Portfolio Power SM Arch Mortgage Guaranty Company Guidelines Summary Effective June 26, 2015

archmicu.com © 2015 Arch Mortgage Guaranty Company 177-02-15-CU-v4 Table Of Contents

1 Super Jumbo Eligibility

2 Interest Only Product Eligibility

3 Portfolio Program Eligibility

4 AMGC Program Guidelines

6 Condominium Project Eligibility

8 Construction-to-Permanent Guidelines

Super Jumbo Eligibility

MAX MAX MIN LTV/CLTV LOAN CREDIT MAX OCCUPANCY LOAN PURPOSE PROPERTY TYPES /HCLTV AMOUNT SCORE DTI

Owner-Occupied Purchase 1-Unit Single Family 95/95 $850,000 700 43% or (detached & attached), Rate/Term Condominiums, Co-ops Refinance 90/90 $1,500,000 720 41%

85/85 $2,000,000 740 38%

Cash-Out 85/85 $1,000,000 740 38% Refinance Max $250,000 cash out

Second Home Purchase 1-Unit Single Family 90/90 $850,000 720 41% or (detached & attached), Rate/Term Condominiums, Co-ops Refinance

Cash-Out Refinance 85/85 $650,000 740 41% Max $200,000 cash out

Investment Purchase 1-Unit Single Family 85/85 $650,000 740 38% or (detached & attached), Rate/Term Condominiums, Co-ops Refinance

Cash-Out Refinance INELIGIBLE

Short Term ARMs < 5 years fixed period - Maximum $1,000,000 loan amount; Second Homes and Investment ineligible Cash Out: ARM minimum 5 year initial fixed rate Condominiums must meet GSE or AMGC condominium requirements Co-ops: Eligibility limited to the states of CT, NJ, NH, MA, NY HCLTV equals CLTV in all categories

1 06/15 Interest Only Product Eligibility

MAX MAX MIN MAX LTV/CLTV LOAN CREDIT HOUSING/ OCCUPANCY LOAN PURPOSE PROPERTY TYPES /HCLTV AMOUNT SCORE TOTAL DTI Owner-Occupied Purchase 1-Unit Single Family 90/90 $750,000 720 40/43 or (detached & attached),

Rate/Term Condominiums, Co-ops 85/85 $1,000,000 720 40/43 Refinance 2-Units 85/85 $750,000 720 40/43

Ineligible: Short Term ARMs < 5 years fixed period, properties in NY state Condominiums must meet GSE or AMGC condominium requirements Co-ops: Eligibility limited to the states of CT, NJ, NH, MA HCLTV equals CLTV in all categories

2 06/15 Portfolio Program Eligibility

MAX MAX MIN LTV/CLTV LOAN CREDIT MAX OCCUPANCY LOAN PURPOSE PROPERTY TYPE /HCLTV AMOUNT SCORE DTI

Owner-Occupied Purchase, 1-Unit Single Family 97/97 $417,000 700 50 Rate/Term (detached & attached), Refinance, Co-ops, Condominiums or Construction- 1-Unit Single Family 95/95 $625,500 720 50 to-Permanent (detached & attached), Maximum to FHFA High (1-unit Single Co-ops, Condominiums, Balance Loan Limits Family or 2-units Manufactured Homes only) 2-units 90/90 $533,850 700 50

3-units 85/85 $645,300 720 50

4-units 85/85 $801,950 740 50

Cash Out 1-Unit Single Family 90/90 $417,000 740 50 Max $250,000 (detached & attached), Co-ops, Condominiums

2-units 90/90 $533,850 740 50

Second Home Purchase, 1-Unit Single Family 90/90 $650,000 700 50 Rate/Term (detached & attached), Refinance, Co-ops, Condominiums or Construction- to-Permanent (1-unit Single Family only)

Cash Out 85/85 $417,000 740 50 Max $50,000

Investment Purchase 1-Unit Single Family 90/90 $417,000 740 50 or (detached & attached), Rate/Term Co-ops, Condominiums Refinance

AK and HI: The maximum loan amount is the applicable FHFA Conforming loan amount Maximum 40 year amortization term Fully Amortizing Short Term ARMs > 1 year initial fixed period Cash Out: ARM minimum 5 year initial fixed rate; Manufactured Homes ineligible MI coverage on Construction-to-Permanent loans may be activated upon property completion Condominiums must meet GSE or AMGC condominium requirements Co-ops: Eligibility limited to the states of CT, NJ, NH, MA, NY HCLTV equals CLTV in all categories

3 06/15 Arch Mortgage Guaranty Company Program Guidelines

AMGC PROGRAM SUMMARY Cash-Out Refinance EMPLOYMENT AND INCOME Under AMGC’s Programs, credit unions can • The proceeds exceed the outstanding REQUIREMENTS obtain mortgage insurance on loans which may principal balance of the existing liens plus Employment and income documentation and be ineligible under GSE requirements or may fall reasonable and customary closing costs verification must cover a minimum two full outside of QM standards. • All debt consolidation is considered a years. Required documentation includes: cash out transaction Wage Earner ELIGIBLE PROPERTY CRITERIA AND TYPES • Ineligible for cash out transactions: One month’s paystubs, which contains at 1-unit single family attached and detached - Interest Only loans least 30 days of year-to-date earnings AND 2-4 units - Short-Term ARMs (1 to 3 years fixed Two years’ W-2s AND Condominiums period) A verbal Verification of Employment • - Property purchased within the last Condominium units located in projects (completed ≤ 10 days prior to closing); or verified as GSE warrantable or meeting 6 months A fully completed Verification of AMGC’s non-warrantable requirements - Property listed for sale within the last Employment Cooperative Housing Units (Co-ops) 6 months • Eligible in Connecticut, New Jersey, New - Existing first lien refinanced within the Self-Employed (owns > 25% of the business) Hampshire, Massachusetts and New York last 12 months as cash out Two years’ personal and business tax returns and a year-to-date P&L for the business • Must meet Fannie/Freddie’s eligibility criteria ELIGIBLE LOAN TYPE Manufactured and Modular homes Fixed-rate, fixed-payment, fully amortized Non-Employment Income • Single-wide manufactured homes are not over term Refer to the AMGC UW Manual for the eligible • Maximum 40-year amortization term specific income source • Modular homes are treated as Adjustable Rate Mortgage (ARM) VALID CREDIT SCORE 1-unit single family properties for • Positively Amortizing Hybrid ARMs For a credit score to be valid, each member’s documentation and qualification (i.e. 7/1, 10/1) credit history must indicate Properties in all 50 states and the District of - Qualify using the greater of the fully a minimum of three tradelines each Columbia indexed rate or the note rate evaluated for a minimum of 12 months or Properties with greater than 10 acres will • Positively Amortizing Short-Term ARMs a minimum of two tradelines each evaluated require review by the Arch MI Appraisal (1 to 5 years fixed period) for a minimum of 24 Department - Purchase and Rate/Term Refinance only

- Super Jumbo - Owner-Occupied only Non-traditional credit is not permitted LOAN PURPOSE - Qualify using the greater of the fully CREDIT HISTORY Purchase - indexed rate or the note rate + 2.0% The credit report must be < 120 days old on • For LTV calculation on properties in NY state, Temporary buydowns on fixed rate owner- the date the Mortgage Note is signed use the appraised value; for co-ops use the occupied loans qualify at note rate purchase price A minimum of two credit scores are required Interest Only for each member • Relocation - Copy of relocation agreement • Loan resets to fully amortizing after the The loan representative score is determined or detail of company’s standard relocation interest only period by identifying the middle of three scores or package • Maximum 10 year I/O term the lower of two scores for each member. • Rate/Term Refinance Qualify using either the fixed rate payment The score used for qualifying will be the • Pay off an existing first lien including or the correct ARM payment as noted lower of the resulting scores among the reasonable and customary closing costs above member(s). Balloon Payment Mortgages • Pay off a subordinate lien provided Judgments or liens which may impact clear • - used in the original purchase of the Minimum 5 year term to balloon payment title to the property and federal and state property OR ELIGIBLE MEMBERS tax liens must all be paid in full at the time of - seasoned > 12 months OR U.S. Citizens loan closing. - Subordination of a junior lien. The total Permanent and Non-Permanent Resident Collection accounts and charged-off transaction must meet AMGC LTV/CLTV/ Aliens accounts do not require payoff if the balance HCLTV eligibility • Loan file must contain acceptable of an individual account is less than $250 or • Pay off an interim construction loan which documentation to verify the legal US the total balance of all accounts is $1,000 or may include the payoff of an existing lot loan. residence status less - LTV based on the current appraised value Inter Vivos Revocable Trusts Minimum 4 years re-established traditional • Maximum cash back may not exceed the Non-occupant co-borrowers credit after discharge of a bankruptcy; lesser of 2% of the loan amount or $2,000 • Member must be owner-occupant 2 years with documented extenuating • Owner-occupant member(s) must qualify circumstances individually

06/15 4 Arch Mortgage Guaranty Company Program Guidelines

MINIMUM DOWN PAYMENT CASH RESERVES SEASONED LOANS Super Jumbo Program Super Jumbo Program Seasoned Loans are funded without mortgage • Member’s own funds; gifts/grants not • <= $850,000 - 6 months insurance. At least one mortgage payment must permitted • > $850,000 - $1.5mm: 12 months be received and the loan closing date must be Interest Only Program • > $1.5mm - $2.0mm: 24 months within the prior 12 months. Seasoned loans are • <= $417,000 Interest Only Program subject to current AMGC program guidelines and premium rates. – Initial 5% from member’s own funds • <=$417,000 - 2 months – Gifts permitted for addtional funds • > $417,000-$750,000 - 6 months The following documentation is required: needed must be from an immediate • > $750,000-$1mm - 12 months Complete Mortgage Insurance application family member, or future spouse/ Portfolio Program signed and dated noting “SEASONED LOAN” domestic partner who will reside in the • Owner-Occupied or 2nd Home - 2 months The loan closing date. This can be verified by property • Investment - 6 months writing on the MI application or with a copy • > $417,000 of the final HUD. – Member’s own funds; gifts/grants not MULTIPLE LOANS TO SINGLE MEMBER Copy of the completed, final 1003 loan permitted AMGC will insure a maximum of 3 loans to application from the original loan package Portfolio Program any member. The maximum risk exposure to Copy of the completed final 1008 from the • Owner-Occupied - initial 3% from any member is $500,000 (maximum risk original loan package (if applicable) member’s own funds exposure defined as aggregate of original Copy of the Current credit report (dated loan amounts x percent of MI coverage). • Second Home - Minimum 5% from within 120 days of the MI application) member’s own funds Within the multiple loans to a member limit, Current mortgage payment history of the loan • only the maximum amount on the following Owner-Occupied and Second Homes (if not indicated on the credit report). If the will be accepted (limit includes loans – After the initial down payment loan shows a 30-day delinquency, it cannot currently insured): requirement, additional funds for down have occurred in the most recent six months. payment, closing costs, reserves, and • Primary home – 1 loan maximum Appraisal from the original loan package prepaid escrow may be from any of the • Second home – 1 second home and following sources: 1 investment property; OR Current property valuation (appraisal, AVM, exterior appraisal, or recertification of value) • Gift, from a family member defined • Investment property – 2 loans maximum as related by blood, marriage, (no Second Home) Current Verbal Verification(s) of Employment or adoption or legal guardianship, independent verification of self-employment domestic partner or fiancé/fiancée APPRAISAL INELIGIBLE FOR MORTGAGE INSURANCE not related to the transaction, or A full interior/exterior appraisal with photos member’s employer. Funds to be Appraisal requirements: Short-Term ARMs less than 1 year fixed period documented with a gift letter and • Loans ≤ $1,000,000 Limited documentation loans evidence of transfer of funds. – 1 independent interior/exterior Negative amortization mortgages, including • Gifts of Equity are acceptable from appraisal with photos option payment mortgages an immediate family member • Loans > $1,000,000 Single-wide manufactured homes (parent, grandparent, and sibling). – 2 independent interior/exterior Properties located in Guam, Puerto Rico, The terms of the equity gift must be appraisal reports with photos OR and the Virgin Islands documented. – 1 independent interior/exterior Non-Resident Aliens, Partnerships, • Investment appraisal with photos and a complete Corporations, Syndications, Non-Revocable – Minimum 10% member funds must be field review supporting value Trusts and Foreign Nationals verified • Appraisals must be ≤ 120 days old on the Interest only on properties in NY state – No gift or grant funds can be applied date the mortgage note is signed towards member funds • Appraisals > 120 days old up to 12 months Ineligible: old must be recertified • The gift/grant provider may not be an • Appraisals >12 months old are not interested party to the transaction acceptable • “Sweat Equity” as defined by Fannie Mae/ • Appraisals originally ordered for an FHA Freddie Mac loan are acceptable

5 06/15 Condominium Project Criteria

GENERAL ELIGIBILITY Budget/Balance Sheet – utilized to verify New Project AMGC will review individual condominium the financial resources of the HOA. This • A new project is defined as: units for mortgage insurance subject to the determines the ability to provide – The project is not fully completed, general eligibility requirements outlined maintenance and upkeep for the project such as proposed construction, new below. grounds, fund necessary project construction, or the proposed or improvements, and maintain adequate PROJECT ELIGIBILITY incomplete conversion of an existing insurance building to a condominium Condominiums are eligible for insurance from Other documentation used to validate AMGC if the condominium project meets: – The project is newly converted; or eligibility of the condominium project under The project is subject to additional All Fannie Mae or Freddie Mac eligibility – the applicable review type completed phasing or annexation requirements (e.g. “warrantable condo”); – Fewer than 90% of the project’s total or Non-Warrantable Condominium units have been conveyed to the unit Documentation in the file should indicate AMGC’s eligibility requirements (e.g. “non- purchasers warrantable condo”) that the credit union has not completed a GSE review type and is requesting AMGC approval. 2-4 Unit Project MAXIMUM ARCH MI PROJECT EXPOSURE The file should include one or more of the • A 2-4 unit project is defined as: No more than 33% of the project can be following documents: – A project comprised of two, but no insured by Arch MI Appraisal - used to determine project more than four, 1-unit dwellings that are separately owned with separate For 2- to 4-Unit Project Arch MI will insure a characteristics, ownership, pre-sale levels, legal descriptions maximum of 1 unit marketability, and completion levels (required) Established Project Requirements DETACHED UNIT SITE CONDOS HOA Questionnaire – can be used to No single entity (the same individual, Follow single family residence guidelines; determine investor concentration, investor group, partnership, or corporation) the credit union is not required to commercial usage, and single entity may own more than 10% of the units within determine condominium project eligibility ownership and project delinquency levels the project. For 5-20 unit projects an investor Budget/Balance Sheet – utilized to verify the may own up to 2 units. This does not include CONDOMINIUM PROJECT DOCUMENTATION financial resources of the HOA. This units still held by the builder/developer. REQUIREMENTS determines the ability to provide If the subject property is investor owned, Warrantable Condominium Requirements maintenance and upkeep for the project then a minimum 50% of the units in the The loan file must indicate the type of grounds, fund necessary project project must be owner-occupied or second GSE review completed to determine improvements, and maintain adequate homes condominium project eligibility and insurance No more than 15% of the total units in the include documentation supporting the Other documents deemed necessary to project can be 60 or more days past due on determination validate the marketability and solvency of the payment of condo/association fee Sample Documentation to Support the condominium project payments Condominium Project Eligibility No more than 25% of the project area can be NON-WARRANTABLE CONDOMINIUM for commercial usage Fannie Mae Condo Project Manager (CPM) ELIGIBILITY or Project Eligibility Review Service (PERS) Project Types New Project Requirements determination Established Project The project must be substantially complete Appraisal – used to determine project • An established project is defined as: (i.e. all the units in the subject property’s characteristics, ownership, pre-sale levels, The project is fully complete, including phase are complete and available for marketability, and completion levels – all units and common elements and not occupancy) (required) subject to any additional phasing or At least 50% of the units in the complex/ HOA Questionnaire - can be used to annexation legal phase must be conveyed or under determine investor concentration, – At least 90% of the total units have contract as owner-occupied or second commercial usage, and single entity been conveyed to unit purchasers homes ownership and project delinquency levels (continued on next page) – Control of the HOA has been turned over to the HOA or unit purchasers

6 06/15 Condominium Project Criteria

No single entity (the same individual, Investor ownership of any units is not Any project or building that is owned by investor group, partnership, or corporation) permitted several owners as tenants-in-common may own more than 10% of the units within No one person or entity may own multiple Condotels the project. For 5-20 unit projects an investor units Timeshare, fractional or incremental may own up to 2 units. This does not include No portion of the project can include ownership units still held by the builder/developer. commercial usage Manufactured housing site condominiums No more than 15% of the total units in the Multi-dwelling unit condominiums project can be 60 or more days past due on INELIGIBLE CONDOMINIUM TYPES New projects where the seller is offering the payment of condominium/association AMGC will not insure any of the following types excessive sale/financing concessions fee payments of condominium projects: Kiddie condos (condominium purchased for No more than 25% of the project area can be Projects with pending lawsuits that impact student occupancy) for commercial usage the safety, structural soundness, habitability

or functional use of the project Houseboat projects 2- to 4-Unit Project Requirements Projects with outstanding environmental Condo projects that represent legal but The project must be 100% complete issues non-conforming use of the land All but one unit must be sold and conveyed

7 06/15 Construction-to-Permanent Guidelines

DEFINITION – Construction costs may include, but CONVERSION TO PERMANENT A construction-to-permanent loan is are not limited to, building permits and When the credit union receives the final residential financing an individual member(s) architectural drawings, survey, and loan inspections, final title update, and Certificate obtains to finance both their home’s fees, in addition to the cost of labor of Occupancy (if applicable), conversion to a construction and long-term permanent and materials required to complete the fully amortized loan will occur. The loan will mortgage. This can be completed as either a improvements become fully amortized over the remaining single transaction in which the construction Construction-Refinance – a transaction term financing becomes the permanent mortgage where the member holds title to the lot The credit union must notify appraiser of any or a “two time” transaction in which the and is named as the member for the material changes made to the plans and construction financing is re-written into a new construction loan specifications, and certify no impact on final financing mortgage on the completed • The LTV may be based on the current as value property. completed appraised value AMGC’s program offers mortgage insurance • Maximum cash out not to exceed 2% of MORTGAGE INSURANCE ACTIVATION coverage upon completion of the property. the loan amount or $2,000, whichever is Mortgage insurance coverage may be placed LESS in-force as determined by the credit union CONSTRUCTION PHASE • Reimbursement of member expenses upon property completion. The credit union The Commitment will be issued for a period in excess of the construction loan is can choose the effective date based on local of 12 months. Extension/Reinstatement after considered cash out and is not permitted practices: 12 months is not permitted. A new MI Ineligible: 1. Date of the certificate of occupancy application with current member information • Owner/Builder Transactions 2. Date the property is accepted as will be required and will be subject to current • Condominiums, Co-Ops, and complete by the member published program guidelines and rates at the Manufactured Homes • Loan cannot be in default as of the date time of the new application credit union activates the mortgage UNDERWRITING REQUIREMENTS The Commitment is subject to credit insurance The Premium Rate and DTI will be documentation update (see Underwriting • Contact Arch MI Policy Servicing at determined using the interest rate and value Requirements section for details) (800) 909-4264 to activate coverage established for the permanent financing Mortgage insurance coverage may be • Premium payment to be remitted within If the current residence is under a contingent activated upon conversion to permanent 45 days of the effective date selected sales contract and will be sold upon financing when the property is completed to secure coverage after construction is completion, the PITIA for both the current completed LOAN PURPOSE AND LTV residence and the newly completed – If the initial premium payment is Construction-Purchase – a transaction where residence must be considered in the DTI received past 45 days, the date the the member is not currently the owner of calculation. The underwriter may exclude premium payment is received will be record of the land and/or is acquiring the lot the current residence PITIA if they can the effective date for coverage at the time the construction loan is obtained ascertain there is a ready market for the • If the member does not own the land, current residence. The following market NOTE: In order for a claim to be paid the initial draw disbursement may assist conditions should be present: for a construction-to-permanent loan, in purchasing the land. However, the • A ready market is apparent with the insurance must be in-force with the member’s down payment must be used marketing times no greater than 6 months premiums paid and the construction towards the purchase of the land before • Property values are stable or increasing must be completed according to the any mortgage proceeds are used • The equity in the current residence is construction plans and specifications on • The LTV will be based on the lot purchase sufficient to cover all liens and sales and which the appraisal was based price plus the documented costs of closing costs Default caused by the member’s inability improvements or the current appraised Activation of coverage greater than 120 days to secure permanent financing or the value upon completion, whichever is less from the original commitment date requires: credit union’s unwillingness to convert – If the land is acquired by gift or • Recertification of the property value the loan to a permanent loan is NOT a inheritance, use the appraised value of • Verbal verification of employment covered event of default for mortgage the land, and document the acquisition The following additional documents should insurance purposes and transfer of the land be included in the final loan file: – Cost of improvements is defined as the • Contract between the builder and documented costs to build the home, member showing materials and the costs to obtain the construction construction cost, time to complete and and/or the permanent financing and draw schedule the cost of the land, or value of the lot • A proposed dwelling survey (Plot Plan) depending on when the lot was acquired

8 06/15 Arch MI Underwriting Network Phone: (888) 746-6264

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