300 - FHA Lending Guide 12/31/2015 (Case Files prior to 9/14/15)

Transcription

1 300 - FHA Lending Guide 12/31/2015 (Case Files prior to 9/14/15) Equal Housing Lender 2015 Ocwen Loan Servicing, LLC Worthington Road, Suite West Palm Beach, FL ( )NMLS #1852. Trade/Service marks are the property of Ocwen Loan Servicing, LLC. Some products may not be available in all states. Information, rates and pricing are subject to change without notice at the sole discretion of Ocwen Loan Servicing, LLC. All loan programs subject to borrowers meeting appropriate underwriting conditions. Advertisement for Mortgage Professionals Only. This is not a commitment to lend. Other restrictions apply. All rights reserved.

2 300 - Table of Contents FHA LOANS PRODUCT DESCRIPTION Product Description Notice AUS Guidelines FRM Product Codes ARM Product Codes Ineligible FHA Programs ARM Features ARM Interest Adjustment Table Case Number Assignment and Cancellation Requesting Case Numbers Automatic Case Number Cancellation Case Number Reinstatement Transferring Case Numbers HUD Handbooks & Mortgagee Information HUD Section of the Act and ADP Codes LOAN TERMS Loan Terms Maximum Loan Amount Minimum Loan Amount Base Loan Maximum LTV Identity of Interest Transactions Non-Occupying Co-Borrowers Three and Four Unit Properties Building On Own Land Paying Off Land Contract Occupancy of Former Investment Property Required Minimum Cash Investment Maximum Number of Financed Properties and Maximum Exposure ELIGIBLE TRANSACTIONS Temporary Buydowns Construction Housing History Eligible Borrowers Occupancy Paying Off Debt Purchase Refinances General Refinance Requirements FHA Refinance Credit Query County Loan Limits Rate and Term Refinance Occupancy LTV Calculation Seasoning Requirements Ocwen Loan Servicing LLC Client Select 300-i

3 Maximum Insurable Mortgage Maximum Cash Back to the Borrower Mortgage Payment History Requirements Subordinate Financing Refinance Buyouts Short Payoffs Cash Out Refinance Maximum LTV/CLTV Secondary Financing Ownership Seasoning Requirements STREAMLINE REFINANCES Streamline Refinances Ineligible Non-Credit Qualifying Streamlines Max Loan Amount without Appraisal Max Loan Amount Credit Qualifying with Appraisal Max Loan Amount Non-Credit Qualifying with Appraisal Net Tangible Benefit Seasoning Requirements Max Cash Back to Borrower Secondary Financing Occupancy and Property Types Employment / Income Verification Social Security Validation Qualifying Ratios For Case Numbers Assigned prior to April 21, Qualifying Ratios For Case Numbers Assigned on or after April 21, Qualifying Ratios Maximum Qualifying Ratio Matrix Credit Requirements Mortgage Payment History Asset Documentation Appraisal Requirements Loan Application CAIVRS LPD/GSA List TOTAL Scorecard Mortgage Insurance IRS Form 4506-T SECONDARY FINANCING Overview Permissible Sources Ineligible Secondary Financing Sources Secondary Financing from Family Members for Purchase Transactions Borrowed Down Payment Terms and Conditions Completion for Secondary Financing Modified HELOC GEOGRAPHIC RESTRICTIONS Approved States OCCUPANCY AND PROPERTY Property Types ii Ocwen Loan Servicing Client Select

4 Primary Residence Units Properties Condos PUD s HUD REO Repair Escrows Deed Restrictions Listed for Sale Ineligible Property Types Leasehold Estates Requirements Lease Requirements Ground Rents ELIGIBLE BORROWERS Number of Borrowers Borrower Requirements Borrower Identity Verification Borrower Names Co-Borrowers / Co-Signors HUD Employees Living Trust Living Trusts and Security Instrument Certification of Trust Trust Loan Documentation Requirements Military Personnel Non-Purchasing Spouse Mandatory Rejection of a Borrower Borrower Waiting Period Eligibility for Federal Related Credit Effect of Past Delinquencies on Eligibility Ineligible Parties Documenting Borrower Eligibility INCOME General Income Stable Monthly Income Employment History Verbal VOE Verbal VOE Self-Employed AUS Documentation IRS Form 4506-T Prior to April 15 th IRS Form 4506-T prior to June 15 th IRS Form 4506-T after June 15 th IRS Form 4506-T Not Required to File Salaried / Wage Income Paystub and W2 Requirements Alimony, Child Support, Maintenance Auto Allowances and Expense Account Payments Capital Gains Commission Income Employer Differential Payments Ocwen Loan Servicing LLC Client Select 300-iii

5 Employment by Family Owned Business Employment Gaps Government Assistance Programs Section 8 Home Ownership Vouchers Interest and Dividend Income Military Income Mortgage Credit Certificate New Employment Non-Taxable Income Note Receivable Income Overtime / Bonus Income Second Job Income Projected Income Recent Return to Work Force Rental Income Rent Loss Insurance Retirement and Social Security Self-Employed Overview Effective Income Length of Time in Business Self-Employed Income Documentation Foreign Income Tip Income Temporary Leave and Short Term Disability Income Trailing Spouse Trust Income VA Benefits Borrowers on Strike LIABILITIES AND QUALIFYING RATIOS Alimony Child Support Authorized User Accounts Condominium Fees Contingent Liability Conversion of Existing Primary Residence Installment Debt Obligations not considered as Debt Projected Debt PITIA Qualifying Ratios For Case Numbers Assigned prior to April 21, Qualifying Ratios For Case Numbers Assigned on or after April 21, Qualifying Ratios For Case Numbers Assigned on or after April 21, 2014 (Continued) Qualifying Ratios For Case Numbers Assigned on or after April 21, 2014 (Continued) Qualifying Ratios - NOTES For Case Numbers Assigned on or after April 21, Maximum Qualifying Ratio Matrix Compensating Factors For Case Numbers assigned prior to April 21, iv Ocwen Loan Servicing Client Select

6 Compensating Factors For Case Numbers assigned on or after April 21, Residual Income for Manually Underwritten Undisclosed Debt Revolving or Open-Ended Debt Student Loans CREDIT General TOTAL Scorecard and AUS Bankruptcy Documentation Chapter 7 Bankruptcy Chapter 13 Bankruptcy Disputed Accounts Analysis of Collections and Judgments Capacity Analysis of Collections and Judgments Consumer Credit Counseling CAIVRS Credit Inquiries Credit Reports Escrow Waivers / Impound Waivers Credit Score Requirements Debts Omitted from Credit Report Authorized User Accounts Delinquent Federal Debt Duplicate Public Records Foreclosures / Short Sales Housing History Privately Held Mortgages Multiple Mortgages Non-Traditional Credit Non-Arm s Length Transactions ASSETS Asset Verifications Cash Reserve Requirements Ineligible Assets for Cash Reserves Business Funds Cash Reserves Retirement Accounts Cash on Hand Private Savings Clubs Checking, Savings, CDs Joint Assets Large Deposits Commission from Sale Credit Card Financing Disaster Relief Grants / Loans Down Payment Earnest Money Deposit Employer Assistance Plans Employer Guarantee Plans Foreign Assets Gift Funds Ocwen Loan Servicing LLC Client Select 300-v

7 Gift Documentation Requirements Gift of Equity Down Payment Assistance Programs Individual Development Accounts Loans from Family Members Collateralized Loans Homeowners Bridal Registry Real Estate Proceeds Real Estate Tax Credit Rent Credit Retirement Funds Sale of Personal Property Savings Bonds Stocks and Bonds Sweat Equity Trade Equity Lender Credit Seller Contributions Unused Funds from Escrow Account CLOSING COSTS Allowable Fees Discount Points Rate Lock or Lock-In Fees UFMIP Real Estate Broker Fees Premium Pricing Higher Priced Mortgage Loans Safe Harbor Qualified Mortgage Loans Rebuttable Presumption Qualified Mortgage Loans Interest Credit MORTGAGE INSURANCE Overview Determining UFMIP MIP Premiums MIP Premiums (Cont d) UFMIP Refunds APPRAISAL REQUIREMENTS General Responsibilities Appraisal Logging AMC Management Appraiser Independence Safeguards Quality of Report Appraiser Eligibility Converted Appraisals Appraisal Portability / Transfers Acceptable Second Appraisals Re-using the Appraisal Appraisal Updates Photos Uniform Appraisal Dataset Appraisal Reporting Forms vi Ocwen Loan Servicing Client Select

8 Lead-Based Paint Standards Environmental Hazards Site Hazards Mineral Rights Property Conditions Termite Inspections Well Inspections Community Water Systems Individual Well Water Systems Shared Wells Well Location Septic / Sewage Inspections Roof Inspections Heating Source Public and Private Streets Carbon Monoxide Detectors Repair Escrow Holdback General Required Repairs Private Transfer Fees Unit Properties Construction Existing Construction less than One Year HUD Form Existing Construction, Less than One Year High Ratio (Over 90% LTV) Low Ratio (90% or less) NATURAL DISASTERS Overview Procedure Example Requirements for Affected Areas PROPERTY FLIPPING General Overview of FHA Flipping Policy Owner of Record day Flip Waiver Exceptions to 90 Day Restriction Resale Days Resale 91-One Year Date of Property Acquisition Anti-Flipping and the Sales Contract AUTOMATED UNDERWRITING SYSTEMS TOTAL Scorecard Resubmission DU AUS Resubmission AUS Tolerances Post Close Resubmissions AUS Reports Underwriting Issues Manual Downgrade Downgrade Triggers Ocwen Loan Servicing LLC Client Select 300-vii

9 APPLICATION, DISCLOSURES & COMPLIANCE General Electronic Signatures Laws Predatory Lending Compliance with Points & Fees Points and Fees Calculation High Cost Loans Face-to-Face Interview Sales Contract Disclosures Origination Disclosures Social Security Numbers Power of Attorney Review of Closing Disclosure (or Final HUD-1) CLOSING POLICIES & PROCEDURES Scheduling a Loan Closing Practices Verification of Employment Closing Protection Letter Taxes Insurance Seller Contributions Premium Pricing Credits Principal Reductions HUD Approval Process Funding viii Ocwen Loan Servicing Client Select

10 300 - Product Description Product Description Fixed and Adjustable Rate Loans that meet applicable Federal Housing Administration (FHA) government guidelines. Homeward purchases FHA loans that meet applicable Federal Housing Administration (FHA) government guidelines. IMPORTANT: Refer to the for all FHA guidelines not addressed in this product summary. Please note for FHA Casefile Numbers pulled on or after 9/14/15, please reference the guidelines from the Single Family Housing Guide on the HUD Website and Homeward FHA Overlays. andbook_ Notice This FHA 203(b) lending guide is an addendum to the HUD 4155 and all corresponding Mortgagee Letters and updates. Brokers who are approved to submit Ocwen Loan Servicing LLC FHA loans should refer to the most recent published HUD guidelines for the Overview, Eligibility Standards, Quality Control, Representations and Warranties, Registration and Commitments, and Compliance not referenced herein. AUS Guidelines All Loans must be submitted through FHA TOTAL Scorecard, except for Streamline Refinance transactions. Brokers may use Fannie Mae s Desktop Underwriter. See Loans Downgraded to a Manual Underwrite section for requirements on when Ocwen will approve loans that have been run through TOTAL Scorecard, but were downgraded to a manual underwrite. IMPORTANT: All FHA loan approvals, whether through AUS or manually underwritten, are at the discretion of the DE Underwriter. Ocwen Loan Servicing LLC Client Select 300-1

11 Product Description, Continued FRM Product Codes The following Product Code Matrix outlines the applicable product codes for FHA FRM Loan products. Product Name Product Code Product Feature Options FHA Fixed Rate G1000BEF Years: 10 FHA Fixed Rate: G1500BEF Years: G2000BEF Years: G2500BEF Years: G3000BEF Years: Amortizations 10 to 30 years in 12 month increments. Loan Purpose: Purchase, Rate Term Refinance, and Cash Out Refinance available. FHA High Balance NOTE: For loan amounts >$417,000 G1512BEF Years: G3015BEF Years: CREDIT QUALIFYING STREAMLINE REFINANCE PRODUCT CODES Product Name Product Code Product Feature Options FHA Fixed Rate GS1000BEF Years: 10 FHA Fixed Rate: GS1500BEF Years: GS2000BEF Years: GS2500BEF Years: Amortizations 10 to 30 years in 12 month increments. Loan Purpose: Qualifying Streamline Refinance available. GS3000BEF Years: FHA High Balance NOTE: For loan amounts >$417,000 GS1512BEF Years: GS3015BEF Years: Ocwen Loan Servicing Client Select

12 Product Description, Continued NON-CREDIT QUALIFYING STREAMLINE REFINANCE PRODUCT CODES Product Name Product Code Product Feature Options FHA Fixed Rate GSNC1000BEF Years: 10 FHA Fixed Rate: GSNC1500BEF Years: GSNC2000BEF Years: GSNC2500BEF Years: Amortizations 10 to 30 years in 12 month increments. Loan Purpose: Qualifying Streamline Refinance available. GSNC3000BEF Years: FHA High Balance NOTE: For loan amounts >$417,000 GSNC1512BEF Years: GSNC3015BEF Years: Ocwen Loan Servicing LLC Client Select 300-3

13 Product Description, Continued ARM Product Codes The following Product Code Matrix outlines the applicable product codes for FHA ARM Loan products. Product Name Product Code Product Feature Options FHA Adjustable Rate GA3100BEF 3/1 Treasury ARM FHA Adjustable Rate: FHA High Balance NOTE: For loan amounts >$417,000 GA5100BEF GA7100BEF GA3115BEF GA5115BEF 5/1 Treasury ARM 7/1 Treasury ARM 3/1 Treasury ARM 5/1 Treasury ARM Amortizations 30 years. Loan Purpose: Purchase, Rate Term Refinance, and Cash Out Refinance available. GA7115BEF 7/1 Treasury ARM CREDIT QUALIFYING STREAMLINE REFINANCE PRODUCT CODES Product Name Product Code Product Feature Options FHA Adjustable Rate GAS3100BEF 3/1 Treasury ARM FHA ARM Rate: FHA High Balance NOTE: For loan amounts >$417,000 GAS5100BEF GAS7100BEF GAS3115BEF GAS5115BEF 5/1 Treasury ARM 7/1 Treasury ARM 3/1 Treasury ARM 5/1 Treasury ARM Amortizations 30 years. Loan Purpose: Qualifying Streamline Refinance available. GAS7115BEF 7/1 Treasury ARM Ocwen Loan Servicing Client Select

14 Product Description, Continued NON-CREDIT QUALIFYING STREAMLINE REFINANCE PRODUCT CODES Product Name Product Code Product Feature Options FHA Adjustable Rate GASNC3100BEF 3/1 Treasury ARM FHA ARM Rate: FHA High Balance NOTE: For loan amounts >$417,000 GASNC5100BEF GASNC7100BEF GASNC3115BEF GASNC5115BEF 5/1 Treasury ARM 7/1 Treasury ARM 3/1 Treasury ARM 5/1 Treasury ARM Amortizations 30 years. Loan Purpose: Qualifying Streamline Refinance available. GASNC7115BEF 7/1 Treasury ARM Ineligible FHA Programs The following are ineligible by Ocwen Loan Servicing LLC: FHA 203K Renovation Loans $100 Down Payment Program FHA loans to nonprofit organization borrowers FHA Military Impacted Area loans FHA refinance Loans for Borrowers in Negative Equity Position FHA Section 8 Loans Hawaiian Homeland Loans Hope for Homeowners program HUD 184 Program (Indian Home Loan Guarantee Program) Texas Section 50(a)(6) HUD Good Neighbor Next Door (Teacher, Law Enforcement, Fire Fighter, EMT) Buydowns FHA 203(h) Mortgage Insurance for Disaster Victims Ocwen Loan Servicing LLC Client Select 300-5

15 Product Description, Continued ARM Features The FHA ARM features detailed below provide definitions and other important loan details: Features Interest Only Feature Index Conversion Option Prepayment Penalty Assumable Negative Amortization Not Available. Comments The weekly average yield on U.S. Treasury securities adjusted to a constant maturity of one year. None Not Permitted Assumable permitted subject to conditions and fees. None Caps 3/1: 1/1/5 Rate Adjustments 5/1: 1/1/5 7/1: 2/2/6 The interest rate is fixed for the initial period and is then subject to change on an annual basis thereafter, using the most recent index figure 45 days prior to the interest rate adjustment. The interest rate is rounded to the nearest 1/8 of one percent point after adding the mortgage margin to the index Floor Margin 2.000% Refer to the ARM Interest Adjustable Table within this summary. The floor rate is never lower than the margin. Note Rate All plans qualify at Note Rate. ARM Plans 3/1: /1: /1: Ocwen Loan Servicing Client Select

16 Product Description, Continued ARM Interest Adjustment Table The below are exact first payment change dates based on loan disbursement date required by HUD since FHA ARM loans only adjust 4 times per year. IMPORTANT: DocMagic will return a Fatal Warning if the interest change date does not match one of the months below; data entry must be reviewed and cross-referenced with the below dates to ensure accuracy. If the First Payment of the New Loan is: FHA 3/1 ARM Interest Adjustment Date The last day to Fund: The First Interest Rate Change Date Must Be: January, February, March /07/ /01/2019 April, May, June /07/ /01/2019 July, August, September /07/ /01/2019 October, November, December /07/ /01/2020 If the First Payment of the New Loan is: FHA 5/1 ARM Interest Adjustment Date The last day to Fund: The First Interest Rate Change Date Must Be: January, February, March /07/ /01/2021 April, May, June /07/ /01/2021 July, August, September /07/ /01/2021 October, November, December /07/ /01/2022 If the First Payment of the New Loan is: FHA 7/1 ARM Interest Adjustment Date The last day to Fund: The First Interest Rate Change Date Must Be: January, February, March /07/ /01/2023 April, May, June /07/ /01/2023 July, August, September /07/ /01/2023 October, November, December /07/ /01/2024 Ocwen Loan Servicing LLC Client Select 300-7

17 Product Description, Continued Case Number Assignment and Cancellation Requesting Case Numbers FHA Connection requires users to: Certify, via a checkbox question, that they have an active loan application for the subject property. Provide the subject borrower s name and social security number for all existing construction and existing construction less than one year old. NOTE: Ocwen does not accept FHA loan that are considered Proposed Construction. Automatic Case Number Cancellation FHA Connection automatically cancels any uninsured case number where there has been no activity for six months since the last action except for: Loans where an appraisal update has been entered, and/or Loans that have received the UFMIP. Last action includes; Case number assigned, Appraisal information entered, Firm commitment issued by FHA, Insurance application received and subsequent updates, and Notice of Return and resubmissions. Last action does NOT include updates to borrower names and/or property addresses. Case Number Reinstatement FHA will not reinstate any automatically cancelled case numbers, including case numbers for condominium units, unless: The mortgagee provides verification that not reinstating the case number causes an undue hardship to the borrower that is not related to recent updates to premiums and underwriting requirements, or The mortgagee provides verification that the subject loan closed prior to cancellation of the case numbers, such as a Closing Disclosure (or HUD-1 Settlement Statement) Ocwen Loan Servicing Client Select

18 Product Description, Continued Transferring Case Numbers Ocwen will accept loans where the Case Number was transferred from another lender. Transferring lenders are expected to cooperate in the transfer of case numbers. At the borrower s request, the lender must assign the case number to Ocwen using the Case Transfer function in the FHA Connection. Additionally, the transferring lender: Is not entitled to a fee for the transfer of a streamline refinance case number, regardless of the current stage of processing for the loan, May be entitled to any lock-in fee collected from the borrower at the time of application, Is required to provide Ocwen with the appraisal, but is not required to provide any processing documents. NOTE: If processing documents are provided, the transferring lender must negotiate the fee with Ocwen, and is not authorized to charge the borrower a separate fee for the transfer of the processing documents. If a case number transfer involves a new borrower using an existing appraisal, Ocwen Collects an appraisal fee from the new borrower, and Sends the fee to the original lender, who, in turn, refunds the fee to the original borrower. If the transfer involves a rejected loan, the original lender must complete the Mortgage Credit Reject function in FHA Connection prior to transferring the loan. Ocwen Loan Servicing LLC Client Select 300-9

19 Product Description, Continued HUD Handbooks & Mortgagee Information This product description contains only a portion of HUD s various lending Handbooks and Mortgagee Letters. It is the responsibility of the originating office to ensure that mortgages processed for 203(b) loans meet HUD s guidelines. See the following HUD Handbooks for further clarification or for complete guidelines: Mortgagees Handbook Application through Insurance (Single Family) Singly Family Direct Endorsement Program FHA Title II Mortgage Approval Handbook Architectural Processing and Inspections for Home Mortgage Insurance Valuation Analysis for Home Mortgage Insurance Valuation Analysis for Single Family One to Four Unit Dwellings Mortgage Credit Analysis for Mortgage Insurance on Oneto-Four-Family Properties Lender s Guide to Single Family Mortgage Insurance Processing Endorsement for Insurance for Home Mortgage Programs (Single Family) Handbooks and Mortgagee Letters can also be obtained from HUD s general web site, HUD Section of the Act and ADP Codes HUD Section of Act and ADP Codes Section Description ADP Code 203(b) Basic Home Mortgage Insurance FRM 703 Basic Home Mortgage Insurance ARM (c) Condominium FRM 734 Condominium ARM Ocwen Loan Servicing Client Select

20 Loan Terms Loan Terms Fixed Rate 10, 15, 20, 25 or 30 years (increments of 12 months) Adjustable Rate: 3/1, 5/1 and 7/1 terms The maximum term of any refinance with an appraisal is 30 years. The maximum term for a Streamline refinance mortgage without an appraisal is the lesser of: 30 Years, or the remaining term of the mortgage plus 12 years Maximum Loan Amount Effective with case numbers assigned on or after January 1, 2015: Maximum Loan Amounts (Continental U.S) Units Floor Limits Maximum Standard Loan Limits Maximum High Balance Loan Limits 1 $271,050 $417,000 $625,500 2 $347,000 $533,850 $800,775 3 $419,425 $645,300 $967,950 4 $521,250 $801,950 $1,202,925 Maximum Loan Amounts (Alaska and Hawaii) Units Floor Limits Maximum Standard Loan Limits Maximum High Balance Loan Limits 1 $271,050 $625,500 $938,250 2 $347,000 $800,775 $1,201,150 3 $419,425 $967,950 $1,451,925 4 $521,250 $1,202,925 $1,804,375 NOTE: Maximum loan amounts by MSA/County can be located in the FHA Forward limit type at Base loan amounts cannot exceed the limit set for the individual county. Minimum Loan Amount Ocwen does not have a minimum loan amount. Ocwen Loan Servicing LLC Client Select

21 Loan Terms, Continued Base Loan LTVs are determined using the base loan amount. The base loan is the maximum loan amount prior to adding any financed mortgage insurance premium. The type of transaction will determine the calculation of the base loan amount. Maximum LTV Primary Residence LTV Limitations # of Units LTV Minimum Credit Score Purchase %¹ 620 (all loan amounts) Rate/Term Refinance %² 620 (all loan amounts) Cash Out Refinance %³ 620 (Standard Loan Amounts) 640 (High Balance Loans) 1 Ocwen accepts Secondary Financing only from Family Members for Purchase Transactions. The Maximum CLTV is 96.50%. 2 The maximum CLTV allowed for fully qualifying and documented Rate / Term Refinance transactions is 97.75%. 3 The maximum CLTV for a Cash Out Refinance transaction is 85.00%. LTV Limitations # of Units LTV Minimum Credit Score All Streamline Refinance with or %/97.75% without an Appraisal Ocwen Loan Servicing Client Select

22 Loan Terms, Continued Identity of Interest Transactions Identity of Interest Transactions are transactions between family members, business partners or other business affiliates. Identity-ofinterest transactions are restricted to a maximum LTV of 85%. However, maximum financing above 85% is permissible under the following circumstances: o A family member purchases another family member s home as a principal residence. o If the property is sold from one family member to another and is the seller s investment property, the maximum mortgage is the lesser of: 85% of the appraised value, or The appropriate LTV factor applied to the sales price, plus or minus required adjustments. NOTE: The 85% limit may be waived if the family member has been a tenant in the property for at least six months immediately predating the sales contract. A lease or other written evidence must be submitted to verify occupancy. o An employee of builder purchasing one of the builder s new homes or models as a principal residence. o A current tenant (including a family member) purchasing a home that the tenant has rented for at least six (6) months predating the sales contract, (with lease or other written evidence), and o When a corporation transfers an employee to another location, purchases the employee s home and sells the home to another employee. For identity-of-interest transactions, a family member includes a child, parent, grandparent (biological, foster or step), sister, step-sister, brother, step-brother, legally adopted son or daughter, a child who is a member of the borrower s household due to placement by an authorized agency for legal adoption, aunt, or uncle. Ocwen Loan Servicing LLC Client Select

23 Loan Terms, Continued Non- Occupying Co- Borrowers A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. Non Occupying Co-Borrowers are restricted to a maximum LTV of 75%. However, maximum financing above 75% is permissible under the following circumstances: o borrowers are related by blood, marriage, or law, (spouses, parents/children, siblings, stepchildren, aunts/uncles and nieces/nephews) or o unrelated individuals that can document evidence of a family-type, longstanding and substantial relationship not arising out of the loan transaction, and o the subject property is a one unit property. All borrowers, regardless of occupancy status, must sign the security instrument and the mortgage note. If a parent is selling to a child, the parent cannot be the co-borrower with the child on the new mortgage, unless the LTV is 75% or less. New non-occupant co-borrowers are not permitted on cash-out transactions Ocwen Loan Servicing Client Select

24 Loan Terms, Continued Three and Four Unit Properties Maximum mortgage is limited so that the ratio of the monthly mortgage payment (PITI plus Homeowners association dues, if applicable) divided by the monthly net rental income does not exceed 100%. The monthly payment includes principal, interest, taxes, insurance, monthly mortgage insurance, and homeowner s association dues computed at the note rate. Net rental is the appraiser s estimate of fair market rent from all units, including the unit the borrower will occupy, less the appraisers estimate for vacancies and maintenance or vacancy factor used by the jurisdictional Homeownership Center (HOC). The projected rent may be considered only as gross income for qualifying purposes, and not used to offset the monthly mortgage payment. Three (3) months reserves (PITI) after closing are required on all transactions. (Reserves may not be derived from a gift.) Building On Own Land Building on own land is not eligible for sale to Ocwen. Ocwen Loan Servicing LLC Client Select

25 Loan Terms, Continued Paying Off Land Contract If a borrower does not receive cash at closing, the new mortgage may be processed as a purchase or refinance transaction with maximum FHA-insured financing if the borrower uses the loan to complete payment on a o Land contract o Contract for deed, or o Other similar financing arrangements in which the borrower does not have title to the property. Lenders should process cash-out transactions to pay off land contracts, or refinances on properties subject to ground rents as if they were cash-out refinances on properties held in fee simple, as described in the cash out Refinance Transactions section of this guide. If the property was acquired fewer than 12 months earlier, and the loan proceeds are to be used to pay off the outstanding balance on the land contract, plus eligible repairs and renovations, the loan-to-value (LTV) ratio is applied to the lesser of the o A value of the land and improvements, or o Total cost to acquire the property, which includes the original purchase price, plus any documented costs the borrower incurred for rehabilitation, repairs, renovation, or weatherization, closing costs and reasonable discount points, if treated as a refinance. Equity in the property (original sales price minus the amount owed) may be used for the borrower s entire cash investment. However, if the property was acquired fewer than 12 months earlier, and the borrower receives more than $500 cash at closing, the loan is limited to 85% of the lesser of the o Appraised value of the land and improvements, or o Total cost to acquire the property, which includes the original purchase price, plus any documented costs the borrower incurred for rehabilitation, repairs, renovation, weatherization, closing costs and reasonable discount points, if treated as a refinance. NOTE: Replenishing the borrower s own cash expended for repairs, improvements, renovation, or weatherization is not considered cash back, provided that the borrower can substantiate with cancelled checks and paid receipts all out of pocket funds for the improvements Ocwen Loan Servicing Client Select

26 Loan Terms, Continued Occupancy of Former Investment Property The maximum mortgage amount available for borrowers who reoccupy their former investment property as their primary residence and wish to refinance are subject to the following restrictions: If occupancy of the former investment property was 12 months or more prior to the loan application date, then maximum financing as an owner-occupant is allowed (97.75% for rate/term refinances; 85% for cash-out refinances) If occupancy of the former investment property was less than 12 months prior to the loan application date, then the loan is eligible as a rate/term refinance only with a maximum LTV of 85%. Required Minimum Cash Investment The minimum cash investment by the borrower is three and one half percent (3.50%) of the lesser of the appraised value of the property or the sales price. Funds used to cover the required minimum cash investment (down payment), as well as closing costs and fees, must come from the borrower s own funds or an acceptable sources as quoted within HUD s B.1.b (Acceptable Sources of Borrower Funds) and must be verified and properly documented. Ocwen Loan Servicing LLC Client Select

27 Loan Terms, Continued Maximum Number of Ocwen will limit the number of FHA loans to a borrower to one (1) unless the borrower meets the circumstances in which a borrower may keep his current FHA-insured mortgage below. Relocating The borrower is relocating and re-establishing residency to another area that is not within reasonable commuting distance from the current HUD insured home. There is no need to reduce the principal balance or sell the current home. Other items of clarification are shown below. The relocation need not be employer mandated. If the borrower returns to an area where he/she owns a property with an FHA Mortgage, it is not required that the borrower reestablish primary residency in that property in order to obtain another FHA mortgage. Family Size Increase The borrower s family has increased in the number of legal dependents and the present home no longer meets the family needs and the following applies: o Satisfactory evidence must be provided of the increase in dependents and an explanation of why the property no longer meets the family needs; and o The outstanding mortgage balance on the present home is paid down to a maximum LTV of 75% (excluding financed MIP). o A current residential appraisal must be used to determine LTV compliance. Co-Borrower for Family Member The borrower will be a non-occupying co-borrower on property being purchased as a primary residence by other family members, may have a joint interest in that property as well as his own primary residence, which is a FHA-insured mortgage too. Vacating a Jointly Owned Property The borrower is vacating a residence that will remain occupied by a co-mortgagor. Acceptable situations include following a divorce where the borrower is purchasing a new home or where the borrower is vacating the property Ocwen Loan Servicing Client Select

28 Loan Terms, Continued Financed Properties and Maximum Exposure Maximum of four (4) financed residential properties (including subject) combined for all borrowers. Maximum total exposure of one Borrower with Ocwen is the lesser of four (4) loans or $3,000,000. Ocwen Loan Servicing LLC Client Select

29 Eligible Transactions General Information Temporary Buydowns Not Permitted Construction Construction Financing requires all of the below: Building on own land is not eligible Borrower may not be in title or have ownership of the lot. Borrower may not have the construction loan in their name. Borrower may not be their own general contractor. Status of construction at the time of underwriting is at the discretion of the underwriter. (NOTE: Property must be 100% complete prior to closing the loan) Ocwen Loan Servicing Client Select

30 Housing History In scenarios as indicated, the borrower must report: AUS Approval: No more than 1x30 within the most recent 12 months for Purchase and Rate Term Refinance transaction. Manual Underwrite: No more than 0x30 within the most recent 12 months for Purchase and Rate Term Refinance transactions. All Approval Methods: No more than 0x30 within the most recent 12 months for cash out Refinance transactions. NOTE: Mortgages with less than 6 months of payment history are not eligible for a cash out refinance. Properties owned free and clear are eligible for a cash out refinance. NOTE: Refer to the Credit section for additional details. For Refinances: Verification of a satisfactory mortgage payment history must be provided through the month prior to closing, ensuring that all payments have been made within the month due for the previous 12 months. An updated credit report or Verification of Mortgage (VOM) is required, if the mortgage payment history provided in the loan file is not reporting through the month prior to loan closing. Ocwen Loan Servicing LLC Client Select

31 Eligible Transactions, Continued General Information Eligible Borrowers Any co-borrower or co-signer being added to the Note must be an occupant of the subject property. New non-occupant co-borrowers or co-signers are not permitted. Occupancy Cash-out refinances are eligible only for primary residences. Primary residences owned free and clear must be refinanced as cashout transactions. Owner-occupied One-to-four (1-4) unit dwellings are eligible. Paying Off Debt If the borrower is paying off revolving debt at closing on the Closing Disclosure (or HUD-1), careful evaluation of this type of transaction is required. The Underwriter should review the Borrowers carefully when they are paying off debts in order to qualify. The credit history and the Borrower s use of credit should be a factor in determining whether it is appropriate to exclude debts for qualification purposes Ocwen Loan Servicing Client Select

32 Eligible Transactions, Continued Purchase Transaction Purchase The borrower must make a cash investment at least equal to 3.5% down payment from an acceptable source of funds. NOTE: When seller tax proration reduces cash from borrower at closing to < 3.5% per the Closing Disclosure (or HUD-1), it is acceptable as long as assets were verified in the file which would cover the 3.5% minimum investment into the transaction. At no time may the borrower receive cash back due to the seller tax proration. The borrower may not be on title prior to the loan closing. The seller that is on title (the vested owner of record) must be the individual who executes the sales contract. Additionally, the seller must be on title prior to when the Closing Disclosure (or HUD-1) and closing documents are executed. Seller must be the vested owner of records in all cases, including relocation scenarios. Purchase agreements renegotiated after the completion of the appraisal that increases the sales price are only acceptable under the following circumstances: The sales price adjustment is due to price overruns that impact the tangible value of the property on new construction. An updated appraisal must be obtained to verify the value of the modifications. A renegotiation of only seller paid closing costs and/or prepaids occurs where seller paid closing cost/prepaids are common and customary for the market and supported by comparables. Changes in the purchase contract resulting from renegotiating terms of sale may require review by the appraiser and delays could result. Ocwen Loan Servicing LLC Client Select

33 Eligible Transactions, Continued Refinances Refinances Ocwen offers the following types of refinance transactions: Cash out Refinance (85.00% LTV), Rate/Term Refinance, and Streamline Refinances (FHA loan to FHA loan,) Credit Qualifying with an appraisal Credit Qualifying without an appraisal Non-Credit Qualifying with an appraisal Non-Credit Qualifying without an appraisal Ocwen Loan Servicing Client Select

34 Eligible Transactions, Continued Refinances, (Cont d) General Refinance Requirements A new FHA appraisal is required for each refinance transaction requiring an appraisal. An appraisal used for the purchase of the property cannot be used again for a subsequent refinance even if 120 days has not passed. All Rate/Term refinance and Streamline Refinance transactions must have a payoff statement in the file. The payment due in the month the loan is closing must be paid either prior to closing or included in the payoff amount at closing. (i.e., if the borrower closes and funds on a refinance in the month of December, the borrower does not need to have made the December payment. However, if the loan doesn t close/fund until January, the December payment cannot be included in the loan amount and the borrower will need to pay the December payment from his/her own cash.) All subordinated financing, whether it will be subordinated to the new refinance or will be paid off by the new refinance (unless FHA s more restrictive twelve (12) month period applies), must be seasoned for at least six (6) months with 0x30 day late payments (i.e., six (6) permanent mortgage payments made) prior to application for the new Ocwen. Confirm the borrower is current on the mortgage being refinanced for: The month prior to the month in which they close, and The month they close. NOTE: The borrower has the option to make the current payment at the beginning of the month or include it in the payoff amount at closing, when closing within the month the payment is due. Ocwen Loan Servicing LLC Client Select

35 Eligible Transactions, Continued Refinances, continued FHA Refinance Credit Query If the existing loan is a FHA loan, there could be a refund of a portion of the Upfront MIP. If the new loan will also be a FHA loan, this refund is applied as a credit in determining the new loan amount. FHA provides Refinance Credit Query to use in determining this amount upfront. The Refinance Credit Query is used to determine the amount of the MIP credit available for an active FHA-insured loan that is being refinanced. It provides 30-day and 60-day calculations based on the projected closing date of the new loan. This feature can be used to determine the credit or refund without ordering a new case number. This enables users to know the amount of the MIP credit or refund at the pre-application stage. The refund schedule for FHA-to-FHA refinances is modified to a three (3) year time period for those mortgages endorsed for insurance on or after December 8, In order to accurately determine the correct UFMIP has been charged, DE Underwriters must complete a FHA Case Query on each borrower to verify the accuracy of the case number assignment date. A copy of the case query results must be included in the loan file. Additionally, users MUST investigate, resolve and document in the loan file, any other case number matches that are found under the borrower s social security number. County Loan Limits Ocwen currently does not permit FHA-to-FHA refinance transaction to exceed the new county loan limits Ocwen Loan Servicing Client Select

36 Eligible Transactions, Continued Rate Term Refinance Rate and Term Refinance (No Cash Out Refinance) The existing mortgage being refinanced can be either a current FHA, conventional, or VA loan. This transaction requires an appraisal, full processing documentation and underwriting. Occupancy Owner-occupied, primary residence only. LTV Calculation Seasoning Requirements If the subject property was purchased less than one (1) year prior to loan application and is not already FHA-insured, the maximum loan will be determined by using the lesser of the appraised value or the original sales price. If the subject property was purchased more than one (1) year prior to loan application, the maximum loan will be determined from the appraised value. Ocwen Loan Servicing LLC Client Select

37 Eligible Transactions, Continued Rate Term Refinance, (Cont d) Maximum Insurable Mortgage The maximum insurable mortgage is based on the lesser of: multiply the appraised value of the property by 97.75%, NOTE: If the property was acquired less than one year before the loan application and is not already FHA-insured, the lesser of the current appraised value or original sales price of the property must be used; Or, Existing Debt defined as the amount of the existing first mortgage which includes the interest charged by the servicing lender when the payoff will not likely be received on the first day of the month (as is typically assessed on FHA-insured mortgages), any prepayment penalties assessed on a conventional mortgage or an FHA Title I loan, late charges, escrow shortages (may not include delinquent interest), plus any purchase money second mortgage, any junior liens over 12 months old, closing costs, prepaid expenses (per diem interest to the end of the month on the new loan, hazard insurance premium deposits, monthly mortgage insurance premiums, and any real estate tax deposits needed to establish the escrow account), and discount points minus any refund of UFMIP. NOTE: If the balance or any portion of an equity line of credit in excess of $1000 was advanced within the last 12 months and was for purposes other than repairs and rehabilitation of the property, that portion above and beyond $1,000 of the line of credit is not eligible for inclusion in the new mortgage. The resulting figure is the existing debt. The total FHA mortgage is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP). NOTE: Any appraisal requirements, including, repairs, must be complied with before the mortgage is eligible. See the FHA Refinance Loan Amount Worksheet for assistance in calculating the loan amount. Ocwen does not allow the maximum mortgage to exceed the statutory limit, except by the amount of any new UFMIP Ocwen Loan Servicing Client Select

38 Eligible Transactions, Continued Rate Term Refinance, (Cont d) Maximum Cash Back to the Borrower The borrower may not receive cash back in excess of $500 at closing. Delinquent interest may not be included. The refinance does not permit a borrower to obtain cash back by not making a mortgage payment when due. Mortgage Payment History Requirements The mortgage being refinanced must be current for the month due. Ocwen requires no more than 1 x 30 within the most recent 12 months for all mortgage trade lines. The payment does not need to be paid for the month in which the loan closes/funds. The amount of the existing first mortgage may include the interest charged by the servicing lender when the payoff will not likely be received on the first day of the month (as is typically assessed on FHA-insured mortgages). Ocwen Loan Servicing LLC Client Select

39 Eligible Transactions, Continued Rate Term Refinance, (Cont d) Subordinate Financing If new subordinate financing is being offered by a permitted entity, the CLTV is limited to 97.75% (the FHA-insured first mortgage and any new junior liens when added together). Existing subordinate financing may remain in place, but must be subordinated to the FHA- insured first mortgage, provided the borrower qualifies for making scheduled payments on all liens. The CLTV is limited to 97.75%. The maximum accessible credit limit of the existing subordinate lien must be used to calculate the CLTV ratio. All existing liens (to be paid off or remain subordinate to the new first mortgage) must be seasoned for at least six (6) months (i.e., six (6) permanent mortgage payments made), with an acceptable payment history (i.e., no late payments of 30 days or beyond). Many subordinate lien holders request modifications to the terms of the lien (typically a reduction in the amount of the lien) in exchange for remaining in a subordinate position. Modifying a subordinate lien in this manner often results in re-executing the lien at closing, which is acceptable. In this case, FHA does not consider the lien a new subordinate lien. Subordinate financing, except purchase money seconds, must be seasoned twelve (12) months (i.e. twelve [12] permanent mortgage payments made) to be included in the loan amount. New and existing subordinate financing is permitted up to a maximum CLTV of 97.75%. Refinance Buyouts When the purpose of the new loan is to refinance an existing mortgage in order buy-out an ex-spouses or other co-borrower s equity, the specified equity is considered property related indebtedness and can be included in the new mortgage. The specified equity must be documented in a recorded property settlement agreement or divorce decree. If the borrower is newly separated and no property settlement agreement has been prepared, a legally recorded document prepared by an attorney specifically outlining the division of equity is acceptable Ocwen Loan Servicing Client Select