ANSWERS TO FREQUENTLY ASKED TRUTH-IN-LENDING QUESTIONS

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1 ANSWERS TO FREQUENTLY ASKED TRUTH-IN-LENDING QUESTIONS What is a Truth-IN-LENDING disclosure and why do I receive it?. The Truth-In-Lending Disclosure (TIL) is designed to give you information about the costs of your loan so that you may compare these costs with those of other loan programs. This disclosure statement Is required by federal law. A. Annual Percentage Rate The cost of your credit as a yearly rate B. Finance Charge The dollar amount the credit will cost you C. Amount Financed The amount of credit provided to you or on your behalf D. Total Payment The amount you will have paid after you have made all payments as scheduled What is the Annual Percentage Rate? The Annual Percentage Rate (APR) is the cost of your credit expressed as a yearly rate. The APR may be different than the interest rate on your loan. It is common for the APR to be higher than the interest rate because you may be paying loan discount points and other prepaid Finance Charges at or before closing. Prepaid Finance Charges are Finance Charges that are paid outside of closing (POC), at the closing, or are withheld from the loan proceeds. Examples of Prepaid Finance Charges can include the origination fee, discount points, interim interest, and the initial mortgage insurance premiums. If you loan is an adjustable rate mortgage (ARM), the APR is a composite rate based on the initial interest rate and the formula rate (index plus margin). What is the FINANCE CHARGE? The Finance Charge is the amount you will pay back over the life of the loan in addition to the principal amount you borrowed. This figure is calculated based on the assumption that you loan will not be paid off early. The Finance Charge includes such items as interest accruing on the outstanding principal balance, Prepaid Finance Charges, and other items required to obtain the loan, such as mortgage insurance premiums if applicable What is the AMOUNT FINANCED? The Amount Financed is the loan amount minus the prepaid Finance Charges. If your loan has Prepaid Finance Charges, The Amount Financed is lower than the amount for which you applied. For example if you applied for $50,000 and if the prepaid Finance Charges total $2,000, the Amount Financed would be $48,000. What is the TOTAL OF PAYMENTS? This figure represents the total amount you will pay if you make the required payments for the entire term of the loan. This includes principal, interest and mortgage insurance premiums, if applicable. It does not include payments for real estate taxes or property insurance premiums. If I sell my house at some time in the future, will another person be permitted to assume my loan? Federal law requires us to disclose weather the investor s current assumption policy allows for you loan to be assumed on the original terms. The investor s assumption policy may change in the future. What is the prepayment penalty and will I receive a refund if I pay off my loan Early? Federal law requires us to disclose weather an additional fee or penalty will be charged if you pay off your loan early. In addition, we must disclose weather you would receive a refund of any finance charge which you have paid. Most Finance Charges are not refundable because they are not paid in advance, however, an example of a Finance Charge which may not be refundable is certain private mortgage insurance premium plans which, if paid in advance, may entitle you to a refund of some of the premium if you pay off early. Does the schedule of payments shown represent the amounts I will pay each month? The monthly payments include principal, interest and mortgage insurance premiums, if any. The payments, as disclosed, do not include escrows such as taxes and property insurance premiums. If you loan is an adjustable rate mortgage( ARM), payments are based on the formula Rate (index plus margin). If the initial interest rate is discounted, the payment schedule Reflects the initial rate for the period of time it is effective. After that, it reflects the Formula rate (index plus margin). This disclosure does not predict future changes in the Payments due to an increase in you interest rate.

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3 Date: Monday, April 02, 2007 Borrower(s): Property Address: ATTORNEY SELECTION NOTICE NORTH CAROLINA I understand that I have the right to select a qualified attorney to conduct my title search and loan closing, provided the attorney I select is acceptable to the Lender. If I do not choose an attorney, the Lender will do so. Please check ONE of the following: I elect to have the lender choose a qualified attorney to search title and conduct my closing. I elect to choose the attorney to search title and conduct my closing. In doing so, I fully understand that: -The lender will not be responsible for any cancellation fees. -The lender will not guarantee rate or points should there be a delay in receipt of the title search or loan closing. The attorney I choose is Signature Signature Signature Signature Attorney Selection Notice of North Carolina

4 Authorization For the Social Security Administration to Release Social Security Number Verification Printed Name SSN Date of Birth I authorize the Social Security Administration to verify my Social Security number to through their agent, Tax Verification Bureau. I understand that my consent allows no additional information from my Social Security records to be provided to and that the verification of my Social Security number will be used to confirm my identity. I also understand that my Social Security number may not be used for any other purpose other than the one stated above, including resale or redisclosure to other parties. The only other redisclosure permitted by this authorization is for review purposes to ensure that the agent complies with SSA s consent requirements. I am the individual to whom the Social Security number was issued or that person s legal guardian. I declare and affirm under the penalty of perjury that the information contained herein is true and correct. I know that if I make any representation that I know is false to obtain information from Social Security records, I could be found guilty of a misdemeanor or fined up to $5,000. Signature Date Signed This consent is valid only for 90 days from the date signed, unless indicated otherwise by the individual named above. Contact information of individual signing authorization: Address Phone Number If consent is signed other than by the individual named above, indicate relationship:

5 Authorization For the Social Security Administration to Release Social Security Number Verification Printed Name SSN Date of Birth I authorize the Social Security Administration to verify my Social Security number to through their agent, Tax Verification Bureau. I understand that my consent allows no additional information from my Social Security records to be provided to and that the verification of my Social Security number will be used to confirm my identity. I also understand that my Social Security number may not be used for any other purpose other than the one stated above, including resale or redisclosure to other parties. The only other redisclosure permitted by this authorization is for review purposes to ensure that the agent complies with SSA s consent requirements. I am the individual to whom the Social Security number was issued or that person s legal guardian. I declare and affirm under the penalty of perjury that the information contained herein is true and correct. I know that if I make any representation that I know is false to obtain information from Social Security records, I could be found guilty of a misdemeanor or fined up to $5,000. Signature Date Signed This consent is valid only for 90 days from the date signed, unless indicated otherwise by the individual named above. Contact information of individual signing authorization: Address Phone Number If consent is signed other than by the individual named above, indicate relationship:

6 Notice of Information and Examples of Amortization of Home Loans [Notice to Consumers under North Carolina General Statutes Section A(a1)(1)] Note: North Carolina law requires a mortgage lender to provide this Office of the Commissioner of Banks Notice to a consumer who applies for a home loan. The lender must deliver or mail this Notice to the consumer within three business days after the lender receives the consumer s loan application or the date of loan closing, whichever is earlier. This law defines a home loan as a loan (other than an open-end credit plan) for less than $300,000, obtained for personal, family or household purposes and secured by a first mortgage or first deed of trust on the consumer s dwelling. Information on Home Loan Amortization When you obtain a home loan from a lender, you will be asked to sign a note that requires you to repay the principal amount you borrow, plus interest. You may also be required by your loan documents to pay sums into escrow so that your lender will have sufficient funds on hand to pay your property taxes and property insurance premiums on your behalf as and when they become due. If you are delinquent in making your payments, you may be required to pay a late charge. The order in which your lender applies your payments to these various categories will depend on the specific terms of your loan documents and the manner in which your lender administers your loan. However, as between principal and interest, most lenders will apply your payment to the interest owed before any portion of the payment is applied to reduce the principal balance of the loan. If yours is a typical home loan, during the early years of your loan most of your payment will be applied to satisfy your interest obligation and only a small amount will be applied to the principal balance. However, as your principal balance gradually reduces over time, less of your payment will be applied to interest and more will be applied to principal. The gradual process by which periodic payments affect the principal balance is called amortization. Your mortgage lender or mortgage broker may offer a variety of home loans that may have different maturity dates (the final due date) and different terms of repayment. An amortization schedule for your loan will show the principal amount of your loan, the amount of your periodic payment, the amount of interest that will be collected periodically, how much (if any) will be applied to reduce the principal, whether (and how much) the principal increases if loan payments are insufficient to pay interest, how many scheduled payments you must make to pay off your home loan, and the unpaid principal balance after each scheduled payment is timely made. How your loan will amortize will depend upon the specific terms of your loan and how your lender administers your loan. Typically, a conventional fixed rate home loan is payable in substantially equal monthly payments of principal and interest over the 15-year or 30-year loan term. For this type of loan, the amount you borrow, the interest rate and the loan term will be the most important factors in determining your payment amount and how your loan will amortize. However, because lenders offer a wide variety of home loan products, you should be aware that other factors greatly influence your repayment terms and how your loan will amortize. For example: Some lenders offer interest only home loans. In this type of loan, your payment will cover only the interest that is due, and none of your payment will be applied to principal. As a result, the entire principal balance of your loan will be due at maturity. Some lenders offer balloon home loans. In this type of loan, the required periodic payment is based on an amortization schedule that extends beyond the maturity date of the loan. For example, a lender may offer you a 15-year loan with required periodic payments computed to pay the loan off in 20 years. As a result, even though your required periodic payments may be for a fixed dollar amount and you make all your payments in a timely manner, a substantial portion of the principal balance of the loan will still be due when the loan matures in 15 years. Lenders are permitted to use a variety of different methods to calculate the interest due on your loan. In a typical conventional 15-year or 30- year fixed rate home loan, most lenders calculate interest on the assumption that each month has 30 (and only 30) days and that each year is 360 days long. In other home loans, lenders sometimes determine the actual number of days the principal amount is outstanding for each period and calculate the interest due based on a 360-day, a 365-day, or a 365/366-day year. Although most lenders charge periodic interest in arrears, some charge interest in advance. The interest calculation method used by your lender will affect how your loan amortizes. You should ask your lender about the interest calculation method that will apply to your home loan. Most amortization schedules assume that your lender will receive payment on the exact date your payment is due. If your lender charges periodic interest on the outstanding principal balance of your loan for the actual number of days from your last payment until your next payment is actually received and applied to your loan by the lender, your amortization schedule will become inaccurate the first time you fail to make a payment on the exact date it is due. Beware of negative amortization loans. In this type of loan, the periodic payments required by your loan documents are insufficient to pay the interest as it accrues on your loan. As a result, your loan balance will actually increase, even though you make the required payments on time. Some lenders offer graduated payment or reverse annuity home loans. These are special-purpose loans designed to meet the specific needs of a small segment of homeowners. These are complicated loans that frequently involve negative amortization and/or increasing payment amounts. These types of loans may require you to pay interest on unpaid interest as interest accrues, the lender may be permitted to add it to the outstanding principal balance of the loan. Before you borrow, ask enough questions of your lender to make sure you understand how your loan will be administered and how your loan will amortize. Ask your lender whether your payment amount includes or excludes any required escrow payments. Amortization schedules typically ignore sums you may be required to pay into escrow for taxes and insurance. See the four Example Home Loan Amortization Schedules on the Next Page. Borrower Initials: Form: MLA 009 NC Commissioner of Banks 1 Rev. 3/13/2003

7 Examples of Home Loan Amortization Schedules Examples of amortization schedules are shown for four different home loans of $150,000 on the charts below. These examples permit you, for example, to compare how a higher interest rate will affect your periodic payment and the differences between conventional 15-year and 30-year fixed rate home loans. These examples assume that monthly payments are made on the scheduled due dates. Your lender may be required under North Carolina law to deliver at your loan closing, or mail to you within three days thereafter, an amortization schedule for your loan. These examples are for informational purposes only, and the amortization schedule for your loan may differ based on the terms of your home loan. In addition, your actual required periodic payments may be higher than these examples if your lender uses a different interest calculation method, requires you to make periodic escrow payments for insurance and/or taxes, or you owe late charges. Interest Rate: 8% Term to Maturity: 15 years Monthly Payment: $1, Total Number of Payments: 180 The first 12 and final six payments are shown. A total of 180 payments of $1, or $258, must be made over the life of the loan. Payment Number 15 Years at 8% Monthly Payment Amount Interest Paid Principal Applied New Balance Principal Balance 1 $150, $1, $1, $ $149, $149, $1, $ $ $149, $149, $1, $ $ $148, $148, $1, $ $ $148, $148, $1, $ $ $147, $147, $1, $ $ $147, $147, $1, $ $ $146, $146, $1, $ $ $146, $146, $1, $ $ $145, $145, $1, $ $ $145, $145, $1, $ $ $145, $145, $1, $ $ $144, $8, $1, $56.02 $1, $7, $7, $1, $46.84 $1, $5, $5, $1, $37.59 $1, $4, $4, $1, $28.29 $1, $2, $2, $1, $18.92 $1, $1, $1, $1, $9.49 $1, ($0.65) 30 Years at 8% Interest Rate: 8% Term to Maturity: 30 years Monthly Payment: $1, Total Number of Payments: 360 The first 12 and final six payments are shown. A total of 360 payments of $1, or $396, must be made over the life of the loan. Payment Number Monthly Payment Amount Interest Paid Principal Applied New Balance Principal Balance 1 $150, $1, $1, $ $149, $149, $1, $ $ $149, $149, $1, $ $ $149, $149, $1, $ $ $149, $149, $1, $ $ $149, $149, $1, $ $ $149, $149, $1, $ $ $149, $149, $1, $ $ $149, $149, $1, $ $ $149, $149, $1, $ $ $148, $148, $1, $ $ $148, $148, $1, $ $ $148, $6, $1, $42.99 $1, $5, $5, $1, $35.94 $1, $4, $4, $1, $28.84 $1, $3, $3, $1, $21.69 $1, $2, $2, $1, $14.50 $1, $1, $1, $1, $7.26 $1, ($4.68) Interest Rate: 11% Term to Maturity: 15 years Monthly Payment: $1, Total Number of Payments:1 180 The first 12 and final six payments are shown. A total of 180 payments of $1, or $306, must be made over the life of the loan. Payment Number 175 $9, $1, $90.81 $1, $8, $8, $1, $76.02 $1, $6, $6, $1, $61.09 $1, $5, $5, $1, $46.02 $1, $3, $3, $1, $30.81 $1, $1, $1, $1, $15.47 $1, ($2.09) 30 Years at 11% Interest Rate: 11% Term to Maturity: 30 years Monthly Payment: $1, Total Number of Payments: 360 The first 12 and final six payments are shown. A total of 360 payments of $1, or $514, must be made over the life of the loan. Payment Number 15 Years at 11% Monthlly Payment Amount Interest Paid Principal Applied New Balance Principal Balance 1 $150, $1, $1, $ $149, $149, $1, $1, $ $149, $149, $1, $1, $ $149, $149, $1, $1, $ $148, $148, $1, $1, $ $148, $148, $1, $1, $ $147, $147, $1, $1, $ $147, $147, $1, $1, $ $147, $147, $1, $1, $ $146, $146, $1, $1, $ $146, $146, $1, $1, $ $146, $146, $1, $1, $ $145, Monthly Payment Amount Interest Paid Principal Applied New Balance Principal Balance 1 $150, $1, $1, $53.49 $149, $149, $1, $1, $53.98 $149, $149, $1, $1, $54.48 $149, $149, $1, $1, $54.97 $149, $149, $1, $1, $55.48 $149, $149, $1, $1, $55.99 $149, $149, $1, $1, $56.50 $149, $149, $1, $1, $57.02 $149, $149, $1, $1, $57.54 $149, $149, $1, $1, $58.07 $149, $149, $1, $1, $58.60 $149, $149, $1, $1, $59.14 $149, $8, $1, $75.99 $1, $6, $6, $1, $63.59 $1, $5, $5, $1, $51.08 $1, $4, $4, $1, $38.45 $1, $2, $2, $1, $25.71 $1, $1, $1, $1, $12.85 $1, ($13.76) Form: MLA 009 NC Commissioner of Banks 2 Rev. 3/13/2003

8 EQUAL CREDIT OPPORTUNITY ACT The Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on a basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. Income which you receive as alimony, child support or separate maintenance need not be disclosed to this creditor unless you choose to rely on such sources to qualify for the loan. Income from these and other sources, including part-time or temporary employment, will not be discounted by this lender because of your sex or marital status. However, we will consider very carefully the stability and probable continuity of any income you disclose to us. IMPORTANT INFORMATION ABOUT PROCEDURES FOR APPLYING FOR A MORTGAGE USA Patriot Act Compliance - Disclosure In cooperation with our Government s initiative to help fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account, including obtaining a mortgage loan. WHAT THIS MEANS TO YOU When you apply for a mortgage, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver s license or other identifying documents. / / Borrower Signature Date of Birth Today s Date / / Borrower Signature Date of Birth Today s Date / / Borrower Signature Date of Birth Today s Date AND Complete the following for EACH Non-Applicant, such as Gift Donors, Non-Applicant Spouse, Powers of Attorney and Trustees. If more than one, make copies for the additional persons, or legibly write All Information on a separate sheet of paper and Attach Hereto. Full Name: Street Address: City/State/Zip: Date of Birth: / / Social Security #: - - OR Alien Registration Card #: OR Passport #: AND Country of Issuance:

9 Client Statement of Understanding Congratulations! You finally found the house of your dreams. You made a bid, had it accepted by the seller, and went through the mortgage application process. It looks like you ll qualify. The closing is only weeks away, and you re feeling pretty good. It s smooth sailing from here, right. Probably. However, more than one buyer has had the wind knocked out of his sails at some point in a real estate transaction by the mis-steps described below. If at all possible, steer clear of the following NO-NOs until AFTER you have gone to settlement. Do not take on new debt. The temptation is strong. There are so many big purchases that people want to make in connection with a move: appliances, window treatments, furniture, etc. When you add to this the fact that, today, everyone offers easy terms and no money down- well, why not just do it? Answer: because you will change what the mortgage industry calls your debt toincome ratios (the relationship of your income to your debt). Also, more debt may lower your credit rating. Do not change jobs. If at all possible, try not to make a career move during the time between your mortgage application and the closing on the home you are purchasing. But, you ask, What if it s a BETTER job, for MORE money, in a DIFFERENT field? Still, try and wait until AFTER closing. One of the factors mortgage companies consider is length of present employment; they are partial to stability. At the very least, changing jobs initiates the need for more paperwork, and may delay your closing. Do not pack too soon. Well, go ahead and pack your clothes and dishes. But do not pack your bank statements, tax returns, or other paperwork. Most especially, do not pack your checkbook! More than one buyer has had closing delayed while a friend or relative hurried over with additional funds because the checkbook was in the moving van. Do not lease a new car. This should go under the general heading of no new debt. It is highlighted here because, for some strange reason, many buyers do run right out and lease a new car during the time between mortgage application and closing! As with any debt, this will change your debt-to-income ratios and may cause you not to qualify for your mortgage. Independently make Financial Decisions. Paying-off a loan or opening a new bank account may present problems for your loan officer in the middle of a mortgage transaction. Please consult your loan officer before opening or closing a bank account, depositing more than $1000 into a bank account, or liquidate a retirement account. The thing to remember is that if you are unsure what the impact of a decision will be, consult your loan officer. In short, do nothing that negatively impacts your ability to qualify for your mortgage loan, or initiates a new round of paperwork. If you have any doubts about doing something that may affect your ability to qualify for your mortgage loan, please consult your loan provider before you do it. These suggestions are merely that- suggestions. No one is saying flat out, that bad things will necessarily follow if you do any of the above. They are offered as cautions. Many buyers seem to view the mortgage application procedure as a static action, a snap shot of their financial lives at a given moment in time. It s not. It s an on-going process that takes into account into account everything you do right up until the day of closing. By signing this Statement of Understanding, I acknowledge that What Not to Do After You Have Applied for a Mortgage has been fully explained to me.