zuma prime - jmac lending · max loan amount 5,000,000 rate & term refinance up to 55% max dti...

Zuma PrimeEffective Date: 2.27.2020

Maximum LTVs Full Doc Bank Statement / WVOE / Asset Utilization Other Doc Restrictions Second Homes Reserve Requirements

FICO Loan Amount Purchase & R/T Cash Out Purchase & R/T Cash Out Standard Doc - 1 yr • Max LTV/CLTV: 85% Loan Amounts <= $2mm: 6 mo

720+ <=1,500,000 95*/ 90 85 90 85 • Max LTV/CLTV: 85% • Max LTV/CLTV (Cash-Out): 80% Loan Amounts > $2mm: 12 mo

1,500,001-2,500,000 85 80 85 75 • Max DTI: 50% • Residual Income: $2,500 Residual Income

2,500,001-3,000,000 80 70 70 65 Alt Doc - 12 mo +$250 for the first dependent • $2,500 /mo

3,000,001-5,000,000 70 60 70 60 • Max LTV/CLTV: 85% +$125 for each additional dependent + $250 for the first dependent

700 - 719 <=1,500,000 90 85 90 85 • Max DTI: 50% Investment Properties +$125 for each add dependent.

1,500,001-2,500,000 85 75 80 75 Alt Doc - Asset Utilization Max LTV/CLTV

2,500,001-3,000,000 75 70 70 60 • Max LTV/CLTV: 75% Program max: 80% Prepayment Penalty

3,000,001-5,000,000 65 60 65 60 • Min Credit Score: 680 Cash-out: 75% • Allowed on Investment only

680 - 699 <=1,500,000 90 85 90 85 • Max Loan: $1,500,000 Loan Amount>$2mm: 75% • Terms up to 3 years Allowed

1,500,001-2,500,000 85 75 80 75 • Min Reserves: 6 Months Other Restrictions • Penalties not available on loans

2,500,001-3,000,000 75 65 70 60 • Max DTI: 50% • Rural Properties not allowed vested to individuals in IL and NJ

3,000,001-5,000,000 65 55 65 55 Alt Doc - WVOE Other LTV/CLTV Limits • Prepay not allowed in MD, MI, MN,

660 - 679 <=1,500,000 90 80 85 80 • Max LTV/CLTV: 80% Condo & 2-4 Unit: 85% NM, OH

1,500,001-2,500,000 80 75 80 75 • Max LTV/CLTV (Cash-Out): 70% Non-Warrantable Condo: 80% • Prepay not allowed in PA for loan < $250,324

2,500,001-3,000,000 70 65 70 60 • Max DTI: 50% Rural Property: 80%

640 - 659 <=1,500,000 85 80 85 80

1,500,001-2,000,000 80 70 80 70

2,000,001-3,000,000 70 65 70 60

620 - 639 <=1,500,000 85 80 80 75

1,500,001-2,000,000 80 70 80 70

2,000,001-3,000,000 70 65 70 60

Program Restrictions Debt Consolidation Refinance DTI Residency

Housing 0x30x12 • Applies to Primary Residences only Up to 43% Max DTI • US Citizen

Credit Event (BK/FC/SS/DIL) 48 mo. • Transactions where mortgage & non-mortgage debts are paid off and monthly debt pmnts are lowered by >= • All Doc Types - No rate adjustment • Perm & Non-Perm resident alien

Min FICO 620 10% and Closing Costs are recouped within 60 mo. Cash-in-hand may not exceed $5,000 or 2% of the loan amt. Up to 50% Max DTI

Max LTV: Purchase & R/T 95* / 90 • R/T Refi LTVs available for Debt Consolidation loans. LTV/CLTV capped at 85% • Standard Doc - 1 yr & 2 yr

Max LTV: Cash-Out 85 • Cash-in-hand may be used to meet reserve requirements for loans meeting the Debt Consolidation definition • Alt Doc - 24or12 mo Bank Statement &

Max CLTV 95* / 90 • Reserve requirements reduced to 1-month for all income document types when all of the above meet WVOE & 24 or12 mo CPA Prepared P&L ; Asset Util Interest Only

Max Loan Amount 5,000,000 Rate & Term Refinance Up to 55% Max DTI • IO Period: 120 Months

Fixed Terms 30 Year Fixed & 15 Year Fixed • Reserve requirements are waived when monthly payments are reduced by at least the 10% • Standard Doc - 2 yr • Qualifying Term: Amort

5/1 LIBOR ARM (2/2/5 Caps) 1 YR LIBOR - 3.5 % Margin/Floor Compliance • Total of 12 Mo Reserves required Term (360 or 240 mo)

7/1 LIBOR ARM (5/2/5 Caps) 1 YR LIBOR - 3.5 % Margin/Floor • Impounds are required • Max LTV/CLTV: 80 • Loan Term: 480 or 360 mo

Available Doc Types Standard Doc - 1 or 2 yr • Loans considered high-cost by Federal or State law not allowed • Primary Residence Only • Max LTV/CLTV: 85%

Alt Doc - WVOE (Primary Res) • Points and Fees may not exceed 5% (Business Purpose loans exclude prepay penalty) • First Time Home Buyer not permitted

Alt Doc - 12 or 24 mo Bank Statement Financed Properties • Purchase, R/T Refi, & Debt Consol Only Interested Party Contributions

Alt Doc - 12 or 24 mo CPA Prepared P&L • 20 financed properties including subject • Residual Income: $3,000 • LTV>=80: 4%

Alt Doc - 1 or 2 years 1099 • Add 2 mo reserves for each added financed property. Total reserve requirement capped at 12 mo + $250 for 1st dependent • LTV<80: 6%

• Maximum exposure to a single borrower $5MM or 6 properties + $125 for each additional dependent • Investment (all LTV's) 3%

(Only 3 months reserve required on subject property; Min 680 Fico; 75% Purchase / R&T, 70% Cash-Out, Owner occupied, $2M max loan amount, 36% max DTI, Price as 24 months bank statements)

Loan Amount Loan Amount > $3,000,000 Cash-Out Limit / % of Appraised Value (Cash-In-Hand)

• Min Loan amount: $150,000 • Only Available in the following states: CA, IL, FL, NJ, MD, VA, WA % Property Value Primary & 2nd Home Investor

• Loan Amounts>$1MM & Cash-Out & LTV > 70% • Cash-Out limited to the lower of 50% of property value or $3mm Program Max: 75% 70%

require 2 appraisals • Property Types: SFR, Warrantable and Non-Warrantable Condos Loan Amnt > $1mm: 70% 65%

• Loan Amounts>$1.5MM require 2 appraisals - FL Condos limited to 55% LTV Loan Amnt > $3mm: 50% 50%

• Loan Amounts>$3MM, see additional overlays • See Guides for specific appraisal requirements (OVERLAYS APPY) Condo & 2-4 Unit: 70% 65%

page 1

• Foreign National not eligible, see

FN matrix

Alt Doc - 24 mo CPA prepared P&L ONLY

Alt Doc - Asset Utilization

Zuma Credit FlexEffective Date:

Maximum LTVs Full Doc Bank Statement / WVOE / Asset Utilization Other Doc Restrictions Second Homes Reserve Requirements

FICO Loan Amount Purch / RT Refi Cash-Out Purch / RT Refi Cash-Out Standard Doc - 1 yr • Max LTV/CLTV: 80% Standard Doc (All): 2 mo

720+ <=1,000,000 90 85 90 80 • Max LTV/CLTV: 85% • Min FICO: 540 Alt Doc (All): 4 mo

1,000,001-1,500,000 90 80 85 75 • Min Credit Score: 620 • A, B, & B- Grades Only Investor: 6 mo

1,500,001-2,000,000 85 75 85 75 • Max DTI: 50% • Residual Income: $2,500 Loan Amounts > $1mm: 6 mo

2,000,001-3,000,000 80 70 70 65 • A, B, & B- Grades Only +$250 for the first dependent Loan Amounts > $2mm: 12 mo

3,000,001-5,000,000 70 60 70 60 Alt Doc - 12 mo +$125 for each additional dependent

680 - 719 <=1,000,000 90 80 85 80 • Max LTV/CLTV: 85% Residual Income

1,000,001-1,500,000 90 80 85 75 • Min Credit Score: 620 Investment Properties • $1,250 /mo

1,500,001-2,000,000 85 75 85 75 • Max DTI: 50% Max LTV/CLTV + $250 for the first dependent

2,000,001-3,000,000 75 65 70 60 • A, B, & B- Grades Only Program max: 80% +$125 for each add dependent.

3,000,001-5,000,000 65 60 65 60 Alt Doc - Asset Utilization FICO<640: 75%

660 - 679 <=1,000,000 85 80 85 80 • Max LTV/CLTV: 75% Cash-out: 75%

1,000,001-1,500,000 85 80 85 75 • Min Credit Score: 680 Cash-out & FICO < 640: 70%

1,500,001-2,000,000 85 75 85 75 • Max Loan: $1,500,000 Loan Amount>$2mm: 75%

640 - 659 <=1,000,000 85 80 85 80 • Min Reserves: 6 Months Other Restrictions

1,000,001-1,500,000 85 75 85 75 • Max DTI: 50%, when applicable • Min FICO: 600

1,500,001-2,000,000 80 75 80 75 • A Grade Only • A, B, & B- Grades Only

620 - 639 <=1,000,000 85 80 85 80 Alt Doc - WVOE • Rural Properties not allowed

1,000,001-1,500,000 80 75 80 75 • Max LTV/CLTV: 80%

600 - 619 <=1,000,000 80 75 N/A N/A • Max LTV/CLTV (Cash-Out): 70% Other LTV/CLTV Limits Residency

1,000,001-1,500,000 80 75 N/A N/A • Min Credit Score: 620 Condo: 80% • US Citizen

• Max DTI: 50% 2-4 Unit: 80% • Perm & Non-Perm resident alien

• A & B Grades Only Rural Property: 80%

Loan Amount<150k: 80%

Grade Restrictions DTI Interest Only

Grade A B B- C Up to 43% Max DTI • IO Period: 120 Months

Housing 1x30x12 0x60x12 0x90x12 1x120x12 • Available for all Doc Types, no rate adjustment • Qualifying Term: Amort Term

BK (Chap 13 Discharge) 12 mo Settled Settled Settled Up to 50% Max DTI (360 or 240 mo)

BK (Other) 24 mo 24 mo 12 mo Settled • Standard Doc - 1 yr & 2 yr • Loan Term: 480 or 360 mo

Foreclosure 24 mo 24 mo 12 mo Settled • Alt Doc - 24or12 mo Bank Statement & WVOE • A & B Grades

Short Sale/DIL 24 mo 24 mo Settled Settled & 24or12 mo CPA Prepared P&L & Asset Util. • Max LTV/CLTV: 85%

Min FICO 600 600 600 600 Up to 55% Max DTI • Min FICO: 600

Max LTV: Purchase & R/T 90 85 85 70 • Standard Doc - 2 yr

Max LTV: Cash-Out 85 80 75 65 • Total of 12 Mo Reserves required

Max CLTV 90 90 85 70 • Max LTV/CLTV: 80 Interested Party Contributions

Max Loan Amount 5,000,000 1,500,000 1,000,000 1,000,000 • Primary Residence Only • LTV>=80: 4%

Fixed Terms 30 Year Fixed & 15 Year Fixed 30 Year Fixed & 15 Year Fixed 30 Year Fixed & 15 Year Fixed 30 Year Fixed & 15 Year Fixed • First Time Home Buyer not permitted • LTV<80: 6%

5/1 LIBOR ARM (2/2/5 Caps) 1 YR LIBOR - 4.0 % Margin/Floor 1 YR LIBOR - 4.0 % Margin/Floor 1 YR LIBOR - 5.0 % Margin/Floor 1 YR LIBOR - 5.0 % Margin/Floor • Purchase, R/T Refi, and Debt Consol Only

7/1 LIBOR ARM (5/2/5 Caps) 1 YR LIBOR - 4.0 % Margin/Floor 1 YR LIBOR - 4.0 % Margin/Floor 1 YR LIBOR - 5.0 % Margin/Floor 1 YR LIBOR - 5.0 % Margin/Floor • Residual Income: $3,000

Available Doc Types Standard Doc - 1 or 2 yr Standard Doc - 1 or 2 yr Standard Doc - 1 or 2 yr Standard Doc - 2 yr + $250 for 1st dependent Max Acreage

Alt Doc - WVOE Alt Doc - 24 mo Bank Statement + $125 for

each

• 10 Acres

Alt Doc - Asset Utilization Alto Doc - 12 or 24 mo Bank State. Alt Doc - 24 mo CPA Prepared P&L

Alt Doc 12 or 24 mo Bank State. Alt Doc - 12 or 24 CPA P&L Alt Doc - 2 years 1099 Financed Properties

Alt doc -12 or 24 CPA P&L Alt Doc - 1 or 2 yrs 1099 • 20 financed properties including subject

Alt Doc 1 or 2 yr 1099 • Add 2 mo reserves for each added financed property. Total reserve requirement capped at 12 mo

• Maximum exposure to a single borrower $5MM or 6 properties

Loan Amount Debt Consolidation Refinance Cash-Out Limit / % of Appraised Value (Cash-In-Hand)

• Min Loan amount: $100,000 • Applies to Primary Residences only % Property Value Primary & 2nd Home Investor

• Loan Amounts>$1MM & Cash-Out & LTV > 70% require 2 appraisals • Transactions where mortgage & non-mortgage debts are paid off and monthly debt pmnts are lowered by >= Program Max: 75% 70%

• Loan Amounts>$1.5MM require 2 appraisals 10% and Closing Costs are recouped within 60 mo. Cash-in-hand may not exceed $5,000 or 2% of the loan amt. Loan Amnt > $1mm: 70% 65%

• Loan Amounts>$3MM, see additional overlays • R/T Refi LTVs available for Debt Consolidation loans. LTV/CLTV capped at 85% Loan Amnt > $3mm: 50% 50%

Loan Amount > $3,000,000 • Cash-in-hand may be used to meet reserve requirements for loans meeting the Debt Consolidation definition Condo & 2-4 Unit: 70% 65%

• Only Available in the following states: CA, IL, FL, NJ, MD, VA, WA • Reserve requirements reduced to 1-month for all income document types when all of the above meet Prepayment Penalty

• Cash-Out limited to the lower of 50% of property value or $3,000,000 Rate & Term Refinance • Allowed on Investment properties only

• Property Types: SFR, Warrantable and Non-Warrantable Condos • Reserve requirements are waived when monthly payments are reduced by at least the 10% • Terms up to 3 years allowed

- FL Condos limited to 55% LTV Compliance

• See Guidelines for specific appraisal requirements (OVERLAYS APPY) • Impounds are required • Prepayment penales not allowed in MD, MI, MD, NM, OH

• Loans considered high-cost by Federal or State law not allowed • Penalties not allowed loan amount < $250,324 in PA

• Points and Fees may not exceed 5% (Business Purpose loans exclude prepay penalty) page 2

2.27.2020

• Foreign National not eligibile, see FN

tab

Alt Doc - WVOE (Primary Res)

• Penalties not available on loans vested to individuals in IL and NJ

4

Topic ZUMA GENERAL PROGRAM GUIDELINES

Early Paid Off Policy (EPO) EPO timeline is 12 months (365 days) from closing date of the loan.

Eligible Products

• Fully Amortizing: Qualifying Ratios are based on PITIA payment with the principal and interest payments amortized over the loan term

o 5/1 LIBOR: (2/2/5 Cap Structure)

Qualifying Rate (All Doc Types): Qualify borrower(s) at the greater of the Fully-Indexed Rate or Note Rate.


Qualifying rate (All Doc Types): qualify borrower(s) at the greater of the Fully-Indexed Rate or Note Rate.

o 15 Year Fixed

o 30 Year Fixed

• Interest-Only: Qualifying Ratios are based on PITIA payment with the principal and interest payments amortized over the scheduled remaining loan term at the time of recast after the

interest only period has expired.

o Loan Terms: 360 or 480 Months



Interest-Only Period: 10 Year Interest-Only Period

Amortization Periods: 20 Year or 30 Year



Interest-Only Period: 10 Year Interest-Only Period

Amortization Periods: 20 Year or 30 Year

o 30 Year Fixed

Qualifying rate (All Doc Types): qualify borrower(s) at the Note Rate.

Interest-Only Period: 10 Year Interest-Only Period followed by 20 Year Amortization

o 40 Year Fixed

Qualifying rate (All Doc Types): qualify borrower(s) at the Note Rate.

Interest-Only Period: 10 Year Interest-Only Period followed by 30 Year Amortization

Interest Only

Restrictions

• Primary or Second Home

o Maximum LTV/CLTV: 85%

o Minimum FICO: 600

• Investment

o A and B grades only


o Minimum FICO: 600

o Maximum total loan term: 30-years

5


Interested Party

Contributions (IPC)

Owner Occupied / Second Home

• LTV equal to or greater than 80%: max 4%

• LTV less than 80%: max 6%

Non-Owner Occupied

• May not exceed 3%

Contributions may only be used for closing costs and prepaid expenses and may never be applied to any portion of the down payment or contributed to the borrower’s financial reserve requirements.

Escrow • Escrow Funds / Impounds are required

• Escrow Holdbacks – Not Allowed

Secondary Financing

Secondary financing must be institutional. Lenders must employ reasonable underwriting policies and procedures designed to determine whether the borrower has applied for another credit

transaction secured by the same dwelling. Existing secondary financing must be subordinated and recorded or refinanced. HELOC CLTV must be calculated at the maximum available line amount

unless the borrower can provide documentation the line of credit is past its draw period.

Automated Underwriting

System (AUS)

The borrower must not be eligible for financing through a GSE or Government loan program on full income documentation loans within agency conforming and high balance loan limits; an AUS

Findings with a “Refer”, “Approve/Ineligible”, or “Out of Scope” response is required, or satisfactory evidence loan is not eligible for GSE or Government loan programs.

Previously Listed

Properties

• For all cash-out refinances, properties previously listed for sale should be seasoned at least 6 months from the listing contract expiration date. For investment properties, listing expiration

of less than 6 months permitted with a prepayment penalty.

• For all rate and term refinances listing should be 1 day from contract expiration to application date.

Appraisal

• Appraisal Age: Appraisals must be dated within 120 days prior to Note date. After 120 days period, a re-certification of value is acceptable up to 180 days from original appraisal date, after 180

days a new appraisal is required.

• Personal Property: Any personal property transferred with a property sale must be deemed to have zero transfer value, as indicated by the sales contract and the appraisal.

• Appraisal Transfers: Allowed.

• Appraisal Form: A full Interior & Exterior appraisal report on appropriate Fannie / Freddie form is required for all properties. Property Inspection Waiver (PIW) or exterior-only inspections are

not allowed.

• Fannie Mae Market Conditions Addendum: A Fannie Mae Form 1004MC Market Conditions Addendum, 1004MC must be included in the loan file.

A second appraisal is required when any of the following conditions exist. When a second appraisal is provided, the transactions “Appraised Value” will be the lower of the 2 appraisals. The second

appraisals must be from a different company and appraiser than the first appraisal.

o Loan amount is greater than $1,500,000

o The transaction is a cash out, the LTV exceeds 70% and the loan balance exceeds $1,000,000

o The transaction is defined as flip property defined in the Flipped section of this guide

o As required under appraiser review products

Appraisal Review Products

(Lender to order)

An appraisal review product is required on every loan file unless a 2nd appraisal is required, or the appraisal report has been submitted to Collateral Underwriter and the score is 2.5 or less. For loans

using CU score of 2.5 or less, the file must include a copy of the SSR report.

For files requiring an appraisal review product, the following options are available;

• An enhanced desk review product order through CDA from Clear Capital,

• A field review or second appraisal is acceptable. The field review or 2nd appraisal may not be from the same appraisal company as the original report. (NOTE: Cost will need to be paid by

TPO or borrower)

If CDA review reflects a value more than 10% below the appraised value or cannot provide a validation, a field review or second appraisal, both must be from a different appraisal company and

appraiser than the appraisal report. (NOTE: Cost will need to be paid by TPO or borrower)

Declining Market Trend of property values: “Declining Markets” require a 5% LTV reduction from regular LTV matrix for LTVs greater than 70%.

6


Minimum Sq. Footage

• SFR: 700 sq. ft.

• Condo: 500 sq. ft.

• 2-4 Units: 400 sq. ft. per individual unit

Rural Property

A property is classified as rural if any of the following exists:

o The property is classified as rural by the appraiser

o Two of the three comparable properties are more than 5 miles from the subject property

o Less than 25% of the surrounding area is developed

Appraisal Transfers Allowed. Refer to JMAC Appraisal Policy for transfer requirements.

Acreage Maximum Acreage: Refer to matrix for specifics based on program.

Land Trust Not Allowed

Leasehold

In areas where leasehold estates are commonly accepted and documented via the Appraisal, loans secured by leasehold estates are eligible for purchase. The mortgage must be secured by the

property improvements and the borrower’s leasehold interest in the land. The leasehold estate and any improvements must constitute real property, be subject to the mortgage lien, and be insured

by the lender’s title policy. Seller must provide documentation and Leaseholds must meet all FNMA eligibility requirements (i.e. term of lease).

Texas

A Texas Section 50(a)(6) mortgage is a home equity loan originated under the provisions of Article XVI, Section 50(a)(6), of the Texas Constitution, which allow a borrower to take equity of a

homestead property under certain conditions. All loans must comply with the requirements listed in Texas Constitution.

The Following are allowed:

• Purchase

• Rate/Term Refinance

• Texas Equity 50(a)(6)

• Non-Texas Section 50(a)(6) - A seasoned Texas Section 50(a)(6) loan can be refinanced into a non-Texas Section 50(a)(6) loan if certain conditions are met. A Non-Texas Section 50(a)(6) loan is

eligible for purchase provided the loan meets standard eligibility criteria and the requirements of the Texas Constitution, including:

o The refinanced loan is created at least a year after the initial Texas Equity 50(a)(6) loan was closed;

o The loan amount only covers the actual cost of the refinancing, and does not provide the borrower with additional funds;

o The LTV/CLTV does not exceed 80 percent of the fair market value;

o The lender provides the borrower with certain disclosures within 3 business days of application and 12 or more days before the loan is closed; and

o An affidavit that conforms to Section 50(f-1) Article XVI of the Texas Constitution must be prepared and recorded.

o Not allow on interest only programs.

Property Flipping

For properties acquired by the seller of the property within 6 months of application date where the contract price exceeds the sellers acquisition price by the following:

• More than a 10% price increase if the seller acquired the property in the past 90-days;

• More than a 20% price increase if the seller acquired the property in the past 91-180 days

The following additional requirements apply:

• Second appraisal required from an Approved AMC, (The second appraisal must be provided to the borrower in accordance with either the ECOA or HPML requirements, whichever applies)

• Second appraisal must be dated/delivered prior to the loan consummation/note date;

• Property seller on the purchase contract must be the owner of record;

• Increases in value should be documented with commentary from the appraiser and recent comparable sales.

• Sufficient documentation to validate actual cost to construct or renovate (e.g., purchase contracts, plans and specifications, receipts, invoices, lien waivers, etc.)

Financed Properties

• Maximum of twenty (20) financed properties including subject loan.

• Exposure to a single borrower shall not exceed $5,000,000 in current UPB or six (6) properties;

All financed properties, other than the subject property, require an additional two (2) months PITIA in reserves for each property. Total reserve requirement is not to exceed twelve (12) months.

Reserves are based on subject property PITIA.

7


Departing Residence

/ Departing Primary

• If the borrower’s current principal residence is pending sale but the transaction will not close prior to the subject transaction, the current PITIA and proposed PITIA must be used in qualifying

the borrower. The current PITIA may be excluded provided a credit file is documented with the following:

o The executed sales contract for the current residence, and

o Confirmation that any financing contingencies have been cleared.

• If the borrower plans to convert their departure residence to a rental property, the current PITIA and proposed PITIA must be used in qualifying the borrower. The current PITIA may be

excluded provided the credit file is documented with all the following:

o Copy of Executed Lease Agreement

o Rental Survey / 1007

o Provide receipt of deposit and first month’s rent

8


Property Eligibility

Property Condition

• Eligible Property Condition Ratings: C1, C2, C3

• Eligible Quality of Construction Ratings: Q1, Q2, Q3, Q4

ELIGIBLE PROPERTY TYPES

• Single Family (SFR)

• 2-4 Unit Properties

• Planned Unit Development (PUD) – Must meet the requirements in Fannie Mae Selling Guide B4-2.3-01 and not be an ineligible PUD.

• Warrantable & Non-Warrantable Condo Projects

INELIGIBLE PROPERTY TYPES

• Mixed Use properties;

• Vacant land or land development properties;

• Properties not readily accessible by roads that meet local standards;

• Properties not suitable for year-round occupancy regardless of location;

• Agricultural properties including: farms, ranches, orchards;

• Manufactured, or Mobile;

• Condo-hotels or co-op/timeshare hotels;

• Resort Type Projects;

• Cooperative share loans;

• Boarding houses or bed/breakfast properties;

• Properties with zoning violations;

• Dome or geodesic homes;

• Assisted living facilities;

• Homes on Indian reservations (Reservations);

• Log homes;

• Hawaii properties located in lava zones 1 and/or 2;

• Houseboats;

• Fractional ownership

• Properties used for the cultivation, distribution, manufacture or sale of marijuana

• New condo conversion completed less than 2 years

• Any condo project in which a single entity owns more than 25% of the total number of units. For projects that have 5-19 units, one owner can own two units

• Multi-family units where single deed has ownership of more than one or all the units.

• Projects where more than 50% of total square footage in the project, or in the building that the project is located in, is used for non-residential purposes

• Any condo project where the developer (or its affiliates) owns the common and/or limited elements and leases the elements back to the HOA

• Non-conforming zoning (cannot be rebuilt to current density)

• Condo Project in litigation, arbitration, mediation, or other dispute regarding safety, soundness, or habitability.

• Condo Project with adverse environmental issue(s) involving safety, soundness, or habitability.

• Condo Projects that are not well managed or in poor physical or financial condition

9


Condominiums

• Fannie Mae Warrantable & Non-Warrantable projects allowed.

o Warrantable Established Projects – Follow Fannie Mae full project.

o Non-Warrantable & New Projects – Must be reviewed by third (3rd) party due diligence (Note: Cost Applies – Contact Account Executive for details)

• General Project Criteria:

o Project has been created and exists in full compliance with applicable local jurisdiction, state, and all other applicable laws and regulations.

o Project meets all FNMA insurance requirements for property, liability, and fidelity coverage.

o Borrower must carry H06 coverage for replacement of such items as flooring, wall covering, cabinets, fixtures, built-ins, and any improvements / betterments made to the

unit.

Project documents must not allow a unit owner or any other party priority over the rights of the first mortgagee.

Note: Projects consisting entirely of detached units will not require a project review and are eligible for single-family dwelling LTV/CLTV.

Non-Warrantable

Condominiums

NOTE: Stacking of risk is not allowed (Only 1 Non-Warrantable factor per project) - Non-Warrantable & New Projects – Must be reviewed by third (3rd) party due diligence (Note: Cost

Applies – Contact Account Executive for details)

• SINGLE OWNER/ INVESTOR ENTITY CONCENTRATION:

o Maximum of 25% of project owned by any Single Owner/Investor Entity.

o Maximum of two (2) units owned by any Single Owner/Investor Entity if the project has fewer than 10 units.

• NEW PROJECTS: A Project is considered new if any of the following apply: project is not fully completed or is subject to additional phasing or annexation, fewer than 90 percent of the

total number of units in the project have been conveyed to owners other than the developer, or control of the homeowners association has not been turned over to the unit owners.

New Condominium Projects that meet all the following requirements are eligible for purchase.

o Subject legal phase and any prior legal phases where units have been offered for sale are substantially complete. Substantially complete means that a certificate of occupancy

or its equivalent has been issued and all units in the subject unit building are complete.

o OCCUPANCY: A minimum of 50% of the total number of units in the project are conveyed or under contract to purchaser other than developer or successor as primary or

second home OR at least 50% of the total number of units in the subject legal phase and a minimum of 50% of the units in subject phase plus all prior legal phases must have

been conveyed or under contract as primary or second home.

o Developer must be responsible for assessments on unsold units built but not yet closed.

o BUDGET: A minimum of 10% of the association’s annual budget must provide for funding of replacement reserves for capital expenditures and deferred maintenance.

o Budget must reflect adequate funding for insurance deductible.

o DELINQUENT ASSESSMENTS: Delinquent assessments greater than 60 days cannot exceed 15% of the total number of units.

o Commercial space up to 50% of building space allowed when pre-sale exceeds 70%, otherwise limited to 25%. Commercial entity cannot control the HOA.

• ESTABLISHED PROJECTS: Established projects, as defined by FNMA, which meet all the following requirements are eligible.

• OCCUPANCY: There is no owner-occupancy requirement if the subject unit will be owner occupied. If property will be used as an investment property, a minimum of 30% of the total

number of units in the project must be conveyed to owners who occupy their unit as a primary residence or second home. The project may not have delinquencies greater than 15%,

the project reserve fund must represent a minimum of 100% of project’s annual budget and appraisal must support rental market.

• BUDGET AND RESERVE FUND BALANCE: A minimum reserve fund balance of 30% of annual budget must be in place. A minimum of 10% of the association’s annual budget should

provide for funding of replacement reserves for capital expenditures and deferred maintenance. If not, a lower percentage of annual income may be considered if the appraisal notes no

major repairs and reserve fund balance supports a lower allocation as follows:

o 7% to 9.99% requires a reserve fund balance of 50% of annual budget



• DELINQUENT ASSESSMENTS: Delinquent assessments greater than 60 days may not exceed 15% of the total number of units in the project. 60-day delinquency up to 20% may be

allowed as non-warrantable if HOA reserve fund represents 120% of its annual budgeted income.

• Commercial space limited to 50% of building space. Commercial entity cannot control HOA

10


Rate & Term

Refinance

• Proceeds from the transaction are used to pay off an existing first mortgage loan and any subordinate loan used to acquire the property.

• Any subordinate loan not used in the acquisition of the subject property provided one of the following apply;

o Closed end loan, at least 12 months of seasoning has occurred;

o HELOC, at least 12 months of seasoning has occurred and total draws over the past 12 months are less than $2,000.

• Buying out a co-owner pursuant to an agreement.

• Paying off an installment land contract executed more than 12 months from the loan application date.

• Cash back in an amount not to exceed the lesser of 2% of the new loan amount of $2,000 can be included in the transaction.

• LTV/CLTV based upon the appraised value.

Debt Consolidation

Cash out transactions meeting the following additional requirements may be eligible for enhanced LTV’s or pricing, see Matrix for specific criteria;

• Mortgage and non-mortgage debts are paid off and total monthly debt payments are lowered by at least 10%

• Closing costs are recouped within 60-months

• Cash in hand may not exceed $5,000 or 2% of the loan balance

• The closing documents must reflect the paid off debts

Cash-Out

• A refinance that does not meet the definition of a rate/term transaction.

• A mortgage secured by a property currently owned free and clear is considered cash out.

• The payoff of delinquent real estate taxes (60-days or more past due) is considered cash out.

• For all cash-out transactions, if the LTV exceeds 70%, and the loan balance exceeds $1,000,000; a 2nd appraisal is required.

• Loans not eligible for cash-out:

o Properties listed for sale in the past 6-months.

• See Matrices for cash-out limits.

• Cash-Out Seasoning is defined as the difference between application date of the new loan and prior financing note date or date of purchase.

• For properties owned 12-months or longer, the LTV/CLV is based upon the appraised value.

• If Cash-Out Seasoning is less than (12) months but greater than (6) months the transaction property value is limited to the lower of the current appraised value or the property’s purchase

price + documented improvements.

• Cash out Seasoning of less than (6) months is not allowed when the prior transaction was also a cash out.

• Cash-Out Seasoning of six (6) months or less is allowed with the following restrictions:

o The source of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property).

o The maximum LTV/CLTV ratio for the cash-out transaction based upon the lower of the current appraised value or the property’s purchase price plus document improvements.

o At least one of the following must exist…

No mortgage financing was used to obtain the property; includes delayed financing.

• The original purchase transaction is documented by a settlement statement, which confirms that no mortgage financing was used to obtain the subject

property. (A recorded trustee's deed or similar alternative confirming the amount paid by the grantee to trustee may be substituted for a settlement

statement if a settlement statement was not provided to the purchaser at time of sale.).

• The preliminary title search or report must confirm that there are no existing liens on the subject property, or the existing lien being refinanced was taken

out after the property was obtained as evidenced by a copy of the note.

The mortgage being refinanced was used to purchase the property and has an original term of 24 months or less as evidenced by a copy of the settlement statement

and original note.

If the source of funds used to acquire the property was an unsecured loan or a loan secured by an asset other than the subject property (such as a HELOC secured by

another property), the settlement statement for the refinance transaction must reflect that all cash-out proceeds be used to pay off or pay down, as applicable, the

loan used to purchase the property. Any payments on the balance remaining from the original loan must be included in the debt-to-income ratio calculation for the

refinance transaction.

The lender has documented that the borrower acquired the property through an inheritance or was legally awarded the property through divorce, separation, or

dissolution of a domestic partnership.

11


Non-Occupant

Co-Borrower

• Allowed for full doc and alt doc -bank statement documentations. Maximum LTV for bank statements 75%.

• Non-occupant income limited to full doc only

• Borrower and Co-Borrower must complete and sign a Non-Occupant Co-Borrower Certification.

• Occupying borrower(s) must have a DTI ratio of 60% or less. Excluding income/debts of non-occupant borrower.

• Eligible transactions limited to purchase or rate/term only

Non-ARM’s Length /

Interest Party Transaction

• NON-ARM’S LENGTH TRANSACTION: A non-arm's length transaction occurs when the borrower has a direct relationship or business affiliation with subject property Builder, Developer,

or Seller. Examples of non-arm’s length transactions include family sales, property in an estate, employer/employee sales and flip transactions. When the property seller is a

corporation, partnership or any other business entity it must be ensured that the borrower is not an owner of the business entity selling the property.

o A non-arm’s length transaction is not intended to bail out a family member who has had difficulties making their mortgage payment. A thorough review of the title report in

these cases is required as well as the payment history pattern (VOM on the Seller’s mortgage)

• INTERESTED PARTY TRANSACTION: A Conflict-Of-Interest Transaction occurs when the borrower has an affiliation or relationship with the Mortgage Broker, Loan Officer, Real Estate

Broker or Agent, or any other interested party to the transaction. In the case of the Mortgage Broker, Loan Officer, or Real Estate Broker/Agent extra due diligence must be exercised.

For example, the seller’s real estate agent for the subject property may not act as the loan officer for the borrower(s) purchasing the same subject property. An examination of the

relationship among the Mortgage Broker, Title/Escrow Companies, Appraiser and any other party to the transaction must be closely examined. A Letter of Explanation regarding the

relationship between the parties is required.

• ELIGIBLE NON-ARM’S LENGTH AND INTERESTED PARTY TRANSACTIONS:

o Buyer(s)/Borrower(s) representing themselves as agent in real estate transaction

Commission earned by buyer/borrower cannot be used for down payment, closing costs, or monthly PITIA reserves.

o Seller(s) representing themselves as agent in real estate transaction

o Renter(s) purchasing from Landlord

24 months cancelled checks to prove timely payments required

A VOR is not acceptable

o Purchase between family members

Full Documentation only

Gift of Equity requires a gift letter and the equity gift credit is to be shown on the CD

Must provide a 12-month mortgage history on existing mortgage securing subject property confirming Family Sale is not a foreclosure bailout

• NON-ARM’S LENGTH AND INTERESTED PARTY RESTRICTIONS:

o Primary Residences only

o Borrower to provide cancelled check verifying the earnest money deposit

o Cash-Out refinances not allowed


o For-Sale-By-Owner (FSBO) transactions must be arms-length

o Employer to employee sales or transfers not allowed

• Property trades between buyer and seller not allowed

Residency

Eligible: Us Citizen, Permanent Resident Alien, and Non-Permanent Resident Alien

Ineligible: Applicants possessing diplomatic immunity, Borrowers from OFAC sanctioned countries, politically exposed borrowers, any material parties company or individual) to transaction listed on

HUD’s Limited Denial of Participation (LDP list, and the federal General Services Administrative (GSA) Excluded Party list or any other exclusionary list.

Permanent Resident

Alien

An alien admitted to the United States as a lawful permanent resident. Lawful permanent residents are legally accorded the privilege of residing permanently in the United States.

Acceptable evidence of permanent residency includes the following:

• Alien Registration Receipt Card I-151 (referred to as a green card).

• Alien Registration Receipt Card I-551 (Resident Alien Card) that does not have an expiration date on the back (also known as a green card).

• Alien Registration Receipt Card I-551 (Conditional Resident Alien Card) that has an expiration date on the back and is accompanied by a copy of the filed INS Form I-751 (petition to remove

conditions).

• Non-expired foreign passport that contains a non-expired stamp (valid for a minimum of three years) reading “Processed for I-551 Temporary Evidence of Lawful Admission for Permanent

Residence. Valid until [mm-dd-yy]. Employment Authorized.”

Eligible without guideline restrictions

12


Non-Permanent

Resident Alien

An alien admitted to the United States as a lawful temporary resident. Lawful non-permanent residents are legally accorded the privilege of residing temporarily in the United States.

• Legal Status Documentation

o Visa types allowed: E-1, E-2, E-3, EB-5, G-1 through G-5, H-1, L-1, NATO, O-1, R-1, TN NAFTA

o Visa must be current and may not expire for a minimum of 2 years following the close date.

o When applicable, valid Employment Authorization Document (EAD) required for US employment if not sponsored by current employer. If the Visa will expire within 6 months of loan

application, it is aceptable to obtain a letter from the employer documenting the borrower’s continued employed and continued visa renewal sponsorship (employer on the loan

application must be the same as on the unexpired visa).

• Guideline restrictions:


o Full Documentation (24-Months) only

o Non-Occupant Co-Borrowers not allowed

o Gift Funds not allowed

o US credit requirements detailed under the CREDIT section of this guide should be utilized.

First Time

Home Buyer (FTHB)

The following requirements apply to first time home buyer transactions:

• Primary residence only

• Minimum 600 credit score

• DTI may not exceed 50%

• Minimum 6 months of reserves

• Not eligible for 12-month bank statement income documentation

• 12-month rental history required reflecting 0x30. Rental history is not required for borrowers living rent free (See the Housing History section of this guide for restrictions on borrowers

living rent free)

• Payment shock limited as follows:

>36% DTI <=36 DTI

Credit Score >= 620: 300% current housing Payment shock not applicable

Credit Score < 620: 200% current housing Payment shock not applicable

FTHB with gift funds: 150% current housing Payment shock not applicable

Payment Shock = (Proposed Housing Payment /Present Housing Payment) * 100

o Lender should use prudent judgment in evaluating any payment shock implications and the ability of the Borrower to repay the new mortgage loan. Payment shock exceeding

acceptable limits will be reviewed case by case and must be accompanied by a documented history of saving which supports the borrower’s ability to handle the increased payment

Prepays Offered

1, 2, to 3 years

Investment Properties Only

Where permitted by applicable laws and regulations, a prepayment charge can be structured to be assessed for one (1), two (2), or up to three (3) years following the execution date of the note. The

following prepayment structures may be utilized; either six (6) months of interest or 3% of the outstanding principal balance.

• Six Months Interest – The prepayment charge will be equal to 6 months of interest on the amount of the prepayment that exceeds 20% of the original principal balance. The charge applies

to loans that payoff due to sale or refinance, or curtailments that exceed 20% of original principal balance in a given 12-month time period.

• 3% fixed percentage - The prepayment charge will be equal to 3% and applied to any curtailment or the entire outstanding principal balance during the prepay period. The charge applies

to loans that payoff due to sale or refinance.

• Prepayment penalties not available in loan vested to individuals in Illinois and New Jersey.

• Prepayment penalties not allowed in KT, MD, MI, MN, NM, and OH.

13


Housing History

Mortgage/rental history is required for all programs. If a borrower’s mortgage or rental history is not reported on the credit report, alternative documentation showing the most recent 12-month

history (cancelled checks, mortgage/rental statements including payment history, etc.) must be provided.

For properties owned free and clear, a property profile report or similar document showing no lien against the property should be provided in the credit file.

Borrower mortgage and/or rental history may reflect late payments based on Documentation Option and grade criteria, see matrices for requirements. All housing late payments must be cured at

the time of application and remain paid as agreed through closing.

Housing late payments exceeding 1x60x24 require a letter of explanation from the borrower. The situation causing the delinquency must be adequately documented as resolved. The new housing

payment must be considered when determining if the situation is adequately resolved.

Borrowers who live rent free or without a complete 12-month housing history are allowed with the following restrictions;

• DTI may not exceed 43%

• Full Doc 24-months or Bank Statement 24-months

• Primary Residence only

• 10% minimum borrower contribution

• Any available portion of a 12-month housing history must be paid as agreed.

• Borrower(s) who own their primary residence free and clear aren’t considered living rent free.

• Borrower(s) who sold a primary residence within the past 6-months and are currently residing rent free until subject transaction closes are not considered living rent free.

Credit History

Any non-mortgage account can be no more than 30-days delinquent at time of application. Any delinquent account must either be brought current or paid off at closing.

All mortgage accounts must be current at application and remain paid as agreed through closing.

• If a short sale, deed in lieu of foreclosure, or foreclosure has occurred within the last 12 months, no more than a 1x30x6 is allowed on each revolving debt account and no more than a 1x30x12

is allowed on each installment debt account.

Timeshares • Timeshare obligations will be treated as consumer installment loan regardless how credit is reporting.

Charge-Offs /

Collections

• Individual collection and non-mortgage charge-off accounts equal to or greater than $250 and accounts that total more than $2,000 must be paid in full prior to or at closing.

• Medical collections may remain open with a max cumulative balance of $10,000.

• A 2nd mortgage or junior lien that has been charged off is subject to foreclosure seasoning periods for grade determination based upon the charge off date.

• Collections and charge-offs that have expired under the state statute of limitations on debts may be excluded. Evidence of expiration must be documented.

Charge-offs and collections not excluded by the above bullet points above must be paid or may stay open if using one or a combination of both of the following:

• Payments for open charge-offs or collections are included in the DTI (Subject to program DTI restrictions), if a payment amount is not known, 5% of the balance may be utilized as the payment.

• Reserves are enough to cover the balance of the charge-offs or collections and meet reserve requirements.

Judgements / Liens • All open judgments, garnishments, and all outstanding liens must be paid off prior to or at loan closing.

Tax Liens

All income tax liens (federal, state, local) must be paid off prior to or at loan closing. Tax liens that do not impact title may remain open provided the following are meet;

• The file must contain a copy of the repayment agreement

o A minimum of 6-payments has been made under the plan with all payments made on time

• The balance of the lien must be included when determining the maximum CLTV for the program

• Refinance transactions require a subordination agreement from the taxing authority for liens against the subject property

Disputed Accounts

When the credit report contains tradelines disputed by the borrower, the credit file should be documented with a credit supplement showing the account(s) have been resolved. If the disputed

account balance is $250 or less, the payment can be included in the total debt calculation and the account can remain in dispute. Total aggregate balance of accounts in dispute remaining

unresolved can’t exceed $2,000

14


Credit Events

See Matrices for Grade Determination

• Forbearance / Modifications are treated as short sale / deed-in-lieu for grading & pricing purposes.

o For Credit Grade B, B-, & C where the housing event can be settled, the delinquency proceeding the housing event can be ignored.

Tradelines

• All Programs –

o At least three (3) tradelines reporting for a minimum of 12- months, with activity in the last 12-months, or

o At least two (2) tradelines reporting for a minimum of 24-months, with activity in the last 12-months

• The following are not acceptable to be counted as a tradeline: “non-traditional” credit as defined by Fannie Mae, any liabilities in deferment status, accounts discharged through bankruptcy,

authorized user accounts, charge-offs, collection accounts, foreclosures, deed in lieu of foreclosure, short sales, or pre-foreclosure sales.

Limited Tradelines

Allowed Under Credit Flex Only with the following:

• Max Grade “B”

• Max LTV/CLTV of 85%

• A 10% down payment must be made by the borrower from own resources / funds.

• Primary Residences Only

• Not Allowed for Alt Doc 12-month bank statement program and Asset Depletion doc types.

Payment Shock

Payment shock should not exceed 300% of the borrower’s current housing payment unless DTI is less than or equal to 36%. If payment shock exceeds this limit the underwriter must provide

justification of borrower’s ability to handle the increased payment. If the loan purpose is debt consolidation, and the net tangible benefit test is met, a payment shock calculation is not required.

NOTE: See additional payment shock restrictions in the First Time Home Buyers section of this guide. (Payment Shock = (Proposed Housing Payment /Present Housing Payment) * 100)

Reserves

The loan program includes minimum reserves as outlined on the Product matrices;

• Additional Reserves - Each financed property in addition to the subject property, will increase the applicable reserve requirement by two (2) months PITIA on the subject property to a

maximum requirement of 12 months (Additional reserves based upon the PITIA of the subject property);

• Reserves must be sourced and documented.

• Reserves for a loan with an Interest Only feature based upon the interest only payment;

• ARM loans – reserves based upon initial PITIA, not the qualifying payment;

• Proceeds from a cash-out refinance can be used to meet the minimum reserve requirements;

• Reserve requirements are waived for Rate-And-Term Refinance transactions when the transaction results in a reduction to the monthly principal and interest payment of 10% or greater AND

housing history is 1x30x12 or better. Waiver not eligible for DTI greater than 50%. For an interest only loan the reduction is based on the amortizing payment used for loan qualification;

• Proceeds from 1031 Exchange cannot be used to meet reserve requirements

Gift Funds

• Unless otherwise specified, Gift Funds are acceptable if ONE of the following applies:

o For owner occupied transaction, a 5% down payment has been made by the borrower from their own resources

100% Gift Funds are allowed for Prime and Credit Flex for full doc or Alt Doc 24-month bank statement loans only, with a maximum LTV of 75%. Borrower(s) must meet

both the reserve and residual income requirements.

o For investment transactions, a minimum of 50% of the down payment must be made by the borrower from their own funds.

• Fannie Mae guidelines should be used for donor relationship to borrower(s), documentation, proof of funds, and evidence of receipt;

• Gift funds may not be used to meet reserve requirements;

• Gift of Equity allowed for Primary Residence only. Must meet all other guidelines for Gift Funds.

15


Consumer Credit

Installment Debt

• Can be excluded if there are 10 or fewer monthly payments remaining. If the payment is substantial and exceeds 5% of the borrower’s qualifying income, there should be strong

compensating factors such strong reserves.

Lease Payment

• Must be included regardless of how many payments are left.

Student Loan

• If a payment amount is provided on the credit report, that amount can be used for qualifying purposes.

• If the credit report does not reflect a payment (or reflects $0), apply 1% of the outstanding balance of the student loan, or a calculated payment that will fully amortize the loan/payment,

based on the documented loan repayment terms.

Deferred Installment Debt

• Must be included as a reoccurring monthly debt obligation.

Revolving Debt

• Minimum payment is used on credit or current account statement

• If there is no payment, the greater of $10 or 5% of the current balance should be included in the DTI calculation

• Any non-mortgage account can be no more than 30-days delinquent at time of application. Any delinquent account must either be brought current or paid off at closing.

• All mortgage accounts must be current at application and remain paid as agreed through closing.

• If a short sale, deed in lieu of foreclosure, or foreclosure has occurred within the last 12 months, no more than a 1x30x6 is allowed on each revolving debt account, and no more than a

1x30x12 is allowed on each installment debt account.

Consumer Credit Counseling Services

• Borrower enrollment in CCCS is allowed when a minimum of 12 months have elapsed on the plan and evidence of timely payments for the most recent 12 months is provided. The CCCS

Administrator must also provide a letter allowing the borrower to seek financing on a new home while enrolled in a plan.

• A monthly consumer credit counseling service plan payment must be included into the DTI calculation.

Timeshares

• Treated as a consumer installment debt

Business Debt

• If debt is 6 months old, the payment must be included into the DTI ratio.

• If debt is reflected on borrower’s personal credit report, the borrower is personally liable for the debt and must be included in the DTI unless borrower can provide one of he following

documentations:

o Most recent 6 months cancelled checks drawn against the business account; or

o Tax returns reflect the business expense deduction; or

o Business bank statements showing assets remain after funds to close and reserve requirements are with a balance greater than or equal to the balance of the debt

Current Debt obligations, Alimony and Child Support

• If payment is more than 10 months, the payment must be included into the borrower’s reoccurring monthly debt obligations. However, voluntary payments do not need to be included.

Employment Offers or

Contracts For borrower(s) starting a new employment, a copy of an executed offer or contract plus first paystub. The first paystub must be dated prior to the note date.

16


Assets

In addition to documenting the down payment, closing costs, and minimum PITIA reserve requirements, all borrowers must disclose and Lender must verify all other liquid assets. Fannie Mae

guidelines prevail regarding sources and types of assets as well as assets which are not eligible for closing costs and/or reserves.

• Account Statements should cover most recent 60-day period;

• VOD should be dated within 30 days of loan application date;

• Stocks/Bond/Mutual Funds - 100% of stock accounts can be considered in the calculation of assets for closing and reserves;

• Vested Retirement Account funds – 60% may be considered for closing and/or reserves;

• Non-vested or restricted stock accounts are not eligible for use as down payment or reserves.

• Any assets which produce income or are used as income already included in the income calculation are not eligible for use as down payment or reserves.

• When bank statements are used for asset verification, large deposits must be evaluated. Large deposits are defined as any single deposit that represents more than 50% of the

borrower(s) monthly income. Assets held in foreign accounts may be used as a source of funds to close and to meet applicable reserve requirements. These funds must be

transferred to a U.S. domiciled account in the borrower’s name at least ten (10) days prior to closing.

• Documenting Assets Held in Foreign Accounts:

o Assets must be verified in U.S. Dollar equivalency at the current exchange rate via either www.xe.com or the Wall Street Journal conversion table.

o A copy of the two (2) most recent statements of that account. If the funds are not seasoned a minimum of sixty (60) days, a letter of explanation is required along with the

information to comprise a sixty (60) day chain of funds.

• Any documents not in English needs to be translated by a third party

Business Funds

• Business funds may be used for down payment, closing costs and for the purposes of calculating reserves.

• If Business funds are used, the borrower must be the sole proprietor or 50% owner of the business.

• Underwriter must determine that the withdrawal of funds will not have a negative impact on the business by one of the following methods based upon the income documentation.

• Full Income Documentation

o The Lender must perform a business cash flow analysis to confirm that the withdrawal of funds for this transaction will not have a negative impact on the business. The Lender

should utilize FNMA Form 1084 or a similar cash flow analysis form to show the business can support the withdrawal of the funds.

• Self-Employed Solutions – 12 or 24-Month Business Bank Statement (May use one of the following methods)

• Business Expense Coverage: Using the most recent business bank statement(s) used for income documentation perform the following calculation;

Statement(s) Ending Balance

- Transaction Down Payment

- Transaction Closing Costs

- Program Required Reserves

+Fund Available from Personal Account(s)

Funds Available for Business Expense Coverage

Funds Available for Business Expense Coverage must be a positive number and reflect a minimum of 2 months of average expenses as reflected on the P&L or as determined by

the expense factor; or

• Balance Sheet Method: The balance sheet for the business (signed and dated by borrower) must reflect positive working capital. Working capital is the difference between the

current assets less current liabilities. The result represents the maximum amount of business funds available to use towards down payment, closing cost and reserves

Residual Income

Residual Income is the amount of monthly income remaining once a borrower has paid all monthly debt obligations. Residual Income = Gross Monthly Income minus total monthly debt.

Minimum Residual Income Requirements are calculated using the table below plus $250 for the first dependent and $125 for each additional dependent.

Occupancy Maximum LTV Minimum Residual Income

Prime - Primary Residence 95 $2,500

Credit Flex - Primary Residence 90 $1250

Prime & Credit Flex (DTI to 55%) $3,000

Second Home – All Programs 80 $2,500 •

17


Documentation Options

Various forms of documentation are acceptable depending on borrower income type. Income should be calculated and documented to Fannie Mae guidelines, unless otherwise specified within

guidelines. Fannie Mae guidelines prevail regarding sources and types of income as well as income not eligible to be included. A Fannie Mae Form 1084 or Seller equivalent income worksheet should

be included and delivered as part of the credit file

Doc Type Full Doc 2 Year Full Doc 1 Year WVOE 24 Months Bank Statement

/1099 / P&L

12 Months Bank

Statements / 1099/ P&L

Asset Utilization P&L Only

Min FICO 600 620 620 620 620 680 680

Max LTV/CLTV 90 85 80 90 85 75 75

Income Docs 2 Years W2 /

Tax Returns

1 Year W2 / Tax

Returns

WVOE Only 24 Months Personal /

Business Bank Statements

12 Months Personal /

Business Bank Statements

Amortized Liquid Assets P&L

Tax Returns Yes Yes No No No No No

4506T Yes Yes No No No No No

Employment W2 or Self

Employed

W2 or Self

Employed

W2 Only Self Employed Only Self Employed Only W2 or Self Employed Self-Employed Only

• Note: Part Time, Overtime, Bonus, & Commission Income requires 2 years.

Wage Earners

W2 only allowed on Full Doc if wage earner only.

• If rental properties exist tax returns will be required either 12 or 24 months based on documentation type.

Alternative Doc

Written Verification

Of Employment (WVOE)

A written Verification of Employment may be utilized when the only source of earnings is wages/salary.

• Two-year history with same employer is required.

• Completed FNMA Form 1005

• Minimum credit score:

o Prime Ascent – 660

o Credit Ascent 620 (Minimum credit grade “A”).

• Primary Residence Only

• 1 to 4-unit properties allowed, cannot use rental income on units for qualification.

• 24-month 0x30 housing history required.

• Paystubs, Tax Returns, 4506-T, or W-2’s not required.

• Max LTV 80% for purchase/R&T of owner occupied home only. Max LTV for C/O is 70%.

• Must be completed by Human Resource, Payroll Department or Officer of the Company.

• 2 Months Personal Bank Statements required to support the WVOE. Monthly deposits must support at least 65% of reported income is deposited into borrower’s account after

accounting for tax and insurance withholdings.

• FTHB maximum LTV 70%, no gift funds allowed.

• Borrower(s) employed by family members or related individuals are not eligible.

• Only eligible source of income is limited to Wage/Salary. Supplemental income sources such as rental income not permitted.

• An internet search of the business is required with documentation to be included in the credit file to support existence of the business.

18


Alternative Doc

Asset Utilization

The Asset Utilization documentation option is an option for the use of a borrower’s liquid assets to augment income for loan and product qualification purposes.

• RESTRICTIONS:

o See Matrices for acceptable credit grades, max LTV, and DTI.

o Non-occupant co-borrowers not allowed

o Maximum DTI is 50%

o Minimum 680 credit score

o Gift funds not eligible

• INCOME CALCULATION:

o Debt Ratio Calculation: Minimum Eligible Assets required is the lower of $1,000,000 or 150% of the loan balance. Qualifying income based upon Total Assets Eligible for

Depletion, less down payment, less out of pocket closing costs less required reserves, divided by 100. Maximum DTI 50%.

• INCOME DOCUMENTATION:

o All individuals listed on the asset account(s) must be on the Note and Mortgage.

o Assets considered for this program must be verified with most recent 3 months of account statements or a VOD.

o Assets must be seasoned 120 days.

o Income other than Asset Depletion must be documented in accordance with the Full Doc program including tax returns and IRS Form 4506-T.

• ASSETS ELIGIBLE FOR DEPLETION: Assets must be liquid and available with no penalty. Additional documentation may be requested to validate the source of the asset.

o 100% of Marketable securities (i.e. CD’s, money market accounts)

o 100% of Checking and Savings;

o 70% of Stocks, Bonds, and Mutual Funds;

o 60% of Retirement Assets: Eligible if the borrower is not of retirement age

• ASSETS INELIGIBLE FOR DEPLETION:

o Equity in real estate

o Privately traded or restricted/non-vested stocks

• Any asset which produces income already included in the income calculation

Any assets held in the name of a business

Restrictions

on 12 or 24 months bank

statements

24 months bank statement

• Refer to the matrix for acceptable grades, max LTV and DTI;

• Borrower must be self-employed for a least 2 years;

• Business must be in existence for a minimum of 2 years;

• Primary borrower (Most Household income) must be Self-Employed

12 months bank statements

• Refer to the matrix for acceptable grades, max LTV;

• Maximum DTI 50%;

• Borrower must be self-employed for a least 2 years;

• Business must be in existence for a minimum of 2 years;

• Primary borrower (Most Household income) must be Self-Employed;

• Minimum 620 credit score;

• First-Time home buyer not allowed

19

Alt Doc

Bank Statement

12- or 24-Month /

P&L with Bank

Statements/

P&L Only/

IRS Form 1099

Personal Account: Account Reflecting Personal income & expenses

• Verify the existence of the business, within 60-days of the note date, to ensure the business is active with the following; a letter

from either the businesses tax professional certifying 2 years of self-employment in same business.

• Verify the business is active and operating with either a phone listing and/or business address using directory assistance or

internet search (Independent Contractors with income reported on 1099s exempt from requirement);

• Verify that the borrower owns a minimum of 20% of the business.

o CPA letter, operating agreement, or equivalent reflecting the borrower’s ownership percentage.

• Most recent twenty-four (24) or twelve (12) months of PERSONAL bank statements.

• Most recent two (2) months of BUSINESS bank statements

Business Account or Co-Mingled Account in the name of the business reflecting only business income and expenses

• Verify the existence of the business, within 60-days of the note date, to ensure the business is active with the following; a letter

from either the businesses tax professional certifying 2 years of self-employment in same business.

• Verify the business is active and operating with either a phone listing and/or business address using directory assistance or

internet search (Independent Contractors with income reported on 1099s exempt from requirement);

• Verify that the borrower owns 50% of the business by providing one of the following:

o CPA letter, tax preparer letter, operating agreement, or equivalent reflecting the borrower’s ownership percentage.

• Non-borrowing owners of the business must provide a signed and dated letter acknowledging the transaction and verifying the

borrower’s access to the account for income calculations.

• Net income from the analysis of the bank statements must be multiplied by the borrower’s ownership percentage to determine

the borrower’s qualifying income.

• Co-mingled Only – verify that the borrower is 100% owner of the business (borrower and spouse with combined 100%ownership

is also eligible);

Alt doc – 24 month or 12 month Bank statements Options: Three (3) options exist to analyze Business Accounts:

o Option 1 – 50% Net Margin

A business narrative provided by the borrower which includes detail regarding the size and operating profile of

the business addressing; location/rent, number of employees/contractors, COGS, Trucks/Equipment (Owned

or Leased)

24- or 12-month of business bank statements covering the most recent time-period.

NOTE: Business with high expense ratios, such as restaurants, auto dealers, groceries stores, etc should be

excluded from this option.

o Option 2 – Business Expense Statement Letter

An expense statement specifying business expenses as a percent of the gross annual sales/revenue prepared

and signed by either a CPA or tax preparer; and

Credit file must contain documentation showing evidence of the preparer’s business; and

24 or 12-months of business bank statements covering the most recent time-period

o Option 3 – 24 or 12 Month Third Party P&L Statement

P&L covering 24 or- 12-month prepared and signed by either a CPA / Accountant or licensed tax preparer; and

Credit file must contain documentation showing evidence of the preparer’s business; and

24 or 12-months of business bank statements covering the most recent time-period and matching the time-

period covered by the P&L.

Alt Doc – P&L covering 24 or 12 month, prepared by a CPA or IRS Enrolled Agent (EA):

o 24 or 12 month CPA compiled P&L Statement

24 or 12 month (P&L) prepared/compiled and signed by a CPA (proof of CPA current state license required or

EA (proof EA currently active on IRS website) dated within 30-days of the loan application, and

The preparer must attest they have prepared the borrower’s most recent tax returns; and

A minimum 2- months of business bank statements covering the most recent 2 -month period.

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Alt Doc – P&L covering 24 Months ONLY, prepared by a CPA or IRS Enrolled Agent (EA):

o 24 CPA compiled P&L Statement

24 (P&L) prepared/compiled and signed by a CPA (proof of CPA current state license required or EA (proof EA

currently active on IRS website) dated within 30-days of the loan application, and

The preparer must attest they have prepared the borrower’s most recent tax returns

o Restrictions to Matrix

Zuma Prime pricing based on 24 months bank statements

• For pricing and registration chose Doc-Type of “Other Bank Statements”

• Pricing needs to indicate Exception = YES

Primary Residence Only

Allowed on all products

Loan amount Maximum $2M

Minimum Fico score of 680

Purchase and R&T transaction max at 75% LTV

Cash-out Transaction max at 70%

3 months reserve on subject property plus 2 months on each additional financed cap at 12 months.

Housing 0x30x12

Credit events – 48 months from any event

Max DTI 36%

Eligible property types: SFR, Condo, PUD

P&L end date must be within 90-days of the note date

The business needs to be existed for at least the last 2 years

Borrower must own at least 50% of the business

Expenses: The P&L must have the expense itemized

Alt Doc - IRS Form 1099

• Permitted for borrower’s earning 100% commission or for independent contractors

• 1-year or 2-years of 1099 permitted

• 4506T required along with a transcript for 1099s

• One of the following Business expense analysis methods:

o 90% Net Margin (10% Expense Factor)

o Business Expense Statement Letter (CPA, accountant, tax preparer)

• Qualifying income is the 12 or 24 monthly average from the total amount of the 1099s minus the expense factor from the

method chosen above

• YTD earnings must be documented to support the ongoing receipt of income showing on the 1099s by:

o Checks or single check stub(s) with YTD totals if available, or

o Bank statements (YTD).

The YTD earnings from the total of check stubs or the tally of deposits from the bank statements must be

within 10% of the qualifying income.

• The Alt Doc Loan/LTV matrix should be utilized.

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Alt Doc

Income Analysis

PERSONAL Bank Statement Review:

o Income should be calculated based on a 24 or 12 month average of total deposits, minus any inconsistent or large deposits not justified. Qualifying income may not exceed the

income indicated on the initial 1003.

o Pattern of deposits and payment should be consistent;

o ATM deposits may be included if a consistent pattern of such deposits is present;

o Expectations of changes in deposit pattern must be considered;

o Income documented separately, but comingled, must be backed out of deposits;

o Two months business bank statements;

Must evidence activity to support business operations, and

Reflect transfers to the personal account.

BUSINESS & CO-MINGLED Bank Statement Review: The Business Bank Statement calculator is available for download in JMAC’s Help Center

o 24 or 12 Month CPA or EA compiled P&L Statement

The 2-months of business bank statements must support the sales reflected on the 24 or 12-month CPA (proof of current state licensing required) or EA (proof EA

currently active on IRS web site) prepared P&L. The average deposits from the bank statements must be greater than, or no more than, 10% below the average monthly

sales. In the event the 10% tolerance is not met, continuous bank statements may be added to the analysis until the tolerance is met. The qualifying income is the lower of

(a) the net income from the P&L divided by 24 or 12; (b) total deposits per bank statements, minus any inconsistent deposits, divided by the number of bank statements,

or (c) the income disclosed on the initial 1003.

o 24 or 12 Month Third Party P&L Statement

P&L Sales/Revenue must be supported by the provided bank statements. Total deposits per bank statements, minus any inconsistent deposits, must be greater than, or

no more than, 10% below revenue reflected on P&L. The bank statements and P&L must cover the same time period. If the deposits support the sales, qualifying income is

the lower of (a) the Net Income indicated on the P&L divided by 24 or 12, (b) total deposits per bank statements, minus any inconsistent deposits, divided by 24 or 12, or

(c) the income indicated on the initial 1003.

o Business Expense Statement Letter

Net Income determined by total deposits, per bank statements, less total expenses. Total expenses are calculated by multiplying the total deposits, by the expense factor

provided by CPA or tax preparer. Qualifying income is the lower of the net income from the analysis, or the income indicated on the initial 1003.

o 24 or 12 Months of Bank Statements using a 50% Net Margin

Qualifying income is the lower of (a) total deposits per bank statements, minus any inconsistent deposits, multiplied by 50%, divided by number of bank statements (24 or

12) or (b) the income indicated on the initial 1003.

The narrative provided by the borrower should be reviewed to determine if the business provides a service; or produces/manufactures goods. If the business has a web

site, it should be reviewed to gain additional information on the business and its size. The goal of the analysis is to determine if the method appears reasonable for the

type of business. Rental Income

Businesses within an industry that experience higher expense ratios are not eligible for the 50% margin and must utilize another option. Higher expense ration industries

include, but are not limited to the following:

• Construction, Manufacturing, Retail & Wholesale trade, Hospitality, Food & Beverage Services and Transportation.

Rental Income

o Borrowers utilizing the Alt Doc 24 or 12 month bank statement or CPA compiled 24 or 12 month documentation, or Alt Doc 1099, may include rental income as a secondary source, if

the following apply:

Copy of lease(s) for rental property provided in credit file;

Must provide 2-months proof of receipt of rental income. The deposits must be to a separate bank account. Any deposits to the business bank statements used in the

business income analysis, are not eligible;

75% of verified monthly rental income can be used to offset the PITIA of the rental property;

If deposits are not able to be validated in a separte account, the full PITIA of the rental unit must be included in the qualifying DTI ratio.

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Bank Statements

Qualification

Non-Sufficient Funds

(NSF)

• Non-sufficient funds (NSF) or negative balances reflected on the bank statement must be considered. Overdraft protection (fees) associated with a pre-arranged link to savings account

or line of credit must also be considered unless one of the following conditions exist…

o Overdraft protection from a depository account: Occurrences may be excluded if statements for the linked account confirm that (a) the linked account balance at the time of

the transfer exceeded the amount of the overdraft transfer, (b) the linked account’s balance did not report as zero or negative at any point during the statement period of

the transfer, and (c) the linked account did not itself receive overdraft protection proceeds during the statement period of the transfer.

o Overdraft protection from a line of credit: Occurrences may be excluded if statements for the linked account confirm that (a) the line’s credit limit was not exceeded during

the statement period of the transfer and (b) a payment amount which equals or exceeds the sum of all overdraft protection occurrences analyzed in the statement period is

made within 30 days after the statement close date.

• Occurrences included in the analysis are subject to the following tolerances…

o An occurrence is defined as one or more checks returned the same day.

o Up to five (5) occurrences in the most recent twelve (12) month time period is acceptable if there are zero (0) occurrences in the most recent three (3) month time period.

o Up to three (3) occurrences are allowed in the most recent twelve (12) month time period if there are one (1) or more occurrences in the most recent two (2) month time

period.

o Exception requests for tolerance deviations must include (a) a letter of explanation from the borrower outlining the reason for the occurrences and an explanation of how

and when the issue leading to the occurrences was rectified, and (b) additional compensating factors outlined by the underwriter supporting the viability of income.

• Underwriter must consider the financial strength of a self-employed borrower's business.

• Non-sufficient funds (NSF) or negative balances reflected on the bank statement must be considered. Overdraft protection (Fees) associated with a pre-arranged link to a savings

account or line of credit must also be considered unless one of the following conditions exist…

o Overdraft protection from a depository account: Occurrences may be excluded if statements for the linked account confirm that (a) the linked account balance at the time of

the transfer exceeded the amount of the overdraft transfer, (b) the linked account’s balance did not report as zero or negative at any point during the statement period of

the transfer, and (c) the linked account did not itself receive overdraft protection proceeds during the statement period of the transfer.

o Overdraft protection from a line of credit: Occurrences may be excluded if statements for the linked account confirm that (a) the line’s credit limit was not exceeded during

the statement period of the transfer and (b) a payment amount which equals or exceeds the sum of all overdraft protection occurrences analyzed in the statement period is

made within 30 days after the statement close date.

• Occurrences included in the analysis are subject to the following tolerances…

o Up to five (5) occurrences in the most recent twelve (12) month time period is acceptable if there are zero (0) occurrences in the most recent three (3) month time period.

o Up to three (3) occurrences are allowed in the most recent twelve (12) month time period if there are one (1) or more occurrences in the most recent two (2) month time

period.

o Exception requests for tolerance deviations must include (a) a letter of explanation from the borrower outlining the reason for the occurrences and an explanation of how

and when the issue leading to the occurrences was rectified, and (b) additional compensating factors outlined by the underwriter supporting the viability of income.

• Ensure the business is active and document and verify any business licensing (as applicable)

Underwriter must consider the financial strength of a self-employed borrower's business.

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Other sources of income

Capital Gains

• Document a two-year history with Federal tax returns for the most recent two years, including an IRS Form 1040, Schedule D. Use a two-year average for income if the borrower provides

current evidence that they own additional property or assets that can be sold to support the borrower will continue to receive the capital gain income for a minimum of 3-years. Current

receipt is not required; however, asset ownership must comply with the Age of Credit Documents section. Capital losses do not have to be considered.

Employment offers or Contracts

• For borrower(s) starting new employment, the loan file must contain a copy of an executed offer or contract plus the first paystub. The first paystub must be dated prior to the note

date.

Housing/Parsonage Income

• Housing or parsonage income may be considered qualifying income if there is documentation that the income has been received for the most recent 12-months and the allowance is likely

to continue for the next three years. The housing allowance may be added to income but may not be used to offset the monthly housing payment. Written documentation, such as a

WVOE provided by the church, must be obtained. The housing allowance, although not subject to federal income taxes, is subject to self-employment taxes. Gross income on Schedule SE

of the borrower’s 1040 should include housing allowance paid.

Restricted Stock Units

• Restricted stock units (RSUs) are issued to an employee through a vesting plan and distribution schedule. RSUs give an employee interest in company stock but have no tangible value

until vesting is complete. The RSUs are assigned a fair market value when they vest and considered income with a portion of the shares withheld to pay income taxes upon vesting. The

employee receives the remaining shares and can sell them at their discretion. Restricted stock options may be used as qualifying income when all the following requirements are met:

o Income has been consistently received for the prior 2-years, is continuing, and is identified on the borrower’s tax returns as income.

o RSU income is calculated using a 2-year average.

o If the RSU income is declining, proof of stability must be provided, and the most conservative average used for qualifying.

o RSU income must be likely to continue for 3-years.

o Borrower must be employed at the same company that issued the RSUs.

o Employer must be a publicly traded entity (e.g., a Fortune 500 company).

o Non-vested restricted stock is not an acceptable source of income or reserves.

o Vested RSUs may not be considered as qualifying income if they are also used for down payment, closing costs, and/or reserves.

The following documentation is required:

• Evidence that stock is publicly traded.

• Most recent vesting schedule or issuance agreement showing continuance of RSU income for a minimum of 3-years.

• To prove 3-year continuance, take the available RSUs from the Note date multiplied by the 52-week low stock price divided by 36-months. The monthly amount must be greater than

or equal to the monthly qualifying amount.

• Evidence of payouts of RSUs for the past 2-years. Acceptable verification includes:

o Tax returns for the last 2-years reflecting RSU income,

o Year-end paystubs reflecting the RSU payout, or

o Employer-provided statement paired with a brokerage or bank statement showing transfer of shares or funds that include the (a) date of the payout and (b) the number

of vested shares and their cash equivalent distributed to the borrower.

Teacher Income

• Teachers are paid on a 9-month, 10-month or 12-month basis. The pay structure should be determined before calculating the monthly income. If unable to determine the pay frequency,

documentation such as a copy of their contract or documents from the school district’s personnel office, may be required.

Tip Income

• Tips and gratuity income can be considered if receipt of such income is typical for borrower’s occupation (i.e., waitperson, taxi driver, etc.). Income should be received for at least two-

years and documented through the most recent year-to-date pay stubs and federal income tax returns for the most recent two-years. Income should be averaged over the time-period

verified. If the tip income is not reported on the pay stubs or tax returns, then it may not be included in qualifying income.

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Trust Income

• Confirm the trust income by obtaining a copy of the trust agreement or the trustee’s statement confirming the following:

o The borrower is a beneficiary, the amount, frequency, and duration of payments.

o Obtain a copy of the borrower’s tax return verifying receipt of the income.

o Verify that the trust income will continue for at least three years from the date of the mortgage Note.

Unless this income is received monthly, documentation of current receipt of the income is not required if the income is on the borrower’s most recent tax return.

VA Benefits

• Document the borrower’s receipt of VA benefits with a letter or distribution form from the VA, along with one-month proof of receipt. Verify that the income can be expected to

continue for a minimum of three years from the date of the mortgage Note. (Verification is not required for VA retirement or long-term disability benefits.) Education benefits are not

acceptable income because they are offset by education expenses.

Ineligible Income Sources

• Boarder Income

• Educational Benefits

• Gambling winnings

• Illegal income

• Mortgage Credit Certificates

• Mortgage Differential Payments

• Refunds of federal, state, or local taxes