Conventional Underwriting Guidelines

Transcription

1 Conventional Underwriting Guidelines

2 Conventional Underwriting Guidelines Table of Contents Table of Contents MiMutual Underwriting 10 Philosophy 10 Program Description 11 Requirements and Restrictions 12 Loan Requirements 12 Loan Restrictions (Ineligible) 12 Debt-to-Income Ratios: 12 Maximum LTV / CLTV / HCLTV 12 Qualified Mortgages with Rebuttable Presumption 13 Residual Income Evaluation Table 14 Collateral Requirements 15 Eligible Collateral 15 Ineligible Collateral 15 Appraisals 16 Appraiser Independence 16 Approved Appraiser List 16 Uniform Appraisal Dataset (UAD) 16 Appraisal Order Process 17 Revisions Due to Sales Contract Amendments 17 Appraisal Delivery Requirements 17 Appraisal Report Forms 18 Appraisal Exhibits 19 Fannie Mae Property Inspection Waiver (PIW) 19 Value Reconsideration Request 19 Appraisal Portability 20 Appraisal Validity Period 20 Modular Home Eligibility 20 FEMA Declared Disaster Area Policy 21 Repair Escrows 21 Minimum Square Footage 21 Acreage 21 Age-Restricted Communities 21 Estimated Remaining Economic Life 21 Commercial/Industrial Zoning 21 Properties Listed For Sale within the Last 6 Months (Refinances) 22 Cash Out Transactions 22 Rate/Term Transactions 22 Properties Located on a Repaired Sinkhole 22 Construction-to-Permanent 23 Condominiums / PUDs 24 Property Determination 24 Condominiums 24 PUDs 24 Eligibility Requirements 24 Conventional HOA Questionnaire

3 Conventional Underwriting Guidelines Table of Contents Project Approval 24 Insurance Requirements 25 Hazard/Liability Insurance (Project Approval) 25 HO-6 (Loan Level) 25 Fidelity Bond / Fidelity Insurance (Project Approval) 26 Flood (Project and Loan Level) 26 Site Condominiums 27 Project Types 28 Ineligible Project Types 28 Ineligible Project Characteristics 29 Calculation of Commercial Space 30 Max LTV on Florida Condos 30 Project Review Methods 31 Limited Review 31 Limited Review of Attached Units in Established Projects 31 Documentation Requirements 32 Full Review (using CPM) 32 Eligibility Requirements 32 Restrictions for Units in Florida 34 Documentation Requirements 34 Credit 35 Documentation Requirements 35 Verification of Institutional Mortgage History 35 Verification of Rental Payment History 35 Land Contract/Contract for Deed 35 Lease with Option to Purchase 35 Credit Reports 35 Housing Payment History 36 Land Contracts 36 Bankruptcy 37 Chapter 7 Bankruptcy 37 Chapter 13 Bankruptcy 37 Discharged Chapter Dismissed Chapter Exceptions for Extenuating Circumstances 37 Multiple Bankruptcy Filings 37 Exceptions for Extenuating Circumstances 37 Foreclosure 38 Exceptions for Extenuating Circumstances 38 Foreclosure and Bankruptcy on the Same Mortgage 38 Deed-in-Lieu of Foreclosure, Preforeclosure Sale, and Charged-Off Mortgages 38 Exceptions for Extenuating Circumstances 38 Hardship Modifications 39 Purchases 39 Refinances 39 Extenuating Circumstances for Derogatory Credit 39 Requirements for Reestablishing Credit 39 Consumer Credit Counseling 39 Credit Score 40 Valid Credit Score 40 Borrowers/Co-Borrowers 40 Occupying 40 Non-Occupying Co-Borrowers 40 Disputed Accounts

4 Conventional Underwriting Guidelines Table of Contents Credit Inquiries within 90 days of Report Date 41 Departure Residence Pending Sale 41 Accounts with No Monthly Payment Reported 41 HELOCs 41 Open 30-Day Charge Accounts 41 Contingent Liability 41 Joint/Co-Signed Debts by Applicants 42 Business Debt in Borrower s Name 42 Installment Debt 42 Projected Obligations 43 Student Loans 43 Student Loans Currently in Repayment 43 Student Loans Currently Deferred or in Forbearance 43 Obligations Not Considered Debt 43 Calculating Housing Expense Ratio 44 Payoff or Paydown of Debt for Qualification 44 Past-Due, Collections, and Charge-Off Accounts 44 Judgments, Garnishments, and Liens 44 Employment/Income 45 Documentation Requirements 45 Hourly or Salaried Employees 45 Overtime and Bonus Income 45 Second Jobs/Part-Time Income 45 Seasonal Employment 46 Unemployment Benefits 46 Union Employees 46 Commission Income Employees 46 Unreimbursed Business Expenses 47 Automobile Allowances 47 Self-Employed 47 Alimony, Child Support, or Separate Maintenance 48 Social Security Income 49 Pension/Retirement Income 49 Military Income, Entitlements, and Reserve Duty Income 50 Foster Care Income 50 Non-Taxable Income 50 Short Term Disability / Workman s Comp 50 Projected Income 50 Foreign Income 50 Maternity Leave 51 Rental Income 52 Rental Income from the Subject Property 52 When the Subject Property is the Primary Residence 52 When the Subject Property is an Investment Property 52 Rental Income from Property Other Than the Subject 52 Conversion of Principal Residence Requirements 53 Partial or No Rental History on Tax Returns (Qualifying Exceptions) 53 Offsetting Monthly Obligations for Rental Property Reported through a Partnership or an S Corporation 54 Timing of Tax Returns 55 Additional Documentation Requirements 56 Use of IRS Forms to Obtain Federal Income Tax Information

5 Conventional Underwriting Guidelines Table of Contents Assets 57 Borrower s Own Funds to Close 57 Bank Statements 57 Verification of Deposit 57 HUD-1 from Sale of Current Residence 57 Retirement Accounts 57 Stocks, Stock Options, Bonds, and Mutual Funds 57 Large Deposits 58 Refinance Transactions 58 Purchase Transactions 59 Cash Back on Purchases 59 Sale of Personal Property 59 Minimum Reserve Requirements 59 Business Assets 60 Gift Funds 60 Acceptable Donors 60 Gift Documentation 60 Verifying Donor Ability of Funds and Transfer of Gift Funds 61 Minimum Borrower Contribution Requirement from Borrower s Own Funds 61 Gift of Equity 62 Downpayment Assistance Programs 62 Collateralized Loans 62 Gift Funds/Grants by Charitable Organizations 63 Donations from Entities 63 Minimum Borrower Contribution Requirements 63 Subordinate Financing 64 Acceptable Subordinate Financing Types 64 Unacceptable Subordinate Financing Terms 64 Eligible Variable Payment Terms for Subordinate Financing 64 Refinance Transactions 65 Cash Out Refinances 65 Additional Underwriting and Eligibility Criteria 65 Rate & Term Refinances/Limited Cash Out 66 Existing Debt 66 Refinances to Buy Out an Owner s Interest 66 Additional Underwriting and Eligibility Criteria 66 Loan Seasoning 67 Property Seasoning 67 Property Seasoning 67 No Cash Out/Limited Cash Out 67 Cash-Out 67 Mortgage Payoffs 67 Texas Refinances 68 Non-Homestead Properties 68 Delayed Financing Exception 69 Subordinate Financing 70 Defining Refinance Transactions Based on Subordinate Lien Payoff 70 Cash Out and Principal Curtailments 71 Purchase Transactions 72 Residential Purchase Agreement

6 Conventional Underwriting Guidelines Table of Contents Earnest Money Deposit (EMD) 72 Short Sales 72 Interested Party Contributions 72 Principal Residence or Second Home 72 Investment Property 72 Property Seasoning 72 Personal Property 73 Identity of Interest Transactions/Non-Arm s Length Transactions 73 Borrower Acting as an Interested Party 73 Determining Property Taxes on New Construction Dwellings 73 Reacquisition of a Formerly-Owned Property 73 Seller Utilizing a Relocation Company 74 Relocation Company Takes Power of Attorney 74 Double Escrow 74 Relocation Company Acts as Seller without Taking Title 74 Expanded LTV/CLTV/HCLTV 75 Purchase Transactions 75 Limited Cash Out Refinance Transactions 76 Private Mortgage Insurance (PMI) 77 Minimum Credit Score 77 Transaction Types 77 Coverage Options 77 Points and Fees Restriction 77 General Provisions 78 Documentation Requirements 78 Citizenship 78 Permanent Resident Aliens 78 Non-Permanent Resident Aliens 78 Required Visas 78 Eligible Visa Classes 79 Expired Visa Requirements 79 Employment Authorization Document (EAD) 80 Additional Immigration Status 80 North American Free Trade Agreement (NAFTA) Workers 80 Diplomatic Immunity 80 Social Security Number 80 Translated Documents 80 Legal Name 81 Married Names 81 Maximum Number of Financed Properties/Multiple Properties 81 Maximum Number of Borrowers Allowed 81 Age of Borrower 81 Non-Occupant CoBorrowers 81 Power of Attorney 82 Rescission 82 Tax and Insurance Escrows 82 Partial Escrow Policy 82 Flood Insurance

7 Conventional Underwriting Guidelines Table of Contents Hazard Insurance 83 Non-Homestead Property Taxes 83 Title Companies/Settlement Agents 83 Title Requirements 84 Redemption Periods on Title 84 Schedule B 84 Delinquent Property Taxes 84 Paying Debt at Closing 84 Mortgage Payoffs 84 Verifications 84 Age of Documents 85 Non-Purchasing Spouse 85 Electronic Signatures 86 Ineligible Documents for esignature 86 Approved Vendors 86 Trusts 87 Eligible Borrowers 87 Eligible Properties 87 Required Documentation 87 Exception for Trust Certificate Authorized States 87 Other Title and Closing Requirements 88 Ineligible 88 LDP/GSA Lists 88 Debt-To-Income Ratios 88 Credit Card Financing 88 ARMs 89 Product Description 89 Index 89 Margin 89 Caps 89 Qualifying Rate 89 5/1 89 7/1 89 Maximum Loan Amount 89 Maximum LTV/CLTV/HCLTV Ratios 90 Financing Types 90 Purchase 90 Rate/Term Refinance (Limited Cash Out) 90 Cash Out Refinance 90 Property Types 90 Condominiums 90 Appraisal Requirements 90 High-Balance Loans 91 Minimum / Maximum Loan Amounts 91 Loan Amount and LTV Limitations 91 Minimum Credit Score 91 Available Terms 91 Maximum Debt-to-Income Ratio (DTI) 91 Occupancy 91 Property Types

8 Conventional Underwriting Guidelines Table of Contents Private Mortgage Insurance (PMI) 92 Assets 92 Minimum Borrower Investment (From Own Funds) 92 Gift Funds 92 Reserves 92 Appraisals 92 Seller Contributions 92 DU Refi Plus 93 Available Terms 93 Maximum LTV/CLTV 93 Maximum Mortgage Amount 93 Minimum Credit Score 93 Qualifying Ratios 93 Credit 93 Mortgage Payment History 93 Bankruptcy 93 Foreclosure 93 Occupancy 94 Property Types 94 Benefit to Borrower 94 DU Findings 94 Escrow Waivers 94 Credit Documentation Requirements 94 Income 94 Assets 95 Mortgage Insurance 95 Appraisal Requirements 95 Subordinate Financing 95 Additional Important Notes 96 Repair Escrows 97 Introduction 97 Requirements 97 Restrictions 97 New or Proposed Construction 98 Existing Construction 98 Appraisal Requirements: 99 Completion of Repairs 99 Texas 50(a)(6) 100 Available Terms 100 LTV/CLTV/HCLTV 100 Subject Property 100 Required Forms 100 Notice Concerning Extensions of Credit (12 Day Disclosure Notice) 100 Affidavit of Fair Market Value 100 Additional Signature Requirements 101 Homestead Limitations 101 Fee Limitations

9 Conventional Underwriting Guidelines Table of Contents AUS Requirements 102 Additional Requirements 102 HomeReady 103 Program Overview 103 Available Terms 103 Max LTVs 103 Income 104 Income Limitations 104 Non-Occupant CoBorrowers 104 Non-Borrower Household Income 104 Boarder Income 104 Income from Accessory Units 105 Sweat Equity 105 Assets 105 Additional Underwriting and Eligibility Criteria 105 Homeownership Education 106 Mortgage Insurance 106 MI Coverage Requirements 106 Automated Underwriting System 107 Approve/Eligible Risk Classification 107 Approve/Ineligible Risk Classification 107 System Overrides and Manual Downgrades 107 Previous Mortgage Foreclosure 107 Delinquent Federal Debt 107 Upfront Disclosure Policy 107 Underwriting Status/Decisions 108 Pre-Qualification 108 Incomplete 108 Submitted 108 Suspended 108 Approved with Conditions 108 Withdrawn 108 Declined 108 Clear to Close

10 Conventional Underwriting Guidelines Underwriting Philosophy & Program Description MiMutual Underwriting Philosophy MiMutual underwrites and purchases all types of residential mortgages. These programs and products can be found in our Product Matrices (located on MiMutual s website) and on our daily rate sheet. The Product Matrices will reference specific product features and requirements (such as maximum Loan-to-Value ratios and minimum credit score requirements, if any). This guide is intended to address unique underwriting situations. MiMutual uses Automated Underwriting Systems (AUS). Generally, underwriters validate to the conditions set forth by the AUS. However, there are circumstances where underwriters will need to add conditions to the loan. These guidelines are meant to serve as a guide for obtaining adequate documentation to enable us to satisfy those conditions. MiMutual underwrites a borrower s creditworthiness based solely on information that we believe is indicative of the applicant s willingness and ability to pay the debt they would be incurring. We prudently underwrite to agency standards and guidelines. Due to a multitude of factors involved in a loan transaction, no set of guidelines can contemplate every potential situation. Therefore, each case is weighed individually on its own merits. MiMutual s underwriting philosophy is to weigh all risk factors inherent in the loan file, giving consideration to the individual transaction, borrower profile, the level of documentation provided and the property used to collateralize the debt. Our commitment to fairness and equal opportunity is clear and unequivocal. The application of fair and consistent underwriting practices is mandated in the underwriting guidelines outlined in this guide. All loans considered for denial will be subject to a second level review prior to a final decision. As our guidelines and processes are impacted by external market conditions, it will be necessary for us to reevaluate the guidelines in this manual from time to time. Occasionally, revisions will be made. As applicable, corporate written notifications and updates will be provided to you and incorporated into these guidelines. (Remainder of page intentionally left blank)

11 Conventional Underwriting Guidelines Underwriting Philosophy & Program Description Program Description These underwriting guidelines describe FNMA underwriting guidelines for one to four family conventional mortgages. This set of underwriting guidelines does not represent the entire FNMA underwriting manual The underwriting information contained in this section is intended for use in conjunction with FNMA Guidelines. Unless otherwise stated all FNMA loans must conform to applicable FNMA one-to-two family housing requirements as well as federal, state and local law compliance. MiMutual reserves the right to deny any loan which does not meet these guidelines/requirements. To the extent that any conflicts exist between the provisions set forth in FNMA guidelines and MiMutual s guidelines described here, then MiMutual s guidelines should be followed. In addition to program eligibility and prudent underwriting, MiMutual requires all loans to meet the Ability to Repay rules established by the Consumer Financial Protection Bureau (CFPB). The ATR Rule requires that a reasonable, good faith determination is made before or when the loan is consummated, and that the consumer has a reasonable ability to repay the loan. The eight underwriting factors established by the CFPB must be considered, and the loan must be documented accordingly. 1. The borrower s current or reasonably expected income or assets; 2. The borrower s current employment status; 3. The borrower s monthly payment on the covered transaction; 4. The borrower s monthly payment on any simultaneous loan; 5. The borrower s monthly payment for mortgage-related obligations; 6. The borrower s current debt obligations, alimony, and child support; 7. The borrower s monthly debt-to-income ratio or residual income; and 8. The borrower s credit history Additionally, MiMutual will only underwrite/close loans that are Qualified Mortgages (QMs) which meet the criteria for Safe Harbor. No risky features permitted (we do not currently offer loans with features the CFPB considers risky, so our products will not change) Higher-Priced Mortgage Loans (loans which, at the time the interest rate was set, the APR was 1.5% or more over the Average Prime Offer Rate (APOR)) are only permitted when the loan meets the criteria as outlined in the guidance for HPMLs All loans will be prudently underwritten by MiMutual and must be of sound investment quality. Loans having serious credit and/or property deficiencies may be denied at the option of MiMutual. Note: Guidance contained in this document assumes the loan received an Approve/Eligible recommendation. Manual underwrites are not permitted on Conventional loans

12 Loan Requirements Conventional Underwriting Guidelines Requirements and Restrictions Requirements and Restrictions 10, 15, 20, 25 and 30 year fixed rate terms available. 5/1 and 7/1 LIBOR ARMs available (30 year term). Minimum 640 credit score for all 1-2 unit properties, and 680 for all 3-4 unit properties and cash out transactions on investment properties, regardless of AUS decision. Minimum loan amount is $40,000 ($75,000 for investment properties). Maximum mortgage amount of $417,000 for a Single Family Residence, $533,850 for a 2-family property, $645,300 for a 3-family property, and $801,950 for a 4-family property (unless borrower/loan qualifies for the High Balance program). Fannie Mae County Loan limits can found at Maximum number of borrowers allowed on a loan is 4 DU findings reflecting Approve/Eligible (Version 9.2 or 9.3) Maximum 95% LTV (unless borrower qualifies for the Expanded LTV/CLTV/HCLTV program) on all Purchases and Rate/Term Refinances (for borrowers that qualify for Mortgage Insurance) CLTV Maximums must meet MiMutual requirements for subordinate financing on purchase and refinance transactions. See individual product descriptions below for CLTV limitations. Loan Restrictions (Ineligible) Loans approved based on non-traditional credit history (a traditional credit report with valid credit scores is required) Loans requiring manual underwrites (loans that receive a Refer or that do not otherwise receive an Approve/Eligible) Refinance loans that have been restructured due to a financial hardship / in forbearance / short payoff loans Debt-to-Income Ratios: As determined by the AUS, unless otherwise specified by product type Maximum LTV / CLTV / HCLTV Access the applicable link to view the most current LTV Matrix (excludes DU Refi Plus and High-Balance Loans): DU v9.2 DU v

13 Conventional Underwriting Guidelines Requirements and Restrictions Qualified Mortgages with Rebuttable Presumption This policy is intended for loans that are considered Qualified Mortgages (QM) with rebuttable presumption, and therefore do not meet QM safe harbor requirements. Conventional loans that are considered Higher Priced Mortgage Loans (HPMLs) because they exceed the section 35 calculation (APR that exceeds the APOR at the time the rate was set, by 1.5% or more) are permitted, providing the following criteria are met: Loan passes QM Points and Fees test Approve/Eligible findings HPML disclosure must be signed by borrower at least 24 hours prior to closing An appraisal must be obtained by a certified or licensed appraiser who conducts a physical visit of the interior of the subject property (n/a for DU Refi Plus) An additional appraisal by a separate appraiser may be needed if: o The seller acquired the property 90 days or less prior to the consumer agreement was signed and the agreement exceeds the seller s acquisition price by more than 10%, or o The seller acquired the property 91 to 180 days prior to the consumer agreement and the price exceeds the seller s acquisition price by more than 20% Cannot waive appraisal delivery timing borrower must receive appraisal at least 3 days prior to closing An escrow account for payment of property taxes and insurance premiums is required Residual Income Evaluation (RIE) must be performed, with results determining eligibility requirements per the table on the following page. Any losses reflected on 1040 transcripts must be considered when completing the RIE. DU Refi Plus loans must have a maximum 45% back-end ratio, regardless of AUS findings. Jumbos are not permitted as HPMLs

14 Residual Income Evaluation Table Conventional Underwriting Guidelines Requirements and Restrictions Primary Residence If monthly residual income is Then the minimum reserves required are No minimum reserve requirement based on the residual income $2,500 or greater evaluation. Loan must still comply with the minimum reserve requirements for the base loan program. The greater of: 3mos liquid* PITI reserves are required, OR $800 < $2,500 Minimum reserve requirements for the base loan program. Additional reserves should be considered for loans with higher layered risks < $800 n/a. The loan is not eligible for HPML/rebuttable presumption Second Homes and Investment Properties If monthly residual income is Then the minimum reserves required are $2,500 or greater Loan is eligible with acceptable RIE in file The greater of: 6mos liquid* PITI reserves are required, OR $800 < $2,500 Minimum reserve requirements for the base loan program. Additional reserves should be considered for loans with higher layered risks < $800 n/a. The loan is not eligible for HPML/rebuttable presumption

15 Conventional Underwriting Guidelines Collateral Requirements Collateral Requirements To be eligible for financing, a property is to be free of health and safety hazards and major structural problems. Eligible Collateral Single Family Residences and 2-4 unit dwellings Planned Unit Developments (PUDs) Townhome/Rowhome Condominiums Log; Dome; Berm Homes; Pier Foundations; Auxiliary/Accessory Dwelling Units; Homes with extreme functional obsolescence (i.e. one bedroom). Must be common and typical for the area and have like comparable sales Modular Homes Properties located in age-restricted communities. Must be common and typical for the area and have like comparable sales Agricultural zoned properties (not income-producing farms) Ineligible Collateral Properties containing greater than 4 units Mobile/Manufactured Homes Investment Condos in Florida Commercial/Industrial use Income producing properties/mixed Use Properties Leasehold Properties (title must be held in Fee Simple interest only) Properties currently listed for sale (refinances) Time-Share Units Construction Financing Properties vested in any Life Estates or LLCs (refinance transactions) Multiple dwellings on a single parcel of Land Unwarrantable Condominiums New construction homes purchased at auction Properties located in Coastal Barrier Resource Systems (CBRS) Cooperative units

16 Appraisals Conventional Underwriting Guidelines Collateral Requirements Appraiser Independence MiMutual conforms to Appraiser Independence and as such, is prohibited from accepting appraisals prepared by appraisers who are selected, retained or compensated in any manner by a mortgage broker (or any member of a lender s staff who is compensated on a commission basis). MiMutual requires that all conventional appraisals are ordered through your designated Appraisal Management Company (AMC). Please note that Appraiser Independence does not apply when a Form 2075 is obtained (per the DU Findings). Approved Appraiser List MiMutual does not use an approved appraiser list. Therefore, a copy of the appraiser s license and current Errors & Omissions insurance will be required. All appraisals will be underwritten on a case-by-case basis. Uniform Appraisal Dataset (UAD) Effective for residential property appraisals with an effective date (date of inspection) of September 1, 2011 or after, appraisal reports must be completed in compliance with the Uniform Appraisal Dataset (UAD). This rule applies to all Conventional mortgage loans. The UAD defines all fields required for an appraisal submission for specific appraisal forms and standardizes definitions and responses for a key subset of fields. UAD was formulated to improve the quality and consistency of appraisal data. The UAD does not change the look of the existing appraisal forms, but some fields on the forms are being extended to include additional information. The appraisal forms that must be UAD-Compliant effective September 1 st are: Uniform Residential Appraisal Report (FNMA Form 1004) Individual Condominium Unit Appraisal Report (FNMA Form 1073) Exterior-Only Inspection Individual Condominium Unit Appraisal Report (FNMA Form 1075) Exterior-Only Inspection Residential Appraisal Report (FNMA Form 2055) NOTE: MiMutual is unable to accept properties with a Condition Rating of C5 or C6, nor a Quality Rating of Q

17 Conventional Underwriting Guidelines Collateral Requirements Appraisal Order Process MiMutual requires that all Conventional appraisals are ordered through one of our designated Appraisal Management Companies (AMCs). MiMutual provides links on our website to order appraisals. Begin at the MiMutual website home page ( to order your appraisal through your assigned AMC. Place the appraisal order in the name of MiMutual Inc., and enter all pertinent data including payment information. All appraisals must be paid for with a credit card at the time order is placed. Upload any required documents such as the Purchase Agreement. The AMC will schedule the appointment with the borrower or realtor as appropriate and complete the appraisal report. Upon completion of the appraisal report, the AMC will upload the appraisal to MiMutual s system, and an notification will be generated to inform the broker that it has been received. Revisions Due to Sales Contract Amendments If the sales contract is amended, the updated contract must be provided to the appraiser to ensure that the appraiser has been given the opportunity to consider any changes and their effect on value. If the appraiser determines that there is no impact to value, then no additional commentary is required from the appraiser. Appraisal Delivery Requirements Under the Dodd Frank Act, Regulation B has been revised for all applications taken on/after January 18, The borrower is required to receive a copy of all valuation documents developed in connection with an application for a loan that is secured by a first lien on a dwelling. This includes: Appraisals Desk reviews AVMs / BPOs MiMutual will deliver the valuation documents directly to the borrower. This will occur promptly upon completion of the documents or no later than three days prior to closing, whichever is earlier, unless the borrower chooses to waive their right to receive the valuation documents prior to closing on the Appraisal Delivery Timing Waiver disclosure. In this case, the valuation documents are not required to be delivered 3 days prior to closing, but must always be delivered at the time of consummation (at the latest). (Remainder of page intentionally left blank)

18 Appraisal Report Forms Conventional Underwriting Guidelines Collateral Requirements Uniform Residential Appraisal Report (Form 1004): For appraisals of one-unit properties and units in PUDs (including those that have an illegal second unit or accessory apartment) based on interior and exterior property inspections. Form 1004 also may be used for two-unit properties, if each of the units is occupied by one of the co-borrowers as his or her principal residence or if the value of the legal second unit is relatively insignificant in relation to the total value of the property (as might be the case for a basement unit or a unit over a garage). In addition, appraisals for units in condo projects that consist solely of detached dwellings may be documented on Form 1004, if the appraiser includes an adequate description of the project and information about the homeowners association fees and the quality of the project maintenance. Appraisals reported on Form 1004 must be completed in accordance with the UAD Specification. Small Residential Income Property Appraisal Report (Form 1025): For appraisals of two- to four-unit properties (including two- to four-unit properties in PUDs) based on interior and exterior property inspections Individual Condominium Unit Appraisal Report (Form 1073): For appraisals of one-unit properties in condo projects based on interior and exterior property inspections. Appraisals reported on Form 1073 must be completed in accordance with the UAD Specification Exterior-Only Residential Appraisal Report (Form 2055): For appraisals of one-unit properties and units in PUDs based on exterior-only property inspections. Appraisals reported on Form 2055 must be completed in accordance with the UAD Specification Exterior-Only Inspection Individual Condominium Appraisal Report (Form 1075): For appraisals of one-unit properties in condo projects based on exterior-only property inspections. Appraisals reported on Form 1075 must be completed in accordance with the UAD Specification Desktop Underwriter Property Inspection Report (Form 2075): Used for single family properties, including an individual unit in a PUD project or a site condominium when determined by the AUS findings. Appraisal Update and/or Completion Report (Form 1004D): For appraisal updates and/or completion reports for all one- to four-unit appraisal reports. Properties must be appraised within the 12 months that precede the date of the Note and Mortgage. When an appraisal report will be more than four months old on the date of the note and mortgage, regardless of whether the property was appraised as proposed or existing construction, the appraiser must inspect the exterior of the property and review current market data to determine whether the property has declined in value since the date of the original appraisal. This inspection and results of the analysis must be reported on the Appraisal Update and/or Completion Report (Form 1004D). o If the appraiser indicates on the Form 1004D that the property value has declined, then a new appraisal for the property must be obtained. o If the appraiser indicates on the Form 1004D that the property value has not declined, then MiMutual may proceed with the loan in process without requiring any additional fieldwork. NOTE: The appraisal update must occur within the four months that precede the date of the Note and Mortgage The original appraiser should complete the appraisal update; however, a substitute appraiser may be used. When updates are completed by substitute appraisers, the substitute appraiser must review the original appraisal and express an opinion about whether the original appraiser s opinion of market value was reasonable on the date of the original appraisal report. MiMutual must note in the file why the original appraiser was not used. At a minimum, when completing the Appraisal Update portion of the report, a photograph of the front of the subject property must be included

19 Conventional Underwriting Guidelines Collateral Requirements Appraisal Exhibits Market Conditions Addendum (Form 1004MC): Required for all one- to four-unit properties. Form 1004MC is intended to provide the lender with a clear and accurate understanding of the market trends and conditions prevalent in the subject neighborhood. The form provides the appraiser with a structured format to report the data and to more easily identify current market trends and conditions. There are several shaded areas in the form to recognize that all the requested data may not be available from the data sources used by the appraiser and therefore the information may not be provided. The lack of completion of these areas is acceptable as long as the appraiser provides an explanation as to why these sections of the form are not complete. However, if the data is available, the appraiser must include the data in the analysis Comparable Rent Schedule (Form 1007): Required in conjunction with the applicable appraisal report if the property is a one-unit property and the borrower is using rental income to qualify. Operating Income Statement (Form 216): Required when rental income from the subject property is being used to qualify and the borrower can document a qualifying exception, whether it is the borrower s primary residence (2-4 unit) or investment property In addition to the above full appraisal options, there will be loan casefiles that receive the property fieldwork waiver option. Fannie Mae Property Inspection Waiver (PIW) This may be used if the DU Findings Property and Appraisal Information section indicate a finding stating DU accepts the value submitted as the market value for the subject property and the loan is eligible for delivery to Fannie Mae without an appraisal. A $75 fee will be charged to exercise this waiver. If the waiver is not exercised, at least the minimum level of fieldwork recommended for the transaction must be obtained. The Property Inspection Waiver may not be used on: Investment Properties, New/Proposed Construction and bank/hud/fannie Mae/Freddie Mac owned properties. Value Reconsideration Request Reconsideration requests must be uploaded for review by the underwriter, and include at least one of the following in order to qualify for the continuance of the appeal process: Provide a previous appraisal dated no more than twelve (12) months prior to the effective date of the appraisal being appealed. Comps in the previous appraisal will not be assessed if sale dates are > 90 days from the new appraisal effective date; however, information in the appraisal regarding amenities, square footage, etc will be given consideration. Provide a minimum of 2 and up to 5 alternate open market sales, including all available data and MLS ticket, which have closed within 90 days of the appraisal effective date. Active listings and closed sales after the effective date of the appraisal will not be accepted. If the underwriter agrees that a reconsideration of value is warranted, they will forward to the AMC. A request for value reconsideration does not guarantee an adjustment in value

20 Conventional Underwriting Guidelines Collateral Requirements Appraisal Portability MiMutual will accept transferred appraisals on Conventional loans. The appraisal must be ed to by the previous lender and must also contain the invoice, Appraiser Independence certificate, UCDP certificates for both Fannie Mae and Freddie Mac, and a letter from the lender authorizing the transfer. If any of the documents above cannot be provided, a new appraisal ordered through one of MiMutual s approved AMCs will be required. All transferred appraisals will be subject to an acceptable desk review ordered by MiMutual. NOTE: Transferred appraisals not permitted with a Collateral Underwriter (CU) risk score of 4 or greater. Appraisal Validity Period Conventional appraisals will be valid for 120 days for all property types: existing, proposed construction and under construction (formerly 6 months for existing property that is complete and 12 months for proposed and under construction). The Appraisal Update and/or Completion Report (FNMA Form 1004D) will be required to extend the validity period of an existing appraisal that is due to expire for existing, proposed, or new construction that is incomplete. The appraisal will then be valid for an additional 120 days. The appraisal may only be updated one time. Modular Home Eligibility MiMutual allows loans secured by modular homes built in accordance with the Uniform Building Code administered by state agencies responsible for adopting and administering building code requirements for the state in which the modular home is installed. Loans secured by on-frame modular construction are not eligible for financing with MiMutual. On-frame modular construction is defined as having a permanent chassis, but no evidence of compliance with the June 15, 1976, Federal Manufactured Home Construction and Safety Standards. Loans secured by prefabricated, panelized, or sectional housing are eligible. These properties do not have to satisfy HUD s Federal Manufactured Home Construction and Safety Standards or the Uniform Building Codes that are adopted and administered by the state in which the home is installed. The home must conform to local building codes in the area in which it will be located. Factory-built housing not built on a permanent chassis such as modular, prefabricated, panelized, or sectional housing is not considered manufactured housing and is eligible under the guidelines for one-unit properties. These types of properties must assume the characteristics of site-built housing, must be legally classified as real property, and must conform to all local building codes in the jurisdiction in which they are permanently located. The purchase, conveyance, and financing (or refinancing) must be evidenced by a valid and enforceable firstlien mortgage or deed of trust that is recorded in the land records, and must represent a single real estate transaction under applicable state law. MiMutual affords modular, prefabricated, panelized, or sectional housing homes the same treatment as sitebuilt housing. Therefore, MiMutual does not have minimum requirements for width, size, roof pitch, or any other specific construction details

21 Conventional Underwriting Guidelines Collateral Requirements FEMA Declared Disaster Area Policy The FEMA Declared Disaster Area Policy applies to all areas eligible for individual assistance due to a federal government disaster declaration. If the subject property has had an appraisal completed prior to a declared disaster, prior to the end date of a declared disaster, or after a declared disaster with no comments addressing the post-disaster condition of the property from the appraiser, a 1004D with photos will be required to recertify the value/condition of the subject property. For properties located in a declared disaster area, where the AUS recommendation allows for a reduced property inspection (Property Valuation Update, PIW, 1075, 2055, 2075, 2095), a full appraisal (interior/exterior inspection) will be required for up to 90 days after the disaster incident period end date. The date of approval will be used to determine if sufficient time has elapsed. Repair Escrows Permitted. See Repair Escrows chapter for details. Minimum Square Footage All properties must have a minimum of 750 square feet. Exceptions will be considered for properties between 650 and 749 square feet if two thirds of the comparables also have <750 square feet. Acreage No maximum number of acres; however, property cannot have agricultural use and comparables must have similar acreage. Age-Restricted Communities Certification from the HOA will be required, verifying: Community must be intended and operated for occupancy by persons 55 years of age and older At least 80% of the occupied units must be occupied by at least 1 person who is 55 years of age or older Estimated Remaining Economic Life The appraiser is required to indicate the estimated remaining economic life of the subject property as a single number or as a range (must be deemed acceptable for at least the term of the new mortgage). Commercial/Industrial Zoning While there are no zoning classification restrictions, the property must have residential use and all comparable sales must have similar influence. The Zoning Compliance must be Legal or Legal Non-Conforming. The highest and best use of the subject property as improved (or as proposed) must be the present use. Illegal properties are not eligible for Conventional financing

22 Conventional Underwriting Guidelines Collateral Requirements Properties Listed For Sale within the Last 6 Months (Refinances) Cash Out Transactions The MLS listing is required to be cancelled at least six months prior to disbursement or the loan is subject to a maximum 70% LTV. In all circumstances, listing agreements must be cancelled prior to loan disbursement. The listing agreement, evidence of cancellation, and signed/dated explanation from the borrower with the reason why the property was for sale is required. Rate/Term Transactions The MLS listing is required to be cancelled prior to disbursement (with the exception of DU Refi Plus loans). The listing agreement, evidence of cancellation, and signed/dated explanation from the borrower with the reason why the property was for sale is required. NOTE: These properties pose an increased risk to MiMutual, therefore may be subject to additional documentation and/or limitations. Properties Located on a Repaired Sinkhole Properties with repaired sinkholes/sinkhole activity may be determined to be eligible with the following items: Evidence the remediation was satisfactorily completed Evidence the proper permits were pulled at the time of repair, and were signed off on by a qualified engineer Copies of the initial engineering report, the repair reports, and the engineering certification Evidence of sinkhole insurance either included on the borrower s standard property insurance policy or a separate policy Any property with sinkhole damage that has not yet been repaired or cannot meet the criteria described above is ineligible for financing

23 Conventional Underwriting Guidelines Collateral Requirements Construction-to-Permanent Two-closing construction-to-permanent mortgage transactions utilize two separate loan closings. The first is to obtain the interim construction financing (and may include the purchase of the lot), and the second closing is to obtain the permanent financing upon completion of the improvements. MiMutual does not provide construction financing; however, will allow a loan that provides the permanent financing as two-closing Construction-to-Permanent transactions. The new mortgage used to provide the permanent financing may be closed as: A limited cash-out refinance A cash-out refinance Both transaction types are subject to the maximum LTV/CLTV/HCLTV ratios as stated in the LTV Matrix. The length of time the borrower has owned the lot is not a factor in calculating the LTV ratios; however, the borrower must have held legal title to the lot for at least six months prior to the closing of the permanent mortgage to be eligible for a cash-out refinance. All other standard cash-out refinance eligibility and underwriting requirements apply. The as-completed appraised value may be used to calculate the LTV ratios. All construction work, including any work that could entitle a party to file a mechanics or materialmen s lien, must be completed and paid for, and all mechanics liens, materialmen s liens, and any other liens and claims that could become liens relating to the construction must be satisfied at the time of the closing of the permanent financing

24 Conventional Underwriting Guidelines Condominiums/PUDs Condominiums / PUDs Property Determination Condominiums If the word condo appears in the legal description, the property will be deemed a condominium. PUDs A Planned Unit Development (PUD) is a project or subdivision that consists of common property and improvements that are owned and maintained by an HOA for the benefit and use of the individual PUD units. In order for a project to qualify as a PUD, each unit owner s membership in the HOA must be automatic and nonseverable, and the payment of assessments related to the unit must be mandatory. Project review is not required for PUDs, whether attached or detached. Eligibility Requirements Appraisal of the unit meets all appraisal requirements The individual unit must be substantially complete. Any unfinished items must be in compliance with Repair Escrow requirements The unit securing the mortgage meets all insurance requirements The project must be in compliance with FNMA s policy for priority liens o This can be verified with a signed letter from an HOA representative Conventional HOA Questionnaire An HOA Questionnaire must be completed and delivered to underwriting for all condominiums, regardless of project review type. While the use of the form located on MiMutual s website is not mandatory, any other form used must contain the same information. Project Approval If complex is not FNMA approved, the project/unit must meet Fannie Mae requirements, and additional documentation such as complete Master Deed, Bylaws, and Budget may be required

25 Insurance Requirements Conventional Underwriting Guidelines Condominiums/PUDs Hazard/Liability Insurance (Project Approval) The homeowners association is required to: Maintain adequate master or blanket property insurance in an amount equal to 100% of current replacement cost of the project improvements, including the individual units (either in an individual project or multiple affiliated projects) o Premiums must be paid as a common expense o Insurance requirements vary based on the type of HOA master or blanket insurance policy ( Single Entity, All-In, or Bare Walls ) Maintain comprehensive general liability insurance covering all of the common elements, commercial space owned and leased by the owners association, and public ways of the condominium. If the condominium carries blanket insurance, the projects must be legally affiliated. Blanket insurance covering multiple unaffiliated projects is not allowed. Affiliated projects are defined as those projects that are under the same master association or that share the use of common facilities; either owned individually or as part of a master development Projects that do not meet the above definition, including projects managed by the same management company, are considered unaffiliated. If the HOA does not maintain 100% coverage, the unit owner may not obtain gap coverage to meet this requirement. HO-6 (Loan Level) The unit owner is required to: Obtain a walls-in coverage policy (HO-6 or its equivalent) if the master or blanket policy does not include interior unit coverage. The walls-in coverage must be sufficient, as determined by the insurer, to repair the interior of the condominium unit, including any additions, improvements and betterments to repair the unit to its original condition prior to the claim event. (Remainder of page intentionally left blank)

26 Conventional Underwriting Guidelines Condominiums/PUDs Fidelity Bond / Fidelity Insurance (Project Approval) Fidelity Bond Insurance may also be known as Employee Dishonesty or Crime Policy insurance. For all projects with more than 20 units, the homeowners association is required to obtain and maintain this insurance; The homeowners association must maintain this insurance for all officers, directors, and employees of the association and all other persons handling or responsible for funds administered by the association; The coverage must be no less than a sum equal to three months aggregate assessments on all units plus reserve funds unless State law mandates a maximum dollar amount of required coverage. If the homeowners association engages the services of a management company, the homeowners association must require the management company to maintain this insurance coverage for its officers, employees and agents handling or responsible for funds of, or administered on behalf of, the owners association. The required coverage must meet the following requirements: Must name the owners association as an obligee; Must be in an amount not less than the estimated maximum of funds, including reserve funds, in the custody of the owners association or management agent at any given time during the term of each bond; In no event may the aggregate amount of such bonds be less than a sum equal to 3 months aggregate assessments on all units plus reserve funds unless State law requires a maximum amount of required coverage. Flood (Project and Loan Level) For attached units, the homeowners association is required to obtain and maintain: Coverage equal to the 80% of the replacement cost or up to the National Flood Insurance Program (NFIP) standard of $250,000 per unit, whichever is less; The maximum limit of building insurance coverage of a residential condominium building in a regular program community is $250,000 times the number of units in the building (not to exceed the building s replacement cost); The homeowners association, not the borrower or the individual unit owner, is responsible for obtaining and maintaining adequate flood insurance under the NFIP on buildings located in a Special Flood Hazard Area (SFHA); and The flood insurance coverage must protect the interest of borrowers who hold title to an individual unit as well as the common areas of the condominium project. The policy must cover all of the common elements and property (including machinery and equipment that are part of the building), as well as each of the individual units in the building. The contents coverage should equal 100% of the insurable value of all contents (including machinery and equipment that are not part of the building), owned in common by association members. If the subject is a detached unit, follow the flood insurance coverage requirements for standalone dwellings

27 Site Condominiums Conventional Underwriting Guidelines Condominiums/PUDs A detached condo is not necessarily a site condo. Site condominiums are defined as: Single family totally detached dwellings (no shared garages or any other attached buildings such as archways or breezeways), and Are encumbered by a declaration of condominium covenants or condominium form of ownership, and The condominium unit consists of the entire structure as well as the site and air space, and are not considered to be common areas or limited common areas, and Insurance and maintenance costs are totally the responsibility of the unit owner, and Any common assessments collected will be for amenities outside of the footprint of the individual site. Project approval is required for site condominiums, as well as condos that do not meet the definition of site condo above (including detached condominiums). Site condos require the Uniform Residential Appraisal Report (Form 1004), and the Condominium Rider to the Mortgage/Deed of Trust (prepared by MiMutual) must be fully executed at closing. Site Condominium comparable sales should be used in completing the appraisal report. If the appraiser uses comparable sales other than site condos, they must provide an explanation in the appraisal report. A condo questionnaire is not required. (Remainder of page intentionally left blank)

28 Conventional Underwriting Guidelines Condominiums/PUDs Project Types The scope of MiMutual s requirements and the specific eligibility criteria to be met are dependent upon various project and/or loan level characteristics. The project types that are acceptable to MiMutual, and the characteristics that define them, are described in the table below. Project Type Established Condo Project Two- to Four-Unit Condo Project Planned Unit Development (PUD) Project Identification Criteria A project for which all of the following are true: At least 90% of the total units in the project have been conveyed to the unit purchasers; The project is 100% complete, including all units and common elements; The project is not subject to additional phasing and annexation, and; Control of the HOA has been turned over to the unit owners A project comprised of two, three, or four residential units in which each unit is evidenced by its own title and deed. A two- to four-unit condo project must be an established project, and may be comprised of attached and/or detached units A project or subdivision that consists of common property and improvements that are owned and maintained by an HOA for the benefit and use of the individual PUD unit owners. Ineligible Project Types The following project types are ineligible for financing with MiMutual: New condo projects (not defined as established ). All common areas and recreational facilities must be completed. The final Certificate of Occupancy for the final unit and/or subject unit may be required. Additional phasing and/or add-ons are not permitted. Newly-converted projects. Conversion of an existing building where completion did not occur more than 3 years ago (must be 3 years since conversion as determined by recording date on the master deed). 90% of units must be conveyed to unit purchasers other than the developer, project must be 100% complete and not subject to additional phasing, and HOA must be turned over to unit owners. Manufactured home projects Co-Op projects

29 Conventional Underwriting Guidelines Condominiums/PUDs Ineligible Project Characteristics MiMutual will not finance mortgage loans that are secured by units in certain condo projects if those projects have characteristics that make the project ineligible. Such characteristics are described in the table below. Investment securities (projects that have documents on file with the SEC or projects where unit ownership is characterized or promoted as an investment opportunity) Timeshare, fractional, or segmented ownership projects Projects with mandatory upfront or periodic membership fees for the use of recreational amenities, such as country club facilities and golf courses, owned by an outside party (including the developer or builder). Membership fees paid for the use of recreational amenities owned exclusively by the HOA or master association are acceptable. Projects that are managed and operated as a hotel or motel, even though the units are individually owned* Projects with covenants, conditions, and restrictions that split ownership of the property or curtail an individual borrower s ability to utilize the property* Projects with property that is not real estate, such as houseboat projects* Any project that is owned or operated as a continuing care facility* Projects with non-incidental business operations owned or operated by the HOA including, but not limited to, a restaurant, spa, or health club* Projects that do not meet the requirements for live-work projects* Projects in which the HOA is named as a party to pending litigation, or for which the project sponsor of developer is named as a party to pending litigation that relates to the safety, structural soundness, habitability, or functional use of the project* Any project that permits a priority lien for unpaid common expenses in excess of Fannie Mae s priority lien limitations* Projects containing manufactured housing Projects that represent a legal, but non-conforming, use of the land, if zoning regulations prohibit rebuilding the improvements to current density in the event of their partial or full destruction Multi-dwelling unit projects that permit an owner to hold title to more than one dwelling unit, with ownership of all of his/her owned units evidenced by a single deed and financed by a single mortgage* The total space that is used for nonresidential or commercial purposes may not exceed 25%. See Calculation of Commercial Space below. Projects in which a single entity (the same individual, investor group, partnership, or corporation) owns more than the following total number of units in the project: o Projects with 2-4 units: 1 unit o Projects with 5-20 units: 2 units o Projects with 21 or more units: 10% Units currently subject to any lease arrangement must be included in the calculation. This includes lease arrangements containing provisions for the future purchase of the units such as lease-purchase and lease-to-own arrangements. Units are not included in the calculation if they are owned by the developer/sponsor and are vacant and being actively marketed for sale. *see Fannie Mae s Selling Guide for further details regarding these items

30 Conventional Underwriting Guidelines Condominiums/PUDs Calculation of Commercial Space Any commercial space in the project or building in which the residential project is located must be compatible with the overall residential nature of the project. Rental apartments and hotels located within the project must be classified as commercial space even though these may be considered residential in nature. Commercial space allocation is calculated by dividing the total non-residential square footage (both above and below grade) by the total square footage of the project or building. This calculation includes the total square footage of commercial space even if the residential and commercial owners are represented by separate associations. Non-residential square footage includes: Retail and commercial space, Parking space that is separate from parking allocated to residential unit owners, and Space that is non-residential in nature and owned by a private individual or entity outside of the HOA structure Examples include, but are not limited to: Public parking facilities (fee-based or free), Rental apartments, Hotels, Restaurants, and Private membership-based fitness facilities Non-residential square footage excludes amenities that are: Residential in nature; Designated for the exclusive use of the residential unit owners (such as, but not limited to, a fitness facility, pool, community room, and laundry facility); and Owned by the unit owners of the HOA Max LTV on Florida Condos The following table provides the LTV allowances for loans secured by units in established condo projects located in Florida. The required project review type depends on the LTV ratio of the mortgage loan. For detailed requirements per review type, please see below. Maximum LTV 1 Maximum LTV/CLTV/HCLTV 2 Full (using CPM) Limited Primary Residence 97% 75/80/80% Second Home 90% 70/75/75% Investment Not Eligible Not Eligible 1 Refer to Fannie Mae s Eligibility Matrix for the maximum allowable CLTV and HCLTV ratios 2 The CLTV and HCLTV ratios in this column align with the maximum CLTV and HCLTV ratios that are permitted for projects outside of Florida

31 Conventional Underwriting Guidelines Condominiums/PUDs Project Review Methods A number of project review methods are available. Whether a project review method is allowable or required depends on: The unit type (attached or detached); The project type (condo or PUD); The project status (established MiMutual does not finance units in new projects); and The mortgage transaction. The characteristics that dictate which method to use are shown in the following table. Unit and Project Type Attached condo unit in an established project, including an attached unit in a condo project that includes a mixture of attached and detached units Detached condo unit in an established project, including a detached unit in a condo project that includes a mixture of attached and detached units Attached or detached unit in an established two- to four-unit condo project Project Review Method(s) Limited Review, only for a unit that is a o Principal residence with an LTV ratio 90%, or o Second home with an LTV ratio 75% Full Review (completed with or without using Condo Project Manager (CPM)) Limited Review Based on the mortgage transaction and project characteristics, two- to four-unit condo projects may be reviewed using either Limited Review; or Full Review (completed with or without using CPM) Limited Review To be eligible for a Limited Review, the unit securing the mortgage must not be in an ineligible project, be an attached or detached unit in an established condo project, and meet the other criteria described below. Limited Reviews must have been completed within 180 days prior to the Note date. Limited Review of Attached Units in Established Projects The following chart provides the maximum LTV/CLTV/HCLTV ratios based on occupancy types: Limited Review: Attached 1 Established Projects, including 2-4 Unit Projects (excludes Florida) Occupancy Type Principal Residence 90% Second Home 75% Investment Property Maximum LTV/CLTV% Not Allowed 1 For Detached Established projects not located in the State of Florida, standard LTV restrictions apply

32 Conventional Underwriting Guidelines Condominiums/PUDs Documentation Requirements The Conventional Condominium Questionnaire found on the MiMutual website must be utilized for a Limited Review. This form must be completed in its entirety by the Condominium Homeowner s Association. Master Insurance Policy for unit including General Liability, Fidelity Bond and Flood Insurance, if applicable. Full Review (using CPM) Full Review is required when the unit securing the mortgage is an attached unit. Two- to four-unit projects reviewed using the Full Review process must comply with all requirements of the Full Review, unless specifically stated otherwise. Condo Project Manager (CPM) must be used when the Full Review of a project is required. MiMutual will input loans in CPM and the loan file must be documented according to the CPM decision. The loan file must be documented with the unexpired CPM Certification. Project review must have been completed within 180 days prior to the Note date. Eligibility Requirements The project must not be an ineligible project No more than 15% of the total units in a project may be 60 days or more past due on their common expense assessments (HOA dues). NOTE: In a two- to four-unit project, no unit owners may be 60 or more days past due on their HOA common expense assessments The HOA s projected budget must be reviewed to determine that it Is adequate (i.e. it includes allocations for line items pertinent to the type of condo project), and Provides for the funding of replacement reserves for capital expenditures and deferred maintenance that is at least 10% of the budget. To determine whether the association has a minimum annual budgeted replacement reserve allocation of 10%, the annual budgeted replacement reserve allocation must be divided by the association s annual budgeted assessment income (which includes regular common expense fees). The following types of income may be excluded from the reserve calculation: Incidental income on which the project does not rely for ongoing operations, maintenance, or capital improvements; Income collected for utilities that would typically be paid by individual unit owners, such as cable TV or internet access; Income allocated to reserve accounts; and Special assessment income NOTE: These requirements for a budget review and replacement reserves are not applicable to twoto four-unit projects

33 Conventional Underwriting Guidelines Condominiums/PUDs For projects in which the units are not separately metered for utilities, MiMutual must: Determine that having multiple units on a single meter is common and customary in the local market where the project is located, and Confirm that the project budget includes adequate funding for utility payments NOTE: These requirements are not applicable to two- to four-unit projects. The project must be located on contiguous parcels of land. It is acceptable for a project to be divided by public or private streets. The structures within the project must be within a reasonable distance from each other. Common elements and facilities, such as recreational facilities and parking, must be consistent with the nature of the project and competitive in the marketplace Unit owners in the project must have the sole ownership interest in, and rights to the use of the project s facilities, common elements, and limited common elements, except as noted below. Shared amenities are permitted only when two or more HOAs share amenities for the exclusive use of the unit owners. The associations must have an agreement in place governing the arrangement for shared amenities that includes the following: A description of the shared amenities subject to the arrangement; A description of the terms under which unit owners in the project may use the shared amenities; Provisions for the funding, management, and upkeep of the shared amenities; and Provisions to resolve conflicts between the associations over the amenities. Examples of shared amenities include, but are not limited to, clubhouses, recreational or fitness facilities, and swimming pools. The developer may not retain any ownership interest in any of the facilities related to the project. The amenities and facilities including parking and recreational facilities may not be subject to a lease between the unit owners of the HOA and another party. Parking amenities provided under commercial leases or parking permit arrangements with parties unrelated to the developer are acceptable. The financing of a single or multiple parking space(s) with the mortgage is permitted, provided that the parking space(s) and residential unit are included on one deed as evidenced on the legal description in the mortgage. In such cases, the LTV, CLTV, and HCLTV ratios are based on the combined value of the residential unit and the parking space(s). Phase I and II environmental hazard assessments are not required for condo projects unless MiMutual identifies an environmental problem through the performance of its project underwriting or due diligence. For investment property transactions on attached units in established projects (including two- to four-unit projects), at least 50% of the total units in the project must be conveyed to principal residence or second home purchasers. This requirement does not apply if the subject mortgage is for a principal residence or second home. Financial institution-owned REO units that are for sale (not rented) are considered owner-occupied when calculating the 50% owner-occupancy ratio requirement

34 Conventional Underwriting Guidelines Condominiums/PUDs If the project was a gut rehabilitation project, all rehabilitation work involved in a condo conversion must have been completed in a professional manner. Gut rehabilitation refers to the renovation of a property down to the shell of the structure, including the replacement of all HVAC and electrical components (unless the HVAC and electrical components are up to current code). The gut rehabilitation must have been completed at least 3 years ago as evidenced by the date on the master deed. 90% of units must be conveyed to unit purchasers other than the developer, project must be 100% complete and not subject to additional phasing, and HOA must be turned over to unit owners. Restrictions for Units in Florida Minimum 700 credit score Purchase and rate/term refinance transactions only Documentation Requirements The Conventional Condominium Homeowners Certification Form (found on the MiMutual website) or similar form containing the same information must be utilized for a Full Review. It must be completed in its entirety by the condo s Homeowners Association. Current budget with reserves Master insurance policy for unit including General Liability, Fidelity Bond, and Flood Insurance (if applicable)

35 Conventional Underwriting Guidelines Employment/Income Credit Documentation Requirements All documentation must be from a reasonably reliable third-party source, and must satisfy the requirements of the Ability to Repay Rule. Verification of Institutional Mortgage History A current payoff is required on all refinance transactions and one of the following: Verification of Mortgage dated within thirty days of closing. If mortgage history is current on credit bureau and last reported date is within sixty days, and payoff shows current, no Verification of Mortgage is required. This applies to subject property and any other properties owned. (If mortgage is included as part of a bankruptcy or is otherwise not reported accurately on credit report, a payment history/ledger will be required). 12 months canceled checks (front and back) or 12 consecutive month s bank statements showing payments. Verification of Rental Payment History If Verification of Rental Payment History is required, one of the following options may be used: VOR from an uninterested party 12 months canceled checks (front and back) or 12 consecutive month s bank statements showing payments Land Contract/Contract for Deed Copy of Land Contract (recorded or unrecorded) Last 12 (or from inception of the contract) consecutive months canceled checks (front and back), or bank statements showing payments. Lease with Option to Purchase Copy of Lease w/option Agreement Last 12 consecutive months canceled checks (front and back), or bank statements showing payments. NOTE: All lease options are treated as purchase transactions. Any deposit put down at the time agreement was executed can be used toward the down payment, as long as a copy of cancelled check can be provided as verification. Rent credit can be applied for the amount of rent paid over and above the standard market rents (as evidenced by a comparable rent schedule provided with the appraisal). Credit Reports All credit reports since the date of application must be provided to the MiMutual underwriter for review. If a credit report (or multiple reports) exist that were pulled before the credit report being used to decision the file, the underwriter will condition for a copy of each report and analyze the data as a part of the borrower s credit review

36 Conventional Underwriting Guidelines Employment/Income Housing Payment History If applicable, all Conventional loans require a 0x30 housing payment history in the last 12 months (all residences collectively). NOTE: Timeshares are considered as consumer debt, and not real estate. Therefore, any adverse credit on a timeshare should not be considered when analyzing mortgage delinquency/foreclosure. Land Contracts When the proceeds of a mortgage loan are used to pay off the outstanding balance on an installment land contract (also known as contract or bond for deed) that was executed within the 12 months preceding the date of the loan application, MiMutual will consider the mortgage loan to be a purchase money mortgage loan. The LTV ratio for the mortgage loan must be determined by dividing the new loan amount by the lesser of the total acquisition cost (defined as the purchase price indicated in the land contract, plus any costs the purchaser incurs for rehabilitation, renovation, or energy conservation improvements), or the appraised value of the property at the time the new mortgage loan is closed. The expenditures included in the total acquisition cost must be fully documented by the borrower. When the installment land contract was executed more than 12 months before the date of the loan application, MiMutual will consider the mortgage loan to be a limited cash-out refinance. In this case, the LTV ratio for the mortgage loan must be determined by dividing the new loan amount by the appraised value of the property at the time the new mortgage loan is closed. Cash out refinance transactions involving land contracts are not eligible. (Remainder of page intentionally left blank)

37 Bankruptcy Conventional Underwriting Guidelines Employment/Income Chapter 7 Bankruptcy MiMutual will deem the age of the bankruptcy by the discharge/dismissal date for Chapter 7. Chapter 7 BKs discharged less than 4 years will be ineligible. Exceptions for Extenuating Circumstances A two-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the discharge or dismissal date of the bankruptcy action. Chapter 13 Bankruptcy Discharged Chapter 13 MiMutual will deem the age of the bankruptcy by the discharge date. Chapter 13 BKs discharged less than 2 years will be ineligible. Dismissed Chapter 13 MiMutual will deem the age of the bankruptcy by the dismissal date. Chapter 13 BKs dismissed less than 4 years will be ineligible. Exceptions for Extenuating Circumstances A two-year waiting period is permitted after a Chapter 13 dismissal, if extenuating circumstances can be documented (dismissal due to the borrower s inability to complete the plan is ineligible for the exception to the waiting period, and must wait a full four years). There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge. Multiple Bankruptcy Filings For a borrower with more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date. NOTE: The presence of multiple bankruptcies in the borrower s credit history is evidence of significant derogatory credit and increases the likelihood of future default. Two or more borrowers with individual bankruptcies are not cumulative, and do not constitute multiple bankruptcies. For example, if the borrower has one bankruptcy and the coborrower has one bankruptcy this is not considered a multiple bankruptcy. Exceptions for Extenuating Circumstances A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the most recent bankruptcy discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances

38 Conventional Underwriting Guidelines Employment/Income Foreclosure MiMutual will deem age of the foreclosure by the completion date (Sheriff s Deed). Time elapsed must be 7 years or greater. Exceptions for Extenuating Circumstances A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the completion date of the foreclosure action. Additional requirements apply between three and seven years, which include: Maximum LTV/CLTV/HCLTV ratios are the lesser of 90% or the maximum LTV/CLTV/HCLTV ratios for the transaction per the LTV Matrix The purchase of a principal residence is permitted Limited cash-out refinances are permitted for all occupancy types pursuant to all standard guidelines in effect NOTE: The purchase of second homes or investment properties, and cash-out refinances (any occupancy type) are not permitted until a seven year waiting period has elapsed. Foreclosures due to financial mismanagement are not eligible until seven years have elapsed. Foreclosure and Bankruptcy on the Same Mortgage If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if MiMutual obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied. Deed-in-Lieu of Foreclosure, Preforeclosure Sale, and Charged-Off Mortgages These transaction types are completed as alternatives to foreclosure. A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer. These are typically identified on the credit report through Remarks Codes such as Forfeit deed-in-lieu of foreclosure. A preforeclosure sale or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer. These are typically identified on the credit report through Remarks Codes such as Settled for less than full balance. A charge-off of a mortgage account occurs when a creditor has determined that there is little (or no) likelihood that the mortgage debt will be collected. A charge-off is typically reported after an account reaches a certain delinquency status, and is identified on the credit report with a manner of payment (MOP) code of 9. A four-year waiting period is required from the completion date of the deed-in-lieu of foreclosure, preforeclosure sale, or charge-off as reported on the credit report or other documents provided by the borrower. Exceptions for Extenuating Circumstances A two-year waiting period is permitted if extenuating circumstances can be documented. NOTE: Deeds-in-lieu and preforeclosure sales may not be accurately or consistently reported in the same manner by all creditors or credit reporting agencies

39 Hardship Modifications Conventional Underwriting Guidelines Employment/Income Purchases On a purchase transaction, a previous hardship modification does not render a borrower ineligible for financing. However, preforeclosure seasoning requirements must be met. Refinances A previous hardship modification is ineligible on refinance transactions. Extenuating Circumstances for Derogatory Credit Extenuating circumstances are nonrecurring events that are beyond the borrower s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. If a borrower claims that derogatory information is the result of extenuating circumstances, MiMutual must substantiate the borrower s claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment, etc.). MiMutual must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on their financial obligations. Requirements for Reestablishing Credit After a bankruptcy, foreclosure, deed-in-lieu of foreclosure, or pre-foreclosure sale / short sale, the borrower s credit will be considered re-established if all of the following are met: The waiting period and the related requirements are met The loan receives an Approve recommendation from DU The borrower has a traditional credit history. Nontraditional credit or thin files are not acceptable Consumer Credit Counseling Acceptable on Approve/Eligible AUS findings with no additional documentation required

40 Conventional Underwriting Guidelines Employment/Income Credit Score MiMutual will require a minimum credit score of 640. MiMutual will take the middle score from the three reporting credit repositories. If only 2 of 3 scores report, the lower of the 2 scores will be used. Borrowers with only 1 credit score may be considered with traditional credit depth. MiMutual does not underwrite loans for borrowers with only non-traditional credit. NOTE: At times, non-traditional credit may be requested / utilized to supplement and/or strengthen a borrower s credit profile. Valid Credit Score Validating credit scores is subjective, and it typically requires 2-4 trade lines to validate a credit score depending on depth of credit, the type of trade line, and length of time established. If you are in doubt, our scenario help desk ([email protected]), submit your scenario through our website, or contact your Account Executive. Submission of a full credit package including all income and asset information for underwriter review may be required. Borrowers/Co-Borrowers Occupying MiMutual requires a minimum 640 middle credit score for all borrowers. Non-Occupying Co-Borrowers Non-occupying borrowers are permitted. See Non-Occupant Co-Borrower section for detailed guidance. Disputed Accounts When erroneous or disputed accounts are identified on the DU Findings Report, the accuracy of the disputed trade line(s) must be verified to determine if the trade line(s) belong to the borrower and confirm the accuracy of the payment history. To satisfy these conditions, one of the following options must be used: If the trade line does not belong to the borrower, or the reported payment history is inaccurate, written documentation satisfying the DU condition must be obtained and included in the loan file. Under these circumstances, when the information is validated, DU may require no further action. If the trade line does belong to the borrower and the reported payment history is accurate, the disputed trade line(s) must be considered in the credit risk assessment. To ensure the disputed trade line is considered, a new credit report must be obtained with the trade line(s) no longer reported as disputed and resubmit the loan case file to DU. As manual underwriting is not available on MiMutual s Conventional program, the DU requirement must be satisfied by using one of the above-stated options. If DU does not issue the disputed tradeline message, MiMutual is not required to further investigate the disputed tradeline on the credit report, obtain an updated credit report (with the tradeline no longer disputed), or manually underwrite the loan. However, MiMutual is required to ensure that the payment for the tradeline, if any, is included in the total expense ratio if the account does belong to the borrower

41 Conventional Underwriting Guidelines Employment/Income Credit Inquiries within 90 days of Report Date All credit inquiries dated within the last 90 days of report date must be addressed by the borrower(s). An itemized list detailing each inquiry must be provided (date, creditor, and outcome), along with a satisfactory explanation for each inquiry. A blanket statement addressing all inquiries at once is unacceptable. If any new debt was incurred, provide evidence of terms for inclusion in debt ratio. Departure Residence Pending Sale If the borrower's current primary residence is pending sale, but the transaction will not close with title transfer to the new owner prior to the subject transaction, and the borrower is purchasing a new principal residence, both the current PITIA and the proposed PITIA must be used in qualifying the borrower for the new mortgage loan. Accounts with No Monthly Payment Reported For revolving and installment debt, MiMutual will use 5% of the monthly balance if the credit report does not reflect a monthly payment, or if satisfactory documentation of the monthly payment amount cannot be provided. For revolving accounts, the greatest of 5% of the balance or $10 will be used. HELOCs If not shown on the credit report, payments on a HELOC with an outstanding balance may be calculated at the: Greater of $10 or 5% of the outstanding balance, or Payment reflected on the borrower s billing statement If the HELOC has a zero balance, no payment is required to be included for qualifying. Open 30-Day Charge Accounts Open 30-day charge accounts must be paid off at or prior to closing if: the borrower is unable to document sufficient assets to cover the unpaid balance, or the borrower is unable to document that the charges will be reimbursed by his or her employer Contingent Liability Contingent liability exists when an individual will be held responsible for payment of a debt should another jointly obligated party default on the payment. Unless the borrower can provide conclusive evidence from the debt holder that there is no possibility the debt holder will pursue debt collection against him or her should the other party default the full payment will be included in the DTI. If the account is paid as agreed and the last 12 months canceled checks are provided (showing the co-obligor is making the payments), this monthly payment will not be included in the borrower's debt ratio. Accounts listed on the credit report that are not paid as agreed, and/or accounts in borrower s name only (individual accounts) will be included in the debt ratio. In cases of divorce, when the Judgment of Divorce indicates the ex-spouse has received the marital property and is liable for the debt, cancelled checks would not be required

42 Conventional Underwriting Guidelines Employment/Income Joint/Co-Signed Debts by Applicants If the account is paid as agreed and the last 12 months canceled checks are provided (showing the co-obligor is making the payments), this monthly payment will not be included in the borrower's debt ratio. Accounts listed on the credit report that are not paid as agreed, and/or accounts in borrower s name only (individual accts) will be included in the debt ratio. Business Debt in Borrower s Name When a self-employed borrower claims that a monthly obligation that appears on his or her personal credit report is being paid by the borrower s business, the lender must confirm that it verified that the obligation was actually paid out of company funds and that this was considered in its cash flow analysis of the borrower s business. The account payment does not need to be considered as part of the borrower s individual recurring monthly debt obligations if: The account in question does not have a history of delinquency, The business provides acceptable evidence that the obligation was paid out of company funds (such as 12 months of cancelled company checks), and The lender s cash flow analysis of the business took payment of the obligation into consideration The tax returns evidence that business expenses associated with the debt (e.g., interest, lease payments, taxes, insurance) have been reported and support that the debt has been paid by the business. The account payment does need to be considered as part of the borrower s individual recurring monthly debt obligations in any of the following situations: If the business does not provide sufficient evidence that the obligations was paid out of company funds If the business provides acceptable evidence of its payment of the obligation, but the lender s cash flow analysis of the business does not reflect any business expense related to the obligation (such as an interest expense and taxes and insurance, if applicable equal to or greater than the amount of interest that one would reasonably expect to see given the amount of financing shown on the credit report and the age of the loan), it is reasonable to assume that the obligation has not been accounted for in the cash flow analysis If the account in question has a history of delinquency. To ensure that the obligation is counted only once, the lender should adjust the net income of the business by the amount of interest, taxes, or insurance expense, if any, that relates to the account in question. Installment Debt Installment accounts (excluding leases) with less than 10 payments remaining on the balance may be excluded from the debt-to-income ratio (DTI). If the amount of the debt affects the borrower s ability to make the mortgage payment during the months immediately after loan closing MiMutual will include the debt in the DTI (particularly if the borrower will have limited or no cash assets after loan closing). NOTE: Lease accounts are always included in the debt ratio, regardless of number of months remaining on the lease agreement

43 Conventional Underwriting Guidelines Employment/Income Projected Obligations If a debt payment is scheduled to begin within twelve months of the mortgage loan closing, the anticipated monthly obligation will be included in the DTI. MiMutual will use 5% of the monthly balance if the credit report does not reflect a monthly payment or satisfactory documentation of the monthly payment cannot be provided Similarly, balloon notes, 12 months same as cash, etc. will be considered in the DTI. Student Loans Student loans are required to be included in the DTI on all Conventional loans, regardless of deferment period. Student Loans Currently in Repayment For student loans which are currently in repayment (not deferred), MiMutual must use the greater of the following to determine the monthly payment to be used as the borrower s recurring monthly debt obligation: 1% of the outstanding balance; or The actual documented payment (documented in the credit report, in documentation obtained from the student loan lender, or in documentation supplied by the borrower). If the payment currently being made cannot be documented or verified, 1% of the outstanding balance must be used. However, if the actual documented payment is less than 1% of the outstanding balance and it will fully amortize the loan with no payment adjustments, MiMutual may use the lower, fully amortizing monthly payment to qualify. Student Loans Currently Deferred or in Forbearance For student loans which are currently deferred or in forbearance, documentation to support the payment amount included in the monthly debt obligation must be obtained. If no monthly payment is reported on a student loan in deferment or forbearance, MiMutual must either obtain documentation verifying the proposed monthly payment amount, or use a minimum of 2% of the outstanding balance for qualifying purposes. Obligations Not Considered Debt Obligations not to be considered debt (or subtracted from the borrower s gross income) for qualifying purposes include federal, state and local income taxes; FICA or other retirement contributions such as 401k contributions (including 401k loans), union dues, child care expenses, open accounts with zero balances, voluntary deductions to one s bank/investment account, and accounts on credit with an ECOA status that indicates the borrower is an Authorized User

44 Conventional Underwriting Guidelines Employment/Income Calculating Housing Expense Ratio When calculating the housing expense ratio, the payment for the secondary financing must be included. If not shown on the credit report, payments on a HELOC with an outstanding balance may be calculated at the: Greater of $10 or 5% of the outstanding balance, or Payment reflected on the borrower s billing statement If the HELOC has a zero balance, no payment is required to be included for qualifying. Payoff or Paydown of Debt for Qualification Payoff of installment debt solely to qualify must be carefully evaluated and considered in the overall loan analysis. The borrower s history of credit use should be a factor in determining whether the appropriate approach is to include or exclude debt for qualification. Generally: Installment loans that are being paid off or paid down to 10 or fewer remaining monthly payments do not need to be included in the borrower s long-term debt If a revolving account balance is to be paid off at or prior to closing, a monthly payment on the current outstanding balance does not need to be included in the borrower s long-term debt, i.e., not included in the debt to income ratio. Such accounts do not need to be closed as a condition of excluding the payment from the DTI. Past-Due, Collections, and Charge-Off Accounts Accounts that are reported as past due (not reported as collection accounts) must be brought current. For one-unit, principal residence properties, borrowers are not required to pay off outstanding collections or charge-offs, regardless of the amount. For two- to four-unit owner-occupied and second home properties, collections and charge-offs totaling more than $5,000 must be paid in full prior to or at closing For investment properties, individual accounts equal to or greater than $250 and accounts that total more than $1,000 must be paid in full prior to or at closing. NOTE: If the collection account is marked Paid by Close in the online loan application, DU will issue a message in the Findings Report stating that the collection must be paid. Judgments, Garnishments, and Liens Open judgments, garnishments, and all outstanding liens that are in the Public Records section of the credit report will be identified in the Underwriting Findings report, and must be paid off at or prior to closing. Documentation of the satisfaction of these liabilities, along with verification of funds sufficient to satisfy these obligations, must be provided

45 Conventional Underwriting Guidelines Employment/Income Employment/Income Generally borrowers must be employed for 2 years in the same line of work. MiMutual will use a college degree and/or transcripts to document previous history, if dated within 6 months of current employment start date. Large fluctuations in income are ALWAYS subject to underwriter discretion. MiMutual will do a phone verification of employment on all loans within 10 days of closing. MiMutual will require IRS transcripts for the most recent two tax periods (W2s and 1040s) to validate all income used for qualifying, including business returns (for Corporations only) that are required and/or provided. All 4506T results must be obtained by MiMutual. Documentation Requirements All documentation must be from a reasonably reliable third-party source, and must satisfy the requirements of the Ability to Repay Rule. Hourly or Salaried Employees Provide one of the following: One computer generated most recent year-to-date pay stub documenting one full month s earnings and last two years W-2's. One computer generated most recent year-to-date pay stub documenting one full month s earnings and a signed Verification of Employment. Non-computer generated or handwritten pay stubs require last two years W-2's and a signed Written Verification of Employment. Overtime and Bonus Income Overtime and bonus income can be used to qualify if the borrower has received this income for the past two years, the income stream has been consistent, and is likely to continue. If the income has not been stable and/or is not likely to continue, it may not be used to qualify. Periods of overtime and bonus income received for less than two years may be acceptable and will be considered on a case-by-case basis. Second Jobs/Part-Time Income Second Jobs/Part-Time Income can be used to qualify if the borrower has received this income for the past two years, the income stream has been consistent, and is likely to continue. If the income has not been stable and/or is not likely to continue, it may not be used to qualify. Periods of Second Jobs/Part-Time Income received for less than two years may be acceptable and will be considered on a case-by-case basis

46 Seasonal Employment Conventional Underwriting Guidelines Employment/Income Seasonal income may be used to qualify the borrower, permitting: It can be verified that the borrower has worked in the same job (or the same line of seasonal work) for the past 2 years The borrower s employer can confirm that there is a reasonable expectation that the borrower will be rehired for the next season Unemployment Benefits Unemployment compensation cannot be used to qualify the borrower unless it is clearly associated with seasonal employment that is reported on the borrower s signed federal income tax returns, and is expected to recur. Union Employees Union employees who receive their compensation from multiple employers based on assignments from their local labor union are acceptable, and not deemed unstable. Income may be used to qualify the borrower provided; The union provides a letter verifying the borrower is currently a member in good standing Most recent paystub is provided verifying borrower is currently employed W2 statements for all jobs in the last 3 years are provided, supporting a history of employment with the union Commission Income Commission income (including borrowers paid piece work/piece job, truckers paid per mile, etc.) can be used to qualify if the borrower has received this income for the past two years, the income stream has been consistent, and is likely to continue. If the income has not been stable and/or is not likely to continue, it may not be used to qualify. Periods of commission income received for less than two years may be acceptable and will be considered on a case-by-case basis (commission income earned for less than one year will not be considered effective income). In addition to normal employment documentation, copies of tax returns for the last two years are required and any Unreimbursed Business Expenses (see below) must be subtracted from the borrower s qualifying income prior to calculating the housing and debt-to-income ratios Employees Provide one of the following: Last two years tax returns and one computer generated pay stub no more than 30 days old at time of closing, showing year-to-date earnings. Last two years tax returns and a signed Written Verification of Employment no more than 90 days old at time of closing, showing year-to-date earnings

47 Conventional Underwriting Guidelines Employment/Income Unreimbursed Business Expenses For a borrower who is qualified using base pay, bonus, or overtime income, Unreimbursed Business Expenses are not required to be analyzed or deducted from the borrower s qualifying income. This applies regardless of whether Unreimbursed Business Expenses are identified on tax returns (IRS Form 2106) or tax transcripts received from the IRS. Unreimbursed Business Expenses from Schedule A / Form 2106 of the tax returns must be deducted from the borrower s qualifying income if the borrower earns income from commissions (regardless of the percentage of the commission earnings). A 2 year average must be taken, unless the expenses are increasing from year to year. In this case, a 12 month average of the most recent (higher) year must be used. Automobile Allowances Only the amount by which the borrower s automobile allowance exceeds the automobile expense may be used as income (the difference between the automobile allowance and the 2106 expense may be added to income if positive or must be treated as a liability if negative). In addition, the borrower s auto loan payment must be counted as a debt and may not be offset by the automobile allowance. Self-Employed Any individual who has a 25% or greater ownership interest in a business is considered to be self-employed. When the borrower is self-employed, and the self-employment income is being used to qualify, the borrower s last two years complete tax returns (business and personal) must be obtained. Additionally, a signed year-todate profit and loss statement is required. If business returns are required and/or provided for a Corporation, a fully executed Form 4506-T for each business will be required, and will be processed by MiMutual prior to closing. When income from self-employment is being used to qualify the borrower, the tax returns must be analyzed on FNMA Form 1084, Cash Flow Analysis. NOTE: The lower amount of the Ordinary Income or Amount Distributed can be used to qualify without documenting access to funds/liquidity. If either of these amounts is $0.00, additional action must be taken, and the income may not be able to be used in qualification. If a borrower is qualified using only income that is not derived from self-employment, and self-employment income is a separate and secondary source of income (or loss), the self-employment income is not required to be documented, and a written evaluation is not required. Fannie Mae has updated their documentation requirements and income calculation methods for selfemployed borrowers. For detailed direction regarding self-employment, refer to the Selling Guide. NOTE: If the income is being considered for qualification, the borrower must have ownership in the same company for the last 2 years. A Profit & Loss Statement will be used to support a two year income average; however, will not be used for qualifying purposes

48 Conventional Underwriting Guidelines Employment/Income Alimony, Child Support, or Separate Maintenance Document that alimony, child support, or separate maintenance will continue to be paid for at least three years after the date of the mortgage application, as verified by one of the following: A copy of a divorce decree or separation agreement (if the divorce is not final) that indicates payment of alimony or child support and states the amount of the award and the period of time over which it will be received. If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, MiMutual will not consider any proposed or voluntary payments as income. Any other type of written legal agreement or court decree describing the payment terms for the alimony or child support. Documentation that verifies any applicable state law that mandates alimony, child support, or separate maintenance payments, which must specify the conditions under which the payments must be made. MiMutual will check for limitations on the continuance of the payments, such as the age of the children for whom the support is being paid or the duration over which alimony is required to be paid. No less than six months of the borrower s most recent regular receipt of the full payment must be documented. MiMutual will review the payment history to determine its suitability as stable qualifying income. To be considered stable income, full, regular, and timely payments must have been received for six months or longer. Income received for less than six months is considered unstable and may not be used to qualify the borrower for the mortgage. In addition, if full or partial payments are made on an inconsistent or sporadic basis, the income is not acceptable for the purpose of qualifying the borrower. (Remainder of page intentionally left blank)

49 Conventional Underwriting Guidelines Employment/Income Social Security Income Social Security Income for retirement or long-term disability that the borrower is drawing from his or her own account/work record will not have a defined expiration date and must be expected to continue. However, if Social Security benefits are being paid as a benefit for a family member of the benefit owner, that income may be used in qualifying if the lender obtains documentation that confirms the remaining term is at least three years from the date of the mortgage application. Document regular receipt of payments, as verified by the following, depending on the type of benefit and the relationship of the beneficiary (self or other) as shown in the table below. Borrower is Drawing Social Type of Social Security Benefit Security Benefits from Own Account / Work Record Retirement SSA Award Letter, or Disability Proof of current receipt Survivor Benefits NA Supplemental Security Income SSA Award Letter, and Proof of current receipt Borrower is Drawing Social Security Benefits from Another Person s Account / Work Record a SSA Award Letter, Proof of current receipt, and Three year continuance NA a Examples of how a borrower might draw Social Security Benefits from another person s account/work record and use the income for qualifying: A borrower may be eligible for benefits from a spouse, ex-spouse, or dependent parents (the benefit is paid to the borrower on behalf of the spouse, etc), or A borrower may use Social Security Income received by a dependent (a minor or disabled dependent) Pension/Retirement Income Document regular and continued receipt of the income, as verified by: Letters from the organizations providing the income, Copies of retirement award letters, Copies of signed federal income tax returns, IRS w-2 or 1099 forms, or Proof of current receipt. Retirement income must be likely to continue for at least the next three years. If retirement income is paid in the form of a distribution from a 401(k), IRA, or Keogh retirement account, determine whether the income is expected to continue for at least three years after the date of the mortgage application. In addition: The borrower must have unrestricted access without penalty to the accounts; and If the assets are in the form of stocks, bonds, or mutual funds, 70% of the value (remaining after any applicable costs for the subject transaction) must be used to determine the number of distributions remaining to account for the volatile nature of these assets

50 Conventional Underwriting Guidelines Employment/Income Military Income, Entitlements, and Reserve Duty Income A borrower who is a member of the United States Armed Forces may receive pay entitlements such as flight or hazard duty, rations, clothing allowance, or quarters allowance in addition to base pay. MiMutual will consider these entitlements as qualifying income if documented and likely to continue for the next three years. Income paid to military reservists while they are satisfying their reserve obligation is also acceptable if it satisfies the same stability and continuity tests applied to secondary employment Foster Care Income Verify the foster care income with letters of verification from the organizations providing the income, and document that the borrower has a two-year history of providing foster care services. Foster care income must be likely to continue for the next three years. Non-Taxable Income Non-taxable income may be grossed-up by 125%. Examples of non-taxable income are: Social Security / VA Benefit Child Support Foster Care Military Allowances: Basic Allowance for Housing (BAH), Basic Allowance for Subsistence (BAS), clothing allowances, hazard pay, rations allowance, combat pay, flight pay, overseas pay, etc. NOTE: All of these income types require a minimum 3 year continuance to be used for qualifying. Short Term Disability / Workman s Comp Not eligible. No Exceptions. Projected Income MiMutual does not permit projected income to be used to qualify. The borrower must have started their new job, and have a paystub to support full time earnings prior to closing. Foreign Income Foreign income will be considered as acceptable for qualifying only if the income is claimed on US Tax Returns and verifiable via 4506T results

51 Conventional Underwriting Guidelines Employment/Income Maternity Leave If the borrower will return to work as of the first mortgage payment date, the borrower's regular employment income may be used for qualifying. If the borrower will not return to work as of the first mortgage payment date, MiMutual will use the lesser of the borrower's regular employment income or maternity leave income (if any). If it is determined a borrower will be on maternity leave at the time of closing and that borrower's income is needed to qualify for the loan, the effective income used for qualifying must be supported and confirmation employment will continue must be documented as described below: The borrower must have a stable employment and income history that meets standard eligibility requirements; and The borrower must provide written confirmation of his or her intent to return to work and the agreed upon date of return as evidenced by documentation provided by the employer. Information from the borrower's employer indicating that the borrower does not have the right to return to work after the leave period would conclude the borrower s income may not be used as effective income for qualifying. A verbal verification of employment is required to be obtained within 10 business days of closing. If the employer confirms the borrower is on maternity leave, and the return to work date is consistent with the documentation provided, this is sufficient to consider the borrower as employed. Income must be verified accordingly with: the amount and duration of the borrower's maternity leave income, which may require multiple documents or sources depending on the type and duration of the leave period; and the amount of the regular employment income the borrower received prior to the maternity leave (regular employment income includes, but is not limited to, the income the borrower receives from employment on a regular basis that is eligible for qualifying purposes for example, base pay, commissions, and bonus) Note: Income verification may be provided by the borrower, by the borrower's employer, or by a third-party employment verification vendor

52 Conventional Underwriting Guidelines Employment/Income Rental Income If the borrower has a history of renting the subject or another property, generally the rental income will be reported on Schedule E of the borrower s personal tax returns, or on Rental Real Estate Income and Expenses of a Partnership or an S Corporation form (IRS Form 8825) of a business tax return. If the borrower does not have a history of renting the subject property, MiMutual may use a current lease agreement to document rental income per the direction below. If a lease is accepted as documentation of rental income, MiMutual will use the vacancy factor of 25% for all properties. If a property is not currently rented, no rental income may be used to qualify the borrower. Rental Income from the Subject Property When the Subject Property is the Primary Residence The following items will be required to document rental income when the subject property is the borrower s primary residence: Form 1007 or 1025, as applicable, and either: o Last year s federal income tax returns, with a history of receiving rents on Schedule E, or o Copies of the current lease agreement(s) and Form 998/216 (Operating Income Statement), if the borrower can document a qualifying exception When the Subject Property is an Investment Property The following items will be required to document rental income when the subject property is the borrower s investment property: Form 1007 or 1025, as applicable, Proof of 6 months rent loss insurance, Evidence of a two-year history of managing 1-4 unit investment properties, and either: o Last year s federal income tax returns, with a history of receiving rents on Schedule E, or o Copies of the current lease agreement(s) and Form 998/216 (Operating Income Statement), on a purchase transaction, or when the borrower can document a qualifying exception NOTE: Form 1007, the Single Family Comparable Rent Schedule, is used for one-unit properties, and is provided in conjunction with the applicable appraisal report. Form 1025, the Small Residential Income Property Appraisal Report, is used for two- to four-unit properties. Rental Income from Property Other Than the Subject One of the following items will be required to document rental income from properties other than the subject: Last year s federal income tax returns, with a history of receiving rents on Schedule E, or Copies of the current lease agreement(s), if the borrower can document a qualifying exception

53 Conventional Underwriting Guidelines Employment/Income Conversion of Principal Residence Requirements To confirm leasing of the newly converted property or unit (for a two- to four-unit property), MiMutual must obtain a copy of the: Fully executed lease agreement, Security deposit from the tenant, and Bank statement showing deposit of the security funds. Partial or No Rental History on Tax Returns (Qualifying Exceptions) If the borrower is able to document (per the table below) that the rental property was not in service the previous tax year, or was in service for only a portion of the previous tax year, MiMutual may determine qualifying rental income by using: Schedule E income and expenses, and annualizing the income (or loss) calculation, or Lease agreement(s) to determine the gross rental income to be used in the net rental income (or loss) calculation If If the property was acquired during or subsequent to the most recent tax filing year, If the rental property was out of service for an extended period, Then confirm the purchase date using the HUD-1 Settlement Statement or other documentation. If acquired during the year, Schedule E (Fair Rental Days) must confirm a partial year rental income and expenses (depending on when the unit was in service as a rental). If acquired after the last tax filing year, Schedule E will not reflect rental income or expenses for the property. Schedule E will reflect the costs for renovation or rehabilitation as repair expenses. Additional documentation may be required to ensure that the expenses support a significant renovation that supports the amount of time that the rental property was out of service. Schedule E (Fair Rental Days) will confirm the number of days that the rental unit was in service, which must support the unit being out of service for all or a portion of the year. This policy may be applied to refinances of a subject rental property or to other rental properties owned by the borrower

54 Conventional Underwriting Guidelines Employment/Income Offsetting Monthly Obligations for Rental Property Reported through a Partnership or an S Corporation If the borrower is personally obligated on the mortgage debt (as evidenced by inclusion of the related mortgage(s) on the credit report) and gross rents and related expenses are reported through a partnership or S corporation, the business tax returns may be used to offset the property s PITIA. The steps described below should be followed: Obtain the borrower s business tax returns, including IRS Form 8825 for the most recent year. Evaluate each property listed on Form 8825, as shown below: o From total gross rents, subtract total expenses. Then add back insurance, mortgage interest, taxes, homeowners association dues (if applicable), depreciation, and non-recurring property expenses (if documented accordingly). o Divide by the number of months the property was in service. o Subtract the entire PITIA (proposed for subject property or actual for real estate owned) to determine the monthly property cash flow. If the resulting net cash flow is positive, the lender may exclude the property PITIA from the borrower s monthly obligations when calculating the debt-to-income ratio. If the resulting net cash flow is negative (that is, the rental income derived from the investment property is not sufficient to fully offset the property PITIA), the calculated negative amount must be included in the borrower s monthly obligations when calculating the debt-to-income ratio. In order to include a positive net rental income received through a partnership or an S corporation in the borrower s monthly qualifying income, MiMutual must evaluate it according to guidelines for income received from a partnership or an S corporation. (Remainder of page intentionally left blank)

55 Conventional Underwriting Guidelines Employment/Income Timing of Tax Returns When using tax returns to verify income, the following documentation requirements will apply. Only income that can be verified via 4506T can be used for qualifying. In cases where the 4506T results are unable to be obtained due to taxes having been recently filed, the IRS response to the request must reflect No Record of Return Found. In these cases, the following options are available, and can be considered as verified for qualification purposes: Copies of the most recent year s signed return, stamped as received and signed by the borrower s local IRS office. If tax returns were filed by a licensed CPA, it is acceptable to obtain a letter, along with copies of the tax returns directly from the CPA, confirming returns have been filed with the IRS. NOTE: Large increases in income that cannot be validated through a tax transcript may only be considered for qualifying on a case-by-case basis, and are subject to underwriter discretion. When an IRS Form 4506T request returns one of the following messages: Due to limitations, the IRS is unable to process this request. The IRS will mail a notification to the borrower to explain this reason; please contact your borrower, Rejection Code 10, or other verbiage related to a limitation precluding completion of the request, the following steps may apply: o MiMutual must retain the determination from the IRS that their request cannot be processed, with a code of Unable to Process or Limitation o The applicant may request their tax return transcripts and deliver them to MiMutual. Information on how to request transcripts by mail is available at o The applicant must request the previous (one or two, per MiMutual policy) years of complete tax return transcripts. If the applicant has not filed their 2014 taxes, MiMutual must retain: Transcripts for the previous (one or two, per MiMutual policy) tax years, Evidence of the applicant s request for an extension, Documentation of 2014 earnings, and Current income documentation as required per guidelines. IRS transcripts are required as part of a complete loan application package. The above guidelines are only valid for lender requests that the IRS will not process due to the recent data breach or confirmed identity theft. These guidelines do not apply to rejected requests from the IRS due to misspelled names or incorrect/transposed data

56 Conventional Underwriting Guidelines Employment/Income Additional Documentation Requirements When using tax returns to verify income, and it is between the tax filing date (typically April 15 th ) and the extension expiration date (typically October 15th), the borrower must provide: o Copy of the filed extension. MiMutual will review the total tax liability reported on IRS Form 4868 (Extension to File) and compare it with the borrower s tax liability from the previous two years as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with previous years may make it necessary for MiMutual to require the current returns in order to proceed. o Current year Profit & Loss Statement, executed by the borrower o Year-End Profit & Loss Statement for prior year, executed by the borrower o Tax returns for the previous 2 years After the tax return extension expiration date, loan is not eligible without prior year tax returns When tax returns provided were filed within 90 days of the application date and reflect that the borrower had underpaid throughout the year, proof of payment and source of funds are required to document that the tax liability has been fully satisfied. Any excessive tax liability outside of 90 days is subject to underwriter discretion. Use of IRS Forms to Obtain Federal Income Tax Information When federal income tax information is used to document income for qualifying purposes, MiMutual will obtain transcripts of the applicable federal income tax documents directly from the IRS by using IRS Form 4506 T. However, in certain instances, copies of the actual returns, schedules, or forms are needed because the tax return transcripts will not provide the detail required to qualify the borrower. For example, MiMutual must obtain copies of Schedules B through F, Schedule K-1, Form 2106, or business returns. These schedules or forms are not required if: The income reflected on the applicable schedule transcripts is positive, and The income supported by that schedule or form is not being used for qualifying

57 Assets Conventional Underwriting Guidelines Assets Borrower s Own Funds to Close MiMutual follows AUS findings for acceptable documentation. All documentation must be from a reasonably reliable third-party source, and must satisfy the requirements of the Ability to Repay Rule. Bank Statements When using most recent two months bank statements dated within 60 days of closing, large deposits must be explained and documented. Verification of Deposit Two month average balance must be reflected (current balance must show sufficient funds required). Large increases must be explained and documented with paper trail. MiMutual will investigate accounts opened within 90 days of the application date and account balances that are considerably greater than the average balance reflected on the VOD. HUD-1 from Sale of Current Residence Final HUD-1 from sale of current residence is considered acceptable documentation, if dated within 30 days of loan closing. Retirement Accounts Vested funds from individual retirement accounts (IRA/SEP/Keogh accounts) and tax-favored retirement savings accounts (401(k) accounts) are acceptable sources of funds for downpayment, closing costs, and reserves. MiMutual will verify ownership of the account, and confirm that the account is vested and allows withdrawals regardless of current employment status. If the retirement assets are in the form of stocks, bonds, or mutual funds, the account must meet the requirements below for determining value. When funds from retirement accounts are used for reserves, MiMutual does not require the funds to be withdrawn from the account. Stocks, Stock Options, Bonds, and Mutual Funds Vested assets in the form of stocks, government bonds, and mutual funds are acceptable sources of funds for the down payment, closing costs, and reserves provided their value can be verified. The lender must verify the borrower s ownership of the account or asset. The value of the asset and any related documentation must meet the requirements outlined in the table below

58 Conventional Underwriting Guidelines Assets Asset Type Stocks and Mutual Funds Stock Options Government Bonds Determining the Value of the Asset MiMutual must determine the value of the asset (net of any margin accounts) by obtaining either: The most recent monthly or quarterly statement from the depository investment firm; or A copy of the stock certificate, accompanied by a newspaper stock list that is dated as of or near the date of the loan application The value of vested stock options can be documented by: A statement that lists the number of options and the option price, and Using the current stock price to determine the gain that would be realized from exercise of an option and the sale of the optioned stock NOTE: Non-vested stock options are not an acceptable source of funds for the downpayment, closing costs, or reserves The value of government bonds must be based on their purchase price unless the redemption value can be documented. When used for downpayment or closing costs, evidence of the borrower s actual receipt of the funds realized from the sale or liquidation must be documented. When used for reserves, 100% of the value of the assets (as determined above) may be considered, and liquidation is not required. Large Deposits MiMutual considers large deposits as a single deposit that exceeds 50% of the total monthly qualifying income for the loan. Requirements for evaluating large deposits vary based on the transaction type, as shown below: Refinance Transactions Documentation or explanation for large deposits is not required; however, MiMutual remains responsible for ensuring that any borrowed funds, including any related liability, are considered. Therefore, large deposits on refinance transactions will be evaluated by the underwriter to determine funds deposited were not borrowed

59 Conventional Underwriting Guidelines Assets Purchase Transactions If funds from a large deposit are needed to complete the purchase transaction (that is, are used for the downpayment, closing costs, or financial reserves), MiMutual must document that those funds are from an acceptable source. Occasionally, a borrower may not have all of the documentation required to confirm the source of a deposit. In those instances, MiMutual must use reasonable judgment based on the available documentation as well as the borrower s debt-to-income ratio and overall income and credit profile. Verified funds must be reduced by the amount (or portion) of the undocumented large deposit, and MiMutual must confirm that the remaining funds are sufficient for the downpayment, closing costs, and financial reserves. When MiMutual uses a reduced asset amount, net of the unsourced amount of a large deposit, that reduced amount must be used for underwriting purposes. NOTE: When a deposit has both sourced and unsourced portions, only the unsourced portion must be used to calculate whether or not it must be considered a large deposit. All monies for closing to be supported by bank statement dated within 60 days of closing. Cash Back on Purchases Not allowed; however, items the borrower has paid outside of closing (i.e. appraisal, homeowner s insurance) may be reimbursable through seller contributions at the time of closing. Borrower must provide satisfactory documentation of payment for these services prior to closing. Sale of Personal Property Proceeds from the sale of personal property (cars, recreational vehicles, stamps, coins, baseball card collections, etc.) is an acceptable source of funds for the down payment, closing costs and reserves, provided the individual purchasing it is not a party to the transaction in any way. The following must be documented: The borrower s ownership of the asset The value of the asset as determined by an independent and reputable source. This may be in the form of published value estimates, such as those issued by automobile dealers, philatelic or numismatic associations, or a separate written appraisal by a qualified appraiser with no financial interest in the loan transaction. The transfer of ownership of the asset, as documented by a bill of sale and a copy of funds received from purchaser The borrower s receipt of the sale proceeds with a copy of the deposit slip and bank statement showing new balances Minimum Reserve Requirements Minimum required reserves vary depending on a number of factors. For detailed direction regarding minimum reserve requirements, please follow the link to Fannie Mae s Selling Guide

60 Conventional Underwriting Guidelines Assets Business Assets Business assets may be an acceptable source of funds for the down payment, closing costs, and financial reserves when a borrower is self-employed and the individual federal income tax returns have been evaluated by MiMutual, including, if applicable, the business federal income tax returns for that particular business (non- Schedule C). The borrower must be listed as an owner of the account and the account must be verified. MiMutual will perform a business cash flow analysis to confirm that the withdrawal of funds for this transaction will not have a negative impact on the business. Gift Funds A borrower of a mortgage loan secured by a principal residence or second home may use funds received as a personal gift from an acceptable donor. Gift funds may fund all or part of the down payment, closing costs, or financial reserves, subject to the Minimum Borrower Contribution Requirements. Gifts are not allowed on an investment property. Acceptable Donors A gift can be provided by: a relative, defined as the borrower s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or a fiancé, fiancée, or domestic partner. The donor may not be, nor have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction Gift Documentation Gifts must be evidenced by a letter signed by the donor, called a gift letter. The gift letter must: specify the dollar amount of the gift; specify the date the funds were transferred; include the donor s statement that no repayment is expected; and indicate the donor s name, address, telephone number, and relationship to the borrower. When a gift from a relative or domestic partner is being pooled with the borrower s funds to make up the required minimum cash down payment, the following items must also be included: A certification from the donor stating that he or she has lived with the borrower for the past 12 months and will continue to do so in the new residence. Documents that demonstrate a history of borrower and donor shared residency. The donor s address must be the same as the borrower s address. Examples include but are not limited to a copy of a driver s license, a bill, or a bank statement

61 Conventional Underwriting Guidelines Assets Verifying Donor Ability of Funds and Transfer of Gift Funds MiMutual must verify that sufficient funds to cover the gift are either in the donor s account or have been transferred to the borrower s account. Acceptable documentation includes the following: a copy of the donor s check and the borrower s deposit slip a copy of the donor s withdrawal slip and the borrower s deposit slip, a copy of the donor s check to the closing agent, or a settlement statement showing receipt of the donor s check. When the funds are not transferred prior to settlement, MiMutual must document that the donor gave the closing agent the gift funds in the form of a certified check, a cashier s check, or other Official check. Minimum Borrower Contribution Requirement from Borrower s Own Funds The table below describes the borrower s minimum required investment when gift funds are used. LTV, CLTV, or HCLTV Ratio Minimum Borrower Contribution Requirement from Borrower s Own Funds 80% or less One- to four-unit principal A minimum borrower contribution residence from the borrower s own funds is not required. All funds needed to close Second home can come from a gift. Greater than 80% One-unit principal residence A minimum borrower contribution from the borrower s own funds is not required. All funds needed to close can come from a gift. Two- to four-unit principal The borrower must make a 5% residences minimum borrower contribution from his or her own funds 1. After the Second Home minimum borrower contribution has been met, gifts can be used to supplement the down payment, closing costs, and reserves. 1 If the borrower receives a gift from a relative or domestic partner who has lived with the borrower for the last 12 months, or from a fiancé or fiancée, the gift is considered the borrower s own funds and may be used to satisfy the minimum borrower contribution requirement as long as both individuals will use the home being purchased as their principal residence

62 Conventional Underwriting Guidelines Assets Gift of Equity A gift of equity refers to a gift provided by the seller of a property to the buyer. The gift represents a portion of the seller s equity in the property, and is transferred to the buyer as a credit in the transaction. A gift of equity is permitted for principal residence and second home purchase transactions only. The acceptable donor and minimum borrower contribution requirements for gifts also apply to gifts of equity. Mortgage payoff (if any) must reflect no more than 29 days delinquent at time of closing. Any history of major delinquencies (30 days or more) reflected on title or payoff, will require additional information and may not be eligible. Spouse to Spouse purchases are not acceptable except in instances such as divorce, where legal documentation (such as a Divorce Decree) indicates the seller/spouse will be vacating the property. The following documents must be obtained: A signed gift letter (see Gift Funds for criteria), The fully executed purchase agreement reflecting Gift of Equity, and The HUD-1 Settlement Statement listing the Gift of Equity NOTE: Investment property transactions not eligible for gifts of equity. Downpayment Assistance Programs MiMutual does not have a list of approved Downpayment Assistance Programs. All DAPs must meet agency requirements. MiMutual will not allow any DAP from a provider that requires the lender to be approved. Evidence of how the DAP is funded and a copy of the approval letter containing terms of assistance must be provided. If DAP will result in a soft/silent 2 nd lien on the subject property, this must be considered in the CLTV calculations. If the DAP is a true gift or grant, see the appropriate section for borrower s minimum contribution requirements. Collateralized Loans Funds can be borrowed for the total required investment as long as satisfactory evidence is provided that the funds are fully secured by an asset. Such assets may include stocks, bonds, real estate (other than the property being purchased), etc. In addition, certain types of loans secured against deposited funds, such as the cash value of life insurance policies, loans secured by a 401(k) etc. in which repayment may be obtained through extinguishing the asset, do not require consideration of repayment for qualifying purposes. However, in such circumstances, the asset securing the loan may not be included as assets to close or otherwise considered as available to the borrower. An independent third party must provide the borrowed funds. The seller, real estate agent, broker, lender, or other interested third party may not provide such funds. Unacceptable borrowed funds include signature loans, cash advances on credit cards, borrowing against household goods and furniture and other similar unsecured financing

63 Conventional Underwriting Guidelines Assets Gift Funds/Grants by Charitable Organizations Gifts administered by charitable organizations are acceptable. The gift from the charitable organization to the homebuyer must meet Fannie Mae requirements and the transfer of funds must be properly documented. Gifts from charitable organizations where the seller makes a contribution are not acceptable. NOTE: Gift funds are not allowed on investment property transactions. Donations from Entities A borrower of a mortgage loan secured by a principal residence may use donated gift or grant funds from acceptable entities to fund all or part of the downpayment, closing costs, or financial reserves subject to the minimum borrower contribution requirements below. Donated gifts and grants are not allowed on a second home or an investment property. Acceptable entities include churches, municipalities, nonprofit organizations (excluding credit unions), a regional Federal Home Loan Bank under one of its affordable housing programs, and public agencies. Minimum Borrower Contribution Requirements The following table describes the minimum borrower contribution requirements for transactions that contain donated gifts or grants: LTV/CLTV/HCLTV Ratio Minimum Borrower Requirements from Borrower's Own Funds 80% or less 1-4 Unit Principal Residence A minimum borrower contribution from the borrower s own funds is not required. All funds needed to complete the transaction can come from a donated gift or grant. Greater than 80% 1 Unit Principal Residence A minimum borrower contribution from the borrower s own funds is not required. All funds needed to complete the transaction can come from a donated gift or grant.* 2-4 Unit Principal Residences The borrower must make a 5% minimum borrower contribution from his or her own funds. After the minimum borrower contribution has been met, donated gifts or grants can be used to supplement the down payment, closing costs, and reserves.* The donated gift or grant must be documented with either a copy of the letter awarding the gift or grant to the borrower or a copy of the legal agreement that specifies the terms and conditions of the gift or grant. The document must include language indicating that repayment of the gift or grant is not expected, and how the funds will be transferred to the borrower, lender, or closing agent. The transfer of gifts or grants must be documented with a copy of the donor s canceled check, a copy of the settlement statement showing receipt of the check, or similar evidence. *Check with your MI Company for additional guidelines regarding minimum borrower contribution requirements

64 Conventional Underwriting Guidelines Assets Subordinate Financing Subordinate liens must be recorded and clearly subordinate to MiMutual s first mortgage lien. If a first mortgage is subject to subordinate financing, MiMutual will calculate the LTV, CLTV, and HCLTV ratios. If a lien is being subordinated, MiMutual will require the following: Copy of the Note or HELOC Agreement with terms of financing A fully executed subordination agreement prior to closing, reflecting accurate terms of loan Acceptable Subordinate Financing Types Variable payment mortgages that comply with the details below Mortgages with regular payments that cover at least the interest due, so that negative amortization does not occur Mortgages with deferred payments in connection with employer subordinate financing Mortgage terms that require interest at a market rate NOTE: If financing provided by the property seller is more than 2% below current standard rates for second mortgages, the subordinate financing must be considered a sales concession and the subordinate financing amount must be deducted from the sales price. Unacceptable Subordinate Financing Terms Mortgages with negative amortization (with the exception of employer subordinate financing that has deferred payments) Subordinate financing that does not fully amortize under a level monthly payment plan where the maturity or balloon payment date is less than five years after the note date of the new first mortgage (with the exception of employer subordinate financing that has deferred payments) Eligible Variable Payment Terms for Subordinate Financing Variable payments for subordinate financing are permitted if the following provisions are met: With the exception of HELOCs, when the repayment terms provide for a variable interest rate, the monthly payment must remain constant for each 12 month period over the term of the subordinate lien mortgage. For HELOCs, the monthly payment does not have to remain constant The monthly payments for all subordinate liens must cover at least the interest due so that negative amortization does not occur

65 Conventional Underwriting Guidelines Refinance Transactions Refinance Transactions Cash Out Refinances The borrower must have owned the property for more than six months predating the loan application to be eligible for cash-out, with the exception of borrowers who inherit or were legally awarded a property by divorce, separation, or dissolution of a domestic partnership. Additional Underwriting and Eligibility Criteria Maximum cash to borrower is: o $250,000 (if < 680 score) o Unlimited (if 680 score) The mortgage being refinanced must be current for the month due, e.g., a refinance of a mortgage anytime in March must have had the February payment made (borrowers who are delinquent or in arrears under the terms and conditions of their mortgage are not eligible). Subordinate liens, including credit lines, regardless of when taken, may remain outstanding (but subordinate to the FNMA mortgage) and are subject to a maximum CLTV of 80%. A copy of the current note is required and the borrower must qualify with the scheduled monthly payments. A subordination agreement will be required. Modified existing subordinate liens are acceptable and are not considered a new subordinate lien. New subordinate liens may be placed behind the FNMA mortgage and are subject to a maximum CLTV of 80%. The borrower must qualify with the scheduled monthly payments. Cash out transactions where the property is listed for sale require the MLS to be cancelled at least six months prior to disbursement or the loan is subject to a maximum 70% LTV. In all circumstances, listing agreements must be cancelled prior to disbursement. The listing agreement, evidence of cancellation, and signed/dated explanation from the borrower with the reason why the property was for sale is required. These properties pose an increased risk to MiMutual, and therefore may be subject to additional documentation and/or limitations. It is acceptable to finance the payment of closing costs, points, and prepaid items. The borrower can include prepaid real estate taxes in the new loan amount if those taxes are due within the 60 days prior to or 60 days following the closing date of the new loan. Delinquent real estate taxes (taxes past due by more than 60 days) can also be included in the new loan amount, but if they are, an escrow account must be established, subject to applicable law or regulation. Cash out refinance transactions involving land contracts are not eligible

66 Conventional Underwriting Guidelines Refinance Transactions Rate & Term Refinances/Limited Cash Out There is not a minimum length of time the borrower must have owned the property. The current appraised value may be used to calculate LTV. Existing Debt Add together the amount of the existing first lien, any purchase money second mortgage (any HELOC or second mortgage not used as purchase money must be treated as a cash-out). MiMutual will document that the entire amount of the subordinate financing was used to acquire the property. Refinances to Buy Out an Owner s Interest A transaction that requires one owner to buy out the interest of another owner (for example, as a result of a divorce settlement or dissolution of a domestic partnership) is considered a limited cash-out refinance if the secured property was jointly owned for at least 12 months preceding the disbursement date of the new mortgage loan. Except in the case of recent inheritance of the subject property, documentation must be provided to indicate that the security property was jointly owned by all parties for at least 12 months preceding the disbursement date of the new mortgage loan. NOTE: The specified equity to be paid is considered property-related indebtedness and is eligible for inclusion in calculating the new mortgage. The divorce decree or settlement agreement must be provided to document the equity awarded to the ex-spouse or co-borrower Additional Underwriting and Eligibility Criteria The mortgage being refinanced must be current for the month due, e.g., a refinance of a mortgage any time in March must have had the February payment made (borrowers who are delinquent or in arrears under the terms and conditions of their mortgage are not eligible). Subordinate liens, including credit lines, regardless of when taken, may remain outstanding and subject to 95% CLTV (or 97% if borrower qualifies for Expanded LTV/CLTV/HCLTV program). A copy of the current note is required and the borrower must qualify with the scheduled monthly payments. A subordination agreement will be required. New subordinate liens may be placed behind the 1 st mortgage and are subject to 95% CLTV (or 97% if borrower qualifies for Expanded LTV/CLTV/HCLTV program). The borrower must qualify with the scheduled monthly payments. At closing the borrower may not receive cash back in excess of $2000 or 2% of loan amount. Rate/term refinances where the property is listed for sale require the MLS to be cancelled prior to disbursement. The listing agreement, evidence of cancellation, and signed/dated explanation from the borrower with the reason why the property was for sale is required. These properties pose an increased risk to MiMutual; therefore, may be subject to additional documentation and/or limitations. It is acceptable to finance the payment of closing costs, points, and prepaid items. The borrower can include prepaid real estate taxes in the new loan amount if those taxes are due within the 60 days prior to or 60 days following the closing date of the new loan. If such taxes are included in the new loan amount, an escrow account must be established, subject to applicable law or regulation. If an escrow account is not being established, the loan must be considered as a cash out refinance

67 Conventional Underwriting Guidelines Refinance Transactions Loan Seasoning HUD-1 required from any transaction within the last 6 months. If the last transaction on the property was a cash-out refinance within the last six months (regardless of the LTV), the new mortgage must be considered a cash-out refinance. Note date to note date is what is used to calculate the six months. Property Seasoning The date on the Certificate of Occupancy will determine new construction/less than 1 year old versus existing construction Property Seasoning No Cash Out/Limited Cash Out There is not a minimum length of time the borrower must have owned the property; the current appraised value may be used to calculate LTV. However, if the borrower refinanced within 6 months predating the loan application, the HUD-1 from the last refinance must be obtained. If the last transaction was a cashout transaction then the new mortgage must be treated as a cash-out refinance. Cash-Out The borrower must have owned the property for more than six months predating the loan application to be eligible for cash-out. NOTE: The date on the Certificate of Occupancy will determine New Construction/Less than 1 Year Old versus Existing Construction. Mortgage Payoffs All refinance transactions will require current payoff statements for all liens on title to reflect the loan is current at time of closing (should not reflect more than 59 days of interest). However, paying off an existing FHA loan, where it is permitted for the servicer to collect a full 30 days of interest if payment in full is received after the required monthly payment due date, may result in a full two months worth of interest on the payoff. As long as the mortgage is current, this would be considered acceptable. MiMutual does not refinance loans that have been modified (due to hardship), have forbearance agreements in place, or with restructured/short payoffs

68 Conventional Underwriting Guidelines Refinance Transactions Texas Refinances When refinancing a borrower s primary residence (homestead) in Texas, it first has to be determined whether or not the property is eligible for max financing based on the borrower s current liens. A Texas cash out refinance of the borrower s homestead is considered to be a home equity loan and is typically referred to as a 50(a)(6). There are 2 different ways a loan can be subject to Texas Article XVI, Section 50(a)(6): If the borrower will receive any amount of cash out from the refinance, even if it is of an incidental amount, or If the borrower has ever completed a cash-out refinance on the subject property before, or has secured a non-purchase money second, even if the current transaction is only a rate/term refinance. Once a Texas Equity Loan, always a Texas Equity Loan. Because incidental cash back to the borrower is not permitted on a rate/term refinance in Texas, MiMutual considers the following practices unacceptable: Including Fees Paid Outside of Closing in the Loan Amount Per Texas requirements, a fee that is paid outside of closing cannot be financed into the loan amount. When cash back is considered a refund for fees paid outside of closing (POC), MiMutual has essentially financed POC fees into the new loan amount. Additionally, MiMutual requires that in order for fees to be included in the loan amount, the fee must be reasonable, incurred, and be a necessary closing cost (i.e. required to close the transaction). Principal Curtailments/Reductions Applying a principal curtailment/reduction (normally the amount of the POC fees) results in a reduction to the principal amount of the loan as listed on the HUD; however, the principal amount of the loan as listed on the loan documents the amount the borrower is obligated to pay has not been reduced. Increasing Payoff Amounts for the Purpose of Reducing Cash Back Reducing cash back to the borrower by increasing payoff amounts on the HUD results in prohibited cash back to the borrower in the form of a payoff refund. When any loan proceeds from a borrower s homestead are being paid directly to the borrower, any creditor not secured by a lien against the property, or in payment of any existing home equity loan/line of credit, the transaction is a Texas 50(a)(6) loan. Refer to the TX 50(a)(6) chapter of the guidelines for specific guidance and requirements. Non-Homestead Properties Borrowers are allowed cash back on non-homestead property, even if they previously occupied the property and claimed it as homestead, providing: The borrower(s) now own another property as their primary residence of equal or greater dignity (MiMutual must be provided with evidence of same) It has been verified and documented with the title company that they will insure the property as non-homestead

69 Conventional Underwriting Guidelines Refinance Transactions Delayed Financing Exception Borrowers who purchased the subject property within the past six months (measured from the date on which the property was purchased to the application date of the new mortgage loan) may be eligible for a cash out refinance, as an exception, if all of the following requirements are met: The original purchase transaction was an arms-length transaction The borrower(s) meet all general eligibility requirements. The borrower(s) may have initially purchased the property as one of the following: o A natural person, o An eligible inter vivos revocable trust, when the borrower is both the individual establishing the trust and the beneficiary of the trust, o An LLC or partnership in which the borrower(s) have an individual or joint ownership of 100% The original purchase transaction is documented by a HUD-1 Settlement Statement, which confirms that no mortgage financing was used to obtain the subject property. (A recorded trustee s deed [or similar alternative] confirming the amount paid by the grantee to trustee may be substituted for a HUD-1 if a HUD-1 was not provided to the purchaser at time of sale). The preliminary title search or report must confirm that there are no existing liens on the subject property. The sources of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property) If the source of funds used to acquire the property was an unsecured loan or a loan secured by an asset other than the subject property (such as a HELOC secured by another property), the HUD-1 for the refinance transaction must reflect that all cash out proceeds be used to pay off or pay down, as applicable, the loan used to purchase the property. Any payments on the balance remaining from the original loan must be included in the debt-to-income ratio calculation for the refinance transaction. Funds received as gifts and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan. The new loan amount can be no more than the actual documented amount of the borrower s initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV/CLTV/HCLTV ratios for the cash out transaction based on the current appraised value). All other cash out refinance eligibility requirements are met. Cash out pricing is applicable. NOTE: Standard Exception Policy will apply. The date on the Certificate of Occupancy will determine New Construction/Less than 1 Year Old versus Existing Construction

70 Conventional Underwriting Guidelines Refinance Transactions Subordinate Financing Subordinate liens must be recorded and clearly subordinate to MiMutual s first mortgage lien. If a first mortgage is subject to subordinate financing, MiMutual will calculate the LTV, CLTV, and HCLTV ratios. If a lien is being subordinated, MiMutual will require the following: Copy of the Existing Note or HELOC Agreement with terms of financing A fully executed subordination agreement prior to closing, reflecting accurate terms of loan If the credit line is being reduced with a borrower pay down, a fully executed Modification agreement is to be provided (only in cases where the line has to be paid down to meet HCLTV/CLTV requirements) Follow the links for more information on Acceptable Subordinate Financing Types and Unacceptable Subordinate Financing Terms. Defining Refinance Transactions Based on Subordinate Lien Payoff The table below provides the underwriting considerations related to subordinate financing under refinance transactions: Refinance Transaction Includes Payoff of the First Lien and... The payoff of a purchase money second with no cash out The payoff of a non-purchase money second, regardless of whether additional cash out is taken The subordinate financing is being left in place, regardless of whether the subordinate financing was used to purchase the property, and the borrower is not taking cash out except to the extent permitted for a limited cash out refinance transaction The subordinate financing is being left in place, regardless of whether the subordinate financing was used to purchase the property, and the borrower is taking cash out Then MiMutual will underwrite the transaction as a... Limited cash out refinance Cash out refinance Limited cash out refinance Cash out refinance n/a n/a Comments The subordinate lien must be resubordinated to the new first mortgage loan

71 Conventional Underwriting Guidelines Refinance Transactions Cash Out and Principal Curtailments Principal Curtailments due to an excess premium from the Lender Credit, or to correct the amount of cash back to the borrower, are permitted. The matrix below describes maximum cash out requirements and allowable curtailments. Product Maximum Cash to Borrower FNMA DU Refi Plus $250 Limited Cash Out Refinance 2% or $2000 Maximum Principal Curtailment Due to changes in payoff figures, closing costs, etc. $500 Maximum Premium Pricing Curtailment 1% of the loan amount or $2000, whichever is less Closing costs paid out of the borrower s own funds may be reimbursed at closing and are not considered cash out. When a principal curtailment is permitted, all excess amounts must be clearly reflected on the HUD-1 as a principal reduction

72 Residential Purchase Agreement Conventional Underwriting Guidelines Purchase Transactions Purchase Transactions All purchase transactions require this document to be executed by ALL parties. The current owner of record must execute as the seller of subject property. All borrowers on the loan application must sign the agreement. All sellers that sign the purchase agreement must be authorized by that entity. If any changes to the purchase agreement occur, see Revisions Due to Sales Contract Amendments. Earnest Money Deposit (EMD) The Earnest Money Deposit must be verified (deposit amount and source of funds) regardless of the amount. If the Earnest Money Deposit is not verifiable, the borrower(s) should not be given any credit for it in the transaction or on the HUD-1 Settlement Statement. Short Sales MiMutual will accept purchase transactions where the seller is selling the home under a short sale agreement with their current lender. MiMutual must be given the fully executed short sale approval letter and the requirements set forth by the current lender must be met prior to closing. Interested Party Contributions Interested Party Contributions (IPCs) are costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property. Maximum IPCs allowed are as follows: Principal Residence or Second Home 6% for LTVs 90% 3% for LTVs > 90% Investment Property 2% Property Seasoning The date on the Certificate of Occupancy will determine new construction/less than 1 year old versus existing construction

73 Conventional Underwriting Guidelines Purchase Transactions Personal Property Any personal property (excluding appliances) transferred with a property sale must be deemed to have zero transfer value, as indicated by the sales contract and appraisal. If any value is associated with the personal property, the sales price and appraised value must be reduced by the personal property value for purposes of calculating the LTV/CLTV/HCLTV. Identity of Interest Transactions/Non-Arm s Length Transactions Non-arm's length transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property. Fannie Mae allows non-arm s length transactions for the purchase of existing properties unless specifically forbidden for the particular scenario, such as delayed financing. For the purchase of newly constructed properties, if the borrower has a relationship or business affiliation (any ownership interest, or employment) with the builder, developer, or seller of the property, Fannie Mae will only purchase mortgage loans secured by a principal residence. Fannie Mae will not purchase mortgage loans on newly constructed homes secured by a second home or investment property if the borrower has a relationship or business affiliation with the builder, developer, or seller of the property. Borrower Acting as an Interested Party A borrower may act as an interested party to a sales transaction for the subject property; however, the borrower may not use any payment for services rendered from the sales transaction of the subject property towards the down payment, closing costs and/or reserve requirements. (Payment for services rendered includes, but is not limited to: realtor commissions, broker commissions, sales associates commissions). NOTE: Non-Arm s Length transactions may require additional documentation, depending on the underwriter's assessment of the overall risk of the loan. Determining Property Taxes on New Construction Dwellings On newly-constructed properties, realistic estimates of the property taxes that reflect the value of the improvements once they are assessed by the units of government to which those taxes are paid must be used. Such estimates may be obtained from reliable sources such as the appraiser, comparable sales data, or the assessor s office. Reacquisition of a Formerly-Owned Property MiMutual is unable to finance the acquisition of a property that the borrower (or their spouse) has had previous ownership in, that resulted in foreclosure or short sale activity, where they relinquished their ownership interest but did not change their residency. MiMutual considers this as unacceptable property flipping

74 Seller Utilizing a Relocation Company Conventional Underwriting Guidelines Purchase Transactions When the seller enlists the assistance of a Relocation Company for the sale of the subject property, the relocation agreement must always be reviewed by MiMutual prior to closing. There are multiple ways the transaction can be consummated, and it is very important to have a clear understanding of which of the below-mentioned methods is being used. Relocation Company Takes Power of Attorney The most common circumstance is where the Relocation Company signs the purchase agreement as the seller, and will sign the closing documents on behalf of the vested owner. In this instance, a Power of Attorney executed by the vested owner(s), authorizing the relocation company to sign on their behalf (the vested owner will reflect as the seller on the HUD-1 statement) will be required. The Power of Attorney must be executed and dated prior to the execution of the purchase agreement (unless the relocation agreement states that a Power of Attorney will be prepared to consummate the closing). There must be documentation allowing someone else the right to sell the property. Double Escrow Another common occurrence involving relocation companies is where the Relocation Company will actually be the seller reflected on the HUD-1 settlement statement. In this circumstance, the title commitment should have a requirement for the current vested owners to deed the property to the Relocation Company, and another requirement for the Relocation Company to deed the property to our borrower. This is the only time a double escrow is acceptable, and not considered property flipping. Relocation Company Acts as Seller without Taking Title In certain geographical areas (i.e. Michigan), it may be common practice for the Relocation Company to negotiate and execute the purchase agreement and HUD-1 at closing as the seller, and to receive the proceeds from the sale of the property without actually taking title. This option is acceptable only if all of the following fully executed documents are reviewed and approved by the underwriter prior to closing: Warranty Deed Reflecting the Vested Owner with Buyer Info Left Blank: This is a deed executed by the vested owners, which is held in escrow by the title company until a buyer is found and the sale is closed. Appointment of Special Agent and Assignment of Proceeds: This document is executed by the vested owner authorizing the Title Company/Closing Agent to complete the appropriate information on the blank deed and other pertinent documentation. This also directs the Title Company/Closing Agent to allow the Relo Company to receive all proceeds. Special Power of Attorney: This document is executed by the vested owner authorizing the Relo Company to sign/execute all documents necessary to consummate the sale (i.e. Purchase Agreement, closing docs, etc.). This document should also reference the blank deed that will be completed when a buyer is found and the sale is closed. Relocation Agreement: This is the agreement between the vested owner and the Relo Company that will describe the terms of the sale of the subject property. This document is essential in determining the legitimacy of the transaction to avoid potential unethical property flipping schemes

75 Conventional Underwriting Guidelines Expanded LTV/CLTV/HCLTV Expanded LTV/CLTV/HCLTV Fannie Mae is providing new options to serve creditworthy borrowers and expand opportunities. Using Desktop Underwriter, mortgages for sustainable homeownership are able to be underwritten safely and responsibly. Effective for loan casefiles underwritten through DU v9.2, which will be implemented the weekend of December 13, 2014, LTV ratios greater than 95% up to a maximum of 97% will be allowed for: Standard purchase transactions, if at least one borrower is a first time homebuyer Standard limited cash out refinances of existing Fannie Mae loans Purchase Transactions The requirements for purchase transactions are in the following table: LTV/CLTV/HCLTV Ratios Loan Type Property and Occupancy Borrower Eligibility Underwriting Method Homebuyer Education and Counseling Minimum Borrower Contribution Mortgage Insurance Coverage Reserves Other Purchase Transactions LTV: to 97% CLTV: to 97% if the subordinate lien is not a Community Seconds loan 105% if the subordinate lien is a Community Seconds loan HCLTV: to 97% Fixed rate loans with terms up to 30 years *High Balance and ARM loans are not permitted One unit principal residences only. At least one borrower must be a first time homebuyer, as indicated on the Uniform Residential Loan Application (Form 1003) in Section VIII, when at least one borrower responds No to Declaration M: Have you had an ownership interest in a property in the last three years? *There are no income limit requirements DU only Not required Standard contribution requirements apply 35% Reserve requirements will be determined by DU. Reserves may come from eligible gifts All other MiMutual guidelines and policies apply

76 Conventional Underwriting Guidelines Expanded LTV/CLTV/HCLTV Limited Cash Out Refinance Transactions The increased LTV/CLTV/HCLTV ratios will be permitted for standard limited cash out refinance transactions if Fannie Mae is the owner of the existing loan. These requirements are not applicable to DU Refi Plus loans. The requirements are in the following table: Existing Loan LTV/CLTV/HCLTV Ratios Loan Type Property and Occupancy Underwriting Method Mortgage Insurance Coverage Other Limited Cash Out Refinance Transactions MiMutual must document that the existing loan being refinanced is owned (or securitized) by Fannie Mae. Documentation may come from: MiMutual s servicing system, The current servicer (if MiMutual is not the servicer), Fannie Mae s Loan Lookup tool, or Any other source as confirmed by MiMutual Fannie Mae must be indicated in the Owner of Existing Mortgage field on the loan application. Because this indication will be used by DU to determine eligibility of the loan for delivery to Fannie Mae when the LTV, CLTV, or HCLTV exceed 95%, MiMutual is required to document the loan being refinanced is currently owned by FNMA. *The Owner of Existing Mortgage field will not impact the underwriting of DU Refi Plus casefiles. DU will continue to determine eligibility for DU Refi Plus loans. LTV: to 97% CLTV: to 97% if the subordinate lien is not a Community Seconds loan 105% if the subordinate lien is a Community Seconds loan HCLTV: to 97% Fixed rate loans with terms up to 30 years *High Balance and ARM loans are not permitted One unit principal residences only. DU only 35% All other standard limited cash out refinance policies apply

77 Conventional Underwriting Guidelines Private Mortgage Insurance Private Mortgage Insurance (PMI) MiMutual will allow certain loans to exceed 80% LTV with Private Mortgage Insurance (PMI), providing the borrowers meet the guidelines of the MI Company (in addition to MiMutual s standard guidelines). Minimum Credit Score 660 Transaction Types Purchase Rate/Term Refinance Coverage Options Borrower-Paid Zero Option Monthly Premium Standard Coverage only Borrower-Paid Single Premium Standard Coverage only *Cannot be financed Lender-Paid Single Premium Lender-Paid Single Premium on High Balance Loans Points and Fees Restriction Certain MI premiums require inclusion in the 3% restriction on points and fees, effective with the QM Rule on January 10, The following MI options are not included in the points and fees calculation: All borrower-paid monthly premiums All lender-paid premiums The following MI options are required to be included in the points and fees calculation: All borrower-paid single premiums, whether refundable or non-refundable. *Single premiums up to the FHA premium rate (currently 1.75%) are not excluded NOTE: MiMutual does not offer borrower-paid annual premiums, lender-paid monthly premiums, or split premium mortgage insurance

78 Conventional Underwriting Guidelines General Provisions General Provisions Documentation Requirements All documentation must be from a reasonably reliable third-party source, and must satisfy the requirements of the Ability to Repay Rule. Citizenship Citizenship of the United States is not required for eligibility. Borrowers must be one of the following: a U.S. Citizen, a lawful Permanent Resident Alien, or a lawful Non-Permanent Resident Alien. We will lend under the same terms and conditions for all three designations. A mortgage to a non-u.s. citizen who has no lawful residency status in the United States is not eligible. Permanent Resident Aliens Non-United States Citizens who hold acceptable evidence of permanent residency issued by the U.S. Citizenship and Immigration Services (USCIS) are considered Permanent Resident Aliens. Lawful Permanent Resident Aliens must have any of the following: A legible copy of the front and back of the Permanent Resident Card / Alien Registration Card (USCIS Form I-551) otherwise known as a Green Card. While the Green Card itself states Do Not Duplicate for the purpose of replacing the original card, U.S. Citizenship and Immigration Services (USCIS) allow photocopying of the Green Card. Making an enlarged copy or copying on colored paper may alleviate any concerns the borrower may have with photocopying. A legible copy of the unexpired foreign passport that contains an unexpired stamp reading Processed for I-551. Temporary Evidence of Lawful Admission for Permanent Residence. Valid until (MM-DD-YY). Employment authorized. Any other evidence of permanent residency issued by the USCIS. Non-Permanent Resident Aliens Non-United States Citizens who are permitted to reside in the United States on a temporary basis and may have been granted authorization to work in the U.S. by the U.S. Citizenship and Immigration Services (USCIS) are considered Non-Permanent Resident Aliens. Required Visas All non-permanent resident aliens must provide evidence of a valid, acceptable visa or an Employment Authorization Document (EAD). A copy of the unexpired visa (see Expired Visa Requirements below) or EAD must be included in the Loan file

79 Conventional Underwriting Guidelines General Provisions Eligible Visa Classes A Series (A-1, A-2, A-3): These visas are given to officials of foreign governments, immediate family members and support staff. Only those without diplomatic immunity, as verified on the visa, are allowed. E-1 Treaty Trader and E-2 Treaty Investor: This visa is essentially the same as an H-1 or L-1; the title refers to the foreign country's status with the U.S. E-3: Given to Australian nationals employed in a specialty occupation. G series (G-1, G-2, G-3, G-4, and G-5): These visas are given to employees of international organizations that are located in the U.S. Some examples include the United Nations, Red Cross, World Bank, UNICEF, and the International Monetary Fund. Verification that the applicant does not have diplomatic immunity must be obtained from the applicant s employer and/or by the viewing the applicant s passport. H-1 (includes H-1B and H-1C) Temporary Worker: This is the most common visa given to foreign citizens who are temporarily working in the U.S. L-1, Intra-Company Transferee: An L-1 visa is given to professional employees whose company's main office is in a foreign country. O-1A: Individuals with an extraordinary ability in the sciences, education, business, or athletics (not including the arts, motion pictures, or television industry). O-1B: Individuals with an extraordinary ability in the arts or extraordinary achievement in motion picture or television industry. O-2: Individuals who will accompany an O-1, artist or athlete, to assist in a specific event or performance. TN, NAFTA visa: Used by Canadian or Mexican citizens for professional or business purposes. TC, NAFTA visa: Used by Canadian citizens for professional or business purposes. Expired Visa Requirements A borrower with an expired visa may be considered, subject to each of the following: Visa classification is one of the eligible visas listed above. Confirmation that the borrower has submitted an application for extension of the visa or an application for a green card. Documentation includes, but is not limited to: o USCIS Form I-797 (issued when an application or petition is approved). o USCIS Form I-797C or I-797E (must not state that the application has been declined). o Application for extension of current visa (USCIS Form I-539 or equivalent) or copy of application for green card (USCIS Form I-485 or equivalent) and electronic verification of receipt from the USCIS web site. o If the borrower is sponsored by the employer, the employer may verify that they are sponsoring the visa renewal

80 Conventional Underwriting Guidelines General Provisions Employment Authorization Document (EAD) A current (unexpired) Employment Authorization Document (EAD) issued by United States Citizenship and Immigration Services (USCIS) may be provided in lieu of a visa. If the EAD will expire within one year, the following must be provided: One previous EAD renewal must be documented, or If there are no prior EAD renewals, the likelihood of renewal must be determined based on the information from the USCIS. All standards for determining stable monthly income, adequate credit history, and sufficient liquid assets must be applied in the same manner to each borrower including borrowers who are nonpermanent resident aliens. NOTE: Non-Permanent Resident Aliens with Temporary Protected Status are not eligible. Additional Immigration Status Loans to non-citizens who have been granted political asylum require underwriting to Non-Permanent Resident Aliens guidelines. Asylees and refugees must provide their Arrival and Departure Records (Form I-94) and copies of their employment authorization documents. A grant of asylum is for an indefinite period. North American Free Trade Agreement (NAFTA) Workers Canadian and Mexican citizens who are working in the United States under the terms of NAFTA must be treated as Non-Permanent Resident Aliens when determining their eligibility. They must meet the standard requirements established for Non-Permanent Resident Aliens. NAFTA workers must provide a NAFTA Worker s Visa (see above TN and TC Visa classifications). Diplomatic Immunity Due to the inability to compel payment or seek judgment, transactions with individuals who are not subject to United States jurisdiction are not eligible. This includes embassy personnel with diplomatic immunity. Verification the borrower does not have diplomatic immunity will be determined by reviewing the visa, passport, or the U.S. Department of State s Diplomatic List, at (then click search list ). Social Security Number A valid Social Security Number is required for all borrowers. Evidence of social security number must be provided in each case file. Individual Tax Identification Number (ITIN) is not acceptable. Translated Documents All documents of foreign origin must be filled out in English, or a complete and accurate translation from an acceptable source must be provided for each document

81 Conventional Underwriting Guidelines General Provisions Legal Name Each borrower must use their legal name when applying for a mortgage. Review the following list of documents to ensure the borrower s name is consistent: Loan application (1003) Credit Report DU/LP findings MiMutual requires that all pertinent loan documentation be prepared in the borrower s legal name. In most cases the name reflected on the driver s license is utilized to determine the borrower s legal name. However, in those instances where there is a variance between the driver s license, Social Security card, income, and asset documents, the underwriter will exercise due diligence to determine all documents belong to one and the same person. Married Names If a borrower has recently married or is married during loan processing, the new married name, if applicable, will be utilized for all pertinent loan documentation. MiMutual will require a copy of the marriage license if the new name is not reflected on both the driver s license and the social security card. NOTE: In all of the above cases, an AKA/FKA affidavit containing all name variations will be required at closing. Maximum Number of Financed Properties/Multiple Properties When multiple properties are owned, all mortgages must be current at time of closing. Also, If borrower is purchasing a new home (as owner occupied); however, is not selling current residence, MiMutual may consider the subject as non-owner occupied if the value of the subject is not greater than current residence (case by case). The borrower(s) can have no more than four properties financed including the subject property, and the maximum number of properties owned (financed or not) cannot exceed ten. To determine how to apply the limitations based on the type of property ownership, reference the table in FNMA s Selling Guide. Maximum Number of Borrowers Allowed MiMutual does not allow any greater than 4 borrowers on a single loan. Age of Borrower There is no maximum age limit for a borrower. The minimum age is 18. Non-Occupant CoBorrowers A non-occupant coborrower is permitted on a 1-4 unit principal residence, with a maximum LTV of 95%. DU will consider the income, assets, liabilities, and credit of all borrowers in the analysis, whether the individual borrower will occupy the property or not

82 Power of Attorney Conventional Underwriting Guidelines General Provisions MiMutual allows a Power of Attorney (POA) under the following criteria: Application, initial disclosures, and Purchase Agreement (if applicable) must be signed by all parties on the loan Subject property must be owner-occupied All signatures on the POA must be notarized, and the POA must be reviewed by a MiMutual underwriter prior to closing. Signatures on the POA must match the signatures in the file to MiMutual s satisfaction. The POA must be transaction-specific, including the full property address of the subject The title policy must not make any exceptions based on the use of the POA NOTE: For properties located in Florida, all Powers of Attorney executed after October 1, 2011 are required to be signed by a Notary Public and two witnesses. Rescission MiMutual will not waive a borrower's three-day right to rescind. No exceptions. Tax and Insurance Escrows Escrows for taxes and insurance are required for all loans with an LTV in excess of 80%. Escrow waivers are only permitted for loans with LTVs 80% (with the exception of properties in California, where escrow waivers are permitted up to 89.99% LTV, and properties in New Mexico, where escrow waivers are only permitted up to 79.99%). Loans with delinquent taxes that are being paid with loan proceeds (cash out refinances) are not eligible for an escrow waiver. Additionally, flood insurance premiums are required to be escrowed, regardless of LTV, state law, or whether borrower qualifies for/elects to use an escrow waiver for property taxes and homeowners insurance. Partial Escrow Policy Where a borrower qualifies for an escrow waiver, MiMutual will allow a borrower to escrow property taxes only, and not escrow for hazard insurance. This selection must be made prior to closing, or redisclosure will be required and the closing will be delayed

83 Conventional Underwriting Guidelines General Provisions Flood Insurance MiMutual requires flood insurance for all properties that are located within a flood zone. If flood insurance is not available in certain flood hazard areas because the community does not participate in the National Flood Insurance Program (NFIP), MiMutual will not finance properties located in those areas. Sufficient dwelling coverage must be determined using the same methodology as described in Hazard Insurance below, but may never exceed $250,000 (NFIP maximum). All principal and/or residential detached structures on the mortgaged property must be covered. Flood insurance premiums must be escrowed, regardless of LTV and/or state law. The only exception to this requirement is if the property has adequate flood insurance coverage provided by a condominium association, homeowners association, or similar group, and the premium is paid by the group as a common expense. Hazard Insurance MiMutual requires hazard insurance on all properties being financed. For a first mortgage secured by a property on which an individually held insurance policy is maintained, MiMutual requires coverage equal to the lesser of the following: 100% of the insurable value of the improvements, as established by the property insurer; or the unpaid principal balance of the mortgage, as long as it at least equals the minimum amount 80% of the insurable value of the improvements required to compensate for damage or loss on a replacement cost basis. If it does not, then coverage that does provide the minimum required amount must be obtained NOTE: Unless a higher maximum is required by state law, the maximum deductible is 5% of the policy face amount. Non-Homestead Property Taxes When the subject property is not currently owner-occupied, but it is verified that it will be when the mortgage transaction is complete, the verified amount of homestead property taxes may be used in qualification. This amount can be determined by county information that provides a clear description of the property tax amount once the homestead exemption has been applied. Title Companies/Settlement Agents We do not use an approved title company list. However, we reserve the right to refuse any title company/settlement agent. A loan specific Insured Closing Protection Letter must be received prior to closing, along with specific wiring instructions

84 Title Requirements Conventional Underwriting Guidelines General Provisions Redemption Periods on Title MiMutual will not accept an unexpired redemption period exception on the final title policy. This guidance applies when the seller is an entity other than the individual with redemption rights. Schedule B All exceptions reflected in Schedule B of the preliminary title report that may impact lien position must be addressed and/or cleared to ensure the final title policy will reflect the loan in first lien position Delinquent Property Taxes Any delinquent property taxes being paid at closing on a refinance transaction will be considered a cash-out transaction. Transactions with severely delinquent property taxes (such as those resulting in a tax sale, and therefore being outside of DU s risk assessment) must be manually underwritten, which MiMutual does not permit on Conventional loans. Paying Debt at Closing MiMutual will not allow any debt to be paid at closing on a purchase transaction. Any debt being paid at closing on a refinance (other than existing mortgages on subject property) will be considered a cash-out transaction. Mortgage Payoffs All refinance transactions will require current payoff statements for all liens on title to reflect the loan is current at time of closing (should not reflect more than 59 days of interest). However, when paying off an existing FHA loan, where it is permitted for the servicer to collect a full 30 days of interest if payment in full is received after the required monthly payment due date, may result in a full two months worth of interest on the payoff. As long as the mortgage is current, this would be considered acceptable. MiMutual does not refinance loans that have been modified (due to hardship), have forbearance agreements in place, or with restructured/short payoffs. Verifications Verification forms (VOEs / VODs / VORs, etc.) must pass directly between the broker and the provider without being handled or transmitted by any third party or using any third party s equipment. Verifications must be addressed to the employer or financial institution and may not be directed to an individual (such as may be directed to Account Verification Department or Human Resources but not to John Doe). No document used in the processing or underwriting of a loan may be handled or transmitted by or through the borrower, a real estate agent or any other interested third party to the transaction. The Verification of Deposit (VOD) and Verification of Employment (VOE) may be faxed documents or printed pages from the Internet if they clearly identify their sources (e.g., contain the names of the borrower s employer or depository/investment firm). The document must contain all headers/footers. Fax transmissions must clearly identify the source and a printed web page also must show its uniform resource locator (URL) address as well as the date it was printed

85 Conventional Underwriting Guidelines General Provisions Age of Documents Credit document expiration dates are listed below unless the nature of the document is such that its validity for underwriting purposes is not affected by being older than the number of prescribed days (e.g. divorce decrees, tax returns). Credit Report - 90 days Paystub 60 days Written VOE - 90 days VOD/Bank Statement 60 days (funds to close or reserves) or the most recent statement, if statements are received quarterly, as is typically seen with 401(k) or retirement account statements VOR 90 days VOM 30 days Appraisal 120 days Title Commitment 90 days Closing Protection Letter 30 days NOTE: Agency document expiration dates can be followed with a score of 680+, providing the loan is not a specialty product (for example, DU Refi Plus or High Balance) and meets QM Safe Harbor requirements. Non-Purchasing Spouse On a purchase transaction, a non-purchasing spouse (or any other party) may appear on the security instrument or otherwise take title to the property at loan settlement. On a purchase or refinance transaction, if required by state law (dower right/homestead states), in order to perfect a valid and enforceable first lien, the non-purchasing spouse may be required to sign either the security instrument or documentation (usually, the mortgage/deed of trust, Truth-In-Lending and Notice of Right to Cancel) evidencing that he or she is relinquishing all rights to the property. If the non-purchasing spouse executes the security instrument for such reasons, he or she is not considered a borrower for our purposes and need not sign the loan application. Where there are non-purchasing spouses who sign security instruments relinquishing their rights to the property pursuant to applicable state laws, these non-purchasing spouses do not have to sign the mortgage note. Signing the security instrument for such purposes does not make the non-purchasing spouse a coborrower. Mortgages in the name of the non-purchasing spouse (the person named on the Note is not our borrower) must be verified as current. Any delinquency on the mortgage history in the most recent 12 months must be evaluated when determining the credit worthiness of the borrower

86 Conventional Underwriting Guidelines General Provisions Electronic Signatures MiMutual can accept esigned origination documents (application, application disclosures, etc) from an approved vendor once the broker has been approved through our Client Relations department. All loan submissions using esign must include a Disclosure Tracking Summary or Disclosure Tracking Detail. If the Disclosure Tracking Detail indicate that disclosures were either not delivered in a timely manner to ensure compliance with federal and state regulations, or not in compliance with the esign Act, the loan is ineligible for delivery to MiMutual. Ineligible Documents for esignature The following documents require wet signatures: Any closing documents or documents that require notarization or witnesses, including Power of Attorney SSA-89 Borrower s Certification & Authorization LOX for inquiries Priority Appraisal Credit Card Authorization Approved Vendors

87 Conventional Underwriting Guidelines General Provisions Trusts Living ( inter vivos ) trusts must comply with local state regulations and the following requirements. To be eligible for financing, the borrower must be: The settlor, or the person who created the trust, and The beneficiary, or the person who is designated to benefit from the trust, and The trustee or the person who will administer the trust for the benefit of the beneficiary, the borrower Eligible Borrowers One or more borrowers with one living trust, or Two or more borrowers with separate living trusts, or Multiple borrowers with one or more holding title as an individual and one or more holding title as a living trust Eligible Properties 1-4 unit primary residences 1 unit second homes Required Documentation Attorney s Opinion Letter from the borrower s attorney, verifying all of the following: o The trust was validly created and is duly existing under applicable law, o The trust is revocable, o The borrower is the settlor of the trust and the beneficiary of the trust o The trust assets may be used as collateral for a loan, o The trustee is: Duly qualified under applicable law to serve as trustee, Is the borrower, Is the settlor, Is fully authorized under the trust documents and applicable law to pledge or otherwise encumber the trust assets Complete copy of the trust documents certified by the borrower to be accurate, OR a copy of the abstract or summary for jurisdictions that require a lender to review and rely on an abstract or summary of trust documents instead of the trust agreements Exception for Trust Certificate Authorized States In lieu of the Attorney s Opinion letter and copies of trust documents, the title company Trust Certification is acceptable for the following states: Alabama Kansas New Mexico Tennessee Arizona Maine North Carolina Texas Arkansas Michigan Ohio Vermont California Minnesota Oregon Virginia District of Columbia Missouri Pennsylvania Washington Idaho New Hampshire South Carolina Wyoming The same terms and conditions apply as shown above for the Attorney s Opinion. NOTE: This exception is not applicable to Jumbo loans. A complete copy of the trust along with an Attorney s Opinion Letter is required for all Jumbos

88 Other Title and Closing Requirements Ineligible Conventional Underwriting Guidelines General Provisions The title to the property is vested in the trustee on behalf of the trust (or such other customary practices), Title binder may not contain any exceptions to coverage based on the mortgaged property being held by the living trust, The Note must be executed individually by the settlor and by the trustee on behalf of the trust. The Revocable Trust Rider must be used with the mortgage or Deed of Trust The date of the trust must be reflected on the Note as part of the description below the Trustee s signature (i.e. Jane Doe, Trustee of the Jane Doe Trust dated April 1, 2000) Blind Trusts Life Estates LDP/GSA Lists MiMutual will examine HUD s Limited Denial of Participation (LDP) list and the U.S. General Services Administration s List of Parties Excluded from Federal Procurement and Non-procurement Programs (GSA). The LDP and GSA lists must be checked on all loans. If the name of the broker s office or loan officer appears on either list, the application is not eligible. The LDP list may be checked by going to and the GSA list by going to Debt-To-Income Ratios Maximum debt ratios are determined by the AUS Credit Card Financing MiMutual permits certain costs that must be paid early in the application process, such as lock-in fees, origination fees, commitment fees, credit report fees, and appraisal fees, to be charged to the borrower s credit card because these fees do not represent extraordinary amounts and the credit card debt is considered in the borrower s total monthly debt-to-income ratio. Borrowers are not required to pay off these credit card changes before closing. Under no circumstances may credit card financing be used for the down payment. MiMutual may allow credit card financing for the payment of common and customary fees paid outside of closing up to a maximum of 2% of the loan amount if we: confirm that the borrower has sufficient liquid funds (financial reserves) to cover these charges (in addition to funds needed for other closing costs and the down payment that he or she will be paying); or recalculate the credit card payment to account for the new charges and include the updated payment in the qualifying ratio calculation. MiMutual must apply this policy manually, by either including the fees charged to the borrower s credit card on line f. Estimated Closing Costs of the Details of Transaction, and removing any Borrower Paid Fees entered in the Other Credits section of the Details of Transaction for the fees paid outside of closing; or by increasing the monthly credit card payment in the liabilities section of the loan casefile submitted to DU to include the charges if not reflected in the credit report

89 ARMs Conventional Underwriting Guidelines ARMs ARMs are not eligible for the Expanded LTV/CLTV/HCLTV program. Unless otherwise stated below, all of MiMutual s standard Conventional underwriting guidelines apply. Product Description 5/1 and 7/1 ARMs available on a 30 year term Index LIBOR for 12 months (US Dollar) as published in the Wall Street Journal Margin 2.25% Caps 5/1 ARM: Initial Period: 2% Subsequent Periods: 2% Lifetime: 5% 7/1 ARM: Initial Period: 5% Subsequent Periods: 2% Lifetime: 5% Qualifying Rate 5/1 Use the higher of the fully indexed rate (index + margin) or initial note rate + 2% 7/1 Use the greater of the fully indexed rate (index + margin) or the note rate Maximum Loan Amount 1 Unit: $417,000 2 Unit: $533,850 Fannie Mae County Loan limits can found at:

90 Maximum LTV/CLTV/HCLTV Ratios Please see MiMutual s Conventional LTV Matrix for specific LTV/CLTV/HCLTV limits Conventional Underwriting Guidelines ARMs Financing Types Purchase Rate/Term Refinance (Limited Cash Out) HUD-1 required from any transaction within the last 6 months. If a new transaction combines a first and non-purchase money subordinate second or previous transaction was a cash out, regardless of the seasoning, it is still considered a cash out refi. Cash Out Refinance One borrower must have held title to the subject property for at least 6 months (measured from previous note date to new application date). Property Types Condominiums Project must be FNMA-warrantable Florida condos are permitted for primary residences only Established projects require a Lender Full Review. New and newly-converted attached projects must have PERS Final Project Approval issued by FNMA. Ineligible Project Warranty includes FHA-approved project, CPM Expedited, Limited Review Appraisal Requirements Follow DU Recommendation (Remainder of page intentionally left blank)

91 Conventional Underwriting Guidelines High Balance Loans High-Balance Loans Fannie Mae permits loan amounts to exceed the General Loan Limits in certain geographic locations. Listings of loan limits by area, as determined by the FHFA, are provided at the following site: Click on the link Conforming Loan Limits by Area, and the spreadsheet provides drop-down menus to allow sorting and viewing by county, state, or MSA. All standard Conventional underwriting guidelines apply, except as described below. Minimum / Maximum Loan Amounts High Balance Area Loan Limits Established by Federal Housing Finance Agency (FHFA) in the Continental US Units Minimum Loan Amount Maximum Loan Limits 1 $417,001 $625,500 2 $533,851 $800,775 3 $645,301 $967,950 4 $801,951 $1,202,925 *These amounts are the maximum loan amounts that may apply; the limit may be lower for a specific high-balance area; however may not exceed 115% of area median home price. Loan Amount and LTV Limitations High Balance loan eligibility with regards to LTV, CLTV, and HCLTV mirror standard eligibility requirements, with a maximum of 95%. NOTE: High Balance loans are not eligible for the Expanded LTV/CLTV/HCLTV program. Minimum Credit Score 660 Available Terms 10, 15, 20, and 30 year fixed rate loans are available. Maximum Debt-to-Income Ratio (DTI) 45% Occupancy Primary residence Second home Investment property

92 Conventional Underwriting Guidelines High Balance Loans Property Types Florida Condos not permitted. See lists of Eligible Collateral and Ineligible Collateral in standard Conventional guidelines for further clarification. Private Mortgage Insurance (PMI) Private Mortgage Insurance is required for High Balance loans with LTV ratios greater than 80%. Check with individual MI Companies for any overlays, if applicable. Assets Minimum Borrower Investment (From Own Funds) No minimum investment required beyond standard guidance Gift Funds Gift funds are permitted per standard guidance. Reserves Follow DU s recommendation for required reserves Appraisals MiMutual will follow DU recommendation. In addition to the standard Selling Guide or DU fieldwork requirements, a One-Unit Residential Appraisal Field Review Report (Form 2000) or a Two- to Four-Unit Residential Appraisal Field Review Report (Form 2000A), is required if the property is valued at $1,000,000 or more and the LTV, CLTV, or HCLTV ratio is greater than 75%. A Field Review is required to ensure that the appraisal is an accurate representation of value. If the Field Review results in a different opinion of value than the appraisal, the lowest of the original appraised value, the Field Review value, or the sales price (for purchases) should be used to calculate the LTV ratios. Seller Contributions Max 3%

93 DU Refi Plus Conventional Underwriting Guidelines DU Refi Plus DU Refi Plus loans, which are part of the HARP initiative, are available for applications through December 31, Available Terms 10, 15, 20, 25, and 30 year fixed rate Maximum LTV/CLTV Unlimited LTV/CLTV/HCLTV Maximum Mortgage Amount The maximum mortgage amount is the payoff balance of the existing first mortgage plus closing costs and prepaid expenses. High Balance loans are permitted. The eligibility parameters for DU Refi Plus supersede those for the High Balance feature. The new loan may have a High Balance feature, subject to current loan limits. Jumbo loans are not permitted. Minimum Credit Score A minimum credit score of 680 is required. Qualifying Ratios As determined by DU Approve/Eligible findings Credit Mortgage Payment History Cannot be past due by two or more payments in the last 12 months Bankruptcy A minimum of 48 months must have elapsed since the discharge date Foreclosure A minimum of 84 months must have elapsed since the date of the event

94 Occupancy 1-4 unit primary residence 1 unit second home 1-4 unit investment property Conventional Underwriting Guidelines DU Refi Plus NOTE: The existing mortgage and the new DU Refi Plus mortgage loan do not have to represent the same occupancy. The occupancy of the subject property may have changed by the time of the new mortgage transaction. Because the loan represents existing FNMA risk, there is no requirement that the occupancy has stayed the same. Property Types DU Refi Plus property types mimic the Eligible Collateral and Ineligible Collateral lists in the Collateral chapter. NOTE: Though a condo questionnaire is not required for condominiums, the HOA must still verify that the property is not a condotel, houseboat project, a timeshare, or a segmented ownership project. Benefit to Borrower To be eligible for DU Refi Plus, the borrower must receive a benefit in the form of either a reduced monthly mortgage payment (principal and interest), a more stable product (such as a move to a fixed-rate mortgage from an ARM), a reduction in the interest rate, or a reduction in the loan amortization term. DU Findings Approve/Eligible recommendation required for approval. Findings must contain the DU Refi Plus condition. Manual underwrites are ineligible. Approve/Ineligible recommendations are not acceptable, regardless of reason. Escrow Waivers Permitted for all DU Refi Plus loans that exceed 80% LTV, providing they previously had an escrow waiver. Credit Documentation Requirements Income A VVOE will be performed within 10 days of closing for all loans W2 Borrower: Most recent paystub and last year s W2 statement(s) Commission Income: Most recent paystub and last year s W2 statement(s) or most recent year s personal tax returns (without regard to percentage of commission earnings) Self-Employed: Most recent year s personal tax returns

95 Assets Conventional Underwriting Guidelines DU Refi Plus Any funds required for closing will need to be documented with 1 month bank statement dated no less than 60 days from closing. Large deposits that appear on statements are not required to be investigated Proof of liquidation of assets to pay closing costs is not required Standard policy regarding discount of certain assets (60%) applies if the assets are required to satisfy DU reserve requirements. Mortgage Insurance MiMutual will only accept loans that do not require Mortgage Insurance. This includes situations in which the original loan had an LTV of less than or equal to 80%, and the new loan has a LTV greater than 80% but no MI is required per Fannie Mae's MI waiver for DU Refi Plus loans. Appraisal Requirements As determined by DU. A Property Inspection Waiver may be available for a fee of $75.00, if the PIW condition appears on the findings. If an appraisal is required, it must be ordered through Priority Appraisal USA. For a refinance of an investment property, Form 1007 is not required to be obtained if the borrower is using rental income to qualify. Subordinate Financing New subordinate financing is only permitted if it replaces existing subordinate financing Existing subordinate financing may not be satisfied with the proceeds of the new DU Refi Plus loan Existing subordinate financing can remain in place as long as it is resubordinated to the new DU Refi Plus loan Existing subordinate financing may be simultaneously refinanced as long as the new subordinate lien loan amount does not exceed the existing unpaid principal balance A signed Subordination Agreement will be required prior to closing

96 Additional Important Notes Conventional Underwriting Guidelines DU Refi Plus Maximum $250 cash back. Cash out refinances are not permitted. Original loan must have closed prior to 6/1/2009 in order to be eligible An existing borrower(s) may be removed from the new loan, provided: o The borrower being removed is also removed from the deed and retains no ownership interest in the property, and o At least one of the original borrower(s) is retained on the new loan Borrower(s) may be added to the new loan, provided the existing borrower(s) is retained. Make sure name and address in DU match the name and address on the previous FNMA loan exactly. Example: John B Homeowner vs. John B. Homeowner Borrower availability can be checked at Some loans that contain credit enhancements will not be eligible for this program. This includes some loans with lender-paid Mortgage Insurance (LPMI) and lender recourse. It does not need to be confirmed that the subject property is not currently listed for sale

97 Conventional Underwriting Guidelines Repair Escrows Repair Escrows Introduction Escrow holdbacks are used to facilitate loan closings for properties that require no more than $5000 of minor repairs. The borrower is required to establish a cash escrow that will ensure the completion of the required repairs. These proceeds are held in an escrow account until the repair requirements are completed. This borrower accommodation allows the loan to close and the borrower to occupy the property while incidental work is finished. This document is intended to give guidance on proper qualification and closing procedures. Requirements MiMutual will allow escrow holdbacks under the following conditions: Minimum Amount: $500 Maximum Amount: o $5000 on existing construction o 10% on new/proposed construction MiMutual will collect a $175 Repair Escrow Administration Fee from the borrower at closing. These funds will be used to pay for the Final Inspection once all repairs have been completed satisfactorily. All work must be completed by a licensed contractor/builder MiMutual will hold and administer the escrow account. Lien waivers will be required upon disbursement (only 1 disbursement). An Escrow Agreement must be executed by MiMutual and the borrower that states how the escrow account will be managed, and how funds from the escrow account will be disbursed. The mortgage insurance (if applicable) and title insurance may not be adversely affected during or after the time the completion escrow is in effect Once a Certificate of Completion is obtained, MiMutual will release the final draw from the escrow account, which should include any funds in excess of the amount needed to pay for the completion of the postponed items. MiMutual will then obtain a final title report, which must not show any outstanding mechanic s liens, take any exceptions to the postponed improvements, or take any exceptions to the escrow agreement. If the final title report is issued before the completion of the improvements, an endorsement to the title policy must be obtained that ensures the priority of MiMutual s lien. Restrictions Not available on Jumbos

98 New or Proposed Construction Conventional Underwriting Guidelines Repair Escrows All improvements must be completed within 180 days of the date of the mortgage note. Acceptable items include items that: o Are part of the sales contract (third party contracts are not permissible); o Are postponed for a valid reason, such as inclement weather or a shortage of building materials; and o Do not affect the ability to obtain an occupancy permit A certification of completion must be obtained to verify the work was completed, and must: o Be completed by the appraiser, o State that the improvements were completed in accordance with the requirements and conditions in the original appraisal report, and o Be accompanied by photographs of the completed improvements The cost of completing improvements must not represent more than 10% of the as completed appraised value of the property. A completion escrow must be established for the postponed improvements, by withholding from the purchase proceeds funds equal to 120% of the estimated cost for completing the improvements. However, if the contractor or builder offers a guaranteed fixed-price contract for completion of the improvements, the funds in the completion escrow only need to equal the full amount of the contract price. Existing Construction If there are minor conditions or deferred maintenance items to be remedied or completed after closing, these items may be escrowed for, as long as MiMutual can ensure that these items do not affect the safety, soundness, or structural integrity of the property. Minor conditions and deferred maintenance items include, but are not limited to: worn floor finishes carpet minor plumbing leaks holes in window screens cracked window glass, or other minor issues typically related to normal wear and tear In this instance the appraiser must complete the appraisal subject to completion of these repairs. NOTE: Properties with incomplete items or conditions that DO affect the safety, soundness, or structural integrity of the property are ineligible. When setting up an escrow holdback, the following documentation is required for MiMutual Underwriter review and approval, specific to the holdback, before the loan is cleared to close: Two (2) itemized bids, from licensed contractors, that clearly identify each item to be completed (including an itemized estimation of costs). MiMutual will use 150% of the highest bid to establish the escrow account. A copy of the contractor s current license. All repairs must be completed within 90 days of the Note date. The cost of completing the improvements must not exceed $5,

99 Appraisal Requirements: Conventional Underwriting Guidelines Repair Escrows Appraisal reports must reflect adverse conditions that were apparent during the inspection or discovered while performing research, such as, but not limited to, needed repairs and/or deterioration Detrimental conditions of the improvements must be reported in the appraisal even if the conditions are typical for competing properties The appraiser must identify: o Items that require immediate repair; and o Items where maintenance may have been deferred, which may or may not require immediate repair The appraisal comments section must address needed repairs and physical, functional, or external inadequacies If the appraiser is not qualified to evaluate the alterations or repairs needed, the appraisal must identify and describe the deficiencies, and the property must be appraised subject to a satisfactory inspection by a qualified professional. The appraisal may have to be revised based upon the results of the inspection. If so, the report must indicate the impact, if any, on the final opinion of value. MiMutual will review the revised appraisal report to ensure that no physical deficiencies or conditions that would affect the safety, soundness, or structural integrity of the property are indicated. A certification of completion is required to ensure the necessary alterations or repairs have been completed. Completion of Repairs Upon completion of the work and prior to the repair escrow deadline, MiMutual will work directly with the customer and the contractor to obtain the following items to document that all the work has been completed. Appraisal Update, which can be satisfied with any of the following: o Appraisal Update and/or Completion Report (Form 1004D) o Uniform Residential Appraisal Report (Form 1004) Invoices showing work completed that are to be paid Signed lien waivers from builder/contractor

100 Conventional Underwriting Guidelines Texas 50(a)(6) Texas 50(a)(6) When any loan proceeds are being paid directly to the borrower, any creditor not secured by a lien against the property, or in payment of any existing home equity loan or line of credit, the transaction is a Texas 50(a)(6) loan. Available Terms 10, 15, 20, and 30 year fixed LTV/CLTV/HCLTV The maximum LTV/CLTV/HCLTV permitted is 80% of the fair market value of the property on the date the loan is closed. Example: Property with fair market value of $100,000, the maximum amount of debt against the property is $80,000. If existing liens (other than the current loan if it is being refinanced) total $30,000, the maximum allowed amount of the equity loan is $50,000. Subject Property The subject property must be: A one-unit primary residence located in the state of Texas The borrower s homestead (may not be a second home or investment property) A residential property not a farm, ranch, or used for any agricultural purposes/milk production Required Forms In addition to all standard state-specific disclosure requirements, the following disclosures are needed for all 50(a)(6) loans: Notice Concerning Extensions of Credit (12 Day Disclosure Notice) MiMutual must provide this disclosure at least 12 calendar days prior to closing. The disclosure must be signed and dated by the owner and returned to MiMutual. Loan closing may not occur until at least 12 calendar days after the date on the disclosure. If this disclosure is mailed to the owner, the loan may not be closed until 15 days after mailing. The 3 additional mailing days may not include Sundays and federal holidays. Affidavit of Fair Market Value MiMutual and the owners of the homestead (subject property) must execute a written acknowledgement of the fair market value of the homestead property as of the date the extension of credit is made. Both the borrower and an authorized MiMutual representative must sign this document on the day of closing. NOTE: Both of these documents must be signed by the borrower s spouse (if applicable), regardless of whether the spouse is a borrower on the loan or holds title to the subject property

101 Conventional Underwriting Guidelines Texas 50(a)(6) Additional Signature Requirements The security instrument (mortgage/deed of trust) must be signed by each owner and each owner s spouse, regardless of whether or not all of these individuals are borrowers on the Note. Homestead Limitations The title commitment / survey will be reviewed to verify the subject property does not exceed the land limitations for 50(a)(6) eligibility. The amount that may be claimed as homestead property is: 10 acres for an urban property 100 acres (single person) or 200 acres (married couple) for a rural property Fee Limitations Fees to be paid by the borrower may not exceed 3% of the appraised value of the subject property, including discount points. Please reference the table below to determine which fees are included in the 3% calculation

102 AUS Requirements Conventional Underwriting Guidelines Texas 50(a)(6) This is a Freddie Mac product. Although DU is used as the AUS, Fannie guides should not be followed All TX 50(a)(6) loans must be coded as cash out refinances, regardless of cash back to borrower Additional Requirements Title commitment must be vested in the borrower s name (and spouse, if applicable). Title may not be vested in a living trust. The tax certificate must be reviewed to determine that the property is not subject to an agricultural exemption. This information will also be indicated on the title report, and it is also recommended that the appraisal be reviewed for indications of agricultural use. If the property is agricultural, STOP! The application must be declined, as 50(a)(6) loans may not be secured by agricultural property. A borrower is only permitted one home equity loan per year, regardless of how quickly the loan is repaid, and a home equity loan may not be converted to another type of loan. Only one home equity loan may be made against a home at a time. While additional financing arrangements might be possible, a homeowner cannot obtain a second home equity loan until the first has been paid in full. Not later than one day prior to closing, the borrower must receive a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged (via the final HUD-1 Settlement Statement). A survey must be obtained, and it must document that the property does not exceed the amount of homestead that may be claimed. An existing survey is acceptable, providing it still accurately represents all features of the property. Mail-out closings are not permitted. A home equity loan may be closed only at the permanent office of MiMutual, a title company, or an attorney s office. The use of a Power of Attorney is not permitted. Fees to be paid by the borrower may not exceed 3% of the appraised value of the subject property, including discount points. A full appraisal with interior/exterior inspection is required on all loans, regardless of AUS findings

103 Program Overview HomeReady Conventional Underwriting Guidelines HomeReady Affordable lending product for creditworthy, low- to moderate-income borrowers with expanded eligibility for financing homes in designated low-income, minority, and disaster impacted communities HomeReady will have to be selected as the Community Lending Product o When a casefile is not underwritten as HomeReady, DU will compare the total qualifying income on the loan against the HomeReady income guidelines for the census tract in which the property is located (using FIPS code entered on the loan application or address standardization). If it appears the loan is eligible based on income limitations only, DU will issue a message that the loan may be eligible for HomeReady, and that HomeReady may be chosen as the Community Lending Product and resubmitted to DU. DU will apply eligibility guidelines for maximum LTV (97%): o 1-4 family principal residence only. No second homes or investment properties. 1 unit: SFR, eligible condos, PUDs 2-4 unit: condos and manufactured homes not permitted o Purchase or limited cash out refi only. No cash out refis Manufactured homes not permitted High Balance loans eligible but subject to standard LTV/CLTV/HCLTV guides (max 95%); however, CLTV may exceed 95% on fixed rate mortgages when subject to a Community Seconds loan Borrowers are not required to be First Time Homebuyers Available Terms Fixed: 10, 15, 20, 30 year ARMs: 5/1, 7/1 Max LTVs 1 Unit: o Purchase: 97% FRM // 90% ARM o LCOR: 95% FRM // 90% ARM 2-4 Unit (Purchase and LCOR): o 2 Unit: 85% FRM // 75% ARM o 3-4 Unit: 75% FRM only

104 Income Conventional Underwriting Guidelines HomeReady Income Limitations Income guidelines (DU will apply these guides based on the census tract): No income limits for properties located in low-income census tracts 100% of Area Median Income (AMI) for properties located in high-minority census tracts or designated disaster areas 80% of AMI for properties located in all other census tracts To look up HomeReady income eligibility by property address or by Federal Information Processing Standards (FIPS) code, use the HomeReady Income Eligibility Lookup tool. Non-Occupant CoBorrowers Non-occupant coborrowers are permitted, and the income and liabilities of all borrowers will be considered when determining the DTI used for qualifying. Income is also subject to income limitations. Non-occupant borrowers are permitted to own other residential properties Subject to standard LTV/CLTV/HCLTV guides (max 95%) o CLTV may exceed 95% on fixed rate mortgages that are not secured by a manufactured home when subject to a Community Seconds loan Non-Borrower Household Income Non-borrower household income may be considered as a compensating factor to be eligible for a higher DTI. It is not added to the borrower s income for qualifying purposes; however, the existence of this income may allow the borrower to have a DTI greater than 45% (up to 50%) when the amount of the nonborrower income is 30% or more of the total qualifying income used to underwrite the casefile. Non-borrower income is not used for qualifying purposes, and is not considered when determining whether the loan meets the HomeReady income limitations When needed as a compensating factor for a higher DTI, DU will issue a message requiring a signed statement of the non-borrower s intent to reside with the borrower for a minimum of 12 months (FNMA Form 1019 may be used), and reminding MiMutual of the requirement to document nonborrower income in accordance with the Selling Guide. o If the DTI does not exceed 45% (the loan is eligible without the non-borrower income), these messages will not fire and this documentation is not required. The non-borrower household member is not required to be a family member Income from more than one non-borrower household member may be considered Must be reflected in DU as Non-Borrower Household Income in order for it to be considered properly Boarder Income Eligible from relatives or non-relatives, up to 30% of qualifying income for 1 unit properties only (not eligible for 2-4 unit properties) Evidence of rental payments for at least nine of the most recent twelve months is acceptable, when the amount is averaged over 12 months Documentation of shared residency for the past 12 months is required

105 Income from Accessory Units Conventional Underwriting Guidelines HomeReady Rental income is an acceptable source of qualifying income for a one-unit principal residence with an accessory unit (not eligible for 2-4 unit properties) DU will issue a message stating the income must be calculated and documented according to the Selling Guide Sweat Equity Sweat equity will be added as an Other Credit on the Details of Transaction (DOT) The Selling Guide should be followed for documentation and minimum borrower contribution requirements LTV/CLTV/HCLTV will be limited to 95% when sweat equity is used; however, CLTV may exceed 95% on fixed rate mortgages that are not secured by a manufactured home when subject to a Community Seconds loan Assets Minimum Borrower Contribution (from own funds) o 1 Unit: $0.00 o 2-4 Unit: 3% Acceptable sources of funds for downpayment and closing costs include gifts, grants, and Community Seconds. Additional Underwriting and Eligibility Criteria Loan must receive an Approve/Eligible recommendation from DU Occupant borrower(s) may not have an ownership interest in any other residential property at the time of closing

106 Homeownership Education Conventional Underwriting Guidelines HomeReady Pre-purchase homeownership education is required for at least one borrower on all HomeReady loans (purchase and LCOR). o Must be provided through Framework, an online program o $75.00 fee paid by the borrower to Framework for a simple, accessible online program with support 7 days a week. MiMutual is permitted to provide a credit against closing costs for this amount in accordance with Section B of the Selling Guide o Homeownership Education certificate must be retained in the file o Although one-on-one counseling is optional, Framework will offer borrowers a referral to a HUDapproved counseling agency for additional assistance. Borrowers also have the option to consult a counselor of their choice. Post-purchase support will be accessible for the life of the loan through Framework s homeownership advisor service, to support sustainability. Landlord education is required for 2-4 unit properties, in accordance with Selling Guide requirements. This education is not available through Framework. For borrowers with previous homebuyer education, in lieu of the Framework course, a certificate of prepurchase education/counseling from a HUD-approved counseling agency may be accepted, providing it is dated within the previous six months before the loan application date, and before September 30, NOTE: Online education may not be appropriate for all potential homebuyers. The presence of a disability, lack of internet access, and other issues may indicate that a consumer is better served through other education modes (in-person classroom education, telephone conference call, etc). ONLY in these situations, consumers should be directed to Framework s toll-free customer service line ( ), from which they can be directed to a HUD-approved counseling agency that can meet their needs. The counseling agency that handles the referral must provide a certificate of completion, and MiMutual must retain a copy of the certificate in the file. Mortgage Insurance Standard mortgage insurance is required on loans with LTV ratios at or below 90%, and 25% coverage is required for loans with LTV ratios above 90% to 97%. Reduced coverage not permitted. Borrower-paid MI and lender-paid MI permitted. Borrower-paid single premium cannot be financed. MI Coverage Requirements Mortgage Insurance Coverage Requirements Transaction Type % % % % HomeReady fixed rate, term 20 years HomeReady fixed rate, term > 20 years, ARMs 6% 12% 25% 25% 12% 25% 25% 25%

107 Conventional Underwriting Guidelines Automated Underwriting System Automated Underwriting System Approve/Eligible Risk Classification If the AUS rates the mortgage loan application as an Approve/Eligible, based on the analysis of the credit, capacity to repay, and certain other loan characteristics, the loan is eligible for MiMutual underwriting provided: The data entered into the AUS is true, complete, properly documented, and accurate; and The entire loan package meets all other conventional requirements (except for those specifically not required because the loan was evaluated by an AUS). Approve/Ineligible Risk Classification Loans that receive a recommendation of "Approve/Ineligible" are not eligible for approval. The broker will need to correct the issue(s) that caused the loan to be ineligible and resubmit the loan to attempt to obtain an "Approve/Eligible" recommendation (such as when a mortgage amount exceeds statutory limits, debt-toincome ratios, etc.) System Overrides and Manual Downgrades A system override and/or manual downgrade of an "Approve/Eligible" to a "Refer" classification may be required if a particular loan application variable is revealed during loan processing. MiMutual will not manually approve the loan. MiMutual is required to manually downgrade the loan to a "Refer" under any of the following conditions: Previous Mortgage Foreclosure When a borrower whose previous residence or other real property was foreclosed on or has given a deedin-lieu of foreclosure within the previous seven years, but it is not reflected on the credit report or considered in the AUS analysis. Delinquent Federal Debt If the borrower, as revealed by public records and/or credit information that may appear on title or elsewhere in the loan file, has delinquent Federal debt (such as a Tax lien) that is not considered in the AUS analysis. Upfront Disclosure Policy At the time of loan submission MiMutual requires evidence that initial disclosures were delivered to the borrower within compliance. The date indicated on the disclosures must reflect they were prepared / delivered in compliant timeframes. The broker must submit copies of all federal, state and local disclosures which will be monitored on every transaction. MiMutual complies with federal, state and local policies and procedures such as Fair Housing, ECOA, SAFE ACT, RESPA, HVCC, MDIA, etc

108 Conventional Underwriting Guidelines Underwriting Status/Decisions Underwriting Status/Decisions Pre-Qualification 1003 has been uploaded or loan has been locked (no underwriting package had been submitted Incomplete Insufficient documentation was submitted for the loan file to be submitted to underwriting. Submitted Loan package has been received, 1003 has been uploaded, and loan has been submitted to an underwriter. Suspended Crucial documentation was missing from the submission for the underwriter to render a sound decision. Approved with Conditions Underwriter has approved the loan with conditions which need to be met before the loan is Clear to Close. Withdrawn Loan file was withdrawn by the borrower or the broker. Declined A loan is declined only after all alternatives are explored. MiMutual may make recommendations or offer a counter proposal regarding the terms and conditions required for loan approval. Clear to Close All prior to closing conditions have been met and cleared by the underwriter and loan is ready to close. All at closing or prior to funding conditions must be forwarded to MiMutual prior to funding for underwriter approval, or with the closed loan package as noted on the MiMutual Underwriting Report under Conditions to be cleared at Closing