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Second Mortgage MUST CLOSE CONCURRENTLY with a FLAGSTAR FIRST MORTGAGE

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Second Mortgage MUST CLOSE CONCURRENTLY with a FLAGSTAR FIRST MORTGAGE Second Mortgage MUST CLOSE CONCURRENTLY WITH A FLAGSTAR FIRST MORTGAGE PRIMARY RESIDENCE – PURCHASE and RATE/TERM REFINANCE 1 Maximum Maximum Minimum Total Property Type CLTV Loan Amount Credit Score Debt Ratio $150,000 700 89.99% 1-Unit $250,000 720 Condo 43% PUD $250,000 660 80% $500,000 680 2-Unit 75% $250,000 700 43% SECOND HOME – PURCHASE and RATE/TERM REFINANCE 1 Maximum Maximum Minimum Total Property Type CLTV Loan Amount Credit Score Debt Ratio $150,000 720 89.99% 1-Unit $250,000 740 Condo 43% PUD $150,000 680 80% $250,000 700 1. Texas: Customers may originate only purchase-money Second Mortgage loans in Texas; refinances are not available. PROGRAM SUMMARY Subordinate lien, closed-end fixed-rate loan. Loans under this program must be closed concurrently with a Flagstar Bank conventional first mortgage. This is not a stand-alone second mortgage program. Loans will close in the customer’s usual closing name, and they are eligible for warehouse or table funding (depending on Correspondent or Broker approval status with Flagstar). PRODUCTS OFFERED Product Name Term Second Mortgage 15-Year Fixed (Concurrent) 180 months Second Mortgage 10-Year Fixed (Concurrent) 120 months LICENSING Origination of secondary lien loans may require specific licensing in the state where the subject property is located. Such licensing may differ from what is required to originate first mortgage loans. Consult the appropriate state licensing authority, your Flagstar account executive or Flagstar’s Lending Service Center (LSC) for more information. ELIGIBLE BORROWERS • Borrowers must be the same for both the first and second mortgage loans • U.S. citizens • Permanent resident aliens V. Product Guidelines 1 of 12 Document #5562 Return to Top 06/29/2018 Second Mortgage • Non-permanent resident aliens • Non-occupant co-borrowers • Revocable/living trusts are acceptable provided it is established by, and the primary beneficiary is, an individual; o Loans closing in trust must follow the same requirements as the first mortgage INELIGIBLE BORROWERS • Land trusts are not eligible, including Illinois land trusts ELIGIBLE PROPERTY TYPES • 1 to 2-unit properties • Planned unit developments (PUDs) • Condominiums: o Must meet Fannie Mae warranty guidelines o Must be on Flagstar’s eligible projects list INELIGIBLE PROPERTY TYPES • 3 to 4-unit properties • Condominiums not meeting the criteria listed under Eligible Property Types above • Manufactured/mobile homes (single- or double-wide) • Cooperatives • Properties over 10 acres (may be eligible with an exception) • Properties under construction at time of loan closing MINIMUM LOAN AMOUNT $10,000 QUALIFYING RATE/PAYMENT The qualifying payment is a fully amortizing payment over the loan term calculated at the note rate. TOTAL DEBT RATIO The maximum debt-to-income (DTI) ratio is 43%, regardless of any higher ratios permitted by the AUS response on the first mortgage. APPRAISAL A full appraisal appropriate to the property type must be obtained. The appraisal from the first mortgage can be used; however, any reduced appraisal options offered by the first mortgage AUS findings, including a property inspection waiver (PIW), are not eligible. Appraisals must be reviewed by a qualified, designated reviewer. Broker and non-AIR compliant Correspondent appraisals must be ordered through Loantrac and will be eligible from any approved AMC listed in Appraisal Management Companies, Doc. #4903. V. Product Guidelines 2 of 12 Document #5562 Return to Top 06/29/2018 Second Mortgage AIR compliant Correspondent appraisals must meet the following guidelines: • Appraisal is not required to be ordered from one of our approved AMCs • Upon Appraisal Review discretion, a review appraisal or a full appraisal from one of our approved AMCs may be required at the customer’s expense; it will be the responsibility of the customer to place the order INITIAL DISCLOSURES Loan Estimates are required for second mortgage loans UNDERWRITING All loans must meet the parameters as set out in Flagstar Bank’s current Conventional Underwriting Guidelines, except as modified below: • This Second Mortgage program is offered only in conjunction with a concurrently closing conventional first mortgage loan underwritten by and to be funded or purchased by Flagstar Bank. • Delegated underwriting is not permitted • Both the first and second lien loans must be tied together using the Linked Loan functionality in Loantrac, and should be submitted to Underwriting at the same time. • The associated first mortgage loan application must receive a DU Approve or LPA Accept response. CREDIT • The credit report issued for the first mortgage, and used in the AUS submission(s), should be reissued through Loantrac for the Second Mortgage transaction. • Minimum four tradelines; one currently active and open for more than 12 months with a minimum high balance of $1,000, regardless of credit score • Credit score for the file will be determined using the standard agency method (file score is lowest individual score; individual borrower scores determined as the middle score for a three repository credit report or the lower score for a two repository credit report) • Credit history must show 0x30 for all mortgages in last 12 months • Bankruptcies/CCCS – discharged at least four years with excellent re-established credit • Foreclosures/repossessions/short sales – not allowed • Collections or charge-offs less than 24 months old or over $1,000 cumulative must be paid off prior to or at closing • All credit must be current at time of underwriting • Co-signers cannot be used to offset derogatory credit or the inability of the main borrower to budget Borrowers can pay off debts to qualify; however, the debt must be paid in full and all remaining debt will be included in qualifying ratios; all debts to be paid off must be clearly identified on the closing disclosure; lease payments and student loans will always be included in the debt ratio. EMPLOYMENT AND INCOME Income, employment and assets must be listed on the 1003 and verified. Documentation may not be more than 90 days from date note is signed. Borrowers must have two years consistent employment with the same employer or in the same industry. V. Product Guidelines 3 of 12 Document #5562 Return to Top 06/29/2018 Second Mortgage Standard Fannie Mae full documentation is required (two years W2s and current pay stub, etc.). Pay stubs must be computer generated. Handwritten pay stubs require a borrower to provide tax returns and all schedules. The following income documentation must be provided for each borrower whose income is used to qualify: Employment Income Income Type Required Documentation • An earnings trend must be established and documented. Large increases in salary over the previous two years must be explained and documented. • W-2 for prior two years. Salaried • Year-to-date pay stub up through and including the most current pay period at the time of application. • If borrower is claiming overtime pay, it must be shown on the YTD pay stub. An earnings trend must be established and documented. Stable to increasing income should be average over a minimum two year period. When declining income has occurred, the most recent 12 months should be used. In all cases, the decline in income must be analyzed to determine if the rate of decline would have a negative Hourly & Variable impact on the continuance of income and the borrower’s ability to repay. Declining Income income must be explained by the employer/borrower and a written determination by the underwriter must be provided if declining income is used for qualifying. • W-2 forms or personal tax returns, including all schedules, for prior two years. • Year-to-date pay stub up through and including the most current pay period at the time of application. Borrower must have worked the part-time job uninterrupted for the past two years, and plans to continue. When declining income has occurred, the most recent 12 months should be used. In all cases, the decline in income must be analyzed to determine if the rate of decline would have a negative impact on the continuance of Part-Time Income income and the borrower’s ability to repay. If the part-time income shows a continual decline, income should not be used. • W-2 forms for prior two years. • Year-to-date pay stub up through and including the most current pay period at the time of application Commission income must be averaged over the previous two years. When declining income has occurred, the most recent 12 months should be used. In all cases, the decline in income must be analyzed to determine if the rate of decline would have a negative impact on the continuance of income and the borrower’s ability to repay. If the commission income shows a continual decline, income should not be used. • W-2 forms for prior two years if commissions are less than 25% of the total Commission income. • Tax returns, including all schedules, and W-2 form from the previous two years if commissions are ≥ 25% of the total income. • Unreimbursed business expenses (form 2106) must be subtracted from income. • Year-to-date pay stub up through and including the most current pay period at the time of application. V. Product Guidelines 4 of 12 Document #5562 Return to Top 06/29/2018 Second Mortgage Employment Income Income Type Required Documentation An earnings trend for bonus and overtime must be established and documented. A period of more than two years must be used in calculating the average overtime and bonus income if the income varies significantly from year to year. When declining income has occurred, the most recent 12 months should be used. In all cases, the decline in income must be analyzed to determine if the rate of decline would have a Overtime & Bonus negative impact on the continuance of income and the borrower’s ability to repay.
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