Underwriting Guidelines. June 15, 2015

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2 Revision Notes Revisions for Doing Business with Radian In conformance with FNMA, expanded guidelines for parents wanting to provide housing for their physically handicapped or developmentally disabled child to include legal guardians. One Underwrite Approve, Accept/Ineligible The adjustable-rate mortgage (ARM) initial fixed period has been lowered to include both 3/1 and 3/3 ARMs for single family primary residences and second homes, purchase, rate/term refinance. Cash-out Refinance is now available. New Construction/ Construction-to-Permanent Second homes are now eligible for Radian s New Construction/Construction-to-Permanent 12 month Commitment for: One Underwrite Approve, Accept/Eligible One Underwrite Approve, Accept/Ineligible Standard Conforming Non Agency Jumbo The primary residence buy down exclusion has been removed for: One Underwrite Approve, Accept, Ineligible Standard Conforming Included that there may be no late payments during construction when the mortgage insurance is activated more than 120 days from the initial closing. Standard/Manual Clarified that mortgage history may be part of the minimum trade lines but is not a standalone requirement. Lenders may now use 1% of the unpaid balance for student loan payments not reflected on the credit report. Salary increases within 90 days of the note date may be included in qualifying income. Seller credits for repairs or decorating may be included within the Interested Party Contributions subject to GSE established limits up to a maximum of 3%. The maximum LTV for co-op primary residences has been raised to 97%. The adjustable-rate mortgage (ARM) initial fixed period has been lowered to include both 3/1 and 3/3 ARMs for single family primary residences. Clarified ARMS with an initial fixed period of 5 years includes both 5/1 and 5/5 products. Non-Agency Jumbo The adjustable-rate mortgage (ARM) initial fixed period has been lowered to include both 3/1 and 3/3 ARMs for purchases and rate/term refinances on primary residences and second homes. The maximum LTVs have been raised to 90% for second homes and 95% for co-op primary residences. Rev Radian Revision Notes

3 Table of Contents Revision Notes...2 Revisions for...2 Introduction...4 Section I Eligibility Matrices One Underwrite...6 One Underwrite...7 One Underwrite...8 Standard Conforming...9 Standard Conforming Standard FHFA High Balance Standard Affordable Housing; Housing Finance Agencies (HFAs); Federal Home Loan Banks (FHLBs) Non-Agency Jumbo Non-Prime Credit Section II Policy Chapters 1 Doing Business with Radian A. General Eligibility Loan Features Borrower Occupancy Status Property...19 B. and Submission Type Submission Date File Delivery Loan Package Loan Package Documentation...21 C. Mortgage Insurance Approval D. Mortgage Insurance Commitment Conditions Delegated Commitments One Underwrite A. Eligibility Borrower Contribution Agency Automated Systems (AUS)/Recommendation/Response Exclusions Maximum Loan Amount Subordinate Financing Loan Features...26 B. DU/LP Findings and Feedback Reports Identification Conditions/Alerts Compliance...26 C. Data Integrity D. Documentation Age of Documents Documentation Type Transaction...27 E. Consideration(s) Outside of AUS Loan Details Assessment Property Flips...28 F. Program Considerations MyCommunity Mortgage/ Home Possible HomeStyle Renovation New Construction/Conversion of Construction-to-Permanent...28 G. Project Acceptance Planned Unit Development (PUD) Condominium Co-operatives...29 H. Value/Property Considerations Appraisal Postponed Improvements Standard Conforming; Standard FHFA High Balance; Standard Affordable Housing/ Housing Finance Agencies (HFAs)/Federal Home Loan Banks (FHLBs); Non-Agency Jumbo; and Non-Prime Credit A. Specific Eligibility Maximum Loan Amount New Construction/Conversion of Construction-to-Permanent...32 B. General Terms Borrower Eligibility Documentation Loan-to-Value (LTV) Ratio Transaction Types Transaction Characteristics/ Property Features...35 C. Borrower Borrower Credit Classification and Evaluation Borrower Capacity...40 D. Property Eligibility Assessment of Value and Condition...47 E. Loan Specifics Interested Party Contributions Loan Features Payment Qualification Radian Table of Contents

4 Introduction Radian is proud to be a mortgage insurance industry leader. As a leader, we strive to accommodate the needs of the lending community by offering a variety of comprehensive mortgage insurance products while streamlining the application process. We continuously review Fannie Mae and Freddie Mac guidelines to align our eligibility and policy, whenever possible, and identify opportunities to support Non-Agency lending by providing mortgage insurance on loans not aligned with current Fannie Mae and Freddie Mac offerings. Our guidelines are structured to simplify the mortgage insurance process and provide underwriting clarity. Loans which receive a DU Approve/Eligible Recommendation or LP Accept/Eligible Response and satisfy a limited number of underwriting overlays generally meet Radian s eligibility criteria. Eligibility is also available for Standard underwriting, including Non-AUS, AUS ineligible recommendations, manual underwrites, and Construction-to-Permanent 12 month commitments; in addition to Non-Prime Credit and Non-Agency Jumbo loans. To make it easier to locate the requirements specific to your loan, the Policy section of our guidelines is organized into three chapters: 1. Doing Business with Radian Here you can learn about general eligibility criteria, underwriting types, submission options, commitment details and activation. 2. One Underwrite This chapter provides the underwriting criteria and program requirements for Radian s One Underwrite Program. 3. Standard; Non-Agency Jumbo and Non-Prime Credit For loans that do not meet One Underwrite eligibility, standard underwriting guidelines are provided in addition to eligibility details for Non-Agency Jumbo and Non-Prime Credit. As you navigate the guidelines you will find Bookmarks displayed on the left side of the Adobe Acrobat Reader screen that can be used to easily navigate through the various sections of the guidelines. All eligibility matrix(s) and topics can be accessed by simply expanding and clicking on the bookmark of the section, chapter or subject matter you wish to review. In addition, hyperlinks are provided to take you to another area within the guidelines where you can find additional information on a particular topic. If you click a hyperlink, you may return to your previous place by pressing down the alt (Microsoft) or command (Macintosh) key and the back arrow key at the same time on your keyboard. Should you have any questions about Radian s underwriting guidelines, please contact our Customer Care team at 877.RADIAN1 ( ) or your Radian representative. 4 Radian Introduction

5 Section I Eligibility Matrices The Eligibility Matrices can be used to quickly identify eligibility criteria specific to the transaction and property type. The One Underwrite eligibility matrices are distinguished by AUS findings/response while the remaining matrices apply to Standard Eligibility, Non-Agency Jumbo loans and Non-Prime Credit. Please see the Policy section of our manual for complete underwriting guidelines.

6 One Underwrite DU Approve/Eligible; LP Accept/Eligible Minimum 620 FICO 3 4 unit property excluded Property Type Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Exclusions Specific Primary Residence; Second Home; Purchase; Rate/Term Refinance; Cash-out (Includes FNMA MyCommunityMortgage; FNMA HomeStyle Renovation mortgage; FHLMC Home Possible mortgage) Determined by DU/LP New Construction/Construction-to-Permanent 12 month Commitment Primary Residence; Purchase; Rate/Term Refinance Detached single family unit including Planned Unit Development (PUD), detached (Site) Condominium 95% $417,000; AK & HI $625,500 90% FHFA High Balance Per DU/LP ARMs with initial fixed term < 3 years; Manufactured Homes; Properties located in Guam New Construction/Construction-to-Permanent 12 month Commitment Second Home; Purchase; Rate/Term Refinance Detached single family unit including Planned Unit Development (PUD), detached (Site) Condominium 90% $417,000; AK & HI $625,500 Per DU/LP ARMs with initial fixed term < 3 years; Temporary Buy downs; Manufactured Homes; Properties located in Guam Investment Property; Purchase Single family, detached and attached, includes Planned Unit Development (PUD); Condominium 85% $417,000; AK & HI $625, DTI Per DU/LP ARMs with initial fixed term < 5 years; Temporary Buy downs; Balloon Mortgages; Properties located in Guam Non-Warrantable Condominium Projects; Primary Residence; Purchase Attached Condominium 90% $417,000; AK & HI $625, /45% Manufactured Homes; ARMs with initial fixed term < 3 years; Temporary Buy downs; Balloon Mortgages; Properties located in Guam Link to Non-Warrantable Condominium Project Eligibility See following page for DU Approve/Ineligible, LP Accept/Ineligible 6 Eligibility Matrices One Underwrite / DU Approve/Eligible; LP Accept/Eligible

7 One Underwrite DU Approve/Ineligible; LP Accept/Ineligible For LTVs to 97% for Fixed Rate; or LTVs to 97% for ARMs with initial minimum fixed period of 3 years or greater Minimum 620 FICO 2 4 unit property excluded Property Type Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Exclusions Specific Primary Residence; Purchase; Rate/Term Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operative 97% $417,000; AK & HI $625, DTI per DU/LP Per DU/LP ARMs with initial fixed term < 3 years; Temporary Buy downs > 95% ARMs with initial fixed term < 5 years; Temporary Buy downs > 95% 90% FHFA High Balance Per DU/LP ARMs with initial fixed term < 3 years Primary Residence; Cash-out Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operative 85% $417,000; AK & HI $625, /45% ARMs with initial fixed term < 3 years; Temporary Buy downs; Non-traditional credit Second Home; Purchase; Rate/Term Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium, Co-operative 90% $417,000; AK & HI $625,500 Per DU/LP ARMs with initial fixed term < 3 years; Temporary Buy downs; Properties located in Guam Investment Property; Purchase Single family, detached and attached, includes Planned Unit Development (PUD); Condominium 85% $417,000; AK & HI $625, DTI per DU/LP ARMs with initial fixed term < 5 years; Temporary Buy downs; Balloon Mortgages; Properties located in Guam Non-Warrantable Condominium Projects; Primary Residence; Purchase Attached Condominium 90% $417,000; AK & HI $625, /45% Manufactured Homes; ARMs with initial fixed term < 3 years; Temporary Buy downs; Balloon Mortgages; Properties located in Guam Link to Non-Warrantable Condominium Project Eligibility See following page for New Construction/Construction-to-Permanent 12 month Commitment 7 Eligibility Matrices One Underwrite / DU Approve/Ineligible; LP Accept/Ineligible

8 One Underwrite DU Approve/Ineligible; LP Accept/Ineligible For LTVs to 97% for Fixed Rate; or LTVs to 97% for ARMs with initial minimum fixed period of 3 years or greater Minimum 620 FICO 2 4 unit property excluded Property Type Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Exclusions Specific New Construction/Construction-to-Permanent 12 month Commitment Primary Residence; Purchase; Rate/Term Refinance Detached single family unit including Planned Unit Development (PUD), detached (Site) Condominium 95% $417,000; AK & HI $625,500 90% FHFA High Balance Per DU/LP ARMs with initial fixed term < 3 years; Manufactured Homes; Properties located in Guam New Construction/Construction-to-Permanent 12 month Commitment Second Home; Purchase; Rate/Term Refinance Detached single family unit including Planned Unit Development (PUD), detached (Site) Condominium 90% $417,000; AK & HI $625,500 Per DU/LP ARMs with initial fixed term < 3 years; Temporary Buy downs; Manufactured Homes; Properties located in Guam 8 Eligibility Matrices One Underwrite / DU Approve/Ineligible; LP Accept/Ineligible

9 Property Type Standard Conforming Loans that do not meet One Underwrite eligibility Guam General Exclusions: LTVs > 90% Purchase, Rate/Term Refinance Primary Residence New Construction/Construction-to-Permanent 12 month commitment Non-warrantable condominium projects Second Homes Investment Property Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Primary Residence; Purchase; Rate/Term Refinance Exclusions Specific Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operative 97% 95% 2 Units 95% Manufactured Housing 90% $417,000; AK & HI $625,500 $533,850; AK & HI $800,775 $417,000; AK & HI $625, /45% 660/45% 680/45% ARMs with initial fixed term < 3 years; Temporary Buy downs > 95% LTV; Balloon Mortgages ARMs with initial fixed term < 3 years ARMs; Non-traditional credit ARMs with initial fixed term < 7 years; Non-traditional credit Primary Residence; Cash-out Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operative 85% $417,000; AK & HI $625, /45% ARMs with initial fixed term < 3 years; Temporary Buy downs; Non-traditional credit Second Home; Purchase; Rate/Term Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operative ARMS; 90% $417,000; Non-traditional credit 700/45% AK & HI $625,500 85% Non-traditional credit Investment Property; Purchase Single family, detached and attached, includes Planned Unit Development (PUD); Condominium 85% $417,000; AK & HI $625, /45% Co-operatives; Manufactured Homes; ARMs with initial fixed term < 5 years; Temporary Buy downs; Balloon Mortgages; Non-traditional credit Non-Warrantable Condominium Projects; Primary Residence; Purchase Attached Condominium 90% $417,000; AK & HI $625, /45% Manufactured Homes; ARMs with initial fixed term < 3 years; Temporary Buy downs; Balloon Mortgages Link to Adjustable Rate Mortgage Link to Non-Warrantable Condominium Project Eligibility See following page for New Construction/Construction-to-Permanent 12 month Commitment 9 Eligibility Matrices Standard Conforming

10 Property Type Standard Conforming Loans that do not meet One Underwrite eligibility Guam General Exclusions: LTVs > 90% Purchase, Rate/Term Refinance Primary Residence New Construction/Construction-to-Permanent 12 month commitment Non-warrantable condominium projects Second Homes Investment Property Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Exclusions Specific New Construction/Construction-to-Permanent 12 month Commitment Primary Residence; Purchase; Rate/Term Refinance Detached single family unit including Planned Unit Development (PUD), detached (Site) Condominium 95% $417,000; AK & HI $625, /45% ARMs with initial fixed term < 3 years; Non-traditional credit New Construction/Construction-to-Permanent 12 month Commitment Second Home; Purchase; Rate/Term Refinance Detached single family unit including Planned Unit Development (PUD), detached (Site) Condominium 90% $417,000; AK & HI $625, /45% ARMs; Temporary Buy downs; Non-traditional credit Link to Adjustable Rate Mortgage 10 Eligibility Matrices Standard Conforming

11 Property Type Standard FHFA High Balance (FHFA designated high cost areas) Loans that do not meet One Underwrite eligibility General Exclusions: GSE non-warrantable condominium, co-operatives and planned unit development projects Non-traditional Credit Properties located in Guam Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Exclusions Specific Primary Residence; Purchase; Rate/Term Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operative 90% Not to exceed FHFA High Cost Limits 700/45% ARMs with initial fixed term < 3 years New Construction/Construction-to-Permanent 12 month Commitment Primary Residence; Purchase; Rate/Term Refinance Detached Single family unit including Planned Unit Development (PUD), detached (Site) Condominium 90% Not to exceed FHFA High Cost Limits 700/45% Manufactured homes; ARMs with initial fixed term < 3 years; Temporary Buy downs Link to Adjustable Rate Mortgage 11 Eligibility Matrices Standard FHFA High Balance

12 Standard Affordable Housing; Housing Finance Agencies (HFAs); Federal Home Loan Banks (FHLBs) Loans that do not meet One Underwrite eligibility General Exclusions: GSE non-warrantable condominium, co-operatives and planned unit development projects Properties in Guam Property Type Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Exclusions Specific Primary Residence; Purchase; Rate/Term Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium 97%/105% 680/45% ARMs with initial fixed term < 5 years; Temporary Buy downs > 95%; Balloon Mortgages 95%/105% 660/45% ARMs with initial fixed term < 5 years; Co-operative $417,000; 97%/97% AK & HI $625, /45% 95%/95% 660/45% ARMs; Temporary Buy downs; Balloon Mortgages; Non-traditional credit ARMs with initial fixed term < 5 years; Non-traditional credit Manufactured Housing 95%/95% 680/45% ARMs with initial fixed term < 7 years; Non-traditional credit 2 Units 95%/105% $533,850 AK & HI $800, /45% ARMs; Non-traditional credit Link to Adjustable Rate Mortgage 12 Eligibility Matrices Standard Affordable Housing; Housing Finance Agencies (HFAs); Federal Home Loan Banks (FHLBs)

13 Non-Agency Jumbo (Loan amounts exceeding FHFA designated High Cost areas) Document Waivers for Loan Amounts $650,000 For Non-Agency Jumbo loans with a valid DU Approve Credit Recommendation or LP Accept Credit Response follow the respective Agency documentation requirements for employment, income, and assets. Follow Radian Standard for all other loans. All Loan Amounts 5% minimum contribution from occupant borrower own funds required. General Exclusions: Non-Traditional Credit Properties located in Guam Manufactured Housing ARMs with initial fixed term < 3 years Temporary Buy downs Balloon Mortgages < 15 years GSE non-warrantable condominium and planned unit development projects, co-operatives Property Type Maximum LTV/CLTV Maximum Loan Amount Minimum Credit Score Maximum DTI Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operatives Primary Residence; Purchase; Rate/Term Refinance 95% $650,000 90% $850,000 Second Home; Purchase; Rate/Term Refinance 700/45% Single family, detached and attached, includes Planned Unit Development (PUD); Condominium; Co-operatives 90% $650, /45% New Construction/Construction-to-Permanent 12 month Commitment Primary Residence; Purchase; Rate/Term Refinance Single family, detached Planned Unit Development (PUD); (Site) Condominium 95% $650,000 90% $850, /45% New Construction/Construction-to-Permanent 12 month Commitment Second Home; Purchase; Rate/Term Refinance Single family, detached and attached, includes Planned Unit Development (PUD); (Site) Condominium 90% $650, /45% Link to Adjustable Rate Mortgage 13 Eligibility Matrices Non-Agency Jumbo

14 Non-Prime Credit General Exclusions: Second Homes Non-traditional credit Construction-to-Permanent 12 month commitment Properties located in Guam Manufactured Housing 2 4 Units Investment Property GSE non-warrantable condominium and planned unit development projects, co-operatives Property Type Maximum LTV Maximum Loan Amount Minimum Credit Score Maximum DTI Exclusions Specific Primary Residence; Purchase; Rate/Term Refinance Single family, detached and attached, includes Planned Unit Development (PUD); Condominium 95% ARMs $417,000; 680/41% AK & HI $625,500 90% ARMs with initial fixed term < 5 years Link to Adjustable Rate Mortgage 14 Eligibility Matrices Non-Prime Credit

15 Section II Policy Chapters

16 1 Doing Business with Radian A. General Eligibility The following information applies to all Radian insured loans. 1. Loan Features a. Loan Origination Radian insures first lien mortgages only. The loan must have been originated as a full documentation loan. Third party originations are eligible. b. Credit Quality Prime and Non-Prime mortgage insurance coverage is available and issued under separate qualifying criteria. Prime: Industry A credit extended to borrowers considered to be the most credit worthy and qualified to borrow at the market s best interest rate. Non-Prime: Industry A Minus credit extended to borrowers unable to meet Prime credit eligibility requirements as defined within these guidelines or for loans receiving a non-prime credit AUS Response. c. Transaction Coverage is available on mortgage loans used to purchase or refinance a primary residence, second home or purchase of investment property. Radian also insures Fannie Mae s HomeStyle rehabilitation/renovation loans through our One Underwrite program. d. Subject property location Loans securing property located within the United States and Guam are eligible, certain restrictions apply. Radian does not insure property located in Puerto Rico or the U.S. Virgin Islands. e. Maximum insured loans per borrower Radian will insure up to two loans per borrower with a maximum of one investment property. 2. Borrower a. Identification Radian provides mortgage insurance on loans to Individuals and Inter vivo revocable trusts that meet standard Fannie Mae/Freddie Mac requirements. The submitting lender must validate the identity of the borrower. All borrowers on the mortgage loan must have a valid social security number and reached the age at which a mortgage note is legally enforceable. Borrowers with an Individual Tax Identification Number (ITIN) in lieu of a Social Security number are not eligible. b. Citizenship Status The borrower may be a U.S. Citizen, permanent resident alien, or a non-permanent resident alien. The borrower must be subject to all United States laws and regulations. Borrowers with diplomatic immunity are not eligible. 16 Doing Business with Radian General Eligibility

17 c. Relocation Borrowers specific to Relocation Borrowers are not offered. However, in certain cases, favorable pricing is available for Relocation Borrowers who meet the following conditions. Please see rate cards for details. The borrower is purchasing a primary residence. The borrower is a transferred or new employee. The borrower is participating in a formal Relocation program administered by the employer or its agent. The employer contributes to mortgage loan financing through the payment of closing costs, discount points or pre-paid items. 3. Occupancy Status Occupancy type is a component of mortgage insurance eligibility. Radian provides insurance on mortgages secured by property occupied by the borrower as a primary residence or second home. Radian also insures investment property. For Radian insurance eligibility purposes, a property with occupancy or use characteristics inconsistent with those of primary residence or second homes is classified as an investment property. The terms under which Radian will insure an owner occupied property vary depending on whether the property is classified as a primary residence or second home. As a result, for mortgage insurance qualification purposes, Radian provides primary residence and second home occupancy classification requirements. To ensure proper underwriting, all delegated and non-delegated mortgage insurance applications must accurately identify occupancy type. Prior to submission, the lender is to confirm the occupancy type selected on the mortgage insurance application is consistent with Radian s occupancy classification requirements and supported by documentation contained within the loan file. It may be necessary for a lender to perform due diligence before selecting an occupancy type on the mortgage insurance application when the loan details do not provide adequate motivation or clear intent. In these instances, it is prudent for the submitting lender to include with their mortgage insurance application, a summary of the actions taken which provided the details necessary to confirm their selection. Examples of loan file circumstances which may benefit from lender explanation include: 1) Borrower currently owns a primary residence in close proximity to the subject property. 2) Borrower currently owns a property in the subject market area which competes with the subject property in regards to features and benefits. 3) Borrower has acquired other real estate within the past twelve months or is in the process of purchasing other real estate. 4) Borrower is purchasing a home that requires significant updates or improvements to align condition with that which is typical for the neighborhood. 5) Borrower currently co-habits the primary residence owned by their non-entering spouse/domestic partner 6) Subject property is tenant occupied. 7) A non-owner occupant co-borrower transaction when the occupant borrower does not contribute qualifying income. 17 Doing Business with Radian General Eligibility

18 In the event actions taken by a lender do not provide the details necessary to confirm occupancy type classification, the file may be forwarded to the Service Center for a non-delegated underwriting review provided it is identified accordingly (not available for HARP loans due to certificate modification only requirements). a. Primary Residence Radian considers the occupancy of a property to be a primary residence when: The property characteristics are adequate to accommodate the borrower s immediate dependent family. It is occupied by the borrower for the majority of the year. It is located within a reasonable distance from the borrower s place of employment. Note: In the event the borrower is military personnel stationed overseas, all the above occupancy requirements may be met by the borrower s immediate family member(s) when no other real estate is owned by the borrower or occupying family member(s). For purchase and construction conversion transactions: The borrower states an intention to occupy the property as a primary residence, and occupancy will occur no later than (60) days from the date the loan is closed. For existing property refinance transactions: The borrower occupies the property as a primary residence at the time of loan application, and it is the borrower s address of legal record. In addition Radian will insure loans to borrowers as their primary residence when the subject property is owned or purchased by the borrower to accommodate their: Elderly parents, who do not have adequate income or financial resources to qualify for a mortgage on their own. Parents or legal guardians wanting to provide housing for their physically handicapped or developmentally disabled child. Note: The elderly parent or handicapped/disabled child s inability to qualify for a mortgage must be addressed in the loan file. NOTE: Property purchases for the purpose of supplying dormitory or rented housing for the borrower/s or for their family member(s) while attending college or training [commonly referred to as a kiddie condo ] is excluded as a primary residence. b. Second Home Radian will insure loans to borrowers occupying the subject property as a second home subject to the following restrictions: The property will be occupied by the borrower for some portion of the year. The property is: Located in an area that is accessible yet remote enough from the borrower s primary residence to function reasonably as a second home. Suitable for year-round occupancy. Available for the borrower s exclusive use and controlled solely by the borrower. Not under a shared ownership, revenue sharing or rental agreement. NOTE: Property purchased for the purpose of supplying dormitory or rented housing for the borrower/s or for their family member(s) while attending college or training [commonly referred to as a kiddie condo ] is excluded as a second home. 18 Doing Business with Radian General Eligibility

19 c. Investment Property Radian will insure investment property defined as property that the borrower does not intend to occupy and use as their primary residence or second home or a property purchased in lieu of supplying dormitory or rented housing for the borrower (s) or for their family member(s) while attending college or training [commonly referred to as a kiddie condo ] although the property need not be a condominium unit. 4. Property Radian does not insure 3 4 unit properties, mobile homes, time-share properties or lot loans. Each eligible property type is defined below. All properties are subject to Minimum Property Standards. a. Eligible Property Type Defined Single Family Residence A 1 unit detached or attached home. Held in fee simple or leasehold estate. Not subject to a mandatory homeowners association. Planned Unit Development (PUD); Condominium PUD or Condominium classification can be determined by the legal description. A 1 unit detached or attached home. Held in fee simple or leasehold estate. Located in a project or subdivision which includes common property owned and maintained by a homeowners association. Subject to mandatory membership in the homeowners association and payment of assessments. Co-operatives A 1 unit attached home. Held in fee simple estate. Designed for residential use. Consists of five or more units. Form of ownership in which the buyer obtains shares in a corporation which owns the building where the unit is located. 2 Unit Properties Provides two separate, self contained living units, attached to or detached from each other that are legally permissible and located on the same parcel. Held in fee simple or leasehold estate. Not subject to a mandatory homeowners association. Manufactured Housing Multi-width, 1 unit detached home. Held in fee simple estate. Legally classified and taxed as real estate. Permanently affixed to the lot. 19 Doing Business with Radian General Eligibility

20 b. Minimum Property Standards The subject property must: Have a clear and marketable title. Provide residential use, which has been determined by the appraiser to be the highest and best use. Provide conditions which do not compromise the health, safety or security of the occupants. Demonstrate structural integrity. Have a permanent water source. Have operational utilities and mechanical systems that meet community standards and demonstrated by the comparables. Have legal, unrestricted, year round access. B. and Submission 1. Type Radian provides for both delegated and non-delegated underwriting, the choice of which will determine how a file is submitted and commitment obtained. Non-delegated underwriting requires submission to a Radian Service Center or Radian on-site contract underwriter. Lenders who have executed an Review Agreement with Radian may submit loan files for compliance underwriting in addition to mortgage insurance eligibility. Delegated underwriting requires a Radian Delegated Endorsement to the submitting Lender s Master Policy. Lenders who have been granted delegated underwriting authority are expected to use this authority, employ prudent judgment and underwrite all loans prior to ordering mortgage insurance. The file must include adequate support for the underwriting decision. Radian reserves the right to request additional documentation, if upon review, the file is found to be insufficient. A delegated lender may choose to submit a file non-delegated specifically those that present unique circumstances however once a file has been submitted non-delegated, the lender may not exercise delegated authority on the file. 2. Submission Date All Mortgage insurance applications, regardless of the underwriting type must be submitted in compliance with these date restrictions: Borrower-Paid Mortgage Insurance (BPMI) prior to loan closing date. Lender-Paid Mortgage Insurance (LPMI) prior to the first payment due date. 3. File Delivery Loan packages may be submitted for non-delegated underwriting through a variety of avenues: a. Electronic Delivery Register, check eligibility and upload your loan file via Radian s MI Online data transmission system b. Send to Radian s Service Center via secured to intake@radian.biz. 20 Doing Business with Radian General Eligibility / and Submission

21 c. Fax Fax to Radian s Service Center at d. Overnight Delivery Packages may be sent to: Radian Guaranty Inc. Service Center 250 East Wilson Bridge Road, Suite 175 Worthington, OH e. Blitz Docs For specific information please contact our Customer Care team at 877.RADIAN1 ( ) or your Radian representative. 4. Loan Package For Non-delegated lenders or Delegated lenders requesting a Non-delegated submission, Radian offers a variety of Loan Package options. Radian will review each type of loan package for eligibility, however an appraisal must be provided in order to obtain a mortgage insurance commitment. Radian s decision on a submission without an appraisal will be communicated by a Lender Notice subject to the appraisal and any other loan-specific outstanding information. a. Complete Loan Package A property has been selected by the borrower. The mortgage insurance application includes both the sales contract and appraisal along with all required credit documents. b. Credit Only A property has been selected by the borrower. The mortgage insurance application includes all credit documents however the sales contract and/or appraisal are not currently available for review. c. Pre-Qualification A property has not been selected by the borrower. The mortgage insurance application includes all credit documents. For Delegated lenders only, Radian offers an additional submission option. d. Radian ExpressTrack SM A property has been selected by the borrower. The mortgage insurance application submitted to Radian for underwriting includes four documents: 1008, 1003, credit report and appraisal. Radian reviews the credit report and appraisal to confirm eligibility. The submitting lender represents and warrants that the information presented and contained within the 1008 and 1003 has been properly documented, reviewed for accuracy and accepted as true and complete. In the event an AUS Recommendation is identified on the mortgage insurance application and used to satisfy One Underwrite eligibility, the lender must also represent and warrant the validity of the Findings/Feedback Report reporting the AUS Recommendation. 5. Loan Package Documentation Depending on the transaction and type of Loan Package, all or some of the following documents are necessary to render a decision on the mortgage insurance application. A Radian Mortgage Insurance Application Applications may be obtained through your Radian Representative or our Customer Care team at 877.RADIAN1 ( ). 21 Doing Business with Radian and Submission

22 Initial 1003, signed and dated by the interviewer (and borrower if available). Final 1003/1008 DU Findings Report/LP Feedback Certificate, if applicable. Credit Report Income/employment verification Verification of down payment and reserves Purchase Agreement if applicable Appraisal in PDF format Additional documentation as needed to support the mortgage insurance application. C. Mortgage Insurance Approval The underwriting approval is contingent on the lender closing the loan as approved by Radian. Applications that are restructured after the mortgage insurance approval must be resubmitted for a revised approval. Failure to advise Radian of any changes after approval may invalidate the mortgage insurance policy. D. Mortgage Insurance Commitment 1. Conditions At the time of submission and activation the insured lender must be an active Radian Master Policy holder. Mortgage insurance commitments that have yet to be activated may only be cancelled by the submitting lender. a. Term Mortgage insurance commitments are issued by Radian with a commitment term of 120 days or 12 months for new construction/conversion of construction-to-permanent. Commitment expiration dates cannot be extended. 120 day Commitment The home must be complete and habitable including a Certificate of Occupancy prior to activation of the commitment. New Construction/Conversion of Construction-to Permanent 12 month commitment In the event Radian s 120 day commitment term will not accommodate the property completion date, and subsequent initiation or closing of the permanent financing, or the lender requires coverage during the construction period, a New Construction/Conversion of Construction-to-Permanent, 12 month, commitment term may be requested when initially ordering mortgage insurance. Link to New Construction/Conversion of Construction-to-Permanent under One Underwrite guidelines Link to New Construction/Conversion of Construction-to-Permanent under Standard guidelines b. Coverage The percentage of mortgage insurance coverage issued is subject to published pricing and based upon lender request. 22 Doing Business with Radian and Submission / Mortgage Insurance Approval / Mortgage Insurance Commitment

23 c. Pricing The cost of Radian s mortgage insurance options can be found on our published rate cards located at 1) Non-traditional Credit Loan files which do not contain any FICO score and therefore are qualified using non-traditional credit references are priced using the lowest credit score offered on the rate cards specific to the mortgage insurance product. These no FICO, non-traditional credit loan files are not eligible for Radian s SplitEdge program. d. Activation The loan must close and the coverage be activated with Radian (i.e., loans must be certified) before the commitment expires. This can be accomplished through Radian s receipt of the initial premium due along with the reported date on which the loan closed, or in the case of deferred premium payment option, report the date to Radian on which the loan closed. e. Post-Commitment Data Changes A loan must re-qualify for a mortgage insurance commitment if any information changes prior to the loan closing which impacts the loan s qualification for mortgage insurance or the terms under which the commitment was issued. Subsequent qualification is based on current published guidelines at the time of re-qualification. It is not based on the guidelines published at the time of the original mortgage insurance application or commitment. A mortgage insurance commitment shall be rendered null and void if changes to the loan information result in a loan that no longer meets Radian s eligibility guidelines. 1) Resubmission Tolerance In the event the borrower discloses or the lender discovers additional debt(s), the loan will not require requalification if: The debt-to-income (DTI) ratio does not exceed the lower of published guidelines, 45%; the DTI ratio does not increase by 3 percentage points or more (if the calculated DTI ratio is less than 45%). A new credit report is obtained and the representative credit score continues to meet published guidelines. In all cases, any change to the loan file must be documented on a revised 1003 provided prior to certification. 2. Delegated Commitments Radian provides delegated lenders the opportunity to obtain a mortgage insurance commitment in one of the following ways: a. The loan information may be entered into Radian s MI Online, data transmission system. It is important to note, Radian s MI Online system validates the eligibility of specific loan features however it is not an underwriting system. The lender is required to adhere to Radian s published guidelines and any representations/ warranties associated with their delegated underwriting authority endorsement. b. The loan information may be transferred through EDI Transmission. c. The loan information may be submitted to a Radian Service Center. Please provide a completed, signed 1008 with the FICO-based credit score clearly noted and applicable AUS Recommendation/Response. 23 Doing Business with Radian Mortgage Insurance Commitment

24 Delegated lenders will be asked to provide channel information when requesting a commitment. Please identify channel according to the following definition: Retail: Submitting Lender took loan application. Wholesale Submitting Lender did not take loan application. Correspondent: Submitting Lender did not take loan application but is the investor buying the loan. 24 Doing Business with Radian Mortgage Insurance Commitment

25 2 One Underwrite Loan files which are submitted with a valid AUS Approve/Accept Credit Recommendation/ Response and satisfy a limited number of underwriting overlays qualify for Radian mortgage insurance. Fannie Mae and Freddie Mac analyze credit characteristics and risk features through their proprietary automated underwriting systems (AUS) to identify first lien mortgage loans of prime credit quality. Radian recognizes the value of this assessment and will allow certain prime credit recommendations/ responses in conjunction with a limited number of underwriting overlays to satisfy eligibility requirements. Although Radian presents this opportunity to our lending partners, we promote prudent underwriting and risk assessment as an inherent part of responsible lending and anticipate our clients will complete appropriate due diligence when submitting a loan for mortgage insurance coverage. A. Eligibility Radian will insure loans receiving a Prime credit recommendation/response through the use of Radian Delegated and Non-delegated underwriting subject to the following: 1. Borrower Contribution Radian follows Fannie Mae DU/DO and Freddie Mac LP regarding the occupant borrower s minimum contribution from own funds. For delegated submissions using MI Online and non-delegated submissions underwritten by Radian: Personal gifts, gifts of equity, down payment assistance, employer assistance, or grants meeting GSE requirements are acceptable sources of occupant borrower own funds for purchase transactions of single family primary residences. As a reminder: These loans must be properly identified in MI Online by populating No to Borrower 3% Funds field and answering the corresponding questions regarding source of funds for closing. 2. Agency Automated Systems (AUS)/Recommendation/Response Fannie Mae Desktop Underwriter (DU) Approve/Eligible, Approve/Ineligible Recommendation. DU eligibility includes Desktop Originator (DO). Freddie Mac Loan Prospector (LP) Accept/Eligible, Accept/Ineligible Response for: LTVs to 97% for Fixed Rate; or LTVs to 97% for ARMs with initial minimum fixed period of 3 years or greater Follow GSE requirements for qualifying ARM mortgage payment. a. A recommendation/response specific to a DU Refi Plus or LP Open Access Refinance is not eligible. b. Radian accepts specific lender approvals or variances to a lender s master agreement issued by Fannie Mae/Freddie Mac for the following: Fannie Mae or Freddie Mac approvals or variances related to income and asset eligibility and documentation. Fannie Mae s HomeStyle renovation mortgages. Mortgages secured by properties located in Guam. 25 One Underwrite Eligibility

26 A co-operative share loan. Secondary financing in conjunction with Affordable Housing programs. Approvals or variances must be available upon request. Link to Program Considerations c. Loans submitted to an Agency Custom AUS or Non-Agency AUS; or loans receiving any recommendation/response other than DU Approve/Eligible, Approve/Ineligible or LP Accept/Eligible, Accept/Ineligible must meet standard Radian published guidelines. Link to Chapter 3 Standard; Non-Agency Jumbo and Non-Prime Credit 3. Exclusions DU Refi Plus; LP Open Access Refinance DU Approve/Eligible, LP Accept/Eligible 3 4 Units DU Approve/Ineligible, LP Accept/Ineligible 2 4 Units 4. Maximum Loan Amount Subordinate Financing Loan Features: Amortization; Adjustable Rate Mortgages; Temporary Buy downs Link to One Underwrite DU Approve/Eligible; LP Accept/Eligible matrix Link to One Underwrite DU Approve/Ineligible; LP Accept/Ineligible matrix B. DU/LP Findings and Feedback Reports 1. Identification The final AUS Findings/Feedback Report, a result of the most recent submission, must be included in the loan file. Eligibility details, including special program considerations, must be identifiable. 2. Conditions/Alerts All conditions identified within the Findings/Feedback Report must be satisfied as required by respective Agency guidelines. Red flags identified within the Findings/Feedback Report are to be addressed within the loan file. 3. Compliance The loan must close according to the terms and conditions of the AUS Findings/Feedback Report. Resubmission tolerances as identified by the respective Agency are permitted. C. Data Integrity The transmission of accurate loan data to the Agency AUS is critical to the meaning and effectiveness of the AUS assessment. Therefore the submitting lender is responsible to verify and confirm the accuracy of the data submitted to the Agency AUS which result in the Eligible Recommendation/Response. This includes but is not limited to the Borrower s credit history, source and amount of qualifying income and assets, transaction and property type. 26 One Underwrite Eligibility / DU/LP Findings and Feedback Reports / Data Integrity

27 D. Documentation 1. Age of Documents Follow applicable Fannie Mae/Freddie Mac guidelines. 2. Documentation Type Radian follows applicable Fannie Mae/Freddie Mac requirements for the type of documentation required to support specific sources of qualifying income and assets. Radian will accept streamlined documentation as permitted within the applicable AUS recommendation/response. However, consistent with Fannie Mae/Freddie Mac guidance; there may be instances where AUS streamlined documentation is not sufficient to adequately support the loan details as submitted. On these occasions, the lender must identify and require the documentation necessary to support the loan details and subsequent AUS recommendation/response. 3. Transaction The terms and definition of the transaction, including Interested Party Contributions (IPCs), must meet standard Fannie Mae/Freddie Mac requirements. E. Consideration(s) Outside of AUS 1. Loan Details At times, Fannie Mae and Freddie Mac identify loan details and circumstances which are not captured and/or considered with the AUS. These may vary depending on effective date, system limitations or scheduled upgrades. Files which include loan details not considered within the applicable AUS recommendation/response, including but not limited to required reserves, derogatory credit waiting periods, and multiple financed property limitations, must be given manual underwriting consideration to confirm the loan file continues to meet applicable agency guidelines. In the event the file no longer meets applicable agency guidelines, the loan is no longer eligible for One Underwrite and must meet standard published guidelines. Link to Chapter 3 Standard; Non-Agency Jumbo and Non-Prime Credit Fannie Mae and Freddie Mac require lenders to perform a manual calculation of the required minimum reserves for: Current Principal Residence Pending Sale; Current Principal Residence Converting to Second Home; Current 1 4 unit Principal Residence Converting to Investment Property. 2. Assessment When approving a loan as a result of an AUS Recommendation, employ prudent underwriting judgment in assessing the appropriateness of the AUS Recommendation. Confirm the accuracy of the data submitted, making sure the submission did not fail to include any data that might have affected the AUS recommendation had it been known. Ensure that the loan complies with all of the verification messages and approval conditions specified in the AUS Findings report. 27 One Underwrite Documentation / Consideration(s) Outside of AUS

28 Apply due diligence when reviewing the documentation in the loan file. Review the credit report to confirm that the AUS evaluated credit report data with respect to the borrowers credit history was accurate and complete. Determine if there is any potentially derogatory or contradictory information that is not part of the data analyzed by the AUS. Take action when erroneous data in the credit report or contradictory or derogatory information in the loan file would justify additional investigation or potentially deliver a decision that is different from the AUS recommendation. 3. Property Flips The potential increased risk associated with a property flip may not be specifically considered within the scope of the AUS recommendation/response. As a result, the sale of a property recently acquired by the seller after a brief holding period typically for profit must be given consideration outside of the AUS recommendation/response. The expectation exists that any non-arms length transaction or increase in value be documented and analyzed to ensure the risk presented within the transaction is appropriate. F. Program Considerations 1. MyCommunity Mortgage/Home Possible The AUS Eligible Recommendation may be specific to Fannie Mae s MyCommunity Mortgage or Freddie Mac s Home Possible programs, however Radian s overlays remain in effect. 2. HomeStyle Renovation Radian will accept AUS Eligible Renovation loans approved, closed and delivered in compliance with Fannie Mae s HomeStyle Renovation program. Fannie Mae loan feature restrictions apply. 3. New Construction/Conversion of Construction-to-Permanent AUS Eligible and Ineligible Recommendations specific to Construction-to-Permanent loan files are subject to Radian s commitment term of 120 days. The home must be complete and habitable including a Certificate of Occupancy prior to activation of the commitment. In the event Radian s 120 day commitment term will not accommodate the property completion date, subsequent initiation or closing of the permanent financing, or the lender requires coverage during the construction period, a New Construction/Conversion of Construction-to-Permanent, 12 month, commitment term may be requested when initially ordering mortgage insurance. Link to New Construction/Conversion of Construction-to-Permanent under Standard guidelines 28 One Underwrite Consideration(s) Outside of AUS / Program Considerations