Correspondent DU Refi Plus Product– Standard & High Balance

Page 1 01.06.2014

Topic Product Guideline

Program Description DU Refi Plus is a product created to assist borrowers who have demonstrated an acceptable payment history on their existing Fannie Mae mortgage loan, but due to a decline in property values have been unable to refinance to obtain a lower payment or move to a more stable product. Borrower’s eligible for this product: Borrower must have had their most recent closed loan transaction on the property sold to Fannie Mae and their note date must be on or before May 31, 2009. Eligibility for DU Refi Plus is determined in the DU Underwriting Findings report.

Products Fannie Mae Conforming 30 yr fixed, 25 yr fixed, 20 yr fixed, 15 yr fixed, and 10 yr fixed

AUS method DU 9.0 acceptable – Approve/Eligible – No Manual Underwrites – No Expanded Criteria

Program Codes CF30RP1-37, CF30RP2-37 CF25RP1-37, CF25RP2-37, CF20RP1-37, CF20RP2-37, CF15RP1-37, CF15RP2-37, CF10RP1-37, CF10RP2-37 CF30RP1HP-37, CF30RP2HP-37 CF25RP1HP-37, CF25RP2HP-37, CF20RP1HP-37, CF20RP2HP-37, CF15RP1HP-37, CF15RP2HP-37, CF10RP1HP-37, CF10RP2HP-37 (HPML) CF30JRP1-37, CF30JRP2-37, CF25JRP1-37, CF25JRP2-37, CF20JRP1-37, CF20JRP2-37, CF15JRP1-37, CF15JRP2-37, CF10JRP1-37, CF10JRP2-37 (RP1 = ≤ 105% and RP2 = > 105%)

Eligible States All continental states, Alaska, and Hawaii Geographic restrictions are listed under property types

Maximum Loan Amounts Continental U.S 1-Unit: 417,000 / 625,500* 2-Unit: 533,850/ 800,775* 3 Unit: 645,300/ 967,950* 4 Units: 801,950/ 1,202,925*

*High balance loan limits by county areallowable:

Agency Standard and High Balance Limits

Alaska and Hawaii 1-Unit: 625,500/ 938,250* 2-Unit: 800,775/ 1,202,150* 3 Unit 967,950/ 1,451,925* 4 Units: 1,202,925/ 1,804,375*

*High balance loan limits by county areallowable:

Agency Standard and High Balance Limits

Maximum Refinance

LTV/CLTV/ HCLV

** Pre existing, new, or

simultaneously refinanced

subordinate financing

permitted – see

subordinate financing

section

No Maximum CLTV

Exceptions to LTV ratio

limits apply to Texas

mortgages –Follow Fannie

Mae guides

Texas 50 (a)(6) mortgages

are not allowed

Primary

Limited Cash-Out Refi

1-4 Units Fixed: 150%**

Second Home

Limited Cash-Out Refi

1-Unit Fixed: 150%**

Investment/Non-Owner

Limited Cash-Out Refi

1-4 Units Fixed: 150%**

Borrower Eligibility • US Citizens

• Perm Resident Aliens

• Non-Permanent Resident Aliens.

Correspondent DU Refi Plus Product– Standard & High Balance

Page 2 01.06.2014

• See Special Features and Criteria

Refinance-Listed Property Properties currently listed for sale are ineligible for financing Must have proof of cancelled listing to be eligible if listed.

Refinance-Limited Cash

Out

A limited cash out refinance may only include the following:

• Maximum cash back to the borrower is limited to 250 dollars (IF exceeds this is aprinciple reduction)

• Texas: borrower may not receive any cash back regardless the amount

• The payoff of the outstanding balance of an existing first mortgage.

• The financing of closing costs (including prepaid expenses).

Existing subordinate financing cannot be included in the financing, and must resubordinate or refinancing simultaneously – See subordination section for details

Borrowers who had a loan modification are eligible for a rate/term refinance after 12 months of on-time payments since the modification went into effect. Payments must be documented.

Requirements for Continuity of Obligation For a refinance transaction to be eligible for sale to Fannie Mae, there must be a continuity of

obligation if there is currently an outstanding lien that will be satisfied through the refinance

transaction. Continuity of obligation is met when any one of the following exist:

• At least one borrower is obligated on the new loan who was also a borrower obligatedon the existing loan being refinanced.

• The borrower has been on title and residing in the property for at least 12 months andhas either paid the mortgage for the last 12 months or can demonstrate a relationship(relative, domestic partner, etc.) with the current obligor.

• The loan being refinanced and the title to the property are in the name of a naturalperson or a limited liability company (LLC) as long as the borrower was a member ofthe LLC prior to transfer. Transfer of ownership from a corporation to an individualdoes not meet the continuity of obligation requirement.

• The borrower has recently inherited, or was legally awarded, the property (divorce,separation, or dissolution of a domestic partnership).

Loans with an acceptable continuity of obligation may be underwritten, priced, and delivered as

either cash-out or limited cash-out refinance transactions based on the requirements for each type

of transaction.

No Acceptable Continuity of Obligation If the borrower is currently on title but is unable to demonstrate an acceptable continuity of

obligation, or if there is no outstanding lien against the property, the loan is still eligible for

delivery but with the additional restrictions described in the following table. The loans must be

underwritten, priced, and delivered as a cash-out refinance transaction.

Outstanding Liens Purchase Date LTV Ratio Requirements

No

(The property was purchased

for cash, previous mortgage

have been paid off, and so

Within the 6-12 month

period prior to the

application date for the new

financing.

The LTV/CLTV/HCLTV

ratios must be based on the

lesser of the original sales

price/acquisition cost

Correspondent DU Refi Plus Product– Standard & High Balance

Page 3 01.06.2014

on).

More than 12 months prior to

the application date for the

new mortgage

(documented by the HUD-1

settlement statement) or the

current appraised value

The LTV/CLTV/HCLTV

ratios must be based on the

current appraised value

Yes The borrower has been on

title for at least 6 months

The maximum

LTV/CLTV/HCLTV ratios

are limited to 50% based on

the current appraised value

Refinance-Cash Out Not permitted

Minimum Loan Amount $50,000

Eligible Property Types SFR, PUD, Detached/Attached SFR and PUDs, Warrantable Condos, Factory Built -Modular/Pre-Cut/Panelized Housing, and 2-4 Unit properties

Ineligible Property Types Condotels, Manufactured Housing, Co-op, Mixed-Use, Dome, Straw/Bale, Log, Earth and Construction properties

Special Property Types Leasehold Estates: Permitted if marketable for area, and lease term follows FNMA criteria and have at least five years beyond the maturity date of the mortgage

Illinois Land Trusts: Not Permitted on High Balance loan amounts

Rural Properties:

They are generally acceptable with the following conditions:

• Acreage must be typical and may not exceed 40 acres.

• The appraisal and comparables must support the land/site-to-value ratio. The appraisermust determine if the property’s land/site-to-value ratio is typical for the area. Theprimary dwelling must represent at least 70% of the total appraised value.

• The land is to be considered residential and not for potential future development.

Index One year LIBOR

Margin 2.25

Interest Rate Caps N/A

Recast Option N/A

Prepayment Penalty

Option

N/A

Conversion option N/A

Correspondent DU Refi Plus Product– Standard & High Balance

Page 4 01.06.2014

Terms Fixed :360 months, 300 months, 240 months, 180 months, and 120 months

Amortization Fully Self amortizing,

Buy down, Temporary Not Permitted

Special Features and

Specifications

Principal and interest payment for the new loan must be lower than the existing loan, unless the loan is being refinanced into a more stable product.

• Borrowers on the existing mortgage must match the borrowers on the new mortgage,except as indicated below.

• A new borrower may be added to the new loan, provided the existing borrower(s) is/areretained on the new loan.

• A borrower may be removed from the new loan, provided one of the existing borrower(s)is/are retained on the new loan.

Homebuyer Education: N/A Revocable Inter-Vivos trust: Permitted on Underwriting management approval Non-Arm’s Length Transaction: N/A Loans using Hardest Hit Funds: Not Permitted

HPML: Permitted on fixed rate product only – must have an impound account and meet borrower benefit criteria per agency program requirements – See Qualifying Ratios for additional info Power of Attorney: Fannie Mae allows for an attorney-in-fact to sign specific documents on the borrower’s behalf when certain conditions are met. These conditions have been revised, please follow the Fannie Mae Sellers Guide B1-1-01 Contents of the Application Package, B8-2-03 Signature Requirements; Security Instrument, B8-3-03 Signature Requirements: Notes, B8-5-06 Requirements of Use

Loans closed under HomePath Mortgage: Not eligible for DU Refi Plus/Refi Plus programs Loans with existing credit enhancements from Fannie Mae are not eligible for DU Refi Plus

Escrow Waiver LTV > 80 - Waiver is available if the original loan does not have an impound account. If the loan has impounds, it will continue to have impounds LTV < 80% impounds not required

Assumption Eligibility Fixed: not permitted

Underwriting Procedure Run FNMA DU For approval - Refers and Expanded Approvals are not permitted

Large Deposits The requirements for verification of depository and non-depository accounts is not necessary - Furthermore, Fannie Mae's standard policy regarding “discounting” of certain assets applies if the assets are required to satisfy DU reserve requirements.

Second Home /Investment

Properties

When an operating income statement is not required, the information will be reviewed on the application, separate statement from the borrower, or appraisal for the gross monthly rent for each non owner occupied unit.

Principal Curtailment Borrower may receive cash back at closing ≤ $250. Excess cash representing the difference between the estimated and the actual payoff of the original loan plus closing costs and prepaid fees must be applied as principal curtailment or reduction in the loan amount

Correspondent DU Refi Plus Product– Standard & High Balance

Page 5 01.06.2014

Documentation

Requirements

Full Documentation Standard Agency documents apply Tax Transcripts are required for the number of years of income documented required by AUS

Minimum Credit Score 620 min credit score, 660 min score for LTV > 125%

Credit History Acceptable credit history determined by AUS (need a minimum of two credit scores)

0 x 30 late pays in the past 12 months for all mortgages.

Bankruptcy, Foreclosures, Deed-in-Lieu or Pre-foreclosure/Short Sale will be recognized by

DU and a message will be issued accordingly.

Mortgage Insurance Loans that did not have existing mortgage insurance, will not need mortgage insurance even if the LTV exceeds 80%.

If the loan exceeded 80%, and has mortgage insurance, then mortgage insurance will be required for the new loan. The existing policy is eligible for transfer and the coverage amount will remain the same Ineligible MI types: LPMI Monthly

Subordinate Financing Only Permitted for existing subordinate financing, however

• The loan may not be paid off with proceeds from the new DU Refi Plus Loan

• No CLTV limits

• May have negative amortization

• May have restricted re payment (pre pays)

• Existing subordinate financing may be simultaneously refinanced as long as new liendoes not exceed the existing unpaid principal balance

• New subordinate financing is permitted provided it replaces the existing subordinatefinancing.

Project Eligibility Condominium and Attached PUDs: Must verify the property is not a Condotel, co-op, timeshare, houseboat project, or any segmented ownership project. Must confirm hazard, flood, and liability insurance coverage is required. HOA Cert required

Appraisal Follow DU Recommendation DU will issue property field works recommendations which may include a PFW.

Property Fieldwork Waivers: $ 75 fee When a DU Refi Plus PFW is exercised, Fannie Mae accepts the property value estimate submitted to DU as the market value for the subject property. However, the use of the estimated value or the DU value to calculate the LTV is acceptable. If a full appraisal has been obtained for the property, the value from that report must be entered in DU for HARP loans. It is not acceptable to use a higher value than the appraisal, even if the value is accepted by DU. Conditions rates greater than C4 are not eligible Fannie Mae continues to require the representing and warranty that all of the information and data submitted to DU is complete and accurate

Qualifying Ratios Maximum Qualifying Ratio: AUS determination for non HPML loans

HPML: Once determined the loan is HPML – the loan requires manual confirmation that the credit score is ≥ 620 and the DTI ratio is ≤ 45% - effective with implementation of DU 9.1

Correspondent DU Refi Plus Product– Standard & High Balance

Page 6 01.06.2014

Contributions to Closing

Costs

Not Applicable.

Down Payment/Gift Rules Not Applicable

Reserves Determined by DU

Down payment Assistance

Programs

Not Applicable.

Non-Occupying Co-

Borrower

Permitted DU does not consider non occupant co borrowers income as qualifying income

Trailing Co-Borrower Not permitted

Foreign Borrower Non residents not permitted

Multiple Properties No Limit to the number of financed properties the borrower has

Anything not specifically addressed here, follow the more restrictive of Fannie Mae or MI guidelines