Sistar Mortgage Company

Sales Guide – Products A5, A6, J8 and I5

August 1, 2017 Thank you for participating in Sistar’s correspondent loan program. This is the Sales Guide of Sistar Mortgage Company (together “Sistar”).

This Sales Guide contains the following two volumes: (I) Underwriting Guidelines; and (II) Policies and Procedures.

The Underwriting Guidelines include the following sections: 1. General Requirements 2. Loan Programs 3. Mortgage Products 4. Borrower Eligibility; Borrowers, Guarantors and Non-Borrower Mortgagors 5. Credit Scores and History 6. Calculating, Verifying and Documenting Income, Verifying and Documenting Employment History, and Completing the Final Application 7. Determining and Documenting Borrower Assets 8. Determining and Borrower Occupancy 9. Determining Loan Purpose 10. Qualifying Calculations - Loan to Value Ratio, Amount of Cash-out, Income Ratios, Assets, Funds to Close Reserves and Payment Shock 11. Compliance 12. Property and Property Appraisal Requirements 13. Insurance Requirements 14. Mortgage Document Requirements 15. Exhibits

The policies and procedures include the following sections: 1. Contacting Sistar 2. Interest Rate Locks 3. Sistar Fee Schedule 4. Submitting Loans to Sistar for a Guideline Review prior to close 5. Submitting Closed Loans to Sistar for Purchase 6. Receiving Borrower Payments Post Sistar Purchase 7. Final Documents 8. Changes to Policies and Procedures

Volume I Underwriting Guidelines

3 Table of Contents

1. General Requirements ...... Page 8 1.1 Conformance with the Underwriting Guidelines and Policies and Procedures Required ...... Page 8 1.2 Net Tangible Benefit to the Borrowers Required ...... Page 9 1.3 Lender’s Must Offer Applicants the Lowest Cost Loan Available ..Page 9 1.4 Compliance with ECOA Required...... Page 10 1.5 Lenders Must Make Their Own Credit Decisions and Use Independent Funding to Close Loans...... Page 10 1.6 Lenders Must Document a Loan’s Compliance with the Requirements of These Underwriting Guidelines by Compiling a Mortgage File ...... Page 10 1.7 Non-qualified Subordinate Financing, Tax Liens and Judgements Prohibited...... Page 10 1.8 Prepayment Penalties on Consumer Loans Prohibited...... Page 10 1.9 Definitions ...... Page 10 1.10 Underwriting Guidelines Amendable at Sistar’s Option...... Page 12

2. Loan Programs...... Page 13 2.1 Loan Program Eligibility Matrices ...... Page 13 2.2 SP J8…. Jumbo Prime ...... Page 14 2.3 SP A5…. Income per Bank Statements...... Page 18 2.4 SP A6…… Asset Depletion ...... Page 22 2.5 SP I5…...Investor DSC ...... Page 27

3. Mortgage Products ...... Page 30 3.1 5/1 Hybrid ARM Product ...... Page 30 3.2 7/1 Hybrid ARM Product ...... Page 30 3.3 30 Year Fixed Product ...... Page 30

4. Borrower Eligibility; Occupying Borrowers, Non-occupying Co-borrowers, Investment Borrowers, Guarantors and Non-Borrower Mortgagors .Page 32 4.1 Borrowers, Guarantors and Non-Borrower Mortgagors Defined ...... Page 32 4.2 Subject Property Owners Must Be Borrowers, or Non-Borrower Mortgagors ...... Page 33 4.3 Non-borrower Mortgagor Requirements ...... Page 33 4.4 Borrower Requirements for Owner Occupied Properties ...... Page 33 4.5 Borrower Requirements for Investor Occupied Properties ...... Page 34 4.6 General Borrower Requirements ...... Page 35 4.7 Citizens / US Persons and Foreigners ...... Page 35

4 4.8 Country Restrictions ...... Page 36 4.9 OFAC ...... Page 36 4.10 Diplomatic Immunity ...... Page 36 4.11 Limitation on Mortgages for which Borrowers are Obligated .....Page 37

5. Credit Scores and History and Fraud Prevention Engine Requirement ...... Page 38 5.1 Consumer Credit Report Required ...... Page 38 5.2 Age of Credit Report ...... Page 38 5.3 Credit Score Requirements...... Page 38 5.4 Trade Line Requirements ...... Page 39 5.5 Delinquency and Derogatory Credit ...... Page 40 5.5.1 Foreclosures, bankruptcies, short sales. forbearances and deed in lieu of foreclosure ...... Page 40 5.5.2 Liens, Judgements and Other Attachments...... Page 40 5.5.3 Collection and Charge-off Accounts...... Page 40 5.6 Required Mortgage and Housing Payment History ...... Page 41 5.7 Written Explanations of Derogatory Credit ...... Page 41 5.8 Verification of Obligations Not Appearing on Consumer Credit Report...... Page 41 5.9 Explanations Regarding Lawsuits and Pending Litigation...... Page 41 5.10 Credit Report Identified Inquiries ...... Page 42 5.11 Use of Fraud Prevention Engine Required...... Page 42

6. Determining and Documenting Income and Employment History ...... Page 43 6.1. Loan Program J8- Jumbo Prime ...... Page 43 6.2 Loan Program A5 – Income per Bank Statements ...... Page 45 6.3 Loan Program A6 – Asset Depletion ...... Page 50 6.4 Loan Program I5 – Investor DSC (debt service coverage) ...... Page 51

7. Calculating and Verifying Borrowers Assets for Closing and Reserves ...... Page 54 7.1 Calculating and Documenting Assets for Down Payment, Closing Costs and Reserves for loan programs J8 - Jumbo Prime, A5 - Income per Bank Statements and I5 - Investor DSC Loan...... Page 54 7.2 Calculating and Documenting Assets for Down Payment, Closing Costs and Reserves for loan program A6 - Asset Depletion ...... Page 58 7.3 Depletable Assets for Loan Program A6 – Asset Depletion ...... Page 63 7.4 Permitted Foreign Banks...... Page 64

8. Determining and Borrower Occupancy ...... Page 66 8.1 Primary Residences ...... Page 66 8.2 Second Homes...... Page 67

5 8.3 Business Purpose/ Investor Properties...... Page 68

9. Determining Loan Purpose, Requirements related to Purchas, Refinances and Cash- out Refinances ...... Page 69 9.1 Purchase Transactions ...... Page 69 9.2 Rate & Term Refinance Transactions ...... Page 70 9.3 Cash-out Refinance Transactions...... Page 71

10. Qualifying Calculations - Loan to Value Ratio, Amount of Cash-out, Income Ratios, Assets, Funds to Close Reserves and Payment Shock Page 72 10.1 Loan to Value Ratio and Cumulative Loan to Value Ratio...... Page 72 10.2 Calculating Mortgage Payments, Housing Expense and Other Obligations ...... Page 73 10.3 Income Tests...... Page 75 10.4 Testing the Sufficiency of Down Payment and Closing Fund, and of Borrower Reserves ...... Page 76

11. Compliance ...... Page 78 11.1 Compliance Requirements ...... Page 78 11.2 High Cost Loans Ineligible ...... Page 78 11.3 Use of Compliance Engine Required ...... Page 78 11.4 Texas Cash-out Refinances...... Page 79 11.5 Rescission Hardships Not Permitted...... Page 79 11.6 TRID ...... Page 79 11.7 Business Purpose/ Investment Loans ...... Page 79

12. Property and Property Appraisal Requirements ...... Page 80 12.1 Eligible Properties ...... Page 80 12.2 Ineligible Properties ...... Page 80 12.3 Property Requirements ...... Page 81 12.4 As is Condition ...... Page 81 12.5 Properties Listed for Sale ...... Page 82 12.6 Property Acquired Vacant ...... Page 82 12.7 Condominium Project Requirements...... Page 82 12.8 Property Appraisal Requirements ...... Page 84 12.9 Additional Appraisal Requirements ...... Page 87 12.10 Clear Capital CDA or Pro Teck ARR required ...... Page 87 12.11 Appraised Value ...... Page 88

13. Insurance Requirements...... Page 89 13.1 Title Insurance ...... Page 89 13.2 Hazard Insurance ...... Page 92 13.3 Flood Insurance ...... Page 93

6 14. Mortgage Document Requirements...... Page 94 14.1 Loan Document Requirements ...... Page 94 14.2 Escrow Accounts ...... Page 94 14.3 Lenders Must Accurately Complete the Final Application...... Page 95 14.4 Power of Attorney Requirements...... Page 95

15. Exhibits ...... Page 96 15.1 Exhibit 14.1 Borrowers Attestation...... Page 96 15.2 Exhibit 12.7 Sistar Mortgage Condominium Project...... Page105

7 1. General Requirements

1.1 Conformance with these Underwriting Guidelines and Policies and Procedures Required

These underwriting guidelines (the “Underwriting Guidelines”) describe the underwriting requirements of Sistar Mortgage Company (together “Sistar”). For a mortgage loan (a “Loan”) to be eligible for sale to Sistar, the Loan must conform, without exception, to the requirements set forth in these Underwriting Guidelines. In addition, for a Loan to be eligible for sale to Sistar, the Loan must, without exception, be originated, interest rate locked and delivered in accordance with Sistar’s policies and procedures (the “Policies and Procedures”). These Underwriting Guidelines and the Policies and Procedures together constitute Sistar’s sales guide (the “Sales Guide”) which is available to Spout’s approved correspondent lenders online at www.sistarmortgage.com.

These Underwriting Guidelines constitute the “Underwriting Guidelines” to which lenders represent and warrant compliance, in the Mortgage Loan Purchase Agreements under which loans are sold to Sistar. If a Loan is purchased by Sistar that does not conform to the requirements of these Underwriting Guidelines, the Loan is subject to repurchase in accordance with the Sistar Mortgage Loan Purchase Agreement.

These Underwriting Guidelines reference requirements in the Fannie Mae Selling Guide. Whenever these Underwriting Guidelines reference the “Fannie Mae Selling Guide”, the “Fannie Guide,” “Fannie Mae requirements,” “Fannie Mae’s requirements,” or Fannie Mae, the applicable portions of the Fannie Mae Selling Guide required by the context of these Underwriting Guidelines is incorporated herein, and the requirements set forth in such portions of the Fannie Mae Selling Guide become requirements for the purposes of these Underwriting Guidelines.

Ability to Repay Required

Borrowers obligated on a Loan (the “Borrowers”) must have the ability to repay the Loan, and must, prior to the Loan’s closing, attest to their ability to repay the Loan on a Sistar designated form, a specimen of which is shown at Exhibit 15.1 of these Underwriting Guidelines. Moreover, for a Loan to be eligible for sale to Sistar, the Lender must, prior to the Loan’s closing, evaluate the Borrowers’ ability to repay the Loan, and must make a good faith determination that the Borrowers do have the ability to repay the loan in conformance with the regulations promulgated by the Consumer Finance Protection Bureau. In making such an evaluation, the Lender must consider the borrowers’:

1. Current or reasonably expected income or assets 2. Current employment status

8 3. Monthly Mortgage payment for the loan in question 4. Monthly payments on other loans secured by the same property 5. Monthly payments for property taxes, insurance and home association fees 6. Debts, alimony or child support obligations 7. Monthly debt to income ratio or residual income that was calculated using the total of all the mortgage and non- mortgage obligations as a ratio of gross monthly income 8. Credit history

A Lender that sells a Loan to Sistar must attest that the Lender evaluated the ability of the Borrowers to repay the Loan, and its conclusion that the Borrowers do have the ability to repay the Loan. The Lender must represent and warrant that the origination of the Loan complied with all applicable laws and regulations related to the Borrowers’ ability to repay the Loan, including the regulations of the Consumer Finance Protection Bureau. In addition, a Lender must confirm its representation and warranty regarding compliance with laws and regulations related to the Borrowers’ ability to repay the Loan, at the time the Lender executes a purchase advice setting forth the terms under which the Loan is being sold to Sistar.

Notwithstanding the foregoing, if a loan is originated solely for business purposes, and is secured by an investment property, then the Lender is not required to evaluate the Borrowers’ ability to repay, and an attestation regarding the Borrowers’ ability to repay is not required from the Lender or the Borrowers.

1.2 Net Tangible Benefit to the Borrowers Required

For a Loan to be eligible for sale to Sistar, the Loan must provide a net tangible benefit to the Borrowers. A tangible benefit may include: financing the acquisition of a property, reducing the cash expenditure required to service an existing mortgage, lowering the interest rate of an existing mortgage, extending the period during which the interest rate on an existing mortgage is fixed, extending the term of an existing mortgage, and obtaining additional cash proceeds through a cash-out refinance. For a Loan to be eligible for sale to Sistar, the tangible benefit provided to the borrowers by the Loan must exceed the borrowers’ cost to acquire the Loan.

1.3 Lender’s must Offer Applicants the Lowest Cost Loan Available

Sistar requires that, prior to originating a Loan for sale to Sistar, the Lender first consider all the alternative loan programs the Lender has available, and then offer loan applicants the lowest cost loan program that (i) meets the applicants’ requirements and preferences, and (ii) for which the applicants qualify.

9 1.4 Compliance with ECOA Required

Sistar requires that Lenders selling Loans to Sistar comply in all respects with the Equal Credit Opportunity Act.

1.5 Lenders Must Make Their Own Credit Decisions and Use Independent Funding to Close Loans

For a loan to be eligible for sale to Sistar (i) the Lender must make its own determination as to whether to approve and consummate the Loan, (ii) ensure that none of Sistar’s directors, officers, employees, agents, contractors or affiliates influenced or interfered with the Lender’s decision to approve or consummate a Loan, and (iii) the Lender must consummate the Loan by advancing its own funds (and may not “table fund” the Loan or broker the Loan).

1.6 Lenders Must Document each Loan’s Compliance with the Requirements of These Underwriting Guidelines by Compiling a Mortgage File

For a Loan to be eligible for sale to Sistar, the Loan must be documented in a mortgage file (the “Mortgage File”) that demonstrates the Loan complies, in all respects, with the requirements set forth in these Underwriting Guidelines.

1.7 Non-qualified Subordinate Financing, Tax Liens and Judgements Prohibited

For a Loan to be eligible for sale to Sistar, the property securing the Loan (the “Subject Property”) may only be encumbered by the mortgage securing the Loan and by “Acceptable Subordinate Financing” as defined in the Fannie Guide. If the Subject Property is encumbered by any other lien then the Loan is ineligible for sale to Sistar.

1.8 Prepayment Penalties on Consumer Loans Prohibited

Sistar does not require or permit prepayment penalties on Loans to consumers. Any Loan that is subject to the Truth in Lending Act shall be classified as a consumer loan for the purpose of this Section 1.8. Sistar does not require, but does, where lawful, permit prepayment penalties on business purpose loans secured by investment properties (provided that any Loan which is subject to the Truth and Lending may not be deemed a business purpose loan).

1.9 Definitions

For the purposes of these Underwriting Guidelines: The term (“Applicable Loan Program”) shall mean, for a given Loan, the Lender selected Sistar Loan Program under which the Loan is offered for sale and delivered to Sistar, as more fully described in Section 2.1 of these Underwriting Guidelines;

10 The term (“Date of the Loan”) shall mean the date the note and Mortgage evidencing the loan were executed by the Borrowers (if different Borrowers executed the note and Mortgage on different dates, the “Date of the Loan” shall be the first date on which any Borrower signed the note and Mortgage); The term (“Final Application”) shall mean the loan application that contains, in all respects, accurate, verified and documented information, which is signed by the Borrowers on the Date of the Loan; The term (“Initial Application”) shall mean the first application for a Loan submitted by the Borrowers to the Lender; for all Loans except business purpose / investment loans, the Initial Application must be made on Fannie Mae form 1003. The term (“Lender”) shall mean for any given Loan, the mortgagee set forth in the Mortgage (or in the case of a Loan for which MERS is the mortgagee, the entity identified on the Mortgage as the entity for which MERS is nominee; The term (“Liquid Financial Reserves”) shall have the meaning described in the portion of the Fannie Guide under the heading “What are Liquid Financial Reserves?” The term (“Mortgage”) shall mean the customary and appropriate legal instrument that provides for a first lien security interest on the Subject Property and includes mortgages, deeds of trust and other similar security instruments; The term (“PITIA”) shall mean the monthly payment due on the Loan for principal, interest, tax escrows and impounds, insurance escrows and impounds. homeowner association fee escrows and impounds and ground rent escrows and impounds; The term (“Seasoned Funds”) shall mean funds that have continuously been on deposit since the date that is sixty days prior to the date of the Initial Application, in an account that belongs to a Borrower at either a domestic depository or domestic stock broker or investment advisor (each an “Eligible Account”); Seasoned Funds may have been transferred between Eligible Accounts; The term (“Seasoning Period”) shall mean the period beginning 60 days prior to the date of the Initial Application, and ending on the earlier of (i) the date the relevant asset (or if the asset is liquidated, the proceeds therefrom) are transferred to an Eligible Account or (ii) the Date of the Loan.

11 1.10 Underwriting Guidelines Amendable at Sistar’s Option

These Underwriting Guidelines may be amended by Sistar at any time and from time-to-time without prior notice. In the event that Spout amends these Underwriting Guidelines, updated Underwriting Guidelines will be posted at www.Sistarmortgage.com A Loan that was interest rate locked prior to the date and time of an amendment will be subject to these Underwriting Guidelines as they were effective prior to the amendment, unless the lock-in period for such Loan expires. Any Loan locked after the date and time of an amendment to these Underwriting Guidelines must conform with all the requirements of such amendment. In addition, any Loan which was interest rate locked prior to the date and time of an amendment to these Underwriting Guidelines, but which is not purchased by Sistar prior to the expiration of such interest rate lock, must conform with all of the requirements of such amendment.

12 2. Loan Programs

Sistar purchases Loans that fully conform to the eligibility requirements of one of its four loan programs. The four programs are:

Program Program Description

SP J8 Jumbo Prime SP A5 Income per Bank Statements SP A6 Asset Depletion SP I5 Investor DSC

2.1 Loan Program Eligibility Matrices

For each Loan a Lender offers for sale to Sistar, the Lender must specify a Sistar Loan Program (the “Loan Program”) under which the Loan is to be sold, and the Loan must conform to all of the requirements of the specified Loan Program. Many of the requirements for the Sistar Loan Programs are set forth on the loan program matrices in this Section 2 of these Underwriting Guidelines, including requirements for loan to value ratio, debt to income ratio, loan amount, credit score, occupancy, property type, transaction type, and numerous other loan characteristics. For a Loan to be eligible for sale to Sistar, the Loan must conform, in all respects, with the requirements set forth on the matrix for the Loan Program under which the Loan is offered for sale to Sistar.

The loan matrices for the Sistar loan programs are as follows:

13 2.2 Program Matrix for Loan Program SP J8 – Jumbo Prime

Program Number SP J8 Program Description Jumbo Prime 5/1 ARM, 7/1 ARM and 30 Year Fixed Additional ARM Terms: Margin: 3.99/5.99 Eligible Products Investor Occupancy, Index 1 year LIBOR, Caps: 2% annual and 5% lifetime, Floor: initial note rate 5/1 ARM: 7 Year Interest Only, 10 Year Interest Only or 30 Year Self-amortization 7/1 ARM: 10 Year Interest Only or 30 Year Self- amortization 30 Year Fixed: 7 Year Interest Only, 10 Year Interest Only and Amortization Options: Interest Only or 30 Year Self-amortization (Interest Only products are for a 30-year term. After the Interest Only period the loan must amortize over the remaining term; interest only not available in Illinois.) Citizens / US persons and foreigners permitted, foreigners only permitted for 2nd home and Citizenship / Visa requirements investor occupancy with a maximum LTV of 70% for 2nd home occupancy and 65% for investor occupancy. Primary Residence – 1 - 4 Unit and Condo Loans with foreign borrowers are ineligible for primary residences

Purchase and Rate & Term Refinance:

720 minimum Credit Score 85% LTV to $1,500,000

700 minimum Credit Score:

85% LTV to $1,000,000 80% LTV to $1,500,000 75% LTV to $2,000,000 65% LTV to $2,500,000 Allowable Loan to Value (LTV), Maximum 60% LTV to $3,000,000 Loan Amounts 680 minimum Credit Score 80% LTV to $1,000,000 70% LTV to $2,000,000 60% LTV to $3,000,000

660 minimum Credit Score: 80% LTV to $750,000 75% LTV to $1,000,000 70% LTV to $1,500,000 60% LTV to $2,000,000

640 minimum Credit Score: 75% LTV to $750,000 65% LTV to $1,000,000

55% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 80% LTV to $1,000,000 70% LTV to $1,500,000 60% LTV to $2,000,000 50% LTV to $3,000,000

680 minimum Credit Score 75% LTV to $1,000,000 65% LTV to $1,500,000 55% LTV to $2,000,000 50% LTV to $3,000,000 660 minimum Credit Score 75% LTV to $750,000 70% LTV to $1,000,000 65% LTV to $1,500,000 55% LTV to $2,000,000 640 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Second Homes – 1 - 2 unit and condo Loans with foreign borrowers limited to 65% maximum LTV

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 70% LTV to $1,500,000

680 minimum Credit Score: 80% LTV to $750,000 70% LTV to $1,000,000 60% LTV to $2,000,000

640 minimum Credit Score: 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 75% LTV to $750,000 65% LTV to $1,500,000 55% LTV to $2,000,000

700 minimum Credit Score 70% LTV to $1,000,000 60% LTV to $1,500,000

680 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $2,000,000

640 minimum Credit Score 65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000

Investment / Business Purpose – 1 - 4 unit and condo Loans with foreign borrowers limited to 70% LTV

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 70% LTV to $1,500,000

680 minimum Credit Score: 80% LTV to $750,000 70% LTV to $1,000,000 60% LTV to $2,000,000

640 minimum Credit Score: 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 75% LTV to $750,000 65% LTV to $1,500,000 55% LTV to $2,000,000

700 minimum Credit Score 70% LTV to $1,000,000 60% LTV to $1,500,000

680 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $2,000,000

640 minimum Credit Score 65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000

Owner occupied and second homes: $100K, Minimum Loan Amount Investor: $75K

Minimum Credit Score 640 Maximum Debt to Income Ratio 50% DTI 1-4 Units, warrantable condo and non- Eligible Properties Types warrantable condo (non-warrantable condo requires rate add-on) Primary residences, second homes and Permissible Occupancy investment

Loan Amount Reserves up to $1,000,000 3 months*

$1,000,001 to $2,000,000 6 months* more than $2,000,000 12 Months*

* if Borrowers own investment properties which Required Reserves are not the Subject Property, then required reserves must be increased by 1% of the mortgages outstanding on mortgage debt not secured by the Subject Property.

Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.

For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements. Acceptable States All 50 States and DC (territories not permitted) Gifts permitted provided gifts must conform to all Gifts Fannie Mae gift requirements; For gifts of equity, LTV must be reduced by 5% Income Documentation Please refer to Section 6. No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves

Credit History No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 70% and with reserves increased by 6 months Mortgage and Rental History Maximum permitted delinquency is 1x30x12 Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing Subordinate Financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements. 1 Full Appraisal + CDA or ARR. Loan amounts Appraisal Requirements over $1,000,000 require 2 appraisals + CDA or ARR Escrows Required AUS Not applicable; manual underwrite

Calculator http://Sistarmortgage.com/calculators/ Pre-Payment Penalty 3 YR PP, Required for Investor Occupancy If one or more Borrowers is a foreigner, then ACH ACH draft required for mortgage payments draft required.

2.3 Program Matrix for Loan Program SP A5 – Income per Bank Statements

Program Number SP A5 Program Description Income per Bank Statements Eligible Products 5/1 ARM, 7/1 ARM and 30 Year Fixed Additional ARM Terms: Margin: 3.99/5.99 Investor Occupancy, Index 1 year LIBOR, Caps: 2% annual and 5% lifetime, Floor: initial note rate 5/1 ARM: 7 Year Interest Only, 10 Year Interest Only or 30 Year Self-amortization 7/1 ARM: 10 Year Interest Only, 30 Year Self- amortization Interest Only and Amortization 30 Year Fixed: 7 Year Interest Only, 10 Year Interest Options Only or 30 Year Self-amortization (Interest Only products are for a 30-year term. After the Interest Only period the loan must amortize over the remaining term; interest only not available in Illinois.) Self-employment, tip and service At least one borrower must have been continually self- gratuity income requirement employed for two years, or must receive material income from tips and service gratuities Citizenship / Visa requirements Citizens / US persons permitted, foreigners NOT permitted Allowable Loan to Values (LTV), Primary Residence – 1 - 4 Unit and Condo Maximum Loan Amounts Loans with foreign borrowers’ ineligible for primary residences

Purchase and Rate & Term Refinance:

740 minimum Credit Score 85% to $1,500,000

720 minimum Credit Score: 85% to $1,250,000

700 minimum Credit Score: 85% LTV to $750,000 80% LTV to $1,500,000 75% LTV to $2,000,000 65% LTV to $2,500,000 60% LTV to $3,000,000

680 minimum Credit Score 80% LTV to $1,000,000 70% LTV to $2,000,000 60% LTV to $3,000,000

660 minimum Credit Score: 80% LTV to $750,000 75% LTV to $1,000,000 70% LTV to $1,500,000 60% LTV to $2,000,000

640 minimum Credit Score: 19

75% LTV to $750,000 65% LTV to $1,000,000 55% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 80% LTV to $1,000,000 70% LTV to $1,500,000 60% LTV to $2,000,000 50% LTV to $3,000,000

Second Homes – 1 - 2 unit and condo Loans with foreign borrowers limited to 65% maximum LTV

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 70% LTV to $1,500,000

680 minimum Credit Score: 80% LTV to $750,000 70% LTV to $1,000,000 60% LTV to $2,000,000

640 minimum Credit Score: 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 75% LTV to $750,000 65% LTV to $1,500,000 55% LTV to $2,000,000

700 minimum Credit Score 20

70% LTV to $1,000,000 60% LTV to $1,500,000

680 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $2,000,000

640 minimum Credit Score 65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000

Investment / Business Purpose – 1 - 4 unit and condo Loans with foreign borrowers limited to 65% LTV

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 70% LTV to $1,500,000

680 minimum Credit Score: 80% LTV to $750,000 70% LTV to $1,000,000 60% LTV to $2,000,000

640 minimum Credit Score: 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 75% LTV to $750,000 65% LTV to $1,500,000 55% LTV to $2,000,000

700 minimum Credit Score 70% LTV to $1,000,000 60% LTV to $1,500,000

680 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $2,000,000

640 minimum Credit Score 65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000

Minimum Loan Amount Owner occupied and second homes: $100,000 21

Investor occupied / business purpose: $75,000 Minimum Credit Score 640 Maximum Debt to Income Ratio 50% DTI Eligible Properties Types 1-4 Units, warrantable condo and non-warrantable condo (non-warrantable condo requires rate add-on) Permissible Occupancy Primary residences, second homes and investment

Required Reserves Loan Amount Reserves up to $1,000,000 3 months* $1,000,001 to $2,000,000 6 months* more than $2,000,000 12 Months*

* if Borrowers own investment properties which are not the Subject Property, then required reserves must be increased by 1% of the mortgages outstanding on mortgage debt not secured by the Subject Property.

Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.

For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements Acceptable States All 50 States and DC (territories not permitted) Gifts Gifts permitted provided gifts must conform to all Fannie Mae gift requirements; For gifts of equity, LTV must be reduced by 5%. Income Documentation Please refer to Section 6. Credit History No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves

No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 70% and with reserves increased by 6 months Mortgage and Rental History Maximum permitted delinquency is 1x30x12 Subordinate Financing Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements. Appraisal Requirements 1 Full Appraisal + CDA or ARR. Loan amounts over $1,000,000 require 2 appraisals + CDA or ARR Escrows Required AUS Not applicable; manual underwrite Calculator http://Sistarmortgage.com/calculators/ Pre-Payment Penalty 3 YR PP, Required for Investor Occupancy ACH draft required for mortgage ACH not required (Foreign Borrowers are not eligible for payments loan program A5

2.4 Program Matrix for Loan Program SP A6 – Asset Depletion

Program Number SP A6 Program Description Asset Depletion 5/1 ARM, 7/1 ARM and 30 Year Fixed Additional ARM Terms: Margin: 3.99/5.99 Eligible Products Investor Occupancy, Index 1 year LIBOR, Caps: 2% annual and 5% lifetime, Floor: initial note rate 5/1 ARM: 7 Year Interest Only, 10 Year Interest Only or 30 Year Self-amortization 7/1 ARM: 10 Year Interest Only, 30 Year Self- amortization 30 Year Fixed: 7 Year Interest Only, 10 Year Interest Only and Amortization Options: Interest Only or 30 Year Self-amortization (Interest Only products are for a 30-year term. After the Interest Only period the loan must amortize over the remaining term; interest only not available in Illinois.) Citizens / US persons and foreigners permitted, foreigners only permitted for 2nd home and Citizenship / Visa requirements investor occupancy with a maximum LTV of 70% for 2nd home occupancy and 65% for investor occupancy. Primary Residence – 1 - 4 Unit and Condo Loans with foreign borrowers ineligible for primary residences

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 85% LTV to $1,500,000

700 minimum Credit Score:

85% LTV to $1,000,000 80% LTV to $1,500,000 75% LTV to $2,000,000 65% LTV to $2,500,000 Allowable Loan to Values (LTV), Maximum 60% LTV to $3,000,000 Loan Amounts 680 minimum Credit Score 80% LTV to $1,000,000 70% LTV to $2,000,000 60% LTV to $3,000,000

660 minimum Credit Score: 80% LTV to $750,000 75% LTV to $1,000,000 70% LTV to $1,500,000 60% LTV to $2,000,000

640 minimum Credit Score: 75% LTV to $750,000 65% LTV to $1,000,000

55% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 80% LTV to $1,000,000 70% LTV to $1,500,000 60% LTV to $2,000,000 50% LTV to $3,000,000

Second Homes – 1 - 2 unit and condo Loans with foreign borrowers limited to 65% maximum LTV

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 70% LTV to $1,500,000

680 minimum Credit Score: 80% LTV to $750,000 70% LTV to $1,000,000 60% LTV to $2,000,000

640 minimum Credit Score: 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 75% LTV to $750,000 65% LTV to $1,500,000 55% LTV to $2,000,000

700 minimum Credit Score 70% LTV to $1,000,000 60% LTV to $1,500,000 24

680 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $2,000,000

640 minimum Credit Score 65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000

Investment / Business Purpose – 1 - 4 unit and condo Loans with foreign borrowers limited to 65% LTV

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 70% LTV to $1,500,000

680 minimum Credit Score: 80% LTV to $750,000 70% LTV to $1,000,000 60% LTV to $2,000,000

640 minimum Credit Score: 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 75% LTV to $750,000 65% LTV to $1,500,000 55% LTV to $2,000,000

700 minimum Credit Score 70% LTV to $1,000,000 60% LTV to $1,500,000

680 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $2,000,000

640 minimum Credit Score 65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000

Owner occupied and second homes: $100,000 Minimum Loan Amount Investor occupied / business purpose: $75,000 25

Minimum Credit Score 640

Depletable Assets Maximum as a Percent of Debt to Income Loan Amount Ratio Maximum Debt to Income Ratio (varies based on amount of reserves) 110% to 129.9% 50% DTI 130% to 149.9% 55% DTI 150% and higher 59% DTI

1-4 Units, warrantable condo and non- Eligible Properties Types warrantable condo (non-warrantable condo requires rate add-on) Primary residences, second homes and Permissible Occupancy investment

Loan Amount Reserves 110% of the Loan + 3

up to $1,000,000 months* 110% of the $1,000,001 to loan amount + $2,000,000 6 months*

110% of the more than loan amount + Required Reserves $2,000,000 12 Months*

For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements Acceptable States All 50 States and DC (territories not permitted) Gifts other than gifts of equity are not permitted. Gifts Gifts of equity require 5% reduction in Loan to Value Income Documentation Please refer to Section 6 No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves

terms of the subordinate financing conform to Fannie Mae requirements. 1 Full Appraisal + CDA or ARR. Loan amounts Appraisal Requirements over 1,000,000 require 2 appraisals + CDA or ARR Escrows Required AUS Not applicable; manual underwrite Calculator http://Sistarmortgage.com/calculators/ Pre-Payment Penalty 3 YR PP, Required for Investor Occupancy ACH draft required for mortgage payments If one or more Borrowers is a foreigner

2.5 Program Matrix for Loan Program SP I5 – Investor DSC (Debt Service Coverage)

Program Number SP I5 Program Description Investor DSC 5/1 ARM, 7/1 ARM and 30 Year Fixed Additional ARM Terms: Margin: 5.99, Index 1 year Eligible Product LIBOR, Caps: 2% annual and 5% lifetime, Floor: initial note rate

5/1 ARM: 7 Year Interest Only, 10 Year Interest Only or 30 Year Self-amortization 7/1 ARM: 10 Year Interest Only, 30 Year Self- amortization 30 Year Fixed: 7 Year Interest Only, 10 Year Interest Interest Only and Amortization Options: Only or 30 Year Self-amortization (Interest Only products are for a 30-year term. After the Interest Only period the loan must amortize over the remaining term; interest only not available in Illinois.)

Borrowers who are natural persons may be Citizens / US persons or foreigners

Borrowers who are eligible legal persons (LLCs and

corporations) must be organized in one of the fifty Citizenship / Visa requirements states or the District of Columbia.

If one or more Borrowers is a foreigner LTV is capped at 65% and 12 months of reserves are required.

Investment / Business Purpose – 1 - 4 unit and condo Loans with foreign borrowers limited to 65% LTV

Purchase and Rate & Term Refinance:

720 minimum Credit Score: 70% LTV to $1,500,000

680 minimum Credit Score: 80% LTV to $750,000 Allowable Loan to Values (LTV), Maximum 70% LTV to $1,000,000 Loan Amounts 60% LTV to $2,000,000

640 minimum Credit Score: 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $1,500,000

Cash Out Refinance

720 minimum Credit Score 75% LTV to $750,000 28

65% LTV to $1,500,000 55% LTV to $2,000,000

700 minimum Credit Score 70% LTV to $1,000,000 60% LTV to $1,500,000

680 minimum Credit Score 70% LTV to $750,000 60% LTV to $1,000,000 50% LTV to $2,000,000

640 minimum Credit Score 65% LTV to $750,000 55% LTV to $1,000,000 50% LTV to $1,500,000

Minimum Loan Amount $75,000 Minimum Credit Score 640 Minimum Debt Service Coverage 1.0 times PITIA 1-4 Units, warrantable condo and non-warrantable Eligible Properties Types condo (non-warrantable condo requires rate add-on) Investor / business purpose properties only Permissible Occupancy (borrowers must sign a business use affidavit (no primary or second home occupancies)

Loan Amount Reserves up to $1,000,000 3 months*

$1,000,001 to $2,000,000 6 months* more than $2,000,000 12 Months*

* if Borrowers own investment properties which are Required Reserves not the Subject Property, then required reserves must be increased by 1% of the mortgages outstanding on mortgage debt not secured by the Subject Property.

Reserve requirements may be waived based on mortgage rating, please see Section 10.4 for specific requirements.

For cash-out refinances, loan proceeds disbursed to Borrower may be used to meet reserve requirements.

Acceptable States All 50 States and DC (territories not permitted)

Gifts permitted provided gifts must conform to all Gifts Fannie Mae gift requirements; For gifts of equity, LTV must be reduced by 5%. Income Documentation Please refer to Section 6. 29

No Foreclosure, bankruptcy, deed in lieu or short sale over past 48 months at standard LTVs and reserves

Credit History No foreclosure, bankruptcy, deed in lieu or short sale permitted over past 24 months available at a maximum LTV is 70% and with reserves increased by 6 months Mortgage and Rental History Maximum permitted delinquency is 1x30x12 Subordinate financing permitted provided (1) CLTV does not exceed the applicable LTV limits, (2) that the debt service on subordinate financing is included Subordinate Financing in the DTI calculation, and (3) that the terms of the subordinate financing conform to Fannie Mae requirements. 1 Full Appraisal + CDA or ARR. Loan amounts over Appraisal Requirements 1,000,000 require 2 appraisals + CDA or ARR

Escrows Required Pre-Payment Penalty 3 YR PP, Required AUS Not applicable; manual underwrite http://Sistarmortgage.com/calculators/ Calculator If one or more Borrowers is a foreigner an ACH is ACH draft required for mortgage payments required.

3. Mortgage Products and Subordinate Financing Requirements

Mortgage Products

For a Loan to be eligible for sale to Sistar, the Loan must conform to the Sistar mortgage product requirements set forth in this Section 3. Sistar purchases three types of loan products: 5/1 hybrid adjustable rate mortgage, 7/1 hybrid adjustable rate mortgage (“ARM”) and 30-year fixed rate mortgage. Temporary buy-downs are not permitted.

3.1 5/1 Hybrid ARM Product

The required loan terms of the 5/1 hybrid ARM product are as follows:

Term: 360 months Initial interest rate: fixed for 60 months, followed by an initial adjustment, and then followed by additional adjustments every 12 months Index: 1 year LIBOR Margin: owner occupied - 3.99%, investor occupied – 5.99% Caps: Initial - 2%, Annual - 2%, Lifetime – 5% Amortization: either (a) interest only for 84months and then self-amortizing over the remaining 276 months, (b) interest only for 120 months and then self- amortizing over the remaining 240 months, or (c) self-amortizing over 360 months.

3.2 7/1 Hybrid ARM Product

The required loan terms of the 7/1 hybrid ARM product are as follows: Term: 360 months Initial interest rate: fixed for 84 months, followed by an initial adjustment, and then followed by additional adjustments every 12 months Index: 1 year LIBOR Margin: owner occupied - 3.99%, investor occupied – 5.99% Caps: Initial - 2%, Annual - 2%, Lifetime – 5% Amortization: either (a) interest only for 120 months and then self-amortizing over the remaining 240 months, or (b) self-amortizing over 360 months.

3.3 30 Year Fixed Product

The required loan terms of the 30-year fixed product are as follows: Term: 360 months

31 Interest rate: note rate fixed throughout the life of the Loan Amortization: either (a) interest only for 84months and then self-amortizing over the remaining 276 months, (b) interest only for 120 months and then self- amortizing over the remaining 240 months, or (c) self-amortizing over 360 months.

Subordinate Financing Requirements

Sistar purchases first lien mortgage loans. Sistar permits a Subject Property collateralizing a to be encumbered by a subordinate mortgage if each of the following are true:

1) The terms of the subordinate mortgage comply, in all respects, with Fannie Mae’s requirements for Acceptable Subordinate Financing; 2) There is only one subordinate mortgage encumbering the Subject Property (if the Subject Property is encumbered by multiple subordinate mortgages the Loan is ineligible for sale to Sistar); 3) The mortgage payment for the subordinate mortgage is including in the debt to income ratio used to qualify the Loan; 4) The cumulative loan to value ratio for the Loan does not exceed the permitted loan to value ratio for the loan.

32 4. Borrower Eligibility; Occupying Borrowers, Non-occupying Co-borrowers, Investment Borrowers, Guarantors and Non-Borrower Mortgagors

4.1 Borrowers, Guarantors and Non-Borrower Mortgagors Defined

For the purposes of these Underwriting Guidelines, for any given Loan:

Borrowers are defined as all Occupying borrowers, Non-occupying co- borrowers, Trust Borrowers, Investment Borrowers and Guarantors;

(a) Occupying borrowers are defined as natural persons who (i) occupy, or will, upon a Loan’s closing, occupy the Subject Property, (ii) become obligated for the Loan and sign the note and Mortgage evidencing the Loan, (iii) either (a) own an interest in the Subject Property or (b) are the settler of a revocable inter vivos trust that conforms to Fannie Mae’s requirements for inter vivos trusts, and (iv) whose credit qualifications are used to determine whether the Loan will be granted;

(b) Non-occupying co-borrowers are defined as natural persons who (i) are obligated for a Loan where the Loan occupancy is primary residence or second home, and sign the note and Mortgage evidencing the Loan, (ii) are owners of the Subject Property, (iii) do not and will not occupy the Subject Property, (iv) whose credit qualifications are used to determine whether the Loan will be granted;

(d) Investment borrowers are defined as natural persons or legal persons who (i) are obligated for a Loan where the Loan occupancy is business purpose / investor occupied, and sign the note and Mortgage evidencing the Loan, (ii) are owners of the Subject Property, (iii) do not and will not occupy the Subject Property, and (iv) whose credit qualifications are used to determine whether the Loan will be granted; Investment borrowers may only be natural persons, LLCs or corporations, and may not be any other type of entity;

33 (e) Guarantors are defined as natural persons who (i) own an interest in the legal person which owns the Subject Property, (ii) are obligated for a Loan where the Loan occupancy type is investor occupied / business, and sign the note and Mortgage evidencing the Loan, (iii) do not and will not occupy the Subject Property, and (iv) whose credit qualifications are used to determine whether the Loan will be granted Loan.

Non-borrower mortgagors are not included in the definition of Borrowers, and are defined as natural persons who are not obligated for a Loan, but who own or otherwise have an interest in the Subject Property, and mortgage such interest so that the Subject Property can collateralize the Loan.

4.2 Subject Property Owners Must Be Borrowers, or Non-Borrower Mortgagors

For a Loan to be eligible for sale to Sistar, at least one owner of the Subject Property must be a Borrower, and each owner of the Subject Property must be a Borrower or a Non-Borrower Mortgagor.

4.3 Non-borrower Mortgagor Requirements

If one or more Non-borrower mortgagors owns an interest in the Subject Property, then each Non-borrower mortgagor must conform with each of the following requirements:

(a) The Non-Borrower Mortgagor is the Spouse of a Borrower; (b) The Non-Borrower Mortgagor executes the mortgage securing the Loan, thereby mortgaging his or her interest in the Subject Property in a manner that provides the Lender with an enforceable first lien on the Subject Property (Non-Borrower Mortgagors are not permitted if the title insurer that insures the Lender’s first lien security interest in the Subject Property makes any exception or change to its insurance coverage as a result of a Non-Borrower Mortgagor); (c) The Non-Borrower Mortgagor is not an applicant for the Loan, does not file a loan application, and is not evaluated in determining whether the Loan will be granted.

4.4 Borrower Requirements for Owner Occupied Properties

If the Subject Property is owner occupied then the Loan must conform with each of the following requirements:

(a) at least one Borrower must be an Occupying borrower;

34 (b) Each Non-occupying co-borrower meets the following requirements:

(1) has one of the following family relationships with one of the Occupying borrowers; mother, father, sister, brother, son, daughter, uncle, aunt, nice or nephew, in each case, either by blood or marriage;

(2) for purchase transactions, not less than 5% of the purchase price of the Subject Property may be derived from the Occupying borrower(s)’ funds;

(3) The credit score that is the basis for qualification of the Loan may not be improved by a non-occupying Borrower; (if the credit score for a Loan, as calculated in accordance with Section 5 hereof is higher due to the inclusion of a Non-occupying co- borrower, then the credit score of the non-occupying co- borrower must be excluded in determining the representative credit score for the Loan, however if the credit score of a Non- occupying co-borrower diminishes the credit score for the Loan, then the credit score of the Non-occupying co-borrower must be included in determining the representative credit score for the Loan;

(4) Non-occupying co-borrowers must live in the United States.

(c) If a Borrower is a Trust Borrower, then (1) the settler of the Trust Borrower must occupy the Subject Property, and (2) the Trust Borrower must conform to all of Fannie Mae’s requirements regarding inter vivos trusts.

4.5 Borrower Requirements for Investor Occupied Properties

If the Subject Property occupancy is business purpose / investor (non-owner occupied) then the Loan must conform with each of the following requirements:

(a) No Borrower and no owner of the Subject Property may occupy the Subject Property, either now, or at any time the Loan is outstanding;

(b) No person who is related by blood or marriage to a Borrower may occupy the Subject Property, either now, or at any time the Loan is outstanding (for the purposes hereof, related shall include spouse, domestic partner, mother, father, mother-in-law, father-in-law, sister, brother, sister-in-law, brother-in-law, son, daughter, son-in-

35 law, daughter-in-law, uncle, great uncle, aunt, great aunt, niece, nephew or first cousin, all either by blood or marriage);

(c) If the Borrower is a legal person (non-natural person), then all owners of the Borrower must be natural persons (the Borrower may not be owned by one or more legal persons).

(d) If the Borrower is a legal person, each person who owns 20% or more of the Borrower must be a Guarantor (if no natural person owns 20% of the Borrower, then the Loan is ineligible for sale to Sistar).

4.6 General Borrower Requirements

Each Borrower must (i) file a loan application, (ii) become obligated on the Loan by signing the note and Mortgage evidencing the Loan, and (iii) complying with the requirements set forth in Sections 4.7 Citizens and Non-citizens; 4.8 Country Restrictions, 4.9 OFAC, 4.10 Diplomatic Immunity, 4.11 Limitation on Mortgages for which Borrowers are Obligated, and Section 5 Credit Scores and Credit History.

4.7 Citizens / US Persons and Foreigners

Each Borrower who is a natural person must be classified as either:

(i) A citizen / US person, which for the purposes hereof shall include all US citizens, all holders of immigration document I551 (green card), all persons who have been approved for I551 (green card) status and who can document such approval (typically through immigration form I797) and all persons holding visas allowing residency in the United States that are acceptable to Fannie Mae, provided that in no event will a person holding an “A” class (diplomatic visa) or “G” class (international organization visa) be eligible for financing;

(ii) A foreigner;

Foreigners are subject to reduced loan to value limits and other special qualification requirements, and a pricing overlay. Documentation evidencing the visa status of non-citizens, including copies of non-citizens’ passports must be included in the Mortgage File.

Each Borrower who is a legal person (LLC, corporation or inter vivos trust) must be organized under the laws of one of the fifty states or the District of Columbia, and the

36 documents evidencing the formation of such Borrower must be included in the Mortgage File.

4.8 Country Restrictions

Notwithstanding any other provision of this Underwriting Guide, a Loan is ineligible for sale to Sistar if one or more Borrowers obligated on the Loan (i) is (a) not a United States Citizen and (ii) does not hold a form I551 (green card), and (iii) is a citizen of any of the following countries:

Afghanistan Balkans Burma Central African Republic Cote d’Ivoire

Cuba Democratic Republic of Congo Iraq Kenya Myanmar

Libya Nigeria North Korea Somalia Sudan

Syria Yemen Zimbabwe

4.9 OFAC

No Borrower may be listed on the United States Treasury’s OFAC website. Lenders must determine if a Borrower is listed on the OFAC website, and must include in the Mortgage File documentation showing the Borrower is not listed on the OFAC website.

4.10 Diplomatic Immunity

No Borrower or non-borrower mortgagor may have diplomatic immunity, hold an “A” class visa, or hold a “G” class visa.

37 4.11 Limitation on Mortgages for Which Borrowers and Guarantors are Obligated

No Borrower may be obligated for more than 6 loans that have been sold to Sistar. If a person is already obligated for 6 loans that have been sold to Sistar, then additional Loans for which such person is a Borrower are ineligible for sale to Sistar.

No Borrower may be obligated for loans sold to Sistar with an aggregate principal amount that exceeds $5 million. If a person is already obligated for loans that have been sold to Sistar with an aggregate principal amount of $5 million or more, then additional Loans on which such person is a Borrower are ineligible for sale to Sistar.

5. Credit Scores, Credit History and Fraud Prevention Engine Requirements

38 5.1 Consumer Credit Report Required

An industry standard, tri-merge credit report (a “Credit Report”) is required for each Borrower who is (i) a citizen / US person, and (ii) a natural person.

All Credit Reports must provide merged credit information from Experian, Trans Union and Equifax.

Special Requirement for foreigner Borrowers

For Borrowers classified as foreigners (in accordance with section 4.7 of these Underwriting Guidelines), the Lender must attempt to obtain a Credit Report. If a Credit Report is unavailable, the Loan is still eligible for sale to Sistar, however if a Credit Report with credit scores is available, it must be used to evaluate whether the Loan conforms to the credit cores and credit history requirements of the applicable Loan Program. Lenders must include in the Mortgage File, documentation demonstrating that the lender attempted to obtain a Credit Report for each foreign Borrower.

5.2 Age of Credit Report

Credit reports may not be greater than 90 days old on the Date of the Loan.

5.3 Credit Score Requirements

As set forth in the loan program matrices in Section 2 of these Underwriting Guidelines, each loan program has a required minimum credit score. To determine if a Loan meets the minimum credit score requirement for its Loan Program, Lenders must determine the Loan’s Representative Score. If the Representative Score for a Loan, is less than the required score, then the Loan is ineligible for sale to Sistar. In addition, the Representative Score must be used to determine if a Loan complies with other Loan Program requirements which are dependent on credit score, such as maximum loan amount for a given loan to value ratio.

For loan program J8 – Jumbo Prime and SP A6 – Asset Depletion, the Representative Score is the Applicable Score of the Occupying Borrower with the greatest income among all Occupying Borrowers. For the purposes hereof, the Applicable Score for an Occupying Borrower is (i) the middle score for Occupying Borrowers with 3 Valid Credit Scores, and (ii) the lower score for Occupying Borrowers with 2 two valid Credit Scores.

For loan program SP A5 – Income per Bank Statements, the Representative Score is the lowest Applicable Score among all Borrowers who are natural persons. For the purposes hereof, the Applicable Score for a Borrower is (i) the middle score for Borrowers with 3 Valid Credit Scores, and (ii) the lower score for Borrowers with 2 valid Credit Scores. 39

For loan program SP I5 – Investor DSC, the Representative Score is, at the Lender’s option, either (i) the average Applicable Score among all Borrowers who are natural persons or (ii) the lowest Applicable Score among all Borrowers who are natural persons. For the purposes hereof, the Applicable Score for a Borrower is (i) the middle score for Borrowers with 3 Valid Credit Scores, and (ii) the lower score for Borrowers with 2 two valid Credit Scores.

A (“Valid Credit Score”) is a credit score from Experian (FICO), Trans Union (Empirica), and Equifax (Beacon). Only scores from these reporting agencies are Valid Credit Scores.

For a Loan to be eligible for sale to Sistar, all Borrowers who are citizens of, or reside in, the United States must have a Valid Credit Score. Foreigners are not required to have a Valid Credit Score, however for a Loan to be eligible for sale to Sistar, the lender originating the Loan must have attempted to run credit on each foreign borrower. If a Valid Credit Score is not available for a foreign borrower, the Loan is still eligible for sale to Sistar. If a Valid Credit Score is available for a foreign borrower, the Valid Credit Score must be used in determining the Representative Credit Score for the Loan, and whether the Loan meets the credit score requirement of the Loan Program.

5.4 Trade Line Requirements

If one or more of the Borrowers on a Loan is a citizen or US person, then Sistar requires that the Borrowers jointly have a minimum of 3 trade lines of established credit in the United States. For a trade line to be included in the count of trade lines toward the required minimum it must have been reported by Experian, Trans Union or Equifax with a history of at least twelve months prior to the date of the credit report, or it must be verified through a mortgage verification, rent verification or installment debt verification as having been established not less than twelve months prior to the date of such verification (each tradeline included in the count of tradelines must have been opened for not less than twelve months).

In addition, if one or more of the Borrowers on a Loan is a Citizen / US person, then Sistar requires that Borrowers jointly have two trade lines that have (i) been active within the twelve months prior to the date of the Borrower’s consumer credit report, and (ii) have been established for twelve months or longer. For the purposes hereof, trade lines may include mortgage debt, installment debt, revolving debt and real property rental payments. Trade lines of any Borrower may be counted toward the total number of trade lines required, but trade lines for which more than one Borrower is obligated may only be counted as one trade line.

5.5 Delinquency and Derogatory Credit

40 5.5.1 – Foreclosures, bankruptcies, short sales. forbearances and deed in lieu of foreclosure

For a Loan to be eligible for sale to Sistar at standard LTV ratios and reserves, during the four-year period preceding the date of the Loan: no Borrower may have (i) owned a property, located in the United States, that was or is in foreclosure, (ii) been in bankruptcy under the jurisdiction of the United States, (iii) given a deed in lieu of foreclosure on a property located in the United States, (iv) sold a property located in the United States in a short sale, or (v) settled a mortgage debt secured by a property in the United States for less than the debt’s full principal due.

Notwithstanding the preceding paragraph, a Loan is eligible for sale to Sistar if each of the following are true: (a) during the two-year period preceding the date of the Loan: (i) no Borrower has owned a property located in the United States that was or is in foreclosure, (ii) been in bankruptcy under the jurisdiction of the United States, (iii) given a deed in lieu of foreclosure on a property located in the United States, (iv) sold a property located in the United States in a short sale, or (v) settled a mortgage debt secured by a property located in the United States for less than the debt’s full principal, (b) the Loan’s LTV does not exceed 70%, and (c) the Borrower’s reserves are at least six months greater than standard (six months greater than what would have been Sistar’s required reserves, if not for this paragraph).

5.5.2 Liens, Judgements and Other Attachments

For a loan to be eligible for sale to Sistar, the Borrowers must not be subject to a lien, judgement or other item that may or will attach to the Subject Property and became a lien or other “cloud” on title, and all liens, judgements and other items that may attach to the Subject Property must be paid in full.

5.5.3 Collection and Charge-off Accounts

All non-medical collection accounts and charge-offs that are not in dispute (except collection accounts and charge offs no longer enforceable due to the applicable state statute of limitations), must be paid in full prior to or at the time of a Loans’ funding by the originating lender.

Medical collection and charge-off accounts, and disputed collection and charge-off accounts need not be paid in full if the following requirement is met: in additional to all reserves otherwise required, Borrowers must have additional reserves equal to the amount of all medical and disputed collection and charge-off accounts not paid in full (except collection accounts and charge offs no longer enforceable due to the applicable state statute of limitations); accounts other than medical and disputed accounts must be paid in full regardless of reserves.

5.6 Required Mortgage and Housing Payment History

41 For a Loan to be eligible for sale to Sistar the maximum delinquency on any Borrower’s mortgage or rental obligations for properties located in the United States is:

1 X 30 X 12; if the mortgage or rental rating of any Borrower shows delinquency greater than 1 X 30 X 12, then the Loan is ineligible for sale to Sistar.

5.7 Written Explanations of Derogatory Credit

A satisfactory written explanation signed by the applicable Borrower and explaining the reason(s) for obligations paid more than sixty days past their due date, and for liens, judgements and charge-offs is required. The explanation must satisfactorily identify the reason(s) for the adverse credit and provide detail demonstrating that the situation causing the delinquency has now been resolved.

5.8 Verification of Obligations Not Appearing on Consumer Credit Report

Lenders must verify Borrower obligations with United States nexus which are not rated on Borrowers’ Credit Report including obligations for rental payments, mortgages and installment debts. Both the balance outstanding and the monthly payment must be verified, and a 12-month payment history must be obtained. Acceptable verification methods include verification of mortgage, verification of rent, verification of installment debt or copies of the front and back of the last 12 months’ checks used to pay an obligation.

5.9 Explanations Regarding Lawsuits and Pending Litigation

If the application, title or Credit Report reveal that a Borrower is presently involved in a lawsuit or pending litigation a statement from the Borrower’s attorney is required. The statement must explain the circumstances of the lawsuit or pending litigation and discuss potential liability and any applicable insurance coverage. A copy of the legal complaint and answer must be included in the Mortgage File. The title company closing the loan must be informed of the lawsuit, and not title exceptions are permitted which stem from the lawsuit or pending litigation. If the lawsuit or litigation is reasonably likely to have a material adverse impact on the borrower’s ability to repay a Loan, or if the lawsuit or pending litigation or the cause of a title exception, then the Loan is ineligible for sale to Sistar.

5.10 Credit Report Identified Inquiries

If a credit report indicates that a Borrower made inquiries about obtaining credit within the 90-day period prior to the date of the credit report, the Lender must determine whether credit was granted to the Borrower in connection with such inquiry, and must document the method of its determination. If additional credit was granted, such additional credit must be included on the Borrowers’ Final Application and in the calculation of the Borrowers’ obligations.

5.11 Use of a Fraud Prevention Engine Required

For a loan to be eligible for sale to Sistar, a fraud prevention engine pull must be obtained from either DataVerify, CoreLogic, SAS - or from another fraud prevention engine which Sistar, in its discretion, chooses to accept. Each high-risk alert indicated by the engine pull must be addressed by the Lender.

6. Determining and Documenting Income and Employment History

Sistar requires different methods of determining and documenting income and employment history for the various Sistar loan programs. For loan programs J8 – Jumbo Prime, A5- Income per Bank Statements, and A6 Asset Depletion, Lenders must determine the income and employment history of the Borrowers. For loan program I5 – Investor DSC, Lenders must determine the rental income from the Subject Property, but should not determine or document the Borrowers’ income, or verify the Borrowers’ employment history (the Borrowers’ employer information should however be accurately included on the Borrowers’ loan application). Sistar’s specific requirements regarding determining and documenting income, and where applicable employment history, are as follows:

6.1 Loan program J8 – Jumbo Prime

Lenders submitting Loans to Sistar for purchase under the Jumbo Prime program (“Jumbo Prime Loans”) must determine and document income and employment history in accordance with the manual underwriting requirements of the Fannie Mae Selling Guide.

Notwithstanding the general requirement that Jumbo Prime Loans be underwritten in accordance with the Fannie Guide, the following exceptions to the Fannie Guide are permitted:

1) Employment income may be documented by a combination of (1) the Borrowers’ most recent paystubs, which must show earnings for 30 successive calendar days, and which must list year-to-date earnings, and (2) a W2 tax form for the previous calendar year (W2 forms for other than the previous calendar year are not required).

2) Self-employment income may be documented by a combination of (1) the Borrowers’ personal tax return, and (2) if applicable, business tax return(s). Business tax returns are only needed to demonstrate sufficient income for the Borrowers to qualify (if the Borrowers qualify based on one or more businesses, tax returns for additional businesses are not required). Only one year of tax return(s) is required. If the Date of the Loan is on or before April 15 of a given year, the needed tax return(s) are the return(s) for the full calendar year prior to the calendar year most recently ended. If the Date of the Loan is after April 15 of a given year, then the needed return(s) are the return(s) for the calendar year most recently ended. A profit and loss statement is not required except as set forth in the following paragraph.

If required tax return(s) are not unavailable due to a filing extension, then the tax return(s) for the immediately prior year may be used to document income. 44

If the immediately prior year tax return(s) are used to document income, then the Borrowers must submit a signed profit and loss statement for each of the Borrowers’ businesses used for qualifying (if a borrower business is not used for qualifying, then a profit and loss statement for that business is not required). If the signed profit and loss statement shows lower income than the prior year’s tax return, then the income shown on the profit and loss statement (instead of the prior year’s tax return) must be used in calculating the Borrowers’ debt to income ratio.

3) Rental income may be documented through leases (as opposed to tax returns). Rental income may be included in the Borrowers’ income, in the amount documented with leases, regardless of how long a property has been rented. Lenders must verify rental income documented with a lease by including, in the Mortgage File, Borrower bank statements which show either (1) three months of rent receipts or (2) for a new lease, receipt of a security deposit and one month of rent.

Special requirements for Foreign Borrowers for Program J8 – Jumbo Prime

To determine and document the income of foreigners (“Foreign Borrowers”), Lenders must generally adhere to the requirements for documenting income set forth in the Fannie Guide, except that the following are acceptable income and documentation thereof for Foreign Borrowers, and may be included in the Borrowers’ income for qualifying:

Salary and wage income validated by either:

(a) paystubs and tax returns; if the Foreign Borrowers’ resident country utilizes the equivalent of a W2 form, then the W2 equivalent may be substituted for tax returns. Paystubs, W2s and tax returns must be translated to English if they are in a foreign language; or

(b) a letter from the Foreign Borrowers’ employer which states the Foreign Borrowers’ year-to-date income for the current year, and the Foreign Borrowers’ income for the previous year, with a break-out of base salary or wages, overtime, bonuses, commissions and other sources of income. Employer letters must be on company letterhead, and must include the employer’s address and telephone number. If the letter is in a language other than English, a translation of the letter into English must be provided. If the employer’s letterhead does not include the employers’ website address, the website address must be obtained and included in the Mortgage File.

Self-employment income validated by either:

(a) Most recent year tax return filed by the Foreign Borrowers in their resident country; if the tax return is not in English, it must be translated to English; or

(b) A letter from the Foreign Borrowers’ certified public accountant (or the equivalent thereof in the Borrowers’ resident country) on the accountant’s letterhead stating the Foreign Borrowers’ income from self-employment for the previous calendar year. If the accountant’s letter is not in English, then a translation into English must be provided. In addition, if Foreign Borrower self-employment income is verified by a certified public accountant, a copy of the accountant’s license must be included in the Mortgage File.

Rental income validated by either:

(a) Most recent year of tax return filed by the Foreign Borrowers in their resident country; if the tax return is not in English, then it must be translated to English; or

(b) Leases setting forth rental income and three recent bank statements showing receipt of the rental income into the Foreign Borrowers’ bank account.

Income from other sources validated as follows:

(a) For types of income that are documentable with statements, copies of statements for the previous year with an accompanying translation; examples of income documentable with statements include dividends, interest, retirement income, income from trusts, and royalty income;

(b) For other types of income, a letter from the Foreign Borrowers’ certified public accountant, on the accountant’s letterhead, describing the nature of the income, the amount of income received by the Foreign Borrowers and whether the income is likely to continue over the next three years; if the letter is not in English a translation to English is required; in addition, a copy of the accountant’s license must be obtained and included in the Mortgage File.

6.2 Loan Program A5 – Income per Bank Statements

Lenders submitting a Loan to Sistar for purchase under the Income per Bank Statements program must document that (i) at least one Borrower must have been continuously self-employed for two years, and (ii) each Borrower whose self-

46 employment income is used to qualify for the Loan must have been continuously self- employed for two years. In addition, Lenders must verify the portion of the Borrowers’ business that is owned by the Borrower. Acceptable documentation may include business licenses, a written statement from a certified public accountant, LLC or partnership agreements, incorporation records, assignment of tax ID notices, and other similar records.

Lenders submitting loans to Sistar for purchase under the Income per Bank Statements program must determine and document income from self-employment based on one of the following three methods:

Co-mingled accounts

If the Borrowers use the same bank account for both personal and business banking, Lenders must determine income from self-employment by obtaining the Borrower(s)’ 12 most recent bank statements for their bank account. The Lender must then determine, over the twelve-month period covered by the bank statements, (1) the average monthly business receipts deposited into the bank account, and (2) the average monthly business expenses paid out from the bank account. Lenders may accept as business receipts, deposits which are typical during the 12-month period, and reasonable for the Borrowers’ type of business. Unusually large deposits must be validated to be ordinary business revenue to be included as business receipts. Deposits not related to ordinary regular business activities, including deposits related to assets sales or borrowings which are not in the ordinary course of business, and deposits related to tax refunds, may not be counted as business receipts. To determine business expenses, Lenders must classify debits from the Borrowers’ bank account as either business or personal. Debits that are clearly personal in nature, such as loan payments to financial institutions that are aligned with amounts due on non- business mortgages, installment and revolving debts can be classified as personal expenses. Also, classifiable as personal expenses, are payments to doctors, schools, retailers, and other goods and services providers clearly unrelated to the Borrowers’ business, and payments to family members. In addition, withdrawals of limited and reasonable amounts of cash may be classified as personal. Other debits should be classified as business expenses unless documentation is obtained that shows a specific debit is personal.

Once a Lender has determined average monthly business receipts and average monthly business expenses (over the past 12 months), the Lender must subtract average business expenses from average business receipts to calculate average monthly income from self-employment. The calculated result should be listed on the Borrowers’ Final Application in the “Other Income Section” as the Borrowers’ “Cash Self-Employment Income Based on Bank Statement Analysis.”

Separate Business and Personal Accounts – Personal Statement Analysis

If the Borrowers have both business and personal bank accounts, the Lender may document and determine income from self-employment by averaging the Borrowers’ deposits into their personal bank accounts, over the 12-month period preceding the date of the Borrower’s loan application (the “Analysis Period”), provided such deposits resulted from the Borrowers’ self-employment. For the purposes hereof:

(i) if a deposit is less than the average monthly deposits made into the Borrowers’ personal accounts over the Analysis Period, and provided that the Borrower’s personal bank statements do not explicitly show the deposit results from any of: (a) a transfer from another personal asset account, (b) loan proceeds from a loan to the Borrowers , (c) an asset sale (d) another source of Borrowers’ income (for example deposits due to a spouse’s employment or deposits due to rent receipts), or (e) a tax refund, then Lenders may presume the deposit is from the Borrowers’ self-employment (for the purposes of clarity: transfers from the Borrower’s business bank account to their personal bank account(s) may be presumed to result from self-employment).

(ii) If a deposit is more than the average monthly deposits made into the Borrowers’ personal accounts over the Analysis Period, then Lenders must document that the deposit results from the Borrowers’ self- employment. For the purposes hereof, a transfer from the Borrowers’ business bank account to their personal bank account(s), which is evidenced by bank statements, may be accepted as resulting from the Borrowers’ self-employment. In addition, documentation showing a deposit is derived from a customer of the Borrowers’ business may be accepted as resulting from the Borrowers’ self-employment.

Lenders should include the Borrower’s average monthly deposits from self- employment over the Analysis Period in the Borrowers’ income, which the Lender uses to qualify the Borrower for a Loan, and must list their amount as “Cash Self- Employment Income Based on Bank Statement Analysis” in the “Other Income” section of the Borrowers’ Final Application.

Separate Business and Personal Accounts – Business Statement Analysis

If the Borrowers have both business and personal bank accounts, the Lender may determine and document income from self-employment by calculating the product of (1) the average deposits from acceptable sources into the Borrowers’ business bank accounts over the 12-month period preceding the date of the Borrower’s loan application (“Average Acceptable Deposits”), times (2) the Profit Margin (as defined

48 below) for the Borrowers’ business, times (3) the percentage of the Borrowers’ business owned by the Borrowers. For the purposes hereof:

(i) Acceptable sources for deposits are the ordinary operations of the Borrowers’ business, and exclude (a) transfers from another asset account, (b) extraordinary asset sales, (c) unusual borrowing (provided that borrowings which are common and customary for the business such as programmatic borrowing under a secured revolving credit facility or factoring agreement, shall not be excluded), or (d) tax refunds;

(ii) The (“Profit Margin”) for the Borrowers’ business is 50%. Notwithstanding the foregoing, if the Borrowers are in a high margin business (for example, doctors, architects, consultants, tutors, coaches and teachers) then Lenders may choose to use a Profit Margin higher than 50% provided either: (a) the Borrowers’ certified public accountant provides a written statement which sets forth the average profit margin of the Borrowers’ business over the past two years, in which case the Profit Margin is the average profit margin from the accountant’s statement; or (b) the Borrowers’ certified public accountant provides historical profit and loss statements for the Borrowers’ business for the two calendar years preceding the date of the Borrower’s loan application, in which case the Profit Margin is the average profit margin earned by the Borrower’s business over the past two years. The profit and loss statements must be signed by the certified public accountant, and must reasonably demonstrate the profit margin for the Borrowers’ business;

(iii) The percent of the business owned by the Borrowers is the Borrowers verified ownership interest in the business on a current (as opposed to fully diluted) basis (preferred securities, convertible securities and options are not includable in determining the Borrowers’ percent of the business owned).

Lenders may include income from self-employment calculated in accordance with this subsection (“Business Income per Bank Statements”), in the income used to qualify the Borrower for a Loan, and should include Business Income per Bank Statements in the income section of the Borrowers’ Final Application.

Additional Sources of Income

For Loans submitted to Sistar for purchase under Loan Program A5 – Income per Bank Statements, Lenders may include in the income used to qualify Borrowers, 49 income from sources other than the Borrowers self-employment (“Income from Other Sources”). Such sources include spouse employment income (provided spouse is a Borrower), and income from social security, pensions, rent, royalties, alimony, child support, dividend, interest, other investments and trusts. Income from other sources should be verified as follows:

Spouse employment income Paystubs covering 30 days and showing year-to-date earnings, and previous year W2; gaps in employment over the previous two years must be satisfactorily explained as required by Fannie Mae;

Social Security Award letter or bank statements showing six months of deposits;

Pensions Award letter or bank statement showing three months of deposits;

Rent Lease and bank statements showing three months of rent receipts (or bank statement showing receipt of security deposit and first month’s rent if newly rented property);

Royalties Contract and bank statements showing three months of receipts;

Alimony Divorce or separation agreement or court order plus bank statements showing six months receipts;

Child Support Divorce or separation agreement or court order plus bank statements showing six months receipts;

Dividend and Interest Statements from brokerages and banks showing dividend and interest income earned year-to-date and for the previous calendar year;

Other Investments & Trust Institutional statements, K1 tax forms, statements from certified public accountants or similar documentation which clearly shows income earned year-to-date and over the previous calendar year.

Qualifying Income for Loan Program A5 – Income per Bank Statements

The income to be used to qualify Borrowers for loan program A5– Income per Bank Statements is the sum of Income from Self-Employment plus Income from Other Sources.

Setting forth Qualifying Income on the Final Application

The Borrowers’ Income from Self-employment must be included on the Final Application in the “Other Income Section” as the Borrowers’ “Cash Self-Employment Income Based on Bank Statement Analysis.” 50

The Borrowers’ Income from Other Sources must be included on the Final Application based on income type, in the manner that is customary for loans eligible for sale to Fannie Mae. For example, wages, overtime, commissions and dividends and interest should be included on the appropriate rows in Section V of the Final Application, while Social Security should be included in the Other Income area of Section V and described as “social security income.”

Use of Sistar Calculator # A5 - BSI is Required

Lenders must use Sistar Calculator # A5 - BSI in determining if Borrowers’ have sufficient income for a Loan to be qualified and deliverable to Sistar under the Income per Bank Statements Program. Sistar Calculator # A5 - BSI is available online at www.Sistarmortgage.com/calculators. Lenders must accurately input the data required by the calculator, and the calculator must indicate that the Borrowers’ income is sufficient for the Borrowers to qualify for the Loan. In qualifying Borrowers, a Lender should reduce the Borrowers’ income below the income determined by the calculator if the Lender is aware of any circumstance that would likely reduce the Borrowers’ income. Lenders may not qualify a Loan based on income which is higher than the income determined by the calculator.

Lenders must print and include the calculator output in the Mortgage File. Loans which do not include a printout of calculator results are ineligible for sale to Sistar under the Income per Bank Statements program.

6.3 Loan program A6 – Asset Depletion

Lenders submitting a Loan to Sistar for purchase under the Asset Depletion program must document that (i) the Borrower’s Depletable Assets are at least 110% of the original principal balance of the Loan, and (ii) the Borrowers’ Income from Asset Depletion plus the Borrowers’ Income from Other Sources are sufficient so the Borrowers’ debt to income ratio does not exceed the maximum debt to income ratio in the matrix for the asset depletion program in Section 2.4 of these Underwriting Guidelines.

Determining the Borrowers’ Income from Asset Depletion

Under Loan program A6, Lender’s may include in the income used to qualify the Borrowers Income from Asset Depletion. To determine monthly Income from Asset Depletion, Lenders must divide (i) Depletable Assets (as calculated in accordance with section 7.3 of these Underwriting Guidelines) by (ii) 120 months.

Under Loan Program A6, Lenders may also include in the income used to qualify the Borrowers, income from sources other than asset depletion (“Income from Other Sources”). Any type of income that may be included in Borrower income under the Fannie Mae Selling Guide may be included in Income from Other Sources used to 51 qualify Borrowers under Program A6 except “Employment Related Assets as Qualifying Income” (as described in the Fannie Guide). Examples of acceptable Income from Other Sources include employment income (including self-employment income), and income from social security, pensions, rent, royalties, alimony, child support, dividends and interest. All Income from Other Sources must be validated and documented in accordance with the requirements of the Fannie Guide.

Setting forth Qualifying Income on the Final Application

The Borrowers’ Income from Asset Depletion must be included on the Final Application in the “Other Income Section” with the description “Income from asset depletion.”

Use of Sistar Calculator # A6 – Asset Depletion is Required

Lenders must use Sistar Calculator # A6 – Asset Depletion in determining if Borrowers’ have sufficient income for a Loan to be qualified and deliverable to Sistar under the Income per Bank Statements Program. Sistar Calculator # A6 – Asset Depletion is available online at www.Sistarmortgage.com/calculators. Lenders must accurately input the data required by the calculator, and the calculator must indicate that the Borrowers’ income is sufficient for the Borrowers to qualify for the Loan. In qualifying Borrowers, a Lender should reduce the Borrowers’ income below the income determined by the calculator if the Lender is aware of any circumstance that would likely reduce the Borrowers’ income. Lenders may not qualify a Loan based on income which is higher than the income determined by the calculator.

6.4 Loan Program I5 – Investor Debt Service Coverage

Lenders submitting a Loan to Sistar for purchase under the Investor Debt Service Coverage program must document that the gross rent from the Subject Property - reduced by real estate taxes, insurance, and as applicable homeowner association dues and ground rents - will carry the mortgage payments on the Loan.

Determining Gross Rental Income

The Subject Property’s gross rental income is the lower of (i) the rental value of the property from a rental addendum prepared by the appraiser that determined the market value of the Subject Property, and which is included in the appraisal of the Subject Property (if two appraisals are required, the lower rental value between the two appraisals must be used) and (ii) if the Subject Property will be leased as of the Date of the Loan, the actual rent for which the Subject Property if leased. If the Subject Property will not be leased as of the Date of the Loan, then the gross rental income is simply the rental value of the property set forth on the rental addendum (or if two appraisals are obtained, the lower of the rental values on the rental addendums).

Calculating Net Rental Income

To calculate the Subject Property’s net rental income Lender’s must subtract from its gross rental income the cost of real estate taxes, insurance, common charges, and ground rents applicable to the Subject Property.

Validating and Documenting Real Estate Taxes, Insurance Costs, Common Charges and Ground Rents

Lenders must validate and document the real estate taxes, insurance costs, common charges and ground rents applicable to the Subject Property. Examples of acceptable documentation include title reports, insurance bills, statements from condominium project homeowner associations and property managers and other similar documentation.

Setting Forth Gross Rental Income and Net Rental Income on the Borrowers’ Final Application

For loan program SP I5 – Investor DSC, Lenders must complete the income section of the Final Application as follows:

For purchases and refinances:

Complete Sections I., and II. of the Final Application,

If the Borrower is other than a natural person, complete the areas of Section III of the Final Application pertaining to the Borrower’s name, address, phone number and, if the Borrower has a tax identification number, the Borrower’s tax identification number. Complete Section III of the Final Application, in its entirety, for each Borrower who is a natural person and each Guarantor.

Complete Section IV of the Final Application for each Borrower who is a natural person and for each Guarantor. 53

Leave the income area of Section V on the Final Application blank except for “Other Income.” Enter at Other Income, on the Final Application for the Borrowers only (and not for the Guarantors), the net rental from Sistar Calculator # SP I5. In the proposed Monthly Housing Expense area of Section V, enter the payments on the proposed mortgage, and the verified monthly hazard insurance, real estate taxes, common charges and ground rents. At the description of other income make the following entry “Net Rental Income after taxes, insurance, common charges and ground rents”

Complete Section VI of the Final Application with verified amounts for each Borrower who is a natural person, and for each Guarantor. On the Schedule of Real Estate Owned in Section VI, if the transaction is a refinance, include the Subject Property on the list of real estate owned, but leave gross rental income, insurance and Net Rental Income blank.

Complete Section VII of the Final application on the 1003 applicable to the first Borrower, but not on additional 1003 forms for additional Borrowers and Guarantors.

Complete Section VIII for each Borrower and Guarantor.

Each Borrower and Guarantor must sign the Final Application, on the 1003 applicable to such Borrower or Guarantor.

Use of Sistar Calculator # SP I5 – Investor DSC is Required

Lenders must use Sistar Calculator # I5 – Investor DSC to calculate Net Rental Income. Sistar Calculator # SP I5 – Investor DSC is available online at www.Sistarmortgage.com/calculators. Lenders must accurately input the data required by the calculator, and the calculator must indicate that the Subject Property’s net rental income is to qualify for the Loan.

7. Calculating and Verifying Borrower Assets for Closing and Reserves

7.1 Calculating and Documenting Assets for Down Payment, Closing Costs and Reserves for loan programs J8 - Jumbo Prime, A5 - Income per Bank Statements and I5 - Investor DSC.

For a Loan to be eligible for sale to Sistar under Loan programs J8 – Jumbo Prime, A5 – Income per Bank Statements or I5 – Investor DSC, the Borrowers must have sufficient acceptable sources of funds for the down payment and closing costs and sufficient reserves to meet the Loan Program’s reserve requirement. The reserve requirement for each loan program is set forth on the matrices in Section 2 of these Underwriting Guidelines.

(“Down Payment and Closing Funds”) are defined as assets that meet Fannie Mae’s requirements, as modified by the overlays listed below, for sources of funds that may be used for the down payment and closing costs. (“Borrower Reserves”) are defined as assets that meet Fannie Mae’s requirements, as modified by the overlays listed below, for sources of funds that may be included in the Borrowers’ reserves.

The following overlays modify certain of Fannie Mae’s requirements for determining Down Payment and Closing Funds and Borrower Reserves. Lenders must include in the Mortgage File, documentation showing adherence to the requirements of each applicable overlay. If there is a conflict between an overlay and the Fannie Mae Selling Guide, the overlay is applicable and supersedes the Fannie Mae Selling Guide. The overlays are as follows:

1) The Borrowers must have Borrower Reserves equal to or greater than the required number of months set forth on the Sistar program matrix applicable to the Borrower’s loan program (as opposed to the number of months set forth in the Fannie Mae eligibility matrix and the portions of the Fannie Mae guides related to reserves for multiple financed properties).

2) Cash-out proceeds available to the Borrowers from a cash-out refinance transaction may be included in Borrower Reserves (loan proceeds remitted by the settlement agent to pay off debt including paying off existing mortgages, tax liens, installment and revolving debt and collection accounts, are not proceeds available to the Borrowers, and may not be included in available Borrower Reserves).

3) Interested party contributions are limited to the lower of (i) the maximum interested party contribution permitted under the Fannie Guide and (ii) 6% (interested party contributions cannot exceed 6% even in cases where a contribution greater than 6% is permitted under the Fannie Guide).

4) Funds transferred to the Borrowers, from a bank or brokerage account of a business owned by the Borrowers, may be included in Down Payment and Closing Cost Funds only if either (i) the Lender performs a business cash flow analysis and confirms that the withdrawal of funds will not have a negative impact on the business (the cash flow analysis must be prepared in accordance with the Fannie Mae Selling Guide), or (ii) the Lender obtains a statement from a Certified Public Accountant (“CPA”) stating that the withdrawal of funds will not have a negative impact on the business. If funds transferred from a business or brokerage account are included in Down Payment and Closing Cost Funds, then Lender’s must adhere to Fannie Mae’s requirements for evaluating large deposits into the Borrowers’ business accounts (as set forth in the Fannie Guide: large deposits do not need to be evaluated for refinances, and when they are not needed for Down Payment and Closing Funds or for Borrower Reserves). Lenders do not need to evaluate business tax returns to include transfers from business bank or brokerage accounts in Down Payment and Closing Cost Funds.

Funds transferred to the Borrowers, from a bank or brokerage account of a business owned by the Borrowers, may be included in the Borrower Reserves. (Lenders are not required to perform a business cash flow analysis or obtain a CPA statement if transferred funds will only be used to meet Sistar’s reserve requirement.) If funds transferred from a business or brokerage account are included in Borrower Reserves, then Lender’s must adhere to Fannie Mae’s requirements for evaluating large deposits into the Borrowers’ business accounts (as set forth in the Fannie Guide: large deposits do not need to be evaluated for refinances, and when they are not needed for either Down Payment and Closing Funds or Borrower Reserves). Lenders do not need to evaluate business tax returns to include transfers from business bank or brokerage accounts in Borrower Reserves.

If funds in a business bank or brokerage account have not been transferred to the Borrowers’ personal accounts, such funds may not be included in Down Payment and Closing Funds, however such funds may be included in Borrower Reserves, provided that the percent of the business’ funds which may be included in Borrower Reserves may not be greater than the percent of the business owned by the Borrowers (for example, if the Borrowers’ own 25% of a business, only 25% of the business’ funds may be included in Borrower Reserves). If funds transferred from a business or brokerage account are included in Borrower Reserves, then Lender’s must adhere to Fannie Mae’s requirements for evaluating large deposits into the Borrowers’ business accounts (as set forth in the Fannie Guide: large

deposits do not need to be evaluated for refinances, and when they are not needed for either Down Payment and Closing Funds or Borrower Reserves). Lenders do not need to evaluate business tax returns to include transfers from business bank or brokerage accounts in Borrower Reserves.

5) Funds in Individual Development Accounts and funds obtained through matches from nonprofit or government agencies may not be included in Down Payment and Closing Funds or Borrower Reserves.

6) Funds in or obtained from Pooled Savings may not be included Down Payment and Closing Funds or Borrower Reserves.

7) The section of the Fannie Mae Selling Guide pertaining to Verification of Assets for Non-US Citizen Borrowers is expanded as follows:

a. Funds in foreign bank accounts, and publicly traded stocks and bonds and government issued bonds held in foreign brokerage accounts may be used as a source for Down Payment and Closing Funds or Borrower Reserves.

b. Funds and securities in foreign accounts used for Down Payment and Closing Funds or Borrower Reserves, must be, transferred, and in the case of securities, liquidated, and be on deposit in, a domestic bank account belonging to a Borrower not later than ten days prior to the Date of the Loan. Notwithstanding the preceding sentence, required Borrower Reserves which exceed six months of PITIA may be held in in a foreign bank or brokerage account provided the account must belong directly to a Borrower (and may not be an account belonging to the Borrowers’ business).

c. An Automated Clearing House repetitive draft must be established under which mortgage payments due are deducted directly from the domestic account holding the Borrower Reserves.

d. All requirements in the Fannie Mae Selling Guide pertaining to seasoning, documentation and evaluating large deposits apply to foreign accounts except as otherwise specified in this section 7.1.

to US dollars based on published conversion rates from the Wall Street Journal or other similar sources; a record of the conversion rate and its source must be included in the Mortgage File.

8) If the purpose of a Loan is to acquire the Subject Property and the transaction entails a gift of equity, then the maximum loan to value ratio on the Loan is 5% less than the maximum loan to value ratio that would otherwise be permitted pursuant to the applicable program matrix in Section 2 of this Sales Guide.

9) Donations from entities, including but not limited to donations from churches, municipalities and non-profit organizations may not be used for Down Payment and Closing Funds or Borrower Reserves (this overlay does not affect gifts and gifts of equity from relatives as permitted in the Fannie Mae Selling Guide).

10)Disaster relief grants or loans may not be used for Down Payment and Closing Funds or Borrower Reserves.

11)Trade equity is subject to the following requirements. Only qualified exchanges under section 1031 of the Internal Revenue Code are permitted and no other trade equity may be included in Down Payment and Closing Funds or Borrower Reserves. In addition, the Borrowers must acquire the Subject Property in connection with the 1031 exchange, and must use funds held by a Qualified Intermediary (as such term pertains to section 1031 exchanges) to pay a portion of the consideration for the Subject Property (direct exchanges of properties that do not include funds being held by a Qualified Intermediary are ineligible, as are exchange transactions where any portion of the consideration to be paid to the seller of the Subject Property is other than cash). All documentation pertaining to the 1031 exchange must be included in the mortgage file, including documentation that funds were held by a Qualified Intermediary (a written statement from the Qualified Intermediary is sufficient for this purpose).

12)Proceeds from the sale or financing of personal property (such as cars, collections or art), may not be used for Down Payment and Closing Funds or Borrower Reserves (personal property does not include real estate or financial assets).

*Lenders must use Fannie Mae’s requirements for its standard programs, requirements for HomeReady and other specialized programs are not applicable and may not be used.

7.2 Calculating and Documenting Assets for Down Payment, Closing Costs and Reserves for loan program A6 - Asset Depletion

The Asset Depletion program is designed for Borrowers with substantial liquid assets, and relies on the depletion of assets as a means by which the Borrowers will have the ability to service mortgage payments. Consequently, the asset depletion program requires that Borrowers hold in post-closing reserves a minimum of 110% of the loan amount they are borrowing.

For a Loan to be eligible for sale to Sistar under Loan programs A6 – Asset Depletion, the Borrowers must have sufficient acceptable sources of funds for the down payment and closing costs and sufficient reserves to meet the Loan Program’s reserve requirement. The reserve requirement is set forth on the matrix in Section 2.4 of these Underwriting Guidelines.

1) The Borrowers must have verified Borrower Reserves equal to or greater than the sum of (i) 110% of the original principal balance of the Loan, plus (ii) the required number of months set forth on the Sistar program matrix for loan program A6 in Section 2.4 (as opposed to the number of months set forth in the Fannie Mae eligibility matrix and the portions of the Fannie Mae guides related to reserves for multiple financed properties).

2) Cash-out proceeds may not be included in available Borrower Reserves.

4) Funds transferred to the Borrowers, from a bank or brokerage account of a business owned by the Borrowers, may be included in Down Payment and

Closing Cost Funds only if either (i) the Lender performs a business cash flow analysis and confirms that the withdrawal of funds will not have a negative impact on the business (the cash flow analysis must be prepared in accordance with the Fannie Mae Selling Guide), or (ii) the Lender obtains a statement from a Certified Public Accountant (“CPA”) stating that the withdrawal of funds will not have a negative impact on the business. If funds transferred from a business or brokerage account are included in Down Payment and Closing Cost Funds, then Lender’s must adhere to Fannie Mae’s requirements for evaluating large deposits into the Borrowers’ business accounts (as set forth in the Fannie Guide: large deposits do not need to be evaluated for refinances, and when they are not needed for Down Payment and Closing Funds or for Borrower Reserves). Lenders do not need to evaluate business tax returns to include transfers from business bank or brokerage accounts in Down Payment and Closing Cost Funds.

Reserves). Lenders do not need to evaluate business tax returns to include transfers from business bank or brokerage accounts in Borrower Reserves.

In addition, funds held in a Borrowers’ business may not account for more than 40% of the required reserves. For example, if the required reserves are $400,000, then only $160,000 of the required reserves may be held in a Borrowers’ business, and the remaining required reserves must be held by a Borrower directly and personally.

5) Funds in Individual Development Accounts and funds obtained through matches from nonprofit or government agencies may not be included in Down Payment and Closing Funds and Borrower Reserves.

6) Funds in or obtained from Pooled Savings may not be included in Down Payment and Closing Funds and Borrower Reserves.

7) The section of the Fannie Mae Selling Guide pertaining to Verification of Assets for Non-US Citizen Borrowers is expanded as follows:

b. Funds and securities in foreign accounts used for Down Payment and Closing Funds or Borrower Reserves, must be, transferred, and in the case of securities, liquidated, and be on deposit in, a domestic bank account belonging to a Borrower not later than ten days prior to the Date of the Loan. Notwithstanding the preceding sentence, required Borrower Reserves which exceed six months of PITIA may be held in a domestic brokerage account or in a Permitted Foreign Bank, provided accounts in Permitted Foreign Banks must belong directly to a Borrower (and may not be a business account). The list of Permitted Foreign Banks is set forth in Section 7.4

c. An Automated Clearing House repetitive draft must be established under which mortgage payments due are deducted directly from the domestic account holding the Borrowers Reserves.

d. All requirements in the Fannie Mae Selling Guide pertaining to asset seasoning, documentation and evaluating large deposits apply to foreign accounts except as otherwise specified in these section 7.2.

e. Funds transferred from foreign accounts and deposited into domestic accounts as dollar deposits need not be converted but are accepted at the US dollar value deposited. Funds and securities not transferred, which remain in foreign accounts should be converted to US dollars based on published conversion rates from the Wall Street Journal or other similar sources; a record of the conversion rate and its source must be included in the Mortgage File.

8) The Borrowers’ beneficial interest in a trust may be included in Borrower Reserves as follows:

a. Only the Borrowers beneficial interest in trust bank deposits, publicly traded stocks and bonds issued by public companies or government entities may be included in Borrower Reserves (beneficial interests in non-liquid trust assets such as real estate may not be included in Borrower Reserves);

b. The Borrowers must either i. Be entitled, at their discretion, to withdraw their beneficial interest from the trust; or ii. If the Borrowers are not entitled to withdraw their beneficial interest at their discretion, but receive a periodic, fixed distribution from the trust, trust assets may be Borrower Reserves in an amount equal to the lower of 10 times the annual distribution received by the Borrowers from the trust or (y) the portion of the Borrowers’ beneficial interest represented by bank accounts, publicly traded stock and bonds issued by a public company or government entity;

c. The Borrowers’ beneficial interest, the Borrowers’ ability to withdraw at their discretion and conformance with the other requirements for using trust assets as verified liquid reserves must be documented either through a statement from a trusted, or documentation such as statements and trust agreements.

d. Notwithstanding the requirements in this item 8 regarding assets held in trust being includable in Borrower Reserves, assets transferred from a trust to a Borrower’s personal bank, account prior to the Date of the Loan, may be included in Down Payment and

Closing Funds and Borrower Reserves provided Fannie Mae’s requirements for using trust assets as a source for Down Payment and Closing Funds and Borrower Reserves are satisfied.

9) Gifts, other than gifts of equity, are not permitted.

10)If the purpose of a Loan is to acquire the Subject Property and the transaction entails a gift of equity, then the maximum loan to value ratio on the Loan is 5% less than the maximum loan to value that would otherwise be permitted pursuant to the applicable program matrix in Section 2 of this Sales Guide.

11)Donations from entities, including but not limited to donations from churches, municipalities and non-profit organizations may not be used for Down Payment and Closing Funds and Borrower Reserves (this overlay does not affect gifts and gifts of equity from relatives as permitted in the Fannie Mae Selling Guide).

12)Disaster relief grants or loans may not be used for Down Payment and Closing Funds and Borrower Reserves.

13)Trade equity is subject to the following requirements. Only qualified exchanges under section 1031 of the Internal Revenue Code are permitted and no other trade equity may be included in Down Payment and Closing Funds or Borrower Reserves. In addition, the Borrowers must acquire the Subject Property in connection with the 1031 exchange, and must use funds held by a Qualified Intermediary (as such term pertains to section 1031 exchanges) to pay a portion of the consideration for the Subject Property (direct exchanges of properties that do not include funds being held by a Qualified Intermediary are ineligible, as are exchange transactions where any portion of the consideration to be paid to the seller of the Subject Property is other than cash). All documentation pertaining to the 1031 exchange must be included in the mortgage file, including documentation that funds were held by a Qualified Intermediary (a written statement from the Qualified Intermediary is sufficient for this purpose).

14)Proceeds from the sale or financing of personal property (such as cars, collections or art), may not be used for Down Payment and Closing Funds or Borrower Reserves (personal property does not include real estate or financial assets).

*Lenders must use Fannie Mae’s requirements for its standard programs, requirements

for HomeReady and other specialized programs are not applicable and may not be used.

7.3 Depletable Assets for Loan Program A6 – Asset Depletion

Depletable Assets are the assets used to determine Income from Asset Depletion (in accordance with section 6.3 of these Underwriting Guidelines).

Depletable Assets are equal to (i) assets which are included in Borrower Reserves, and (ii) are in one of the following six asset classes:

1) Funds on deposit in domestic bank accounts (provided such accounts are acceptable under the Fannie Guides); net of any borrowing secured by such funds;

2) Funds on deposit at Permitted Foreign Banks (which are listed in Section 7.4 of these Underwriting Guidelines); net of any borrowing secured by such funds;

3) Stocks, bonds and options which are (i) acceptable sources of funds under the Fannie Mae Guides and (ii) are either (a) held in a domestic brokerage account or (b) held directly by the Borrowers, and are issued by a domestic corporation or political subdivision of the United States (including by the US states and territories and their municipalities); directly held foreign stocks and bonds, and assets in a foreign brokerage account are not includable in Depletable Assets);

4) A Borrower’s beneficial interest in a trust may be included in Depletable Assets as follows: a. Only the Borrowers beneficial interest in trust bank deposits, publicly traded stocks and bonds issued by public companies or government entities may be included in Borrower Reserves (beneficial interests in non-liquid trust assets such as real estate may not be included in Borrower Reserves);

represented by bank accounts, publicly traded stock and bonds issued by a public company or government entity;

5) Retirement accounts in accordance with and to the extent permitted by Fannie Mae as acceptable reserves; and

6) The cash value of life insurance in accordance with and to the extent permitted by Fannie Mae as an acceptable source of reserves.

The amount of Depletable Assets available to the Borrowers must be calculated after giving effect to the closing of the Loan (amounts needed for the Down Payment and Closing must be excluded from Depletable Assets).

While the assets from the asset classes listed in this Section 7.3 are the only assets includable in Depletable Assets, Depletable assets may be sourced from any acceptable source for Borrower Reserves as specified in Section 7.2 of these Underwriting Guidelines.

7.4 Permitted Foreign Banks

The Permitted Foreign Banks are as follows:

Agricultural Bank of China Bank of America (foreign branches) Bank of China Bank Leumi Bank of Montreal

Bank of New York Mellon (foreign branches) Barclays BNP Paribas Citigroup (foreign branches) Credit Suisse

Deutsche Bank Discount Bank of Israel Goldman Sachs (foreign branches) Groupe BPCE Group Crédit Agricole

Hapoalim Bank HSBC Industrial and Commercial Bank of China Limited ING Bank JP Morgan Chase (foreign branches)

Macquarie Bank Limited Mitsubishi UFJ FG Mizuho FG Morgan Stanley (foreign branches) Nordea

Royal Bank of Canada Royal Bank of Scotland Santander Société Générale Standard Chartered

State Street (foreign branches) Sumitomo Mitsui FG TD Bank UBS Unicredit Group

Wells Fargo (foreign branches)

8. Determining Borrower Occupancy

Sistar requires that, for each loan sold to Sistar, the Borrowers declare whether they will occupy the Subject Property as their primary residence or second home, or if they will not occupy, but instead will use the Subject Property as a business purpose investment. Sistar also requires that Lenders conduct diligence to determine if the Borrowers will or will not occupy the Subject Property as declared.

Certain Sistar loan programs permit Borrowers to occupy the Subject Property as the Borrowers’ primary residence, second home or to use the Subject Property as a business purpose investment, while other Sistar programs require the Subject Property to be used as a business purpose investment. Finally, Foreign Borrowers may only occupy the Subject Property as a second home, or use the Subject Property as a business purpose investment. The permissible occupancies for Sistar’s loan programs are as follows:

8.1 Primary Residences

If the Borrowers’ obligated on a loan declare they will occupy the Subject Property as their primary residence, the following must be true or the loan is ineligible for sale to Sistar:

a. The Borrowers must have declared that they will occupy the Subject Property as their primary residence in a written affirmation;

b. If the purpose of the loan is refinancing, the Borrowers’ address on their pay stubs, bank statements, tax returns, driver’s licenses and insurance records must predominately be the Subject Property;

c. The Subject Property must not be rented, and if (i) the purpose of the loan is refinancing, and (ii) the Loan Program is J8- Jumbo Prime, then the Borrowers’ tax returns must not show rental income from the Subject Property;

d. If the purpose of the loan is to purchase the Subject Property, and the Borrowers are not selling their current primary residence, the Subject Property must be a reasonable alternative to their prior residence (i.e. if the borrowers live in a large house with a big family it is unreasonable that they are moving into a one-bedroom apartment).

e. If the Borrowers are employed, their place of employment must be in the same area as the Subject Property (except that long-distance commuting is allowed if it is (i) commiserate with a Borrower’s job title and responsibility, (ii) the Borrower returns home on a regular basis, (iii) the 67

Borrower’s family lives in the Subject Property while the Borrower is away, and (iv) the Borrower lives in a hotel or smaller dwelling - such as a corporate apartment while away at work).

Loans for which the obligated Borrowers’ purported occupancy is questionable are not eligible for sale to Sistar.

8.2 Second Homes

If the Borrowers declare they will occupy the Subject Property as a second home, the following must be true or the loan is ineligible for sale to Sistar:

a. The Borrowers must have declared that they will occupy the Subject Property as a second home in a written affirmation;

b. The location of the Subject Property must be reasonable for second home use (for example if the Subject Property is in the same neighborhood as the Borrowers’ primary residence, or if it is in another neighborhood in the borrowers’ metropolitan area and such area has no appeal as a second home destination, it would not be a reasonable second home; second homes should generally be either (i) if the Borrowers live in or near a city center, a country home within a three hour drive of the Borrowers’ primary residence, (ii) in a vacation destination, (iii) in a city distant from the Borrowers (for example the city where the borrowers grew up and where their extended family lives, or where their adult children live, or (iv) if the Borrowers live outside their city center, a pied-a-terre in their city center.

c. If the purpose of the loan is for a refinance, the Borrowers must not have rented the Subject Property for more than two weeks with minimal rental income;

d. The Subject Property must be for the Borrowers’ exclusive usage, for not less than fifty weeks per year, no time shares are permitted, and the Subject Property may not be used as the primary residence of a family member, for example a second home may not be occupied as the residence of the Borrower’s parents or children.

e. If the purpose of the loan is refinancing, the insurance in force on the Subject Property must not be renters’ insurance or the equivalent;

f. No Borrower may own more than two second homes other than the Subject Property (If a Borrower obligated on a Loan owns more than two second

homes not including the Subject Property, the Loan is ineligible for sale to Sistar);

g. The Subject Property must be suitable for year-round use.

Loans for which the obligated Borrowers’ purported occupancy is questionable are not eligible for sale to Sistar.

8.3 Business Purpose / Investment Properties

If the Borrowers’ obligated on a Loan declare they will use the Subject Property as a business purpose investment, the following must be true or the Loan is ineligible for sale to Sistar:

a. No Borrower and no relative of a Borrower is occupying the Subject Property, and no Borrower or relative of a Borrower will occupy the Subject Property;

b. Each Borrower must sign a statement affirming that neither any Borrower or any parent, child, brother, sister, grandparent, grandchild, uncle, aunt, nice or nephew of the borrowers, either by blood or by marriage, will occupy the Subject Property, and that ownership of the Subject Property is solely for business purposes;

c. Each Borrower must sign a business purpose affidavit in the form set forth in Exhibit 15.1 of these Underwriting Guidelines;

d. No documentation submitted by the Borrower(s) may indicate that the Subject Property is the Borrower(s)’s residence (for example, bank statements and tax filings may not list the Subject Property as a Borrower’s mailing address).

Loans for which the obligated Borrowers’ purported occupancy is questionable are not eligible for sale to Sistar.

9. Determining Loan Purpose; Requirements Related to Purchases, Rate & Term Refinances and Cash-out Refinances

For a Loan to be eligible for sale to Sistar, the Loan must be for one of three eligible purposes: (i) to finance the purchase of the Subject Property (the Loan is a “Purchase Transaction”), (ii) to refinance eligible existing mortgage(s) encumbering the Subject Property with a new mortgage of the same, or a lesser amount than the existing mortgage(s) (the Loan is a “Rate & Term Refinance Transaction”), or (iii) to refinance eligible existing mortgage(s) encumbering the Subject Property with a new mortgage of a larger amount (the Loan is a “Cash-out Refinance Transaction”).

9.1 Purchase Transactions

For a Loan to be eligible for sale to Sistar as a Purchase Transaction, each of the following must be true: a. Loan proceeds must be used for the acquisition of the Subject Property; no proceeds may be paid to the Borrowers other than nominal amounts to reimburse the Borrowers for the overpayment of fees; b. None of the Borrowers may have had an ownership interest in the Subject Property over the past twelve months; c. If the purchase of the Subject Property is a “non-arms length transaction” as such term is described in Fannie Guide, then (i) all Fannie Mae requirements for non-arms length transactions, including that the Subject Property must be the Borrowers’ primary residence apply, and (ii) two appraisal are required regardless of loan size; d. If either (x) the purchase of the Subject Property is a non-arms length transaction, (y) the purchase transaction includes a gift of equity, or (z) the Subject Property is being purchased from a family member, then the Lender must verify (i) that the Subject Property is not in foreclosure, and (ii) that the mortgages encumbering the Subject Property are current. If the Subject Property is in foreclosure or the mortgages encumbering the Subject Property are not current, then a Loan secured by the Subject Property is ineligible for sale to Sistar. e. Installment land contracts are permitted pursuant to Fannie Mae requirements. Deed transfers under an installment land contract occurring within 12 months of the date of the contract will be treated as purchase transactions provided the other requirements set forth in this Section 9.1 are satisfied.

9.2 Rate & Term Refinance Transactions

For a Loan to be eligible for sale to Sistar as a Rate & Term Refinance, each of the following must be true:

a. The principal amount of the Loan may not exceed the sum of (i) the amount needed to pay off eligible mortgage debt plus (ii) the closing costs to settle and qualify for the Loan, plus (iii) the amount of escrows, impounds and prepaids required from the Borrowers in connection with settling the Loan, and (iv) a nominal amount of cash to the Borrowers, not to exceed the lessor of 2% of Loan principal or $2000. For the purposes hereof, eligible mortgage debt includes the first lien mortgage encumbering the Subject Property, and junior lien mortgages that either (x) were originated concurrent with the acquisition of the Subject Property, of (y) are seasoned. For the purpose hereof, a closed end mortgage loan is seasoned if it was originated more than one year prior to the closing of the refinance (one year prior to the Date of the Loan), while a HELOC is seasoned if it was originated (1) more than one year prior to the closing of the refinance (one year prior to the Date of the Loan), and (2) no more than an aggregate of $2000 has been drawn from the HELOC during the 12-month period preceding the Date of the Loan; b. At least one of the Borrowers must have been an owner of the Subject Property throughout the three-month period preceding the Date of the Loan; c. No portion of the principal due on a mortgage loan encumbering the Subject Property is being forgiven in connection with the refinance; d. Installment land contracts are permitted pursuant to Fannie Mae requirements. Deed transfers under an installment land contract occurring more than 12 months after the date of the contract will be treated as rate & term refinance transactions provided the other requirements set forth in this Section 9.2 are satisfied. e. The Subject Property has not been listed for sale, and may not have been listed for sale during the three-month period preceding the Date of the Loan.

9.3 Cash-out Refinance Transactions

For a Loan to be salable to Sistar as a Cash-out Refinance, each of the following must be true:

a. At least one of the Borrowers must have been an owner of the Subject Property throughout the three-month period preceding the Date of the Loan; b. No portion of the principal due on a mortgage loan encumbering the Subject Property is being forgiven in connection with the refinance; c. If the Loan is a business purpose / investor loan, then the Borrowers must provide a letter of explanation stating how the loan proceeds will be used; uses for other than business purposes are not permitted; d. The Subject Property has not been listed for sale, and may not have been listed for sale during the three-month period preceding the Date of the Loan.

10. Qualifying Calculations - Loan to Value Ratio, Amount of Cash-out, Income Ratios, Assets, Funds to Close and Reserves

For a Loan to be eligible for sale to Sistar, the Loan must pass each of the ratio test requirements, other mathematical requirements and other requirements for the Loan Program under which the Loan is to be sold to Sistar. Many of the ratio test requirements, other mathematical requirements and other requirements for each Sistar loan program are set forth on the applicable loan program matrix in Section 2 of these Underwriting Guidelines, which include requirements for loan to value, debt to income, funds to close, reserves, credit score and maximum and minimum loan amounts. This Section 10 of these Underwriting Guidelines sets forth the methods Lenders must use to compute a Loan’s loan to value ratio, cumulative loan to value ratio, debt to income ratio, debt service coverage ratio, and required funds for Down Payment and Closing Funds and Borrower Reserves.

10.1 Loan to Value Ratio and Cumulative Loan to Value Ratio

For a Loan to be eligible for sale to Sistar, the Loan’s loan to value ratio cannot exceed the maximum loan to value ratio set forth on the matrix for the Loan Program applicable to the Loan (loan program matrices are in Section 2 of these Underwriting Guidelines). In addition, the Loan’s cumulative loan to value ratio cannot exceed the maximum loan to value ratio set forth on the matrix for the Loan Program applicable to the Loan.

Purchase Transactions

To calculate the loan to value for a purchase transaction, the Lender must divide the loan amount by the lower of the Subject Property’s (i) purchase price or (ii) appraised value as defined in, Section 12.11 of these Underwriting Guidelines. To calculate the cumulative loan to value for a purchase transaction, the Lender must divide the sum of (x) the loan amount plus (y) the principal amount of purchase money subordinate financing by the lower of the Subject Property’s (i) purchase price or (ii) appraised value as defined in, Section 12.11.

The purchase price is the price set forth on the sales contract under which the Subject Property will be conveyed, less excess seller contributions to closing costs, less any sales concessions, and less unverified down payments.

Seller contributions to closing costs may include payments made by the seller for loan discount points, loan fees, title insurance costs and survey and appraisal costs. The amount of seller contributions to closing costs is limited to 6% of the purchase price of the Subject Property if the loan to value ratio is 80% or less, and is limited to 3% of the purchase price of the Subject Property if the loan to value ratio exceeds 80%, except that if the occupancy of the Subject Property is business purpose / Investment, then the seller contributions to closing costs are limited to 2% of the purchase price. If seller contributions exceed the allowed limit, then the difference between the actual 73 contributions paid by the Seller to closing costs less the allowed limit is considered an excessive contribution and must be subtracted from the purchase price of the Subject Property prior to calculating a loan’s loan to value ratio.

Sales concessions are deductions granted to the Borrowers by a seller including credits for early closing and other discounts from the purchase price. Seller concessions must be subtracted from the purchase price of the Subject Property prior to calculating a loan’s loan to value ratio.

Earnest money deposits are amounts paid by property buyers to secure their performance on a purchase contract. Earnest money deposits may be included in the purchase price provided they are verified in accordance with Fannie Mae requirements.

Rate & Term Refinance Transactions

To calculate the loan to value for a rate and term refinance, the lender must divide the loan amount by the Subject Property’s appraised value as defined in, Section 12.11 of these Underwriting Guidelines. To calculate the cumulative loan to value for a rate and term refinance, the Lender must divide the sum of (x) the loan amount plus (y) the principal amount of subordinate financing by the Subject Property’s appraised value as defined in, Section 12.11.

Cash-out Refinance Transactions

To calculate the loan to value for a cash-out refinance, the lender must divide the loan amount by the Subject Property’s appraised value as defined in, Section 12.11 of these underwriting guidelines. To calculate the cumulative loan to value for a cash-out refinance, the Lender must divide the sum of (x) the loan amount plus (y) the principal amount of purchase money subordinate financing by the Subject Property’s appraised value as defined in, Section 12.11. If (i) the Borrowers acquired the Subject Property within the 12-month period preceding the Date of the Loan, and (ii) the appraised value of the property exceeds 115% of the consideration paid by the Borrowers, then the appraisal report or an addendum thereto must describe the reason the Subject Property’s appraised value exceeds the purchase price paid by the Borrowers.

10.2 Calculating Mortgage Payments, Housing Expense and Other Obligations

The qualifying criteria for Sistar’s loan programs includes ratio tests and qualifying calculations that use as factors, the Borrower’s housing expense and other obligations and a Loan’s monthly mortgage payment.

Calculating Proposed Housing Expense

The proposed housing expense is the sum of (x) the Qualifying Monthly Mortgage Payment on the Loan (in accordance with the calculation requirements below) plus 74

(y) the monthly payment on a qualified subordinate financing plus (z) one-twelfth of the sum of (i) the annual real estate taxes on the Subject Property, plus (ii) the aggregate annual cost of mortgage, hazard and flood insurance, plus (iii) the annual fees payable to homeowners’ associations, condominium associations, associations formed to provide common security, road maintenance, or waste disposal, and other similar associations, and plus (iv) annual ground rents. Lenders must document, in the Mortgage File, all amounts included in the proposed housing expense.

Qualifying Monthly Mortgage Payment

The qualifying monthly mortgage payment on the Loan must be calculated as follows:

For Sistar loan programs J8 – Jumbo Prime, A5- Income per Bank Statements and A6 – Asset Depletion

1. Determine the applicable base interest rate; the applicable base interest rate is the higher of (a) the note rate and (b) the index plus the margin (the “Fully Indexed Rate”) (in most cases the applicable base interest rate will be the note rate).

2. Add to the base interest rate the appropriate qualifying spread as follows:

For 5/1 ARM loans: Self-amortizing loans: -0- Interest only for seven years: 1.25% Interest only for ten years: 1.90%

For 7/1 ARM loans: Self-amortizing loans: -0- Interest only for ten years: 1.90%

For 30-year fixed rate loans: Self-amortizing loans: -0- Interest only for seven years: 1.25% Interest only for ten years: 1.90%

3. Calculate the payment using a 30-year amortization schedule with an interest rate equal to the applicable base interest rate plus the qualifying spread. (the qualifying spread serves as a proxy which ensures the borrower is qualified, in accordance with federal regulation, at the payment required once amortization begins). The result is the Qualifying Monthly Mortgage Payment.

For Sistar loan program I5- Investor DSC

Calculate the initial payment on the loan. If the Loan has an interest only feature, then the initial payment is the interest only payment, if the Loan does not have an interest only feature, then the initial payment is the self-amortizing payment. The initial payment is the Qualifying Mortgage Payment.

Qualified Subordinate Financing

The payment on Qualified Subordinate Financing is the actual required loan payment for the junior mortgage which will encumber the Subject Property (except that if there is no junior mortgage than this sentence does not apply). This payment must be verified and documented in accordance with the Fannie Guide. (For a Loan to be eligible for sale to Sistar the terms of Subordinate Financing must conform to the Fannie Mae’s requirements.)

Monthly Debt Obligations

Monthly Debt Obligations must be calculated in accordance with the Fannie Mae guide. Generally Monthly Debt Obligations include all payments Borrowers are obligated to make including payments on mortgages on other properties (offset by rents where and as permitted in the Fannie Guide), payments on installment obligations (including auto and student loans), and revolving obligations, alimony, and child support. All Fannie Mae rules regarding Monthly Debt Obligations apply including special handling rules for Borrower obligations being paid by persons other than the Borrowers, certain obligations being paid by self-employed Borrowers’ businesses, deferred student loans, obligations being paid in full prior to the Date of the Loan, and other special circumstances. Lenders must adhere to the Fannie Mae guide in calculating the Borrowers’ Monthly Debt Obligations.

10.3 Income Tests

Debt to Income Ratio for loan programs J8 – Jumbo Prime, A5 – Income per Bank Statements, and A6 – Asset Depletion

For loan programs J8 – Jumbo Prime, A5 – Income per Bank Statements, and A6 – Asset Depletion, for a Loan to be eligible for sale to Sistar, the Borrowers’ debt to income ratio must not exceed the allowable debt to income ratio set forth in the matrix for the Loan Program applicable to the Loan (the matrix in Section 2 hereof that pertains to the Loan Program).

To calculate the Borrowers’ debt to income ratio, a Lender must divide the sum of (x) the Proposed Housing Expense, plus (y) the monthly payment on Qualified Subordinate Financing, plus (z) Monthly Debt Obligations, all calculated in accordance with Section 10.2 of this Underwriting Guide; by the Borrowers’ income as determined in accordance with Section 6 of these Underwriting Guidelines. 76

Debt Service Coverage Ratio for Program I5 – Investor DSC

For loan programs I5 – Investor DSC, for a Loan to be eligible for sale to Sistar, the Loans’ debt service coverage ratio must exceed 100%.

To calculate the debt service coverage ratio, Lenders must divide the Net Rental Income (as calculated in accordance with Section 6.4 of these Underwriting Guidelines) by the Qualifying Monthly Mortgage Payment (calculated in accordance with Section 10.2 of these Underwriting Guidelines). If the debt service coverage ratio is less than 100%, then the loan is ineligible for sale to Sistar.

10.4 Testing the Sufficiency of Down Payment and Closing Fund, and of Borrower Reserves

For a Loan to be eligible for sale to Sistar the Borrowers’ Down Payment and Closing Funds, and their Borrower Reserves must satisfy the following requirements:

Purchase Transactions

Down Payment and Closing Cost Funds

The Borrowers must have sufficient Down Payment and Closing Funds to pay the sum of (x) the difference between the Subject Property’s purchase price less the principal amount of the Loan less the principal amount of Qualified Subordinate Financing plus (y) Borrower paid closing costs including discounts, points, mortgage broker fees, title insurance and abstract costs, settlement agent costs and other mortgage related fees, escrows, impounds and prepaids, plus (z) all other amounts due from Borrower to consummate the Loan, including any required pay offs of installment debt, liens, collection accounts or other similar obligations.

Borrower Reserves

The Borrowers must have sufficient Borrower Reserves, to meet the reserve requirement for the Loan Program (reserve requirements for each loan program are set forth on the program matrices.

Refinance Transactions

Down Payment and Closing Cost Funds

Shortfall if Mortgage Debt Being Refinanced Exceeds Loan Proceeds

The Borrowers must have Down Payment and Closing Cost Funds, to pay the sum of (x) any shortfall resulting from the proceeds of the Loan being less than the amount 77 needed to pay off the existing mortgage loans encumbering the Subject Property (as adjusted to account for Qualified Subordinate Financing that is being subordinated to the Loan or advanced concurrent with the Loan, but only as otherwise permitted in accordance with these Underwriting Guidelines) plus (y) Borrower paid closing costs including discounts, points, mortgage broker fees, title insurance and abstract costs, settlement agent costs and other mortgage related fees, escrows, impounds and prepaids, plus (z) all other amounts due from Borrower to consummate the Loan, including any required pay offs of installment debt, liens, collection accounts or other similar obligations.

Borrower Reserves

The Borrowers must have sufficient Borrower Reserves, to meet the reserve requirement for the Loan Program (reserve requirements for each loan program are set forth on the program matrices in Section 2 of these Underwriting Guidelines). NOTWITHSTANDING THE PRECEDING SENTENCE, if each of the following are true

(i) the Loan Program is not program A6 – Asset Depletion; (ii) no Borrower is a foreigner; (iii) each mortgage that encumbers the Subject Property has been paid timely over the past two years (mortgage rating of 0 X 30 X 24); and (iv) each mortgage listed on a Borrower’s credit report that is not secured by the Subject Property is rated either 0 X 30 X 24, if it was originated two or more years ago, or is rated 0 X 30 since its origination, if it was originated less than two year ago; then the reserve requirement set forth in this paragraph is waived (if a mortgage encumbering the Subject Property was originated less than 24 months ago the reserve requirement in this paragraph is not waived).

11. Compliance

11.1 Compliance Requirements

For a Loan to be eligible for sale to Sistar, the origination and servicing of the Loan must comply, in all respects, with all applicable federal, state and local laws, ordinances and regulations. Without limiting the foregoing, for a Loan to be eligible for sale to Sistar, it must be in compliance with each of the following:

a. Dodd Frank; b. Truth in Lending Act and the Integrated Disclosure Rule; c. Real Estate Settlement Procedures Act; d. Fair Credit Reporting Act; e. Financial Institutions Reform Recovery and Enforcement Act; f. Financial Services Modernization Act; g. Home Ownership and Equity Protection Act; h. Homeowners Protection Act; i. Mortgage Disclosure Improvement Act; j. Equal Credit Opportunity Act; k. US Patriot Act.

11.2 High Cost Loans Ineligible

Loans that are high cost loans under the rules of the Home Ownership and Equity Protection Act are ineligible for sale to Sistar.

11.3 Use of Compliance Engine Required

For a Loan to be eligible for sale to Sistar, the Loan must have passed a compliance engine query that indicates that the loan complies with all applicable federal, state and local laws and regulations.

Mavent and ComplianceEase have been preapproved by Sistar as acceptable compliance engines and may be used by Lenders to satisfy Sistar’s compliance engine requirement (for Mavent or ComplianceEase to be acceptable, the engine testing parameters must be set to include federal, state and local testing). Lender’s choosing to use a compliance engine other than Mavent or ComplianceEase must receive approval from Sistar prior to their use of such engine.

Loans found by Mavent or ComplianceEase to be out of compliance with an applicable law or regulation are ineligible for sale to Sistar.

79 11.4 Texas Cash-out Refinances

Prior to Sistar purchasing a refinance loan secured by a property located in Texas which is subject to section 50(a) (6) of the Texas constitution, the Lender selling such loan must be specifically authorized to sell loans regulated by the Texas constitution to Sistar. If a Subject Property is it Texas, then all documents evidencing the loan secured by the Subject Property must be prepared by counsel admitted to the Texas bar. Interest only loans are not permitted on Texas refinance transactions.

11.5 Rescission Hardships Not Permitted

Sistar requires, for refinance transactions, that if a loan is to be sold to Sistar, a complete rescission period must have passed between closing and funding. Loans for which rescission was abbreviated due to Borrower hardship are not eligible for sale to Sistar.

11.6 TRID

For a Loan to be eligible for sale under all loan programs except SP I5 – Investor DSC, the Loan must conform to TILA’s Integrated Disclosure Rules (TRID) as promulgated by the Consumer Financial Protection Bureau. Sistar does not permit Borrowers to wave TRID waiting period requirements.

11.7 Business Purpose / Investment Loans

For a Loan to be eligible for sale to Sistar under loan program I5 – Investor DSC, neither a Borrower or any family member of a Borrower may occupy the Subject Property. If a Borrower or family member occupies the Subject Property, then the Loan is ineligible for sale to Sistar.

80 12. Property and Property Appraisal Requirements

Loans sold to Sistar must be collateralized by properties that constitute eligible collateral.

12.1 Eligible Properties

The following properties are generally eligible collateral provided they are not otherwise ineligible under another part of this Section 12.

a. SFR; b. Duplex (2 unit); c. 3 Unit; d. 4 Unit; e. Fannie warrantable condos; and f. Eligible non-warrantable condos

12.2 Ineligible Properties

Properties of the following types or with any of the following features, are always ineligible collateral:

a. Properties with more than four units.; b. Properties with any commercial occupancy, except that owner- occupied offices (such as Doctor or Dentist offices) which are ancillary to an otherwise eligible property, and which are permissible under the Fannie Guide, are eligible collateral; c. Time shares; d. Condotels (condominium hotels) e. Kiddie Condos (student based condominiums); f. Properties of more than fifteen acres; g. Properties where the value of the property’s improvements as a percent of the value of the property is extraordinary for the neighborhood where the property is located; h. Farms, ranches or other agricultural properties, (properties used for commercial farms are ineligible collateral, as are properties with substantial farm activities; limited, recreational use associated with farms, such as a horse barn where horses are maintained for personal use, or a small vegetable garden, do not render a property ineligible collateral); i. Leasehold properties except that leasehold properties which meet the Fannie Mae’s requirements for leaseholds are eligible; j. Rooming or boarding houses;

81 k. Properties with adverse environment conditions; l. Rectories, Priest Houses and similarly used properties; m. Properties improved by residences of less than 500 sq. ft. of gross living area; n. Properties unique or unusual for their neighborhood; o. Log homes; p. Earth, berm or basement properties; q. Vacant land; r. Properties not accessible by roads; s. Properties not suitable for year-round occupancy; t. Properties which are part of a cooperative project;

u. Properties used for “bed and breakfast” lodging; v. Mobile homes; w. Manufactured homes (Modular homes with appeal similar to stick built properties are eligible collateral); x. Properties considered dome or geodesic; y. Properties located in a lava zone 1 or a lava zone 2 (Hawaii); z. Houseboats or any other “property” that does not include a permanent improvement on a deeded, mortgageable lot.

12.3 Property Requirements

For a property to be eligible collateral, the property must satisfy each of the following requirements:

a. Conforms to the legal definition of improved real property for the jurisdiction where it is located; b. Designed and available for year around residential use; c. Contains kitchen and bathroom facilities; d. Contains a minimum of 500 square feet of gross living area; e. Is appraised to be in C1, C2, C3, C4 or C5 condition (properties in C6 condition are not eligible collateral); f. Represents the “highest and best” use of the subject property; g. Is free of all health and safety violations; and h. Is free of violations of housing codes that adversely affect the property’s habitability or marketability.

12.4 As is Condition

For a property to be eligible collateral it must be appraised in “as is condition.” Notwithstanding this requirement, if a property is (i) appraised “subject to completion,” (ii) the cost of completion is less than the lesser of 3% of the appraised value of the property or $10,000, and (iii) the Loan to be secured by the property

82 (and to be sold to Sistar) is for a purchase transaction, then Lenders may originate a Loan secured by the property (provided the property is otherwise eligible collateral, and the Loan otherwise conforms to the requirements of these Underwriting Guidelines); Sistar will not purchase a Loan secured by a property appraised “subject to completion” until (i) all required work specified on the appraisal is completed and (ii) the Lender obtains and includes in the Mortgage File, a completion certificate prepared by the appraiser who issued the appraisal report, which indicates all work specified on the appraisal has been completed (the completion certificate must be on a form, and prepared in a manner acceptable under the Fannie Guide). Sistar will not purchase if more than ninety days have passed since the Loan was originated.

12.5 Properties Listed for Sale

If a property is listed for sale, or was listed for sale at any time over the past three months, a Loan secured by the property is ineligible for sale to Sistar.

12.6 Property Acquired Vacant

If a loan is for a purchase transaction, and the declared occupancy of the Subject Property is other than investor occupied, then the property must be acquired by the Borrowers in vacant condition, and the sales contract under which the property is being acquired must provide that the property will be delivered vacant. Notwithstanding the foregoing, if the Subject Property is a multiunit property, if one of the units is vacant and will be delivered vacant, the property may be conveyed with other units rented.

12.7 Condominium Project Requirements

Warrantable Condominium Projects

Units in condominium projects that meet Fannie Mae’s condominium project requirements are eligible collateral (provided the unit is not otherwise ineligible under this Section 12).

Non-warrantable Condominium Projects

Units in non-warrantable condominium projects are eligible collateral if they meet each of the requirements in the chart below, and provided that non-warrantable condominium projects require a loan level price adjustment.

83 Requirements for Non-warrantable Condominium Projects

Criteria Requirements Pre-Sale for Projects with 10+ 35% of the units in the project must have been sold or under contract prior to the Units: one-year anniversary of the date in which the units in the project were first marketed. 55% of the units in the project must have been sold or under contract prior to the eighteenth month anniversary of the date in which the units in the project were first marketed. 70% of the units must have been sold or under contact if the project has been marketed for more than eighteen months. For the purpose, hereof the date first marketed shall mean the date the units in the subject phase were first offered for sale, but never later than the date of the first contract to sell a unit in the subject phase.

Cap on Sistar exposure The maximum number of units that Sistar will finance in any condominium project is the greater of one unit or 15% of the total units sold in the project. Pre-Sale for Projects with less • Projects with 1 to 4 units are not eligible than 10 Units: • Projects with 5 Units, 4 Units must be sold • Projects with 6 Units, 5 Units must be sold • Projects with 7 Units, 5 Units must be sold • Projects with 8 Units, 6 Units must be sold • Projects with 9 Units, 6 Units must be sold Ownership Concentration: No single entity (individual, partnership, LLC or corporation) may own more than 15% of total units in the Subject Project (other than the original developer or sponsor). Investor Occupancy: No more than 50% of total units in the Subject Project may be renter occupied Insurance: The home owner association must generally maintain all required insurance coverage in accordance with Fannie Mae guidelines, provided that minor deviations from Fannie Mae’s requirements are acceptable at Sistar’s discretion. Required Subject Property The unit being financed (the Subject Property) must be for one-family, residential Type occupancy.

Ineligible Property Types: The Subject Project may not include any units with the following characteristics: • Condominium conversions that were not gut rehabilitations, if the conversion occurred less than 2 years prior to the date of the Loan to be sold to Sistar • Mobile home units • Manufactured home units except that modular built homes with an appeal similar to stick built homes are acceptable • Time shares units • Cooperative units • Units that include the option to receive assisted living services • Multi-family units • Common interest or community apartment units (projects where all units are owners have right to lease individual units) • Houseboat units • Units offering daily, weekly or monthly rentals • Condotels • Units offered through filings with the United States Securities and Exchange Commission • Units that are subject to fees on transfer that are payable to any person or entity other than the homeowner association • Units in condominium projects in which the sponsor / developer owns and leases back to the homeowner association common areas or amenities

• Units in condominium projects where any unit owner or the homeowner’s association is a party to a revenue sharing agreement with the sponsor or another third-party • Units in condominium projects that are managed as a hotel or motel • Units in condominium projects whose names include the words “hotel,” “motel,” “resort,” or “lodge” • Resort type projects Phase Construction Construction must be completed in the subject phase. Construction of all Completion: common areas and amenities designated for use by owners of units in the subject phase must be fully completed. Ownership Interests: Units in the condominium project must be held fee simple Commercial Percentage: For projects with 50 or more units no more than 50% of total square footage may be used for commercial purpose. For projects that contain less than 50 units, the commercial percentage must conform to Fannie Mae requirements. Homeowner Association Budgeted income other than Homeowner Association dues may not make up income from sources other more than 35% of total Homeowner Association’s budgeted income. than dues: Homeowner Association No more than 15% of the units within the condominium project may be Delinquency: delinquent more than 60 days on amounts due the homeowner association. No Units owned by the sponsor, developer or affiliates may not be delinquent on amounts due to the homeowner association. Capital Reserve Requirements: The homeowner association’s current annual budget must include an allowance for capital reserves of not less than 5% of the total expenditures included in such budget. Notwithstanding the foregoing, if the homeowner association has a capital reserve equal to or greater than 50% of the expenditures set forth in its current annual budget, than the required allowance for capital reserves is waived. Litigation The homeowner association cannot be named as a defendant in litigation unless its potential liability is fully covered by insurance (except that insurance coverage may be subject to a deductible of up to $50,000). The condominium association may not be a plaintiff in litigation that alleges that there are hazardous or unsafe conditions associated with the condominium project.

To verify that a non-warrantable condominium project conforms to the requirements of this section 12.7, Lenders must obtain a completed questionnaire from the condominium project’s managing agent or homeowner association. The questionnaire must either (i) be on the form set forth at Exhibit 15.2, or (ii) contain all of the information set forth on the form at Exhibit 15.2. This form is available at www.Sistarmortgage.com/forms.

12.8 Property Appraisal Requirements

For a loan to be eligible for sale to Sistar, the Subject Property securing the loan must be the subject of an appraisal report prepared by an appraiser who is licensed in the state where the Subject Property is located. While an appraiser produces the appraisal, the Lender remains responsible for ensuring that each loan sold to Sistar conforms to all the requirements set forth in this Section 12, including the appraisal requirements in this Section 12.8.

85 If the property being appraised is a single-family residence, the appraisal must be completed on Fannie Mae form 1004, if the property being appraised is a duplex, three-unit property or four-unit property, the appraisal must be completed on Fannie Mae form 1025, and if the property being appraised is a condominium the appraisal must be completed on Fannie Mae form 1073.

The appraisal must accurately reflect the value and condition of the property and site, and the condition of the marketplace where the property is located, as of the time the appraisal report is issued.

In addition, the appraisal must:

a. Be prepared in accordance with the Uniform Standards of Professional Appraisal Practices (“the USPAP”); b. Include a Certification and Statement of Limiting Conditions signed by the appraiser; c. Include an exterior building sketch of the improvements indicating dimension; a floor plan sketch is required along with calculations demonstrating how the estimate for gross living area was determined; for units in condominium projects, interior perimeter unit dimensions are required instead of exterior building dimensions; d. Include a Street map showing the location of the subject property and all comparable properties used; e. Include original color photographs or digital color images of the front, street and rear views of the subject property; f. Include interior photos of the subject including the kitchen, all bathrooms, the main living area, any areas with physical deterioration, and any in progress renovations/improvements; g. If the property is a duplex, three unit or four unit, include an Operating Income Statement on Fannie Mae Form 216; h. Include any other data as an attachment or addendum to the appraisal report form necessary to provide an adequately supported estimate of market value; i. Include an analysis of all agreements of sale, options or listings for the subject property as of the effective date of the appraisal; j. Include an analysis of all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal; k. Include a completed sales comparison approach, in accordance with the form of appraisal being used; l. Clearly describe any unfavorable conditions, such as adverse environmental or economic factors, and how those conditions impact the market value of

86 the property, and include comparable sales that are impaired by similar unfavorable conditions; m. Include a license certification from the appraiser that completed the appraisal; n. Been completed only after a physical inspection of the appraised property was conducted by the person signing the appraisal as the appraiser (left portion of the certification); o. If the appraiser is being appraised within one year of its most recent transfer, and the appraised value of the property exceeds 120% of the most recent transfer price for the property, then the appraiser must comment on why the appraised value exceeds the most recent transfer price.

Use of Appraisal Management Company Required

For a loan to be eligible for sale to Sistar it must be obtained through a licensed appraisal management company, and such appraisal management company must perform testing and quality assurance designed to ensure the accuracy and completeness of the appraisal. A Lender may request a waiver to obtain appraisals through its appraiser panel, rather than through an appraisal management company if the Lender is a supervised depository, a subsidy of a supervised depository or a subsidiary of a bank holding company. Waivers will be granted at Sistar’s discretion. Lenders must include, in the Mortgage File pertaining to a Loan, any comments received from the appraisal management company regarding the value, condition or marketability of a Subject Property. The Lender’s engagement of the appraisal management company, and the appraisal management company’s engagement of the appraiser must be in accordance with Fannie Mae’s rules and with applicable laws and regulations regarding appraiser independence.

Acceptable appraisals are either (x) an appraisal obtained from an appraisal management company by the Lender, (y) an appraisal obtained from an appraisal management company by a mortgage broker client of the Lender, or (z) an appraisal obtained from an appraisal management company by another lender or mortgage broker which was paid for by the Borrowers and which was transferred to the Lender or a mortgage broker client of the Lender in accordance the USPAPs Appraisal Independence Requirements. No other appraisals may be used, and other appraisal reports will not be considered in determining a property’s value, condition or rental income.

Prior to the performance of the appraisal obtained by the Lender or a mortgage broker client of the Lender, the Lender or mortgage broker client must provide the appraisal management company with (i) for purchase transactions, a copy of the

87 contract of sale under which the Subject Property will be acquired, and any additional information the lender has regarding the purchase transaction, including sales concessions given, that may affect the value of the property or an assessment of its condition or marketability, and (ii) for refinance transactions, any information the lender possesses about the Subject Property that may affect the value of the property or an assessment of its condition or marketability.

12.9 Additional Appraisal Requirements

Age of Appraisal

The appraisal report(s) must be completed not earlier than 120 days prior to the Date of the Loan, that if the original appraiser issues a recertification of value which is acceptable under the Fannie Guide and prepared in accordance with the USPAP, then (i) the appraisal must not be dated earlier than 180 days prior to the Date of the Loan and (ii) the recertification of value must not be dated earlier than 60 days prior to the Date of the Loan.

Two appraisals required for loan amounts of $1 million or greater

If the principal amount of a Loan is $1 million or greater, then for the Loan to be eligible for sale to Sistar, the Subject Property must be appraised by two independent appraisers, and must be the subject of two appraisal reports. Each appraisal report must be obtained and completed in accordance with the requirements of Section 12.8 of these underwriting guidelines.

Two appraisals required for non-arm’s length transactions

If, under the Fannie Guide, a Loan is non-arm’s length, then for the Loan to be eligible for sale to Sistar, the Subject Property must be appraised by two independent appraisers, and must be the subject of two appraisal reports. Each appraisal report must be obtained and completed in accordance with the requirements of Section 12.8 of these underwriting guidelines.

12.10 Clear Capital CDA or Pro Teck ARR required

For a Loan to be eligible for sale to Sistar, the appraisal of the Subject Property must be reviewed through either a collateral desktop review (“CDA”) from Clear Capital, or an Appraisal Risk Review (“ARR”) from Pro Teck. Lenders must order the review, which must be received by Sistar directly from Clear Capital or Pro Teck, and independent of the Lender (Lenders ordering reports should specify Sistar as the recipient, upon which Clear Capital and Pro Teck will deliver the reports electronically to Sistar).

If the value on the CDA or ARR is less than 90% but greater than 80% of appraised value of the Subject Property, then the value of the Subject Property used in the Loan to Value calculation must be reduced to the value on the CDA or ARR. If the value on the CDA or ARR is less than 80% of the appraised value, then the Loan is ineligible for sale to Sistar.

If two appraisals were performed on the Subject Property, then the appraisal indicating the lower value for the Subject Property is the appraisal that must be reviewed by Clear Capital or Pro Teck (the appraisal with the higher value does not need to be reviewed).

12.11 Appraised Value

Appraised Value

The appraised value to be used in calculating the loan to value ratio and cumulative loan to value ratio in accordance with Section 10.1 of these Underwriting Guidelines, is the appraised value from the appraisal report less any downward adjustments made by the lender.

Appraised Value if Two Appraisals are Obtained

If two appraisals are required in accordance with section 12.10 of these Underwriting Guidelines, then the appraised value to be used in calculating the loan to value ratio and cumulative loan to value ratio in accordance with Section 10.1 of these Underwriting Guidelines, is the appraised value from the appraisal report that, among the two appraisal reports, indicates a lower value for the Subject Property, less any downward adjustments made by the lender.

89 13. Insurance Requirements

For a Loan to be eligible for sale to Sistar, the Subject Property must be insured against title defects and hazards. In addition, if the Subject Property is in a flood zone, the property must be insured against flood damage.

13.1 Title Insurance

For a Loan to be eligible for sale to Sistar, the Subject Property must be covered by a title insurance policy for the benefit of the lender and its assignees (MERS cannot be named as the insured in the title policy), and for not less than the full dollar amount of the Loan. The title insurance policy must conform to Fannie Mae’s requirements for title insurance and to each of the following requirements:

a. The title insurer must be qualified to do business in the state where the subject property is located. b. The premium for the title insurance must have been paid in full on the Date of the Loan or on the Loan’s funding date; c. The title insurance must be in force and non-cancelable d. The title policy must be written on one of the following forms: i. the 2006 American Land Title Association (ALTA) standard form; ii. the ALTA short form; or iii. the ALTA form with amendments required by state law in states in which standard ALTA forms of coverage are not used or in which the 2006 ALTA forms have not yet been adopted, provided those amendments are acceptable to Fannie Mae. e. The title report must include a 24-month chain of title which was prepared not earlier than 90 days prior to the Date of the Loan, and which includes the transfer date, names of buyers and names of sellers for any conveyances within the past 24 months; f. The Borrowers’ names must be indicated on the title commitment and must be identical as the Borrowers’ names on the note and mortgage without any variances for spelling, use of a middle name or use of a personal title; g. If Borrower’s marital status appears to be different than on 1003, the discrepancy must be addressed. h. The title insurer must provide a closing protection letter covering the closing settlement agent’s errors, omissions, fraud, theft, and embezzlement (except that in New York State a closing protection letter is not required). i. The title insurance must include (Gap Insurance) covering liens and ownership transfer from the Date of the Loan through to the recording of the security instruments establishing the Loan’s first lien collateral interest in the Subject Property.

90 j. If the Loan is an adjustable rate mortgage the policy includes an adjustable rate endorsement in a form acceptable to Fannie Mae. k. If the property is located in New York the title agency preparing the title abstract must provide an E&O Policy with minimum coverage of $500,000 per claim and $1,000,000 in aggregate with a deductible of no more than $5,000. The title insurer must have an “A” or better rating from A.M Best Company rating service.

If the title being insured is for a condominium unit, the following additional title policy requirements are applicable:

a. An ALTA 4-06 or 4.1-06 endorsement or equivalent is required to be attached and incorporated into the text of the policy; b. If the homeowner’s association owns the common areas or facilities of the project separately, the title insurance must insure such ownership; c. The title policy must provide for the following: i. that the mortgage must be superior to any lien for unpaid common expense assessments; ii. that insurance covers against any impairment or loss of title by any past, present, or future violations of any covenants, conditions, or restrictions of the master deed for the project; iii. that the unit does not encroach on another unit or any of the common areas/facilities; iv. that the mortgage is secured by a unit in the condo project that has been created in compliance with applicable statutes; and v. the real estate taxes are assessable only against the condo unit and its undivided interest in the common elements rather than the project as a whole.

Acceptable Title Exceptions

The following title exceptions are permissible regarding Loans sold to Sistar, provided that they are also permissible in accordance with Fannie Mae’s title insurance requirements:

a. Customary public utility subsurface easements, the location of which are fixed and can be verified; b. Above-surface public utility easements that extend along one or more property lines for distribution purposes or along the rear property line for drainage, provided they do not extend more than 12 feet from the subject property lines and do not interfere with any of the buildings or improvements, or with the use of the subject property, and further provided

91 their violation will not result in the forfeiture or reversion of title or a lien of any kind for damages, or have an adverse effect on the fair market value of the subject property. c. Mutual easement agreements that establish joint driveways or party walls constructed on the subject property and on an adjoining property, provided all future owners have unlimited and unrestricted use of them. d. Encroachments on one foot or less on adjoining property by eaves or other overhanging projections or by driveways provided there is at least a ten (10) foot clearance between the buildings on the subject property and the property line affected by the encroachments. e. Encroachments on the subject property by improvements on adjoining property provided these encroachments extend one foot or less over the property line of the subject property, have a total area of 50 square feet or less, do not touch any buildings, and do not interfere with the use of any improvements on the subject property or the use of the subject property not occupied by improvements; f. Encroachments on adjoining properties by hedges or removable fences; g. Liens for real estate or ad valor taxes and assessments not yet due and payable; h. Outstanding oil, water, or mineral rights as long as they do not materially alter the contour of the property or impair its value or usefulness for its intended purposes.

Survey Requirements

Each Loan purchased by Sistar must either (i) include a survey of the property securing the Loan, or (ii) be the subject of a survey affidavit acceptable, in all respects, to the title insurance company insuring the Loan such that the title insurance policy insuring the first mortgage encumbering the Loan is without exception regarding any matter related to a survey including the location of improvements on the Subject Property, the location of easements on the Subject Property, the location of encroachments affecting the Subject Property, or the Subject Property’s metes and bounds. If a survey is included, the survey must have been certified, dated, and signed by the licensed civil engineer or registered surveyor performing the survey. Unimproved land surveys are not acceptable.

Surveys must be reviewed by the lender for easements, encroachments, flood zone impacts and possible boundary violations.

92 13.2 Hazard Insurance

For a Loan to be eligible for sale to Sistar, the improvements on the property securing the Loan must be covered by a hazard insurance policy for the benefit of the Lender and its assignees, with policy coverage of not less than the lower of:

1) The full replacement cost of the improvements of the Subject Property; or 2) The amount of the Loan principal, but never less than 80% of the replacement cost of the improvements of the Subject Property.

In addition, the hazard insurance policy must conform to Fannie Mae’s requirements for hazard insurance and to all of the following requirements:

a. Deductibles may not exceed five percent (5%) of the face amount of the insurance policy; b. The policy must contain the Borrower’s name, the agent’s name the agent’s company name and the full address of the subject property and be in effect at closing; c. The Mortgage File must document payment of the premium for the hazard file; d. For purchases, the premium for one year of coverage, effective from date the Borrowers acquire the Subject Property, must be paid in full and for refinances the policy must be effective for at least 60 days after the Date of the Loan; e. The hazard insurance policy must be written by a carrier that meets the following requirements: i. Carriers rated by A.M. Best Company, Inc. must be rated “B” or better; ii. Carriers rated by Demotech, Inc. must have an “A” or better rating in Demotech’s Hazard Insurance Financial Stability Ratings; iii. Carriers rated by Standard and Poor’s must have a “BBB” or better Insurer Financial Strength Rating in the Standard and Poor’s Ratings Direct Insurance Service; iv. Carriers not rated by any of A.M Best Company, Inc, Demotech, Inc. or Standard and Poor’s are ineligible and policies from such carriers may not be used to meet the policy requirements herein.

93 13.3 Flood Insurance

If the Subject Property located within any area designated by the Federal Emergency Management Agency (FEMA) as an Area of Special Flood Hazard, then for the Loan secured by the Subject Property to be eligible for sale to Sistar, the Subject Property must be covered by flood insurance.

To determine whether the Subject Property is in a flood zone, Lenders must obtain a Flood Certificate on the lot of the Subject Property from a nationally recognized Flood Certificate provider.

Required Flood Insurance

If flood insurance is required, then the amount or required insurance is the lessor of (i) full replacement cost coverage for the improvements on the Subject Property, or (ii) the maximum coverage available under the National Flood Insurance Administration program. The flood insurance must conform to the flood insurance requirements of Fannie Mae, and must also conform to all of the following requirements:

a. Deductibles permitted up to the maximum deductible available under the National Flood Insurance Program (NFIP); b. The Borrower name and the Subject Property address must be on the flood insurance application and binder; c. The flood insurance policy must contain a mortgagee clause, naming lender and its assignees as the loss payee; d. Evidence of coverage must be provided at closing.

The requirement for flood insurance requirement may be waived if:

a. The subject property improvements are not in the area of Special Flood Hazard, even though part of the land is in Flood Zone A or V; or b. The Borrowers obtain a letter from FEMA stating that its maps have been amended so that the subject property is no longer in an area of Special Flood Hazard.

94 14. Mortgage Document Requirements

14.1 Loan Document Requirements

Disclosures, Notes, Mortgages, Riders, Addendums and Endorsements

A Lender must use the Sistar Document Set unless the Lender receives a waiver from Sistar. The Sistar document set is available on DocMagic and Ellie Mae Docs. Sistar’s new lender implementation team will work with lenders to link their loan origination systems with DocMagic or Ellie Mae Docs, and set the parameters in their loan origination system so that, on an ongoing basis, the correct items in Sistar’s document set are automatically selected and populated based on the terms and characteristics of a Loan. Sistar’s document set provides lenders with the disclosure documents, notes, mortgages, riders, addendums and endorsements necessary to correctly document a Loan to be sold to Sistar. Notwithstanding the foregoing, Lenders are responsible for documenting each Loan sold to Sistar in accordance with Sistar’s loan documentation requirements which are incorporated into these Underwriting Guidelines as if they were reprinted here. Spout’s loan documentation requirements are available at Sistarmortgage.com/documentation.

Signed Form 4506-T Required

For loan program J8 – Jumbo Prime, Sistar requires that Lenders include an IRS form 4506-T which must be executed by the borrower. Lenders should not obtain a 4506-T for loan program where income is not documented by tax filings.

Borrower Attestation Required

The Sistar Document Set includes the borrower attestations specimens of which are shown in Section 15.1. The required attestations for the Sistar loan product selected must be fully completed and signed by the Borrowers for a loan to eligible for sale to Sistar.

14.2 Escrow Accounts

Sistar requires that loans sold to Sistar include a provision mandating escrow accounts (impound) for the payment of real estate taxes, hazard insurance and flood insurance. Initial escrow balances must (i) include sufficient funds, so that, when added to the collection of monthly escrow deposits, Sistar will have funds to pay required tax and insurance disbursements, plus (ii) the maximum escrow cushion permitted (1/6 of estimated annual escrow distributions).

95 14.3 Lenders Must Accurately Complete the Final Application

In completing the Final Application, Lender’s must adhere to the requirements of Fannie Mae’s guidelines, and must complete the Final Application accurately and without omission, except as otherwise proved in this Sales Guide.

14.4 Power of Attorney Requirements

Sistar permits closings by power of attorney except for cash-out refinance transactions, provided that upon Sistar’s purchase of a Loan, Sistar must have an insured first lien on the Subject Property. If the use of a power of attorney limits or restricts title insurance in any manner, the Loan is ineligible for sale to Sistar. In addition, a power of attorney used execute the note, Mortgage and other documents evidencing a Loan to be sold to Sistar must be:

a. Specific to the closing of the loan and when applicable associated real property purchase, and for no other purpose transaction; b. Recorded with the Mortgage/Deed of Trust, except that in jurisdictions where recording powers of attorney is prohibited or not in accordance with customary practice, powers of attorney do not need to be recorded; c. Given and executed by the Borrower who signed the initial I003; and d. Given to a party that has no nexus to the origination of the Loan or the related real property transaction being financed by the Loan, other than as a Borrower or representative of a Borrower (for example, a power of attorney may not be a seller of the Subject Property, a realtor, title agent or employee of affiliate of the Lender).

CLOSING BY POWER OF ATTORNEY IS NOT PERMITTED ON CASH-OUT REFINANCE TRANSACTIONS AND LOAN’S CLOSED BY POWER OF ATTORNEY WHERE THE TRANSACTION TYPE IS CASH-OUT REFINANCE ARE INELIGIBLE FOR SALE TO SISTAR.

96 15. Exhibits

15.1 Exhibit 14.1 Borrowers Attestation

The following Borrower Attestation is required for all loan programs except SP A5, SP A6, and SP I5

Borrower Attestation ATR -01A BORROWER’S AFFIRMATION OF INFORMATION PROVIDED TO ESTABLISH ABILITY TO REPAY (ATR)

Below is a summary of information provided by you (or in some cases obtained by us) during your loan process. We have used this information to help us make a reasonable and good faith determination regarding whether you have a reasonable ability to repay the loan you have applied for, as required by the Consumer Financial Protection Bureau (CFPB) under authority granted it by the U.S. Congress through the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Pursuant to the certifications that you made in the Form 1003 Uniform Residential Loan Application, you are responsible for the accuracy and truthfulness of the information you provided to us which we used to determine your ability to repay the loan for which you are applying.

For each question below, please initial either response (a) or (b) to conﬁrm your accurate and truthful answer. In the event you answer (b) for any question, please use the space provided beneath your response to provide additional explanations.

1) BORROWER INCOME AFFIRMATION All Borrowers Must Initial Each Response a) To the best of my knowledge, I have no reason to believe, that my income will decrease from what I reported as my current income from all sources in my loan application within the next 12 months. b) I have received notice, or I have reason to believe, that my income will decrease from what I reported as my current income from all sources in my loan application within the next 12 months. I will describe such information in the box below.

If you or any borrower associated with this loan answered (b), please explain (additional pages may be attached to this form if needed):

2) BORROWER EMPLOYMENT AFFIRMATION All Borrowers Must Initial Each Response a) To the best of my knowledge, my employment prospects at my current job are excellent and I am not planning any change in my employment status as reported on my loan application. This includes voluntary or involuntary loss of job; job departure or job change. b) I am aware of, have reason to believe that there will be, or am planning a change in my employment status as reported on my loan application. This includes voluntary or involuntary loss of job; job departure or job change. I will describe such information in the box below. If you or any borrower associated with this loan answered (b), please explain (additional pages may be attached to this form if needed):

3) AFFIRMATION BORROWER PROVIDED ALL REQUESTED All Borrowers Must Initial MATERIAL INFORMATION Each Response a) To the best of my knowledge, there have been no changes to my income, assets, debts, expenses, or anything that could affect my ability to repay this loan since the time of application., which are not reflected in my loan application or referenced in this document. I have not obtained any additional loans, lines of credit, been a guarantor after applying for your loan. b) I have told my broker, loan officer or someone else involved in the origination process about changes to my income, assets, debts, expenses, or anything that could affect my ability to repay this loan, which are not reflected in my loan application or referenced in this document. I will describe such information in the box below. If you or any borrower associated with this loan answered (b), please explain (additional pages may be attached to this form if needed):

4) BORROWER AFFIRMATION OF AFFORDABILITY All Borrowers Must Initial Each Response a) I understand that it is Lender’s responsibility to determine my ability to repay the mortgage loan under the CFPB’s Ability to Repay Rule. However, to the best of my knowledge, and my understanding of the terms of the mortgage loan as they have been described to me, I have every reason to believe that I can afford this mortgage loan and that I will have sufficient residual income to meet my living expenses after making my monthly mortgage payments. I also understand that Lender’s determination of my ability to repay my mortgage loan will be independent of my affirmation of affordability. b) Either (1) I do not understand that it is Lender’s responsibility to determine my ability to repay the mortgage loan under the CFPB’s Ability to Repay Rule and require further explanation; or (2) based upon my own analysis of my financial situation, and my understanding of the terms of the mortgage loan as they have been described to me, I have reason to believe that I cannot afford this mortgage loan, or that I will not have sufficient residual income to meet my living expenses; and/or (3) I do not understand that Lender’s determination of my ability to repay my mortgage loan will be independent of my affirmation of affordability.

By signing below, • I hereby acknowledge that all the information listed above is true and correct. • I hereby acknowledge that Lender’s requirement to make a reasonable, good faith determination of my ability to repay the loan under the CFPB’s Ability to Repay Rule has been thoroughly explained to me. • I understand that Lender is obligated to comply with the requirements of the ATR rule as they relate to my loan, and therefore attest that I have provided accurate and truthful information in my loan application.

Signature Date

Name (Printed)

99 The following Borrower Attestation is required for loan program SP A5:

Borrower Attestation SP A5 ATR-01B

BORROWER’S AFFIRMATION OF INFORMATION PROVIDED TO ESTABLISH ABILITY TO REPAY (ATR)

100

101

By signing below,

• I hereby acknowledge that all the information listed above is true and correct. • I hereby acknowledge that Lender’s requirement to make a reasonable, good faith determination of my ability to repay the loan under the CFPB’s Ability to Repay Rule has been thoroughly explained to me. • I understand that Lender is obligated to comply with the requirements of the ATR rule as they relate to my loan, and therefore attest that I have provided accurate and truthful information in my loan application. • I understand and recognize that my qualification for this loan product and the Lender’s primary method for determining my ability to repay the mortgage loan is based upon the Lender’s analysis of the monthly cash flow in the bank statements that I provided to the Lender. I understand and recognize that the Lender is not considering my tax returns during the underwriting of the mortgage loan.

Signature Date

Name (Printed)

102 The following Borrower Attestation is required for loan program SP A6:

Borrower Attestation SP A6 ATR-01C

BORROWER’S AFFIRMATION OF INFORMATION PROVIDED TO ESTABLISH ABILITY TO REPAY (ATR)

103

104

b) Either (1) I do not understand that it is Lender’s responsibility to determine my ability to repay the mortgage loan under the CFPB’s Ability to Repay Rule and require further explanation; or (2) based upon my own analysis of my financial situation, and my understanding of the terms of the mortgage loan as they have been described to me, I have reason to believe that I cannot afford this mortgage loan, or that I will not have sufficient residual income to meet my living expenses; and/or (3) I do not understand that Lender’s determination of my ability to repay my mortgage loan will be independent of my affirmation of affordability.

By signing below,

• I hereby acknowledge that all the information listed above is true and correct. • I hereby acknowledge that Lender’s requirement to make a reasonable, good faith determination of my ability to repay the loan under the CFPB’s Ability to Repay Rule has been thoroughly explained to me. • I understand that Lender is obligated to comply with the requirements of the ATR rule as they relate to my loan, and therefore attest that I have provided accurate and truthful information in my loan application. • I understand and recognize that my qualification for this loan product and the Lender’s primary method for determining my ability to repay the mortgage loan is based upon the Lender’s analysis of the income and assets that I have listed on the [loan application]. I understand and recognize that the term of the mortgage loan is 30 years, and I hereby certify that I will I preserve sufficient income and assets to ensure repayment of the mortgage loan through the maturity of the loan term

Signature Date

Name (Printed)

105 15.2 Exhibit 12.7 Sistar Mortgage Condominium Project Questionnaire

Condominium Project Questionnaire

Lender:

Borrower Name(s) Unit Number: (the “Subject Unit”)

Condominium Project

Project name: Address of project:

Homeowner association name:

Managing Agent

Name: Address:

Person Completing This Questionnaire

Name: Title:

Phone: Email:

Person completing this form is an officer, employee or affiliate of (please check one of the following): Managing Agent Independent HOA Officer Other (Please

(not affiliated with Developer indicate or managing agent) affiliation:

1. Does the condominium project include more than one phase? yes no

2. If the condominium project includes more than one phase: a. How many phases does the project contain? b. In which phase is the Subject Unit located?

3. Is the Subject Unit for one-family, residential occupancy? yes no

4. Please complete the following questions for the phase in which the Subject Unit is located (the “Subject Phase”): a. What was the date the Subject Phase was first marketed? b. What was the date of the first contract for a unit in the Subject Phase c. How many units are in the Subject Phase? d. How many units in the Subject Phase have been conveyed? e. How many units in the Subject Phase are under contract? f. How many units in the Subject Phase are rented (investor owned)?

5. Is construction of all amenities and common areas designated for use by owners of units in the Subject Phase fully complete? yes no

106

6. Is construction of the Subject Phase fully complete (100%) complete? yes no

If the answer to question # 6 is “No” please answer the following questions a through g immediately below, (otherwise skip to question # 7).

a. Is construction of the Subject Phase 75% or more complete? yes no

b. Does the managing agent have specific knowledge that the sponsor has insufficient funding to complete construction of the Subject Phase? yes no

c. Does the managing agent have specific knowledge that a construction loan needed to finish construction of the Subject Phase is “out of balance”?

or otherwise unavailable? yes no d. Does the managing agent have specific knowledge that construction of the Subject Phase is not continuing and ongoing? yes no

e. Does the managing agent have specific knowledge that the Subject Phase will not be completed within twelve months of the date of this questionnaire? yes no

f. Does the managing agent have specific knowledge that the condominium project is encumbered by a mechanic’s lien in excess of $25,000? yes no

g. Does the managing agent have specific knowledge that one or more sponsor owned units is more than sixty days delinquent on real estate taxes? yes no

7. Does any entity other than the Original Sponsor / Developer own more than 15% of the units in the phase? yes no

8. Does the Subject Phase include:

a. units that are mobile homes? yes no

b. units that are manufactured homes (other than modular units with an appeal similar to stick built units) yes no

c. units owned under time share or fractional ownership plans? yes no

d. units that include the option to receive assisted living services? yes no

e. units that are cooperative units or cooperative apartments? yes no f. multi-family units? yes no

g. common interest or community apartment units? yes no

h. Houseboat units? yes no

107 i. units offering daily or weekly rentals? yes no j. units that are Condotels? yes no

108

k. units offered through filings with the US Securities and Exchange Commission? yes no l. units that are subject to fees on transfer that are payable to any

Person or entity other than the homeowner association? yes no m. common arears or amenities that are owned by the

sponsor / developer & leased back to the homeowner association?_ yes no

9. Are all units in the condominium project conveyed fee simple? yes no

10. Does the condominium project include commercial units (such as store or a hotel)? yes no

a. If the condominium project includes commercial units,

what portion of the square footage of the condominium project is commercial occupancy? %

11. Please indicate the portion of the units in the condominium project that

are current, 31 to 59 past due and 60 or more days past due on amount owing to the homeowner association:

total units units units units current 31 to 59 60+

12. Is the sponsor / developer current on all amounts due the homeowner association? yes no

13. Is the condominium association a defendant in litigation related to

the safety, structural soundness, habitability or functional use of the condominium premises (not include “slip and fall” litigation)? yes no

14. Is the condominium association a defendant in litigation unrelated

to the safety, structural soundness, habitability or functional use of the condominium premises (including “slip and fall” litigation)? yes no

a. If the answer to #12 is “yes,” is the liability posed by the litigation fully covered by an insurance policy (except for a deductible related to such policy)? yes no

b. If the liability posed by litigation is fully covered by an

Insurance policy other than a deductible, how much Is the policy deductible? $_

109 15. Do the condominium premises suffer from environmental, safety or

soundness hazards that have not been successfully remediated? yes no

16. Is the managing agent aware of any condition that has caused, or will cause the homeowner association to become unstable? yes no

Please provide a copy of the following:

1. the master insurance certificate showing coverages maintained by the homeowner association. 2. the homeowner association’s annual budget

3. the most recent homeowner association year-end financial statement.

The undersigned represents that (1) the information provided in this questionnaire is true and correct as of the date set forth opposite my signature, and that any intentional or negligent misrepresentation of the information contained on this questionnaire may result in civil liability, including monetary damages, to any person who may suffer any loss due to reliance upon any misrepresentation that I have made on this questionnaire, and/or in criminal penalties including, but not limited to, fine or imprisonment or both under Title 18, United States Code, Sec. 1001, et seq., and (2) the information contained in this questionnaire may be relied on by lenders, mortgage buyers and securities underwriters.

Signature Printed Name Date Completed

110

Volume II Policies & Procedures Manual

This policies and procedures manual contains the required policies and procedures for selling loans to Sistar Mortgage Company. Sistar maintains the following policies and procedures which are included in this manual in the noted sections:

Policy and Procedure Section Number

Contacting Sistar 1 Interest Rate Locks 2 Sistar Fee Schedule 3 Submitting Loans to Sistar for a Guideline Review prior to close 4 Submitting Closed Loans to Sistar for Purchase 5 Receiving Borrower Payments Post Sistar Purchase 6 Final Documents 7 Changes to Policies and Procedures 8

2 1. Contacting Sistar

1.1 Telephone contacts

Sistar’s main telephone number is (888) 841-4238.

Upon calling Sistar’s telephone number, a caller may select form the following departments:

“1” to reach the lock desk for extensions, re-locks, program changes and other pricing support;

“2” to reach scenarios and client support, for help with underwriting guidelines, possible exceptions, and support not related to submitted loan files;

“3” to reach SLS Servicing, which services Sistar’s loans, regarding remitting interim servicing payments and other interim servicing issues;

“The extension number or direct dial” of the person assigned to a loan file (as indicated on Sistar’s portal) to reach the guideline review or pre-purchase specialist assigned to such file.

1.2 Sistar’s physical address

For all purposes other than loan payments and custodial packets, Sistar’s physical address is:

Sistar Mortgage Corporation 51650 Oro Road, Shelby Township MI 48315

3 2. Interest Rate Locks

This policy applies to locking and registering loans with Sistar Mortgage. Prior to delivering a Loan for purchase to Sistar, the Loan must be locked in accordance with the following policies. Lenders may elect to lock a Loan for up to 45 days prior to its delivery to Sistar. Price and program guidelines under which the loan was locked will be guaranteed during the lock period.

2.1 Lock Management - Lenders are responsible for the management and delivery of their locked pipeline. Upon closing of the loan, locked loans, including those with extensions and relocks, will be subject to mandatory delivery. If the closed loan is not delivered to Sistar for purchase within 90 days of the locking of the loan, the Lender will be obligated to pay a pair-off fee to Sistar. The amount of the pair-off fee will be 1% of the principal amount of the Loan. Loans that that do not meet the pre-close loan review requirements for Sistar will not be subject to the 1% pair-off but will be subject to billing for Sistar’s admin fee.

2.2 Available Locks Periods – Lenders may choose a lock period of 15 days, 30 days or 45 days.

2.3 Closed Loan Delivery – Lenders must deliver Loans to Sistar in purchasable form no later than lock expiration date. If a lender delivers a Loan in purchasable form no later than the lock expiration date, Sistar will purchase the loan at the locked price. However, if a Loan is delivered later than the lock expiration date, or is not delivered in purchasable form, then the loan will be subject to extension fees or repricing.

2.4 Lock Extensions – Sistar allows for 1 extension for ten (10) days per locked loan. Provided the lock for a Loan has not been previously extended, Lenders may extend the unexpired lock for ten days at a cost of 0.125 point. Locks on Loans that were previously extended may not be extended for a second time, they must be re- locked.

2.5 Re-Locking – If a lock expires or has already had 1 extension, pricing will be worse case pricing between the original lock and current market plus a cost of quarter (.25) point.

2.6 Pricing Availability – Lenders may lock loans from 9AM to 9PM Eastern Time on Business Days (“Lock Hours”), excluding holidays under the regulations of the Federal Reserve System. Notwithstanding the foregoing, Sistar may change the interest rates and / or prices that are available for locking at any time without notice. In such event, Sistar will temporarily suspend accepting locks until new rates and / or prices are

4 posted. The new rates and / or prices will be effective immediately upon their posting.

2.7 Lock and Registration Procedures – To lock or register a Loan, a lender must use the automated locking engine on the Sistar Mortgage website (www.Sistarmortgage.com). Lenders must logon to the website and then choose the product and pricing tab. The lender will then be prompted to enter loan and select the product to lock. Finally, Sistar’s offered interest rates and corresponding prices will be displayed and the lender will be prompted to select the rate / price combination the lender desires.

2.8 Rate Lock Confirmations – Upon locking a Loan a lender will receive an electronic lock confirmation showing the terms of the lock as well as the lock’s expiration date. Lock details will also be available at www.Sistarmortgage.com in the lender pipeline view.

2.9 Manifest Error – In the event that the Sistar automated locking engine locks a loan at terms that constitute a manifest error – for example an unrealistically low rate, unrealistically long lock period or unrealistically high price – then such lock shall be null and void.

2.10 Product Changes – Lenders may change the product of a Loan that was previously locked – for example from a 5/1 ARM to a 7/1 ARM - provided that the Loan’s lock term (including any applicable lock extension) has not expired. If a product is so changed, the Lock will be amended to reflect the interest rates and prices for the new product that were available on the day the Loan was locked plus a reduction in price of 0.25 point.

2.11 Program Changes - Lenders may change the program of a Loan that was previously locked – for example from an SP M1 to an SP M2 - provided that the Loan’s lock term (including any applicable lock extension) has not expired. If a program is so changed, the Lock will be amended to reflect the interest rates and prices for the new product that were available on the day the Loan was locked plus a reduction in price of 0.25 point in price.

2.12 Program Discontinuations and Changes – Sistar reserves the option to discontinue or change the underwriting and other requirements of its programs at any time without notice. In the event that Sistar effects a program discontinuation or requirements change, Loans that are locked will be purchased in accordance with the program requirements that were in effect prior to the discontinuation or requirements change, provided that such Loans are delivered to Sistar in

5 purchasable form no later than the expiration of the lock period (including any lock extensions).

6 3. Sistar Fee Schedule

Sistar charges the following fees:

Fee Deducted from Billed Amount Loan proceeds Monthly

Administrative Fee – Closed Loan $925 X Tax Service Fee - Closed Loan 90 X

Guideline Review Fee – submitted to Sistar for guideline review but loan not closed or closed but not sold to Sistar $925 X

Extension fees, relock fees and pair-off fees As set forth in the interest rate locks policy X

Fees indicated as “Deducted from Loan proceeds” are net funded from the purchase proceeds, while fees indicated as “Billed Monthly” are invoiced; provided that Sistar reserves the right, at its discretion, to offset past “Billed Monthly Fees” from loan purchase proceeds.

7 4. Submitting loans to Sistar for a guideline review prior to closing

Sistar approved lenders may submit a loan to Sistar for Guideline Review, after the lender has underwritten and approved the loan, but prior to the lender closing the loan.

Sistar will test a loan submitted for Guideline Review to determine if the loan conforms to selected loan program requirements. Sistar’s testing is at a high level and is based on information received by Sistar, including information regarding the amount and satisfactory nature of loan applicants’ income, assets and credit history.

Sistar’s testing generally centers on, and is limited to, ratio analysis and other mathematical requirements, and does not include a general re-underwriting or review of a loan’s overall quality, the accuracy of data and information, or the sufficiency of hazard and other insurance. Lenders are cautioned not to use the guideline review as a substitute for prudent and thorough underwriting. Sistar’s Guideline Review does not amend the representations and warranties given by lenders to Sistar which remain fully effective regardless of the results of Sistar’s Guideline Review.

Upon completing a guideline review, Sistar will notify the lender that either 1) those aspects of the loan tested by Sistar do not reveal any incidents in which the loan is inconsistent with Sistar’s guidelines (“meets”), or 2) aspects of the loan do not conform to Sistar’s guidelines (“does not meet”).

Lenders may access the results of Sistar’s guideline review, regarding a loan, on Sistar’s website at www.SistarMortgage.com. On the website, Sistar will either indicate whether a loan cleared all of Sistar’s testing without condition, or will list the conditions that were identified that resulted in non-conformance. If conditions of non-conformance are listed, lender’s may submit new documentation, changes in loan amount or loan terms, or other changes for the purpose of eliminating such conditions and causing the loan to pass all of Sistar’s guideline review testing. In addition, lenders may speak with the Sistar reviewer that performed the guideline review for explanations regarding what changes are needed to eliminate the conditions of non-conformance.

To submit a loan to Sistar for guideline review, lenders should follow the procedures set forth at www.Sistarmortgage.com under guideline review requirements, including procedures for obtaining an appraisal risk review from Proteck or a collateral desktop analysis from Clear Capital.

8 5. Submitting Closed Loans to Sistar for Purchase

Submission of Collateral Package to Sistar’s Custodian To submit a loan for sale to Sistar, lenders must deliver under Bailee the following legal documents to Sistar’s custodian – of California, unless the loan is a cooperative loan: 1) Original note with any required riders, endorsed in blank; 2) A Bailee letter or Seller release indicating the correct remittance instructions for funding; 3) Power of Attorney if the Mortgage Note was executed pursuant to a power of attorney or other instrument that authorized or empowered such Person to sign, the certified true copy of the power of attorney.

If the loan is a cooperative loan, lenders must deliver the following legal documents to Sistar’s custodian – Banc of California: 1) Original note with any required riders, endorsed in blank; 2) A true and correct copy of the security instrument; 3) The original proprietary lease with an assignment of the proprietary lease with the assignee left blank; 4) The original recognition agreement; 5) An original assignment of the recognition agreement, with the assignee left blank; 6) Original stock certificate evidencing ownership of the cooperative shares; 7) A stock power for the cooperative shares in blank; 8) Original UCC-1 financing statement with evidence of filing; a. Original executed UCC-3 financing statements or other appropriate UCC financing statements required by state law (provided that the custodian is not responsible for verifying that any of the financing statements is required by state law), evidencing a complete and unbroken line from the mortgagee to purchaser with evidence of recording thereon (or in a form suitable for recordation); b. Original or certified copies of each assumption agreement, modification agreement, consolidation or extension agreement, written assurance or substitution agreement, if any; 9) Power of Attorney if the Mortgage Note was executed pursuant to a power of attorney or other instrument that authorized or empowered such Person to sign, the certified true copy of the power of attorney; 10)Original estoppel letter, if applicable; and 11)Original consent, if applicable.

To make delivery to Banc of California, lenders must follow the procedure set forth in the Collateral Checklist located at www.Sistarmortgage.com under Forms, regarding stack order, use of a file folder and delivery address instructions.

9 SUBMITTING CLOSED LOAN FILES FOR PURCHASE REVIEW To submit a loan for sale to Sistar, lenders must also deliver a mortgage file that documents the loan’s conformance to the requirements in Sistar’s Underwriting Guidelines. Unless Sistar’s Underwriting Guidelines state otherwise, the mortgage file must include the documentation required by Fannie Mae, in accordance with the Fannie Mae Seller Servicer Manual, to document conformance with Sistar’s requirements regarding borrower income, assets, obligations, credit history, the real estate transaction being financed, and the value and condition of the property securing the loan. To submit a loan to Sistar for guideline review, lenders should follow the procedures set forth at www.Sistarmortgage.com/forms under purchase review requirements.

Sistar will review the legal documents and mortgage credit file. If a condition of non-conformance with Sistar’s requirements, as set forth in this Sales Guide is identified, Sistar will communicate such condition(s) to the lender through the Purchase Review Condition document. In addition, the condition(s), if any, will be listed on Sistar’s portal. The lender will then have the opportunity to correct condition(s), so that the loan fully conforms with all Sales Guide requirements for purchase

Upon a loan being reviewed and found by Sistar to conform to the requirements of the Sales Guide, Sistar will issue a purchase advice to the lender regarding the loan. The lender must sign and return the purchase advice to Sistar prior to the loan being purchased.

Upon Sistar receiving the signed purchase advice, Sistar will remit funds to the lender to purchase the loan in accordance with the wiring instructions set forth on the Bailee letter or Seller’s release.

6. Receiving Borrower Payments Post Sistar Purchase

If a borrower makes a payment to a Lender after Sistar has purchased the Loan, Lenders must deliver mortgage payments and other funds received from borrowers and due Sistar within 5 days of receipt to the servicer that services Sistar’s loans – Specialized Loan Servicing.

If forwarding borrower checks, please endorse properly to SLS without recourse, if forwarding a corporate check please make the check payable to SLS. The loan number, date of receipt and the purpose of each check should be clearly identified (payment, payoff, etc.). Checks must be delivered:

Specialized Loan Servicing LLC 8742 Lucent Blvd., Ste 300 Highlands Ranch, CO 80129 Attn: Cashiering

10 7. Final Documents

Lender’s must deliver final documents (Final Title Policy and Recorded Security Instrument with all riders) to Sistar at: Sistar Mortgage 4600 Fuller Drive Irving, TX 75038, Attention: Post Closing Department.

8. Changes to Policies and Procedures

Sistar may change the policies and procedures set forth it this Sales Guide at any time without notice. If Sistar does make changes to these policies and procedures, changes made to the policies and procedures after the date a loan was interest rate locked, will not be effective regarding such loan, provided such loan is purchased by Sistar prior to the expiration of the interest rate lock applicable to such loan.