Effective June 1, 2008 UNDERWRITING GUIDELINES

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2 Radian Guaranty Inc. Contents Introduction... 4 Full Documentation Prime Credit ( Industry A )... 4 Limited Documentation Prime Credit ( Alternative A or Alt A )... 6 Full Documentation Non-Prime Credit ( A Minus )... 6 Guideline Criteria for All Programs... 7 Credit Philosophy and General Handling... 7 Credit Credit Report Requirements... 7 Credit Definitions... 8 Credit Non-Traditional Credit (No or Invalid FICO Score)... 8 General Pricing Information General Radian Requirements...11 Borrower Qualification...11 Individual Tax Identification Number (ITIN) Resident Aliens Qualifying Ratios Temporary Buydowns Loan Repayment Types Fixed Rate Adjustable Rate Mortgages Interest Only Loan Term Temporary Buydowns Loan Features Borrower Equity Financing Concessions Non-Occupant Co-Borrower Refinances Secondary Financing Property Qualifications/Restrictions Cooperatives Condominium/Attached PUD Manufactured Housing Geographic Guidelines Declining Markets Policy Appraisal Requirements Maximum Loans to One Borrower Policy Maximum Mortgage Insurance Risk Exposure

3 Radian Guaranty Inc. Maximum Compliance Loans to One Borrower General MI Restrictions General Submission Requirements Requirements for Loan Amounts Up to $650, Requirements for Loan Amounts Greater Than $650, Delegated Authority Radian s MI Online Revision notes Revisions for April 30, Revisions for June 1, Rev

4 Radian Guaranty Inc. Introduction These guidelines are applicable to mortgage insurance applications for 1 to 4-unit properties. Borrower-paid mortgage insurance (BPMI) applications must be submitted prior to loan closing/funding date; lender-paid mortgage insurance (LPMI) must be submitted prior to the first payment due date. A 1-unit property is defined as a single-family detached dwelling, a single-family attached dwelling, a co-operative unit, or a condominium unit. Please refer to the guidelines for details on manufactured housing. Full Documentation Prime Credit ( Industry A ) Radian s Full Documentation Prime program ( Industry A ) is designed for loans with full/alternative documentation verifying income, employment, and assets as defined by Fannie Mae/Freddie Mac and maintained by the lender, and have a minimum FICO score of 620. All loans must comply with Radian s Declining Markets Policy and property/ appraisal guidelines. In addition, loans with all of the following characteristics are eligible for Radian Full Documentation Prime mortgage insurance, subject to prudent underwriting, and are not required to meet the additional guidelines as stated herein: DU Approve/Eligible or LP Accept/Eligible response Primary residence, 1 2 units Purchase or Rate/Term Refinance transaction Minimum 620 FICO score (minimum 680 FICO score for % LTV) Uniform Standards of Professional Appraisal Practice (USPAP)-compliant appraisal required; see the Appraisal Requirements section for guidance Eligible per AUS Primary residence Purchase & rate/ term refinance LTV Max loan amount Min FICO score 1 Unit Single Family 97 $ 417, c i 95 $ 417, c i 2 Units 97 $ 533, c i 95 $ 533, c i Condominium 97 $ 417, i 95 $ 417, i Co-op 97 $ 417, i 95 $ 417, i Manufactured Housing 95 $ 417, Key to Loan Notes: c Eligible for Construction-to-Permanent, i Eligible for Interest Only (minimum term of 60 months) All other Full Documentation Prime loans not meeting the above criteria must meet the following Radian Full Documentation Prime guidelines contained herein. Loan notes 4

5 Radian Guaranty Inc. Primary Residence Purchase & Rate/ Term Refinance LTV Max loan amount Min FICO score Manual and/or Not Eligible per AUS Max DTI% 1 Unit Single Family 97 $ 450, $ 650, c i $ 550, c i 90 $ 850, c i $ 650, c i 85 $ 900, c i 2 Units 95 $ 650, i $ 550, i 90 $ 850, i $ 650, i 85 $ 900, i 3 4 Units 90 $ 850, Condominium 97 $ 450, $ 650, i $ 550, i 90 $ 850, i $ 650, i 85 $ 900, i Co-op 95 $ 650, Manufactured Housing 90 $ 450, Cash-Out Refinance (Maximum $150,000 cash-out) LTV Max loan amount Min FICO score Max DTI% 1 Unit Single Family 90 $ 450, i 2 Units 90 $ 550, i Condo 90 $ 450, i Co-op 90 $ 450, Loan notes Loan notes Key to Loan Notes: c Eligible for Construction-to-Permanent, i Eligible for Interest Only (minimum term of 60 months) Second Home Purchase & Rate/ Term Refinance Traditional full documentation or alternative documentation (pay-stubs, bank statements) as defined by standard Fannie Mae/Freddie Mac guidelines is required. A loan application receiving a DU response of Approve/Eligible or an LP response of Accept/Eligible which includes the waiver of income or asset documentation, and validated closed per the findings, is eligible as full documentation. Please see the Radian Documentation Types guide on our Web site at for details. Notes Investment Property Guidelines and pricing apply to 3 4 units. Debt consolidation is priced as cash-out and this occurrence should be treated as a cash-out refinance. Payoff from loan proceeds of any debt which is not secured by a lien on the subject real estate is considered a cash-out transaction. Borrowers LTV Max loan amount Min FICO score Max DTI% 1 Unit Single Family 95 $ 650, $ 750, c Condominium 95 $ 650, Cash-Out Refinance (Maximum $150,000 cash-out) 90 $ 750, LTV Max loan amount Min FICO score Max DTI% 1 Unit Single Family 90 $ 450, Condominium 90 $ 450, Investment Property Purchase & Rate/ Term Refinance LTV Max loan amount Min FICO score Max DTI% 1 Unit Single Family 90 $ 650, Units 90 $ 650, Cash-Out Refinance (Maximum $150,000 cash-out) LTV Max loan amount Min FICO score Max DTI% 1 Unit Single Family 85 $ 450, Units 85 $ 550, Loan notes Loan notes Loan notes Loan notes 5

6 Radian Guaranty Inc. may leave the closing table with a maximum of cash per program guidelines and including debts paid as referenced herein. Generally, a lender s delegated authority is limited to a maximum $650,000 loan amount. Please see the Delegated Authority section for details. Limited Documentation Prime Credit ( Alternative A or Alt A ) Full Documentation Non-Prime Credit ( A Minus ) Loans which do not conform to all of the requirements of Full Documentation are deemed to be Limited Documentation loans, which are ineligible for Radian. This includes any GSE standard or negotiated program or commitment that allows reduced or limited documentation. Please see the Radian Documentation Types Guide for more details. Radian s Full Documentation Non-Prime program ( A Minus ) is designed for the borrower who has credit criteria that do not meet the Radian Full Documentation Prime guidelines, but who is identified as an insurable risk. Radian s Full Documentation Non-Prime program requires a minimum representative FICO score of 660. Eligible loans must meet Radian s published Full Documentation Non-Prime guidelines, regardless of any Automated Underwriting System (AUS) response. Traditional full documentation or alternative documentation (pay-stubs, bank statements) as defined by standard Fannie Mae/Freddie Mac guidelines is required. Please see the Radian Documentation Types guide on our Web site at for details. Ineligible AUS responses DU EA-IV DU Refer LP Refer LP Caution/Ineligible Out of Scope Manual and/or Not Eligible per AUS Primary Residence Purchase & Rate/ Term Refinance LTV Max Loan Amount Min FICO Score Max DTI% 1 Unit Single Family 95 $ 450, Units 95 $ 550, Condominium 95 $ 450, Notes Debt consolidation is considered as cash-out refinance. Payoff from loan proceeds of any debt which is not secured by a lien on the subject property is considered a 6

7 Radian Guaranty Inc. Guideline Criteria for All Programs cash-out refinance. Cash-out refinance is not eligible for Radian s Full Documentation Non-Prime program. The following guidelines cover all Radian mortgage insurance programs, including Full Documentation Prime and Full Documentation Non-Prime. Program-specific exceptions are noted. Credit Philosophy and General Handling The basis for any credit analysis should be a review of each borrower s complete credit history, length of time accounts have been opened, types of credit used, balance to credit limit comparisons, and number of recent inquiries. At Radian, we feel that the credit score should be only a part of the total credit consideration. To evaluate the complete credit picture, Radian will apply the following credit criteria in order to determine if a borrower s FICO score is a true representation of the borrower s credit profile when determining insurability of a loan. IF the borrower has 24+ months primary housing (mortgage or rent) history reported/documented with 0x30 late THEN a minimum of 2 additional tradelines with 12 months reported activity on each is required. IF the borrower has months primary housing (mortgage or rent) history reported/documented with 0x30 late THEN a minimum of 3 additional tradelines with 24 months reported activity on each is required. IF the borrower has 0 12 months primary housing (mortgage or rent) history reported/documented and/or prior derogatory history on the current mortgage/ rental history (as permitted in the Credit Definitions below) THEN a minimum of 4 additional tradelines with 24 months reported activity on each is required. IF the borrower s credit only contains non-traditional credit history, THEN the borrower must provide four non-traditional verifications, each of which must indicate a 12-month history. One of the four verifications must be a primary housing (mortgage or rent) payment history. The other three verifications may be utilities, insurance, receipts for cash rental payments, or any other documented non-traditional credit source. Note: A tradeline is defined as a revolving or installment payment account. The tradeline must not be in dispute and must clearly belong to the borrower in order to be eligible for consideration. Collections, judgments, charge-offs, repossessions, foreclosures, bankruptcy repayment plans, and credit counseling do not apply. Credit Credit Report Requirements Radian will underwrite mortgage insurance based on the lowest representative FICO score of all borrowers. At least two national repositories must be checked for each 7

8 Radian Guaranty Inc. borrower. The representative FICO score for each borrower will be determined as follows: If two scores are provided, the lower score will be used. If three scores are provided, the middle score will be used. Credit Definitions Full Documentation Prime Full Documentation Prime above $650,000 Full Documentation Non-Prime Minimum FICO AND Mortgage or rental history AND No more than 1x30 (no rolling lates) in last 12 months All mortgages must be current at time of subject loan application and closing. Installment debt history AND No more than 1x30 in last 12 months Revolving debt history AND No more than 2x30 in last 12 months 0x30 for last 24 months All mortgages must be current at time of subject loan application and closing. No more than 2x30 or 1x60 in last 24 months No more than 2x30 or 1x60 in last 24 months No more than 2x30 or 0x60 in last 12 months. Rolling lates of 2x30 successively are considered 1x30 to qualify. All mortgages must be current at time of subject loan application and closing. No more than 3x30 or 1x60 in last 12 months. Three successive 30-day lates may count as one event. All delinquent consumer credit must be current at loan closing. No more than 3x30 or 1x60 in last 12 months. Three successive 30-day lates may count as one event. All delinquent consumer credit must be current at loan closing. Major derogatory credit AND None in last 12 months None in last 24 months Charge-off and collection accounts greater than $2,500 (cumulative balance) must be paid at or before closing. Minimum duration of credit history AND Bankruptcy AND Foreclosure, short sale, deedin-lieu of foreclosure activity 12 months 24 months 12 months Minimum 48 months since discharge/dismissal date, with satisfactory credit reestablished Minimum 60 months since date of activity and satisfactory credit re-established Ineligible Ineligible Credit Non-Traditional Credit (No or Invalid FICO Score) Medical collections of any amount must show a resolution plan in place. Minimum 36 months since discharge/ dismissal date, with satisfactory credit re-established Minimum 36 months since date of activity prior to date of application and satisfactory credit re-established Radian s non-traditional credit guidelines are acceptable only for fully documented loan files that would align with a traditional manually underwritten A credit borrower credit profile. A valid Social Security number is required for all borrowers contributing to the qualification for the mortgage, and the lender s file submission to Radian must include the credit reporting agency s response to the lender s order for a tri-merged traditional credit report for each borrower, including a FICO score calculation and public records search. Non-traditional credit is acceptable for Radian insurance when a borrower contributing to the qualification for the mortgage does not have enough of the types 8

9 Radian Guaranty Inc. of credit that would appear on a traditional tri-merged credit report to generate a usable FICO score OR if all borrowers on a loan application have insufficient credit references to develop a traditional credit report and usable FICO score. Under no circumstances should a lender use a non-traditional credit evaluation to offset derogatory information that appears in a tri-merged traditional credit report. The following features define eligibility criteria: Full third-party verification of assets, income, employment is required 1 2 units detached/attached or condominium Primary residence only Purchase only Maximum 95% LTV (Radian s Declining Markets Policy will apply) Full file submission to a Radian Service Center Loan amounts limited to maximum of GSE conforming for the 48 contiguous states Ineligible for non-traditional credit Full Documentation Non-Prime Co-ops Manufactured housing Construction-to-permanent Acceptable non-traditional credit references must be only those types of credit that require the borrower to make periodic payments on a regular basis at intervals that are no longer than every three (3) months. A minimum of four (4) such references (held singly or jointly) must be verified for each borrower contributing to the qualification for the mortgage. 9

10 Radian Guaranty Inc. The types of credit that can be used fall into five categories, some of which are required: Type 1 Credit Type 2 Credit Type 3 Credit Type 4 Credit Type 5 Credit Credit Category Housing payment: Required to be verified by a non-interested third party for the most previous 12 months minimum Automobile financing/leasing and/or cell phone carrier(s): Required if applicable for past 12 months Housing-related (over the past 12 months; at least one from this category is required), such as: Utilities Cable television Furniture rental Land-line telephone service Insurance (over the past 12 months), such as: Medical insurance Renter s insurance Automobile insurance Other (over the past 12 months), such as: Department store Furniture store Child care Full Documentation Prime Credit Acceptability 0x30 days delinquent in past 12 months 1x30 in previous 12 months, if available; no rolling lates 0x30 days delinquent in past 12 months 0x30 days delinquent in past 12 months 1x30 days delinquent in past 12 months; no rolling lates 1x30 days delinquent in past 12 months; no rolling lates Reported Traditional Credit If any on the tri-merged traditional credit report No derogatories (since non-traditional credit references can not be used to offset adverse traditional credit) Public Records Required to be checked (with findings affirmatively stated on response document to lender s request for tri-merged traditional credit report) No collections (other than explainable medical collections) No repossessions No judgments, liens, or bankruptcy foreclosure in past 5 years Full Documentation Prime If a valid FICO score is not provided or unavailable for the borrower(s), a verified credit history must comply with all of the credit criteria noted above in order to be eligible for Radian mortgage insurance at Industry A rates. Loans without a valid FICO score, or with no FICO score, must be submitted to a Radian Service Center for review. Please provide a completed Radian Mortgage Insurance Application, a completed 1008 and 1003, credit report (along with alternative credit information if credit report information does not meet Radian s minimum criteria), and the subject property appraisal. General Pricing Information Please refer to the Radian rate cards posted at for specific pricing criteria or contact your Radian representative for additional information. Loan amounts greater than $650,000 are subject to an additional premium surcharge as disclosed on the Radian pricing material. 10

11 Radian Guaranty Inc. General Radian Requirements Borrower Qualification Radian mortgage insurance underwriters retain the right to exercise prudent risk underwriting and modify or decline to insure a mortgage insurance request based on the overall risk profile. However, we would appreciate the opportunity to work with you on any loan which you believe is an insurable risk. Guidelines not specifically addressed herein default to standard Fannie Mae/Freddie Mac guidelines, i.e., non-desktop Underwriter/non-Loan Prospector. Loans originated by a third party must first be underwritten by the submitting lender before submission to Radian for mortgage insurance. First-lien mortgages only. Radian does not provide mortgage insurance if borrowers are corporations, partnerships, or limited partnerships (LLCs). Corporate and business tax ID numbers are unacceptable as a substitute for Social Security numbers. Radian will only provide mortgage insurance on loans to individuals, with the exception of living/ inter-vivos trusts. Individual Tax Identification Number (ITIN) Loans to borrowers having an Individual Tax Identification Number (ITIN) in lieu of a Social Security number are ineligible for Radian mortgage insurance. ITIN numbers are issued regardless of immigration status of the applicant and, as such, do not allow identification as to resident or non-resident aliens and legal or illegal immigrants. An ITIN is a tax processing number issued by the IRS. Although an ITIN is formatted like a Social Security number, all ITINs begin with the number 9 and contain a 7 or 8 as the fourth digit (9xx-7x-xxxx or 9xx-8x-xxx). Resident Aliens Permanent resident aliens are eligible for all Radian insurance products. Non-permanent resident aliens, in the United States on a temporary permit/visa, are eligible for Full Documentation Prime insurance only with LP s Accept/Eligible or DU s Approve/Eligible response. Non-permanent resident borrowers are eligible under Full Documentation Non-Prime for 1-unit primary residence, 90% LTV, with all necessary assets in U.S. funds, and showing two years of employment and credit history in the U.S. Ineligible resident aliens Non-resident aliens/foreign nationals/diplomats 11

12 Radian Guaranty Inc. Qualifying Ratios A borrower s Debt-to-Income Ratio (DTI) includes all monthly debts as defined in the Fannie Mae/Freddie Mac guides, divided by the monthly qualifying income. The DTI ratio must not exceed the maximum allowed per the following: Full Documentation Prime, except as noted below 41% % LTV Temporary buydowns 38% 38% 3 4 units and investment properties 33% Full Documentation Non-Prime 50% ARMs with an initial adjustment period of less than 60 months must qualify using the higher of the Note Rate or the fully indexed accrual rate (margin plus index value), also referred to as FIAR. ARMs with an initial interest rate adjustment period of 60 months or more may qualify using the start rate. Interest Only mortgages must be qualified with a fully amortizing principal and interest payment (PITI). Temporary Buydowns Primary Residence and Second Home Fixed rate loans and ARMs with an initial adjustment period less than 60 months must qualify using the higher of the Note Rate or the fully indexed accrual rate (margin plus index value), also referred to as FIAR. ARMs with an initial interest rate adjustment period of 60 months or more may qualify using the start rate. Loan Repayment Types Investment Property Qualified at the higher of the Note Rate or the fully indexed accrual rate. Fixed Rate Fixed Rate mortgages include positively amortizing ARMs with an initial fixed rate and payment period of five years or more. Adjustable Rate Mortgages Interest rate caps Radian requires that all adjustable rate mortgages include an interest rate cap. The following represents Radian s maximum interest rate caps for ARMs: 12

13 Radian Guaranty Inc. Interest Only ARM product Full Documentation Prime Full Documentation Non-Prime Initial cap Periodic cap Lifetime cap 6 Month 1% 1% 6% 1 2 Year 2% 2% 6% 3 5 Year 3% 2% 6% > 5 Year 5% 2% 5% < 5-year initial interest rate adjustment period is ineligible 5 Year 3% 2% 6% > 5 Year 5% 2% 5% Maximum IO period of 15 years, minimum IO period 5 years, except for properties located in the state of New York as noted in the grid below: All states other than NY Minimum/Maximum interest-only term NY interest-only terms (must be exact interest only term based on loan term) Loan term/interest-only term 5 years/15 years 15 years/5 years 20 years/7 years 25 years/8 years 30 years/10 years 40 years/11 years Ineligible for Interest Only Full Documentation Non-Prime loans 3 4 unit properties, second homes, and investment properties Temporary buydowns Co-ops and manufactured housing Loan Term Loans with an amortization period and/or a Note term greater than 40 years up to 50 years are eligible, subject to the following conditions: Property is limited to 1 unit, primary residence only Maximum 95% LTV Maximum Note term is 50 years Ineligible for loan terms over 40 years Manufactured housing 13

14 Radian Guaranty Inc. Temporary Buydowns Primary Residence, Second Home, and Investment Property are eligible with a maximum buydown. Eligible up to 97% LTV (95% for Full Documentation Non-Prime loans) and must meet Fannie Mae/Freddie Mac requirements. Loan Features Borrower Equity The borrower is required to have the following minimum equity or down payment from their own funds: Full Documentation Prime Primary residence Second home Investment property LTV % 3% NA NA LTV 95% and below 5% 5% 10% Full Documentation Non-Prime 5% NA NA Gift funds For primary residence only, gifts from immediate family members are acceptable, provided the borrower(s) has the minimum equity/cash down payment. Gifts are not an acceptable source of down payment on investment property and second homes. Gift documentation meeting Fannie Mae/Freddie Mac requirements must be obtained. Reserves Radian defines reserves as the number of months of principal, interest, and escrow deposits for taxes and insurance that a borrower could pay by using his or her liquid financial assets. For full-documentation loans with an Agency Eligible response, Radian will generally rely on the AUS response and the reserve requirement necessary to generate that response. For loan amounts greater than $650,000, six (6) months reserves are required for each property owned by the borrower, including the subject loan. An equity position of $50,000 per property is also acceptable. For all other loans (i.e., Agency Ineligible or non-aus underwriting), Radian requires two (2) months reserves for Primary Residences and Second Homes, and four (4) months reserves for Investment Properties. 14

15 Radian Guaranty Inc. Financing Concessions Closing costs and/or pre-paid expenses typically paid by the borrower, but paid on behalf of the borrower by an interested party, are subject to the following limitations: LTV Full Documentation Prime Full Documentation Non-Prime Primary residence Second home Investment property 97% 3% NA NA 95% 3% 3% NA 90% 6% 6% 2% 95% 3% NA NA 90% 6% NA NA Financing concessions in excess of the limitations above require a downward adjustment to the sales price by the amount that the concessions exceed the limits. Additionally, sales concessions, such as furniture or other inducements, require a dollar-for-dollar deduction from the sales price prior to calculation of the LTV. Non-Occupant Co-Borrower Non-occupant co-borrowers are only permitted for Full Documentation Prime loan amounts up to $650,000. Maximum LTV is 95%. Primary residence only; 1-2 units. Non-occupant co-borrower is to be a disinterested third party to the sales transaction (e.g., cannot be the property seller, builder, real estate broker, etc.). The non-occupant co-borrower does not have to take title to the property but must sign the mortgage note. Occupying borrower s DTI ratio should not exceed guidelines by more than 7%. Occupying borrower must have minimum equity/cash down payment of 5% from their own funds. Refinances Cash-out refinance requires 12 months seasoning. Debt consolidation is considered as cash-out refinance. Payoff from loan proceeds of any debt which is not secured by lien on subject property is considered a cash-out refinance. Streamline refinance A Streamline Refinance is a Rate/Term (Limited Cash-Out) Refinance transaction where the borrower is not subject to standard qualification and/or where the documentation of the original file is used. Radian must be the insurer of the current mortgage. 15

16 Radian Guaranty Inc. Current In-Force Certificate Industry A (Full Doc Prime) with original FICO score Industry A (Full Doc Prime), no original FICO score A Minus (Full Doc Non-Prime) with original FICO less than 660 A Minus (Full Doc Non-Prime) with original FICO greater than or equal to 660 A Minus (Full Doc Non-Prime), no original FICO score Existing Radian certificate can not currently be Radian Alt A or Limited Doc (SISA, SIVA, No Doc, NINA, No Ratio), Documentation Type not provided, or Documentation Type unknown. Must meet current eligibility for A (Full Doc Prime) and A Minus (Full Doc Non-Prime) for determination of whether the insurance is eligible for this documentation efficiency process. If the insurance request does not meet current Full Doc Prime or Non-Prime criteria, the request may have to go to Customer Service as an MI modification, or be considered as a Full Doc Prime/Non-Prime Rate/ Term Refinance. Documentation Required (in lender s file) Credit Eligibility Eligibility/Pricing Current mortgage history Current mortgage history Current mortgage history New credit report with FICO Current mortgage history Current mortgage history New credit report with FICO Mortgage history maximum 1x30 in previous 12 months or life, if less than 12 months Mortgage history maximum 1x30 in previous 12 months or life, if less than 12 months FICO greater than or equal to 660 and mortgage history maximum 1x30 in previous 12 months or life, if less than 12 months Mortgage history maximum 1x30 in previous 12 months or life, if less than 12 months FICO greater than or equal to 660 and mortgage history maximum 1x30 in previous 12 months or life, if less than 12 months Full Doc Prime/Industry A Full Doc Prime/Industry A Full Doc Non-Prime/A Minus Full Doc Non-Prime/A Minus Full Doc Non-Prime/A Minus Delegated submission to a Radian Service Center is required (1008 and MI application which includes rep and warrant of original appraisal value); MI applications must be fully completed by the lender. Loan can not be currently delinquent. New loan amount can not exceed original UPB plus $2,500 for closing costs. All occupancy and property types (as eligible in Radian s published guidelines) are eligible. Maximum 97% LTV for Full Doc Prime, maximum 95% LTV for Full Doc Non- Prime (Radian s Declining Markets Policy does not apply to streamline refinance transactions). New loan must be fully amortizing: Fixed Rate or ARM (minimum 5 years to first adjustment); Interest Only ineligible; temporary buydown ineligible. Radian s current MI rates apply. 16

17 Radian Guaranty Inc. Property Qualifications/Restrictions CLTV/Secondary Financing Purchase transactions Radian does not insure purchase transactions with simultaneous secondary financing from any source. Rate/Term Refinance Transactions Existing subordinate mortgage liens may be re-subordinated, but the maximum aggregate mortgage lien encumbrance to the subject property first mortgage plus any secondary financing (whether a fixed mortgage, line of credit, or other recorded mortgage liens) may never exceed the maximum LTV per the transaction type per Radian s published guidelines. New subordinate mortgage liens/secondary financing simultaneous with the closing of the first mortgage refinance transaction are not permitted. Cash-Out Refinance Transactions Radian does not insure cash-out refinance transactions with simultaneous secondary financing from any source. Existing subordinate mortgage liens must be paid off from loan proceeds or borrower s own funds; re-subordination of mortgage liens is not permitted. Ineligible Property Categories The following property categories are ineligible for Radian mortgage insurance: Condotels Single-wide manufactured homes Mobile homes Time share properties Lot loans Cooperatives Must be located in markets where co-ops are typical. Property must conform to Fannie Mae standard co-op property guidelines. Condominium/Attached PUD Investor concentration generally limited to 40% of project Generally, minimum 1,000 sq. ft. per unit; variations for local markets must be supported by three comparables in the appraisal report with similar square footage Must be warrantable to Freddie Mac or Fannie Mae 17

18 Radian Guaranty Inc. Manufactured Housing Multi-width, one-family dwellings Permanently affixed to the lot; legally classified and taxed as real estate Minimum 1,000 square feet of living area Must assume the characteristics and functional utility of site-built housing Please contact a Radian Service Center for additional details regarding eligibility of manufactured housing. Geographic Guidelines This section references geographic guidelines that are applicable to all Radian mortgage insurance programs, unless otherwise noted. Alaska Loan amounts greater than $417,000 are eligible per Radian s Manual and/or Not Eligible per AUS loan guidelines. Florida Condominiums and co-ops are not eligible for mortgage insurance in Miami-Dade and Broward counties. Guam Only the following are eligible for Radian mortgage insurance: Full Documentation Prime only Maximum $650,000 loan amount 1-unit only Owner-occupied property only 90% LTV maximum Purchase and rate/term refinance only Applications must be submitted to a Radian Service Center as non-delegated. Submission to include: 1003, 1008, appraisal, credit report, AUS findings (if applicable), and MI Application. Ineligible for Radian mortgage insurance in Guam Condominiums Hawaii Loan amounts greater than $417,000 are eligible per Radian s Manual and/or Not Eligible per AUS loan guidelines. Nevada Condominiums and co-ops are not eligible for mortgage insurance in Nevada. 18

19 Radian Guaranty Inc. New York Specific Interest Only terms apply for New York. See the Interest Only section. Puerto Rico Not eligible for Radian mortgage insurance U.S. Virgin Islands Not eligible for Radian mortgage insurance Declining Markets Policy The maximum eligible LTV is reduced by 5% in declining markets for all products, except for loans above 95% LTV, which are reduced to 95%. Radian defines a declining market as one for which any of the following conditions are met: An AUS reports the market as declining. The appraisal indicates declining property values. If a quarter-over-quarter decline in the Office of Federal Housing Enterprise Oversight (OFHEO) MSA-level index occurs in the MSA for the property. If the appraisal contains one or more of the above characteristics, the appraiser should adequately explain the trend and specific factors contributing to the current conditions. The maximum LTV category allowed under these conditions would then be lowered to the next category (i.e., generally 5% lower), except that maximum financing for condominiums and cooperatives is reduced to 90% LTV. Please see also the Radian Guideline Quick Reference Guide for Declining Markets on our Web site at Appraisal Requirements Radian s appraisal requirements are determined by the amount of the loan to be insured. Radian does not accept AVMs, PVMMs, Property Inspection Waivers (PIWs), or Property Inspection Alternatives (PIAs) in lieu of appraisals. The Uniform Standards of Professional Appraisal Practice (USPAP) are the generally accepted standards for professional appraisal practice in North America. To be accepted by Radian, a property appraisal must be USPAP-compliant. For loan amounts up to $650,000, a USPAP-compliant appraisal (URAR, or property type-specific equivalent, with a minimum exterior inspection) is required. For loan amounts greater than $650,000, two independently prepared USPAPcompliant appraisals (URAR, or property type-specific equivalent, with interior and exterior inspection) are required. 19

20 Radian Guaranty Inc. Maximum Loans to One Borrower Policy General MI Restrictions Maximum Mortgage Insurance Risk Exposure Radian s maximum risk exposure policy for mortgage insurance is the lesser of $300,000 insured risk exposure or four (4) insured properties to one borrower. The property-type mix may only consist of a primary residence, one (1) second home, and a maximum of two (2) investor loans. All Radian investor guideline and requirements still apply. Note: Mortgage insurance insured risk exposure is calculated by using the original loan amount times the percentage of MI coverage. For example, a $100,000 mortgage with 25% coverage equals $25,000 mortgage insurance risk exposure. Full Documentation Non-Prime programs are limited to two (2) insured properties to one borrower. Although we will insure up to two (2) properties under Full Documentation Non-Prime programs, in cases where a borrower has a loan under a Limited Documentation Prime program, the maximum Full Documentation Non-Prime exposure is limited to one (1) loan. Maximum Compliance Loans to One Borrower Radian s policy for maximum compliance loans to one borrower is the lesser of five (5) loans or $1,000,000 aggregate loan amount, not to exceed the investor s own guideline for maximum exposure to one borrower. The aggregated loan amount is determined by totaling the entire loan amounts for all active loans. Within the above restriction, loans submitted under less than full documentation or no documentation programs are limited to four (4) properties per borrower. This includes the loan file(s) currently under consideration as well as any and all Radian compliance-underwritten loans for that borrower in the past two years and not currently in declined status. Ineligible Loan Categories The following types of loans are ineligible for Radian mortgage insurance: Government loans (FHA/VA/Rural Housing Service) Second mortgages Credit upgrades Wraparound mortgages Blanket mortgages Interim construction loans Negative amortization, potential or scheduled Graduated payment mortgages Reverse mortgages 20

21 Radian Guaranty Inc. General Submission Requirements Radian will not accept BPMI loans after the loan closing/funding date and LPMI loans after the first payment due date. Requirements for Loan Amounts Up to $650,000 Delegated: Submission to Radian requires a minimum of the completed 1008 and a completed Radian Mortgage Insurance Application. The investor, program name, automated underwriting system and response (if applicable), and the FICO score must be clearly noted in the appropriate section of either the 1008 or MI Application. The appropriate product type must be clearly noted in the Radian product section of the MI Application. Please note: Non-delegated lenders are permitted to submit under this procedure when a loan has been underwritten via either Fannie Mae s Desktop Underwriter with a response of Approve/Eligible or Freddie Mac s Loan Prospector with a response of Accept/Eligible. Non Delegated: Submission to Radian requires a minimum of the completed 1008, 1003, credit report, appraisal, and a Radian MI Application. The investor, program name, automated underwriting system and response (if applicable), and the FICO score must be clearly noted in the appropriate section of either the 1008 or the MI Application. The appropriate product type must be clearly noted in the Radian product section of the MI Application. Requirements for Loan Amounts Greater Than $650,000 Loan amounts greater than $650,000 must be submitted as a full documentation file to Radian with a 1008, 1003, credit report, FICO score, all appraisals, and all asset and income documentation. Submission must include a Radian Mortgage Insurance Application with the investor name/program marked as well as Super Jumbo A noted in the same section. All other loan amounts may be submitted per Radian s normal submission process as previously outlined, plus the MI Application marked as noted above. Delegated Authority Radian-delegated lenders may use their Radian delegated mortgage insurance authority to underwrite in compliance with the terms of their delegated underwriting agreement. Radian continues to expect our valued lending partners to exercise prudent underwriting judgment under their Radian delegated authority. Radian program underwriting guidelines apply for all submission types (manual, EDI, MI Online). 21

22 Radian Guaranty Inc. Radian acknowledges that exceptions may be made by Radian underwriters and/or delegated lenders when submitting mortgage insurance applications on a delegated basis, however prudent manual underwriting is expected and compensating factors must exist. Generally, slight exceptions to criteria such as DTI are considered reasonable where compensating factors are present, such as the following: significant cash reserves; a rate/term refinance with a significant reduction in the current housing expense; or a rate/term refinance from adjustable rate to fixed rate, purchase transaction reflecting minimal payment difference, below-maximum LTV, etc., or a below-maximum LTV and/or high FICO. However, exceptions to occupancy/ltv/ FICO combinations are considered more significant. Delegated lenders retain the option of submitting marginal, high-risk, and/or exception loans to a Radian Service Center for non-delegated mortgage insurance underwriting. Please see Radian s submission procedures for loan amounts up to $650,000 and greater than $650,000. Radian underwriting staff continues to retain the option to request additional documentation on any loan submitted under a lender s delegated mortgage insurance authority with Radian. Radian s MI Online Radian s MI Online system is a data entry system for convenient transmission of information to Radian for the ordering of mortgage insurance. All lenders using Radian s MI Online system (delegated and non-delegated) are responsible for knowing and adhering to Radian s guidelines. Use of Radian s MI Online system does not relieve the lender of any representations/ warranties associated with their Radian delegated underwriting authority. Non-delegated lenders are only permitted to use Radian s MI Online when a loan has been underwritten via either Fannie Mae s Desktop Underwriter with a response of Approve/Eligible or Freddie Mac s Loan Prospector with a response of Accept/ Eligible. Generally, loan amounts greater than $650,000 may not be submitted via MI Online. Please contract your Radian representative with any questions. 22

23 Radian Guaranty Inc. Revision notes Revisions for April 30, 2008 The following revisions have been made to the April 30, 2008 guidelines: General References to LTV have been changed to LTV/CLTV. Geographic guidelines have been added for Alaska, Florida, Hawaii, and Nevada. Additional financing restrictions have been placed on condominiums and co-ops in declining markets. Streamline refinance requirements have been clarified. Full Documentation Prime Loans submitted in the Eligible per AUS category (the blue table on page 4 of this document) with % LTV/CLTV must have a minimum 680 FICO score. Limited Documentation Prime This program has been discontinued. Full Documentation Non-Prime Full Documentation Non-Prime loans are no longer eligible for non-traditional credit. Revisions for June 1, 2008 The following clarifications have been made to the April 30, 2008 guidelines, effective June 1, 2008: General The maximum LTV for streamline refinances has been changed and the topic of streamline refinances has been given a more thorough treatment (pages 15 16). The reference to geographic restrictions on condominiums and cooperatives has been removed from the Declining Markets Policy section (page 18, second paragraph). References to CLTV have been removed and a section discussing CLTV and secondary financing has been added (page 17). Full Documentation Prime Loans submitted in the Eligible per AUS category are still subject to prudent underwriting and to Radian s Declining Markets Policy (page 4, second paragraph in Full Documentation Prime Credit). 23