Underwriting Guideline Matrix

Transcription

1 Program / Product Codes: NewLeaf Wholesale FHA ID Number: SKYLINE FINANCIAL CORPORATION Subject to Change Without Notice Valid as of: Copyright 2015 Skyline Financial Corp. dba Skyline Home Loans, Nationwide Mortgage Licensing System (NMLS) Company ID# Arizona Mortgage Banker License #927740, Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act File No: , Georgia Residential Mortgage Licensee, Illinois Residential Mortgage Licensee, Ohio Broker/Banker Registration #MBMB , Oregon Mortgage Lender License ML 2797, Washington Consumer Loan Company License CL Refer to and input NMLS#12072 to see where Skyline Financial Corp. is a licensed lender.

2 FOR CASE #S ASSIGNED ON OR AFTER 9/14/2015 HUD HANDBOOK NewLeaf Wholesale FHA ID Number: SKYLINE FINANCIAL CORPORATION Please note that this matrix is intended as an aid to help determine whether a loan is eligible for FHA financing. This matrix is not intended as a replacement for FHA guidelines. Users are expected to know and comply with FHA requirements. Additionally, this matrix includes overlays, which may be more restrictive than FHA requirements. A thorough review of this matrix is highly recommended. For any circumstance that is not addressed in this matrix, refer to the HUD Handbook Transaction Parameters # Units Conforming Max Loan Amount For Contiguous 48 States Owner Occupied: Purchase High Balance Max Conforming Max Loan Amount For Loan Amount Contiguous 48 States For Hawaii High Balance Max Loan Amount For Hawaii 1 $417,000 $625,500 $625,500 $938,250 2 $533,850 $800,775 $800,775 $1,201,150 3 $645,300 $967,950 $967,950 $1,451,925 4 $801,950 $1,202,925 $1,202,925 $1,804,375 Owner Occupied: Rate / Term Refinance Conforming Max High Balance Max Conforming Max High Balance Max # Loan Amount For Loan Amount For Loan Amount Loan Amount Units Contiguous 48 States Contiguous 48 States For Hawaii For Hawaii 1 $417,000 $625,500 $625,500 $938,250 2 $533,850 $800,775 $800,775 $1,201,150 3 $645,300 $967,950 $967,950 $1,451,925 4 $801,950 $1,202,925 $1,202,925 $1,804,375 # Units Conforming Max Loan Amount For Contiguous 48 States Owner Occupied: Cash Out High Balance Max Loan Amount For Contiguous 48 States Conforming Max Loan Amount For Hawaii High Balance Max Loan Amount For Hawaii 1 $417,000 $625,500 $625,500 $938,250 2 $533,850 $800,775 $800,775 $1,201,150 3 $645,300 $967,950 $967,950 $1,451,925 4 $801,950 $1,202,925 $1,202,925 $1,804,375 Mortgage Insurance: Purchase, Rate/Term, Cash Out 15 Year Term **Effective with case number assignments on or after June 3, 2013** LTV / CLTV 96.50% / 100% LTV / CLTV 97.75% LTV / CLTV 85.00% FICO 600 FICO 600 FICO 600 Page 1 of 14 Last Updated 02/01/2016

3 Loan Limits General Guidelines FHA mortgage limits for all areas: Maximum Base Loan Amount cannot exceed the FHA Statutory Mortgage Limits for each county. The above limits are the maximum allowable loan amounts. See link above for specific FHA County Mortgage Limits. Maximum CLTV's Purchase: Max CLTV is % Non-Streamline Rate/Term Refinance: Max CLTV is 97.50% Cash Out: Max CLTV is 85.00% Refer to FHA Matrix for details Property Types Ineligible Programs Eligible: SFR, 2-4 Units, Condo's (Must be FHA Approved), PUDs, Manufactured Housing, Rural Properties in accordance with HUD guidelines & must be residential in nature Ineligible: Hotel/Resort Projects, Mobile Homes, Condo-hotels, Geodesic Domes, Income Producing Property, Unimproved Land and Co-ops, Lava Zones 1 & 2 203k, Hawaii Homelands, Construction Financing, Cash Out in Texas, Hope, Indian Reservation, GPM's, No Energy Efficient Homes (EEH), MCCs Eligible States AZ, CA, CO, CT, FL, GA, HI, ID, NE, NM, OR, TN, TX, UT, WA & WV Minimum Loan Amount $75,000 Maximum Loans to One Borrower NewLeaf Wholesale SM, a division of Skyline Financial, maximum exposure per borrower is limited to the lesser of 4 properties or $2,000,000 in aggregate loans Purchases Refinances Purchase: Borrower must contribute 3.5% towards the transaction from their own funds or another acceptable source. See Assets section for details Limited Cash Out/Rate & Term Refinance: Maximum LTV is 97.75%: o When borrower has occupied subject property for the previous 12 months, OR o When the borrower has acquired the subject property within the previous 12 months and has occupied the subject property since: Acquisition, and Case number assignment Maximum LTV is 85%: o When the borrower has occupied subject property for less than 12 months prior to the case number assignment date, OR o When the Borrower has acquired the subject property within the previous 12 months and has not occupied subject property for the entire period of ownership Proceeds can be used to pay off a first mortgage regardless of age Proceeds can be used to pay off any junior liens that are purchase money or any junior liens that have been seasoned at least 12 months. If the junior lien being paid off is a HELOC and any draws within the past 12 months have not exceeded $1000 besides documented repairs, the lien may be paid off with proceeds of the loan. Pay related Closing Costs and Prepaid items Disburse cash to the borrower in an amount not to exceed $500 Non-FHA to FHA The LTV is based on the lesser of purchase price or appraised value if property is owned less than 12 months Non-Occupant co-borrowers are permitted If any mortgage tradeline including mortgage line of credit payments, during the most recent 12 months reflects the following below the loan must be downgraded to a manual underwrite: o three or more late payments of greater than 30 Days; o one or more late payments of 60 Days plus one or more 30-Day late payments; or o one payment greater than 90 Days late. Eligible Terms Cash Out: Subject property must have been owned and occupied by the borrower as their principle residence for the 12 months prior to the date of the case assignment If subject property was inherited, the borrower is not required to occupy the property for a minimum period of time before applying for a cash-out refinance transaction provided that the borrower has not utilized the subject property as an investment property at any time since the inheritance of the property Borrower may not have any 30 day mortgage lates in the past 12 months on subject property. If Borrower has any 30 day mortgage lates in the past 12 months on subject property, the loan must be downgraded to a manual underwrite Non-occupant co-borrowers are only permitted if they were on the original loan and their income is not used for qualifying purposes Satisfactory six months of payment history is required for all cash out transactions See 3 to 4 Unit section below for further clarification Fixed Rate (15, 20, 25 & 30 Year) Section 203(b) with ADP codes of 703 & 734 for Condominiums ARMs (5/1) Section 203(b) with ADP code of 729 & 731 for Condominiums Qualifying Rate Fixed Rate & ARM's - Note Rate Ratios Total Scorecard Approval Ratios determined by AUS HPML: Any loan that is determined to be HPML has a maximum DTI of 48% Total Scorecard Refer/Eligible: May be manually underwritten See Manual Underwriting Section Below U.S. Citizens & Permanent Resident Aliens are allowed with proof of lawful permanent residence Inter Vivos Revocable Trusts: Eligible Borrowers o The borrower(s) must be the settler and the beneficiary and the trustee. Non-permanent Resident Aliens with acceptable Visas per HUD guidelines and MUST have an EAD card All borrowers must have a valid social security number Page 2 of 14 Last Updated 02/01/2016

4 Ineligible Borrowers Corporations, LLC's, & Partnerships, Irrevocable Trusts, Non-US Citizen with no lawful residency status in the US, Individuals with diplomatic immunity, Borrowers with TIN numbers, Foreign Nationals, Land Trusts, Non-Resident Aliens (Foreign Nationals) are not allowed, Borrowers on public assistance, commonly known as section 8, are not permitted Escrow Holdbacks Permitted: See NewLeaf Broker Manual AUS Loans must have a Total Scorecard Approval Good Neighbor Program Mortgage Insurance Premium Financing Concessions Non-Occupant Co-Borrower Property must be a HUD REO and has to be designated eligible by HUD SFR, PUDs and Condos only Eligible borrowers: Law Enforcement, Firefighters, EMTs and Teachers Borrower must agree to occupy the property as a primary residence for three years without interruption Minimum down payment is $ AND closing costs may be included in the mortgage up to a maximum of 100% LTV based on the current value Required Documents: o Certificate of Law Enforcement Officer, Teacher, Firefighter or EMT (HUD-9549-A) o Land Use Restrictions Addendum (HUD-9549-B) o Assignment of Sales Contract (HUD-9549-C) o Employer Verification of Participant Enrollment (HUD-9549-E) See Mortgage Insurance Premium Matrix in Tools section of website Must be entirely financed into the mortgage (rounded down to a whole dollar) or paid entirely in cash in full If paid entirely with cash - cash can be comprised of each or the aggregate of Borrower s own funds, Borrower cash out refinance proceeds, lender s credit, or seller s credit Not permissible to pay some in cash and finance the balance Financing concessions cannot exceed 6% of the sales price. Non-occupying co-borrowers are permitted for purchase and rate/term transactions. The definition of a non-occupying coborrower can be found in the HUD handbook Purchase transactions are limited to 75% if the subject property is 2-4 unit properties When a non-occupying co-borrower is participating in a purchase or rate/term transaction, blended ratios are permitted For cash out transaction, non-occupant co-borrowers are only permitted if they were on the original loan being refinanced. Identity of Interest Identity of Interest transactions are restricted to a maximum LTV of 85%. However, maximum financing above 85% LTV is permitted under the following circumstances: A family member purchasing another family member's principal residence A current tenant purchasing the property that the tenant has rented/occupied for at least six months prior to the date on the purchase contract. A lease or other written evidence must be submitted verifying occupancy Corporation transfers an employee to another location, purchases that employees home, and then sells the home to another employee Restricted Family Member Transactions: If the property being sold from one family member to another is the property seller's investment property, the maximum mortgage is the lesser of either 85% of the lesser of the sales price or appraised value or the current maximum mortgage calculation formula per ML Definition of Family Member Includes: Child, parent or grandparent (biological, foster or step) Spouse Legally adopted child or foster child Brother/stepbrother or sister/stepsister Aunt or Uncle Identity of Interest Additional Restrictions: "Flip" transactions are not permitted An "as is" appraisal is required Commission from the sale or listing of the property may not be used for the down payment An employee of a builder purchasing one of the builder's new homes or models as a principal residence - is limited to 85% LTV/CLTV CAIVRS & LDP/GSA NewLeaf will run CAIVRS & LDP/GSA, borrower(s) must obtain a clear rating Number of Financed Properties Maximum number of financed properties is four ( 1-4 units) Page 3 of 14 Last Updated 02/01/2016

5 Multiple FHA Loans to one Borrower Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below: o Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by an FHA insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage. o Increase in Family Size. The borrower may be permitted to obtain another home with an FHA insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan to value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance or by comparing the unpaid principal balance to the original sales price of the property. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance. o Vacating a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a coborrower, the borrower is permitted to obtain another FHA insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property. o Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with an FHA insured mortgage. (See HUD Handbook for additional information). Under no circumstances may investors use the exceptions described above to circumvent FHA's ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences". Credit Credit Requirements Each borrower must have at least two valid credit scores to be eligible If the borrower does not have a credit score, Non-traditional credit is permitted. Please refer to the Non-Traditional Credit and the manual underwriting sections for additional requirements Disputed Accounts If Total Scorecard issues a referral to manual underwriting based on the presence of one or more disputed accounts on the credit report, the Total Scorecard finding may be ignored if any of the following circumstances are present: o The disputed account has a zero balance, or o The disputed account is marked as "paid in full" or "resolved" or o The disputed account is both less than $1000 AND more than 24 months old If Total Scorecard issues an approval and the total outstanding balance of all disputed derogatory accounts (excluding medical) is less than $1,000 then downgrade to a manual underwrite is not required. However, if the total outstanding balance of all disputed derogatory accounts (excluding medical) have an aggregate balance equal to or greater than $1,000 then downgrade to a manual underwrite is required (Disputed derogatory accounts of a non-purchasing / non-borrowing spouse in a community property state are not included in the cumulative balance for purposes of determining if the mortgage is downgraded to a manual underwrite.) Refer to ML & ML for complete requirements Contingent Liability If a borrower is co-obligated on a mortgage, car loan, student loan or any other obligation including credit cards - the monthly payments must be included in the DTI unless documentation is provided to prove that the other party that coobligated on the account has been making payments during the most previous 12 month period and there have been no delinquencies. This must be documented by 12 months cancelled checks or other acceptable evidence including but not limited to a copy of the payment coupon and 12 months bank statements. Authorized Users Accounts for which the borrower is an authorized user must be included in the DTI unless the borrower can provide documentation that shows the primary account holder has made all the required payments on the account for the previous 12 months. If less than three payments have been required on the account in the previous 12 months, the payment amount must be included in the DTI. Timeshare A loan secured by an interest in a timeshare must be considered an installment loan Deferred Obligations Must be included in the DTI including loans that are in forbearance: o For student loans, if the monthly payment is zero or not available, 2% of the outstanding balance must be used to calculate the payment however the following applies: Income based for repayment plans, if payment is zero use 0% for qualifying Graduated payment plans, use current payment for qualifying Exclusion of Debts Installment loans not secured by real estate may be excluded from ratios IF: o The debt will be paid off within 10 months, AND o The remaining cumulative payments are less than or equal to 5% of the borrower s gross qualifying monthly income, AND o The borrower may not pay down debt to achieve this percentage Paying Off Debt Installment debt-allowed, payment excluded from qualifying ratios Revolving Debt may be paid off in order to qualify at NewLeaf underwriter s discretion Paying Down Debt Not allowed Page 4 of 14 Last Updated 02/01/2016

6 Revolving Accounts When the credit report does not indicate a monthly payment for the account, use the payment shown on the most current account statement or 5% of the outstanding balance 30 day Accounts Bankruptcy 30 Day Accounts Are not included in the DTI if: o Documentation to show that the borrower paid the outstanding balance in full every month for the past 12 months must be provided (i.e. credit card statements), AND o There have been no late payments on in the past 12 months, AND o Documentation is provided to show that funds are available to pay off the balance in excess of any fund to close and required reserves If the three requirements above cannot be met, 5% of the outstanding balance must be included in the DTI 2 years must have elapsed since completion or discharge of Chapter 7 Bankruptcy. A period of less than two years, but not less than 12 months may be acceptable if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond control an has since financially recovered and re-established credit If there is less than 2 years seasoning since the Chapter 7 or 13 Bankruptcy, the loan must meet the requirements for extenuating circumstances and will be downgraded to a manual underwrite (see manual underwriting section below) 2 years must have elapsed from the discharge date of a Chapter 13 Bankruptcy. o If the Chapter 13 has not been discharged and is being completed, then a period of less than two years but not less than 12 months may be acceptable if all of the following circumstances are present: There must have been at least a one year pay-out period and All the payments must have been made on time and Borrower must receive written permission from the bankruptcy court to enter into the mortgage transaction o If the Chapter 13 has been discharged/completed, then a period of less than two years is acceptable. There is no seasoning requirement if the original Chapter 13 Bankruptcy is greater than or equal to a one year term Seasoning period begins from the date of discharge to the date of the case assignment. Foreclosure 3 years must have elapsed since completion of a Foreclosure or Deed-in- Lieu. Less than 3 years seasoning may be acceptable if the foreclosure was a result of documented extenuating circumstances that were beyond the control of the borrower and the loan must meet the requirements for extenuating circumstances and will be downgraded to a manual underwrite (see manual underwriting section below) Regardless of the circumstance, the minimum time that must have elapsed since the completion of the foreclosure or Deedin-Lieu is 1 year Seasoning period begins on the date the property transferred ownership to the foreclosing lender through the date of the case assignment. Short Sale/Deed-inlieu of foreclosure If the borrower was not in default at the time of the Short Sale, 3 years must have elapsed since completion of Short Sale; the wait period can be waived if all of the following conditions are met: o The loan was current at the time of the short sale o The loan was paid on time in the 12 months preceding the short sale o All other installment debts were paid on time in the preceding 12 months If the seasoning of the short sale is less than 3 years, the loan must meet the requirements for extenuating circumstances and will be downgraded to a manual underwrite (see manual underwriting section below) If the borrower was in default at the time of the Short Sale, 3 years must have elapsed since the completion of the Short Sale; the wait period can be waived if the default was due to circumstances beyond the borrower's control and the borrower s credit was satisfactory prior to the circumstances beyond the borrower's control that caused the default. If the borrower pursued a Short Sale to take advantage of declining market conditions and is purchasing a similar or superior property within a reasonable commuting distance, the 3 year waiting period may not be waived Seasoning period begins on the date the property was sold through the date of the case assignment. Modified Loans If the modification occurred within the past 3 years and is the subject property, the loan must be downgraded to a manual underwrite and must meet all manual underwriting requirements including mortgage history requirements If the modification occurred within the past 3 year and is not the subject property, the loan does not have to be manually downgraded. If the modification agreement prohibits the rental of the property, then rental income cannot be used to qualify. In all cases, all payments must have been made on time since the modification and meet all applicable mortgage payment history per transaction type Judgments/ Collections and Charge Offs All judgments must be paid Payment of Collection Accounts and Charge Offs are at the discretion of the underwriter If the cumulative outstanding balance of all collections of all borrowers (including a non-purchasing / non-borrowing spouse) is equal to or greater than $2,000 and the collection accounts will remain open after closing, the monthly payment must be included in the DTI using the payment arrangement or 5% of the outstanding balance of each collection (This does not include medical collections & medical charge offs) Subordinate Financing Closed ended subordinate financing qualified using credit report payment For financing other than HELOCs, the maturity date or amortization basis of the junior lien must not be less than five years after the Note Date unless the junior lien is fully amortizing. If the junior lien contains a balloon or call provision within the five-year period, the First Lien Mortgage is ineligible. HELOCs qualified using the greater of 1% of max line amount or the credit report payment. Non-subject property qualified using credit report payment, unless draw made at closing -Then 1% of max line amount used for qualification Refer to HUD Handbook Section 4.d.J for Secondary financing details Modified Subordinate Liens: FHA understands that many subordinate lien holders have requested modification to the terms of the lien (typically a reduction in the amount of the lien) in exchange for remaining in subordinate position. Modifying subordinate liens often results in re-executing the legal documents at closing, which is acceptable and not considered a new subordinate lien. Existing or modified subordinate liens may remain in place Page 5 of 14 Last Updated 02/01/2016

7 Non-Traditional Credit All loans with Non-Traditional Credit must be manually underwritten. Please refer to the Manual Underwriting section Non-Purchasing Spouse / Non- Borrowing Spouse Except for obligations specifically excluded by state law, the debts of the non-purchasing / non-borrowing spouse must be included in the borrower s qualifying ratios, if the borrower resides in a community property state, or, property being insured is located in a community property state. The non-purchasing / non-borrowing spouse s obligations must be considered in the debt-to-income (DTI) ratio unless excluded by state law. A credit report that complies with the requirements of HUD must be provided for the non-purchasing / non-borrowing spouse in order to determine the debts that must be counted in the DTI ratio. The non-purchasing / non-borrowing spouse must provide a signed / dated Borrower s Credit Authorization Non-borrowing spouse s credit report must indicate the social security number and must be validated with the directly SSA Manual Underwriting In addition to meeting all standard FHA guidelines the following guidelines apply for Manual Underwriting in this section Manual Underwriting Regardless of AUS/Total Score Card Manual underwriting is required: When AUS/TOTAL Score Card receives a REFER finding When AUS/TOTAL Score Card conditions cannot be met When a borrower or co-borrower has less than 2 credit scores When a borrower is using non-traditional credit When a borrower s bankruptcy discharge is less than 2 years from the case number assignment date When a date of transfer of title by short sale or deed in lieu of foreclosure is less than 3 years from the date of the case number assignment TOTAL Score Card date When a foreclosure seasoning is less than 3 years from the case number assignment date When the Borrower has undisclosed mortgage debt When any mortgage rating does not appear on the credit report with a complete 12 month history If any mortgage trade line, including HELOC payments, reflect a current delinquency or any delinquency within 12 months of the case number assignment Purchase and Rate/Term Refinances: If any mortgage tradeline including mortgage line of credit payments, during the most recent 12 months reflects the following: o three or more late payments of greater than 30 Days; o one or more late payments of 60 Days plus one or more 30-Day late payments; or o one payment greater than 90 days late. Cash-out transactions: If any mortgage tradeline, including mortgage line of credit payments reflects: o A current delinquency, or o Any delinquency within 12 months of the case number assignment date When the Borrower s business income shows greater than a 20% decline over the tax years being analyzed If there has been a 20% or greater decline, the income is still deemed stable if: o The reduction was a result of documented extenuating circumstances AND o The income has been stable or increasing for at least the last 12 months AND o The borrower qualifies using the reduced income Credit Requirements for Manual Underwriting The Borrower s credit history may be acceptable IF: o The borrower has made all housing and installment debt payments on time for the previous 12 months, AND o Has no more than two 30-day late mortgage payments or installment payments in the previous 24 months, AND o The borrower has no major derogatory credit on revolving accounts in the previous 12 months. o Major derogatory credit on revolving accounts includes: Any payments made more than 90 days after the due date OR Three or more payments made more than 60 days after the due date Collections/Charge Offs for Manual Underwriting The borrower must provide a letter of explanation with supporting documentation for each outstanding Charge Off or Collection account which must be consistent with other credit information in the file. Mortgage/Rental History for Manual Underwriting Borrower s housing obligation payment history for previous 12 months must be documented with the following: o The credit report OR o VOR from a licensed management company, OR o Verification of mortgage received directly from the mortgage servicer, OR o Review of cancelled checks (front & back) that cover the most recent 12 month period For borrowers who indicate that they are living rent free, the lender must obtain written verification from the property owner where they are residing that the borrower has been living rent free and the amount of time the borrower has been living rent free Mortgages that have been modified the payment history must be analyzed starting with the date of the modification agreement in determining late housing payments Page 6 of 14 Last Updated 02/01/2016

8 Permitted for conforming loan limits only Borrower s with no credit score cannot exceed 31/43 DTI The credit history must include three credit references, with at least one of the following: o Rental payments via 12 months cancelled checks (front and back) or a VOR from a licensed management company, OR o Utility company reference (if not included in the rental payment), including gas, electricity, water, television service or internet service If all three credit references are not obtained from the previous list above, the following sources may be used: o Insurance premiums not payroll deducted (medical, auto, life, renters insurance, etc.) o Payment to child care providers made to licensed business that provide such services; school tuition o Retail store credit cards not reported to the credit bureaus (example: furniture stores, appliance stores, specialty stores, etc.) o Rent-to-own (furniture, appliances, etc.) o Payment of medical bills to providers that are not covered by insurance o A documented 12 month history of savings evidenced by regular deposits resulting in an increased balance to the account that were made at least quarterly, were not payroll deducted and caused no insufficient (NSF) checks o A personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments o A documented 12 month history of payment by the borrower on an account for which the borrower is an authorized user. Non-Traditional Credit Extenuating Circumstances Non-Traditional and Insufficient Credit (Manual) For Borrowers without a credit score, a Non-Traditional Mortgage Credit Report (NTMCR) from a credit reporting company must be obtained or Skyline must independently develop the Borrower s credit history using the requirements outlined below. o Non-Traditional Mortgage Credit Report Definition- An NTMCR is designed to access the credit history of a Borrower who does not have the types of trade references that appear on a traditional credit report and used either as: a substitute for a TRMCR or an RMCR; or a supplement to a traditional credit report that has an insufficient number of trade items reported to generate a credit score. A NTMCR developed by a credit reporting agency may be used that verifies the following information for all non-traditional credit references: the existence of the credit providers; that the credit was actually extended to the Borrower; and the creditor has a published address or telephone number. The NTMCR must not include subjective statements such as satisfactory or acceptable, must be formatted in a similar fashion to traditional references, and provide the: creditor s name; date of opening; high credit; current status of the account; required monthly payment; unpaid balance; and payment history in the delinquency categories (for example, 0x30 and 0x60). Independent Verification of Non-Traditional Credit Providers - Skyline may independently verify the Borrower s credit references by documenting the existence of the credit provider and that the provider extended credit to the Borrower. o To verify the existence of each credit provider, Skyline must review public records from the state, county, or city or other documents providing a similar level of objective information. o To verify credit information, the Mortgagee must: use a published address or telephone number for the credit provider and not rely solely on information provided by the applicant; and obtain the most recent 12 months of cancelled checks, or equivalent proof of payment, demonstrating the timing of payment to the credit provider. o To verify the Borrower s rental payment history, Skyline must obtain a rental reference from the appropriate rental management company, provided the Borrower is not renting from a Family Member, demonstrating the timing of payment of the most recent 12 months in lieu of 12 months of cancelled checks or equivalent proof of payment. Sufficiency of Credit References- To be sufficient to establish the Borrower s credit, the credit history must include three credit references, including at least one of the following: o rental housing payments (subject to independent verification if the Borrower is a renter); o telephone service; or o utility company reference (if not included in the rental housing payment), including: gas; electricity; water; television service; or Internet service. If all three credit references are not obtained from the previous list above, the following sources may be used: o Insurance premiums not payroll deducted (medical, auto, life, renters insurance, etc.) o Payment to child care providers made to licensed business that provide such services; school tuition o Retail store credit cards not reported to the credit bureaus (example: furniture stores, appliance stores, specialty stores, etc.) o Rent-to-own (furniture, appliances, etc.) o Payment of medical bills to providers that are not covered by insurance o A documented 12 month history of savings evidenced by regular deposits resulting in an increased balance to the account that were made at least quarterly, were not payroll deducted and caused no insufficient (NSF) checks o An automobile lease o A personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments o A documented 12 month history of payment by the borrower on an account for which the borrower is an authorized user. The following are extenuating circumstances which may apply to requested seasoning exceptions for Bankruptcy, Foreclosure, Deed-in-Lieu and Short Sale: o Death of a wage earner o Serious illness o Divorce may be concerned an extenuating circumstance for Short Sale, Foreclosure or Deed-in-Lieu if the borrower s loan was current at the time of the divorce and the ex-spouse received the property and the loan later went into foreclosure, deed-in-lieu or was short sold Page 7 of 14 Last Updated 02/01/2016

9 Loans receiving a Total Scorecard Refer/Eligible or downgraded from an Approve/Eligible due to HUD guidelines may be manually underwritten and must meet the below requirements: DTI requirements for Manual Underwriting o o o o 31/43 DTI: Borrower s with no credit score cannot exceed 31/43 DTI 37/47 DTI: The following is required: Verified and documented cash Reserves in addition to the reserve requirements listed below, AND Minimum increase in housing payment; OR Residual income as calculated per VA requirements 40/40 DTI: The following requirements must be met: Borrower with established credit and open credit lines carries no discretionary debt. Monthly housing payment is only open installment account and revolving credit is paid off monthly 40/50 DTI: Two of the following requirements must be met: Verified and documented liquid cash reserves in addition to the reserve requirements listed below Minimum increase in housing payment; Significant additional income not reflected in effective income; and/or Residual income as calculated per VA requirements Reserve Requirements for Manual Underwriting In ALL cases, the maximum DTI for manual underwriting is 50%. Also, an AUS is required in the file Reserves equivalent to one month s PITI after closing for one- to two-unit Properties. Reserves equivalent to three months PITI after closing for three- to four-unit Properties. Income/Employment Overtime and Bonus Hourly Income Overtime or bonus income, the income must be averaged over the previous two years However, if the overtime or bonus income from the current year decreases by 20% or more from the previous year, the current year must be used Less than two years may be considered if documentation is provided to show that overtime has been consistently earned over a period of not less than one year and is likely to continue This applies to both AUS approvals and manually underwritten loans For employees who are paid hourly and the hours do not vary, the borrower s current hourly rate is used to calculate the qualifying income For employees who are paid hourly and the hours vary, an average of the income over the previous two years is used to calculate the qualifying income. If there is a decline in the income between the previous and current year, the lower amount will be used If documentation is provided to show an increase in pay rate, income can be calculated using the most recent 12 months of average of hours at the current pay rate This applies to both AUS approvals and manually underwritten loans Part Time employment Income may be used as qualifying income if the borrower has worked a part time job uninterrupted for the past two years and the current position is reasonably likely to continue If documentation is provided to show an increase in pay rate, income can be calculated using the most recent 12 months of average of hours at the current pay rate This applies to both AUS approvals and manually underwritten loans Commission Income May be used if the borrower earned the income for at least one year in the same or similar line of work and it is reasonably likely to continue Commission must be calculated by using the lesser of o The average net commission income earned over the previous two years, or the length of time the commission income has been earned if less than two years OR o The average net commission earned over the previous one year Unreimbursed business expenses (2106) as shown on Schedule A of tax returns must be subtracted from the gross commission income to calculate net commission income Frequent Job Changes If the borrower has changed jobs more than three times in the previous twelve months period to advance income or benefit or has changed their line of work the following is required: o Employment documentation evidencing continual increases in income and/or benefits, OR o Transcripts of training and education demonstrating qualification for a new position Gaps in Employment Borrowers with gaps in employment less than six months are not required to provide an explanation Borrower s with gaps of six months or more (an extended absence) may be considered if: o The borrower has been employed in the current job for at least six months at the time of the case assignment AND o A two year work history prior to the absence from employment can be documented Page 8 of 14 Last Updated 02/01/2016

10 Temporary Reduction of Income For borrowers with a temporary reduction of income due to short term disability or similar temporary leave, the current disability income may be considered as effective income if it can be documented with the following requirements regardless if they are returning to work before or after the first payment due date: o A written statement from the borrower s employer confirming all of the following: Date of return to work Position and compensation will remain the same o A written statement from the borrower confirming their intent to return to work, and the intended date of return o The borrower qualifies for the mortgage using the reduced disability income If the borrower will be returning to work after the first mortgage payment due date, the borrower s current income plus available surplus liquid asset reserves, above and beyond any required reserves, as an income supplement up to the amount of the borrower s pre-leave income may be used to qualify o The amount of the monthly income supplement is the total amount of surplus reserves divided by the number of months between the first payment due date and the borrower s intended date of return to work. o Documentation of sufficient liquid assets, used to supplement the borrower s income through the intended date of return to work with current employer If the borrower will be returning to work before or at the time of the first payment due date, the borrower s pre-leave income may be used to qualify. Disability Income Social Security: o Most recent award letter to establish a minimum three year continuance and one of the following is required: Most recent federal tax returns, or Most recent bank statement, or Copy of the borrower s social security statement (form SSA-1099/1042S) VA Disability: o VA form (Verification of VA Benefits) showing the amount of the assistance and establishing a minimum of three year continuance and one of the following is required: Most recent federal tax returns, or Most recent bank statement Private Disability: o Documentation from the private disability insurance provider to verify the amount and a minimum of three year continuance of the benefit and one of the following is required: Most recent federal tax returns, or Most recent bank statement Child and Spousal Support Income A fully executed copy of the final divorce decree, legal separation agreement, court order, or voluntary payment agreement with documented receipt is required Required documentation: o When using a final divorce decree, legal separation agreement or court order, evidence of receipt using deposits on bank statements, canceled checks, or documentation from the child support agency for the most recent three months that supports the amount used in qualifying is required o If the payments are voluntary the agreement must be documented with 12 months of cancelled checks, bank statements or tax returns Calculation of effective income: o If the borrower has received consistent Alimony, Child Support and Maintenance Income for the most recent six months, the current payment may be used o When using a final divorce decree, legal separation agreement or court order, if the Borrower has received consistent Alimony, Child Support and Maintenance Income for the most recent three months, the current payment to calculate Effective Income may be used o If the Alimony, Child Support and Maintenance Income have not been consistently received for the most recent six months, the average of the income received over the previous two years must be used to calculate effective Income. If Alimony, Child Support and Maintenance Income have been received for less than two years, the average over the time of receipt must be used to calculated effective income Military Income If the borrower s Leave and Earnings Statement (LES) indicates that the borrower will be separating from the service within the first 12 months of the mortgage, military income may only be used if the borrower states their intent in writing to continue military service Retirement Income Social Security Documentation to verify the Borrower s receipt of income from the SSA and that it is likely to continue for at least a three year period from the date of case number assignment is required. The current amount of Social Security Income received must be used to calculate effective income. For SSI, one of the following documents is required: o federal tax returns; o Most recent bank statement evidencing receipt of income from the SSA; o Proof of Income Letter, also known as a Budget Letter or Benefits Letter that evidences income from the SSA; or o Copy of the Borrower s form SSA-1099/1042S, Social Security Benefit Statement. In addition to verification of income, the following documentation is required to support the continuance of SSI income: o a copy of the last Notice of Award letter which states the SSA s determination on the Borrower s eligibility for SSA income or o an equivalent document that establishes award benefits to the Borrower (equivalent document). o If any income from the SSA is due to expire within three years from the date of case number assignment, that income may not be used for qualifying. If the Notice of Award or equivalent document does not have a defined expiration date, the income will be considered of effective and reasonably likely to continue. No additional documentation from the Borrower to demonstrate continuance of Social Security Administration income is required If the Notice of Award letter or equivalent document specifies a future start date for receipt of income, this income may only be considered effective on the specified start date Page 9 of 14 Last Updated 02/01/2016

11 Retirement Income - Pension Documentation to evidence the Borrower s receipt of periodic payments from the Borrower s Pension and that the payments are likely to continue for at least three years is required. A copy of the award letter documenting three years continuance AND any one of the following documents is required: o Federal tax returns; o The most recent bank statement evidencing receipt of income from the former employer; or o A copy of the Borrower s Pension/retirement letter from the former employer Retirement Income IRA/401K Documentation to verify the Borrower s receipt of recurring IRA/401(k) distribution Income and that it is reasonably likely to continue for three years is required. The most recent IRA/401(k) statement and any one of the following documents are required: o Federal tax returns; o The most recent bank statement evidencing receipt of income For borrowers with IRA/401(k) income that has been and will be consistently received, the current amount of IRA Income received must be used to calculate effective income. For borrowers with fluctuating IRA/401(k) income, the average of the IRA/401(k) income received over the previous two years must be used to calculate effective income. If IRA/401(k) income has been received for less than two years, the average over the time of receipt must be used to calculate effective income. Non-Taxable Income Future Income Rental Income Non-taxable income may be grossed to the greater of 15% or the actual tax rate based on the borrower s tax rate of the previous year If the borrower was not required to file a federal tax return for the previous year, non-taxable income may be grossed up 15%. No additional adjustments or allowances based upon the number of dependents is allowed Future income may be considered as qualifying income accept when the borrower is to be employed by a family owned business A copy of the fully executed non-contingent employment contract is required and must verify the borrower s employment start date to be within 60 days of the mortgage s closing For retirement income to be used as future income documentation to verify the amount and that it is guaranteed to be begin within 60 days of the mortgage closing is required The borrower must have sufficient cash reserves to support the mortgage payment and any other obligations between the time the mortgage closes and the borrower starts to receive the income History of Rental Income - Subject Property o When the borrower has a history of rental income from the subject since the previous tax filing, the rental income must be documented by the borrower s most recent two years tax returns, including Schedule E. For properties with less than two years of rental income history, documentation of the date of acquisition with either the deed, HUD or similar legal document is required Rental Income - Limited or No History of Rental Income Subject Property o When the borrower does not have a history of rental income from the subject since the previous tax filing, rental income must be documented by fair market rents obtained from the appraisal and, if available, the prospective leases o To calculate the effective rental income from the subject property when the borrower does not have a history of rental income from the subject property since the previous tax filing, rental income will be based on the lesser of: The monthly operating income reported on FNMA form 216/Freddie Mac form 998 OR 75% of the lesser of: Fair market rent reported by the appraiser OR Rents reflected in the lease or rental agreement Rental Income - Limited or No History of Rental Income Other Properties o When the borrower does not have a history of rental income for the non-subject property since previous tax filing, including property being vacated by the borrower, an appraisal must be obtained evidencing market rent and that the borrower has at least 25% equity in the property. The appraisal is not required to be completed by an FHA Appraiser o Two to Four Units Rental income must be documented by obtaining an appraisal showing fair market rents and a FNMA Form 216/Freddie Mac Form 998 and, if available, the leases o One Unit Rental income must be documented by obtaining a FNMA Form 1007/Freddie Mac Form 70 and a FNMA Form 216/Freddie Mac Form 998 and, if available, the lease Rental Income (Continued) Rental Income - History of Rental Income Other Property o The borrower s last two year s tax returns with Schedule E must be obtained o To calculate the net rental income the amount shown on the Schedule E for all properties still owned by the borrower must be averaged. Depreciation may be added back to the net income or loss o If the property has been owned for less than two years, the rental income must be annualized for the length of time the property has been owned o For properties with less than two years of rental income history, the date of acquisition must be documented by obtaining the deed, HUD or similar legal document o Positive net rental income must be added to the borrower s effective income. Negative net rental income must be included as a debt/liability Boarder Income Is acceptable if the borrower has a two year history of receiving this type of income with the following requirements: o Two years personal tax returns evidencing income from the boarders and the current lease o For purchase transactions a copy of an executed written agreement documenting the boarder s intent to continue to reside with the borrower(s) o Income to be calculated by using the lesser of current lease or two year average Page 10 of 14 Last Updated 02/01/2016

12 Seasonal Employment Seasonal income is acceptable if: o Income must have been received for two years in same line of work, and o Income is likely to continue as document by VOE Unemployment income may be considered if borrower has received it for the most recent two years Income to be calculated by using the most recent two year average When a borrower is employed by a family owned business the following is required: o Letter from business CPA to state borrower has no ownership in the business o Most recent two years tax returns Employed by Family Owned Business Self Employed Borrowers Documentation Type/Tax Transcripts Calculation of Effective Income: o Salary - For employees who are salaried and whose income has been and will likely continue to be consistently earned, the current salary must be used to calculate Effective Income. o Hourly - For employees who are paid hourly, and whose hours do not vary, Borrower s current hourly rate may be considered to be used to calculate Effective Income. For employees who are paid hourly and whose hours vary, the income over the previous two years must be averaged. If there is an increase in the borrowers pay rate, the most recent 12-month average of hours at the current pay rate can be used and must be documented. If a borrower has been self employed for less than 2 years but not less than 1 year, income may be used to qualify if the borrower was employed in the same line of work or related occupation in the previous two years When a borrower s business income shows greater than a 20% decline over the tax years being analyzed, the loan must be downgraded to a manual underwrite. Refer.to the manual underwriting section. Must obtain a year to date P&L and balance sheet if more than a calendar quarter has elapsed since date of most recent calendar or fiscal year-end tax return was filed by the borrower. A balance sheet is not required for self employed borrowers who are filing a Schedule C If income used to qualify the borrower exceeds the two year average of tax returns, an audited P&L or signed quarterly tax return must be obtained form the IRS. Validated IRS Tax transcripts are required for each borrower whose income is utilized as a source of repayment. The most recent two year tax transcripts are required. TOTAL Scorecard Accept Self-Employed Borrowers (ML ): P & L and Balance Sheet required if more than a calendar quarter has elapsed since the date of most recent calendar or fiscal-year end tax return was filed by the borrower. Assets Cash on Hand Borrower s with cash on hand must meet the defined profile in the HUD Handbook Earnest Money Deposit Down Payment Assistance Programs Use of Business Funds If the earnest money deposit exceeds 1% of the sales price, it must be verified and sourced. This applies to both AUS approvals and manually underwritten loans Seller funded down payment assistance programs are not permitted Borrower must file a Schedule C or be 100% owner of the corporation or LLC A CPA letter stating that the use of business funds will not negatively impact the business is required A cash flow analysis of the business and its capacity must be performed by the underwriter, broker must provide a minimum of three months complete business bank statements although the underwriter may request more if needed to determine eligibility Commission from Sale of Subject Property as Down Payment If the borrower is a licensed real estate agent entitled to a real estate commission from the sale of the property being purchased, those funds may be used as part of the down payment, a letter from the Real Estate Agency must state how much will be credited to the Sales Agent (after any commission split or deduction of other fees) at closing on the HUD-1. A family member entitled to the commission may also gift the funds to the borrower. There is no required adjustment to the maximum mortgage. Loans with gift funds must meet the following criteria (See HUD Handbook for complete guidelines): Gifts may be used for down payment, closing Purchase costs and prepaids Gifts must come from a close family member or a person having a long standing relationship with the borrower Gifts given in the form of cash are not acceptable Gifts are permitted to be used for reserves for AUS loans Requirements for Gift Transfer Documentation: Gifts Reserves If the gift funds are in the borrower s account, a copy of the withdrawal documents showing that the withdrawal was from the donor s account and a copy of the deposit slip or a bank statement showing the deposit are required If the gift funds are to be provided at closing and are in the form of a certified check from the donor s account, a copy of the donor s bank statement showing the withdrawal from the account and a copy of the certified check are required If the gift funds are to be provided at closing and are in the form of a cashier s check, money order, official check or any other type of bank check, the donor must provide a withdrawal document or cancelled check for the amount of the gift showing that the funds came from the donor s personal account If the gift funds are to be provided at closing and are in the form of an electronic wire transfer to the closing agent, a copy of the wire transfer is required. The wire transfer must indicate the donor as the party transferring the funds to the borrower. If the donor is borrowing the gift funds, documentation is required to show that the donor is borrowing the funds from an acceptable source, not from a party to the transaction. 1-2 unit properties: No reserves are required 3-4 unit properties: 3 months PITI are required Retirement accounts used for reserves must be accessible for liquidation Retirement accounts are given 60% of value reflected on the most recent statements for reserves Stocks, Bonds & Mutual Funds are given 70% of value reflected on most recent statement for reserves Large Deposits Retirement Accounts Source of funds are required for the following: o Recently opened accounts, and o Recent individual deposits that exceed 1% of the average balance of existing accounts 60% of the vested value of the account may be used unless the borrower provides documentation that a higher percentage may be withdrawn after subtracting any federal income tax or penalties Terms and conditions for withdrawal must be provided If any portion of the account is required for funds to close, evidence of liquidation is required Page 11 of 14 Last Updated 02/01/2016

13 Stocks/Bonds/ Mutual Funds 70% of the vested value of the account may be used If any portion of the account is required for funds to close, evidence of liquidation is required Collateral A full appraisal (e.g. form 1004 or equivalent depending on property type, accompanied by form 1004MC is required HUD REO properties do not require a new appraisal unless one or more applies as follows: Appraisal Requirements o o o The current "as is" appraisal is over 4 months old AND a valid HUD contract was not executed prior to the expiration date of the appraisal The current "as is" appraisal is over 4 months old and the purchasers have not already been approved for the loan A copy of the appraisal was ordered from the: Marketing and Management (M&M) contractor" but the M&M contractor is unable to provide the report Deed Restrictions Not permitted, however, age-restricted communities may be considered and must be reviewed. Please provide By-Laws / Regulations of community. 3-4 Unit Properties 3-4 unit properties must be self-sufficient. To determine if property meets self-sufficiency requirement, the following calculations are used: o Total of Fair Market Rents as reported by appraiser x vacancy factor must be equal or greater to PITI and o PITI divided by net rent as calculated in #1 cannot exceed 100% (Vacancy factor of 25% will apply) Reserves equivalent to three months PITI are required and gift funds are not permitted If there is a non-occupying co-borrower and the loan is a purchase, the LTV may not exceed 75% Borrower(s) must sign/date the FHA Hotel & Transient Form Condominiums Condominiums must be FHA approved Site condominiums do not require HUD project approval HUD REO's do not require FHA Condominium Project Approval HO6 Coverage is required HOA certs are required to verify that the project still meets HUD guidelines To look up a project to check if it is approved, go to Unpermitted Additions Garage Conversions: o If the garage door is still attached: The appraiser must appraise it as a garage, assign a cost to cure, state whether it was done in a workmanlike manner and that the addition conforms to the original structure and meets HUD Minimum Property Requirements o If the garage door has been removed: The above requirements apply and the appraiser must include at least one comp that has an unpermitted garage conversion with the door removed in order to give it value as a garage. If the appraiser cannot find at least one comp to support that this is common for the area, no value may be given to the garage at all Unpermitted Room Additions: HUD allows unpermitted room additions, such as a bedroom, bathroom, etc. The appraiser must certify that it has been done in a workmanlike manner, conforms to the structure and meets HUD Minimum Property Requirements. If the appraiser gives the unpermitted room addition value, HUD requires at least one comparable closed sale to document market acceptance of the property. If no closed comparables are available, value may not be given to the room addition(s) Unpermitted Accessory Units: HUD allows unpermitted accessory units, also referred to as mother-in-law units or guest quarters. It is the appraiser s responsibility to certify that the property complies with local zoning requirements. Additionally, the appraiser must comply with the same requirements as listed above for unpermitted room additions. A very important requirement is that the accessory unit may not be income producing. Unpermitted / Illegal Units: This type of unit differs from an accessory unit insofar that it is income producing and has separate electrical / gas meters and does not comply with local zoning requirements. This is not permitted under any circumstances. Properties Recently Listed for Sale Rate / Term Refinance: Listing must be cancelled at time of application and appraisal date Cash Out Refinance: 6 month seasoning is required. If expired/cancelled listing is less than 6 months old, LTV is limited to 70% Page 12 of 14 Last Updated 02/01/2016

14 Exemptions to the FHA Prohibition of Property Flipping Rule (purchase agreement =< 90 days from seller acquisition): Properties acquired by an employer or relocation agency in connection with the relocation of an employee Re-sales by HUD under its Real Estate Owned (REO) program Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies HUD REO properties that were purchased by nonprofits at a discount with resale restrictions Sales of properties that are acquired by the seller through inheritance Sales of properties by state and federally-chartered financial institutions and government sponsored enterprises Sales of properties by local and state government agencies Sales of properties within Presidentially Declared Disaster Areas, and Builders selling a newly built home or building a home for a borrower Prohibition of Property Flipping Rule Conversion of Primary Residence to Investment Property/Departing Residence Legal Non- Conforming Zoning Mixed Use Properties Additional Notes: The seller must be by the owner of record Appraisers are required to analyze any prior sales of a subject property in the previous 3 yrs. for 1 to 4 family residential properties per USPAP standards A second appraisal is required by another appraiser if: the re-sale date of a property is between 91 and 180 days following the acquisition of the property by the seller, and the resale price is 100 percent or more over the price paid by the seller when the property was acquired Per FHA additional documentation may be required to support the resale value of a property, if: The resale date is more than 90 days after the date of acquisition by the seller, but before the end of the twelfth month following the date of acquisition, and The resale price is 5 percent or greater than the lowest sale price of the property during the preceding 12 months If rental income is being derived from the property being vacated by the borrower, the borrower must be relocating to an area 100 miles or more from their current residence and the following is required: o Copy of a Lease agreement for at least 1 year duration from date of funding o Documentation to evidence payment of security deposit or first month s rent being deposited into the borrower s account Rental income from departing residence may be used to offset PITI only if it can be documented that the borrower has at least 25% equity in the property, which must be documented by a 2055 drive by inspection. Rental income will be calculated using rental agreement (75% gross rent minus PITI or per specific Home Ownership Center/HOC). If zoning is legal non-conforming, documentation to evidence that subject property can be rebuilt is required. If the appraiser comments in the appraisal report that the subject property cannot be rebuilt, if destroyed, the property is not eligible for FHA financing A minimum of 51% of the entire building square footage must be for residential use Unless specified below, all above FHA guidelines must be met Maximum Loan Amount: Maximum loan amount is $417,000. High Balance loan limits are ineligible Underwriting Method: AUS approval is required Manual Underwriting is not allowed Manufactured Housing Transaction Types: Purchase Mortgages o An existing manufactured home must have been permanently attached to its foundation for a minimum of 12 months prior to the loan application date. New construction is ineligible. Rate Term Mortgages: Proceeds of a limited cash-out refinance mortgage may be used to: o Pay off the outstanding principal balance of an existing first lien mortgage secured by the manufactured home and land (or existing liens if the home and land were encumbered by separate first liens); The current appraised value of the manufactured home and land; or If the manufactured home was owned by the borrower for less than 12 months on the loan application date and if the home and land are secured by separate liens, the lowest price at which the home was previously sold during that 12 month period plus the lower of the current appraised value of the land or the lowest sales price o HUD1 Statement required from any transaction within the past 6 months. If previous transaction was a cash out or if it combined a non- purchase money second lien into a new first, the loan is ineligible o Payoff of the existing first mortgage regardless of seasoning o Payoff of existing subordinate liens that were used in whole to acquire the subject property o Closing costs and prepaids items may be financed into the loan amount o Cash out limited to the lesser of 2% of the principal amount of the new loan or $200 whichever is less for conventional o Acceptable Continuity of Obligation Cash-Out Transactions Not Allowed Eligible Property Types: 1 unit Manufactured house with the following requirements: Double Wide or larger 600 Minimum square feet and 12 feet wide Maximum 10 acres Ineligible Property Types: Condo Manufactured housing Co-op manufactured housing PUD manufactured housing Leasehold property New Construction manufactured home Single Wide Manufactured housing Property Requirements: The land must be fee simple The Manufactured Home must be a one unit dwelling legally classified as real property The towing hitch, wheels, and axles must be removed The Manufactured Home must have sufficient square footage, room dimension to be acceptable to purchasers in the subject market area The Manufactured Home must have been built in compliance with the Federal Manufactured Home Construction and Page 13 of 14 Last Updated 02/01/2016

15 Safety Standards that were established 6/15/1976 as well as additional requirements that appear in HUD regulation at 24 C.F.R Part 3280 evidence by: o HUD Data Plates/Compliance Certificate o HUD Certification Label The appraisal form 1004c must indicate evidence of the HUD Data Plate/Compliance Cert and the HUD Certification Label The Manufactured Home must be attached to a permanent foundation system Engineers Certificate for foundation system is required The Manufactured Home must be permanently connected to all necessary utilities Property cannot be located in flood zone Title Requirements: Endorsement ALTA 7,7.1 or 7.2 is required Confirm property is legally classified as real property. Any certificate of title to the manufactured home must be surrendered to the appropriate state government authority. Owner of the manufactured home must also own the land on which home is situated o A mortgage/deed of trust must be recorded in the land records and must identify the encumber property as including both the home and the land. It must also include the VIN,Serial numbers form the HUD Data Plate of the manufactured home along with the description of the land. Appraisal Requirements: Appraisal must be completed using the Manufactured Home Appraisal Report Form 1004C Appraiser must use a minimum of three comparable sales of similar manufactured home A detailed and supported cost approach to value is required on all MFH appraisals The following are ineligible: o If the site or manufacture home is substantially non-conforming with the neighborhood it is ineligible o Creating comparable sales by combining vacant land sales with the contract purchase price of the home is prohibited. Page 14 of 14 Last Updated 02/01/2016