TABLE OF CONTENTS PRODUCT DESCRIPTION Page # Product Description 3 ELIGIBILITY Occupancy 3 Underwriting Methods 3 Documentation Requirements 3 Transaction Types 3 Eligible Property Types, Ineligible Property Types 4 Eligible Borrowers 5 Maximum APR Rate Allowed in Texas, Texas Cash-Out Refinance Transaction 5 Geographic Restrictions 5 Minimum Loan Amount 5 Section 32 5 Non-Occupant Co-Borrowers 5 Assumability 5 Prepayment Penalty 5 Escrow Holdbacks 6 Non-ARMs Length Transactions, Non-Borrowing Spouse 6 Contributions by Interested Parties 6 First Lien Requirements 6-7 Age of Documents 7 UNDERWRITING Qualifying Ratios 7 Reserve Requirements 7 Payment Calculations for Debt Ratios 7 Credit Criteria - Credit History, Tradelines defined 8 1
TABLE OF CONTENTS PROPERTY/APPRAISAL Page # Appraisal Requirements 9 Age of Appraisal 9 Property Seasoning 9 Maximum Property Values 10 Soft Market Areas 10 SPECIAL NOTES Title Requirements 10 PROGRAM MATRICES Matrices 11-12 Full Doc 11 Stated Doc 12 2
PRODUCT DESCRIPTION Fixed rate S070: 15-Year Fixed S071: 30-Due-in-15 Fixed Lien position must be Second (No exceptions) OCCUPANCY Primary residence Second home Investment properties UNDERWRITING METHODS ExpressLoan TM or Traditional Underwriting method DU or LP DOCUMENTATION REQUIREMENTS Standard FNMA income and asset documentation Agency doc waivers are acceptable with limitations to debt ratios. TRANSACTION TYPE Purchase Rate and Term Cash-out 3
ELIGIBLE PROPERTY TYPES Attached/detached SFR I unit properties, or attached/detached PUD with minimum 750 sq ft Low-Rise Condos (up to 4 stories) and High-Rise Condos ( 5 Stories or more) with minimum 600 sq ft 2-4 Units Properties to 10 acres maximum Please refer to Matrices for specific LTV/CLTV and property criteria INELIGIBLE PROPERTY TYPES Properties currently listed for sale or within the last 12-Months Condotels Mobile Homes Co-ops Rural Properties Properties > 10 acres Agricultural Non-Warrantable condos Geodesic Domes Commercial Properties Earth Homes Manufactured Homes/Factory Built Attached/detached SFR 1 unit properties, or attached/detached PUD properties with less than 750 sq ft. Condo units with less than 600 sq. ft. 4
ELIGIBLE BORROWERS Program requires title to be placed in individual names for qualified inter Vivos Trusts only. U.S. Citizens and Permanent Resident Aliens Non-Permanent Resident Aliens 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. The Non-Permanent resident Alien borrower must meet all of the following requirements: o Two years employment in the U.S. o Two years credit history AND Two years residence history o Established asset base in the U.S. (Funds from outside the U.S. are not acceptable.) o Income and residency in the U.S. must be likely to continue for at least three years. o 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 If all borrowers are Non-Permanent resident aliens, the following restrictions apply: o Owner occupied and Second Home transactions only o Max CLTV is 90% for Piggy-back Second o Max CLTV is 70% for Stand alone Note: Non-Occupant Co-borrowers are NOT eligible. TEXAS CASH -OUT Texas Refinance Requirements: Loans subject to Article XVI Section 50 (a) (6) of the Texas Constitution are not permitted. APR s greater than 10% are not allowed in Texas MINIMUM LOAN AMOUNT Minimum loan amount is $15,000 SECTION 32 Section 32 loans are not permitted NON OCCUPANT CO-BORROWER Non-Occupying Co-borrowers are NOT eligible. ASSUMABLITY Not Allowed GEOGRAPHIC RESTRICTIONS All states in which lender is licensed Loans in Alaska are not permitted. PREPAYMENT PENALTY An optional unforgivable hard Prepayment Penalty (PPP) is available and defined as one that is applicable when the property is sold or refinanced (including loans to the same Lender or Note Holder). Unless otherwise required by state law, the PPP will equal six months interest if 20% or more of the original principal balance is prepaid during the previous 12 months. See rate sheet for additional details. 5
ESCROW HOLDBACK Not Allowed NON ARMS LENGTH TRANSACTION Not Allowed Non-arms Length Transactions 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.) who is involved in the lending process of the subject property o If borrowers are purchasing a property from a builder who is purchasing the borrowers existing residence. Non-Borrowing Spouse Non-Borrowing Spouse: o The Security instrument must be signed by Non-borrowing spouse where required by state law to create a valid lien. o For owner-occupied refinance transactions, the TIL and Right of Rescission must be signed in addition to the Security instrument CONTRIBUTIONS BY INTERESTED PARTIES Primary Residence All CLTVs: = 6% maximum contribution. Second/ Vacation Home: o CLTVs > 80% = 3% max o CLTV <= 80% = 6% maximum contribution. Investment Property: o 3% for Investor transactions. (No LTV limitation) FIRST LIEN REQUIREMENTS Eligible First Mortgages: o Conventional loans o VA or FHA loans (Stand alone transactions only. No VA Vendee). o Closed-end Fixed rate Second loans may be originated as Stand alones behind an existing Balloon First lien. The existing Balloon First lien must have 36-Months or more remaining on its current term. o Negative amortization loans are eligible provided the cap on the negative amortization does not exceed 125%. o When used in a Piggyback transaction with either the Pay Option ARM or Hybrid POA, (product codes A558/A559/A560, & A565/A566) the CLTV is NOT is not subject to the Gross-Up formula stated below. o Standalone transactions subordinate to a negative amortizing First Lien are subject to Grossed Up formula as stated below o When used in a Piggyback transaction with a negative amortization First lien (other than the Pay-Option ARM or Hybrid POA listed above), the CLTV is Grossed-Up based on the following formula: Continued on next page 6
Continued from previous page QUALIFYING RATIO Ineligible First Mortgages: o Contract for Deed, contract for purchase or land contracts o All inclusive Trust Deeds o Private party First Liens o Reverse Mortgages o Loans that provide for future advances o A fixed rate Second Mortgage behind a First Lien with a potential for negative amortization that has no ceiling or a ceiling in excess of 125% is not eligible for purchase. Maximum 50% Debt-to-Income (DTI) ratio allowed except for: o Stated Doc loans- Maximum 45% DTI RESERVE REQUIREMENTS Full Doc: No Reserves required Stated Income: o 3-Months PITI required on the Owner-Occupied Primary Residence o 6-Months PITI required on the Second Home and Investment Properties NOTE: Cash proceeds may NOT be used to meet reserve requirements. PAYMENT CALCULATIONS FOR DEBT RATIO 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 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 over 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 Buydowns: 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 Fixed Rate: The payment is a fully amortized fixed payment that is added to the housing expenses and other monthly debt to calculate the Debt-to-Income Ratio. o Balloons: The payment is based on a 30-Year fixed payment which is added to the housing expenses and other monthly debt to calculate the Debt-to-Income Ratio. AGE OF DOCUMENTS Credit documentation may not be dated more than 120 days prior to the Note date. Appraisals require a re-certification of value after 120 days. Appraisal report may not be older than 180 days from the Note date. 7
CREDIT CRITERIA A 24-month credit history is required. At least one (1) revolving, installment or mortgage tradeline must be rated for 24 months. Full Doc & Stated Income: All borrowers must have at least a 620 minimum credit score even if the primary borrower s score is used. FULL DOC: A three (3) bureau merged report with three (3) credit scores per borrower or an RMCR with two (2) scores per borrower is required. If three (3) credit scores are available, use primary borrower s middle score. If two (2) scores are obtained, use primary borrower s lowest score. Primary borrower is defined as the highest wage earner. If the borrower s incomes are equal, use the lowest score of all borrowers. STATED INCOME DOC: Use the lowest credit score among all borrowers. Determine the lowest overall credit score by selecting the lower of two (2) reported scores for each borrower, or the middle score of three (3) reported scores for each borrower. Credit History Pricing Table Credit Score 720 680-719 620-679 Payment History Trade-line Requirements* Bankruptcy 1 All Doc Types: 0x30 in 24-Months All Doc Types: 0x30 in 12-Months Full & Alt Doc: 1x30 in 12-Months Stated Doc: 0x30 in 12-Months Three (3) open & active trade-lines* are required with a 12 month history: At least one must be rated 24 months, All three trade-lines must have had activity in the last 12 months. Note: History payment may count towards tradeline requirements if reported on credit report directly by Lender (may not be non-traditional credit) Must have been discharged for minimum 7-Years * and reestablished credit Must have been discharged for minimum 5-Years * and re-established credit Must have been discharged for minimum 5-Years * and re-established credit Foreclosure 1 Must have occurred at least 7-Years ago * and re-established credit Must have occurred at least 5- Years ago * and re-established credit Must have occurred at least 5-Years ago * and re-established credit Adverse Credit, open within the last 12-Months: (Includes collections, With prior With prior approval only if over charged-off approval when over $200 $500 With prior approval only if over $500 accounts, judgments, liens, All must be paid at closing All must be paid at losing All must be paid at closing repo s, garnishment, any 90-Day delinquency.) 1 Bankruptcy/Foreclosures occurring less than 7 (but at least 5) years with 720 Credit Score must be priced @ 680-719 Credit Score level. Minimum of 24-Months of re-established credit that must include same tradeline criteria stated above. 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. *Note: Collections, judgments, charge-offs, repossessions, foreclosures, bankruptcy payment plans, consumer credit counseling, authorized user accounts and tradelines reported by utility companies (including utility companies in regions where credit reporting is a normal practice)do NOT count as trade lines. Non-traditional (alternative) credit is NOT acceptable. 8
PROPERTY/ APPRAISAL APPRAISAL REQUIREMENTS AGE OF APPRAISAL Appraisal requirements are as follows: o DU/LP appraisal requirements are acceptable*. o Combined loan amounts to $1MM or a Standalone = 1 Full Appraisal Report o Combined loans $1MM to $1.5MM = 1 Full Appraisal Report + 1 Field Appraisal 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 4-Months (120 days) or less from the Note date. A re-certification of value is required for appraisals dated more than 4-Months from the Note date. Drive by appraisals must be dated no more than 4-Months (120 days) from the Note date. If the drive by appraisal is more than 4-Months from the Note date, a new drive by appraisal is required. PROPERTY SEASONING Purchase Transactions: Use the lesser of the Sales Price or Appraised value. Refinance Transactions: If the property was purchased within the last 12-Months, the value is based on the current Appraised value or acquisition costs, whichever is less OR If the property was purchased more than 12-Months ago or for new construction purchased within the last 12- Months, the current Appraised value is to be used. 9
MAXIMUM PROPERTY VALUE No limitations SOFT MARKET AREAS SPECIAL NOTES A soft market area is defined as any area that shows evidence of declining property values, an over-supply of property, and/or marketing time of more than 6 months. Any property identified in the appraisal report located in a soft market, will require: o o Title Requirements: A 5% LTV reduction from permitted financing stated in the program matrix. In addition to the three comparables normally required, at least one and preferably two comparable pending sales are required to validate the value Loan amounts less than or equal to $100,000 require a Title Search or its equivalent unless the under the following exceptions: A full ALTA policy for loan amounts greater than $50,000 is required in Oregon. A full ALTA policy is required only on Standalone transactions in Florida. Vermont requires a full ALTA on all transactions regardless of loan amount. Loan amounts greater than $100,000 require a full ALTA policy. Simultaneous (piggyback) title requirements: 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). Loan amounts greater than $100,000 require the ALTA policy to cover both the First and Second lien. Any loans closed on properties that have a change in vesting or is a leasehold must have a full ALTA policy. 10
FULL DOCUMENTATION Purchase, Rate & Term, and Cash-Out Transactions Doc Type Occupancy Property Type Primary SFR s, PUD s Attached Condos 2-Units Maximum Loan Amt Maximum CLTV Minimum Credit Score $250,000 100% 660 1 $100,000 100% 660 $150,000 90% 620 $500,000 80% 720 $300,000 80% 620 $150,000 95% 660 $150,000 80% 620 Maximum Debt Ratio Full 3-4 Units $150,000 90% 660 $150,000 80% 620 50% Second Home SFR s, PUD s Attached Condos $150,000 90% 680 $150,000 80% 620 2-4 Units N/A N/A N/A Investment SFR s, PUD s Attached Condos $150,000 90% 680 $150,000 80% 620 2-4 Units $150,000 90% 680 1. All borrowers are required to have a minimum credit score of 660. 11
STATED INCOME Purchase, Rate & Term, and Cash-Out Transactions Doc Type Occupancy Property Type Maximum Loan Amt Maximum CLTV Minimum Credit Score Maximum Debt Ratio Primary SFR s, PUD s Attached Condos $250,000 95% 680/700 1 $250,000 90% 660 $300,000 80% 620 2-4 Units $150,000 90% 660 Stated Income Second Home SFR s, PUD s Attached Condos $150,000 $150,000 90% 80% 660 620 45% 2-4 Units N/A N/A N/A Investment SFR s, PUD s Attached Condos $200,000 80% 660 2-4 Units $200,000 75% 660 1 CLTVs > 90% are allowed for Salaried borrowers with a 700 minimum credit score. Self-Employed borrowers are allowed with a 680 minimum credit score. 12