minimum Loan Amount/Draw 5 Section 32 5 Non-Occupant Co-Borrowers, Non-Borrowing Spouse, 5 Contributions by Interested Parties 5 Assumability 5 Escrow Holdbacks 6 Non-ARMs Length Transactions 6 HELOC Rate Adjustments, Billing Statements, Payment Due Date, Access Information 6 Minimum Payment Requirements, Introductory Teaser Rate 7 Geographic Restrictions 7 State Specific Fees and Charges Chart 8-10 Senior Lien Requirements 11 Ineligible First Liens 11 UNDERWRITING Qualifying Ratios 11 Reserve Requirements 12 Payment Calculations for Debt-to-Income Ratios 12 Maximum Number of Loans per Borrower 12 Credit Score Determination 12 Credit Criteria - Credit History 13 1

2 TABLE OF CONTENTS UNDERWRITING (Cont ) Page # Salaried and Self-Employed Borrowers 14 Stated Income /Stated Assets Documentation PROPERTY/APPRAISAL Appraisal Requirements 16 Age of Appraisals 16 Maximum Property Value 16 Property Seasoning 16 Properties Listed For Sale 16 SPECIAL NOTES Title Requirements 16 PROGRAM MATRICES Stated Income/Stated Assets: Purchase, Rate & Term and Cash-Out Transactions 17 2

3 PRODUCT DESCRIPTION OCCUPANCY Piggyback transactions only. Standalone transactions are NOT acceptable. $15,000 Minimum Draw Loan Amount Required Twenty-five (25) Year term. Draw Period: 5-Year initial draw period with a 5-Year renewal option at the Investors discretion. Payments during the initial draw period will offer an interest only payment option (Tennessee has a 10-Year draw, 10- Year Repay). Repayment Period: 15-Year amortized repayment period. Lien position must be in Second position LOAN DOCS AVAILABLE THROUGH DOC MAGIC ONLY Primary residence Second Home Investment properties UNDERWRITING METHODS Use the following AUS systems: o DU/LP Manual underwrite NOT acceptable need Clues/Clout TM approval DOCUMENTATION REQUIREMENTS TRANSACTION TYPES Standard FHLMC/FNMA income and asset documentation o When processing an equity loan that is closing simultaneously with a first lien that has received an Approve/Eligible DU or Accept LP, the Equity loan may be delivered with the same documentation as required by the AUS certificate for the First lien loan. A copy of the AUS certificate must be included in the Second lien file. Purchase Rate and Term Cash-out 3

4 ELIGIBLE PROPERTY* INELIGIBLE PROPERTY SFRs (Attached and Detached) PUDs (Attached and Detached) 1-2 Unit properties Low-Rise Condominiums (up to 4 Stories) High-Rise Condominiums > 5 Stories Properties to 10 acres maximum * Please Note: Minimum required square footage is 750 sq ft. for all properties except Condos. The minimum required square footage for condos is 600 sq. ft. 3 4 Unit properties Properties currently listed for sale or within the last 12-Months Properties with less than required 750 sq ft. of living space, or Condo unit with less than 600 sq. ft. Condotels Mobile Homes Co-ops Rural Properties > 10 acres Properties > 10 acres Agricultural Non-Warrantable Condos Geodesic Domes Commercial/Mixed Used Properties Manufactured Homes/Factory Built Housing Earth Homes Timeshares ELIGIBLE PROPERTY PER OCCUPANCY Occupancy Owner-Occupied Second Homes 1 and Investment Properties Eligible Property Types* SFRs PUDs 1-2 Units Condos Properties to 10 acres maximum SFRs PUDs 1-2 Units 1 Condos Properties to 10 acres maximum (eligible for Second Homes only) *Please note: 3-4 unit properties are NOT eligible for this program 1 Two (2) Unit properties are not allowed for Second Homes 4

5 ELIGIBLE BORROWER The following borrowers are eligible: o U.S. Citizens o Permanent Resident Aliens o Non-Permanent resident alien transactions are eligible and can be made under the same terms as a U.S. citizen as long as (1) one borrower is a U.S. citizen or Permanent Resident alien. o The Non-Permanent resident alien borrower must meet all of the following requirements: Two years employment in the U.S. Two years credit history Two years residence history Established asset base in the U.S. Funds from outside the U.S. are not acceptable. Income and residency in the U.S. must be likely to continue for at least three years. All files must contain evidence the borrower is lawfully permitted to reside in the United States. Borrowers with one of the following Visa status are generally considered lawful non-permanent resident aliens: H-1B, H-2A, H-2B, H-3, L-1, E-1, G and TN or TC NAFTA series. Borrower must meet all other borrower eligibility requirements. o If all borrowers are Non-Permanent resident aliens, the following restrictions apply: Owner occupied and Second Home transactions only Max CLTV is 90% for Piggy-back Second Max CLTV is 70% for Stand alone HELOC MINIMUM LOAN Minimum loan amount is $15,000 for Piggy-back Second SECTION 32 Section 32 loans are not permitted NON-OCCUPANT COBORROWER Non-Occupant Co-Borrowers are not eligible Non-Occupant Co-Borrowers may remain on title; however, their income or debt may not be used for qualification purposes NON-BORROWING SPOUSE The Security instrument must be signed by Non-borrowing spouse where required by state law to create a valid lien. For owner-occupied refinance transactions, the TIL and Right of Rescission must be signed in addition to the Security instrument ASSUMABILITY Not allowed CONTRIBUTIONS BY INTERESTED PARTIES Primary Residences: All CLTV s = 6% Second/Vacation Home: o CLTVs >80% = 3% o CLTVs 80% = 6% Investment Property: 3% (No LTV restrictions) 5

6 ESCROW HOLD-BACK Not allowed NON-ARMSLENGTH TRANSACTION RATE ADJUSTMENTS PAYMENT DUE DATE BILLING STATEMENT Not allowed Occurs when a personal or business relationship exists between the borrowers and the builder or seller. These transactions include: o Family sales or transfers o Corporate sales or transfers o Mortgagors employed in the real estate or construction trades who are involved in the construction, financing, or sale of the subject property o Some transactions involving principals or a seller or other vendor (such as an appraiser, settlement agent, title company, etc.) involved in the lending process of the subject property o Borrowers purchasing a property from a builder who purchases the borrowers existing residence. The rate and payment can adjust monthly depending on the Prime Rate. A rate and payment change will occur at the first of the month and will not assess interest if a change in the Prime Rate occurred in the middle of the month. Except for the initial payment, the payment due date is the 15th of each month. Note: The initial payment will be due 25-Days after the first billing statement is mailed. Monthly billing statements are mailed to the borrowers 14-Days before the payment due date. The statement will reflect the previous month s activity. The minimum payment for the draw and repayment period will be calculated as specified in the Line of Credit Agreement. Note: The initial statement may take up to 60-Days to be mailed. USING CONVIENENCE CHECKS The investor will send a book of checks to the borrowers 7-10 Days after the loan is purchased. These checks will allow the borrowers to access their available credit. The minimum amount per check is specified in the Line of Credit Agreement. ACCESSING YOUR HELOC Borrowers may begin accessing the equity line account as soon as they receive their convenience checks. However, borrowers may experience a delay (up to 60-Days from the time of loan closing) in accessing the equity loan amount since the checks will not be mailed until the investor purchases and boards the loan into their servicing system. 6

7 QUALIFYING RATE Use the Fully Indexed, Interest-Only payment based on the total line amount to qualify. Example: $30,000 line at a Fully Indexed rate of 7% equals an interest only payment of $175 Calculated by multiplying $30,000 X.07 divided by 12 months = $ MINIMUM PAYMENT REQUIREMENTS During the Draw Period, the Minimum Payment Due is an Interest-Only payment. After the Draw Period, the Minimum Payment Due equals 1/180th of the outstanding principal balance plus all unpaid finance charges (interest). The repayment period is for 15-Years. Example of payment: $30,000 line amount divided by 180 months = $ plus interest of $175 equals a total payment of $ INTRODUCTORY (TEASER) RATE Not available for this program GEOGRAPHIC RESTRICTIONS Please refer to Geographic Restriction Guidelines. 7

8 FEES AND CHARGES Please note, the footnotes for this table are listed on page #10 State Max. APR Returned Item Late Charge Termination Annual Fee 10 Alabama 18% $30 5% $350 6 $75 Arizona 18% $15 5% or $5 1 $350 6 $75 Arkansas Home equity lines of credit not allowed California 18% $15 5% or $5 1 $350 6 $75 Colorado 18% $15 5% Not Permitted $75 Connecticut 18% $15 5% or $ $75 Delaware 18% $15 5% $350 6 $75 District of Columbia 18% $15 5% Florida 18% $15 5% or $5 1 $350 6 $75 Georgia 18% $15 5% Not Permitted $75 Hawaii 18% N/A 5% Not Permitted $75 Idaho 18% $20 5% or $ $75 Illinois 18% $15 5% Not permitted $20 Indiana 18% $15 $15 Iowa Loan $25K Loan >$25K 18% 18% N/A $10 5% or $15 2 5% or $15 2 Not permitted Not permitted Kansas 18% $10 5% or $25 2 Not permitted Not permitted 12 5 $75 $75 $15 $15 Kentucky 18% $15 5% $350 6 $75 Louisiana 18% 5% or $15 2 5% or $15 2 Not Permitted $75 Maine 18% N/A N/A Not permitted Not permitted Maryland 18% $15 5% Not permitted Not permitted Massachusetts 18% $10 3% or $ $75 Michigan 18% N/A 5% or $ $75 Minnesota 18% $20 5% Not Permitted $50 Mississippi 18% $15 4% or $ $75 Missouri 18% $15 5% or $5 1 Not to exceed $50 13 Not permitted Montana 18% $10 N/A No Permitted Not Permitted Nebraska 18% $15 5% $350 6 $75 8

9 FEES AND CHARGES (Continued) Please note, the footnotes for this table are listed on page #10 State Max. APR Returned Item Late Charge Termination Annual Fee 10 Nevada 18% $15 5% or $5 1 $350 6 $75 New Hampshire 18% $15 5% or $15 2 $350 6 $75 New Jersey 18% $15 5% Not permitted $50 New Mexico 18% $15 5% or $5 1 Not permitted $75 New York O/O 18% N/O 16% $15 2% Not permitted North Carolina 16% $20 N/A Not permitted Not permitted North Dakota 18% $15 5% $350 6 $75 Ohio 18% $20 5% or $ $50 < $14,999 $75 < $15K Oklahoma 18% $10 5% or $15 1 Not Permitted $75 $75 Oregon 18% $15 5% or $5 1 $350 6 $75 Pennsylvania 18% $15 10% or $20 1 Not permitted $50 Rhode Island 18% $15 5% 8 $75 South Carolina 18% $15 5% or $ Not Permitted Not Permitted South Dakota 18% $15 5% $350 6 $75 Tennessee Texas 18%. No ARM margins in excess of 4% $15 5% $350 6 $75 Home equity lines of credit are not allowed Utah 18% $15 5% or $20 1 $350 6 $75 Vermont 18% $15 5% Not Permitted Not Permitted Virginia 18% $15 5% Not Permitted Not Permitted Washington 18% $15 10% Not Permitted $75 West Virginia 18% $25 5% or $5 2 Not Permitted Not Permitted Wisconsin 18% $15 10% Not Permitted $75 Wyoming 18% $15 5% or $5 2 Not Permitted $75 9

10 NOTES: These notes apply to Fee table posted on pages 8 & Whichever is greater (the percentage or the dollar amount). Whichever is less (the percentage or the dollar amount). Lesser of 5% of the unpaid balance or $350 if the account is paid off and reconveyed in the first 3-Years Not to exceed an amount equal to the lesser of $350 or 6-Months interest on the average daily balance over the last 6-Months if paid in full and terminated within the first 3-Years. Not to exceed the lesser of $350 or up to 2% of the unpaid balance of the line of credit if the account is paid off and terminated on or before the third anniversary. $ if paid off and reconveyed in the first 5 years. Up to 1% of the original principal balance or $350, whichever is less, if the loan is paid off and re-conveyed in the first 5-Years. The lesser of $350 or 2% of the balance due if account is paid in full on or before the 1st anniversary. The lesser of $350 or 1% of unpaid principal balance if paid in full on or before the 3rd anniversary. 10 Annual Fee is waived on Full Doc transactions when the primary wage earner has a credit score of 720 or above, For Stated Doc transactions, the fee is waived when the lowest middle score among all borrowers is 720 or above. 11 Up to 1% of the unpaid principal balance or $350, whichever is less, if line is paid off and re-conveyed on or before the 5th anniversary In accordance with DC Code (f). The lesser of $350 or an amount equal to 2 months advance interest on the aggregate amount of all prepayments made in a 12-month period in excess of 1/3 of the original amount of the credit limit, if paid off and reconveyed on or before the 3 rd anniversary. The lesser of 2% of the unpaid principal balance or $350, if paid off and reconveyed in the first 5 years. 10

11 SENIOR LIEN REQUIREMENTS Eligible First Mortgages: Conventional loans This product is available for Piggyback transactions only. Negative amortization loans are eligible provided the cap on the negative amortization does not exceed 125%. Requirements for calculating the CLTV are as follows: o When used in a Piggyback transaction with the Pay-Option ARM (product codes A558/A559), the CLTV is not subject to the Gross-Up formula (stated below). o When used in a Piggyback transaction with a negative amortization First lien (other than the Pay- Option ARM A558/A559), the CLTV is Grossed-Up based on the following formula: CLTV Gross Up Formula Lower of original loan amount or unpaid balance of First Lien x maximum negative amortization percent + amount of equity total loan divided by value of property = CLTV INELIGIBLE FIRST LIENS The following First Mortgages are ineligible for this program: First lien HELOC Contract for deed, contract for purchase or land contracts All-inclusive trust deeds Private party first liens Reverse mortgages or loans that provide for future advances Recapture lien Bonds with recapture taxes ARM/Negative amortization that has no ceiling or a ceiling in excess of 125% FNMA Flex 100 loans Texas (a)(6) loans Cal Vet loans QUALIFYING RATIOS Maximum debt ratios for the Super Streamline (SISA) program are determined through CLUES. 11

12 RESERVE REQUIREMENT Cash reserve requirements are as follows: o 3-Months PITI required on the Owner-Occupied Primary Residence o 6-Months PITI required on the Second Home and Investment Properties PAYMENT CALCULATION FOR DEBT TO INCOME RATIO First Mortgage Payment Calculation: o ARMS: Qualify the borrowers at the maximum interest rate that could be in effect at the beginning of the second year of the mortgage term. If the mortgage is seasoned more than 1-Year, the current interest rate should be used. o Negatively Amortizing First Mortgages: If the underlying First mortgage has a negative amortization feature, calculate the borrowers Debt-to-Income Ratio using the fully indexed rate (current index plus margin), the current principal balance and the remaining term to calculate a payment for the First mortgage. o Buy-downs: Qualify the borrowers at the interest rate in effect at the beginning of the second year of the mortgage term. If the first mortgage is seasoned more than 1-Year, the current interest rate should be used. Equity Loan Payment Calculation o Qualify the borrowers at the fully indexed rate interest only payment based on the total line amount. Example: If prime is 6.00% and the margin is 1.50%, then 7.5% (which is 6.00% %) multiplied by the line amount divided by 12 equals the monthly payment. MAXIMUM NUMBER OF LOANS PER BORROWER A borrower may have a maximum of one (1) home equity loan (HELOC or Closed-End Second lien) on each of the following occupancy types: o Primary Residence o Second/Vacation Home o Non-Owner Occupied CREDIT SCORE DETERMINATION Determine Credit Score as follows: o Use the lowest middle score of all borrowers. o Determine the lowest overall credit score by selecting the lower of two (2) reported scores for each borrower, or the middle score of the three (3) reported scores for each borrower. Note: All borrowers must have a minimum credit score of

13 CREDIT HISTORY All borrowers must have a minimum credit score of 620. Minimum established credit must include at least 2- Years of credit history. In addition, a minimum of three (3) trade-lines must be established, and at least one (1) of them must be currently open and not be a collection or a charge-off. One of the three (3) trade-lines must have had activity in the last 6-Months. Credit History Housing Payment History Consumer Credit History > 720* * * All Doc Types: 0x30 in 24-Months No limit / credit score must be met All Doc Types: 0x30 in 12-Months No limit / credit score must be met Full/Alt Doc: 1x30 in 12-Months Stated Income: 0x30 in 12-Months Credit Score > 660: No limit / credit score must be met Credit score < 660: 3x30 in 12-Months Consumer Credit Counseling Greater than 2-Years & re-established credit* Greater than 2-Years & re-established credit* Greater than 2-Years & re-established credit* Bankruptcy/ Foreclosure Greater than 7-Years & re-established credit* Greater than 5-Years & re-established credit* Greater than 5-Years & re-established credit* Adverse Credit, open or paid within the last 12- Months: (Includes collections, charged-off accounts, judgments, liens, repossessions, garnishment, any 90-Day delinquency.) With investor approval only when over $200 All must be paid at closing With investor approval only when over $500 All must be paid at closing With investor approval only when over $500 All must be paid at closing * Note: Credit criteria must be met as listed in table in order to satisfy pricing eligibility. Minimum of 24-Months of re-established credit that must include three (3) trade-lines in addition to the existing First mortgage with satisfactory payment rating. Accounts opened prior to the bankruptcy or foreclosure are not considered re-established credit. Also, there may be no delinquencies after the bankruptcy or foreclosure. 13

14 EMPLOYMENT AND INCOME CRITERIA General Requirements o Stated Income is acceptable for salaried or Self-Employed borrowers. Verification of income is waived, but the income must be disclosed accurately to allow for underwriting the borrower s ability to repay the debt. o Stated Income is not a No income qualifier. o Ratios are calculated and the borrower must still be qualified for the loan. o Stated Income must be deemed reasonable and consistent with the borrower s profession or occupation. o The borrower s Self-Employed status must be verified. Specific Requirements o Refer to Stated Income Matrix for loan amount, Credit Score and CLTV criteria. o Lowest middle score of all borrowers must be used. o 4506-T Request for Transcript of Tax Return is required. Eligible Borrowers o Self-employed borrower must be with the same business, at the same location for a minimum of 2- Years. A borrower is considered self-employed if he/she owns 25% or more of a business, or is the owner of a Sole Proprietorship, a Corporation, or a Partnership. o A valid business license reflecting a minimum of 2-Years Self-Employment is required to verify a borrower s Self-Employed status*. o Salaried borrowers must have a minimum of 2-Year continuous work history in the same field. *Note: In those cases where the local municipalities do not issue business licenses, the loan file should contain evidence of this, and provide alternate verification that the business exists. For example, a copy of the local yellow pages advertisement or other marketing documentation would be acceptable. Ineligible Borrowers o Retirees or fixed-income borrowers are not allowed on this program. o Non-occupant co-mortgagors. o Borrowers with 30 days or more lates on any mortgage within the past 12-Months. Loan Requirements o Verification of the borrower s income is waived, but the income must be disclosed accurately on o The borrower s Self-employment status must be verified with a minimum 2-Year history required. All other credit must be valid. Note: Borrowers are not eligible for a loan using the Stated Income Program if they have been 30 or more days late on any mortgage within the past 12-Months. Continued on next page 14

15 (Continued from previous page) Required Reserves and Assets o Owner-Occupied: Required to provide 3-Months PITI (total housing payment, including the 1st and 2nd) in verified liquid assets after close of escrow. o Second Home and Investment properties: Required to provide 6-Months PITI (total housing payment, including the 1st and 2nd) in verified liquid assets after close of escrow. o The borrower s liquid assets should be consistent with the stated income. Liquid assets are defined as demand deposits, savings accounts, IRAs, Keoghs, 401k plans, CDs, and publicly traded stocks and bonds and other qualified investment accounts. o The borrower must supply 2-Months bank statement or Verification of Deposit (VOD). Loan proceeds are not an acceptable source of resources. o Assets that would not be acceptable are accounts in the name of a Corporation or Partnership, or other party, and stock in a closely held Corporation. PROPERTY APPRAISAL REQUIREMENTS AGE OF APPRAISAL Appraisal requirements are as follows: o DU/LP appraisal requirements are acceptable*. o Combined loan amounts to $1MM = 1 Full Appraisal Report supporting value o Combined loans > $1MM to $1.5MM = 1 Full Appraisal Report + 1 Field Appraisal supporting value Field Appraisal must be ordered by Closing Lender o Combined loan amounts > $1.5 MM = 2 Full Appraisal Reports Second Appraisal must be ordered by Closing Lender *Appraisal waivers are not allowed. Appraisals must be dated 6-Months or less from the Note date. A re-certification of value is required for appraisals dated more than 6-Months from the Note date, up to 12- Months MAXIMUM PROPERTY VALUE No Limitations PROPERTY SEASONING Property owned less than 12-Months: o Purchase Transactions: Use the lesser of the Sales Price or Appraised Value. o Refinance Transactions: If the property was purchased within the last 12-Months, the value is based on the current Appraised Value or the original Sales Price plus any documented Home Improvements, whichever is less. For properties purchased more than 12 months ago, and for new construction purchased within the last 12 months, use the current appraised value. 15

16 PROPERTIES LISTED FOR SALE Properties currently or previously listed for sale in the past 12 months are not eligible for financing. All properties previously listed for sale must have: o A minimum 12 months seasoning AND o Copy of cancelled listing in file SPECIAL NOTES Title Requirements: o Loan amounts less than or equal to $100,000 require a Title Search or its equivalent unless the under the following exceptions: o A full ALTA policy for loan amounts greater than $50,000 is required in Oregon. o A full ALTA policy is required only on stand alone transactions in Florida. o Vermont requires a full ALTA on all transactions regardless of loan amount. o Loan amounts GREATER than $100,000 require a full ALTA policy. A Revolving Credit Line Endorsement is required for HELOCs. For Simultaneous (Piggyback) transactions: o Loan amounts less than or equal to $100,000 require only a copy of the title commitment from the first mortgage. No additional coverage is required (except Oregon and Vermont). o Loan amounts greater than $100,000 require the ALTA policy to cover both the First and Second lien, including for HELOCs, a Revolving Credit Line endorsement. o Any loans closed on properties that have a change in vesting or is a leasehold must have a full ALTA policy. 16

17 STATED INCOME /STATED ASSETS DOCUMENATION 1 Owner-Occupied Primary Residence 3 Maximum CLTV Maximum Loan Amount Minimum Credit Score 95% $125, % $250, Second Home 2, 3 90% $250, Investment Property % 125, Equity loan must be closed concurrently with a conforming or non-conforming CLUES Fast & Easy TM program. Both loans must receive a CLUES Accept decision. The more restrictive of the first-and second-lien guidelines apply. Form 4506-T, Request for Transcript of Tax return is required. Note: Product codes are T6350, T6355 & A6351 for Conforming loans and T6360, T6365 & A6361 for Conforming/Jumbo loans Two (2) -Unit properties not allowed for second homes 3-4 Units not allowed 17