POLICY NAME: Homebuyer Selection and Mortgage Origination APPROVED DATE: 08/17/18 REVISION NUMBER: REVISED DATE

POLICY NAME: Homebuyer Selection and Mortgage Origination APPROVED DATE: 08/17/18 REVISION NUMBER: REVISED DATE:

Scope: The policy handbook contains a collection of guidelines that apply to homeowner selection and mortgage origination for all Wichita Habitat for Humanity employees and designated volunteers within the homeowner services team, including selection, support and committee personnel. Wichita Habitat for Humanity intends that the Policy will be reviewed at least annually and updated from time to time as necessary to keep up with changes in applicable law and changes in Wichita Habitat for Humanity’s operations.

Purpose: The policies and procedures outlined in this handbook consist of key processes in Homeowner Selection/Mortgage Origination for Habitat affiliates. They set out established principles and practices to guide affiliates in lawfully selecting qualified applicants who may purchase a house that is financed — in whole or in part — by the affiliate. The consistent application of these policies is necessary to enable compliance with applicable laws and protect the integrity of the Habitat organization. Policy: Wichita Habitat for Humanity (hereinafter referred to as “Habitat” in the policy documents) commits to complying with every policy and regulation identified in this document. If an exception is required, the board or a board designate must make the final decision.

Acronyms/Definitions:

AMI Area median income AML Anti-money laundering CD Closing disclosure DTI Debt-to-income ECOA Equal Credit Opportunity Act E-SIGN Act Electronic Signatures in Global and National Commerce Act FCRA Fair Credit Reporting Act FMV Fair market value GFE Good faith estimate GLBA Gramm-Leach-Bliley Act GSA Geographic service area HFHI Habitat for Humanity International Homebuyer Selection and Mortgage Origination INOI Informational Notice of Incompleteness LE Loan estimate NMLS Nationwide Multistate Licensing System NOI Notice of Incompleteness NPI Nonpersonal information PII Personal identifiable information QLO Qualified Loan Originator RESPA Real Estate Settlement Procedures Act SAFE Secure and Fair Enforcement for Mortgage Licensing Act SSN Social Security number TILA Truth in Lending Act TRID TILA/RESPA Integrated Disclosure Rule UDAAP Unfair, deceptive or abusive acts or practices USDA United States Department of Agriculture WHFH Wichita Habitat for Humanity ZEM Zero-equivalent mortgage

HOMEOWNER SERVICES TEAM Habitat is committed to being a responsible loan originator organization. In order to meet operational objectives, homeowner services team members will be provided with the required training and development to perform their job in an efficient and compliant manner. Protecting financial information collected from applicants is paramount. We will operate in a manner that safeguards consumer information. Homeowner selection team qualifications The federal SAFE Act and Truth in Lending Act (TILA) require individuals performing loan originator activities to meet certain qualification requirements. These “loan originator” activities are defined in the SAFE Act and the Truth in Lending Act (TILA)/Regulation Z. Under the SAFE Act, a mortgage loan originator is as an individual who: 1. Takes a residential mortgage loan application 2. Offers or negotiates terms of a residential mortgage loan for compensation or gain

Under TILA, a “loan originator” is a person who, in expectation of some compensation or other monetary gain, performs any of the following activities: 1. Taking an application for purchase money mortgage or repair loan secured by real property 2. Arranging a credit transaction 2

Homebuyer Selection and Mortgage Origination 3. Assisting a consumer in applying for credit 4. Offering or negotiating credit terms 5. Making an extension of credit 6. Referring a consumer to a loan originator or creditor 7. Advertising or communicating to the public that you can or will perform any loan origination services

Activities in the homeowner selection process that do not constitute “loan originator” activities: 1. Perform solely clerical or administrative tasks 2. Are front desk staff who just accept applications without discussion 3. Are Board members who only review documents 4. Only receives, collects, and distributes information common for the processing or underwriting (ability to pay) of a loan 5. Only communicates with a consumer to obtain information necessary for the processing or underwriting (ability to pay) of a residential loan. The communication must not include offering, negotiating or counseling consumers about residential mortgage loan rates or terms. 6. Solely underwrites loan (number crunching)

Each member of the team identified as a loan originator must become qualified. At minimum, an individual who participates in taking an application or who assists an applicant in applying for credit MUST become a Qualified Loan Originator, or QLO. The State of Kansas has given Habitat for Humanity Affiliates a SAFE Act exemption and thus licensing through the NMLS is not required. However, each individual loan originator must become qualified pursuant to the TILA Loan Originator Qualification requirements for individuals: 1. At the time of hire, individuals must consent to a nationwide criminal background check and credit report and must provide information regarding any military, civil, criminal or administrative decisions. 2. The nationwide criminal background report will be screened for the presence of these disqualifiers: a. Convictions (including no-contest pleas) to any felony during the past seven years. b. Any felony involving fraud, dishonesty, breach of trust or money laundering at any time. 3. The credit report will be screened for patterns of financial abuse, with the following issues considered: a. The existence of current outstanding judgments, tax liens or other government liens. b. Nonpayment of child support. c. A pattern of bankruptcies, foreclosures or delinquent accounts. 4. Once qualified, TILA does not require ongoing background and credit checks on loan originators unless the Habitat leadership has reasonable grounds to believe the loan originator has engaged in conduct that would render him or her unsuitable to perform the activities of a loan originator according to the original qualification criteria.

Homebuyer Selection and Mortgage Origination 5. Ensure initial and ongoing or annual Training is provided to individual loan originators on both federal and state laws pertinent to the types of loans originated. The ABA Loan Originator curriculum (12 courses), meets the federal law training requirement. State law training may be obtained from a vendor approved to deliver SAFE Act training, or by a person/entity with the requisite experience in applicable state laws. 6. Oversight for this process will be managed by the assistant executive director. Training At minimum, other personnel involved in homeowner services will complete annual training on Anti-Money Laundering, or AML; Privacy; Unfair, Deceptive or Abusive Acts or Practices, or UDAAP; and the Fair Housing Act. Confidentiality/privacy Information collected from applicants and their household members is private and will be shared only with authorized people. Each applicant will be provided an initial privacy disclosure that will accurately reflect Habitat’s privacy policies and practices in compliance with the Gramm Leach Bliley Act, or GLBA.

Homebuyer Selection and Mortgage Origination HOMEOWNER RECRUITMENT Application outreach Habitat will market throughout the geographic service area, or GSA, to recruit qualified applicants. A. We will recruit prospective homeowners regularly throughout the year. Applications will be accepted at a minimum once a month. B. Applications are available in the office, on the website, and in the ReStore during the open application period. C. Applications will be distributed at community, orientation and application meetings. D. We are committed to upholding the spirit and requirements of the Fair Housing Act by: a. Displaying the “Equal Housing Opportunity” logo on all applications, advertisements and marketing materials and on our website, emails and letterhead. b. Displaying an Equal Housing Lender poster whenever applicants are met or wherever applications are taken. c. Ensuring all potential applicants have equal access to the Habitat homeownership program by refraining from statements that would discourage an applicant. Marketing materials A. Applications, marketing or informational materials will not contain any reference to interest rates, down payment amounts or loan amounts. B. Advertising across all media will be clear and accurate, will not mislead consumers or show a preference, and will not discourage any consumer. Nondiscrimination Habitat commits to treating all applicants in an equal manner. The following attributes will NOT factor into any action for the Habitat homeownership program, including information-sharing, distributing applications, advertising or evaluating applications: race, color, national origin, religion, sex, familial or marital status, disability, sexual orientation, age (provided the applicant can legally enter into a contract), income derived from public assistance, or a consumer who has, in good faith, exercised any right under the federal Consumer Credit Protection Act. To fulfill grant requirements, we may target consumers who are elderly or who have a disability, but we will not limit housing solutions to people with these characteristics.

Homebuyer Selection and Mortgage Origination HABITAT HOMEOWNERSHIP APPLICATION (ECOA PHASE) DEFINED Habitat will provide an application package to each consumer who requests one during the application period. The application will serve to evaluate one’s qualification for the Habitat homeownership program based on three criteria: need, ability to pay, and willingness to partner. Application materials will not include any reference to property addresses, property value or a loan amount. Application package Documents included in the application package:  Cover letter, including income limits and application instructions.  Homeownership application.  Background screening release.  ECOA Special Purpose Credit Program Notice.  Initial privacy notice.  E-Sign Act Disclosure.  Right to Receive Copy of Appraisal Disclosures.  Borrower’s authorization.  Application meeting schedule. ECOA “completed application” defined In compliance with the Equal Credit Opportunity Act, or ECOA, a “completed application” must include:  A completed application.  Income documents.  Signed background screening release.  Signed ECOA Special Purpose Credit Program Notice.  Signed E-Sign Act Disclosure.  Evidence of orientation meeting attendance.  Signed borrower’s authorization.  Home visit report and/or “need for housing” assessment.  A “willingness to partner” assessment.  Board concurrence/approval.  Homeowner selection committee report. Allowable fees Habitat will collect only a fee that is reasonable to cover the bona fide cost of a credit report before receiving the borrower’s acknowledged intent to proceed.

Homebuyer Selection and Mortgage Origination APPLICATION EVALUATION As a special purpose credit program, Habitat will evaluate each application to determine qualifications for “need for housing,” “willingness to partner” and “ability to pay.” Nondiscrimination Habitat will not discriminate against any applicant during the credit transaction on the basis of race, color, religion, national origin, sex, marital status, age; for being a public assistance program participant; or for exercising any right under the Consumer Credit Protection Act. Upon Habitat’s receipt of each application, the following actions will be taken by a designated individual: A. Date and time of submission will be noted on the application. B. An initial review will determine if the application is completed and signed. a. If not, the application will be referred to the QLO to issue the applicable notice to the applicant. b. If household income requirements based on the U.S. Department of Housing and Urban Development, or HUD,income guideline for Habitat’s area median income, or AMI; GSA affiliation; or legal U.S. residency is not met, the application will be referred to the QLO to issue an adverse action notice within 30 calendar days of receipt. c. If it is determined that the application requires more information from Habitat in order to complete the assessment, it will be referred to the QLO to issue an adverse action notice or a notice of incompleteness, or NOI, that identifies outstanding items within 30 calendar days of receipt. Application status update Applicants will be updated on their application status every 30 days by way of a written or verbal notice from the QLO. A. Applicants who have been issued an NOI will not receive a status update until the requested items are returned to Habitat. If the applicant does not return the items within the prescribed time frame, the application will be marked “Incomplete” and denied. B. Applicants who have been issued an Informational Notice of Incompleteness will receive a status update if the time frame to provide a decision exceeds 45 days. Completed ECOA application All completed applications, as defined by Habitat policy in the homeowner assessment phase, will be provided with a notice of action taken within 30 calendar days of the decision: A. Approved applicants will be provided with a partnership agreement. B. Applicants who are denied will be provided with an adverse action notice. Excess applicants If the number of identified applicants exceeds the available inventory, applicants will be ranked in order of “need for housing” and income. Those with the greatest need and lowest income will be selected first.

Homebuyer Selection and Mortgage Origination Declined applicants A denial may be issued at any time before closing. Applications declined for any reason will immediately be issued an adverse action notice pursuant to current legal and policy requirements. Background screening Each applicant and co-applicant will be screened for criminal history in the sex offender national database . A. Each individual must provide authorization for the background check reports to be obtained. If no approval is given to Habitat, the application will be denied, and an adverse action notice will be issued. B. Habitat reserves the right to recheck status at any time during the homebuilding process. General selection criteria In accordance with Habitat selection policies, all applicants will be evaluated on the criteria below: A. Need for housing B. Willingness to partner C. Financial readiness/ability to pay ECOA record retention All applications will be retained for 25 months from the date the applicant was notified of the decision. This file will retain all information used to evaluate the applicant, along with a copy of the notice of action taken. Residency A. Habitat encourages all interested consumers to apply for its housing program regardless of their current address. B. Habitat will not restrict its program to U.S. citizens and permanent residents; however, at least one person to be listed on the deed as a grantee for a WHFH home, and financially responsible as a signer of the mortgage, must be either a documented United States Citizen or a legal permanent resident (the “Permanent Owner”). a. Without limiting the application of the eligibility requirements set out in Paragraph B above, a person may be named as a grantee on the deed for a WHFH home who is not a Permanent Owner for the home no matter what their legal or marital status may be. b. Individuals must provide documentary proof of a status sufficient to demonstrate they are able to meet the requirements to be deemed a Permanent Owner by WHFH. Acceptable documentation includes, but not limited to, one or more of the following: i. U.S. Passport ii. Certificate of Naturalization iii. Permanent Resident Card (I-551) iv. Birth Certificate with valid photo identification

Homebuyer Selection and Mortgage Origination Marital Status WHFH does not discriminate in its selection process on the basis of marital status. However, there are legal issues that make information regarding the marital status of applicants relevant to the application process. WHFH will only inquire of marital status using the terms “married”, “unmarried” and “separated”. The term “unmarried” includes single, divorced and widowed individuals. In the State of Kansas, marital rights become relevant with the purchase of a home, even if only one party of the married couple is applying for the purchase of a home. Even if separated, if the marital estate is not yet settled, any purchases (or funds used to make such purchases) could be considered marital property and may be subject to division by the court. Therefore, WHFH requires that the spouse of an applicant must be included as a co-applicant on the application, as he/she is entitled to a portion of the property; this safeguards WHFH’s security interest in the homes it sells. As a result, WHFH is unable to accept applications from individuals who are separated and unwilling to have both parties on the application and mortgage.

WHFH requires documentation of marital status at the time of application.

Financial evaluation Habitat will serve the families with the highest need for housing by using a consistent approach to measure each applicant’s level of need. Need for housing shall be determined by evaluating financial (income level) and physical (substandard living condition) factors. The financial evaluation will include: A. Income limits B. AMI C. Household income D. Cost-burden analysis Physical living condition evaluation This evaluation will include an analysis of the following and a home visit: A. Serious health challenges: a. Carbon monoxide. b. Pest infestation. c. Presence of lead, mold, radon. d. Allergens for those affected. B. Substandard housing: a. Is dilapidated. b. Does not have operable indoor plumbing. c. Does not have a usable flush toilet inside the unit for the exclusive use of a household. d. Does not have a usable bathtub or shower inside the unit for the exclusive use of a household. e. Does not have electricity, or has inadequate or unsafe electrical service. f. Does not have a safe or adequate source of heat. g. Does not have air conditioning. 9

Homebuyer Selection and Mortgage Origination h. Lack of functioning entrance and exit points (front and back doors). i. Should, but does not, have a kitchen. j. Has been declared unfit for habitation by an agency or unit of government. C. Overcrowded/inadequate number of bedrooms, as determined by number of persons, their ages, and genders: a. Parents and children sharing a bedroom b. Female and male children sharing a bedroom c. More than two people per bedroom d. Not every family member sleeps in a bedroom D. Cost-burden: When an applicant pays over 30 percent of their gross income for housing (including utilities) because of the lack of more affordable housing, it can be determined that there is a housing need or a need for housing that is more affordable. E. Government-subsidized housing: Although the conditions may be adequate, there are families who are not in a position to purchase a Habitat home but who could take advantage of this limited resource if an eligible family moved on. F. Homelessness: a. Lacking a fixed, regular and adequate nighttime residence. b. Having a primary nighttime residence that is a supervised publicly or privately operated shelter designed to provide temporary living accommodations (including welfare hotels, congregate shelters and transitional housing). c. Having a primary nighttime residence that is an institution that provides a temporary residence for people intended to be institutionalized. d. Having a primary nighttime residence that is a public or private place not designed for, or ordinarily used as, a regular sleeping accommodation for human beings. G. Denied conventional or government assisted financing

Willingness to partner An applicant’s willingness to partner is a critical component of our relationship. Applicants to Habitat’s homeownership program will evidence a “willingness to partner” by agreeing to meet all the obligations outlined in the current partnership agreement. Failure to meet those agreements in the time frames identified will result in deselection/denial from the program. Ability to pay Ability to pay assessment will be performed to ensure that each applicant is financially ready for homeownership. Income A. Employment income: a. Full- and part-time employment will be verified with the current employer. b. Part-time employment and seasonal income can be used if the employer verifies that employment has continued uninterrupted for the past two years, and is likely to continue. 10

Homebuyer Selection and Mortgage Origination c. Overtime, bonus and commission income will be included if the employer states that it is more than likely to continue into the future. d. Self-employed income will be used if the applicant has been self-employed for a full two years. The usable income for a loan is the bottom line on your federal tax return after all deductions. Depreciation and depletion will be added back to income.  A current profit-and-loss statement will be required for review. B. Other income considerations a. Only income received by the mortgagor(s) will be used for debt service and mortgage calculations to determine ability to pay. b. Child support and alimony will be used. Acceptable proofs of payment are 12 months of cancelled checks or a printout from the court if it is being paid through the court system. c. Public assistance income will be verified and used if it is reasonably expected to continue. No applicant will be excluded solely because he or she receives public assistance. d. All other income used must be ongoing for the next three years. Assets Assets are defined as cash or non-cash items that can be converted to cash, including real property, savings, stocks, bonds, and other forms of capital investment. Household assets will be verified and actual income generated from assets within a 12-month period will be included in annual income. Income over $5,000 will be calculated using the HUD guidelines for calculating imputed income at the current Passbook Rate. Actual value will be counted if under $5,000. Debt-to-income ratio The standard debt-to-income ratio will be capped at 30/41. Debt included in debt-to-income ratios: A. Minimum payments on all open credit card accounts with a balance owing. B. Co-signed loans C. Child support D. Alimony. E. Joint debt with previous marriage will be included unless divorce papers clearly define that the liability belongs to the ex-spouse and there is proof of 12 months of payments made by the other partner. F. Deferred student loans will be included, using a monthly payment of 1 percent of the balance. Other repayment amounts (e.g. income based repayment (IBR) plan) will be used in lieu of the 1% of balance if proper documentation is provided. WHFH understands that applicants and co-applicants who are still in school cannot apply for consolidation or IBR, however, with appropriate documentation of federal student loans WHFH will utilize the IBR calculator (http://www.ibrinfo.org/calculator.php) to estimate the payment that will be due when the applicant or co-applicant graduates and include that amount as a monthly recurring debt payment. G. Collections will be included, using a monthly payment of 5% of the balance. H. Medical Debt. 11

Homebuyer Selection and Mortgage Origination Credit A. A residential mortgage credit report, also known as a tri-merge credit report, will be obtained and reviewed to determine creditworthiness. B. All open judgments have to be satisfied. C. All open liens must be paid in full. D. Any applicant who has filed bankruptcy must have been charged off for no less than 24 months. E. Repossessions must be at least 18 months old at time of closing. F. All open trades must be current or have written arrangements made for repayment with creditor before closing. G. There can be no more than six credit report inquiries within the past six (6) months for possible debts, other than mortgage, housing, utility, insurance and auto loans. When multiple creditors have pulled the applicants’ credit for one application for credit, the associated inquiries will count as one (1). H. Twenty-five percent (25%) or less of the total trades can be delinquent (defined as unpaid collections that do not have a current written payment arrangement, past due balances on open trades, or more than three (3) late payments on an open trade in the past year). Rental verification and monthly payment consistency A. Rent payments will be verified within a Landlord Verification form. B. At least two months of utilities and other credit obligation payments will be verified. Mortgage calculations A. 30 percent of gross income can go to housing (principle, interest, taxes, insurance, plus a predetermined utility allowance) (maximum front-end ratio). B. No more than 41 percent of an applicant’s gross income can go to housing plus other debt (maximum back-end ratio) at closing.

Homebuyer Selection and Mortgage Origination PARTNERSHIP Habitat will serve the household with the highest need for housing. Habitat will objectively define and document how need will be measured and applied consistently to all applicants. Need for housing shall be determined by evaluating financial (income level) and physical (substandard living condition) factors. Deselection Homebuyers will be deselected only in the following cases: A. Demonstrated fraud on the application. a. Fraud or misrepresentation on the application undermines the integrity and fairness of the WHFH Homebuyer Selection Process, which is wholly dependent upon access to complete and accurate information from each applicant household. Each applicant household’s obligation to provide complete and accurate information extends to the entire application process. This includes completion of the paper application, as well as an obligation to respond honestly and completely to subsequent inquiries from WHFH Homeowner Services and/or Homebuyer Selection Committee members. b. Examples of fraud or misrepresentation include, but are not limited to: i. supplying inflated income information ii. omitting debt information on the application iii. supplying inaccurate information about household size or composition iv. falsifying or misrepresenting other information c. Fraud or misrepresentation constitute grounds for de-selection regardless of what point in the process they are discovered. d. After selection, a Partner Family’s obligation to be honest and forthright with WHFH continues. Misrepresentations regarding the completion of Sweat Equity hours or other Partner Family obligations under our partnership constitute both fraud and a failure to partner. Suspected misrepresentations of Sweat Equity will be addressed according to the same procedures outlined in this section. e. A Partner Family that is de-selected for fraud or misrepresentation is not eligible to reapply at a later date. B. Failure to complete requirements set forth in the partnership agreement and sweat equity agreement letter— i.e., lack of willingness to partner. a. Circumstances under which a Partner Family may be found to have failed to partner include, but are not limited to, the following: 1. Failure to comply with the terms of the Partner Family Agreement Letter and Sweat Equity Agreement Letter signed at the time of orientation; 2. Violation of the policies and procedures for volunteering provided at the time of orientation; 3. Failure to complete the minimum hours of Sweat Equity per month; or 4. Failure to save funds for closing. 5. Each Partner Family’s commitment to work the required amount of Sweat Equity in accordance with established policies and procedures is at the heart of the partnership with WHFH. 6. If a Partner Family does not meet the minimum obligations in a timely manner it risks being deselected for failure to partner. The following

Homebuyer Selection and Mortgage Origination procedures will be followed when a Partner Family fails to meet its Sweat Equity obligations:  One month o If a Partner Family fails to meet its monthly minimum of hours, the family should contact WHFH Homeowner Support Coordinator. If Homeowner Services determines that the circumstances are reasonable, leniency may be granted for one month. o If the Partner Family has made no contact with Homeowner Services to request an accommodation, or the stated excuse is not reasonable, and the family has not worked its required Sweat Equity hours for one month, a formal letter will be sent requesting that they work the appropriate number of hours the following month in addition to that month’s minimum monthly hours.  Two months o If a Partner Family has not worked the required sweat equity hours for two consecutive months, a “Promise to Sweat” Agreement must be made with Homeowner Services. The agreement will set up a probationary period and establish specific requirements of the Partner Family to avoid de-selection or loss of lot assignment.  Three Months o By this time a Promise to Sweat Agreement should be in place. . If the agreement is broken and the Partner Family has already been assigned a lot, this lot assignment will be rescinded. The Partner Family may pick a new lot after honoring the agreement for three months in a row or when hours are complete (whichever comes first). . If the Partner Family has not already been assigned a lot, they must honor the agreement for three months in a row before picking a lot. If the agreement is not honored for a second time, de- selection procedures may be initiated. o If the Partner Family has communicated with Homeowner Services about circumstances preventing them from working sweat equity for three months in a row, the Partner Family will be asked to come in and discuss a “Sweat Equity Break”. . If these problems have been resolved, then the Partner Family will be responsible for completing their required hours the following month. . If these problems have not been resolved, the Partner Family may be put on Sweat Equity Break. . WHFH will make every reasonable effort to assist families through the Sweat Equity process.

Homebuyer Selection and Mortgage Origination 7. A Partner Family de-selected for failure to partner will be eligible to reapply one year following notification of de-selection. C. Negative change in financial condition that significantly affects the ability to pay. a. Negative change in economic circumstances can set the Partner Family up for failure by placing them in a home they may not be able to afford. It is the policy of WHFH, however, to work with the Partner Family to the fullest possible extent that is reasonable. De-selection on this ground is a last resort. b. Other changes in the family (i.e. size) should not be considered as reason for de- selection so long as the family’s household income remains in line with the guidelines set in this Policy. c. The Partner Family must notify WHFH of any such change in economic circumstances within thirty (30) days of the change. d. A Partner Family de-selected for a change in financial circumstances will be eligible to apply one year following notification of de-selection. D. Presence on a sex offender database that disqualifies an approved applicant according to the affiliate’s policy on sex offender registry checks. a. This is grounds for immediate de-selection. b. A Partner Family de-selected for presence on a sexual offender database may not re-apply. E. Self De-Selection by Partner Family a. A Partner Family may choose to de-select themselves from the program for personal reasons. b. This notice should be provided to WHFH in writing whenever possible or verified and documented by Homeowner Services representative. c. A Partner Family who self de-selects is eligible to reapply six months following notification of de-selection. Adverse action If a prospective homeowner is deselected, Habitat will send the applicant an adverse action notice that includes the reason for the denial or deselection. Sweat equity A. Each prospective homeowner and their household members (as applicable) will contribute 250-400 sweat equity hours toward the completion of their home or the homes of others. These hours will be completed on the schedule as defined in the partnership agreement and will include construction site work, training for basic home maintenance, homebuyer prepurchase financial training, and other activities as defined by the partnership agreement. Failure to complete these hours is cause for deselection. B. Sweat-equity has no monetary value and will not be compensated should an applicant withdraw or be deselected.

Homebuyer Selection and Mortgage Origination

Credit repair Prospective homeowners with credit issues that can not be resolved within twelve months will not be selected for homeownership partnership and will be sent an adverse action which will include a referral to the WHFH “Heading Home Program” to address their credit issues. A. If an applicant is required to remediate their credit to meet the ability to pay criteria, a work plan drafted by a HUD-certified credit counseling agency and agreed to by the applicant will be developed and they will be assigned a budget coach. B. Failure to progress on this plan according to the schedule will result in deselection. Electronic communication Habitat will provide the option of communicating electronically with each applicant. A. Applicants electing to receive electronic communications will acknowledge an E-Sign Disclosure. B. All personally identifiable information will be sent through encrypted email.

Homebuyer Selection and Mortgage Origination HOUSING AFFORDABILITY AND SUBSIDY Habitat ensures that housing units will be priced in a uniform manner according to HFHI policy, funding programs and applicable laws. We further commit to affordability by financing the sale and offering the right size subsidy. Housing price A. Each home will be sold at the fair market value determined by an independent appraiser. a. When a funding program or applicable law requires a different method for determining sale price, Habitat will adhere to that standard. B. Each homebuyer (whether withdrawn or denied/deselected) who has been issued a lot number or property address will be provided a copy of the appraisal upon completion or no later than three business days before closing. a. An appraisal is considered complete when Habitat reviews and approves it. b. If multiple appraisals are performed, a copy of each appraisal will be provided to the homebuyer. c. Appraisers will be randomly selected for each project. Affordability A fully amortized first mortgage loan will be granted to qualified applicants who meet the conditions in their partnership agreement. A. All first mortgages will not exceed a 30-year term. B. A determination of each applicant’s affordability index will be completed to ensure that their DTI does not exceed 41 percent of gross income. C. At closing, each applicant’s mortgage payment (which includes principle, interest (if any), taxes and insurance) will not exceed 30 percent of their gross income. Subsidy Habitat will provide a subsidy in the form of a subordinate lien to protect any equity at closing. A. The difference between the sales price and the first mortgage (repayable) will be secured with a deferred subordinate lien (generally referred to as a “soft second”). B. The term of the subordinate mortgage will match the term of the first mortgage. C. All deferred mortgages will be forgiven at a rate of 25% at the end of every five years the owner lives in the home. D. Early payment in full of the first mortgage will not satisfy the terms of the subordinate mortgage. Closing costs A. Buyer and seller will share in responsibility for closing costs at the currently defined schedule. B. Combined loan-to-value, or CLTV, will not exceed 100 percent of the sales price, unless closing costs are financed. 1. If closing costs are financed, CLTV will not exceed 103 percent of the sales price. 2. Financed closing costs will be factored into the 30 percent front-end ratio to ensure affordability. 17

Homebuyer Selection and Mortgage Origination STRUCTURING THE SALE Right of First Offer Habitat retains the “right of first offer” on all Habitat property sold. Timing of Title Transfer Title to the completed housing unit will be transferred to the homebuyer at closing.

Marketable Title WHFH will convey marketable title to the homebuyer at closing. Owner’s and Lender’s title insurance will be obtained to protect the investment for both the homebuyer and WHFH. A warranty deed will be used and will warrant and defend the title up to the closing date with exceptions related to general taxes for the current calendar year and any taxes or liens assigned after that date.

Homebuyer Selection and Mortgage Origination SALE PREPARATION (RESPA PHASE) AND CLOSING Habitat will ensure practices for house sale and loan closing and their preparation will adhere to applicable federal and state laws. Homebuyers will be provided all relevant information describing the sale and financing of the housing unit. Sale preparation No later than three months from the expected closing date, Habitat will: A. Order a title search and obtain title commitment. B. Order a flood determination: 1. If the property is located in a special flood hazard area, or SFHA, two notices will be sent to the buyer. 2. If the property is not located in a flood area, the flood certificate will be filed with the loan. Mortgage application/final evaluation A. When a mortgage application as defined by RESPA is triggered, Habitat will: 1. Within three business days, mail or email (as applicable) the initial disclosures to the borrower. 2. Set an appointment to meet with the borrower to review the disclosures. 3. Perform final underwriting and validations. 4. Coordinate with funding partners, if applicable. B. Upon receipt of the intent to proceed from the borrower, Habitat will: 1. Prepare closing disclosures and conveyance documents. 2. Set a closing date and coordinate with the settlement agent. 3. Request a copy of the insurance binder from the buyer. C. Scheduling a final walkthrough with the construction team and the buyer: 1. Obtain the certificate of occupancy from construction personnel. 2. Complete the punch list walkthrough no later than a week before closing. D. Preparing the warranty binder for the borrower: 1. Included in the binder will be all warranty information and instruction manuals, as applicable. E. Upon preparation of closing documents: 1. Review disclosures for accuracy. Be mindful of tolerances. 2. Review conveyance documents for accuracy. 3. Provide closing documents to the borrower no later than three business days before closing. A business day excludes Sunday and public holidays. If a copy of the appraisal has not been provided, it will be sent out with the closing documents. Sales contract Each homebuyer will be provided with a sales contract that includes all pertinent terms and fees to close the loan.

Homebuyer Selection and Mortgage Origination Prohibited practices A. Habitat will not give or accept any fee, kickback or item of value in connection with a real estate settlement service. B. Habitat will not require, directly or indirectly, that the buyer purchase title insurance from any particular title company. Record retention Habitat will safeguard applicant information as follows: A. All applicant information will be stored in a locked fireproof cabinet in the Habitat office. Only affiliate personnel with authorization to read or review such information can remove the file. Neither the file nor any file contents are permitted to be removed from the affiliate office. B. Applications and all information used to determine qualification will be retained for 25 months after a decision has been made. C. WHFH or the assigned title company will provide the original, recorded warranty deed to the homeowner once returned from the real estate records. At closing, WHFH will maintain, and the homeowner will receive, a duplicate original or copy of all other documents executed at the closing. Closing A. Closings are supervised by licensed closing officers and assistants who are licensed or otherwise qualified to conduct residential real estate closings in the state in accordance with all applicable laws and industry standards. B. All applicable documents will be sent to the settlement agent. C. If changed circumstances have been identified that warrant a redisclosure of the LE or GFE/TIL Statement, it will be provided within three business days of the identification of the change. D. Closing will be set for any time after the seventh day the initial disclosures were provided.

______Responsible Staff –Signature and Title Printed Name Date

______Board Representative - Signature Printed Name Date