Base Guidelines

Underwriting

Eligible Transactions

Occupancy

FICO/LTV Matrix

Non-Occupant Co-Borrower(s)

Number of Borrowers

Property Types

Eligible Terms

Qualifying Ratios

High Balance

Streamline Refinances

Cash-out Refinances

Down Payment Assistance

Subordinate Financing

Mortgage Insurance

Escrows

Correspondent Seller Employee

Loan

Loan Amount Limits

Minimum Loan Amount: $125,000

Maximum Loan Amount: Maximum loan limits vary by unit county and by State and County as determined by HUD: https://entp.hud.gov/idapp/html/hicostlook.cfm

The base loan amount (loan amount prior to UFMIP) may not exceed the limits published by HUD.

High Balance loan amounts must utilize a high balance product code.

Tax and Insurance escrows are required on all FHA loans

Fixed: 15 and 30 year; ARM: 3/1 Arm & 5/1 Arm, Margin 2%, Caps 1/1/5, Index based 1 Yr T-Bill (per WSJ)

For Purchase transactions, maximum CLTV is 100% of the Cost to Acquire if the secondary financing is from a Government Agency/HUD-approved Non-Profit considered in instrumentality of goverment. The cost to acquire is defined as

Sales Price + Borrower Paid Closing Costs + Discount Points + Pre-paid Expenses.

Maximum 0x30x12 mortgage history and must score Approve/Eligible

New subordinate financing is not permitted on refinance transactions. Modified and existing subordinate liens are permitted within the max CLTV tolerance noted above. A copy of the subordinating Note, Mortgage/Deed and Subordination

Agreement is also required. See down payment assistance section for subordinating liens on purchase money transactions.

Owner Occupied only. The following documentation is required:

• 2 yrs personal 1040 tax returns

• 2 yrs business tax returns (if applicable)

• 2 yrs W2s & Paystub (current with YTD earnings)

• 2 months bank statements

• AVM / QC tool including validation of value

• Refer to FICO/LTV Matrix for minimum credit score;

• 0x30 mortgage lates in the last 12 months;

• There is no limit to the maximum cash-out permitted;

• Property must be owned for 12 months preceding loan application to use the appraised value. Properties acquired less than 12 months must use the lesser of the appraised value or sales price to qualify.

If the property has been inherited, the appraised value may be used. If the property was acquired via deed transfer that was not part of an inheritance, then the borrower must be seasoned 12 months prior to

cashing out.

See FHA MORTGAGE INSURANCE PREMIUM GRID in SOCC FHA Guidelines

1-4 Family Dwellings, PUD, Townhomes, HUD Approved Condominiums, Manufactured (Must Be A Doublewide).

Non credit qualifying permitted., however, a Verbal Verification of Employment (VVOE) must be completed by the Seller within ten (10) days of Seller’s funding date.

Cash-out is not permitted.

Note: Non-occupant co-borrower may not be an interested party to the sales transactions, such as property seller, builder, or real estate broker

FHA Loan Matrix- Wholesale Updated 04/01/2017

Category FICO/LTV Matrix & Program Details

FHA Total Scorecard/AUS must be run; with the exception of Streamline Refinances (manual underwriting is permitted).

Standard Loan Amounts: Refers and Manual downgrades allowed; all manual underwriting guidelines must be met. (References: ML 2014-02 & http://www.gpo.gov/fdsys/pkg/FR-2013-12-11/pdf/2013-29170.pdf)

High Balance Loan Amounts: AUS Accept Rating required. Refers and manual downgrades not permitted.

The following apply to FHA's base guidelines found in HUD 4155 (http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.1/41551HSGH.pdf)

Purchase, No Cash-out Refinance, Cash-out Refinance and Streamline Refinances permitted.

HUD REO Purchase Transactions:

Owner Occupied transactions only

Title Policy is required

HUD $100 Down REO Purchase Program permitted

HUD Repo with Repair Escrow Eligible. Up to $5,000 in repairs. Must meet all requirements of ML 00-27 and 4155.1 6.A.10.a.

Compensating factors can increase eligibility including liquid assets, term of employment, Residual income (Please Use FHA Residual Income Calculator)

There can be no more than 4 borrowers per loan.

Owner Occupied, Primary Residence only with the exception that Streamline Refinance w/o Appraisal permitted for both owner occupied and non owner occupied transactions.

AUS approved loans max DTI is per AUS. Up to 55% On Rate and Term Above 620 FICO. Sub 620 FICO Max DTI 43% (Regardless of transaction type) Manual underwrites must meet all FHA requirements. (References: ML 2014-02 & http://www.gpo.gov/fdsys/pkg/FR-2013-12-11/pdf/2013-29170.pdf)

SOCC Wholesale 800-278-4281 www.soccwholesale.com

Category Overlay Type

Ineligible Programs

First Time Homebuyers

Maximum # of Financed

Properties

Multiple Mortgages to Same

Borrower

Ineligible Asset Types

Verification of Deposits

Ineligible Property Types

Appraiser Requirements

Condos

Properties Listed for Sale

Deed Restricted Properties

Property Condition

Re-negotiated purchase

agreements

Sales Incentive

Derogatory Credit

Credit Score / History

Credit Inquiries

Paying Down/Off Debt to Qualify

Flip Waiver

• 1031 exchanges are not permitted and are ineligible as an asset type.

• Custodial Accounts for Minors; accounts that are in a minor's name where the borrower is the only custodian of the funds are not eligible for reserves or downpayment

• Pooled Funds

• Mattress MoneyAssets

With the exception of FHA Streamlines, condominiums must be HUD approved and not expired at time of case number issuance: https://entp.hud.gov/idapp/html/condlook.cfm

Note: SOCC will not process a DELRAP.

The maximum allowable sales incentive (commission, finder’s fee, etc.) is limited to 8% of the sales price

All credit inquiries within 120 days of the credit report are required to be addressed by the customer.

• Minimum score requirements are described in the FICO/LTV Matrix above. All borrowers mustmeet minimum credit score.

• Non-traditional credit is not permitted.

Payoff or paydown of debt solely to qualify must be carefully evaluated and considered in the overall loan analysis. The borrower’s history of credit use should be a factor in determining whether the

appropriate approach is to include or exclude debt for qualification.

• Installment debts do not have to be included if they will be paid off within 10 months and they are less than or equal to 5 percent of the borrower’s gross monthly income.

• Revolving debt cannot be paid down to qualify

• For FHA loans the underwriter has discretion upon review the overall loan analysis to determine if a revolving debt is eligible to be paid off to qualify and if so, whether it must be closed prior to or at

closing

Refer to FHA Handbook 4155.1 4.C.2:

• Chapter 7 must be discharged 24 months preceding the application date; Chapter 13 must have been entered at least 12 months preceding the application date and be paid as agreed. Plan must

be paid out and discharged prior to closing; loan proceeds cannot be used to payoff a BK balance.

• Foreclosures must be settled a minimum of 36 months preceding the application date. Time frames for extenuating circumstances allowed per FHA eligibility criteria with supporting documentation

included in file.

Property condition of C5 or C6 are not eligible All repairs affecting safety, livability, or habitability must be completed prior to delivery. With the exception of eligible HUD Repos with Repair Escrow, any

seller controlled completion / repair escrow holdback request must meet all FHA eligibility requirements and be delivered using an established product code for an escrow holdback.

Policy

Additional Policies & Overlays

• Military Impacted Areas

• Section 8 loans

• Texas A6 loans

• Rebuttable Presumption loans are not eligible

• Section 32 loans are not eligible

• Temporary Buydowns are not permitted

• Section 184

• FHA Back To Work

• Extenuating Circumstances• 203k Loans

• Loans to non-profit organizations

• Negative Equity Program

• Indian Reservations

• HOPE for Homeowners

• Construction to Permanent (CTP) Financing where the original note is modified is not eligible

• Dual roles on an FHA transaction are not permitted (An originator cannot have another real estate

related position for any loan)

• Properties with individual water purification systems are not eligible

• Energy Efficient Mortgages (EEM)

All deed restricted properties must be reviewed and receive prior approval from SOCC credit committee

Credit

Not permitted as standalone documentation – must be accompanied by computer printout or other statements directly from the banking institution.

Allowed. Current waiver is valid for sales contracts written by 12/31/14. All FHA requirements must be met as noted in flip waiver located at:

http://portal.hud.gov/hudportal/documents/huddoc?id=waivpropflip2010.pdf

When the seller is an eligible LLC or Corporation, the principals of the LLC/Corp must be identified to insure no identity of interest.

Program

Borrowers are limited to three (3) loans or one million dollars ($1,000,000) total in loans funded/purchased by SOCC. Jumbo loans are excluded from loan amount limit, but still count towards

the aggregate total of loans with SOCC.

R/T Refinance: Must be off the market at least one day prior to application.

Cash Out Refinance: Must be off the market at least six months prior to the application.Collateral

• Properties with manufactured on site being used as storage

• Properties where farm or agricultural income from the subject property is claimed on borrowers tax returns

• Properties encumbered with private transfer fee covenants

• Loans on properties significantly uncommon for the area and lacking comparable sales

• Leasehold Estates

For FHA Financing the borrower may generally only have one FHA loan (Multiple loans to FHA Borrowers not permitted unless eligible per FHA Handbook 4155.1 4.B.2.b).

Allowed

Appraisal must be completed by an FHA Roster appraiser; a copy of the appraiser's license must be included in all funded loan files

The transfer of an FHA appraisal from another lender is permitted; as a standard, an appraisal is only good for 1 closed and funded loan. Re-use of an appraisal from a previously closed transaction is

not permitted.

Generally renegotiated sales contracts are not allowed, however, minor adjustments due to condition or other relevant factors are permitted. Increasing of sales price after the appraisal is completed to

provide seller credit is not permitted.

• Co-ops

• Manufactured/Mobile homes

• Bed and Breakfast Properties

• Hobby Farms

• Live/Work Units

• 2-4 Unit properties in NJ

Category Overlay Type Policy

Additional Policies & Overlays

• Military Impacted Areas

• Section 8 loans

• Texas A6 loans

• Rebuttable Presumption loans are not eligible

• Section 32 loans are not eligible

• Temporary Buydowns are not permitted

• Section 184

• FHA Back To Work

• MCC

• 203K Loans

• Loans to non-profit organizations

• Negative Equity Program

• Indian Reservations

• HOPE for Homeowners

• Construction to Permanent (CTP) Financing where the original note is modified is not eligible

• Dual roles on an FHA transaction are not permitted (An originator cannot have another real estate

related position for any loan)

• Properties with individual water purification systems are not eligible

• Energy Efficient Mortgages (EEM)Program

4506T & Income Validation

Annuity/Retirement/

Distribution Income

Salaried Borrowers

Self Employed Borrowers

Recent Updates /

90 Day Lookback

A fully complete and sign ed 4506T for each borrower is required. Refer to SOCC's Income Validation Policy for details regarding tax transcripts:

• Tax return trans cripts may be required for FHA transactions Where self-employment is evidenced (non credit qualifying Streamline Refinaces are exempt from this requirement).

• Tax return transcripts are required for the years of income being used to qualify the borrower

• Tax return transcripts cannot be used in place of the actual tax return documents for qualification

• Any distribution that is being used to qualify must be established prior to the application date

• Copy of the distribution schedule must be provided

• Copy of at least one month’s distribution check must be provided

• Assets being depleted due to distribution cannot be used for reserves

• A borrower with a 25 percent or greater ownership interest in a business is considered self-employed for FHA mortgage loan underwriting purposes. Two years of personal and business tax returns

with all applicable schedules are required. A Profit and Loss Statement and Balance Sheet are required when the most recent tax return will be older than 120 days on the date of closing. For Accept

transactions, documentation relief on business tax returns is permitted if all AUS conditions are met.

• Business assets are permitted for cash to close and reserves if the borrower is 100% owner of the company and it is determined by the UW that the withdrawal of funds will not impact the borrowers

business. A CPA letter verifying no impact to the business is acceptable; however, if no CPA letter is available the UW will review the tax returns of the business to determine any impact. Any significant

withdrawal should be considered in relation to the overall strength of the borrowers company

TOTAL Scorecard requires the most recent paystub and 30 days YTD earnings for salaried borrowers. If the borrower recently changed jobs, he/she must be employed for at least 30 days with the

current employer and provide 30 days of earnings to be eligible; regardless if the borrower had been previously employed in the same line of work; or if there was no gap between jobs. If the borrower

does not meet this requirement, the loan must be downgraded to a manual underwrite.

Income

12/23/2015 ~ Removed requirement for Net Tangible Benefit Worksheet to apply to all transactions. Please note, that NTB but be documented as required by state law and/or as required by FHA for refinance transactions. • In order to avoid

confusion, "Ineligible Programs" updated to reflect that "Rebuttable presumption" loans are not eligible (previously stated HPML loans ineligible). • Updated payoff of revolving debt to align with FHA requirements. • Reference under High

balance to refer to Credit – Derogatory Credit for additional restrictions for prior Bankruptcy and/or Foreclosure removed. The Derogatory section requires that Correspondent Lenders follow FHA requirements for both standard loan amounts

and high balance loan amounts.