PRODUCT GUIDELINES FHA NEGATIVE EQUITY REFINANCE (PORTFOLIO ONLY) PROGRAM CODES: F30FNEGEQ

REFINANCE

Maximum LTV/CLTV Max Loan Amount Max Ratios Mortgage/Rental History MINIMUM FICO 580 AUS Approved 1 Unit $417,000 35% / 48% AUS Refer 97.75% / 115% New mortgage paymentt cannot 0 x 30 past 3 months 2 Units $533,850 increase more than 6% over trial payment amount

Underwriting Guidelines Requirements All loans must be submitted and approved through FHA's TOTAL Score Card. Loans with a "Refer" classification must be manually underwritten.

PROGRAM ELIGIBILITY Existing Loan Conditions Existing loan must be conventional (not insured by FHA). Homeowner must be in a negative equity position and current on the existing mortgage to be refinanced. The borrower must qualify under standard FHA UW requirements. Existing 1st lienholder must write off at least 10% of the unpaid principal balance.

Borrower Certification All borrowers must execute FHA Borrower Certification Form HUD 92918. This form certifies that they have not been convicted within the last 10 years for any of the following in connection with a mortgage or real estate transaction: felony, larceny, theft, fraud, forgery, money laundering, or tax evasion. The certification must be placed in the Miscellaneous Documents section of the FHA case binder. Failure to execute the form and include in the case binder is considered a serious violation by FHA.

Occupancy Must be owner occupied.

Trial Payment Plan (TPP) Borrower must successfully complete a TPP with their current servicer, making 3 consecutive, on-time monthly payments. Borrower's TPP payment amount must be consistent with the payment amount the borrower would pay with the refinance (within 6%). Borrower must submit the Plan Agreement, payment history from servicer, and cancelled checks or bank statements.

Eligible Expenses New mortgage can pay off interest, prepayment penalties, late charges, escrow shortages, closing costs, prepaid expenses, and discount points. New mortgage may also payoff or pay down 2nd lien, if applicable

Program Expiration This FHA program is available through December 31, 2014. COLLATERAL Condos Must be current FHA-approved condominium complex and meet all HUD requirements (51% occupancy, 15% delinquencies). All condos and attached PUD's require 100% 'walls-in' HO6 coverage. Site condos do not require FHA HRAP/DELRAP approval.

Eligible Collateral Owner Occupied Only. 1-2 Units. PUD's, FHA approved condominium projects.

Ineligible Collateral Manufactured homes, mobile homes, co-ops, commercial or industrial zoned properties, mixed-use, working farms, construction to permanent, land contracts, leaseholds, properties listed for sale in the past 6 mos., properties located in the area of Wrightwood, CA, properties located within designated Costal Barrier Resource System (BRS) areas, and/or any other ineligible properties as defined by HUD Handbook 4150.2.

Subordinate Financing Existing subordinate financing only to maximum 115%. Must not provide for a balloon payment before 10 years. Must permit prepayment without penalty, with 30 days notice. Periodic payments, if any, shall be collected monthly and included in ratios, unless deferred for no less than 36 months.

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CREDIT Overall Credit Requirements An acceptable credit and mortgage payment history must be documented. Indications of major derogatory credit events, such as judgments, collections, and other recent credit problems require sufficient written explanation from the borrower. NSF activity, private mortgage lates, delinquent CAIVRS, LDP or GSA findings, mortgage lates not reporting on the credit bureau, significant delinquencies after bankruptcy, and any other credit delinquencies will supersede any ‘approved/eligible’ finding.

Bankruptcy Prior Bankruptcy must be discharged for at least 2 years. During this time the borrower must have re-established good credit or chosen not to incur new credit obligations.

Consumer Credit Counseling 1 year of the pay-out has elapsed under the plan, borrower's payment performance has been satisfactory with all required payments made timely and borrower has received written permission from the counseling agency to enter into the mortgage transaction.

Social Security Numbers Required for ALL borrowers.

Collections/Charge Offs Borrower must supply sufficient written explanation that is reasonable and consistent with the borrower's other credit information.

Judgments/Liens All outstanding judgments and liens must be paid. Includes judgments of non-purchasing spouse. Borrower must supply sufficient written explanation that is reasonable and consistent with the borrower's other credit information.

Foreclosure / Deed-in-lieu Must be >3yrs from date of trustee's deed or FHA claim (CAIVRS-if applicable).

Short Sale/Short Refi/Modification A borrower is not eligible for a new FHA insured mortgage if a short sale was pursued to take advantage of declining market conditions and purchase a similar or superior property within reasonable commuting distance of prior residence. A borrower in default at time of short sale/restructure or pre-foreclosure is not eligible for a new FHA insured mortgage for 3 yrs from date of pre-foreclosure sale. Borrower's current at time of short sale must have 0x30 mortgage and installment debt pay history for the preceding 3-month period.

Disputed Accounts Must have zero balance or marked as 'paid in full' or 'resolved.' OR is both less than $500 and more than 24 months old.

FICO Minimum of 1 reported credit score required. All borrowers must have credit scores. Non-traditional credit not allowed.

Minimum Payment Greater of 5% or $10 of outstanding balance for revolving accounts if no payment is indicated.

Minimum tradelines Borrowers must have sufficient credit history to generate a valid FICO score. Generally, an acceptable credit history does not have late housing, installment debt, or major derogatory revolving payments. Authorized tradelines are not acceptable for establishing a credit history and may invalidate the FICO score.

Non Borrowing Spouse Credit report required in community property states. Debts must be added to DTI Ratio and Credit History may be considered.

INCOME/ASSETS Debt Ratio All loans must be submitted to TOTAL Mortgage Scorecard. AUS Approved and AUS Refer Max Ratios = 35/48%

Non-Taxable Income Nontaxable income such as Social Security, Pension, Workers Comp, and Disability Retirement income must be grossed up.

Income All types of income must have been received for the most recent two consecutive years including overtime, bonus, second job, part-time, commission, self employment.

Documentation/4506T Full income documentation loans only. IRS Form 4506T must be processed and income validated for most recent 2 years.

Minimum Reserves 1-2 Units: None. Reserves, if required, cannot be gift funds, must be borrower's own.

GENERAL Loan Terms Available 30-Year Fixed

Qualifying Fixed Products Qualify at Note Rate

Qualifying ARM Products Qualify at Note Rate

Maximum Number of Properties Maximum number of financed properties is 1, including the subject property.

Premium Pricing FHA does not permit the use of premium pricing to pay off existing debt obligations to qualify the borrower for the new loan.

Lender Credits FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance.

Payoff The mortgagee must ensure that the existing first lien holder writes off at least 10% of the unpaid principal balance on the first lien. The short payoff serves as payment in full for any debt extinguished. The write off amount must be included in all data collected by FHA at insurance application.

Disclosures Mortgagees must make borrowers aware that the short refinancing under this program may be reflected as a negative on a borrower's credit score. Mortgagees must also advise borrowers to consult with their tax advisors regarding cancellation of debt and possible tax consequence.

Miscellaneous Power of Attorney not permitted

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