DREAM MAKER FIXED RATE LOW INCOME / LOW FICO WHOLESALE PRODUCT GUIDELINES PRODUCT CODES: C30XO C20XO C15XO C10XO Several states and local municipalities have enacted legislation which define High Cost loans based on APR and fee thresholds which may or may not relate to the HOEPA thresholds. These types of loans typically have various restrictions. It is the policy of not to purchase any loan defined as high cost under any federal or state law/regulation or local ordinances and any subsequent amendments thereto. PRODUCT Amortization 20-30 Year FOOTNOTES Description Fixed rate, fully amortizing with level payments for life of loan. This purchase and rate/term refinance program allows for zero down payment and closing costs by using a second mortgage to finance the down payment, closing costs and prepaids. Second Mortgage must come from a source other than. Maximum Loan Amount Eligible Transactions Max LTV (TLTV) Purchase & Rate/Term Refi 1 Unit 2 Units 3 Eligible States Eligible Properties Borrower Property Ownership Restrictions Eligible Borrowers Conforming limits - Purchase - Rate and Term Refinances (Loans must have been purchase money A quality mortgage at origination) LTV TLTV 1 Min FICO 100% 105% 620 97% 105% 580 2 100% 100% Noncredit payment reference 97% 100% 660 97% 100% Non credit payment reference - All loans manually underwritten by. - Not LP or DU eligible. If loan put through LP or DU, loan is ineligible for this product. 1 Secondary financing must come from source other than. Must meet FHLMC Affordable Second guidelines. Minimum LTV of 95.01% if secondary financing is used. 2 A minimum down payment of $500 from borrower funds is required for FICO <620. 3 Limited funds available. Not available in Alaska and Hawaii. Broker must have met all appropriate license requirements for each state. Broker must obtain an approval for each state from prior to registering and locking loans. A copy of such licenses must be provided to on an annual basis. Periodically, may identify certain areas as "Soft Market" areas, which may result in applying restrictive program strategies to minimize this risk. Please contact your registration desk for further details. Dade and Broward counties in Florida are not eligible counties. Refer to Predatory Lending Section at the beginning of this Chapter for additional state restrictions. - Single Family detached or attached properties - Primary: 1-2 Units - FHLMC Warrantable Condo s and PUDs - Co-ops and Manufactured Homes are ineligible - Appraisal must indicate the following: - Area at least 25% developed - Increasing or stable property values - Borrower must not have an ownership interest in any other real property other than the subject property as of the date of closing. - NOTE: Does not apply if the ownership interest in other real property is with a related person, ex-spouse, or with any other parties as a result of inheritance, provided that the borrower does not occupy this property and his/her contingent liability can be disregarded by verification that someone other than the borrower has been making the payments for the most recent 12 months. Verification may be by obtaining copies of cancelled checks or by a statement from the lender. All payments must have been made in a timely manner. - U.S. Citizens - Permanent Resident Aliens - Legal residents of the U.S. - Non-occupant co-borrowers are eligible provided that: 1. All non-occupying borrowers are related by blood or if unrelated, can document an established relationship other than through the Mortgage financing transaction and: 2. The income of the non-occupying borrowers is included in the calculation for determining the annual income limitation. 3. The qualifying ratios meet the requirements for non-occupying co-borrowers noted below. rev. 09/04 PRODUCT CODES: C30XO C20XO C15XO C10XO Page 1 of 5
Qualifying Ratios 7100 East Pleasant Valley Road, Suite 155 Independence, OH 44131-45% maximum DTI ratio when only verified income is used to qualify borrower. Self-Employed Stated Income in addition to verified income - If Stated Income is used, 41% is Maximum DTI Ratio using both Verified and Stated Income Combined Qualifying Income). Stated Income may only be used in combination with Verified Income. Only half of the Stated Income from the application may be used in the DTI calculations. Also, the Maximum DTI Ratio using the Verified Income portion of the Combined Qualifying Income may not exceed 50%. There are two calculations that must be made when using Stated Income: 1. Verified Income + ½ of Stated Income from Application = DTI <= 41%. 2. DTI <= 50% using the Verified Income portion only. Non-Occupying Coborrower Qualifying Rate General Underwriting Guidelines - If the income from a non-occupant co-borrower is used, the overall ratio using both incomes may not exceed 41% while the debt ratio of the occupant borrower by itself cannot exceed 55%. (Stated income cannot be used if there is a non-occupant co-borrower) - Note Rate Minimum FICO score of 580 for 97% LTV Minimum FICO score of 620 for 100% LTV Minimum FICO of 660 for 2 unit properties Non-credit payment references may be used if no valid FICO for up to 100% LTV. - Although minimum FICO scores have been set, the underwriter still needs to determine a reasonable expectation that the borrower has the ability and willingness to repay the loan. Extenuating circumstances should be documented to the extent possible and a reasonable determination that the situation is corrected. Low scores due to financial mismanagement may require additional review and justification of the underwriters'determination of the ability and willingness to repay the loan. A lesser period for reestablishment of credit than stated in the guide may be justified as determined by the underwriter. - Non-credit payment references (such as rental history, payment of utility bills, payment of medical bills, deposit history, etc.) must be documented to FHLMC guidelines. This documentation should include the following information: * To whom the payments were made * The nature of the obligation (utilities, payment for purchases, insurance, etc.) * When the account was opened * The amount of the payment required or made * When payments are due * A payment history * Any outstanding balance * The historical status of the account in a format indicating the number of times and duration of times past due. - No income limits on FICO's >679. Otherwise either the borrower's annual income does not exceed 120% of area median income (150% in Calif.), OR the Mortgaged Premises are located in a Concentrated Area. (Defined as: Population of non-white or Hispanic comprise 50% or more of the population.) - No homebuyer education required for borrowers with FICO scores > 679 or for rate/term refinances. - Not restricted to first time homebuyers. (See Borrower Property Ownership Restrictions section.) - Bankruptcy, foreclosure or deed in lieu of foreclosure requirements: When a Borrower s previous credit history indicates a bankruptcy, foreclosure or deed-in-lieu of foreclosure, the Seller must obtain a credit report or other credit documentation evidencing the Borrower has re-established an acceptable credit reputation for at least 4 years. Two years may be acceptable after the discharge of a chapter 13 bankruptcy, regardless of circumstances. A 2-year reestablishment of credit may also be acceptable if the previous action related to a Chapter 7 or Chapter 11 bankruptcy, a foreclosure or deed-in-lieu of foreclosure that resulted in extenuating circumstances as evidenced by the documentation in the Mortgage file. rev. 09/04 PRODUCT CODES: C30XO C20XO C15XO C10XO Page 2 of 5
General Underwriting Guidelines (continued) Processing Options Underwriting Submission Borrower(s) Income Limitations - All other underwriting guidelines not specifically addressed will default to standard FHLMC guidelines. - Proceeds from second mortgage may not be used to payoff debt to qualify for mortgage. - Final approval must be issued by the Underwriting Dept. The Underwriter will place insurance coverage and provide certificate of insurance with approval indicating the appropriate MI % coverage, and structure (standard or A minus) required. - Loans must be manually underwritten by Underwriting Dept. - Loans with higher credit scores that do not need any of the special provisions of this program should use standard programs. - Full documentation - Alternative documentation Loans must be submitted for underwriting to Underwriting Department. DU and LP approvals are not acceptable. Loans must be manually underwritten. - Income used to qualify (including any co borrowers) cannot exceed 120% of area median income (150% in California.) Note: Income Limits do not apply if: The Mortgaged Premises is located in a Concentrated Area. (Defined as: Population of non-white and Hispanic comprises 50% or more of the population.) or FICO score is > 679. Trailing Spouse Income - Not allowed. Tax Exempt Income - Tax exempt income may be grossed up by 25%. Funds for down payment may be from the following sources: Source of Funds 1. Gift from related person Fund Verification 2. Grant from an agency 3. Affordable second - Cash on hand is an acceptable source of funds provided the following conditions are met: 1. Minimum LTV of 90.0% 2. Lender can reasonably conclude that this is a cash-basis individual and cash could have been saved by the borrower. 3. Borrower may have a checking or savings account and may have been a limited user of credit. Credit report should not show more than their trade line references. 4. Updated credit report does not show use of any new accounts or substantial increases to existing accounts. 5. Monthly budget and residual income analysis form confirms total monthly residual income is a positive number. 6. Maximum cash on hand limited to the lesser of 3 percent of loan amount or $2,500. Minimum Borrower Funds/Reserves - To use cash on hand mortgage file must contain: 1. Completed monthly budget and residual analysis form. 2. Copies of three month's cash receipts (such as rent or utility receipts) documenting use of cash to pay debt obligations. 3. Copies of three month's statements for any open revolving accounts verifying no recent cash advances. Receipts may indicate that borrower has checking or savings account. 4. Updated credit report, one week before closing, that reveals no new accounts or substantial increases to balances on existing accounts. - 1 unit property requires 1-month reserves. - 2-unit property requires 2 months reserves. - Reserves must come from borrower's funds. - A minimum of $500 down payment from borrower's funds is required for FICO's <620. rev. 09/04 PRODUCT CODES: C30XO C20XO C15XO C10XO Page 3 of 5
Closing Costs/Prepaids Homebuyer Education Maximum seller Contributions 7100 East Pleasant Valley Road, Suite 155 Independence, OH 44131 Closing costs/prepaids may be paid by any combination of the following: - Borrower s own funds - Verified Gifts - Secured Debt - Premium Pricing - Seller contribution - "Affordable" second Funds from "Affordable Second" Mortgage must meet the following requirements: 1. Must not require balloon payments before the maturity or payment in full of first mortgage. 2. Interest rate may not be higher than the rate on the first mortgage. 3. If monthly payments do not begin prior to the 61st payment of the first mortgage, affordable second payment may be excluded from qualifying ratios. 4. Are typically provided by an agency in conjunction with a financial assistance program. 5. Cannot be in the form of a HELOC. - To ensure that the borrower understands the home buying process and is prepared for the added responsibilities of homeownership, Borrowers are required to participate in pre-purchase homebuyer education and counseling through either MGIC or Radian prior to mortgage closing. Borrowers with FICO scores >680 are exempt from this requirement. Refinance transactions are also exempt from this requirement. - Borrowers purchasing 2 unit dwellings must participate in landlord counseling through either Radian or MGIC and documented in underwriting file. - The homebuyer education counseling through either MGIC or Radian must be properly documented in the underwriting submission file. - will provide post-purchase counseling, including early intervention in the event of a delinquency, at no cost to the Borrower. Counseling services will be available to all Borrowers who experience problems meeting their Mortgage payment obligations. will send the Borrower a letter advising him/her of the availability of free counseling. If the borrower becomes delinquent, will refer a nonprofit counseling center to act as an independent credit counselor to assist the Borrower in managing his or her personal finances. - 6% of the lesser of sales price or appraised value, not to exceed actual closing costs. Mortgage Insurance LTV Coverage 95.01-100.0% 35% 90.01-95.0% 30% 85.01-90.0% 25% 80.01-85.0% 12% Termite Inspection - Required for existing properties located in areas prone to termite infestation. Appraisal - Need fully completed URAR. - MI Premiums paid monthly - Use MGIC and Radian only - A minus MI rates will apply for FICO scores <620. A sample of A minus premiums at different credit levels are as follows: FICO % Coverage Premium 600-619 35% 1.88 580-599 35% 2.57 Beware of this possibility when quoting MI cost to the borrower: Underwriter will communicate place appropriate MI coverage & provide certificate of insurance with approval. Well & Septic Requirements Escrow Completion Impound Escrows Temporary Buydowns - A satisfactory water test/well certification indicating compliance with acceptable local standard and/or a satisfactory septic certification from a local health authority will only be required if: 1. The appraiser recommends or requires a test, or 2. The Purchase Agreement requires a test. - An escrow account may be set up for completion of minor items that do not affect livability. requires an escrow amount of one and one-half times the estimated dollar amount (bid) to complete the work or $1,000 whichever is higher. It is the policy of to recommend only one payout of the escrow account. - Escrows may be waived on LTV rations of 80% or less for a.25 discount point charge. The borrower must sign an Agreement for Waiver of Loan Escrows. - Not allowed. rev. 09/04 PRODUCT CODES: C30XO C20XO C15XO C10XO Page 4 of 5
Assumability Prepayment Penalty Late Charges Loan Disclosures Title Insurance Closing Documents - Non-assumable - None. - 5% or the highest allowed by state law. - Not required. - Standard coverage in the amount of the mortgage, including the following endorsements: - ALTA 4 Condo Endorsement (if applicable). - ALTA 5 PUD Endorsement (if applicable). - ALTA 8.1 Environmental Protection Lien Endorsement (all loans). - ALTA 9 Comprehensive Endorsement (all loans). - Any other endorsements required by state law or regulation. Use most current version required by FHLMC/FNMA for the following documents: Note: - Multistate or state specified, if applicable - Fixed Rate Note FNMA/FHLMC 3200 Rider to Mortgage: - PUD units only - FNMA/FHLMC 3150 Multistate Planned Unit Development Rider - CONDO units only - FNMA/FHLMC 3140 Condominium Rider. - 2nd Home Rider - FHLMC 3890 Second Home Rider for N/O/O properties. - 2-4 Unit Properties - FNMA/FHLMC 3170 Mulitstate one-to-four family Rider. Security Instrument: - In all states, use the state-specific FNMA/FHLMC Mortgage/Deed of Trust rev. 09/04 PRODUCT CODES: C30XO C20XO C15XO C10XO Page 5 of 5