Jumbo Underwriting Guidelines

Jumbo Underwriting

Guidelines

Jumbo Underwriting Guidelines | Table of Contents

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Table of Contents Jumbo AUS_________________________________________________________________________________ 10

Eligibility Matrix _________________________________________________________________________________ 10 Eligibility Requirements ___________________________________________________________________________ 11

Available Products _____________________________________________________________________________________ 11 DTI _________________________________________________________________________________________________ 11 Ineligible Product Types ________________________________________________________________________________ 11 Underwriting _________________________________________________________________________________________ 11 Documentation Requirements ___________________________________________________________________________ 11

Age of Documents __________________________________________________________________________________ 12 Borrowers ___________________________________________________________________________________________ 12

Eligible ___________________________________________________________________________________________ 12 Ineligible __________________________________________________________________________________________ 12

First Time Homebuyers _________________________________________________________________________________ 12 Multiple Properties Financed/Owned ______________________________________________________________________ 13 Rate/Term Refinance Transactions ________________________________________________________________________ 13 Cash Out Refinance Transactions _________________________________________________________________________ 13

Texas 50(a)(6) ______________________________________________________________________________________ 13 LTV/CLTV/HCLTV Calculation for Refinance Transactions _______________________________________________________ 14 Continuity of Obligation ________________________________________________________________________________ 15 Delayed Financing Refinances ____________________________________________________________________________ 15 Construction to Permanent Financing______________________________________________________________________ 15 Non-Arm’s Length Transactions __________________________________________________________________________ 16 Secondary/Subordinate Financing ________________________________________________________________________ 16

Downpayment / Closing Cost Assistance _________________________________________________________________ 16 Credit Requirements _____________________________________________________________________________ 17

Significant Derogatory Credit ____________________________________________________________________________ 17 Forbearance _______________________________________________________________________________________ 18

Housing History _______________________________________________________________________________________ 19 Credit Report _________________________________________________________________________________________ 19

Disputed Tradelines _________________________________________________________________________________ 19 Frozen Credit ______________________________________________________________________________________ 19

Minimum Credit Requirements ___________________________________________________________________________ 19 Credit Score Requirements ______________________________________________________________________________ 19 Debts and Liabilities ___________________________________________________________________________________ 20

HELOC on Subject ___________________________________________________________________________________ 20 Tax Liens and Payment Plans __________________________________________________________________________ 20

Lawsuit/Pending Litigation ______________________________________________________________________________ 20 Income/Employment Requirements ________________________________________________________________ 20

Employment and Income Stability ________________________________________________________________________ 20 Declining Income ___________________________________________________________________________________ 20

General Documentation Requirements ____________________________________________________________________ 21 Salaried Borrowers ____________________________________________________________________________________ 21

Commission/Bonus Income ___________________________________________________________________________ 21 Self-Employment ______________________________________________________________________________________ 22

Documentation Requirements _________________________________________________________________________ 22 Retirement Income (Pension, Annuity, 401(k), IRA Distributions) ________________________________________________ 23 Trust Income _________________________________________________________________________________________ 23 Restricted Stock and Stock Options________________________________________________________________________ 23 Asset Depletion _______________________________________________________________________________________ 24 Unacceptable Income Sources ___________________________________________________________________________ 26

Asset Requirements ______________________________________________________________________________ 27 Gift Funds ___________________________________________________________________________________________ 27 Business Funds _______________________________________________________________________________________ 27 Retirement Accounts ___________________________________________________________________________________ 27 Reserves ____________________________________________________________________________________________ 28


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Collateral Requirements __________________________________________________________________________ 29 Eligible Collateral ______________________________________________________________________________________ 29 Ineligible Collateral ____________________________________________________________________________________ 29 Appraisal Requirements ________________________________________________________________________________ 30 Properties Located in a Disaster Area ______________________________________________________________________ 31

Re-Inspection Requirements __________________________________________________________________________ 31 Loans with Appraisals ________________________________________________________________________________ 31

Jumbo Choice ______________________________________________________________________________ 32

Eligibility Requirements ___________________________________________________________________________ 32 Eligible Products ______________________________________________________________________________________ 32 Qualifying Rate _______________________________________________________________________________________ 32 ARM Specifics ________________________________________________________________________________________ 32

Interest Rate Adjustment Caps _________________________________________________________________________ 32 Index _____________________________________________________________________________________________ 32 Margin ___________________________________________________________________________________________ 32 Interest Rate Floor __________________________________________________________________________________ 32 Conversion Option __________________________________________________________________________________ 32 Assumption Feature _________________________________________________________________________________ 32

Ineligible Products _____________________________________________________________________________________ 33 Documentation Requirements ___________________________________________________________________________ 33 Occupancy ___________________________________________________________________________________________ 34 Maximum DTI ________________________________________________________________________________________ 34 LTV/CLTV/HCLTV ______________________________________________________________________________________ 34 Borrowers ___________________________________________________________________________________________ 36


Multiple Properties Financed ____________________________________________________________________________ 39 Properties Listed for Sale _______________________________________________________________________________ 39 Rate/Term Refinance Restrictions _________________________________________________________________________ 40

Texas 50(f)(2) Refinances _____________________________________________________________________________ 40 Cash Out Refinance Restrictions __________________________________________________________________________ 41

Texas 50(a)(6) Refinances _____________________________________________________________________________ 41 Continuity of Obligation ________________________________________________________________________________ 43 Delayed Purchase Refinances ____________________________________________________________________________ 43 LTV/CLTV/HCLTV Calculation for Refinances_________________________________________________________________ 44 Construction to Permanent Refinance Restrictions ___________________________________________________________ 44 Non-Arm’s Length Transactions __________________________________________________________________________ 45 Secondary / Subordinate Financing________________________________________________________________________ 45

Credit Requirements _____________________________________________________________________________ 46 Derogatory Credit _____________________________________________________________________________________ 46

Past Mortgage Forbearances __________________________________________________________________________ 47 Exceptions for Derogatory Credit _______________________________________________________________________ 47

Outstanding Judgments/ Tax Liens/Charge-Offs/Past-Due Accounts ______________________________________________ 47 Housing Payment History _______________________________________________________________________________ 47

Mortgage History Requirements _______________________________________________________________________ 47 Rental History Requirements __________________________________________________________________________ 48

Credit Report _________________________________________________________________________________________ 48 Age of Credit Report _________________________________________________________________________________ 48 “Frozen” Credit Reports ______________________________________________________________________________ 48 Tradeline Requirements ______________________________________________________________________________ 48 Credit Score Requirements ____________________________________________________________________________ 48 Disputed Tradelines _________________________________________________________________________________ 49 Inquiries __________________________________________________________________________________________ 49 Student Loans ______________________________________________________________________________________ 49 Liability Requirements _______________________________________________________________________________ 49

Departure Residence ___________________________________________________________________________________ 50


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Departure Residence Pending Sale ______________________________________________________________________ 50 Departure Residence Subject to Guaranteed Buy-out with Corporation Relocation ________________________________ 50

Co-Signed Loans ______________________________________________________________________________________ 50 Court Order __________________________________________________________________________________________ 50 Assumption with No Release of Liability ____________________________________________________________________ 50 Tax Liability __________________________________________________________________________________________ 51 Loans Secured by Financial Assets ________________________________________________________________________ 51

Income/Employment Requirements ________________________________________________________________ 51 Declining Income ______________________________________________________________________________________ 51 Gaps in Employment ___________________________________________________________________________________ 52 Residual Income ______________________________________________________________________________________ 52 Paystub Requirements _________________________________________________________________________________ 52 W2 Requirements _____________________________________________________________________________________ 52 Verification of Employment Requirements __________________________________________________________________ 53 Tax Return Requirements _______________________________________________________________________________ 53

Unfiled Tax Returns _________________________________________________________________________________ 54 Taxpayer Identification Theft __________________________________________________________________________ 55

Specific Income Documentation Requirements ______________________________________________________________ 55 Salaried Income ____________________________________________________________________________________ 55 Hourly and Part-Time Income__________________________________________________________________________ 55 Commission Income _________________________________________________________________________________ 55 Overtime and Bonus Income __________________________________________________________________________ 55 2106 Expenses _____________________________________________________________________________________ 56 Alimony/Child Support/Separate Maintenance ____________________________________________________________ 56 Asset Depletion_____________________________________________________________________________________ 56 Borrowers Employed by Family ________________________________________________________________________ 56 Capital Gains _______________________________________________________________________________________ 56 Disability Income (Long-Term) _________________________________________________________________________ 57 Dividends and Interest Income _________________________________________________________________________ 57 Foreign Income _____________________________________________________________________________________ 57 K1 Income/Loss on Schedule E _________________________________________________________________________ 57 Non-Taxable Income _________________________________________________________________________________ 57 Note Income _______________________________________________________________________________________ 57 Rental Income ______________________________________________________________________________________ 58 Restricted Stock and Stock Options _____________________________________________________________________ 59 Retirement Income Sources ___________________________________________________________________________ 59 Trust Income _______________________________________________________________________________________ 60

Self-Employed Income Sources ___________________________________________________________________________ 60 Sole Proprietorship __________________________________________________________________________________ 61 Partnership/S-Corporation ____________________________________________________________________________ 61 Corporation________________________________________________________________________________________ 61

Unacceptable Income Sources ___________________________________________________________________________ 62 Asset Requirements ______________________________________________________________________________ 62

Documentation Requirements ___________________________________________________________________________ 62 Checking and Savings Accounts, Money Markets, CDs _________________________________________________________ 62 Publicly Traded Stocks/Bonds/Mutual Funds ________________________________________________________________ 63 Retirement Accounts (401(k), IRAs, etc) ____________________________________________________________________ 63 Cash Value of Life Insurance/Annuities _____________________________________________________________________ 63 1031 Exchange________________________________________________________________________________________ 63 Business Funds _______________________________________________________________________________________ 64 Gift Funds ___________________________________________________________________________________________ 64 Reserve Requirements _________________________________________________________________________________ 65 Financing Concessions __________________________________________________________________________________ 66 Seller Concessions _____________________________________________________________________________________ 66

Personal Property ___________________________________________________________________________________ 66 Collateral Requirements __________________________________________________________________________ 67

Appraisal Requirements ________________________________________________________________________________ 67 Appraisal Requirements by Loan Amount ________________________________________________________________ 68


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Eligible Collateral ______________________________________________________________________________________ 68 Ineligible Collateral ____________________________________________________________________________________ 69

General Provisions _______________________________________________________________________________ 70 FEMA Declared Disaster Area Policy _______________________________________________________________________ 70

Effective Date of Disaster Policy ________________________________________________________________________ 70 Appraisal and Re-Inspection Requirements _______________________________________________________________ 70 Appraisal Performed On or Before Disaster Incident End Date ________________________________________________ 70 Standard Appraisal Performed After Incident Period End Date for Disaster ______________________________________ 71

Power of Attorney _____________________________________________________________________________________ 71 Requirements ______________________________________________________________________________________ 71 Restrictions on the Use of a Power of Attorney ____________________________________________________________ 71

Title Requirements ____________________________________________________________________________________ 71

Jumbo Max ________________________________________________________________________________ 72

Eligibility Requirements ___________________________________________________________________________ 72 Available Products _____________________________________________________________________________________ 72 Qualifying Rate _______________________________________________________________________________________ 72 Documentation Requirements ___________________________________________________________________________ 72 Occupancy ___________________________________________________________________________________________ 72

Primary Residence __________________________________________________________________________________ 72 Second Home ______________________________________________________________________________________ 72 Investment Property (Non-Owner Occupied)______________________________________________________________ 73

LTV/CLTV/HCLTV ______________________________________________________________________________________ 73 Borrowers ___________________________________________________________________________________________ 75


Multiple Properties Financed ____________________________________________________________________________ 76 Purchases ___________________________________________________________________________________________ 77 Rate/Term Refinance Restrictions _________________________________________________________________________ 77 Cash Out Refinance Restrictions __________________________________________________________________________ 78 Continuity of Obligation ________________________________________________________________________________ 78 Delayed Financing Refinances ____________________________________________________________________________ 78 Land Contract /Contract for Deed ________________________________________________________________________ 79 Construction Loan Refinancing ___________________________________________________________________________ 79 Non-Arm’s Length Transactions __________________________________________________________________________ 79 Secondary / Subordinate Financing________________________________________________________________________ 80

Credit Requirements _____________________________________________________________________________ 80 Bankruptcy/Foreclosure/Deed-in-Lieu/Short Sale ____________________________________________________________ 80 Modifications_________________________________________________________________________________________ 80 Judgments/Liens/Collections ____________________________________________________________________________ 81 Mortgage/Rental History________________________________________________________________________________ 81 Inquiries _____________________________________________________________________________________________ 81 Credit Report _________________________________________________________________________________________ 82

Minimum Credit Requirements ________________________________________________________________________ 82 Credit Score Requirements ____________________________________________________________________________ 82

Debts and Liabilities ___________________________________________________________________________________ 83 Debt-to-Income Ratio ________________________________________________________________________________ 83 Installment Debt ____________________________________________________________________________________ 83 Revolving Debt _____________________________________________________________________________________ 84 Home Equity Line of Credit (HELOC) _____________________________________________________________________ 84

Income/Employment Requirements ________________________________________________________________ 84 Employment and Income Stability ________________________________________________________________________ 85 Tax Transcript Requirements ____________________________________________________________________________ 85 Income Documentation Requirements _____________________________________________________________________ 85

Salaried Borrowers __________________________________________________________________________________ 85 Self-Employed Borrowers _____________________________________________________________________________ 86


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Rental Income ______________________________________________________________________________________ 88 Alimony/Child Support Income ________________________________________________________________________ 89 Non-Taxable Income _________________________________________________________________________________ 89 Retirement or Pension Income _________________________________________________________________________ 89 Social Security Income _______________________________________________________________________________ 89 Foreign Income _____________________________________________________________________________________ 90

Unacceptable Income Sources ___________________________________________________________________________ 90 Asset Requirements ______________________________________________________________________________ 90

Source of Funds _______________________________________________________________________________________ 90 Cash Reserves ________________________________________________________________________________________ 91 Interested Party Contributions ___________________________________________________________________________ 91

Collateral Requirements __________________________________________________________________________ 92 Appraisal Requirements ________________________________________________________________________________ 92 Third Party Appraisal Review_____________________________________________________________________________ 92 Eligible Collateral ______________________________________________________________________________________ 92 Ineligible Collateral ____________________________________________________________________________________ 93 Declining Markets _____________________________________________________________________________________ 93 Land-to-Value ________________________________________________________________________________________ 93 Properties Located in a Disaster Area ______________________________________________________________________ 94

General Provisions _______________________________________________________________________________ 94 Title Requirements ____________________________________________________________________________________ 94

Chain of Title _______________________________________________________________________________________ 94 Hazard Insurance ______________________________________________________________________________________ 94 HERO/PACE/Solar Panels________________________________________________________________________________ 95 Escrow Accounts ______________________________________________________________________________________ 95

Jumbo Select _______________________________________________________________________________ 96

Eligibility Requirements ___________________________________________________________________________ 96 Eligible Products ______________________________________________________________________________________ 96 Qualifying Rate _______________________________________________________________________________________ 96 ARM Specifics ________________________________________________________________________________________ 96

Interest Rate Adjustment Caps _________________________________________________________________________ 96 Index _____________________________________________________________________________________________ 96 Margin ___________________________________________________________________________________________ 96 Interest Rate Floor __________________________________________________________________________________ 96 Conversion Option __________________________________________________________________________________ 96 Assumption Feature _________________________________________________________________________________ 96

Ineligible Products _____________________________________________________________________________________ 97 Documentation Requirements ___________________________________________________________________________ 97 Occupancy ___________________________________________________________________________________________ 98 Maximum DTI ________________________________________________________________________________________ 98 LTV/CLTV/HCLTV ______________________________________________________________________________________ 99 Borrowers __________________________________________________________________________________________ 100

Eligible __________________________________________________________________________________________ 100 Ineligible _________________________________________________________________________________________ 102

Multiple Financed Properties ___________________________________________________________________________ 102 Properties Listed for Sale ______________________________________________________________________________ 103 Rate/Term Refinance Restrictions ________________________________________________________________________ 103

Texas 50(f)(2) Refinances ____________________________________________________________________________ 103 Cash Out Refinance Restrictions _________________________________________________________________________ 104

Texas 50(a)(6) Refinances ____________________________________________________________________________ 104 Continuity of Obligation _______________________________________________________________________________ 106 Delayed Purchase Refinances ___________________________________________________________________________ 106 LTV/CLTV/HCLTV Calculation for Refinances________________________________________________________________ 107 Construction to Permanent Refinance Restrictions __________________________________________________________ 107 Non-Arm’s Length Transactions _________________________________________________________________________ 108


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Secondary / Subordinate Financing_______________________________________________________________________ 109 Credit Requirements ____________________________________________________________________________ 110

Derogatory Credit ____________________________________________________________________________________ 110 Past Mortgage Forbearances _________________________________________________________________________ 110 Exceptions for Derogatory Credit ______________________________________________________________________ 110

Outstanding Judgments/ Tax Liens/Charge-Offs/Past-Due Accounts _____________________________________________ 111 Housing Payment History ______________________________________________________________________________ 111

Mortgage History Requirements ______________________________________________________________________ 111 Rental History Requirements _________________________________________________________________________ 111

Credit Report ________________________________________________________________________________________ 111 Age of Credit Report ________________________________________________________________________________ 111 “Frozen” Credit Reports _____________________________________________________________________________ 111 Tradeline Requirements _____________________________________________________________________________ 112 Disputed Tradelines ________________________________________________________________________________ 112 Inquiries _________________________________________________________________________________________ 112 Student Loans _____________________________________________________________________________________ 112 Liability Requirements ______________________________________________________________________________ 113

Departure Residence __________________________________________________________________________________ 113 Departure Residence Pending Sale _____________________________________________________________________ 113 Departure Residence Subject to Guaranteed Buy-out with Corporation Relocation _______________________________ 113

Co-Signed Loans _____________________________________________________________________________________ 113 Court Order _________________________________________________________________________________________ 114 Assumption with No Release of Liability ___________________________________________________________________ 114 Tax Liability _________________________________________________________________________________________ 114 Loans Secured by Financial Assets _______________________________________________________________________ 114

Income/Employment Requirements _______________________________________________________________ 115 Declining Income _____________________________________________________________________________________ 115 Gaps in Employment __________________________________________________________________________________ 115 Residual Income Requirement __________________________________________________________________________ 116 Paystub Requirements ________________________________________________________________________________ 116 W2 Requirements ____________________________________________________________________________________ 116 Verification of Employment Requirements _________________________________________________________________ 116 Tax Return Requirements ______________________________________________________________________________ 117

Unfiled Tax Returns ________________________________________________________________________________ 118 Taxpayer Identification Theft _________________________________________________________________________ 118

Specific Income Documentation Requirements _____________________________________________________________ 119 Salaried Income ___________________________________________________________________________________ 119 Hourly and Part-Time Income_________________________________________________________________________ 119 Commission Income ________________________________________________________________________________ 119 Overtime and Bonus Income _________________________________________________________________________ 119 2106 Expenses ____________________________________________________________________________________ 119 Alimony/Child Support/Separate Maintenance ___________________________________________________________ 119 Asset Depletion____________________________________________________________________________________ 120 Borrowers Employed by Family _______________________________________________________________________ 120 Capital Gains ______________________________________________________________________________________ 120 Disability Income (Long-Term) ________________________________________________________________________ 120 Dividends and Interest Income ________________________________________________________________________ 120 Foreign Income ____________________________________________________________________________________ 120 K1 Income/Loss on Schedule E ________________________________________________________________________ 121 Non-Taxable Income ________________________________________________________________________________ 121 Note Income ______________________________________________________________________________________ 121 Rental Income _____________________________________________________________________________________ 122 Restricted Stock and Stock Options ____________________________________________________________________ 123 Retirement Income Sources __________________________________________________________________________ 123 Trust Income ______________________________________________________________________________________ 124

Self-Employed Income Sources __________________________________________________________________________ 124 Sole Proprietorship _________________________________________________________________________________ 125 Partnership/S-Corporation ___________________________________________________________________________ 125


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Corporation_______________________________________________________________________________________ 125 Unacceptable Income Sources __________________________________________________________________________ 126

Asset Requirements _____________________________________________________________________________ 126 Documentation Requirements __________________________________________________________________________ 126 Checking and Savings Accounts, Money Markets, CDs ________________________________________________________ 126 Publicly Traded Stocks/Bonds/Mutual Funds _______________________________________________________________ 127 Retirement Accounts (401(k), IRAs, etc) ___________________________________________________________________ 127 Cash Value of Life Insurance/Annuities ____________________________________________________________________ 127 1031 Exchange_______________________________________________________________________________________ 127 Business Funds ______________________________________________________________________________________ 128 Gift Funds __________________________________________________________________________________________ 128 Reserve Requirements ________________________________________________________________________________ 129 Financing Concessions _________________________________________________________________________________ 130 Seller Concessions ____________________________________________________________________________________ 130

Personal Property __________________________________________________________________________________ 130 Collateral Requirements _________________________________________________________________________ 131

Appraisal Requirements _______________________________________________________________________________ 131 Appraisal Requirements by Loan Amount _______________________________________________________________ 132

Eligible Collateral _____________________________________________________________________________________ 132 Ineligible Collateral ___________________________________________________________________________________ 133

General Provisions ______________________________________________________________________________ 134 FEMA Declared Disaster Area Policy ______________________________________________________________________ 134

Effective Date of Disaster Policy _______________________________________________________________________ 134 Appraisal and Re-Inspection Requirements ______________________________________________________________ 134 Appraisal Performed On or Before Disaster Incident End Date _______________________________________________ 134 Standard Appraisal Performed After Incident Period End Date for Disaster _____________________________________ 135

Power of Attorney ____________________________________________________________________________________ 135 Requirements _____________________________________________________________________________________ 135 Restrictions on the Use of a Power of Attorney ___________________________________________________________ 135

Title Requirements ___________________________________________________________________________________ 135

Jumbo Select 90 ___________________________________________________________________________ 136

Eligibility Matrix ________________________________________________________________________________ 136 Eligible Products ________________________________________________________________________________ 136 Documentation Requirements ____________________________________________________________________ 136 Occupancy ____________________________________________________________________________________ 137 Maximum DTI __________________________________________________________________________________ 137 Borrowers _____________________________________________________________________________________ 137

Eligible _____________________________________________________________________________________________ 137 Ineligible ___________________________________________________________________________________________ 137

Multiple Financed Properties _____________________________________________________________________ 138 Properties Listed for Sale_________________________________________________________________________ 138 Credit_________________________________________________________________________________________ 138

Derogatory Credit ____________________________________________________________________________________ 138 Income/Employment ____________________________________________________________________________ 139

Gaps in Employment __________________________________________________________________________________ 139 Residual Income Requirement __________________________________________________________________________ 139 Rental Income _______________________________________________________________________________________ 139

All Properties (Except Departing Primary Residence)_______________________________________________________ 139 Departing Residence ________________________________________________________________________________ 140

Assets ________________________________________________________________________________________ 141 Gift Funds __________________________________________________________________________________________ 141 Reserve Requirements ________________________________________________________________________________ 141

Collateral______________________________________________________________________________________ 142 Eligible Collateral _____________________________________________________________________________________ 142


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Ineligible Collateral ___________________________________________________________________________________ 142 Appraisal Requirements by Transaction Type _______________________________________________________________ 142

Jumbo Underwriting Guidelines | Jumbo AUS

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Jumbo AUS

The Jumbo AUS program allows for documentation requirements per DU findings / FNMA guidelines, except in limited circumstances, such as investment properties and/or when self-employment income is used to qualify.

Eligibility Matrix Primary Residence | Purchase and Rate/Term Refinance

Transaction Type Units FICO Maximum

LTV/CLTV/HCLTV Maximum

Loan Amount1

Purchase or Rate/Term Refinance

1

740 89.99%2,3 $1,500,000

720 85%2,3 $1,500,000

700 80%2 $1,500,000

720 75%2 $2,000,000 720 70% $2,500,000

680 60% $1,000,000

2-4 700 65% $1,000,000 720 60% $1,500,000

Primary Residence | Cash Out Refinance



Loan Amount

Cash Out Refinance

1

700 75% $1,000,000

720 70% $1,500,000

720 60% $2,000,000 720 50% $2,500,000

2 700 60% $1,000,000

Second Home | Purchase and Rate/Term Refinance



Loan Amount

Purchase 1 720 80%2 $1,000,000


1 720

75%2 $1,000,000 70% $1,500,000

65% $2,000,000

50% $2,500,000

Second Home | Cash Out Refinance



Loan Amount

Cash Out Refinance

1 740 60% $1,500,000 1 740 50% $2,000,000

Investment | Purchase and Rate/Term Refinance



Loan Amount Purchase 1-4 740 70% $1,500,000

Rate/Term Refinance 1-4 740 70% $1,500,000


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1First Time Homebuyer (FTHB) maximum loan amount is $1,500,000 2Self-Employment Income: Minimum 720 FICO when any self-employment income is required for qualifying purposes. If the self-employment income is not needed to qualify, then the 720 FICO minimum is not applicable. 3The following requirements apply for transactions with LTVs greater than 80%:

• MI not required • Escrow/impound accounts required for LTVs > 80% unless prohibited by applicable law • Self-employed borrowers not allowed. If the self-employed income is not needed for qualifying purposes, then the

restriction is not applicable

Eligibility Requirements

Available Products 20, 25, 30 year fixed

DTI • LTVs ≤ 80% = 45%

• LTVs > 80% = 36%

Ineligible Product Types • Higher Priced Mortgage Loans (HPMLs)

• Non-Standard to Standard Refinance Transactions (ATR Exempt)

• Higher-Priced Covered Transactions (HPCT QM-Rebuttable Presumption)

• Balloons

• Graduated Payments

• Interest Only Products

• Temporary Buydowns

• Loans with Prepayment Penalties

• Adjustable Rate Terms

Underwriting All loans must have a Fannie Mae Approve/Ineligible (ineligible due to loan amount or maximum cash -out on a rate/term refinance transaction) included in the loan file. The final data submitted to DU must match the closed loan. Manual underwrite is not permitted.

Documentation Requirements DU findings may be followed to document a number of items. The Jumbo AUS Documentation Matrix is a good resource for knowing when additional documentation requirements apply. All documentation requirements detailed in this guide are to be followed in the event of a discrepancy.

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NOTE: Minimum loan amount $548,251 for 1 unit properties, and $1 above the conforming loan limits for 2-4 unit properties.

https://wholesale.mimutual.com/forms/Matrices/MiMutual%20Jumbo%20AUS%20Documentation%20Matrix.pdf


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Age of Documents

• All credit documents, including title commitment must be no older than ninety (90) days from the Note date o FNMA age of documentation guidance applies for loans locked on/after September 9, 2021

• Self-employment age of docs for YTD Profit and Loss must be no older than ninety (90) days from the Note date

Borrowers

Eligible

• US Citizens

• Permanent Resident Aliens with evidence of lawful residency o Must be employed in the US for the past twenty-four (24) months o Legal residency may be documented with one of the following:

▪ A valid and current Permanent Resident Alien card (Form I-551), also known as a green card ▪ A passport stamped “Processed for I-551, temporary evidence of lawful admission for

permanent residence. Valid until _________. Employment authorized”. This evidences the holder has been approved for, but not issued, a Permanent Resident Alien card.

• Non-Permanent Resident Aliens with evidence of lawful residency are eligible with the following restrictions: o Primary Residence Only o Maximum LTV/CLTV/HCLTV 75% o Unexpired H1B, H2B, E1, L1, and G Series Visas issued by the USCIC only

▪ G Series Visas must have no diplomatic immunity ▪ Visa must allow the non-permanent resident alien to work and live in the United States

o Borrower must have a current twenty-four (24) month employment history in the US

• Illinois Land Trust

• Inter Vivos Revocable Trust

• All borrowers must have a valid Social Security Number

• Non-Occupant Borrower – Follow Fannie Mae requirements with exception of non-occupant relationship who must be a related family member of the borrower(s)

Ineligible

• Foreign Nationals

• Borrowers with Diplomatic Immunity status

• Life Estates

• Non-Revocable Trusts

• Guardianships

• LLCs, Corporations or Partnerships

• Land Trusts, except for Illinois Land Trust

• Borrowers with any ownership in a business that is Federally illegal, regardless if the income is not being considered for qualifying

First Time Homebuyers • Maximum loan amount is $1,500,000

• Not allowed on investment property transactions

• See Reserve section for additional requirements


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Multiple Properties Financed/Owned • Maximum number of financed properties – follow Fannie Mae requirements

• All financed 1-4 unit residential properties require an additional six (6) months reserves for each property, unless the exclusions below apply

• 1-4 unit residential financed properties held in the name of an LLC or other corporation can be excluded from the number of financed properties only when the borrower is not personally obligated for the mortgage

• Ownership of commercial or multifamily (five (5) or more units) real estate is not included in this limitation

Rate/Term Refinance Transactions The new loan amount is limited to pay off the current first lien mortgage, any seasoned non-first lien mortgages, closing costs and prepaid items

• If the first mortgage is a HELOC, evidence it was a purchase money HELOC or it is a seasoned HELOC that has been in place for twelve (12) months and total draws do not exceed $2,000 in the most recent twelve (12) months

• A seasoned non-first lien mortgage is a purchase money mortgage or a mortgage that has been in place

for twelve (12) months

• A seasoned equity line is defined as not having draws totaling over $2,000 in the most recent twelve (12) months. Withdrawal activity must be documented with a transaction history

• Max cash back at closing is limited to 1% of the new loan amount

Cash Out Refinance Transactions Investment properties are ineligible.

Texas 50(a)(6)

• Eligible property types include single-unit principal residences designated as the borrower’s

homestead under Texas law. Eligible property types are limited to an attached or detached dwelling, a unit in a PUD project, or a unit in a condominium project. Owner occupied primary residences only. Documented proof of Homestead Designation is required.

• The owner of the homestead and their spouse must consent to the extension of credit by executing the Deed of Trust. A non-borrowing spouse, regardless of their ownership interest in the homestead property, has the right to cancel. Either the federal “Notice of Right to Cancel” or a Texas specific “Notice of Right to Cancel” is required.

• To determine current value, MiMutual must obtain a new full appraisal on either a Uniform Residential Appraisal Report, or Individual Condominium Unit Appraisal Report. The appraisal for the property and the Acknowledgment of Fair Market Value must not include any property other than the homestead.

• Survey (or other acceptable evidence) is required and must demonstrate that: o Homestead property and any adjacent land are separate parcels, and o Homestead property is a separately platted and subdivided lot for which full ingress and egress

is available.

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• Additional Restrictions and Requirements: o Fees and charges to make the Mortgage Loan may not exceed 2% of the Mortgage Loan amount.

The following fees and charges can be excluded from the testing: ▪ Bona Fide Discounts to lower the rate selected ▪ Appraisal Fee ▪ Survey Fee ▪ Lender’s Title Policy

o The Borrower’s first payment must be due no later than two (2) months after closing. o The lender must provide the title company with a detailed closing instruction letter and require

acknowledgement of its receipt. o If this Mortgage Loan is being used to pay off a previous Texas Equity Loan, the Mortgage Loan

may not close before twelve (12) months have passed from the closing date of the Texas Equity Loan being paid off. (See Section D.3 for additional information)

o If the new Mortgage Loan is a Texas Equity Loan originated to cure a failure in the original mortgage to comply with Section 50(a)(6), then the Texas law requirement that at least twelve (12) months have passed since any previous Texas Home Equity loan secured by a homestead property was closed does not apply.

o The Mortgage Loan may not close before twelve (12) days after the Mortgage Loan application was taken by the lender or the Borrower receives the “NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION” disclosure, whichever date is later AND may not close, without the Borrower’s consent, one (1) business day after the date on which the Borrower receives a copy of the Mortgage Loan application, if not previously provided, and a final itemized disclosure of the actual fees, points, interest, costs and charges that will be charged at closing.

o The Mortgage Loan may only close at the office of the lender, title company or an attorney at law.

o Power of Attorney may not be used on a Texas Equity Loan. o The use of FNMA approved Texas Equity legal documents (Note, Deed, Riders, etc.) is required. o If the new refinance Mortgage Loan is classified under Texas law as a Texas 50(a)(6), the loan

must be locked as a cash out refinance

LTV/CLTV/HCLTV Calculation for Refinance Transactions • If subject property is owned more than twelve (12) months, the LTV/CLTV/HCLTV is based on the current

appraised value. The twelve (12) month time frame may be based on subject transaction Note date

• If subject property is owned less than twelve (12) months, the LTV/CLTV/HCLTV is based on the lesser of the original purchase price plus documented improvements made after the purchase of the property, or the appraised value. Documented improvements must be supported with receipts. The twelve (12) month time frame may be based on subject transaction Note date

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Continuity of Obligation When at least one (1) borrower on the existing mortgage is also a borrower on the new refinance transaction, continuity of obligation requirements have been met. If continuity of obligation is not met, the following permissible exceptions are allowed for the new refinance to be eligible:

• The borrower has been on title for at least twelve (12) months but is not obligated on the existing mortgage that is being refinanced and the borrower meets the following requirements: o Has been making the mortgage payments (including any secondary financing) for the most recent

twelve (12) months, or o Is related to the borrower on the mortgage being refinanced

• The borrower on the new refinance transaction was added to title twenty- four (24) months or more prior to the disbursement date of the new refinance transaction

• The borrower on the refinance inherited or was legally awarded the property by a court in the case of divorce, separation or dissolution of a domestic partnership

• The borrower on the new refinance transaction has been added to title through a transfer from a trust, LLC or partnership. The following requirements apply: o Borrower must have been a beneficiary/creator (trust) or 25% or more owner of the LLC or

partnership prior to the transfer o The transferring entity and/or borrower has had a consecutive ownership (on title) for at least the

most recent six (6) months prior to the disbursement of the new loan

Delayed Financing Refinances • Follow Fannie Mae requirements

• LTV/CLTV/HCLTV for rate and term refinances must be met. The loan is treated as a rate/term refinance except for primary residence transactions in Texas, which do not allow for delayed financing

Construction to Permanent Financing The borrower must hold title to the lot which may have been previously acquired or purchased as part of the transaction.

• LTV/CLTV/HCLTV is determined based on the length of time the borrower has owned the lot. The time frame is defined as the date the lot was purchased to the Note date of the subject transaction

• For lots owned twelve (12) months or more, the appraised value can be used to calculate the LTV/CLTV/HCLTV

• For lots owned less than twelve (12) months, the LTV/CLTV/HCLTV is based on the lesser of the current appraised value of the property or the total acquisition costs (documented construction costs plus documented purchase price of lot)

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NOTE: Transfer of ownership from a corporation to an individual does not meet the continuity of obligation requirement.


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Non-Arm’s Length Transactions A non-arm’s length transaction exists whenever there is a personal or business relationship with any parties to the transaction which may include the seller, builder, real estate agent, appraiser, lender, title company or other interested party. The following non-arm’s length transactions are eligible:

• Family sales or transfers

• Property seller acting as their own real estate agent

• Relative of the property seller acting as the seller’s real estate agent

• Borrower acting as their own real estate agent

• Relative of the borrower acting as the borrower’s real estate agent

• Borrower is the employee of the originating lender and the lender has an established employee loan program. Evidence of employee program to be included in loan file

• Originator is related to the borrower

• Borrower purchasing from their landlord (cancelled checks or bank statements required to verify

satisfactory pay history between borrower and landlord)

Gifts from relatives that are interested parties to the transaction are not allowed, unless it is a gift of equity. Real estate agents may apply their commission towards closing costs and/or prepaids if the amounts are within the interested party contribution limitations. Investment property transactions must be arm’s length.

Secondary/Subordinate Financing Allowed up to maximum CLTV per matrix. Secondary financing term must conform to FNMA guidelines.

Downpayment / Closing Cost Assistance Downpayment and closing cost assistance subordinate financing is not permitted.

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Credit Requirements

Significant Derogatory Credit • Bankruptcy, Chapter 7, 11, 13: seven (7) years since discharge / dismissal date

• Foreclosure: seven (7) years since completion date

• Notice of Default: seven (7) years

• Short Sale/Deed-in-Lieu: seven (7) years since completion / sale date

• Forbearance Resulting in Subsequent Loan Modification: seven (7) years since exit from forbearance (see below Forbearance section for additional requirements)

• Mortgage accounts that were settled for less, negotiated or short payoffs: seven (7) years since settlement date

• Loan modifications:

o Lender initiated modification will not be considered a derogatory credit event if the modification did not include debt forgiveness and was not due to hardship as evidenced by supporting documentation. No seasoning requirement would apply

o If the modification was due to hardship or included debt forgiveness – seven (7) years since modification

• Multiple derogatory credit events not allowed, regardless if seasoned over seven (7) years

o A mortgage with a Notice of Default filed that is subsequently modified is not considered a multiple event

o A mortgage with a Notice of Default filed that is subsequently foreclosed upon or sold as a short sale is not considered a multiple event

• Tax liens, judgments, charge-offs, and past-due accounts must be satisfied or brought current prior to or at closing o Cash-Out proceeds from the subject transaction may not be used to satisfy judgments, tax liens,

charge-offs or past-due accounts o Payment plans on prior year tax liens/liabilities are not allowed; they must be paid in full

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10.04.2021 18

Forbearance Any loans that are shown to be in active or previous forbearance but where the borrower continued to make regularly scheduled payments and has made at least one (1) regularly scheduled payment since forbearance inception date are eligible.

• All payments must have been made within the month due

• The forbearance plan must be terminated at or prior to closing and the loan file must contain documentation that the forbearance is no longer active (i.e. removal letter from servicer, etc.).

Any loans (including but not limited to the subject mortgage) where a mortgage reflects reduced or missed payments under a forbearance and borrower has accepted a payment deferral, initiated a repayment plan or has reinstated the mortgage to return to a current status must meet the requirements below:

• Purchase & Rate/Term Refinance: o Three (3) consecutive months of required payments since completed forbearance plan o All payments must have been made within the month due

• Cash-out Refinance: o Twelve (12) consecutive months of required payments since completed forbearance plan o All payments must have been made within the month due

Payment Deferral

The refinance of a loan that has a payment deferral and where the amount of the deferred payments is included in the new loan is eligible as a rate/term transaction. Funds applied to pay off the prior loan, including the deferred portion, are not considered cash out.

Repayment Plan The full amount of the repayment plan monthly payment must be considered in meeting the required consecutive payment requirements (Purchase/Rate Term or Cash-out) detailed above

A mortgage subject to forbearance must utilize the mortgage payment history in accordance with the forbearance plan in determining late housing payments. Loan file must contain a letter of explanation from the borrower detailing the reason for forbearance and that the hardship no longer exists. Forbearance resulting in subsequent loan modification is considered a significant derogatory credit event and subject to a seven (7) year waiting period.

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10.04.2021 19

Housing History Mortgage history requirements:

• If the borrower(s) has a Mortgage in the most recent twenty-four (24) months, a mortgage rating must be obtained, reflecting 0x30 in the last twenty-four (24) months

• The mortgage rating may be on the credit report or a VOM

• Applicable to all borrowers on the loan

• The borrower(s) credit report must be reviewed to determine status of all mortgage loans, including documenting the mortgage is not subject to a loss mitigation program, repayment plan, loan modification or payment deferral plan. In addition to reviewing the credit report, MiMutual must also apply due diligence for each mortgage loan on which a borrower is obligated, including co-signed mortgage loans and mortgage loans not related to the subject transaction, to determine the loan payments are current as of the Note date of the subject transaction. Current means the borrower has made all payments due in the month prior to the Note date of the subject transaction and no later than the last business day of that month. Acceptable documentation includes one of the following: o Loan payment history from the servicer or third party verification service o Payoff statement for loans being refinanced o Current mortgage statement from the borrower o Verification of mortgage (VOM)

• If the mortgage holder is a party to the transaction or relative of the borrower, cancelled checks or bank statements to verify satisfactory mortgage history is required

Credit Report

Disputed Tradelines

• All disputed tradelines must be included in the DTI if the account belongs to the borrower unless documentation can be provided that authenticates the dispute.

• Derogatory accounts must be considered in analyzing the borrower’s willingness to repay. However, if a disputed account has a zero balance and no late payments, it can be disregarded.

Frozen Credit Credit reports with bureaus identified as “frozen” are required to be unfrozen, and a current credit report with all bureaus unfrozen is required for loans locked prior to September 9, 2021. For locks on/after September 9, 2021, FNMA guidance should be followed regarding frozen credit. However, the Jumbo AUS program requirement for all borrowers to have a minimum of two credit scores is still applicable, and must be from the remaining two unfrozen accounts.

Minimum Credit Requirements Non-traditional credit is not allowed.

Credit Score Requirements All borrowers must have a minimum of two (2) credit scores.

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10.04.2021 20

Debts and Liabilities

HELOC on Subject If subject property has a HELOC that is not included in the CLTV/HCLTV calculation, the loan file must contain evidence the HELOC has been closed. Tax Liens and Payment Plans If the most recent tax return or tax extension indicate a borrower owes money to the IRS or State Tax Authority, evidence of sufficient liquid assets to pay the debt must be documented if the amount due is within ninety (90) days of loan application date or if the tax transcripts show an outstanding balance due. A payment plan for the most recent tax year is allowed if the following requirements are met:

• Payment plan was setup at the time the taxes were due. Copy of the payment plan must be included in the loan file

• Payment is included in the DTI

• Satisfactory pay history based on terms of payment plan is provided

• Payment plan is only allowed for taxes due for the most recent tax year, prior years not allowed.

• For example, borrower files their 2019 return or extension in April 2020. A payment plan would be allowed for taxes due for 2019 tax year. Payment plans for 2018 or prior years would not be allowed

• Borrower does not have a prior history of tax liens

Lawsuit/Pending Litigation If the 1003, title commitment or credit documents indicate that the borrower is party to a lawsuit, additional documentation must be obtained to determine no negative impact on the borrower’s ability to repay, assets or collateral.

Income/Employment Requirements

Employment and Income Stability A two-year employment history is generally required. If the borrower(s) have less than a two-year employment and income history, a written analysis must be provided to justify the determination that the income used to qualify the borrower is stable.

Declining Income When the borrower has declining income, the most recent twelve (12) months should be used or the most conservative income calculation if the declining period is shorter than 12 months. Income must be stabilized and not subject to further decline in order to be considered for qualifying purposes. The employer or the borrower should provide an explanation for the decline and the underwriter should provide a written justification for including the declining income in qualifying.

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10.04.2021 21

General Documentation Requirements • Borrower(s) must have a minimum of two (2) years employment and income history

• Tax transcripts for personal tax returns are required when tax returns are used to document borrower’s income or any loss and must match the documentation in the loan file

• A 4506-C form is required to be signed at closing by all borrowers for all transactions

• Taxpayer consent form signed by all borrowers

• Verification of the existence of borrower’s self-employment must be verified through a third party source and no more than twenty (20) business days prior to the Note date. In addition, confirmation that the business is currently operating must be provided. Below are acceptable examples of documentation to confirm the business is currently operating:

• Evidence of current work (executed contracts or signed invoices) that indicate the business is operating on the day the lender verifies self-employment;

• Evidence of current business receipts within 10 days of the Note date (payment for services performed);

• Lender certification the business is open and operating (lender confirmed through a phone call or other means); or

• Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled

• Losses for secondary self-employment must be included in the DTI and self-employed documentation

requirements must be met

• Losses for co-borrower’s self-employment must be included in DTI and self-employed documentation requirements must be met

Salaried Borrowers • Income and Employment must be documented per the DU findings and all income sources and methods

of income calculation must meet the requirements in chapters B3-3 through B3-6 of the Fannie Mae Single Family Selling Guide, published June 3, 2020 and the requirements below.

• Secondary verification of the income documentation is required via W-2 transcripts or 3rd party verification (i.e., The Work Number) with separation of income types (base, bonus, OT, etc.). The number of years provided will be based on the DU findings. o Manual verification of employment, even if through a 3rd party are not permitted o Borrower pulled transcripts are not acceptable o The IRS transcripts and the supporting income documentation must be consistent o If 3rd party (i.e., TheWorkNumber) is the source used to verify income, then W-2 transcripts are also

required as the secondary verification of the income – see below.

Commission/Bonus Income

• Follow requirements above for salaried borrowers, and

• Commission/Bonus income must be documented for the most recent 2 (two) years with a year-to-date paystub and W-2s

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Income Documentation Source Allowable Secondary Verification

Paystub and W2s W2 transcript(s) or TheWorkNumber

TheWorkNumber W2 transcript(s)


10.04.2021 22

Self-Employment Self-Employed borrowers are defined as having 25% or greater ownership.

• Minimum 720 FICO when any self-employment income is required for qualifying purposes. If the self-employment income is not needed for qualifying purposes, then the 720 minimum is not applicable.

• In order to use self-employment income for qualifying purposes, the underwriter must consider the impact of COVID-19 on the business and the stability of income

Documentation Requirements The requirements below apply for Self-Employed Borrowers with Self-Employment income used for qualifying:

• Follow the requirements per the DU findings and the requirements in chapters B3-3 through B3-6 of the Fannie Mae Single Family Selling Guide, published June 3, 2020 except as detailed below: o If DU returns a recommendation for one (1) year of tax returns, the most recent year’s tax return

must be provided. IRS extensions are not permitted ▪ If borrower has filed an extension, the most recent prior two (2) years tax returns are required

• YTD profit and loss statement (audited or unaudited) up to and including the most recent month preceding the loan application date. YTD profit and loss statement must not be more than 60 days aged prior to the Note date o Audited P&L:

▪ An audited year-to-date profit and loss statement reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date; OR

o Unaudited P&L: ▪ An unaudited year-to-date profit and loss statement signed by the borrower, reporting

business revenue, expenses, and net income up to and including the most recent month preceding the loan application date and three business depository account statements no older than the latest three months represented on the year-to-date profit and loss statement

• The three most recent business depository account statements must be reviewed and must support and/or not conflict with the level of business revenue reported in the current year-to-date profit and loss statement

• The business revenue analysis of the bank statements includes bank deposits from gross receipts from the business. Transfers and proceeds from the Small Business Administration PPP or any other similar COVID-19 related loans or grants should not be included

• If the year-to-date profit and loss statement cannot be supported by account statements, the self-employment income is not eligible for use in qualifying

o If the borrower has filed an extension for the current tax year, the year-to-date profit and loss statement must be provided to cover the full year

o If the year-to-date business income is less than the historically calculated income derived from the tax returns, the borrower may qualify by reducing the historical income to no more than the current level of stable monthly income using details from the year-to-date profit and loss statement and business account statements (if applicable)

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10.04.2021 23

Retirement Income (Pension, Annuity, 401(k), IRA Distributions) Existing distribution of assets from an IRA, 401(k) or similar retirement asset must be sufficient to continue for a minimum of three (3) years. If any retirement income will cease within the first three (3) years of the loan, the income may not be used.

Trust Income • Income from trusts may be used if guaranteed and regular payments will continue for at least three (3)

years

• Regular receipt of trust income for the past twelve (12) months must be documented

• Copy of trust agreement or trustee statement showing: o Total amount of borrower designated trust funds o Terms of payment o Duration of trust o Evidence the trust is irrevocable

• If trust fund assets are being used for down payment or closing costs, the loan file must contain adequate documentation to indicate the withdrawal of the assets will not negatively affect income

Restricted Stock and Stock Options • May only be used as qualifying income if the income has been consistently received for two (2) years

and is identified on the paystubs, W-2s and tax returns as income and the vesting schedule indicates the income will continue for a minimum of two (2) years at a similar level as prior two (2) years

• A two (2) year average of prior income received from RSUs or stock options should be used to calculate

the income, with the continuance based on the vesting schedule using a stock price based on the lower of the current stock price or the 52-week average for the most recent twelve (12) months reporting at the time of application. The income used for qualifying must be supported by future vesting based on the stock price used for qualifying and vesting schedule.

• Additional awards must be similar to the qualifying income and awarded on a consistent basis

• There must be no indication the borrower will not continue to receive future awards consistent with historical awards received

• Borrower must be currently employed by the employer issuing the RSUs/stock options for the RSUs/stock options to be considered in qualifying income

• Stock must be a publicly traded stock

• Vested restricted stock units and stock options cannot be used for reserves if using for income to qualify

• RSU income must be entered into DU as bonus income

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10.04.2021 24

Asset Depletion • Maximum 80% LTV/CLTV/HCLTV

• Primary residence 1-2 units only

• Purchase and rate/term refinances only

• Eligible assets must be held in a US account

• At least one borrower who is an account holder must be age 62 or older unless assets have been derived from the sale of a business

• Minimum post-closing assets:

o Borrowers ≥ 62 years of age = $500,000 o Borrowers < 62 years of age = $1,000,000

• Qualifying Asset Income = Net Eligible Assets divided by 240

• Net Eligible Assets equals Total Assets minus: o Funds required to be paid by borrower for closing (i.e. downpayment, closing costs, etc) o Gifts and/or borrowed funds o Reserves o Any portion of assets pledged as collateral for a loan

• Business funds not permitted to be included in total asset amount

• Assets must meet the eligibility and documentation requirements outlined in the below table

Asset Type Eligibility Requirements Documentation Requirements

Retirement Assets

• The retirement assets must be in a retirement account recognized by the Internal Revenue Service (IRS) (e.g., 401(k), IRA)

• Borrower must be the sole owner

• The asset must not currently be used as a source of income by the Borrower

• As of the Note Date, the Borrower must have access to withdraw the funds in their entirety, less any portion pledged as collateral for a loan or otherwise encumbered, without being subject to a penalty or an additional early distribution tax

• The Borrower's rights to the funds in the account must be fully vested

• Most recent retirement asset account statement

• Documentation evidencing asset eligibility requirements are met

*table continues on next page

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10.04.2021 25


Lump-Sum Distribution Funds Not Deposited to an Eligible Retirement Asset

If the lump-sum distribution funds have been deposited to an eligible retirement asset, follow the requirements for retirement assets described above, otherwise:

• Lump-sum distribution funds must be derived from a retirement account recognized by the IRS (e.g., 401(k), IRA) and must be deposited to a depository or non-retirement securities account

• A Borrower must have been the recipient of the lump-sum distribution funds

• Parties not obligated on the Mortgage may not have an ownership interest in the account that holds the funds from the lump-sum distribution

• The proceeds from the lump-sum distribution must be immediately accessible in their entirety

• The proceeds from the lump-sum distribution must not have been or currently be subject to a penalty or early distribution tax

• Employer distribution letter(s) and/or check-stub(s) evidencing receipt and type of lump-sum distribution funds; IRS 1099-R (if it has been received)

• Satisfactorily documented evidence of the following: o Funds verified in the non-retirement

account and used for qualification must have been derived from eligible retirement assets

o Lump-sum distribution funds must not have been or currently be subject to a penalty or early distribution tax

Depository Accounts and Securities

• The Borrower must solely own assets or, if asset is owned jointly, each asset owner must be a Borrower on the Mortgage and /or on the title to the subject property

• As of the Note Date, the Borrower must have access to withdraw the funds in their entirety, less any portion pledged as collateral for a loan or otherwise encumbered, without being subject to a penalty

• Account funds must be located in a United States- or state-regulated financial institution and verified in U.S. dollars

• Obtain account statement(s) covering a two-month period

• For securities only, if the borrower does not receive a stock/security account statement, o provide evidence the security is owned

by the Borrower, and o verify value using stock prices from a

financial publication or web site

• Documentation evidencing asset eligibility requirements are met

• Sourcing deposits: o The source of funds for any deposit

exceeding 10% of the Borrower's total eligible assets in depository accounts and securities must be documented, and it must be verified that the deposit does not include gifts or borrowed funds (or the eligible assets used to qualify the Borrower will have to be reduced by the amount of the deposit)

o When the source of funds can be clearly identified from the deposit information on the account statement (e.g., direct payroll deposits) or other documented income or asset source in the file, additional documentation is not required to be obtained

*table continues on next page

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10.04.2021 26


Assets from the Sale of Borrower's Business

• The Borrower(s) must be the sole owner(s) of the proceeds from the sale of the business that were deposited to the depository or non-retirement securities account

• Parties not obligated on the Mortgage may not have an ownership interest in the account that holds the proceeds from the sale of the borrower's business

• The proceeds from the sale of the business must be immediately accessible in their entirety

• The sale of the business must not have resulted in the following: retention of business assets, existing secured or unsecured debt, ownership interest or seller-held notes to buyer of business

• Most recent three months' depository or securities account statements

• Fully executed closing documents evidencing final sale of business to include sales price and net proceeds

• Contract for sale of business

• Most recent business tax return prior to sale of business

• Satisfactorily documented evidence that the funds verified in the non-retirement account and used for qualification were derived from the sale of the borrower's business

Unacceptable Income Sources • Deferred compensation

• Retained earnings

• Education benefits

• Trailing spouse income

• Projected income

• Any income that is not legal in accordance with all applicable federal, state and local laws, rules and regulations. Federal law restricts the following activities and therefore the income from these sources are not allowed for qualifying: o Foreign shell banks o Medical marijuana dispensaries if borrower has any ownership o Any income resulting from ownership in a business or activity related to recreational marijuana use,

growing, selling or supplying of marijuana, even if legally permitted under state or local law o Businesses engaged in any type of internet gambling, for loans locked prior to September 9, 2021.

For locks on/after September 9, this is permitted as long as the source is legal and in accordance with all applicable federal, state, and local laws, rules, and regulations.

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10.04.2021 27

Asset Requirements Beyond the minimum reserve requirements and to fully document the borrower’s ability to meet their obligations, borrowers should disclose all liquid assets.


• Large deposits inconsistent with monthly income or deposits must be verified if using for down payment, reserves or closing costs

• It must be verified that large deposits did not result in any new undisclosed debt

• Fannie Mae approved third party suppliers and distributors that generate asset verification reports are permitted for the purpose of verifying assets

• Follow the DU and the requirements in chapters B3-3 through B3-6 of the Fannie Mae Single Family Selling Guide, published June 3, 2020 except as detailed below

Gift Funds Gift funds may be used once borrower has contributed 5% of their own funds.

• Not permitted for reserves

• Not permitted for LTVs greater than 80%

Business Funds • Not permitted for reserves

• Cash flow analysis required using most recent three (3) months business bank statements to determine no negative impact to business. Business bank statements must be no older than the latest 3 months represented on the YTD Profit and Loss statement

• Business bank statements must not reflect any NSFs (non-sufficient funds) or overdrafts

• If borrower(s) ownership in the business is less than 100%, the following requirements must be met: o Borrower(s) must have majority ownership of 51% or greater o The other owners of the business must provide an access letter to the business funds o Borrower(s) % of ownership must be applied to the balance of business funds for use by borrower(s)

Retirement Accounts In cases where the account holder is not of retirement age and funds are being used for down payment or closing costs, evidence of liquidation of retirement funds is required. When using retirement accounts to meet reserve requirements:

• If borrower is ≥ 59 ½, then 70% of the vested value after the reduction of any outstanding loans may be used

• If borrower is < 59 ½, then 60% of the vested value after the reduction of any outstanding loans may be used

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10.04.2021 28

Reserves Reserve Requirements (Number of Months of PITIA)

Occupancy Loan Amount Number of Months

Primary Residence

≤ $1,000,000 with LTV ≤ 80% 6

$1,000,000 - $1,500,000 with LTV ≤ 80% 9

≤ $1,000,000 with LTV > 80% 12

$1,000,000 - $1,500,000 with LTV > 80% 15

$1,500,001 - $2,000,000 12

$2,000,000 - $2,500,000 24

Second Home

≤ $1,000,000 12

$1,000,001 - $1,500,000 18

$1,500,001 - $2,000,000 24

$2,000,000 - $2,500,000 36

Investment Property ≤ $1,000,000 18

$1,000,001 - $1,500,000 24

First Time Homebuyer

≤ $1,000,000 with LTV ≤ 80% 12

≤ $1,000,000 with LTV > 80% 15

$1,000,000 - $1,500,000 with LTV ≤ 80% 15

$1,000,000 - $1,500,000 with LTV > 80% 18

Additional 1-4 Unit Financed REO

Additional 6 months reserves PITIA for each property is required based on the PITIA of the additional REO.

If eligible to be excluded from the count of multiple financed properties, reserves are not required.

Max 4 financed properties may be owned.

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10.04.2021 29

Collateral Requirements

Eligible Collateral • 1-4 unit owner occupied properties

• 1 unit second homes

• 1-4 unit investment properties

• Condominiums o Must be FNMA warrantable and meet FNMA guidelines

• Modular homes

• Planned Unit Developments (PUDs)

• Properties with ≤ 40 acres o Properties > 10 acres and ≤ 40 acres must meet the following:

▪ Maximum land value 35% ▪ No income producing attributes ▪ Transaction must be 10% below maximum LTV/CLTV/HCLTV allowed for transactions over 20

acres. For example, if borrower qualifies for a loan at 80% LTV based on transaction, score, loan amount, and reserves, then the maximum allowed would be 70%

• Properties subject to existing oil/gas leases must meet the following:

o Title endorsement providing coverage to the lender against damage to existing improvements resulting from the exercise of the right to use the surface of the land which is subject to an oil and/or gas lease

o No active drilling. Appraiser to comment or current survey to show no active drilling o No lease recorded after the home construction date. Re-recording of a lease after the home was

constructed is permitted o Must be connected to public water

Ineligible Collateral • 2-4 unit second home properties

• Condotels/Condo Hotels

• Manufactured Homes/Mobile Homes

• Mixed-Use Properties

• Model Home Leasebacks

• Non-Warrantable Condominiums

• Properties with condition rating of C5/C6

• Properties with quality rating of Q6

• Properties located in areas where a valid security interest in the property cannot be obtained

• Properties > 40 acres

• Properties with a private transfer fee covenant unless the covenant is excluded under 12CFR 1228 as an

excepted transfer fee covenant

• Tenants-in-Common projects (TICs)

• Unique properties

• Working farms, ranches or orchards

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10.04.2021 30

Appraisal Requirements • Full appraisal is required regardless of the DU Findings

o Property inspection waivers are not permitted

• Transferred appraisals are not allowed

• Collateral Underwriter (CU) with a score of 2.5 or less is allowed in lieu of a CDA o Maximum LTV 80% o Maximum Loan amount $1,500,000

• Appraisal Update (Form 1004D) is allowed for appraisals that are over 120 days – follow Fannie Mae requirements

• Collateral Desktop Analysis (CDA) ordered from Clear Capital is required to support the value of the appraisal. MiMutual is responsible for ordering the CDA. See above for the allowance of CU score in lieu of CDA o If the CDA returns a value that is “Indeterminate” or if the CDA indicates a lower value than the

appraised value that exceeds a 10% tolerance, then one (1) of the following requirements must be met: ▪ A Clear Capital BPO (Broker Price Opinion) and a Clear Capital Value Reconciliation of Three

Reports is required. The Value Reconciliation will be used for the appraised value of the property. MiMutual is responsible for ordering the BPO and Value Reconciliation through Clear Capital

▪ A field review or 2nd full appraisal may be provided. The lower of the two values will be used as the appraised value of the property. MiMutual is responsible for providing the field review or 2nd full appraisal full appraisal

o If two (2) full appraisals are provided, a CDA is not required

Appraisal Requirements Based on Loan Amount

First Lien Amount Appraisal Requirements

Purchase Transactions

≤ $2,000,000 1 full appraisal

> $2,000,000 2 full appraisals

Refinance Transactions

≤ $1,500,000 1 full appraisal

> $1,500,000 2 full appraisals

• When two (2) appraisals are required, the following applies: o Appraisals must be completed by two (2) independent companies o The LTV will be determined by the lower of the two (2) appraised values if the lower appraisal

supports the value conclusion o Both appraisal reports must be reviewed and address any inconsistencies between the two (2)

reports and all discrepancies must be reconciled o If the two (2) appraisals are done “subject to” and 1004Ds are required, it is allowable to provide one

(1) 1004D. If only one (1) 1004D is provided, it should be for the appraisal that the value of the transaction is being based upon

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10.04.2021 31

Properties Located in a Disaster Area See below for requirements pertaining to properties impacted by a disaster in:

• FEMA Major Disaster Declarations with designated counties eligible for Individual Assistance (IA);

• Areas where FEMA has not made a disaster declaration, but a GSE or Agency (Fannie Mae, Freddie Mac, FHA, USDA or the Veterans Administration) has determined that there may be an increased risk of loss due to a disaster;

• Areas where MiMutual has reason to believe that a property might have been damaged in a disaster

Re-Inspection Requirements The inspection document provided must address the specific disaster and indicate any apparent damage to subject property. Inspection reports may not be used to estimate or recertify value.

Loans with Appraisals If a property is in a Declared Disaster Area and the most recent appraisal was completed on or before the incident period end date, or an incident period end date has not yet been declared, then, subject to the applicable product matrix and investor requirements, MiMutual requires that an acceptable property inspection dated after the declared incident period end date be completed prior to closing confirming the property was not adversely affected by the disaster.

• A final exterior inspection or appraisal with exterior photos update signed and dated by the original appraiser o Appraisal Update, form Fannie Mae 1004D, Disaster Inspection, or o Completion Report, form Freddie Mac 442, or

• Property Inspection Report with exterior photos – o Form Fannie Mae 2075, or o Disaster Area Inspection Report (DAIR)

If the re-inspection notes that the property is uninhabitable, unsound, or that the property condition has been affected by the disaster, then a new appraisal must be completed, including an interior inspection and interior and exterior photos showing that:

• All identified damages and associated repairs have been resolved and meet guidelines and,

• The property is habitable, sound, and the property value is supported

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Jumbo Underwriting Guidelines | Jumbo Choice QM

10.04.2021 32

Jumbo Choice

Unless otherwise addressed in these Jumbo Choice guidelines, the more restrictive of the FNMA Selling Guide must be followed. All loans must document the 8 Ability-to-Repay (ATR) rules.


Eligible Products • 20, 25, 30 year fixed rate

• 5/6, 7/6, 10/6 fully amortizing ARM (30 year term)

Qualifying Rate • 5/6: greater of the fully indexed rate or the Note rate + 2%

• 7/6 and 10/6: greater of the fully indexed rate or the Note rate

ARM Specifics

Restrictions

• Max 80% LTV/CLTV/HCLTV

• Minimum credit score 680 applies to all ARM loans

Interest Rate Adjustment Caps

• 2/1/5 (5/6 ARM)

• 5/1/5 (7/6 and 10/6 ARM)

Index

SOFR (30 day average)

Margin 2.75

Interest Rate Floor 2.75

Conversion Option Not convertible Assumption Feature Fixed rate mortgages are not assumable; ARMs are. However, MiMutual does not underwrite or close assumptions.

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10.04.2021 33

Ineligible Products • High cost loans (Federal, state, or local)

• Non-standard to standard refinance transactions (ATR exempt)

• Balloons

• Graduated payments

• Interest only products

• Temporary buydowns

• Loans with prepayment penalties

• Convertible ARMs

Documentation Requirements Full doc. Manual underwriting requirements apply, regardless of AUS documentation waivers. However, DU findings are required on all Jumbo loans to demonstrate the borrower is not eligible for an Agency product. All loans must meet the Price-Based QM definition:

• Safe Harbor = APR < 150bps above the appliable APOR

• Rebuttable Presumption = APR ≤ 225bps above the applicable APOR (HPCT)

QM Designation must be provided in the loan file. QM Designation is QM Safe Harbor - APOR (or similar name, i.e. Price Based).

• A loan is a QM Rebuttable Presumption if the loan is a Higher Priced Covered Transaction (HPCT)

• QM designation is Exempt for investment property transactions when the transaction is exclusively for business purposes. o Investment property transactions require an attestation from the borrower stating the property is

used 100% of the time for business purposes in order for the designation to be Exempt. o If the borrower does not use the property 100% of the time for business purposes, the loan is subject

to QM and the designation would be QM Safe Harbor or QM Rebuttable Presumption o Cash out refinances of investment properties must also contain an attestation regarding the

proceeds from the cash out refinance. If 100% of the proceeds are not used for business purposes, the loan is subject to QM and the designation would be QM Safe Harbor or QM Rebuttable Presumption.

In all cases, the loan file must document the 8 ATR rules. Residual Income Calculation must be provided and meet the residual income requirements indicated in the Income/Employment section of this guide. If the 1003, title commitment, or credit documents indicate the borrower is a party to a lawsuit, additional documentation must be obtained to determine no negative impact exists on the borrower’s ability to repay, assets, or collateral. Borrower affidavit specific to COVID-19 pandemic is required.

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10.04.2021 34

Occupancy • Primary residences 1-4 unit

• Second home residences for 1 unit properties o Must be a reasonable distance away from borrower’s primary residence o Must be occupied by the borrower for some portion of the year o Must be suitable for year-round use o Must not be subject to a rental agreement and borrower must have exclusive control over the

property o Any rental income received on the property cannot be used as qualifying income

• Investment properties 1-4 units

Maximum DTI • Primary residence: 49.99%

o Primary residences with DTIs 45.01% – 49.99% require residual income calc

• LTV/CLTVs > 80% = 38%

• Investment property: 38%

• ARMs: 43%

• Second home: 40%

LTV/CLTV/HCLTV Primary Residence | Purchase and Rate/Term Refinance


LTV/CLTV/HCLTV Maximum Loan Amount1

Purchase and Rate/Term Refinances

1-2 680 85%4 $1,000,000

661 80% $1,500,000

3-4 680 70% $2,000,000

Primary Residence | Cash Out Refinance2


LTV/CLTV/HCLTV Maximum Loan

Amount Maximum Cash Out

Cash Out Refinance

1-2 680 75% $1,000,000 $500,000

680 70% $1,500,000 $500,000

3-4 680 60% $1,500,000 $500,000



LTV/CLTV/HCLTV Maximum Loan Amount


1 680

80% $1,000,000

70% $1,500,000

65% $2,000,000





Cash Out Refinance

1 680 65% $1,000,000 $500,000

60% $1,500,000 $500,000

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10.04.2021 35

Investment3 | Purchase and Rate/Term Refinance | Cash Out Refinance



Purchase 1-4 680 75% $1,500,000

Rate/Term Refi 1-4 680 70% $1,500,000

Cash Out Refi 1-4 700 60% $1,500,000 (max cash out $500,000)

1First-Time Homebuyers are subject to a maximum loan amount of $1,000,000. Loan amounts up to $1,500,000 allowed in CA, NJ, and WA. See Eligible Borrower section for specific requirements for FTHBs.

2Texas 50(a)(6) refinances only allowed on 20, 25, 30 year fixed rate transactions. See Texas 50(a)(6) Refinances section.

3The following requirements apply for investment property purchases, rate/term refis, and cash out refis:

• 20, 25, 30 year fixed rate only

• Florida attached condos limited to 50% LTV/CLTV/HCLTV

• Gift funds not allowed • Transaction must be arm’s length

• Appraiser to provide comparable rent schedule

• FTHBs not allowed

• If using rental income, an executed lease agreement must be provided. See Rental Income in the Income/Employment section for further details.

4The following requirements apply for transactions with LTVs > 80%:

• MI not required

• Secondary financing not allowed

• Maximum DTI 38% • Non-permanent residents not allowed

• Gift funds not allowed

• Escrow/impound accounts required for LTVs > 80% unless prohibited by applicable laws

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NOTES:

• Minimum loan amount is $1 over the conforming/high balance loan limit

• Higher Priced Mortgage Loans (HPML) are allowed if the following requirements are met: o Loan must have an escrow account for a minimum of 5 years o 1002.14(a)(1) allowing the consumer to waive the requirement that the appraisal copy be provided three

business days before consummation, does not apply to higher-priced mortgage loans subject to § 1026.35(c). A consumer of a higher-priced mortgage loan subject to § 1026.35(c) may not waive the timing requirement to receive a copy of the appraisal under § 1026.35(c)(6)(i).

o If the property was acquired by the seller less than 90 days from the purchase agreement, and the purchase price exceeds the seller’s acquisition price by more than 10%, then a second full appraisal is required. Bank owned properties are not exempt

o If the property was acquired by the seller between 91-180 days from the purchase agreement, and the purchase price exceeds the seller’s acquisition price by more than 20%, then a second full appraisal is required. Bank owned properties are not exempt

o If a second appraisal is required for one of the above two reasons, the borrower may only be charged for one of the appraisals o ARM loans have a minimum score of 680 and a maximum LTV/CLTV/HCLTV of 80%


10.04.2021 36

Borrowers

Eligible

• US Citizens

• Permanent Resident Aliens with evidence of lawful residency o Must be employed in the United States for the past 24 months

• Non-Permanent Resident Aliens with evidence of lawful residency are eligible with the following

restrictions: o Primary residence only o Maximum LTV/CLTV/HCLTV 80% o Unexpired H1B, H2B, E1, L1, and G Series visas only. G Series visas must have no diplomatic

immunity. o Credit tradeline requirements must be met, no exceptions. o Borrower must have a current 24 month employment history in the US

• First Time Homebuyers o Defined as a borrower who has not owned a home in the last 3 years. For loans with more than

1 borrower, where at least 1 borrower has owned a home in the last 3 years, first time homebuyer requirements do not apply

o Maximum loan amount $1,000,000 o For transactions located in CA, NJ, and WA, a maximum loan amount of $1,500,000 is allowed if

the following requirements are met and only apply for loan amounts over $1MM in the allowed state: ▪ 680 minimum FICO score ▪ Primary residence only ▪ Reserve requirements for FTHBs are met ▪ Maximum 80% LTV/CLTV/HCLTV

• Non-occupant coborrowers are allowed with the following features: o One-unit primary residence only o Purchase and rate/term transactions only o Maximum loan amount $1,000,000

▪ Up to $1,500,000 allowed in CA and NJ only o Max LTV/CLTV 80% o No minimum downpayment required from the occupant borrower; downpayment and reserves

may be from the occupant borrower or non-occupant coborrower o An additional 6 months reserves are required o The non-occupant coborrower must be a family member o Blended ratios allowed with a maximum 43% DTI o Transaction must be arm's length

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10.04.2021 37

• Inter Vivos Revocable Trusts o Acceptable for 1-2 unit owner-occupied primary residences, 1 unit second homes, and 1-4 unit

investment properties. The subject property can be a SFR, condo, or PUD if documentation and eligibility requirements are met. Title insurance must provide full coverage without exceptions for the trust or trustees for the inter vivos revocable trust in that state

o To determine whether the trust meets all the criteria required by State and investor standards, one of the following will be required: ▪ A copy of the trust agreement ▪ An attorney's opinion stating the trust meets all Secondary Marketing requirements as set

forth by Freddie Mac (FHLMC) or Fannie Mae (FNMA), as applicable, and any applicable State requirements

▪ Certification from a title company evidencing compliance with all Secondary Marketing requirements as set forth by FHLMC/FNMA and any applicable State requirements

▪ Certification from an individual trustee evidencing compliance with all Secondary Marketing requirements as set forth by FHLMC/FNMA, and any applicable State requirements. Additionally, the following requirements must be met:

• Certifications completed by an individual trustee must be notarized, and must confirm the following: o The existence and date of the trust o The settlors and the current trustees o The powers of the trustees o Whether the trust is revocable, and, if revocable, who holds the right to revoke o The names and number of the trustees required to sign on behalf of the trust o The trust identification number, whether that is a social security number, or an IRS-

issued Tax Identification Number o How title to the trust assets should be taken o A statement that the trust has not been revoked, modified, or amended in any manner

▪ The trust agreement must state the following:

• The trustee is authorized to borrow money for the purpose of purchase or refinance.

• The beneficiary does not need to grant written consent for the trust to borrow money. If consent is required, consent has been granted in writing for purposes of the mortgage.

• There is no unusual risk or impairment to the lenders’ rights.

• Holding title in the trust does not diminish the lenders’ rights as a creditor

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10.04.2021 38

Documentation of Lawful Residency

A Permanent Resident Alien is a non-US citizen who is legally eligible to maintain permanent residency in the US and holds a Permanent Resident card. Document legal residency with one (1) of the following:

• A valid and current Permanent Resident Alien card (form I-551), also known as a Green Card

• A passport stamped “processed for I-551, Temporary evidence of lawful admission for permanent

residence. Valid until ____”. Employment authorized. This evidences the holder has been approved for, but not issued, a Permanent Resident Alien card.

A Non-Permanent Resident Alien is a non-US citizen who lawfully enters the US for a specific time period under the terms of a Visa. A Non-Permanent Resident Alien status may or may not permit employment. For a Non-Permanent Resident Alien, verification of a valid and eligible visa that allows the Non-Permanent Resident Alien the right to work and live in the US issued by the USCIS is required. Eligible visa types are:

• H1B

• H2B

• E1

• L1

• G Series o G Series visas must not allow for diplomatic immunity

Ineligible

• Any borrower without a Social Security Number (ITINs are not eligible)


• Borrowers with diplomatic status

• Life Estates


• Guardianships

• LLCs, corporations, or partnerships

• Land Trusts, including Illinois Land Trusts

• Borrowers with any ownership in a business that is federally illegal, regardless if the income is not being used to qualify

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10.04.2021 39

Multiple Properties Financed The borrower(s) may own a total of ten (10) financed, 1-4 unit residential properties, including the subject property, and regardless of occupancy of the subject property.

If the borrower owns up to 4 financed properties:

• Max financing for the subject transaction is allowed

• Additional financed 1-4 unit residential properties require an additional 3 months reserves for each property

If the borrower owns between 5 and 10 financed properties:

• The subject transaction is limited to the lower of 80% LTV/CLTV/HCLTV or the program maximum

• Subject property requires the greater of 6 months reserves or required reserves per guidelines as indicated in the Assets section of this guide

• Additional financed 1-4 unit residential properties require 6 months reserves for each property The borrower may own an unlimited number of financed 1-4 unit residential properties when the subject transaction is a primary residence, with the following requirements met:

• The subject transaction is limited to a maximum of the lower of 80% LTV/CLTV/HCLTV or program

maximum

• Additional financed 1-4 unit residential properties require 6 months reserves for each property. 1-4 unit residential financed properties held in the name of an LLC or other corporation can be excluded from the number of financed properties only when the borrower is not personally obligated for the mortgage. Ownership of commercial or multifamily (5+ units) real estate is not included in this limitation.

Properties Listed for Sale Properties currently listed for sale (at the time of application) are not eligible. Properties listed for sale within six months of the application date are not acceptable for refinance transactions. Cash out refinances are not eligible if the property was listed for sale within 12 months of the application date.

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10.04.2021 40

Rate/Term Refinance Restrictions • The new loan amount is limited to pay off the current first lien mortgage, any seasoned non-first lien

mortgages, closing costs and prepaid items. o If the first mortgage is a HELOC, evidence it was a purchase money HELOC or it is a seasoned HELOC

that has been in place for twelve (12) months and total draws do not exceed $2,000 in the most recent twelve (12) months.

o A seasoned non-first lien mortgage is a purchase money mortgage or a mortgage that has been in place for twelve (12) months.

o A seasoned equity line is defined as not having draws totaling over $2,000 in the most recent twelve (12) months. Withdrawal activity must be documented with a transaction history.

o Max cash back at closing is limited to 1% of the new loan amount.

• Properties inherited less than twelve (12) months prior to application date can be considered for a Rate and Term refinance transaction if the following requirements are met: o Must have clear title or copy of probate evidencing borrower was awarded the property. o A copy of the will or probate document must be provided, along with the buy-out agreement signed

by all beneficiaries. o Borrower retains sole ownership of the property after the pay out of the other beneficiaries. o Cash back to borrower not to exceed 1% of loan amount.

Texas 50(f)(2) Refinances Under certain circumstances, a refinance of an existing Texas Home Equity loan may be considered as a standard refinance transaction per Section 50(f)(2). The following requirements must be met:

• At least one year has elapsed since the Texas Home Equity loan was closed

• There can be no advance of new money (except closing costs) and when the funds advanced refinance a debt described by Sections 50(a)(1) through (a)(7)

• The new principal loan balance may not exceed 80% of the property’s fair market value on the day of the refinance

• The borrower must be provided with a new disclosure 12 or more days prior to closing, advising the borrower of the risks of refinancing into a non-Texas Home Equity loan

• The borrower(s) and borrower’s spouse (if applicable) must sign an Affidavit at closing acknowledging that the above four requirements have been met

• Eligible terms 20, 25, and 30 year fixed rate only

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NOTE: In certain cases, paying a divorce settlement, property tax lien or mechanics lien will require a cash out lock while this would be considered a rate/term refinance per the regulatory text.


10.04.2021 41

Cash Out Refinance Restrictions • Borrower must have owned the property for at least 6 months. If the property is owned free & clear

and 6 months seasoning is not met, refer to Delayed Purchase Financing

• Maximum cash-out limitations include the payoff of any unsecured debt, unseasoned liens and any cash in hand

• Inherited properties may not be refinanced as a cash out refinance prior to 12 months ownership. See Rate/Term Refinances for requirements

• Cash out refinances where the borrower is paying off a loan from a pledged asset/retirement account loan, secured loan, unsecured family loan, or replenishing business funds used to purchase the property, the following guidelines apply: o Cash out limitation is waived if previous transaction was a purchase o Seasoning requirement for cash out is waived (borrower does not have to own for 6 months prior to

subject transaction) o Funds used to purchase the subject must be documented and sourced o CD for subject transaction must reflect payoff or paydown of pledged asset / retirement account

loan, secured loan, unsecured family loan or business asset account. If cash out proceeds exceed payoff of loans, excess cash must meet cash out limitations

o The purchase must have been arm’s length o Investment properties are ineligible

Texas 50(a)(6) Refinances In addition to standard guidelines, loans originated in the State of Texas may be subject to additional requirements and restrictions due to the provisions of Section 50(a)(6) of the Texas Constitution (Texas Equity Loan). All cash-out loans and certain Rate and Term refinance transactions, involving the borrower’s primary homestead property, are subject to these special requirements. MiMutual follows Fannie Mae requirements related to Section 50(a)(6) loans. Failure to follow these requirements will result in the loan being ineligible.

Eligible Product Types

20, 25 and 30-year fixed rate only

Max LTV/CLTV

Texas Equity Loans are limited to the lesser of 80% LTV/CLTV or program maximum. Please refer to specific program for LTV/CLTV maximum.

Eligible Property Types

Single-unit principal residence designated as the borrower’s homestead under Texas law. Eligible property types are limited to an attached or detached dwelling, a unit in a PUD project, or a unit in a condominium project. Owner occupied primary residences only. Documented proof of Homestead Designation is required. 2-4 unit properties not allowed. Non-Borrowing Spouse

The owner of the homestead and their spouse must consent to the extension of credit by executing the Deed of Trust. A non-borrowing spouse, regardless of their ownership interest in the homestead property, has the right to cancel.

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10.04.2021 42

Property Valuation

To determine current value, MiMutual must obtain a new full appraisal on either a Uniform Residential Appraisal Report, or Individual Condominium Unit Appraisal Report. The appraisal for the property and the acknowledgment of fair market value must not include any property other than the homestead. The survey (or other acceptable evidence) must demonstrate that: • Homestead property and any adjacent land are separate parcels, and • Homestead property is a separately platted and subdivided lot for which full ingress and egress

is available. Additional Requirements for Texas Equity Loans

• Fees and charges to make the loan may not exceed 2% of the loan amount. The following fees and charges can be excluded from the testing: o Bona Fide Discounts to lower the rate selected o Appraisal Fee o Survey Fee o Lender’s Title Policy

• The borrower’s first payment must be due no later than two (2) months after closing.

• MiMutual must provide the title company with a detailed closing instruction letter and require acknowledgement of its receipt.

• If this loan is being used to pay off a previous Texas Equity Loan, the loan may not close before twelve (12) months have passed from the closing date of the Texas Equity Loan being paid off.

• If the new loan is a Texas Equity Loan originated to cure a failure in the original mortgage to comply with Section 50(a)(6), then the Texas law requirement that at least twelve (12) months have passed since any previous Texas Home Equity loan secured by a homestead property was closed does not apply.

• The loan may not close before twelve (12) days after the loan application was taken by the lender or the borrower receives the “NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION” disclosure, whichever date is later AND may not close, without the borrower’s consent, one (1) business day after the date on which the borrower receives a copy of the loan application, if not previously provided, and a final itemized disclosure of the actual fees, points, interest, costs and charges that will be charged at closing.

• The loan may only close at the office of MiMutual, title company or an attorney at law.

• Power of Attorney may not be used on a Texas Equity Loan.

• Use FNMA approved Texas Equity legal documents (Note, Deed, Riders, etc.).

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10.04.2021 43



twelve (12) months, or o Is related to the borrower on the mortgage being refinanced.

• The borrower on the new refinance transaction was added to title twenty-four (24) months or more prior to the disbursement date of the new refinance transaction.

• The borrower on the refinance inherited or was legally awarded the property by a court in the case of divorce, separation or dissolution of a domestic partnership.

• The borrower on the new refinance transaction has been added to title through a transfer fr om a trust, LLC or partnership. The following requirements apply: o Borrower must have been a beneficiary/creator (trust) or 25% or more owner of the LLC or

partnership prior to the transfer. o The transferring entity and/or borrower has had a consecutive ownership (on title) for at least the

most recent six (6) months prior to the disbursement of the new loan.

Delayed Purchase Refinances Delayed Purchase Refinancing is allowed with the following requirements:

• Property was purchased by borrower for cash within six (6) months of the loan application.

• HUD-1/CD from purchase reflecting no financing obtained for the purchase of the property.

• Preliminary title reflects the borrower as the owner and no liens.

• Funds used to purchase the property are fully documented and sourced and must be the borrower’s own funds (no gift funds or business funds).

• Funds drawn from a HELOC on another property owned by the borrower, funds borrowed against a margin account, or funds from a 401(k) loan are acceptable as long as the following requirements are met: o The borrowed funds are fully documented o The borrowed funds are reflected on the Closing Disclosure (CD) as a payoff on the new refinance

transaction

• LTV/CLTV/HCLTV for Rate and Term refinances must be met. The loan is treated as a Rate and Term refinance except for primary residence transactions in TX

• Investment properties are allowed as long as borrower is not a builder or in the construction industry and prior transaction was arm’s length.

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10.04.2021 44

LTV/CLTV/HCLTV Calculation for Refinances • If subject property is owned more than 12 months, the LTV/CLTV/HCLTV is based on the current

appraised value. The 12 month time frame is defined as prior Note date to subject Note date.

• If subject property is owned less than 12 months, the LTV/CLTV/HCLTV is based on the lesser of the original purchase price plus documented improvements made after the purchase of the property, or the appraised value. Documented improvements must be supported with receipts. The 12 month time frame is defined as prior Note date to subject Note date.

Construction to Permanent Refinance Restrictions The conversion of construction to permanent financing involves the granting of a long-term mortgage to a borrower for the purpose of replacing interim construction financing that the borrower has obtained to fund the construction of a new residence. The borrower must hold title to the lot, which may have been previously acquired or purchased as part of the transaction.

• LTV/CLTV/HCLTV is determined based on the length of time the borrower has owned the lot. The time frame is defined as the date the lot was purchased to the Note date of the subject transaction. o For lots owned 12 months or more, the appraised value can be used to calculate the

LTV/CLTV/HCLTV. o For lots owned less than 12 months, the LTV/CLTV/HCLTV is based on the lesser of the current

appraised value of the property or the total acquisition costs (documented construction costs plus documented purchase price of lot).

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NOTE: If the subject transaction is paying off a HELOC that is not included in the CLTV/HCLTV calculation, the loan file must contain evidence the HELOC has been closed.


10.04.2021 45


• Family Sales or Transfers





• Borrower is the employee of the originating lender and the lender has an established employee loan program. Evidence of employee program to be included in loan file.


• Originator is a current subsidiary of the builder

• Borrower purchasing from their landlord (cancelled checks or bank statements required to verify satisfactory pay history between borrower and landlord).

Gifts from relatives that are interested parties to the transaction are not allowed, unless it is a gift of equity. Real estate agents may apply their commission towards closing costs and/or prepaids if the amounts are within the interested party contribution limitations.

Secondary / Subordinate Financing For each mortgage loan subject to a subordinate lien, to accurately calculate the LTV/CLTV/HCLTV ratio for eligibility requirement purposes, MiMutual must determine the maximum credit line for all HELOCs, if applicable, and the unpaid principal balance for all closed-end subordinate financing. If any subordinate financing is not shown on a credit report, MiMutual must diligently determine if any other subordinate financing liens exist and provide documentation from the borrower or creditor.

• Institutional Financing only. Seller subordinate financing not allowed.

• Subordinate liens must be recorded and clearly subordinate to the first mortgage lien.

• If there is or will be an outstanding balance at the time of closing, the monthly payment for the

subordinate financing must be included in the calculation of the borrower’s debt-to-income ratio.

• Full disclosure must be made of the existence of subordinate financing and the subordinate financing repayment terms. The following are acceptable subordinate financing types: o Mortgage terms with interest at market rate. o Mortgage with regular payments that cover at least the interest due, resulting in no negative

amortization. (continued on next page)

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NOTE: Investment property transactions must be arm’s length


10.04.2021 46

• Employer subordinate financing is allowed with the following requirements: o Employer must have an Employee Financing Assistance Program in place. o Employer may require full repayment of the debt if the borrower’s employment ceases before the

maturity date. o Financing may be structured in any of the following ways:

▪ Fully amortizing level monthly payments ▪ Deferred payments for some period before changing to fully amortizing payments ▪ Deferred payments over the entire term. ▪ Forgiveness of debt over time ▪ Balloon payment of no less than five (5) years, or the borrower must have sufficient liquidity to

pay off the subordinate lien.

• LTV/CLTV/HCLTV guidelines must be met for loans with subordinate financing.

Credit Requirements

Derogatory Credit • Bankruptcy, Chapter 7, 11, 13 – four (4) years since discharge/dismissal date

• Foreclosure – four (4) years since completion date

• Short Sale/Deed-in-Lieu – four (4) years since completion/sale date

• Mortgage accounts that were settled for less, negotiated or short payoffs – four (4) years since settlement date

• Borrowers with credit events listed above between four (4) and seven (7) years must meet the following requirements: o Tradeline requirements must be met o Satisfactory housing history for 24 months required o No mortgage lates since credit event o No public records since credit event o Purchase or rate/term refinance of a primary residence only

▪ Maximum LTV/CLTV/HCLTV is 80% or the program maximum, whichever is lower

• Loan Modification – two (2) years since modification date with no mortgage lates on any mortgage in the last 24 months

• A forbearance that results in a loan modification (moving payments to the end of the mortgage) is a credit event and will be considered “due to hardship”

• Notice of Default – two (2) years

• A satisfactory explanation letter from the borrower(s) must be provided addressing any of the above derogatory credit events if the event occurred in the last 7 years

• Multiple derogatory credit events are not allowed, regardless if seasoned over 7 years o A mortgage with a Notice of Default filed that is subsequently modified is not considered a multiple

event o A mortgage with a Notice of Default filed that is subsequently foreclosed upon or sold as a short sale

is not considered a multiple event

• Medical Collections – allowed to remain outstanding as long as the balance is less than $10,000 in aggregate

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10.04.2021 47

Past Mortgage Forbearances Allowable six months after the end of the forbearance period, and only if the borrower made all of the monthly payments during forbearance and did not utilize the forbearance terms to skip any payments.

Exceptions for Derogatory Credit Exceptions for credit events that require a 4 year seasoning period will be considered on a case-by-case basis between two (2) and four (4) years with extenuating circumstances, subject to the following:

• Extenuating circumstances are defined as non-recurring events beyond the borrower’s control, resulting in a sudden, significant, and prolonged reduction in income or catastrophic increase in financial obligations o Examples would include death or major illness of a spouse or child, but would not include divorce

or job loss

• Documentation must be provided to support the claim of extenuating circumstances and confirm the nature of the event that led to the credit event and illustrate the borrower had no reasonable option other than to default on their obligations

• If the defaulted debt was assigned to an ex-spouse and the default occurred after the borrower was relieved of the obligation, the event may be considered on an exception basis

Outstanding Judgments/ Tax Liens/Charge-Offs/Past-Due Accounts Tax liens, judgments charge-offs and past-due accounts must be satisfied or brought current prior to or at closing. Cash-out proceeds from the subject transaction may not be used to satisfy judgments, tax liens, charge-offs, or past-due accounts. Payment plans on prior year tax liens/liabilities are not allowed; they must be paid in full.

Housing Payment History

Mortgage History Requirements If the borrower(s) has a mortgage in the most recent 24 months, a VOM must be obtained. The mortgage rating may be on the credit report or a VOM. This applies to all borrowers on the loan. No more than 1x30 in the last 12 months or 2x30 in the last 24 months is permitted. Mortgage lates must not be within the most recent 3 months of the subject transaction. 0x60 and 0x90 is required in the most recent 24 months. A satisfactory LOX from the borrower(s) must be provided for any mortgage lates within the most recent 24 months. If the mortgage holder is a party to the transaction or a relative of the borrower, cancelled checks or bank statements to verify satisfactory rental history is required.

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10.04.2021 48

Rental History Requirements If the borrower has a rental history in the most recent 12 months, a VOR must be obtained. This applies to all borrowers on the loan. No more than 1x30 in the last 12 months. 0x60 and 0x90 is required in the most recent 12 months. Rental lates must not be within the most recent 3 months of the subject transaction. A satisfactory LOX from the borrower(s) must be provided for any rental lates within the most recent 12 months.

If the landlord is a party to the transaction or a relative of the borrower, cancelled checks or bank statements to verify satisfactory rental history is required. Otherwise, if not related or a party to the transaction, a satisfactory VOR can be provided.

Credit Report

Age of Credit Report The credit report may not be more than 90 days old at the time the Note is signed. “Frozen” Credit Reports Credit reports with bureaus identified as “frozen” are required to be unfrozen and a current credit report with all bureaus unfrozen is required.

Tradeline Requirements

• Minimum three (3) tradelines are required. The following requirements apply: o One (1) tradeline must be open for twenty-four (24) months and active within the most recent

six (6) months. o Two (2) remaining tradelines must be rated for twelve (12) months and may be opened or closed. OR

• Minimum two (2) tradelines are acceptable if the borrower has a satisfactory mortgage rating for at least twelve (12) months (opened or closed) within the last twenty-four (24) months and one (1) additional open tradeline.

Each borrower contributing income for qualifying must meet the minimum tradeline requirements; however, borrowers not contributing income for qualifying purposes are not subject to minimum tradeline requirements. Authorized user accounts are not allowed as an acceptable tradeline. Non-traditional credit is not allowed as an acceptable tradeline.

Credit Score Requirements Each borrower must have a minimum of two FICO scores reporting.

• The representative score for each borrower is the middle of the three scores or the lower of the two scores reporting on the credit report

• The representative score for the loan transaction will be based on the lowest representative score

for any borrower.

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10.04.2021 49

Disputed Tradelines All disputed tradelines must be included in the total expense ratio (DTI) if the account belongs to the borrower(s), unless documentation can be provided that authenticates the dispute. Derogatory accounts must be considered in analyzing the borrower(s) willingness to repay debt. However, if a disputed account has a zero balance, and no late payments, it can be disregarded.

Inquiries If the credit report indicates recent inquiries within the most recent 120 days of the credit report, confirmation must be provided that the borrower did not obtain additional credit that is not reflected in the credit report or mortgage application. In these instances the borrower must explain the reason for the credit inquiry.

• If additional credit was obtained, a verification of that debt must be provided and the borrower must be qualified with the monthly payment.

• Confirmation of no new debt may be in the form of a new credit report, pre-close credit report or

gap credit report.

Student Loans For all student loans, whether deferred, in forbearance, or in repayment, a monthly payment must be included in the borrower’s monthly debt obligation.

• If a monthly payment is provided on the credit report, the amount indicated for the monthly payment

may be used for qualifying

• If the credit report does not provide a monthly payment or if it shows $0 as the monthly payment, the monthly payment may be one of the options below: o Loan payment indicated on student loan documentation verifying monthly payment is based on

an income-driven plan o For deferred loans or loans in forbearance:

▪ 1% of the outstanding loan balance (even if this amount is lower than the actual fully amortizing payment), or

▪ A fully amortizing payment using the documented loan repayment terms

Liability Requirements

• The monthly payment on revolving accounts with a balance must be included in the borrower’s DTI, regardless of the number of months remaining. If the credit report does not reflect a payment and the actual payment cannot be determined, a minimum payment may be calculated using the greater of $10 or 5%

• If the credit report reflects an open-end or net thirty (30) day account, the balance owing must be subtracted from liquid assets.

• HELOCs with a current outstanding balance with no payment reflected on the credit report may have the payment documented with a current billing statement. HELOCs with a current $0 balance do not need a payment included in the DTI unless it is being used for downpayment or closing costs

• Lease payments, regardless of the number of payments remaining, must be included in the DTI

• Installment debts lasting 10 months or more must be included in the DTI

• Alimony payments may be deducted from the income rather than included as a liability in the DTI for divorces prior to 1/1/2019. o Effective for borrowers with a divorce on/after January 1, 2019, alimony payments paid by a

borrower must be treated as a liability, and may no longer be deducted from the income


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Departure Residence

Departure Residence Pending Sale In order to exclude the payment for a borrower’s primary residence that is pending sale but will close after the subject transaction, the following requirements must be met:

• A copy of an executed sales contract for the property pending sale and confirmation all contingencies have been cleared/satisfied. The pending sale transaction must be arm’s length.

• The closing date for the departure residence must be within 30 days of the subject transaction note

date.

• 6 months liquid reserves must be verified for the PITIA of the departure residence.

Departure Residence Subject to Guaranteed Buy-out with Corporation Relocation In order to exclude the payment for a borrower’s primary residence that is part of a Corporate Relocation the following requirements must be met:

• Copy of the executed buy-out agreement verifying the borrower has no additional financial responsibility toward the departing residence once the property has been transferred to the 3rd party.

• Guaranteed buy-out by the 3rd party must occur within 4 months of the fully executed guaranteed buy-out agreement.

• Evidence of receipt of equity advance if funds will be used for down payment or closing costs.

• Verification of an additional 6 months PITIA of the departure residence.

Co-Signed Loans The monthly payment on a co-signed loan may be excluded from the DTI if evidence of timely payments made by the primary obligor (other than the borrower) is provided for the most recent 12 months and there are no late payments reporting on the account.

Court Order If the obligation to make payments on a debt has been assigned to another person by court order, the payment may be excluded from the DTI if the following documents are provided.

• Copy of court order.

• For mortgage debt, a copy of the document transferring ownership of property.

• If transfer of ownership has not taken place, any late payments associated with the repayment of the debt owing on the mortgage property should be taken into account when reviewing the borrower’s credit profile.

Assumption with No Release of Liability The debt on a previous mortgage may be excluded from DTI with evidence the borrower no longer owns the property. The following requirements apply:

• Payment history showing the mortgage on the assumed property has been current during the previous twelve (12) months or

• The value on the property, as established by an appraisal or sales price on the HUD-1/CD results in an LTV of 75% or less.

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Tax Liability If the most recent tax return or tax extension indicates a borrower owes money to the IRS or State Tax Authority, evidence of sufficient liquid assets to pay the debt must be documented if the amount due is within 90 days of loan application date, or if tax transcripts show an outstanding balance due.

• A payment plan for the most recent tax year is allowed if the following requirements are met: o Payment plan was set up at the time the taxes were due. Copy of payment plan must be included in

loan file. o Payment is included in the DTI. o Satisfactory pay history based on terms of payment plan is provided. o Payment plan is only allowed for taxes due for most recent tax year, prior years not allowed. For

example, borrower files their 2019 return or extension in April 2020. A payment plan would be allowed for taxes due for 2019 tax year. Payment plans for 2018 or prior years would not be allowed.

o Borrower does not have a prior history of tax liens.

Loans Secured by Financial Assets Loans secured by financial assets (life insurance policies, 401(k), IRAs, CDs, etc.) do not require a payment to be included in the DTI as long as documentation is provided to show the borrower’s financial asset as collateral for the loan.

Income/Employment Requirements To establish stability of employment and income for the borrower(s) whose income is used to qualify, the following requirements must be met:

• A minimum of 2 years stable employment and income receipt history

• Verifiable

• High probability of continuing for at least 3 years An Income Calculation Worksheet is required on all loans: current FNMA 1084, FHLMC Form 91, or equivalent is required for self-employment analysis.

Declining Income When the borrower has declining income, the most recent 12 months should be used. In certain cases, an average of income for a longer period may be used when the decline is related to a one-time capital expenditure and proper documentation is provided. 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. The employer or the borrower should provide an explanation for the decline and the underwriter should provide a written justification for including the declining income in qualifying.

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10.04.2021 52

Gaps in Employment A minimum of 2 years employment and income history is required to be documented. Gaps more than 30 days during the past 2 years require a satisfactory letter of explanation, and the borrower must be employed with their current employer for a minimum of 6 months to include as qualifying income.

Residual Income A Residual Income Calculation is required. All loans must meet the residual income requirements below. Residual Income equals Gross Qualifying Income less Monthly Debt (as included in the DTI).

# in Household 1 2 3 4 5

Required Residual $1,550 $2,600 $3,150 $3,550 $3,700 *Add $150 for additional family members

Paystub Requirements Paystubs must:

• Clearly identify the employee/borrower and the employer;

• Reflect the current pay period and Year to Date (YTD) earnings; o YTD pay with most recent pay period at the time of application must be no earlier than 90 days prior

to the Note date

• Be computer-generated;

• Reflect the URL address, date, and time printed, and also identifying information, for paystubs issued electronically via email or internet

W2 Requirements W2 forms must be complete, and be a copy provided by the employer.

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Verification of Employment Requirements The requirements below apply when income is positive and included in qualifying income:

• Verbal Verification of Employment (VVOE) must be performed no more than ten (10) business days prior to the Note date. The VVOE should include the following information for the borrower: o Date of contact o Name and title of person contacting the employer o Name of employer o Start date of employment o Employment status and job title o Name, phone number, and title of contact person at employer o Independent source used to obtain employer phone number

• Verification of the existence of borrower’s self-employment must be verified through a third party source and no more than 30 calendar days prior to the Note date. o Third party verification can be from a CPA, regulatory agency or applicable licensing bureau. A

borrower’s website is not an acceptable third party source o Listing and address of the borrower’s business o Name and title of person completing the verification and date of verification

• Written Verification of Employment may be required for a borrower’s income sourced from commissions, overtime and other income when the income detail is not clearly documented on W2 forms or paystubs. Written VOEs cannot be used as a sole source for verification of employment; paystubs and W2s are still required

Tax Return Requirements • Personal income tax returns (if applicable) must be complete with all schedules (W2 forms, K1s, etc),

and must be signed. In lieu of a signature, personal tax transcripts for the corresponding year may be provided

• Business income tax returns (if applicable) must be complete with all schedules and must be signed. In lieu of a signature, personal tax transcripts for the corresponding year may be provided

• A 4506-C must be signed and completed for all borrowers. The IRS requires the latest form

o Tax transcripts for personal tax returns for 2 years are required when tax returns are used to document borrower's income or any loss and must match the documentation in the loan file. ▪ See Taxpayer Identity Theft instructions, if applicable ▪ See Unfiled Tax Returns for cases where the IRS indicates “no record found”

o W2 transcripts for 2 years are required to validate W2 wages if tax transcripts are not provided and the borrower does not have any other income source or loss. The following W2 type earnings will require tax transcripts: ▪ Borrower with commission-based income that is greater than 25% of borrower's total pay ▪ Borrower with 2106 expenses (Unreimbursed Business Expenses) ▪ Borrower employed by family ▪ Borrower with ownership in company

• Taxpayer Consent Form signed by all borrowers is required (continued on next page)

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10.04.2021 54

• After the tax return extension expiration date, loan is not eligible without prior year tax returns

• In cases where taxes have been filed and the tax transcripts are not available from the IRS, the IRS

response to the request must reflect "No Record Found". In these cases, an additional prior year's tax transcripts should be obtained and provided. Large increases in income that cannot be validated through a tax transcript may only be considered for qualifying on a case-by-case basis

• If the IRS rejects a 4506-T request and the reason for the rejection is either “Unable to Process” or “Limitation”, the following conditions must be met in order to validate the borrower’s income: o Copy of the IRS rejection with a code of “Unable to Process” or “Limitation”, and o Record of Account for 2 years obtained by the borrower from the IRS. Adjusted Gross Income and

Taxable Income on the Record of Account should match the borrower’s 1040s OR

o Tax return transcripts for 2 years obtained by the borrower via mail from the IRS.

Unfiled Tax Returns The following guidelines apply for the prior year’s tax return:

• For loans closed between January 1 and the tax filing date, (typically April 15), borrowers must provide: o IRS Form 1099 and W2 forms from the previous year o Loans closing in January prior to the receipt of W2s may use the prior year’s year-end paystub.

For borrowers using 1099s, evidence of receipt of 1099 income must be provided

• Personal 1040 tax returns - for loans closed between the tax filing due date (typically April 15) and the extension expiration date (typically October 15), the borrower must provide (as applicable): o Copy of the filed extension o W2 forms o 1099s when applicable o Current year Profit & Loss Statement, executed by the borrower o Year-End Profit & Loss Statement for prior year, if self-employed o Balance Sheet for prior calendar year, if self-employed o Evidence of payment of any tax liability identified on the federal tax extension form

• Partnership (1065) or S-Corporation (1120S) tax returns – For loans closed between the tax filing due date (typically March 15) and the extension expiration date (typically September 15), borrowers must provide (as applicable): o Copy of the filed extension. o Year-end profit and loss for prior year. o Balance sheet for prior calendar year.

• Corporation (1120) tax returns (assuming calendar year) – For loans closed between the tax filing due date (typically April 15) and the extension expiration date (typically October 15), borrowers must provide (as applicable):

• Copy of the filed extension.

• Year-end profit and loss for prior year.

• Balance sheet for prior calendar year. After the extension expiration date, loan is not eligible without prior year tax returns.

NOTE: The total tax liability reported on IRS Form 4868 must be reviewed by the underwriter and compared to the borrower’s tax liability from the previous two years as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with the previous years may make it necessary for MiMutual to require the current returns in order to proceed.


10.04.2021 55

Taxpayer Identification Theft If the 4506-C transcripts do not match the borrower’s income and the borrower is a victim of taxpayer identification theft, the following conditions must be met to validate the borrower’s income:

• Proof of identification theft, as evidenced by one (1) of the following: o Proof ID theft was reported to and received by the IRS (IRS form 14039). o Copy of notification from the IRS alerting the taxpayer to possible identification theft.

• In addition to one (1) of the documents above, all applicable documents below must be provided: o Tax Transcript showing fraudulent information. o Record of Account from the IRS - Adjusted Gross Income and Taxable Income should match the

borrower’s 1040s. Validation of prior tax year’s income (income for current year must be in line with prior years).

Specific Income Documentation Requirements

Salaried Income

• YTD paystub

• W2s or personal tax returns (2 years), with W2 transcripts or tax transcripts (as applicable) to support

• VVOE

Hourly and Part-Time Income

• YTD paystub


• VVOE

• Stable to increasing income should be averaged over a 2 year period

Commission Income

• YTD paystub

• 2 years W2s if commissions are less than 25% of total income

• 2 years tax returns and W2 forms are required if commissions are greater than or equal to 25% of the total income

• W2 transcripts or tax transcripts (as applicable) are required to support

• VVOE

• Stable to increasing income should be averaged for 2 years

Overtime and Bonus Income

• YTD paystub

• W2s or personal tax returns for the last 2 years, with W2 transcripts or tax transcripts (as applicable) to support

• VVOE


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10.04.2021 56

2106 Expenses

• Employee Business Expenses must be deducted from the adjusted gross income, regardless of the income type

• Two years tax returns are required. If 2017 tax returns reflect 2106 expenses and 2018 tax returns show no expenses (due to tax law change), a 12-month average of expenses must be based on 2017 tax return and deducted from qualifying income

• Two years tax transcripts are required

Alimony/Child Support/Separate Maintenance

• Considered with a divorce decree, court-ordered separation agreement, or other legal agreement provided the income will continue for at least 3 years

• Evidence of receipt of full, regular, and timely payments for the most recent 12 months are required


• If the income is the borrower’s primary income source and there is a defined expiration date, even if it is beyond 3 years, the income may not be acceptable for qualifying purposes

Asset Depletion


• Calculate the depletion of the asset using a 3% return over the life of the loan; same as calculating a P&I payment for a mortgage o For borrowers > 59 ½ years of age, all post-closing retirement and liquid assets may be used in

the calculation if the assets are fully vested and unrestricted o For borrowers < 59 ½ years of age, all post-closing liquid (non-retirement) assets can be included

in the calculation ▪ Minimum liquid post-closing assets of $500,000 required to include asset depletion for

qualifying income o Business funds are not allowed for income calculation

Borrowers Employed by Family

• YTD paystub

• 2 years W2s and 2 years personal tax returns, with two years tax transcripts to support

• VVOE

• Borrower’s potential ownership in the business must be addressed

Capital Gains

• Must be gains from similar assets for 3 continuous years to be considered from qualifying income

• If the trend results in a gain, it may be added as income

• If the trend results in a loss, the loss must be deducted from total income

• 3 years of personal tax returns showing a consistent history of capital gains from similar assets are required. Three years tax transcripts are required to support.

• Document assets similar to the assets reported as capital gains to support the continuation of the capital gain income

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NOTE: Borrower’s potential ownership in the business must be addressed.


10.04.2021 57

Disability Income (Long-Term)

• A copy of the policy or benefits statement must be provided to determine current eligibility for disability payments, amount of payments, frequency of payments, and if there is an established termination date

• Termination date may not be within 3 years of the Note date o Note that reaching a specific age may trigger a termination date depending on the policy

Dividends and Interest Income

• 2 years of personal tax returns, with two years tax transcripts to support

• Documented assets to support the continuation of the interest and dividend income

Foreign Income

• YTD paystub

• W2 forms or the equivalent and personal tax returns reflecting the foreign earned income. Income must be reported on 2 years US tax returns, with two years tax transcripts to support

• VVOE

• All income must be converted to US currency

K1 Income/Loss on Schedule E

• If the income is $0 or positive, stable, and not used for qualifying, the K1 is not required

• If less than 25% ownership with income used in qualifying: o Verification of Employment Requirements apply o Year-to-Date income must be verified if the most recent K1 is more than 90 days aged prior to

Note date

• If 25% or greater ownership with income used in qualifying: o Verification of Employment requirements apply o Partnership/S Corp and Self-Employment requirements apply

• If the income is negative, the K1s for the applicable years are required and if ownership is 25% or greater, see self-employment requirements

• Two years tax transcripts are required to support

Non-Taxable Income Non-taxable income includes but is not limited to child support, military rations/quarters, disability, foster care, etc.

• Documentation must be provided to support continuation for 3 years

• Income may be grossed up by applicable tax amount. Tax returns must be provided to confirm income is non-taxable, with two years tax transcripts to support

• If the borrower is not required to file a federal tax return, income may be grossed up to 25%

Note Income

• A copy of the Note must be provided, and document the amount, frequency, and duration of the payment

• Evidence of receipt for the past 12 months and evidence of the Note income must be reflected on personal tax returns. Tax transcripts are required to support

• Note income must have a 3 year continuance

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10.04.2021 58

Rental Income

All Properties (Except Departing Primary Residence)

• Lease agreements must be provided if rental income is used for qualifying purposes o Current lease for each rental property, including commercial properties listed in Part I of

Schedule E of the 1040s -OR- Form 1007 or Form 1025 Market Rent Survey o If the current lease amount is less than the rental income reported on the tax returns,

justification for using the income from the tax returns must be provided and warrant the use of the higher income. If there is no justification, the lease amount less expenses will be considered for rental income/loss

o For leases that have a rollover clause or the property is in a state where all leases roll over, the following requirements must be met: ▪ Copy of most recent lease ▪ Current documentation to evidence receipt of rent (copy of check or deposit into bank

account) must be consistent with most recent lease

• If the property is an investment property (subject or non-subject) and is a seasonal rental, vacation rental, or short-term rental, the following requirements must be met: o Most recent 2 years tax returns reflect the property on Schedule E with consistent rents from

year to year o The county/city where the property is located does not have prohibitions or restrictions on

short-term rentals that impacts rental income received o If the property is a condominium or attached PUD, the HOA must allow for short-term rentals

and verification included in the loan file o Form 1007 or Form 1025 market rent survey to be in closed loan file o Copy of property management agreement to rent property o Copy of most recent lease agreement for property

• Personal Tax Returns – Two years o For properties listed on Schedule E, rental income should be calculated using net rental

income + depreciation + interest + taxes + insurance + HOA divided by applicable months minus PITIA

o If rental income is not available on the borrower’s tax returns, net rental income should be calculated using gross rents x 75% minus PITIA

o Two years tax transcripts are required to support

• Net rental income may be added to the borrower’s total monthly income. Net rental losses must be added to the borrower’s total monthly obligations

• If the subject property is the borrower’s primary residence (one unit property or one unit

property with an accessory unit) and generating rental income, the full PITIA should be included in the borrower’s total monthly obligations

• If the subject property is the borrower’s primary residence with 2-4 units, rental income may be included for the unit(s) not occupied by the borrower as long as the requirements for a lease agreement and/or tax returns above are met.

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10.04.2021 59

Departing Residence

If the borrower is converting their current primary residence to a rental property and using rental income to offset the payment, the following requirements apply:

• Copy of current lease agreement, copy of security deposit and evidence of deposit to borrower’s account.

• In lieu of a current lease agreement, Form 1007 or 1025, as applicable to support rents being

used for departing residence will be accepted

• Rent calculation is 75% of the market rent less PITIA

• Any positive rental income is disregarded for the income calculation and can only be used to offset the payment

Restricted Stock and Stock Options

• Eligible as qualifying income, provided the income has been consistently received for 2 years as identified on the paystubs, W2s, and tax returns as income, and the vesting schedule indicates the income will continue for a minimum of 2 years at a similar level as prior 2 years

• A 2 year average of prior income received from RSUs or stock options should be used to calculate

the income, with the continuance based on the vesting schedule using a stock price based on the lower of the current stock price or the 52 week average for the most recent 12 months reporting at the time of application. The income used for qualifying must be supported by future vesting based on the stock price used for qualifying and vesting schedule. Additional awards must be similar to the qualifying income and awarded on a consistent basis.


• Borrower must be currently employed by the employer issuing the RSUs/stock options in order for

the RSUs/stock options to be considered in qualifying income. Vested restricted stock units and stock options cannot be used for reserves if using for income to qualify.

• Stock must be a publicly-traded stock

Retirement Income Sources

Pension, Annuity, 401(k), IRA Distributions

• Existing distribution of assets from an IRA, 401(k) or similar retirement asset must be sufficient to continue for a minimum of three (3) years. o Distribution must have been set up at least six (6) months prior to Note date if there is no

prior history of receipt OR a 2 year history of receipt must be evidenced. o Distributions cannot be set up or changed solely for loan qualification purposes.

• Document regular and continued receipt of income as verified by any of the following: o Letters from the organizations providing the income. o Copies of retirement award letters. o Copies of federal income tax returns (signed and dated on or before the closing date). In lieu

of a signature, personal tax transcripts for the corresponding year may be provided. o Most recent IRS W2 or 1099 forms. o Proof of current receipt with two (2) months bank statements.

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NOTE: RSU income is capped at 35% of qualifying income (50% for loans locked on/after 8/23/2021)


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Two years tax transcripts are required. If any retirement income will cease within the first three (3) years of the loan, the income may not be used. Social Security Income

Social Security income must be verified by a Social Security Administration benefit verification letter. If any benefits expire within the first full three years of the loan, the income source may not be used in qualifying. Benefits for children or a surviving spouse that have a defined expiration date must have a remaining term of at least 3 years.

Trust Income Income from trusts may be used if guaranteed and regular payments will continue for at least 3 years.

• Regular receipt of trust income for the past 12 months must be documented.

• A complete copy of the Trust Agreement or Trustee Statement showing: o Total amount of borrower-designated trust funds o Terms of payment o Duration of trust o Evidence the trust is irrevocable o If trust fund assets are being used for downpayment or closing costs, the loan file must contain

adequate documentation to indicate the withdrawal of the assets will not negatively affect income

Self-Employed Income Sources Self-employed borrowers are defined as those individuals who have 25% or greater ownership interest or receive a 1099 statement to document income. Year-to-date is defined as the period ending as of the most recent tax return through the most recent quarter ending one month prior to the note date. For tax returns on extension the entire unfiled year is also required. Year to date financials (profit and loss statement and balance sheet) are not required if the income reporting is positive, not declining, and not counted in qualifying income. For example: 2020 returns in file and note date is 7/14/2021 would require 2021 YTD documentation through Q1 or through March 31, 2021. Note date of 8/14/2021 would require YTD documentation covering Q1 and Q2 or through June 30, 2021.

All self-employed income is required to be analyzed on FNMA Form 1084.

• A liquidity analysis must be included in the file if the income analysis includes income from boxes 1, 2, or 3 on the K-1 that is greater than distributions indicated on the K-1

• If a liquidity analysis is required and the borrower is using business funds for downpayment or closing costs, the liquidity analysis must consider the reduction of those assets

NOTE: If borrowers are using trust funds as an eligible asset, then trust income is ineligible for qualifying income


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Sole Proprietorship

• YTD through current quarter P&L and Balance Sheet o Tax returns for prior year are not a substitute for balance sheet o YTD P&L and YTD Balance Sheet may be waived if the borrower is a 1099-paid borrower who

does not actually own a business if all of the following requirements are met: ▪ Schedule C in Block 28 (Total Expenses) must be analyzed in relation to income in Block 7

(Gross Income). Expenses are less than 5% of income. ▪ Analysis of Blocks 8 (Advertising), 11 (Contract Labor), 16a (Mortgage Interest), 20

(Rent/Lease), and 26 (Wages) must indicate the borrower does not have any expenses in these categories

▪ Analysis of Blocks 17 (Legal and Professional Services) and Block 18 (Office Expense) indicate nominal or $0 expense

▪ Block C (Business Name) does not have a separate business name entity ▪ YTD income in the form of a written VOE or pay history is provided by the employer paying

the 1099. YTD income must support prior year’s income.

• 2 years personal tax returns, including all schedules, with two years tax transcripts to support


Partnership/S-Corporation

• 2 years personal tax returns. In lieu of a signature, personal tax transcripts for the corresponding

year may be provided

• 2 years tax transcripts to support

• 2 years K1s reflecting ownership percentage, if counting any income from this source in qualifying (K1 income, W2 income, capital gains, or interest/dividends), or if Schedule E reflects a loss

• 2 years business tax returns (1065s or 1120s), signed if 25% or greater ownership. In lieu of a signature, business tax transcripts for the corresponding year may be provided.

• Due date for business returns for Partnerships and S-Corporations is typically March 15 with an

extension for 6 months or typically September 15. After the extension date, the loan is not eligible without the filed tax return

• Business returns are not required if the income reporting is $0 or positive, not declining, and not counted as qualifying income

• YTD Profit & Loss statement and Balance Sheet if 25% or greater ownership


Corporation

• 2 years personal tax returns. In lieu of a signature, personal tax transcripts for the corresponding year may be provided


• 2 years business tax returns (1120), signed if 25% or greater ownership. In lieu of a signature, business tax transcripts for the corresponding year may be provided o Business returns must reflect percentage of ownership for borrower.

• YTD profit and loss statement and balance sheet if 25% or greater ownership.

• Stable to increasing income should be averaged for two (2) years.

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Unacceptable Income Sources • Rental income received from borrower’s primary residence (one unit property or one unit property with

accessory unit)

• Rental income received from a second home

• Income from trailing coborrowers

• Deferred compensation

• Retained Earnings

• Education Benefits

• Any unverified source

• Income that is temporary or a one-time occurrence

• Any income that is not legal in accordance with all applicable federal, state and local laws, rules and regulations. Federal law restricts the following activities and therefore the income from these sources is not allowed for qualifying: o Foreign shell banks o Medical marijuana dispensaries o Any business or activity related to recreational marijuana use, growing, selling or supplying of

marijuana, even if legally permitted under state or local law. o Businesses engaged in any type of internet gambling

Asset Requirements Beyond the minimum reserve requirements and in an effort to fully document the borrower’s ability to meet their obligations, borrowers should disclose and verify all other liquid assets. Eligible assets must be held in a US account.

Documentation Requirements Large deposits inconsistent with monthly income or other deposits must be verified if using for downpayment, reserves, or closing costs. It must be verified that the deposit was not the result of a new, undisclosed debt. Asset verification by a Fannie Mae approved asset validation provider is allowed in lieu of 2 months statements provided by the borrower. The asset verification must provide 60 days of account activity and include all items normally indicated on bank statements.

Checking and Savings Accounts, Money Markets, CDs • The two most recent, consecutive months’ statements (all pages) for each account are required

• 100% of the funds are eligible for calculation

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Publicly Traded Stocks/Bonds/Mutual Funds • The two months most recent statements (all pages) are required.


• Non-vested stock is ineligible

• Margin account and/or pledged asset balances must be deducted

Retirement Accounts (401(k), IRAs, etc) • Most recent statement or two most recent consecutive monthly statements (all pages) covering a two

month period

• Evidence of liquidation is required when funds are used for downpayment or closing costs

• Evidence of access to funds is required for employer-sponsored retirement accounts

• If the borrower is > 59 ½ years old, 70% of the vested value of retirement accounts, after reduction of any outstanding loans, may be considered toward the required reserves

• If the borrower is < 59 ½ years old, 60% of the vested value of retirement accounts, after reduction of

any outstanding loans, may be considered toward the required reserves

• Retirement accounts that do not allow any type of withdrawal are ineligible for use as reserves

• If the asset is being used as qualifying income, then it is an ineligible asset source

Cash Value of Life Insurance/Annuities • Most recent two statement(s) covering a two (2) month period are required

• 100% of the value is eligible for calculation, unless it is subject to penalties

1031 Exchange • Allowed on second home and investment purchases only. Reverse 1031 Exchanges are not allowed

• Documentation requirements: o HUD-1s/CDs for both properties o Exchange Agreement o Sales Contract for the exchange property o Verification of funds from the Exchange Intermediary

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Business Funds 100% of business funds may be used for downpayment and/or closing costs, and for reserves with additional requirements. Cash flow analysis required using most recent 3 months business bank statements to determine no negative impact to business based on withdrawal of funds. Statements must not reflect any NSFs (non-sufficient funds) or overdrafts.

• The borrower must have access to the funds

• If borrower(s) ownership in the business is less than 100%, the following requirements must be met: o Borrower(s) must have majority ownership of 51% or greater o The other owners of the business must provide an access letter to the business funds o Borrower(s) percentage of ownership must be applied to the balance of business funds for use by

the borrower(s)

• Business funds for reserves or a combination of personal/business funds for reserves will require the total amount of reserves to be double the regular requirement for the subject property and any additional financed REO

• If business funds are used for reserves, the max LTV is reduced to 65%

Gift Funds • Gift funds are permitted after borrower has at least 5% own funds into the transaction

• Gift funds cannot be used as reserves

• Gift funds not allowed on investment properties

• Donor must be an immediate family member, future spouse, or domestic partner

• An executed gift letter with the gift amount and source, donor’s name, address, telephone number, and relationship is required

• It must be verified that sufficient funds to cover the gift are either in the donor’s account, or have been transferred to the borrower’s account. Acceptable documentation includes the following: o A copy of the donor’s check and the borrower’s deposit slip o A copy of the donor’s withdrawal slip and the borrower’s deposit slip o A copy of the donor’s check to the closing agent o A HUD-1 Settlement Statement/CD showing receipt of the donor’s check. When the funds are not

transferred prior to settlement, MiMutual must document that the donor gave the closing agent the gift funds in the form of a certified check, cashier’s check, or other official check.

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Reserve Requirements Gift funds and borrowed funds (secured or unsecured) cannot be used for reserves. If business funds are used for reserves, the max LTV is reduced to 65%.

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Reserve Requirements Occupancy Loan Amount Number of Months of PITIA

Primary Residence

≤ $1,000,000 with LTV ≤ 85% 6

$1,000,001 - $1,500,000 6

$1,500,001 - $2,000,000 9

Second Home

≤ $1,000,000 6

$1,000,001 - $1,500,000 12

$1,500,001 - $2,000,000 18


$1,000,001 - $1,500,000 12

Non-Occupant CoBorrower An additional 6 months reserves required

Self-Employed Borrower Additional 3 months reserves required


If borrower owns up to 4 financed 1-4 unit properties, an additional 3 months PITIA reserves for each property is required based on the PITIA of the additional REO. If borrower owns more than 4 financed 1-4 unit properties, 6 months PITIA reserves are required for each property based on the PITIA of the additional REO. If excluded from the count of multiple financed properties, reserves are not required.


10.04.2021 66

Financing Concessions Interested party contributions include funds contributed by the property seller, builder, real estate agent/broker, mortgage lender, or their affiliates, or any other party with an interest in the real estate transaction. Interested party contributions may only be used for closing costs and prepaid expenses, and may never be applied to any portion of the down payment or contributed to the borrower’s financial reserve requirements.

Maximum IPCs are as follows:

LTV/CLTV/HCLTV Limit and Transaction Type Percent Limit

Primary residences and Second Homes with LTVs ≤ 80% 6%

Investment Properties (regardless of LTV) 2%

Seller Concessions All seller concessions must be addressed in the sales contract, appraisal, and HUD-1/CD. A seller concession is defined as any interested party contribution beyond the stated limits as shown in the prior section, or any amounts not being used for closing costs or prepaid expenses. If a seller concession is present, both the appraised value and the sales price must be reduced by the concession amount for the purposes of calculating LTV/CLTV/HCLTV.

Personal Property Any personal property transferred with a property sale must be deemed to have zero transfer value as indicated by the sales contract and appraisal. If any value is associated with the personal property, the sales price and the appraised value must be reduced by the personal property value for purposes of calculating the LTV/CLTV/HCLTV

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10.04.2021 67


Appraisal Requirements • Full appraisals are required on all transactions (1004 or 1073). See table below for appraisal

requirements. o Investment properties must contain a comparable rent schedule o Appraisals must be completed for the subject transaction. Use of a prior appraisal, regardless of the

date of the prior appraisal, is not allowed

• Appraisals must be ordered through your MiMutual-assigned AMC on all transactions, including

correspondent.

• Transferred appraisals are not allowed.

• Appraisal Update (Form 1004D) is allowed for appraisals that are over 120 days aged but less than 180 days aged from Note date. ▪ The appraiser must inspect the exterior of the property and provide a photo. ▪ Appraiser must review current market data to determine whether the property has declined in value

since the date of the original appraisal. If the value has declined since the original appraisal, a new full appraisal is required.

▪ The Appraisal update 1004D must be dated within 120 days of the Note date

• Collateral Desktop Analysis (CDA) ordered from Clear Capital is required to support the value of the appraisal (unless two full appraisals are obtained). o If the CDA returns a value that is ‘indeterminate’ or if the CDA indicates a lower value than the

appraised value that exceeds a 10% tolerance then one of the following requirements must be met: ▪ A Clear Capital BPO (Broker Price Opinion) and a Clear Capital Value Reconciliation of Three

Reports will be used for the appraised value of the property. MiMutual is responsible for ordering the BPO and the Value Reconciliation through Clear Capital

▪ A field review or 2nd full appraisal may be provided. The lower of the two values will be used as the appraised value of the property. MiMutual is responsible for providing the field review or second full appraisal

• Escrow holdback accounts are not eligible. Any repairs or improvements must be fully completed prior

to closing, and evidence of satisfactory completion is required.

• When 2 appraisals are required, the following apply: o Appraisals must be completed by 2 independent companies o The LTV will be determined by the lower of the two appraised values as long as the lower appraisal

supports the value conclusion. o The underwriter must review both appraisal reports and address any inconsistencies between the

two reports. All discrepancies must be reconciled. o When two appraisals are required, and both appraisals are done “subject to” (1004D required), it is

acceptable to provide only one 1004D. If only one 1004D is provided, it should be for the appraisal that the value of the transaction is being based on.

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NOTE: If a second appraisal is required, MiMutual will cover the cost.

Jumbo Underwriting Guidelines | Jumbo Choice

10.04.2021 68

• For properties purchased by the seller of the property within 90 days of the fully executed purchase contract, additional requirements will apply: o Second full appraisal is required o Property seller on the purchase contract must be the owner of record o Increases in value should be justified and documented with commentary from the appraiser and

recent paired sales

Appraisal Requirements by Loan Amount

First Lien Loan Amount Appraisal Requirement


≤ $2,000,000 One (1) Full Appraisal



> $1,500,000 Two (2) Full Appraisals

Eligible Collateral Eligible collateral includes:

• 1-4 unit owner occupied properties




• Modular homes (not manufactured)

• Condominiums – Attached – (must be FNMA Warrantable) o CPM certificates allowed o Full review allowed, warranty to FNMA guides o Limited review allowed for attached units in established condominium projects:

▪ Eligible transactions as per FNMA guides ▪ Projects located in Florida are not eligible for limited review

o Projects with 2-4 units – no condominium review or condominium warranty is required. FNMA basic requirements only

o Florida condominiums limited to 50% LTV/CLTV/HCLTV on investment transactions o Condominium documents to support condo eligibility review must be no older than 120 days from

the Note date

• Condominiums – Detached (including site condos) o No project review or condominium warranty is required o FNMA basic requirements apply

(continued on next page)

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NOTE: These requirements do not apply if the seller is a bank that received the property as a result of foreclosure or deed-in-lieu


10.04.2021 69


▪ Must be common and typical for the area, with a maximum 35% land-to-value ratio ▪ No income-producing attributes ▪ For transactions > 20 acres:

• Transaction must be 5% below maximum LTV/CLTV allowed for program o For example, if the borrower qualifies for a loan at 90% LTV based on the transaction,

FICO score, loan amount, and reserves, then the maximum allowed would be 85%

• 20, 25, 30 year fixed rate terms only

• Properties subject to existing oil/gas leases must meet the following: o Title endorsement providing coverage to MiMutual against damage to existing improvements

resulting from the exercise of the right to use the surface of the land which is subject to an oil and/or gas lease


constructed is permitted. o Must be connected to public water

• Properties with solar panels must meet FNMA requirements

Ineligible Collateral Ineligible collateral includes:

• Co-Ops

• Properties subject to leasehold

• Unique properties / log homes

• 2-4 unit second homes

• Mixed use properties

• Model home leasebacks

• Non-warrantable condos

• Condotels

• Manufactured/Mobile homes

• Any properties with > 40 acres. Appraiser must indicate total acreage. It is unacceptable to have the property appraised with only 40 acres in order to meet eligibility.

• Working farms, ranches, or orchards

• Properties for which the appraisal indicates a Condition Rating of C5 or C6, or a Quality Rating of Q6


• Properties with a private transfer fee covenant unless the covenant is excluded under 12 CFR 1228 as an excepted transfer fee covenant

• Tenants-in-Common (TIC) projects

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10.04.2021 70

General Provisions

FEMA Declared Disaster Area Policy The FEMA Declared Disaster Area Policy applies to all areas eligible for individual and/or public assistance due to a federal government disaster declaration.

Effective Date of Disaster Policy The disaster-area policy becomes effective as of the incident period end date for the disaster/event. FEMA publishes the incident period along with the declaration date once the area is presidentially declared. For example, refer to the following dates to understand when property re-inspection requirements apply:

• Disaster Incident Period:

o Begin Date: January 15 o End Date: January 17

• Disaster Declaration Date: February 2

• Effective Date for Disaster Procedures: January 17

Based on the dates noted in the above example, all appraisals performed on or before January 17 would require the appropriate re-inspection or review. Appraisals performed after January 17 would continue to require written certification by the appraiser that indicated whether the property was free from damage and whether the disaster had any effect on value or marketability. If there was damage, the extent of that damage needs to be addressed. The disaster policy will be in effect for transactions during an ongoing disaster and transactions with a Note date that is within ninety (90) days of the end date of the disaster incident period. The disaster policy is also in effect for loans with a post-closing disaster and prior to date of sale to investor. Appraisal and Re-Inspection Requirements To ensure the property value has not been impacted by the disaster, a post-disaster property inspection is required. The inspection may be performed by the original appraiser, another licensed appraiser, or licensed property inspection company. Appraisal Performed On or Before Disaster Incident End Date The property inspection must identify the following:

• Property is free from damage and the disaster had no effect on value or marketability.

• If the re-inspection indicates damage, the extent of the damage must be addressed. Completion of repairs is required as evidenced by Form 1004D/442, Appraisal Update and/or Completion Report, or other post- disaster inspection report, with photos of interior, exterior, and neighborhood.

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10.04.2021 71

Standard Appraisal Performed After Incident Period End Date for Disaster Appraisal must include written certification by the appraiser that:


• If the appraisal indicates damage, the extent of the damage must be addressed. Completion of repairs is required as evidenced by Form 1004D/442, Appraisal Update and/or Completion Report, with photos of interior and exterior.

Please note that FEMA makes updates to their state lists. Closely monitor FEMA’s online reference at http://www.fema.gov/news/disasters.fema.

Power of Attorney Subject to the restrictions and requirements listed below, MiMutual will allow the use of a Power of Attorney (POA) to execute the security instrument, note and other closing documents on behalf of the borrower(s).

Requirements

• POA to be recorded along with security instrument in those states requiring recordation.

• The person(s) name(s) granting the power of attorney must match the name on the security instrument.

• The form, signatures, and recording requirements of the applicable state must be followed

• The POA must be valid at the time the affected loan documents were signed.

• The POA must be notarized and unless otherwise required by applicable law, must reference the address of the subject property.

• Only relatives (as defined by FNMA), fiancé, fiancée or domestic partners of the borrower may be named to act as an attorney-in-fact.

Restrictions on the Use of a Power of Attorney Except as required by applicable law, the following restrictions apply:

• Borrower(s) must sign at least the initial 1003/disclosures.

• POAs not allowed on Cash Out transactions.

• POAs not allowed on Texas 50(a)(6) transactions.

Title Requirements Title must be held as Fee Simple. Title to the subject property must not contain an unacceptable title impediment, including unpaid real estate taxes and/or survey exceptions. If surveys are not commonly required in a particular jurisdiction, an ALTA 9 Endorsement must be provided. If it is not customary in a particular area to supply either the survey or an endorsement, the title policy must not have a survey exception. The title commitment cannot be dated more than 90 days prior to the Note date. Unless otherwise stated here, Fannie Mae title insurance guidelines should be followed.

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http://www.fema.gov/news/disasters.fema

Jumbo Underwriting Guidelines | Jumbo Max

10.04.2021 72

Jumbo Max

The Jumbo Max program provides jumbo financing that does not require mortgage insurance. Unless otherwise addressed in these guidelines, follow the most recent FNMA Selling Guide or FHLMC Seller/Servicer

Guide.


Available Products 30, 15 year fixed

Qualifying Rate Note rate

Documentation Requirements Full doc. Manual underwriting requirements apply, regardless of AUS documentation waivers. However, DU findings are required on all Jumbo loans to demonstrate the borrower is not eligible for an Agency product.

Occupancy

Primary Residence A primary residence is the property the borrower occupies as his or her principal residence. At least one of the borrowers must occupy, be on title to the property, and execute the Note and the security instrument. A borrower may not maintain more than one primary residence at any given time.

• 1-4 unit detached, attached, PUD, and eligible condominiums

Second Home The property must be occupied by the borrower from time-to-time and is suitable for year-round use. Typically the property is located in either a resort or vacation area or for convenience in a city where the borrower works when the primary residence is in a distant suburb.

• 1 unit detached, attached, PUD, and eligible condominiums

• Property may not be a time share, subject to a rental agreement or other shared ownership arrangements.

• The property must be a reasonable distance from the borrower’s primary residence.

• Rental income and expenses on Schedule E of the borrower’s personal tax return(s) must not exceed 30 rental days.

• Rental income from a second home cannot be used to qualify the borrower.

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10.04.2021 73

Investment Property (Non-Owner Occupied) An investment property is owned by the borrower but is not occupied by the borrower.

• 1-4 unit detached, attached, PUD, and eligible condominiums.

For cash-out refinance transactions on an investment property, a borrower signed Business Purpose & Occupancy Affidavit indicating the loan purpose is for the acquisition, improvement or maintenance of a rental property is required. See Appendix A for form of Affidavit. Cash out loan proceeds used for any personal use are not eligible.

LTV/CLTV/HCLTV

Fixed Rate

Purchase and Rate/Term Refinance Cash Out Refinance

Occupancy / Units

Max Loan Amount

Max LTV/CLTV

Min Score

Min Reserves

Occupancy / Units

Max Loan Amount

Max LTV/CLTV

Min Score

Min Reserves

Maximum Cash Out

Primary 1 Unit

$2,000,000 89.99% * 680 12

Primary 1 Unit

$2,000,000 89.99% * 740 12 $500k

$2,000,000 80% 660 6 $2,000,000 80% 680 6 $500k

$2,500,000 80% 720 12 $3,000,000 80% 740 18 $500k

$3,000,000 80% 740 18

Second Home

$2,000,000 89.99% * 680 12

Second Home

$2,000,000 75% 700 12 $350k

$2,000,000 80% 660 6 $3,000,000 75% 740 18 $350k

$2,500,000 80% 720 12

$3,000,000 80% 740 18

Primary 2-4 Unit

$2,000,000 80% 700 6 Primary 2-4 Unit

$2,000,000 75% 700 6 $500k

Non-Owner

Occ 1 Unit

$2,000,000 80% 680 12 Non-Owner

Occ 1 Unit

$1,000,000 75% 680 12 $350k

$2,000,000 70% 660 12 $2,000,000 75% 720 12 $350k

$2,500,000 75% 720 12 $2,000,000 70% 680 12 $350k

Non-Owner Occ 2-4

Unit

$2,000,000 75% 680 12 Non-Owner Occ 2-4

Unit

$1,000,000 70% 680 12 $350k

$2,000,000 65% 660 12 $2,000,000 70% 720 12 $350k

$2,500,000 70% 720 12 $2,000,000 65% 680 12 $350k

* 30 year fixed rate only for LTV/CLTV > 80%

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10.04.2021 74

Program Highlights

Underwriting Loans must be underwritten manually to these guidelines.

Mortgage Insurance No PMI allowed

Minimum Loan Amount Must be $1 over the current one-unit conforming limit

DTI Max 43%.

Minimum Credit Req'mts Non-traditional credit is not acceptable. All borrowers must have a minimum of 2 credit scores. Each borrower must have a minimum of 3 open tradelines active for the past 24 months. For borrowers with mortgage or rental history, borrower must have 0x30 lates in the past 24 months.

Eligible Property Types Single family, PUD, condo (Agency eligible only), and 2-4 units.

Declining Property Values Reduce maximum LTV by 10% (max 80% LTV) for any property located in an area of declining property values as reported by appraiser.

Condominium Restrictions Fannie Mae or Freddie Mac warrantable condos. Minimum 400 square feet.

State Restrictions Texas 50(a)(6) not permitted.

Appraisal Restrictions 2 full appraisals required for loan amounts > $1.5MM. If a second appraisal is required, MiMutual will cover the cost.

Rate/Term Refinance Cash out must be the lower of $2,000 or 1% of the new loan amount.

First Time Homebuyer • Owner-occupied only

• 12mos PITI reserves required

• Max $1,500,000 loan amount

• Max 80% LTV/CLTV

Seller Contribution Maximum 6% of sales price for owner-occupied and second homes. Maximum 2% for non-owner occupied.

Higher Priced Covered Transactions Not allowed

Ineligible Features • Balloon

• Interest only

• Prepayment penalty

• Escrow holdback • Recast / reamortization • Temporary buydown

• Higher Priced Covered Transactions

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Borrowers Borrowers must have reached the age at which the mortgage Note can be enforced in the jurisdiction where the property is located. There is no maximum age limit for a borrower. All borrowers must have a valid SSN. There is a maximum of 4 borrowers per loan. MiMutual is required to order a FraudGuard report to identify any borrower information discrepancies and indications of possible fraudulent activity.

Eligible

• US Citizens

• Permanent Resident Aliens

o Copy of valid resident alien card must be included in loan file

• Non-Permanent Resident Aliens o Must be legally present in the US with an acceptable visa type:

▪ E Series (E-1, E-2, E-3) ▪ G Series (G-1, G-2, G-3, G-4, G-5) ▪ H Series (H-1B, H-1C) ▪ L Series (L-1, L-1A, L-1B, Spouse L-2 with EAD) ▪ NATO Series (NATO 1-6) ▪ O Series (O-1) ▪ TN-1, Canadian NAFTA visa ▪ TN-2, Mexican NAFTA visa

o Must have a valid SSN o Must have a minimum of 2 year employment history in the US and qualifying income must be

from the US o Must be able to verify that current employment has a probability of 3 year continuance. VOE

form may be used to document o Must have a 2 year credit history in the US and must meet minimum credit requirements o Funds to close must be deposited in a US financial institution. No funds to close from outside the

US are allowed.

• First Time Homebuyers o Defined as a borrower who as not had ownership interest in a property within the last 3 years

from the application date o Owner-occupied, primary residences only o FTHBs limited to a maximum of 80% LTV/CLTV o See product matrix for loan limits and other requirements

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10.04.2021 76

• Inter Vivos Revocable Trusts o Trust must be established by one or more natural persons, individually or jointly o The individual(s) establishing the trust must be the primary beneficiary/beneficiaries o If the trust is established jointly, there may be more than one primary beneficiary as long as the

income or assets of at least one of the individuals establishing the trust will be used to qualify for the mortgage.

o At least one of the trustees must be either the individual establishing the trust, or an institutional trustee that customarily performs the duties of a trustee and is duly authorized to act as a trustee under applicable state law.

o The mortgage and trust documents must meet Agency eligibility criteria including title and title insurance requirements, as well as applicable state laws that regulate the making of loans to inter-vivos revocable trusts.

o The trustee(s) must have the power to mortgage the security property for the purpose of securing a loan to the party (or parties) who are the borrower(s) under the mortgage or deed of trust note.

Ineligible

• Non-occupant coborrowers

• Any borrower without a Social Security Number (ITINs are not eligible)


• Borrowers with diplomatic immunity

• Irrevocable Trusts

• Corporations, limited partnerships, general partnerships, and LLCs


• Borrowers who are party to a lawsuit

Multiple Properties Financed Borrowers may not own more than four (4) residential 1-4 unit financed properties regardless of the occupancy of the subject property. Borrowers must have six (6) months PITI reserves for each additional financed property owned. Financed properties held in the name of an LLC or other corporation, commercial properties, and unimproved land can be excluded from the calculation of number of properties financed.

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10.04.2021 77

Purchases • Must adhere to Agency guidelines.

• LTV/CLTV is calculated using the lesser of the purchase price or the appraised value of the subject property.

• If seller has taken title to the subject property 90 days prior to the date of the sales contract, the following requirements apply: o Property seller on the purchase contract must be the owner of record o LTV/CLTV will be based on the lesser of the prior sales price or the current appraised value.

• Personal property may not be included in the purchase agreement/sales contract. Personal property

items should be deleted from the sales contract or reasonable value must be documented and the sales price adjusted. Items that are customary to residential real estate transactions such as lighting fixtures, kitchen appliances, window treatments and ceiling fans are not considered personal property.

Rate/Term Refinance Restrictions • Properties listed for sale are ineligible for refinance unless the listing was withdrawn (or expired) prior

to the date of closing.

• Minimum of 6 months seasoning from the note date of the new transaction required if previous refinance was cash-out, including the pay-off of a non-seasoned subordinate lien.

• For properties purchased within six (6) months of closing date the LTV will be based upon the lesser of the original sales price or the current appraised value conclusion from the appraiser. Original sales price will be determined from the Closing Disclosure from the subject acquisition transaction. o Inherited properties are exempt from this seasoning requirement. LTV will be calculated off current

appraised value.

• For properties purchased more than six (6) months prior to the closing date the current appraised value may be used to calculate LTV.

• The mortgage amount may include the:

o Principal balance of the existing first lien. o Pay off of a purchase second lien with no draws exceeding $2,000 within the past 12 months from

date of application. Withdrawal activity must be documented with a transaction history of the line of credit. 12 months seasoning is not required.

o Pay off of a co-owner pursuant to a written agreement. o Financing of the payment of prepaid items and closing costs. o Pay off of a non-purchase second lien seasoned a minimum of 12 months from date of application.

The second lien must not evidence draws exceeding $2,000 within the past 12 months from date of application. Withdrawal activity must be documented with a transaction history of the line of credit.

• Cash back to the borrower is limited to the lesser of $2,000 or 1% of the new mortgage loan

• Principal reduction is permitted up to a maximum of $2,000

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NOTE: Loans that are bank-owned or relocation sales are exempt from the above requirements.


10.04.2021 78

Cash Out Refinance Restrictions • Borrower must have held title for a minimum of 6 months from closing date. Inherited properties are

exempt from this seasoning requirement. LTV will be calculated off current appraised value.

• Properties listed for sale are ineligible for refinance unless the listing was withdrawn (or expired) prior to the date of closing.

• Texas 50(a)(6) loans are ineligible.

• Cash out is limited to the maximum amounts stated on the LTV/CLTV/HCLTV Matrix

Continuity of Obligation For a refinance transaction to be eligible, there must be a continuity of obligation of the outstanding lien that will be paid through the refinance transaction. Continuity of obligation is met when any one of the following exists:

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

• The borrower has been on title and residing in the property for at least 12 months and has 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 natural person or a limited liability company (LLC) as long as the borrower owns at least 25% of the LLC prior to transfer. Transfer of ownership from a corporation to an individual does not meet the continuity of obligation requirement.

• The borrower has recently been legally awarded the property (divorce, separation, or dissolution of a

domestic partnership). Loans with an acceptable continuity of obligation may be underwritten as either cash-out or limited cash-out refinance transactions based on the requirements for each type of transaction.

Delayed Financing Refinances Delayed financing refinances in which the borrowers purchased the subject property for cash within the last ninety days (90) from the date of the application are eligible. Cash back to the borrower in excess of the original purchase price or appraised value (whichever is less) is not allowed. Delayed financing refinances are underwritten as rate/term refinances and are not subject to cash-out refinancing program limitations. The original purchase transaction must be documented by a Closing Disclosure confirming that no mortgage financing was used to obtain the subject property.

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10.04.2021 79

Land Contract /Contract for Deed The payoff of an installment loan land contract is not eligible.

Construction Loan Refinancing Construction loan refinances are eligible as rate/term or cash-out refinances and must meet the following criteria:

• Single closing construction/permanent loan refinances that include a modification are ineligible

• Borrower must have held title to the lot for a minimum of 6 months prior to the closing of the permanent loan.

• The LTV will be based on the current appraised value if the borrower has held title to the lot for 12 or more months prior to the closing date of the permanent loan.

• If the lot was acquired less than 12 months before the closing date of the permanent loan the LTV will be based on the lesser of a) the original purchase price of the lot plus the total acquisition costs (sum of construction costs) or b) the current appraised value of the lot plus the total acquisition costs.

• Appraiser’s final inspection is required.

• A Certificate of Occupancy is required from the applicable governing authority. If the applicable

governing authority does not require a certificate of occupancy proof must be provided.

• Cash out is limited to the maximum amounts stated on the LTV/CLTV/HCLTV Matrix.

• Construction loan refinances in which the borrower has acted as builder are not eligible.

Non-Arm’s Length Transactions All of the parties to a transaction should be independent of one another. Except as indicated below, if a direct relationship exists between or among the parties, the transaction is a non-arm’s length transaction and the related loan is not eligible. The following non-arm’s length transactions are eligible, provided that such transactions and the related circumstances are properly documented:

• Sales or transfers between members of the same family. Transaction may not be due to any adverse circumstances.

• Property seller acting as his or her own real estate agent.

• Borrower acting as his or her own real estate agent.

• Borrower is the employee of the originating lender.

• Borrower purchasing from his or her current landlord (cancelled checks or bank statements required to verify satisfactory pay history between borrower and landlord).

• Investment property transactions must be arm’s length.

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Secondary / Subordinate Financing • New subordinate financing is permitted on purchase and rate/term refis only, up to the maximum

allowable LTV/CLTV/HCLTV. Only institutional financing is permitted.

• Subordination of an existing loan is permitted on purchase and rate/term refinance transactions up to the maximum allowable LTV/CLTV.

• The CLTV should be calculated using the unpaid principal balance on all closed-end subordinate financing and the full amount of any HELOCs (whether or not funds have been drawn)

• Subordinate liens must not have negative amortization, no balloon within 5 years, and no prepayment penalties.

• In cases in which a HELOC is resubordinated to the subject mortgage, monthly amount on credit report will be used. If no monthly payment amount is shown on credit report, a 1% minimum payment of the maximum line amount will be used for qualifying. A credit report supplement showing the minimum monthly payment is also acceptable. If HELOC has a zero balance and no draws within 24 months of application, no payment need be included in DTI. Withdrawal activity must be documented with a transaction history for the line of credit.

Credit Requirements For all transaction types, credit documents may not be older than 90 days from the Note date.

Bankruptcy/Foreclosure/Deed-in-Lieu/Short Sale At least 7 years must have elapsed since bankruptcy discharge or dismissal, foreclosure, Notice of Default (NOD), short sale, or deed-in-lieu measured from the date of completion to the date of application. A satisfactory letter of explanation for the event from the borrower is required. Borrower must also show reestablished credit and meet the minimum credit requirements.

Modifications Only lender-initiated modifications on owner occupied properties (with proof that they were not caused by a distress situation) are permitted.

• The borrower must have made 48 consecutive months of timely mortgage payments on the modified loan before closing on the refinance mortgage loan.

• Restructured loans in which the terms of the original transaction have been changed, resulting in a partial or absolute forgiveness of debt, or a restructure of debt are not eligible: o Forgiveness of a portion of principal and or interest in either the first or the second mortgage. o Application of a principal curtailment or on behalf of the investor to simulate principal forgiveness. o Conversion of any portion of the original mortgage debt to a subordinate mortgage or conversion of

any portion of the original mortgage debt from secured to unsecured.

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Judgments/Liens/Collections A satisfactory explanation for any delinquent credit from the borrower is required. The borrower must pay off all delinquent credit that has the potential to impact lien position. Collection accounts or charged-off accounts do not need to be paid off if the balance of an individual account is less than $1,000, or if there are multiple accounts, the total balance of all accounts cannot exceed $2,500.

Mortgage/Rental History A minimum of 24 months verified housing history is required. Housing payment history must reflect 0x30 in the most recent 24 months. Mortgage/rental history may be documented as follows:

• A 24 month mortgage payment history from an institutional lender, including the month prior to closing, as verified through (i) credit bureau report reference for 24 months, (ii) 24 months canceled checks, or (iii) most recent 12 months canceled checks with a VOM for the prior 12 months.

• For rental verification a standard VOR completed by a professional management company or 24 months

bank statements or canceled checks are required.

• If a borrower is refinancing a privately held mortgage, the following payment verification requirements apply: o The privately held mortgage payments must be verified with either cancelled checks or bank

statements (if the payment is automatically withdrawn from the borrower’s account). o Evidence must be included in the loan file that the lien being paid off is a current recorded lien against

the subject property. Borrowers with no mortgage/rental history due to a residence scenario requiring no mortgage or rental payments are eligible with a satisfactory letter of explanation.

Inquiries All inquiries that have taken place within 120 days of the credit report date must be explained by the borrower and documented accordingly. Borrower must be qualified with any new debt.

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Credit Report

Minimum Credit Requirements Each borrower contributing income must have 3 open and active trade lines for 24 months with a 24 month history. 2 of the 3 trade lines must show activity within the last 12 months from date of application. One trade line must be an installment, rental or mortgage account. MiMutual may consider a borrower not meeting the above trade line requirement if the credit history meets the following:

• No fewer than eight (8) trade lines are reporting, one (1) of which must be a mortgage or a rental history.

• At least one (1) trade line has been open and reporting for a minimum of 12 months.

• The borrower has an established credit history for at least 10 years. Non-traditional/alternative credit accounts are not considered acceptable trade lines. Authorized user accounts are not considered acceptable trade lines. Trade lines may not show significant adverse history.

Credit Score Requirements The representative credit score for qualification purposes for an individual borrower is the middle score of the three (3) scores reported. If two (2) scores are reported the representative credit score is the lower of the two scores. Credit scores from all three repositories must be requested (Equifax, Experian and TransUnion).

• For multiple borrowers, the credit score is the lowest of all representative credit scores.

• If only one credit score or no credit score is reported, borrower is not eligible. A minimum of two credit scores is required.

• No borrower in a transaction may have frozen credit. If a borrower has frozen credit and unfreezes their credit after the original credit report was ordered, a new credit report must be obtained to reflect current updated information for evaluation.

See the LTV Matrix for minimum credit score requirements.

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Debts and Liabilities

Debt-to-Income Ratio The Debt-to-Income (DTI) ratio is based on the total of existing monthly liabilities and any planned future monthly liabilities divided by gross monthly income. Liabilities include but are not limited to all housing expenses, revolving debts, installment debts, other mortgages, rent, alimony, child support, and other consistent and recurring expenses. Refer to the Program Highlights for the maximum allowable DTI. Installment Debt

• Installment debt, including car lease payments, must be included in the qualifying ratio regardless of months remaining.

• Debt that is not a contingent liability must be included in the DTI o A contingent liability is defined as a debt paid by a party or entity other than the borrower where

said party or entity and not the borrower is the primary obligor. If the borrower is the primary obligor on any liability, the debt must be included in the DTI

o Example: a borrower financed the purchase of an automobile for their business and the business pays the loan. If the loan is in the borrower’s name, this debt must be included in the DTI

• Real estate owned by the borrower where the borrower is not on the Note may be excluded from DTI with 12 months cancelled checks showing another party is making the payments. Tax and Insurance amounts on the property must be documented and the full amount of taxes and insurance must be included in the DTI.

• PITI on real estate owned pending sale must be included in the DTI

• Borrowers who have entered into an IRS repayment plan must have a minimum of three months timely pay history. Credit report and title must not indicate an IRS tax lien.

• Student loans must be included as a long term debt even if payments are deferred. If the monthly amount of a student loan is not shown on the credit report, a payment of 1% of the balance may be used for qualifying.

• Payments related to a 401(k) loan do not need to be included in total debt obligation.

• Child support payments with 10 months or less remaining do not need to be included in total debt obligation.

• Installment debt may be paid off to qualify either before or at closing using cash out proceeds

• Gift funds may not be used to pay off debt to qualify

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Revolving Debt

• All revolving debt is included for qualifying regardless of number of payments remaining.

• The monthly payment amount of a revolving account shown on the credit report may be used for qualifying.

• If the monthly payment amount of a revolving account is not shown on the credit report a payment of five percent (5%) of the balance may be used for qualifying.

• The payment may only be excluded if the account is documented as paid in full and closed.

• Revolving debt may be paid off to qualify either before or at closing using cash out proceeds. Documentation that the revolving debt has been paid off and the account is closed is required.

• Gift funds may not be used to pay off debt to qualify.

• For open 30-day charge accounts (for example, American Express), the borrower must have sufficient verified liquid assets to pay off the balance in addition to any reserve requirements to exclude the payment.

• Debt that is not a contingent liability must be included in the DTI. A contingent liability is defined as

a debt paid by a party or entity other than the borrower where said party or entity is the primary obligor. If the borrower is the primary obligor on any liability the debt must be included in the DTI. o Example: A borrower purchased an automobile for their business. The business pays the loan

however the loan is in the borrower’s name. This debt must be included in the DTI.

Home Equity Line of Credit (HELOC) For HELOC loans paid off at closing, the line must be closed to any future draws. A requirement on the title commitment for payoff and cancellation of HELOC is acceptable to document. Subordination of HELOC loans is permitted up to maximum CLTV per matrix. The CLTV should be calculated using the full amount of any HELOCs (whether or not funds have been drawn).

Income/Employment Requirements All income sources and method of income calculation must meet most recent Appendix Q Standards for Determining Monthly Debt and Income. The loan file should include an Income Analysis form detailing income calculations. Appendix Q states that a borrower with a 25 percent or greater ownership interest in a business is considered self-employed. Any borrower for whom the ownership of 25 percent or more of a corporation, limited liability company, partnership, sole proprietorship or other entity appears in the loan file must have the supporting documentation that is required by the relevant portions of the Self-Employed Borrowers subsection below. This documentation is required even if the borrower is a salaried employee of such business entity and/or another company, and even if MiMutual only relied upon the borrower’s salary or other income to establish eligibility. All required documentation as described here and in the following sections must be obtained prior to closing.

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Employment and Income Stability Borrower(s) must have a minimum of 2 years employment and income history. Gaps in employment over 30 days during the most recent 2 year period require a satisfactory letter of explanation from the borrower. All borrowers contributing income for qualification must be employed at present employment for a minimum of 6 months to qualify if there is a gap in employment greater than 6 months during the previous 2 years.

Tax Transcript Requirements Two years wage transcripts, as well as two years tax return transcripts, must be obtained prior to closing on all loans, regardless of income type.

Income Documentation Requirements Appendix Q states that a borrower with a 25% or greater ownership interest in a business is considered self-employed. Any borrower for whom the ownership of 25 percent or more of a corporation, limited liability company, partnership, sole proprietorship or other entity appears in the loan file must have the supporting documentation that is required by the relevant portions of the Self-Employed Borrowers subsection. This documentation is required even if the borrower is a salaried employee of such business entity and/or another company, and even if MiMutual only relied upon the borrower’s salary or other income to establish eligibility.

All required documentation as described in these guides must be obtained prior to closing.

Salaried Borrowers

• Completed, signed and dated final Uniform Residential Mortgage Application. Most current form must be used.

• W-2’s from all employers for the past 2 years. All W2s must be computer generated.

• If the borrower does not have 2 years of employment due to previously being in school, a copy of the school transcript is required.

• Most recent paystubs, covering a 30 day period with YTD earnings. All paystubs must be computer

generated.

• Tax returns are not required for salaried borrowers if wage income is the only source of income used for qualification. See the Self-Employed Borrowers section below for additional requirements for salaried borrowers who also own 25% or more of a business or other entity.

• Unreimbursed business expenses prior to 2018 must be deducted from income. Borrower must be

self-employed in order to deduct business expenses.

• Borrowers employed in a family business must provide evidence that they are not owners of the business with a CPA letter from the business and personal tax returns.

• Signed IRS Form 4506-C.

Salaried Borrowers Who Also File Self-Employed and/or Supplemental Income/Loss Tax Return See the Self-Employed Borrowers section below for additional requirements for salaried borrowers who also own 25% or more of a business or other entity including Schedule C (Sole Proprietorship) and those organized as passthrough entities.

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Salaried Borrowers with Commission/Bonus

• For borrowers receiving bonus, commission, or any other non-base salary compensation in addition to base salary, a 2 year history of the receipt of the income is required.

• This must be addressed with a written VOE breaking down the bonus or commission income for the past 2 years, further supported by a year-to-date paystub and most recent signed two (2) years tax returns.

• A year-to-date paystub, W-2’s and tax returns alone will not satisfy the documentation requirements for bonus, commission or any other non-base salary compensation.

Verbal VOE

A Verbal VOE dated within 5 business days prior to closing must be documented in writing, or for loans locked on/after September 3, 2021, within 10 calendar days. The verbal VOE must cover 24 months of employment. If the borrower has changed jobs during the past two years the verbal VOE must show the start and end dates for each job. The VOE(s) documenting prior employment, not including the current employer, must be dated within 10 calendar days of closing. Any employment gaps one month or greater must be addressed with a satisfactory letter of explanation from the borrower. Closing is defined as the notary date on the Security Instrument. Tax Transcripts

Two years tax transcripts are required to be obtained from the IRS. Wage transcripts are acceptable for W2 borrowers. Borrower-pulled transcripts are not acceptable. The IRS transcripts and the supporting income documentation must be consistent.

Self-Employed Borrowers

• Borrowers with a 25 percent or greater ownership interest in a business are considered self-employed and will be evaluated as a self-employed borrower for underwriting purposes.

• Completed, signed and dated final Uniform Residential Mortgage Application. Most current form

must be used.

• Most recent two (2) years personal tax returns (including all schedules) required for all business income, regardless of whether or not the business income (profit or loss) is used to qualify. The tax returns must be signed and dated prior to closing.

• Most recent two (2) years business tax returns (including all schedules) required for all business

income used for qualifying. Business tax returns also required if the personal tax return schedules show a loss in the prior year for any business, regardless of whether or not the business income is used to qualify, in order to calculate the average loss. The tax returns must be signed and dated prior to closing.

• Self-employed borrowers using wage income to qualify paid by their business need to fully document the income with W-2’s for the past 2 years and most recent paystubs, covering a 30 day period with year-to-date earnings. W-2 and paystubs must be computer generated.

• Signed IRS Form 4506C.

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P&L and Balance Sheet Requirements

MiMutual will diligently review the actions of the business and any impact the current economic environment has taken on the flow of income in order to determine if the borrower’s income is stable and there is a reasonable expectation of continuance. The underwriter must include comments/justification of their analysis to clearly explain their conclusion of the effect to the business. Due to the pandemic’s continuing impact on businesses, the following documentation is now required to be obtained to support the decision that the self-employment income meets requirements:

• Either: o An audited YTD P&L, no older than 60 days from the Note date, reporting business revenue,

expenses, and net income up to and including the most recent month preceding the loan application date, and a Balance Sheet OR

o An unaudited YTD P&L, no older than 60 days from the Note date, signed by the borrower reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date, and business bank statements from the most recent three months represented on the YTD P&L, and a Balance Sheet. ▪ For example, the business bank statements should be from March through May 2021 for

a YTD P&L statement dated through May 31, 2021 ▪ The three most recent bank statements must support and/or not conflict with the

information presented in the current YTD P&L statement. Otherwise, MiMutual must obtain additional statements or other documentation to support the information from the current YTD P&L statement.

• All borrowers owning 25% or more of a business or entity must provide a year-to-date P&L

statement and balance sheet for that entity, regardless of whether or not the business income (profit or loss) is being used to qualify. This requirement includes all business entities, including Schedule C (Sole Proprietorship) and those organized as pass through entities.

• If the tax return for the previous tax year is not filed, a 12 month P&L and balance sheet for this period is required.

• If the most recent year’s tax returns have not been filed by the IRS deadline, an executed copy of the borrower’s extension request for both personal and business tax returns must be provided.

• The P&L and balance sheet is required even if the borrower does not have a business checking account.

• P&L and tax returns must show stable or increasing income from all business entities and income

sources for the period relative to previous periods. Income cannot decline by 20% or more from the prior tax period.

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Small Business Administration (SBA) Loans and Grants

The existence of a Paycheck Protection Program (PPP) loan or any other similar COVID related loan or grant could be helpful information in analyzing the borrower's business. PPP loan terms allow deferred payments for a specified period, no personal loan guarantee, and the potential for all or some portion of the loan to be forgiven. Therefore, a payment for the PPP loan does not need to be included in the borrower’s liabilities. Once it has been determined that any portion of the PPP loan must be repaid, follow the requirements of the Employment and Income and Debts and Liabilities sections of these guidelines. Proceeds from the PPP loan must not be included as business income or assets. PPP loan proceeds cannot be used for the subject transaction down payment, closing costs, prepaids or reserves. Follow all requirements in this section for underwriting self-employed borrowers.

Verification of Active Business

MiMutual must verify the existence of the borrower’s business within 10 calendar days prior to closing. This may be accomplished with a verification from a third party, such as a CPA, regulatory agency or by an applicable licensing bureau. If a CPA letter is used, it must indicate the borrower has been self-employed for a minimum of 2 years. Closing is defined as the notary date on the Security Instrument. Tax Transcripts

Two years 1040 tax transcripts are required to be obtained from the IRS. Borrower pulled transcripts are not acceptable. The IRS transcripts and the supporting income documentation must be consistent.

Rental Income

• Rental income from other properties must be documented with the borrower’s most recent signed federal income tax return that includes Schedule E. Leases are required for all properties where rental income is being used to qualify. Rental income for properties with leases from management companies or rental companies (i.e. AirBNB and VRBO) is not allowed.

• Proposed rental income from the comparable rent schedule may be used for qualifying if there is not a current lease or assignment of lease on purchase of an investment property.

• Properties with expired leases that have converted to month to month per the terms of the lease will require bank statements for the lesser of 12 months or the time period after the lease expired.

• A 25% vacancy factor must be applied to the gross rent used for qualifying. Multiply the gross rent by 75% and subtract the PITI to arrive at the rental income/loss used for qualifying

• Commercial properties owned on Schedule E must be documented with commercial leases and evidence that the primary use and zoning of the property is commercial.

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Conversion of Departing Residence to Investment Property

If the current primary residence is being converted to an investment property the following applies:

• The rental income from the departing residence may be used if the borrower has a loan to value of 75% or less, as evidenced by either: o A current residential appraisal (no more than 6 months old from application date) and

outstanding liens as evidenced by a mortgage statement or credit report reference, or o An Exterior Only appraisal (2055) no more than 6 months old from application date, and

outstanding liens as evidenced by a mortgage statement or credit report reference, or o An Automated Valuation Model (AVM) listing the prior sales price minus outstanding liens as

evidenced by a mortgage statement or credit report reference. The AVM may not be used as a current valuation to determine the borrower’s equity percentage.

• A 25% expense/vacancy deduction must be applied to all rental income. Copies of the signed

lease are required.

• Reserves of 6 months of PITI must be documented in addition to the required reserves for the primary residence

Alimony/Child Support Income Alimony and Child Support are allowable sources of income with proof of a minimum of three year continuance.

Non-Taxable Income

• The non-taxable portion of fixed income, such as Social Security income, VA benefits, pensions, and annuity income may be grossed up 25%.

Retirement or Pension Income Retirement or Pension Income may be verified by the following:

• Copies of retirement award letters.

• Copies of last 2 months bank statements to document the regular deposit of payments.

• Distributions from a retirement account (401k, IRA, Keogh, SEP) must be documented with a distribution letter and copies of the last two (2) months bank statements to document the regular deposit of payments.

• Most recent signed tax return. If distributions are not evident on the tax return, the income cannot be considered as qualifying income.

Annuity retirement benefits must have a minimum continuance of three years from the date of the application to be considered as qualifying income. Social Security Income Social Security Income may be verified by the following:

• Copy of the Social Security Administrations award letter.

• Copies of last 2 months bank statements to document the regular deposit of payments. Benefits must have a minimum continuance of three years from the date of the application to be considered as qualifying income.

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Foreign Income Foreign income used for qualifying must be supported by the most recent two years’ US tax returns.

Unacceptable Income Sources • Any unverified source

• Restricted Stock Income (RSU)

• Income that is temporary or a one-time occurrence

• Rental income (boarder income) received from the borrower's primary residence

• Expense account payments

• Retained earnings

• Non-occupant income

Asset Requirements

Source of Funds • The borrower must have sufficient liquid assets to meet the requirements for downpayment, pre-paid

items, closing costs and reserves.

• Funds needed for closing must be verified with copies of the most recent 2 months bank statements, including all pages.

• Large deposits, defined as a single deposit that exceeds 50% of the total monthly qualifying income, must

be sourced.

• Acceptable sources of verified funds include: o Bank deposits o Stocks, stock options, bonds, and mutual funds.

▪ Stocks and bonds will be discounted at 70% of value for reserves. o Life insurance surrender value if used for cash to close must be liquidated. If used for reserves, no

liquidation is required. o Sale of real property. o Sale of personal property with supporting documentation. o Disbursement from a Trust Fund. o Disbursement from an IRA/401k o Disaster relief grants. Borrowers may use lump sum grant for down payment. No minimum

contribution is required. Grant may not be used for closing costs or reserve requirements. Document that payment received is an actual grant and not a loan. Subordinate lien against the property is ineligible

• Business funds can be used for down payment. Personal and business tax returns for the entity the funds are being withdrawn from, and a YTD P&L and Balance Sheet are required. Business funds may not be counted toward cash reserves. A letter from an accountant verifying the following is also required: o The amount of business assets that can be used must correspond to the borrower’s percentage of

ownership in the business. o The funds are not a loan. o Withdrawal of the funds will not negatively impact the business. (continued on next page)

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• Gift funds are an acceptable source of funds as follows for primary residences and second homes with LTV/CLTV ≤ 80% as follows: o Borrower must contribute at least 5% from their own funds. o Gift donor must be a relative, defined as the borrower’s spouse, child, or other dependent, or by any

other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or a fiancé or domestic partner.

o Gift letter from donor that incudes name, address, telephone number and relationship to borrower o Evidence of funds transfer and receipt prior to closing. o Gift funds are not allowed for investment property transactions o Gift funds may not be used to pay off debt to qualify

• Gifts of Equity are not allowed to be used as a source of funds

Cash Reserves All loans require a minimum cash reserve. Refer to the LTV/CLTV/HCLTV Matrix for reserve requirements. Reserves must be verified and comprised of liquid assets that borrower can readily access. If a borrower owns multiple financed properties, the borrowers must have an additional 6 months cash reserves for each additional property. Equity lines of credit, gift funds, business assets, and cash out from refinance transactions are not acceptable sources to meet the reserve requirement. Vested funds from individual retirement accounts (IRA/SEP/Keogh/401k accounts) are acceptable sources of funds for reserves. If the retirement assets are in the form of stocks, bonds, or mutual funds, in order to be considered for reserves, the account must be discounted by 30% to account for market volatility.

Interested Party Contributions Interested party contributions include funds contributed by the property seller, builder, developer, real estate agent or any other party with an interest in the real estate transaction. Interested party contributions may only be used for closing costs and prepaid expenses. Interested party contributions exceeding the allowed amount per the Program Highlights will be deducted from the sales price to determine LTV.

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Appraisal Requirements All appraisals must be completed on the most current Agency appraisal forms, and conform to Agency appraisal practices.

• Appraisals must not be over 120 days old from the date of the Note. If appraisal is over 120 days old, a new appraisal needs to be performed. For new construction, an appraisal update on form 1004D is required.

• Two (2) full appraisals are required for loan amounts > $1.5 million. LTV will be based on lower of the two values. All inconsistencies between the two appraisals must be addressed and reconciled.

• Appraisals assigned from another lender are not acceptable.

Third Party Appraisal Review • MiMutual must order an appraisal desk review product for each loan from Clear Capital.

o The review must not be over 120 days old from the date of the Note.

• If the desk review produces a value in excess of a 10% negative variance to the appraised value, the loan

is not eligible.

• All appraisals are reviewed for eligibility as well as value support. However, the use of an appraisal review product does not relieve the MiMutual of its representations and warranties relating to the property and the appraisal, including the underwriting thereof.

Eligible Collateral • 1-4 units attached/detached owner occupied properties.

• 1-unit second homes.

• 1-4 unit non-owner occupied properties.

• Maximum lot size 20 acres. Properties with greater than 10 acres must have three comparables with similar acreage.

• Low/mid/high-rise new and established Fannie Mae or Freddie Mac warrantable condominiums. o Warrantable condominium types S and T. o New condominiums (type R). New condominiums may not be subject to additional phasing or

annexation o Limited review is not eligible. All attached condominiums require full lender review with Condo

Project Manager (CPM). The conventional Condo and PUD warranty form must be used to warrant the condo project.

o The project must be reviewed within the 3 months preceding the date of the note. o Minimum square footage 400.

• Planned Unit Development (PUD)

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• Manufactured Homes

• Factory built housing

• Properties with income producing attributes

• Condo hotel units

• Log homes

• Non-warrantable condominiums

• Condominiums with HOA in litigation

• Timeshare units

• Geothermal homes

• Unique properties


• Working farms

• Hobby farms

• Commercial properties

• Agriculturally zoned properties (agricultural/residential eligible)

• Rural zoned properties

• Properties with an oil or gas lease

• Properties with more than 20 acres

• Properties held as leasehold

Declining Markets Reduce maximum LTV by 10% (with maximum 80% LTV/CLTV) for any property located in an area of declining property values as reported by appraiser.

Land-to-Value The property site should be of a size, shape, and topography that is generally conforming and acceptable in the market area. It must also have competitive utilities, street improvements, adequate vehicular access, and other amenities. Because amenities, easements, and encroachments may either detract from or enhance the marketability of a site, the appraiser must reflect them in his or her analysis and evaluation. The appraiser must comment if the site has adverse conditions or if there is market resistance to a property because the site is not compatible with the neighborhood or the requirements of the competitive market, and assess the effect, if any, on the value and marketability of the property.

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Properties Located in a Disaster Area If the property is located in a FEMA declared disaster area, a re-inspection is required to be performed. It must be dated after the incident period end date, and show no damage to the subject property.

General Provisions

Title Requirements Title must be held as Fee Simple, in the name of the individual borrower(s) or trust, with vesting as either individual, joint tenants, or tenants in common. The title insurance policy/commitment must be dated within 90 days and insure the exact loan amount.

• The title policy should include all applicable endorsements issued by a title insurer qualified to do business in the jurisdiction in which the mortgage insured property is located, including the endorsements for Condominiums, PUDs, and ARM loan types.

• The title insurance coverage must include an environmental protection lien endorsement (ALTA 8.1-06 or equivalent state form).

• The title insurance policy must insure MiMutual and its successors and assigns as to the first priority lien of the loan amount at least equal to the outstanding principal balance of the loan.

• A statement by the title insurance company or closing attorney on such binder or commitment that the

priority of the lien of the related Mortgage during the period between the date of the funding of the related Mortgage Loan and the date of the related title policy (which title policy shall be dated the date of recording of the related Mortgage) is insured.

• Any existing tax or mechanic’s liens must be paid in full through escrow

Chain of Title

• All transactions require a minimum twelve (12) month chain of title.

• For purchase transactions, if the seller has taken title to the subject property within 90 days of the sales contract, follow the requirements found in the Purchases section.

Hazard Insurance • Properties where the insurance coverage on the declarations page does not cover the loan amount must

have a cost estimate from the insurance company or agent evidencing the property is insured for its replacement cost.

• Hazard insurance must have the same inception date as the date of disbursement on purchase money mortgages. This may be documented with a post-closing Closing Disclosure or the correction of the inception date on the hazard policy.

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HERO/PACE/Solar Panels Any item that that will include a UCC associated with the property and/or will create an easement on title is ineligible. Payoff of a HERO lien is considered cash out.

Escrow Accounts Escrow accounts may be created for funds collected to pay taxes, hazard insurance, flood insurance, special assessments, water, sewer, and other items as applicable. All applicable loans must adhere to HFIAA regarding flood insurance escrows. Escrow holdbacks are not permitted.

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Jumbo Underwriting Guidelines | Jumbo Select

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Jumbo Select

Unless otherwise addressed in these Jumbo Select QM guidelines, the more restrictive of the FNMA Selling Guide or Appendix Q must be followed. All loans must meet QM Safe Harbor requirements and document the

8 Ability-to-Repay (ATR) rules.


Eligible Products • 20, 25, 30 year fixed rate

• 5/6, 7/6, 10/6 fully amortizing ARM (30 year term)

Qualifying Rate • 5/6: greater of the fully indexed rate or the Note rate + 2%

o Rebuttable Presumption (HPCT) allowed on 5/6 ARMs

• 7/6 and 10/6: greater of the fully indexed rate or the Note rate

ARM Specifics

Interest Rate Adjustment Caps

• 2/1/5 (5/6 ARM)

• 5/1/5 (7/6 and 10/6 ARM)

Index

SOFR (30 day average)

Margin 2.75

Interest Rate Floor 2.75

Conversion Option Not convertible Assumption Feature Fixed rate mortgages are not assumable; ARMs are. However, MiMutual does not underwrite or close assumptions.

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Ineligible Products • Higher-Priced Mortgage Loans (HPML)

• Non-standard to standard refinance transactions (ATR exempt)

• Higher-Priced Covered Transactions (HPCT QM-Rebuttable Presumption)

o See 5/6 ARM product

• Balloons

• Graduated payments

• Interest only products

• Temporary buydowns

• Loans with prepayment penalties

• Convertible ARMs

Documentation Requirements Full doc. Manual underwriting requirements apply, regardless of AUS documentation waivers. However, DU findings are required on all Jumbo loans to demonstrate the borrower is not eligible for an Agency product. All loans must meet the Price-Based QM definition:


QM Designation must be provided in the loan file. QM Designation is QM Safe Harbor - APOR (or similar name).

• QM designation is Exempt for investment property transactions when the transaction is exclusively for

business purposes. o Investment property transactions require an attestation from the borrower stating the property is

used 100% of the time for business purposes, and/or 100% of any cash out proceeds must be used for business purpose in order for the designation to be Exempt.

o If the borrower does not use the property and/or cash out proceeds 100% of the time for business purposes, the loan is subject to QM and the designation would be QM Safe Harbor

In all cases, the loan file must document the 8 ATR rules.

Residual Income Calculation must be provided when applicable, and meet the residual income requirements indicated in the Income/Employment section of this guide. If the 1003, title commitment, or credit documents indicate the borrower is a party to a lawsuit, additional documentation must be obtained to determine no negative impact exists on the borrower’s ability to repay, assets, or collateral. Borrower affidavit specific to COVID-19 pandemic is required.

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NOTE: Loans with application dates on or before 3/1/2021, regardless of lock date, must meet the maximum DTI of 43% and adhere to all appendix Q documentation requirements.


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Occupancy • Primary residences 1-2 unit

• Second home residences for 1 unit properties o Must be a reasonable distance away from borrower’s primary residence o Must be occupied by the borrower for some portion of the year o Must be suitable for year-round use o Must not be subject to a rental agreement and borrower must have exclusive control over the

property o Any rental income received on the property cannot be used as qualifying income

• Investment properties 1-4 units

Maximum DTI • Primary residence: 45% for LTVs ≤ 80%, 36% for LTVs > 80%

o Primary residences with DTIs 45.01% – 49.99% require residual income calc

• Investment property: 38%

• ARMs: 43%

• Second home: 40%

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LTV/CLTV/HCLTV Primary Residence | Purchase and Rate/Term Refinance


LTV/CLTV/HCLTV Maximum Loan Amount1

Purchase and Rate/Term Refinances

1

740 85%2 $1,000,000

700 80% $1,500,000

720 75% $2,000,000

720 70% $2,500,000

680 70% $1,000,000

2 700 65% $1,000,000

720 60% $1,500,000

Primary Residence | Cash Out Refinance3




Cash Out Refinance

1

720 70% $1,000,000 $500,000

700 65% $1,000,000 $500,000

720 65% $1,500,000 $500,000

720 60% $2,000,000 $500,000

720 50% $2,500,000 $750,000

2 720 60% $1,000,000 $500,000





1 720

80% $1,000,000

70% $1,500,000

65% $2,000,000





Cash Out Refinance

1 720 60% $1,500,000 $500,000

50% $2,000,000 $750,000

Investment4 | Purchase and Rate/Term Refinance | Cash Out Refinance



Purchase 1-4 740 70% $1,500,000

Rate/Term Refi 1-4 740 70% $1,500,000

Cash Out Refi 1-4 740 60% $1,500,000 (max cash out $500,000)

*Footnotes on following page

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10.04.2021 100

1First-Time Homebuyers are subject to a maximum loan amount of $1,000,000. Loan amounts up to $1,500,000 allowed in CA, NJ, and WA. See Eligible Borrower section for specific requirements for FTHBs.

2The following requirements apply for transactions with LTVs > 80%: • MI not required

• Secondary financing not allowed

• Maximum DTI 36%

• Non-permanent resident aliens not allowed


• Escrow/impound accounts required for LTVs > 80% unless prohibited by applicable laws

3Texas 50(a)(6) and Texas 50(f)(2) refinances only allowed on 20, 25, 30 year fixed rate transactions.

4The following requirements apply for investment property purchases, rate/term refis, and cash out refis: • 20, 25, 30 year fixed rate only

• Florida attached condos limited to 50% LTV/CLTV/HCLTV


• Transaction must be arm’s length

• Appraiser to provide comparable rent schedule

• FTHBs not allowed • If using rental income, an executed lease agreement must be provided. See Rental Income in the Income/Employment section for

further details.

Borrowers

Eligible

• US Citizens

• Permanent Resident Aliens with evidence of lawful residency o Must be employed in the United States for the past 24 months

• Non-Permanent Resident Aliens with evidence of lawful residency are eligible with the following restrictions: o Primary residence only o Maximum LTV/CLTV/HCLTV 75% o No other financed properties in the US o Unexpired H1B, H2B, E1, L1, and G Series visas only. G Series visas must have no diplomatic

immunity. o Credit tradeline requirements must be met, no exceptions. o Borrower must have a current 24 month employment history in the US

• First Time Homebuyers o Defined as a borrower who has not owned a home in the last 3 years. For loans with more than

1 borrower, where at least 1 borrower has owned a home in the last 3 years, first time homebuyer requirements do not apply

o Maximum loan amount $1,000,000 o For transactions located in CA, NJ, and WA, a maximum loan amount of $1,500,000 is allowed if

the following requirements are met and only apply for loan amounts over $1MM in the allowed state: ▪ 720 minimum FICO score ▪ No gift funds allowed ▪ Primary residence only ▪ Reserve requirements for FTHBs are met ▪ Maximum 80% LTV/CLTV/HCLTV

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NOTE: Minimum loan amount is $548,251 for 1-unit properties and $1 above the conforming loan limit for properties with 2-4 units


10.04.2021 101

• Inter Vivos Revocable Trusts o Acceptable for 1-2 unit owner-occupied primary residences, 1 unit second homes, and 1-4 unit

investment properties. The subject property can be a SFR, condo, or PUD if documentation and eligibility requirements are met. Title insurance must provide full coverage without exceptions for the trust or trustees for the inter vivos revocable trust in that state

o To determine whether the trust meets all the criteria required by State and investor standards, one of the following will be required: ▪ A copy of the trust agreement ▪ An attorney's opinion stating the trust meets all Secondary Marketing requirements as set

forth by Freddie Mac (FHLMC) or Fannie Mae (FNMA), as applicable, and any applicable State requirements

▪ Certification from a title company evidencing compliance with all Secondary Marketing requirements as set forth by FHLMC/FNMA and any applicable State requirements

▪ Certification from an individual trustee evidencing compliance with all Secondary Marketing requirements as set forth by FHLMC/FNMA, and any applicable State requirements. Additionally, the following requirements must be met:

• Certifications completed by an individual trustee must be notarized, and must confirm the following: o The existence and date of the trust o The settlors and the current trustees o The powers of the trustees o Whether the trust is revocable, and, if revocable, who holds the right to revoke o The names and number of the trustees required to sign on behalf of the trust o The trust identification number, whether that is a social security number, or an IRS-

issued Tax Identification Number o How title to the trust assets should be taken o A statement that the trust has not been revoked, modified, or amended in any manner

▪ The trust agreement must state the following:

• The trustee is authorized to borrow money for the purpose of purchase or refinance.

• The beneficiary does not need to grant written consent for the trust to borrow money. If consent is required, consent has been granted in writing for purposes of the mortgage.

• There is no unusual risk or impairment to the lenders’ rights.

• Holding title in the trust does not diminish the lenders’ rights as a creditor

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10.04.2021 102

Documentation of Lawful Residency

A Permanent Resident Alien is a non-US citizen who is legally eligible to maintain permanent residency in the US and holds a Permanent Resident card. Document legal residency with one (1) of the following:

• A valid and current Permanent Resident Alien card (form I-551), also known as a Green Card

• A passport stamped “processed for I-551, Temporary evidence of lawful admission for permanent

residence. Valid until ____”. Employment authorized. This evidences the holder has been approved for, but not issued, a Permanent Resident Alien card.

A Non-Permanent Resident Alien is a non-US citizen who lawfully enters the US for a specific time period under the terms of a Visa. A Non-Permanent Resident Alien status may or may not permit employment. For a Non-Permanent Resident Alien, verification of a valid and eligible visa that allows the Non-Permanent Resident Alien the right to work and live in the US issued by the USCIS is required. Eligible visa types are:

• H1B

• H2B

• E1

• L1

• G Series o G Series visas must not allow for diplomatic immunity

Ineligible

• Any borrower without a Social Security Number/SSN (ITINs are not eligible)


• Borrowers with diplomatic status

• Life Estates


• Guardianships

• LLCs, corporations, or partnerships


• Non-occupant coborrowers

• Borrowers with any ownership in a business that is federally illegal, regardless if the income is not being used to qualify

Multiple Financed Properties The borrower(s) may own a total of four (4) financed, 1-4 unit residential properties, including the subject property, and regardless of occupancy of the subject property.

All financed 1-4 unit residential properties require an additional 6 months reserves for each property, unless the exclusions below apply. 1-4 unit residential financed properties held in the name of an LLC or other corporation can be excluded from the number of financed properties only when the borrower is not personally obligated for the mortgage. Ownership of commercial or multifamily (5+ units) real estate is not included in this limitation.


10.04.2021 103

Properties Listed for Sale Properties currently listed for sale (at the time of application) are not eligible for refinance transactions. Properties listed for sale within six months of the application date are not acceptable for refinance transactions. Cash out refinances are not eligible if the property was listed for sale within 12 months of the application date.

Rate/Term Refinance Restrictions • The new loan amount is limited to pay off the current first lien mortgage, any seasoned non-first lien

mortgages, closing costs and prepaid items. o If the first mortgage is a HELOC, evidence it was a purchase money HELOC or it is a seasoned HELOC

that has been in place for twelve (12) months and total draws do not exceed $2,000 in the most recent twelve (12) months.

o A seasoned non-first lien mortgage is a purchase money mortgage or a mortgage that has been in place for twelve (12) months.

o A seasoned equity line is defined as not having draws totaling over $2,000 in the most recent twelve (12) months. Withdrawal activity must be documented with a transaction history.

o Max cash back at closing is limited to 1% of the new loan amount.

• Properties inherited less than twelve (12) months prior to application date can be considered for a Rate and Term refinance transaction if the following requirements are met: o Must have clear title or copy of probate evidencing borrower was awarded the property. o A copy of the will or probate document must be provided, along with the buy-out agreement signed

by all beneficiaries. o Borrower retains sole ownership of the property after the pay out of the other beneficiaries. o Cash back to borrower not to exceed 1% of loan amount.

Texas 50(f)(2) Refinances Under certain circumstances, a refinance of an existing Texas Home Equity loan may be considered as a standard refinance transaction per Section 50(f)(2). The following requirements must be met:

• At least one year has elapsed since the Texas Home Equity loan was closed

• There can be no advance of new money (except closing costs) and when the funds advanced refinance a debt described by Sections 50(a)(1) through (a)(7)

• The new principal loan balance may not exceed 80% of the property’s fair market value on the day

of the refinance

• The borrower must be provided with a new disclosure 12 or more days prior to closing, advising the borrower of the risks of refinancing into a non-Texas Home Equity loan

• The borrower(s) and borrower’s spouse (if applicable) must sign an Affidavit at closing acknowledging that the above four requirements have been met

• Eligible terms 20, 25, and 30 year fixed rate only

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NOTE: In certain cases, paying a divorce settlement, property tax lien or mechanics lien will require a cash out lock while this would be considered a rate/term refinance per the regulatory text.


10.04.2021 104

Cash Out Refinance Restrictions • Borrower must have owned the property for at least 6 months. If the property is owned free & clear

and 6 months seasoning is not met, refer to Delayed Purchase Financing

• Maximum cash-out limitations include the payoff of any unsecured debt, unseasoned liens and any cash in hand

• Inherited properties may not be refinanced as a cash out refinance prior to 12 months ownership. See Rate/Term Refinances for requirements

• Cash out refinances where the borrower is paying off a loan from a pledged asset/retirement account loan, secured loan, unsecured family loan, or replenishing business funds used to purchase the property, the following guidelines apply: o Cash out limitation is waived if previous transaction was a purchase o Seasoning requirement for cash out is waived (borrower does not have to own for 6 months prior to

subject transaction) o Funds used to purchase the subject must be documented and sourced o CD for subject transaction must reflect payoff or paydown of pledged asset / retirement account

loan, secured loan, unsecured family loan or business asset account. If cash out proceeds exceed payoff of loans, excess cash must meet cash out limitations

o The purchase must have been arm’s length o Investment properties are ineligible

Texas 50(a)(6) Refinances In addition to standard guidelines, loans originated in the State of Texas may be subject to additional requirements and restrictions due to the provisions of Section 50(a)(6) of the Texas Constitution (Texas Equity Loan). All cash-out loans and certain Rate and Term refinance transactions, involving the borrower’s primary homestead property, are subject to these special requirements. MiMutual follows Fannie Mae requirements related to Section 50(a)(6) loans. Failure to follow these requirements will result in the loan being ineligible.

Eligible Product Types

20, 25 and 30-year fixed rate only

Max LTV/CLTV

Texas Equity Loans are limited to the lesser of 80% LTV/CLTV or program maximum. Please refer to specific program for LTV/CLTV maximum.

Eligible Property Types

Single-unit principal residence designated as the borrower’s homestead under Texas law. Eligible property types are limited to an attached or detached dwelling, a unit in a PUD project, or a unit in a condominium project. Owner occupied primary residences only. Documented proof of Homestead Designation is required. 2-4 unit properties not allowed. Non-Borrowing Spouse

The owner of the homestead and their spouse must consent to the extension of credit by executing the Deed of Trust. A non-borrowing spouse, regardless of their ownership interest in the homestead property, has the right to cancel.

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10.04.2021 105

Property Valuation

To determine current value, MiMutual must obtain a new full appraisal on either a Uniform Residential Appraisal Report, or Individual Condominium Unit Appraisal Report. The appraisal for the property and the acknowledgment of fair market value must not include any property other than the homestead. The survey (or other acceptable evidence) must demonstrate that: • Homestead property and any adjacent land are separate parcels, and • Homestead property is a separately platted and subdivided lot for which full ingress and egress

is available. Additional Requirements for Texas Equity Loans

• Fees and charges to make the loan may not exceed 2% of the loan amount. The following fees and charges can be excluded from the testing: o Bona Fide Discounts to lower the rate selected o Appraisal Fee o Survey Fee o Lender’s Title Policy

• The borrower’s first payment must be due no later than two (2) months after closing.

• MiMutual must provide the title company with a detailed closing instruction letter and require acknowledgement of its receipt.

• If this loan is being used to pay off a previous Texas Equity Loan, the loan may not close before twelve (12) months have passed from the closing date of the Texas Equity Loan being paid off.

• If the new loan is a Texas Equity Loan originated to cure a failure in the original mortgage to comply with Section 50(a)(6), then the Texas law requirement that at least twelve (12) months have passed since any previous Texas Home Equity loan secured by a homestead property was closed does not apply.

• The loan may not close before twelve (12) days after the loan application was taken by the lender or the borrower receives the “NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION” disclosure, whichever date is later AND may not close, without the borrower’s consent, one (1) business day after the date on which the borrower receives a copy of the loan application, if not previously provided, and a final itemized disclosure of the actual fees, points, interest, costs and charges that will be charged at closing.

• The loan may only close at the office of MiMutual, title company or an attorney at law.

• Power of Attorney may not be used on a Texas Equity Loan.

• Use FNMA approved Texas Equity legal documents (Note, Deed, Riders, etc.).

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10.04.2021 106



twelve (12) months, or o Is related to the borrower on the mortgage being refinanced.

• The borrower on the new refinance transaction was added to title twenty-four (24) months or more prior to the disbursement date of the new refinance transaction.

• The borrower on the refinance inherited or was legally awarded the property by a court in the case of divorce, separation or dissolution of a domestic partnership.

• The borrower on the new refinance transaction has been added to title through a transfer from a trust, LLC or partnership. The following requirements apply: o Borrower must have been a beneficiary/creator (trust) or 25% or more owner of the LLC or

partnership prior to the transfer. o The transferring entity and/or borrower has had a consecutive ownership (on title) for at least the

most recent six (6) months prior to the disbursement of the new loan.

Delayed Purchase Refinances Delayed Purchase Refinancing is allowed with the following requirements:

• Property was purchased by borrower for cash within six (6) months of the loan application.

• HUD-1/CD from purchase reflecting no financing obtained for the purchase of the property.

• Preliminary title reflects the borrower as the owner and no liens.

• Funds used to purchase the property are fully documented and sourced and must be the borrower’s own funds (no gift funds or business funds).

• Funds drawn from a HELOC on another property owned by the borrower, funds borrowed against a margin account, or funds from a 401(k) loan are acceptable as long as the following requirements are met: o The borrowed funds are fully documented o The borrowed funds are reflected on the Closing Disclosure (CD) as a payoff on the new refinance

transaction

• LTV/CLTV/HCLTV for Rate and Term refinances must be met. The loan is treated as a Rate and Term refinance except for primary residence transactions in TX

• Investment properties are allowed as long as borrower is not a builder or in the construction industry and prior transaction was arm’s length.

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10.04.2021 107

LTV/CLTV/HCLTV Calculation for Refinances • If subject property is owned more than 12 months, the LTV/CLTV/HCLTV is based on the current

appraised value. The 12 month time frame is defined as prior Note date to subject Note date.

• If subject property is owned less than 12 months, the LTV/CLTV/HCLTV is based on the lesser of the original purchase price plus documented improvements made after the purchase of the property, or the appraised value. Documented improvements must be supported with receipts. The 12 month time frame is defined as prior Note date to subject Note date.

Construction to Permanent Refinance Restrictions The conversion of construction to permanent financing involves the granting of a long-term mortgage to a borrower for the purpose of replacing interim construction financing that the borrower has obtained to fund the construction of a new residence. The borrower must hold title to the lot, which may have been previously acquired or purchased as part of the transaction.

• LTV/CLTV/HCLTV is determined based on the length of time the borrower has owned the lot. The time frame is defined as the date the lot was purchased to the Note date of the subject transaction. o For lots owned 12 months or more, the appraised value can be used to calculate the

LTV/CLTV/HCLTV. o For lots owned less than 12 months, the LTV/CLTV/HCLTV is based on the lesser of the current

appraised value of the property or the total acquisition costs (documented construction costs plus documented purchase price of lot).

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NOTE: If the subject transaction is paying off a HELOC that is not included in the CLTV/HCLTV calculation, the loan file must contain evidence the HELOC has been closed.


10.04.2021 108


• Family Sales or Transfers





• Borrower is the employee of the originating lender and the lender has an established employee loan program. Evidence of employee program to be included in loan file.


• Originator is a current subsidiary of the builder

• Borrower purchasing from their landlord (cancelled checks or bank statements required to verify satisfactory pay history between borrower and landlord).

Gifts from relatives that are interested parties to the transaction are not allowed, unless it is a gift of equity. Real estate agents may apply their commission towards closing costs and/or prepaids if the amounts are within the interested party contribution limitations.

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NOTE: Investment property transactions must be arm’s length


10.04.2021 109

Secondary / Subordinate Financing For each mortgage loan subject to a subordinate lien, to accurately calculate the LTV/CLTV/HCLTV ratio for eligibility requirement purposes, MiMutual must determine the maximum credit line for all HELOCs, if applicable, and the unpaid principal balance for all closed-end subordinate financing. If any subordinate financing is not shown on a credit report, MiMutual must diligently determine if any other subordinate financing liens exist and provide documentation from the borrower or creditor.

• Institutional Financing only. Seller subordinate financing not allowed.

• Subordinate liens must be recorded and clearly subordinate to the first mortgage lien.

• If there is or will be an outstanding balance at the time of closing, the monthly payment for the subordinate financing must be included in the calculation of the borrower’s debt-to-income ratio.

• Full disclosure must be made of the existence of subordinate financing and the subordinate financing repayment terms. The following are acceptable subordinate financing types: o Mortgage terms with interest at market rate. o Mortgage with regular payments that cover at least the interest due, resulting in no negative

amortization.

• Employer subordinate financing is allowed with the following requirements: o Employer must have an Employee Financing Assistance Program in place. o Employer may require full repayment of the debt if the borrower’s employment ceases before the

maturity date. o Financing may be structured in any of the following ways:

▪ Fully amortizing level monthly payments ▪ Deferred payments for some period before changing to fully amortizing payments ▪ Deferred payments over the entire term. ▪ Forgiveness of debt over time ▪ Balloon payment of no less than five (5) years, or the borrower must have sufficient liquidity to

pay off the subordinate lien.

• LTV/CLTV/HCLTV guidelines must be met for loans with subordinate financing. Secondary financing not allowed on LTVs > 80%.

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10.04.2021 110

Credit Requirements

Derogatory Credit • Bankruptcy, Chapter 7, 11, 13 – seven (7) years since discharge/dismissal date

• Foreclosure – seven (7) years since completion date

• Short Sale/Deed-in-Lieu – seven (7) years since completion/sale date

• Mortgage accounts that were settled for less, negotiated or short payoffs – seven (7) years since

settlement date

• Loan Modification: o Lender-initiated modification will not be considered a derogatory credit event if the modification did

not include debt forgiveness and was not due to hardship as evidenced by supporting documentation. No seasoning requirement would apply.

o If the modification was due to hardship or included debt forgiveness - seven (7) years since modification

• A forbearance that results in a loan modification (moving payments to the end of the mortgage) is a

credit event and will be considered “due to hardship”

• Notice of Default – seven (7) years

• Multiple derogatory credit events are not allowed, regardless if seasoned over 7 years o A mortgage with a Notice of Default filed that is subsequently modified is not considered a multiple

event o A mortgage with a Notice of Default filed that is subsequently foreclosed upon or sold as a short sale

is not considered a multiple event


Past Mortgage Forbearances Allowable six months after the end of the forbearance period, and only if the borrower made all of the monthly payments during forbearance and did not utilize the forbearance terms to skip any payments.

Exceptions for Derogatory Credit Exceptions for credit events that require a 7 year seasoning period will be considered on a case-by-case basis between four (4) and seven (7) years with extenuating circumstances, subject to the following:

• Extenuating circumstances are defined as non-recurring events beyond the borrower’s control, resulting in a sudden, significant, and prolonged reduction in income or catastrophic increase in financial obligations o Examples would include death or major illness of a spouse or child, but would not include divorce

or job loss

• Documentation must be provided to support the claim of extenuating circumstances and confirm the nature of the event that led to the credit event and illustrate the borrower had no reasonable option other than to default on their obligations

• If the defaulted debt was assigned to an ex-spouse and the default occurred after the borrower was relieved of the obligation, the event may be considered on an exception basis

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Outstanding Judgments/ Tax Liens/Charge-Offs/Past-Due Accounts Tax liens, judgments charge-offs and past-due accounts must be satisfied or brought current prior to or at closing. Cash-out proceeds from the subject transaction may not be used to satisfy judgments, tax liens, charge-offs, or past-due accounts. Payment plans on prior year tax liens/liabilities are not allowed; they must be paid in full.

Housing Payment History

Mortgage History Requirements If the borrower(s) has a mortgage in the most recent 24 months, a mortgage rating must be obtained reflecting 0x30 in the last 24 months. The mortgage rating may be on the credit report or a VOM. This applies to all borrowers on the loan. If the mortgage holder is a party to the transaction or a relative of the borrower, cancelled checks or bank statements to verify satisfactory rental history is required. Rental History Requirements If the borrower has a rental history in the most recent 12 months, a VOR must be obtained reflecting 0x30 in the last 12 months. This applies to all borrowers on the loan. If the landlord is a party to the transaction or a relative of the borrower, cancelled checks or bank statements to verify satisfactory rental history is required. Otherwise, if not related or a party to the transaction, a satisfactory VOR can be provided.

Credit Report

Age of Credit Report The credit report may not be more than 90 days old at the time the Note is signed. “Frozen” Credit Reports Credit reports with bureaus identified as “frozen” are required to be unfrozen and a current credit report with all bureaus unfrozen is required.

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Tradeline Requirements

• Minimum three (3) tradelines are required. The following requirements apply: o One (1) tradeline must be open for twenty-four (24) months and active within the most recent

six (6) months. o Two (2) remaining tradelines must be rated for twelve (12) months and may be opened or closed. OR

• Minimum two (2) tradelines are acceptable if the borrower has a satisfactory mortgage rating for at least twelve (12) months (opened or closed) within the last twenty-four (24) months and one (1) additional open tradeline.

Each borrower contributing income for qualifying must meet the minimum tradeline requirements; however, borrowers not contributing income for qualifying purposes are not subject to minimum tradeline requirements. Authorized user accounts are not allowed as an acceptable tradeline. Non-traditional credit is not allowed as an acceptable tradeline.

Disputed Tradelines All disputed tradelines must be included in the total expense ratio (DTI) if the account belongs to the borrower(s), unless documentation can be provided that authenticates the dispute. Derogatory accounts must be considered in analyzing the borrower(s) willingness to repay debt. However, if a disputed account has a zero balance, and no late payments, it can be disregarded.

Inquiries If the credit report indicates recent inquiries within the most recent 120 days of the credit report, confirmation must be provided that the borrower did not obtain additional credit that is not reflected in the credit report or mortgage application. In these instances the borrower must explain the reason for the credit inquiry.

• If additional credit was obtained, a verification of that debt must be provided and the borrower must be qualified with the monthly payment.

• Confirmation of no new debt may be in the form of a new credit report, pre-close credit report or gap credit report.

Student Loans For all student loans, whether deferred, in forbearance, or in repayment, a monthly payment must be included in the borrower’s monthly debt obligation.

• If a monthly payment is provided on the credit report, the amount indicated for the monthly payment may be used for qualifying

• If the credit report does not provide a monthly payment or if it shows $0 as the monthly payment,

the monthly payment may be one of the options below: o Loan payment indicated on student loan documentation verifying monthly payment is based on

an income-driven plan o For deferred loans or loans in forbearance:

▪ 1% of the outstanding loan balance (even if this amount is lower than the actual fully amortizing payment), or

▪ A fully amortizing payment using the documented loan repayment terms

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10.04.2021 113

Liability Requirements

• The monthly payment on revolving accounts with a balance must be included in the borrower’s DTI, regardless of the number of months remaining. If the credit report does not reflect a payment and the actual payment cannot be determined, a minimum payment may be calculated using the greater of $10 or 5%

• If the credit report reflects an open-end or net thirty (30) day account, the balance owing must be subtracted from liquid assets.

• HELOCs with a current outstanding balance with no payment reflected on the credit report may have

the payment documented with a current billing statement. HELOCs with a current $0 balance do not need a payment included in the DTI unless it is being used for downpayment or closing costs

• Lease payments, regardless of the number of payments remaining, must be included in the DTI

• Installment debts lasting 10 months or more must be included in the DTI

• Alimony payments may be deducted from the income rather than included as a liability in the DTI for divorces prior to 1/1/2019. o Effective for borrowers with a divorce on/after January 1, 2019, alimony payments paid by a

borrower must be treated as a liability, and may no longer be deducted from the income

Departure Residence

Departure Residence Pending Sale In order to exclude the payment for a borrower’s primary residence that is pending sale but will close after the subject transaction, the following requirements must be met:

• A copy of an executed sales contract for the property pending sale and confirmation all contingencies have been cleared/satisfied. The pending sale transaction must be arm’s length.

• The closing date for the departure residence must be within 30 days of the subject transaction note

date.

• 6 months reserves must be verified for the PITIA of the departure residence.

Departure Residence Subject to Guaranteed Buy-out with Corporation Relocation In order to exclude the payment for a borrower’s primary residence that is part of a Corporate Relocation the following requirements must be met:

• Copy of the executed buy-out agreement verifying the borrower has no additional financial responsibility toward the departing residence once the property has been transferred to the 3rd party.

• Guaranteed buy-out by the 3rd party must occur within 4 months of the fully executed guaranteed buy-out agreement.

• Evidence of receipt of equity advance if funds will be used for down payment or closing costs.

• Verification of an additional 6 months PITIA of the departure residence.

Co-Signed Loans The monthly payment on a co-signed loan may be excluded from the DTI if evidence of timely payments made by the primary obligor (other than the borrower) is provided for the most recent 12 months and there are no late payments reporting on the account.

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10.04.2021 114

Court Order If the obligation to make payments on a debt has been assigned to another person by court order, the payment may be excluded from the DTI if the following documents are provided.

• Copy of court order.

• For mortgage debt, a copy of the document transferring ownership of property.

• If transfer of ownership has not taken place, any late payments associated with the repayment of the debt owing on the mortgage property should be taken into account when reviewing the borrower’s credit profile.

Assumption with No Release of Liability The debt on a previous mortgage may be excluded from DTI with evidence the borrower no longer owns the property. The following requirements apply:

• Payment history showing the mortgage on the assumed property has been current during the previous twelve (12) months or

• The value on the property, as established by an appraisal or sales price on the HUD-1/CD results in an LTV of 75% or less.

Tax Liability If the most recent tax return or tax extension indicates a borrower owes money to the IRS or State Tax Authority, evidence of sufficient liquid assets to pay the debt must be documented if the amount due is within 90 days of loan application date, or if tax transcripts show an outstanding balance due.

• A payment plan for the most recent tax year is allowed if the following requirements are met: o Payment plan was set up at the time the taxes were due. Copy of payment plan must be included in

loan file. o Payment is included in the DTI. o Satisfactory pay history based on terms of payment plan is provided. o Payment plan is only allowed for taxes due for most recent tax year, prior years not allowed. For

example, borrower files their 2019 return or extension in April 2020. A payment plan would be allowed for taxes due for 2019 tax year. Payment plans for 2018 or prior years would not be allowed.

o Borrower does not have a prior history of tax liens.

Loans Secured by Financial Assets Loans secured by financial assets (life insurance policies, 401(k), IRAs, CDs, etc.) do not require a payment to be included in the DTI as long as documentation is provided to show the borrower’s financial asset as collateral for the loan.

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10.04.2021 115

Income/Employment Requirements To establish stability of employment and income for the borrower(s) whose income is used to qualify, the following requirements must be met:

• A minimum of 2 years stable employment and income receipt history

• Verifiable

• High probability of continuing for at least 3 years

When the borrower has less than a two (2) year history of receiving income, a written analysis to justify the determination that the income used to qualify the borrower is stable must be provided. An Income Calculation Worksheet is required on all loans: current FNMA 1084, FHLMC Form 91, or equivalent is required for self-employment analysis. The most recent Form 1084 or Form 91 should be used based on application date. Instructions per Form 1084 or Form 91 must be followed.

• Copy of liquidity analysis must be included in the loan file if the income analysis includes income from boxes 1, 2 or 3 on the K-1 that is greater than distributions indicated on the K-1.

• If a liquidity analysis is required and the borrower is using business funds for down payment or closing costs, the liquidity analysis must consider the reduction of those assets

Declining Income When the borrower has declining income, the most recent 12 months should be used. In certain cases, an average of income for a longer period may be used when the decline is related to a one-time capital expenditure and proper documentation is provided. 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. 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. The employer or the borrower should provide an explanation for the decline and the underwriter should provide a written justification for including the declining income in qualifying.


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Residual Income Requirement A Residual Income Calculation is required for DTIs exceeding 45% and not to exceed 49.99%. All loans must meet the residual income requirements below. Residual Income equals Gross Qualifying Income less Monthly Debt (as included in the DTI).



Paystub Requirements Paystubs must:

• Clearly identify the employee/borrower and the employer;

• Reflect the current pay period and Year to Date (YTD) earnings; o YTD pay with most recent pay period at the time of application must be no earlier than 90 days prior

to the Note date

• Be computer-generated;

• Reflect the URL address, date, and time printed, and also identifying information, for paystubs issued electronically via email or internet

W2 Requirements W2 forms must be complete, and be a copy provided by the employer.

Verification of Employment Requirements The requirements below apply when income is positive and included in qualifying income:

• Verbal Verification of Employment (VVOE) must be performed no more than ten (10) business days prior

to the Note date. The VVOE should include the following information for the borrower: o Date of contact o Name and title of person contacting the employer o Name of employer o Start date of employment o Employment status and job title o Name, phone number, and title of contact person at employer o Independent source used to obtain employer phone number

• Verification of the existence of borrower’s self-employment must be verified through a third party

source and no more than 30 calendar days prior to the Note date. o Third party verification can be from a CPA, regulatory agency or applicable licensing bureau. A

borrower’s website is not an acceptable third party source o Listing and address of the borrower’s business o Name and title of person completing the verification and date of verification

• Written Verification of Employment may be required for a borrower’s income sourced from

commissions, overtime and other income when the income detail is not clearly documented on W2 forms or paystubs. Written VOEs cannot be used as a sole source for verification of employment; paystubs and W2s are still required

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Tax Return Requirements • Personal income tax returns (if applicable) must be complete with all schedules (W2 forms, K1s, etc),

and must be signed. In lieu of a signature, personal tax transcripts for the corresponding year may be provided

• Business income tax returns (if applicable) must be complete with all schedules and must be signed. In lieu of a signature, personal tax transcripts for the corresponding year may be provided

• A 4506-C must be signed and completed for all borrowers. The IRS requires the latest form

o Tax transcripts for personal tax returns for 2 years are required when tax returns are used to document borrower's income or any loss and must match the documentation in the loan file. ▪ See Taxpayer Identity Theft instructions, if applicable ▪ See Unfiled Tax Returns for cases where the IRS indicates “no record found”

o W2 transcripts for 2 years are required to validate W2 wages if tax transcripts are not provided and the borrower does not have any other income source or loss. The following W2 type earnings will require tax transcripts: ▪ Borrower with commission-based income that is greater than 25% of borrower's total pay ▪ Borrower with 2106 expenses (Unreimbursed Business Expenses) ▪ Borrower employed by family ▪ Borrower with ownership in company

• Taxpayer Consent Form signed by all borrowers is required

• After the tax return extension expiration date, loan is not eligible without prior year tax returns

• In cases where taxes have been filed and the tax transcripts are not available from the IRS, the IRS

response to the request must reflect "No Record Found". In these cases, an additional prior year's tax transcripts should be obtained and provided. Large increases in income that cannot be validated through a tax transcript may only be considered for qualifying on a case-by-case basis

• If the IRS rejects a 4506-T request and the reason for the rejection is either “Unable to Process” or “Limitation”, the following conditions must be met in order to validate the borrower’s income: o Copy of the IRS rejection with a code of “Unable to Process” or “Limitation”, and o Record of Account for 2 years obtained by the borrower from the IRS. Adjusted Gross Income and

Taxable Income on the Record of Account should match the borrower’s 1040s OR

o Tax return transcripts for 2 years obtained by the borrower via mail from the IRS.

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Unfiled Tax Returns The following guidelines apply for the prior year’s tax return:

• For loans closed between January 1 and the tax filing date, (typically April 15), borrowers must

provide: o IRS Form 1099 and W2 forms from the previous year o Loans closing in January prior to the receipt of W2s may use the prior year’s year-end paystub.

For borrowers using 1099s, evidence of receipt of 1099 income must be provided

• Personal 1040 tax returns - for loans closed between the tax filing due date (typically April 15) and the extension expiration date (typically October 15), the borrower must provide (as applicable): o Copy of the filed extension o W2 forms o 1099s when applicable o Current year Profit & Loss Statement, executed by the borrower o Year-End Profit & Loss Statement for prior year, if self-employed o Balance Sheet for prior calendar year, if self-employed o Evidence of payment of any tax liability identified on the federal tax extension form

• Partnership (1065) or S-Corporation (1120S) tax returns – For loans closed between the tax filing due date (typically March 15) and the extension expiration date (typically September 15), borrowers must provide (as applicable): o Copy of the filed extension. o Year-end profit and loss for prior year. o Balance sheet for prior calendar year.

• Corporation (1120) tax returns (assuming calendar year) – For loans closed between the tax filing due date (typically April 15) and the extension expiration date (typically October 15), borrowers must provide (as applicable):

• Copy of the filed extension.

• Year-end profit and loss for prior year.

• Balance sheet for prior calendar year. After the extension expiration date, loan is not eligible without prior year tax returns.

Taxpayer Identification Theft If the 4506-C transcripts do not match the borrower’s income and the borrower is a victim of taxpayer identification theft, the following conditions must be met to validate the borrower’s income:

• Proof of identification theft, as evidenced by one (1) of the following: o Proof ID theft was reported to and received by the IRS (IRS form 14039). o Copy of notification from the IRS alerting the taxpayer to possible identification theft.

• In addition to one (1) of the documents above, all applicable documents below must be provided: o Tax Transcript showing fraudulent information. o Record of Account from the IRS - Adjusted Gross Income and Taxable Income should match the

borrower’s 1040s. Validation of prior tax year’s income (income for current year must be in line with prior years).

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NOTE: The total tax liability reported on IRS Form 4868 must be reviewed by the underwriter and compared to the borrower’s tax liability from the previous two years as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with the previous years may make it necessary for MiMutual to require the current returns in order to proceed.


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Specific Income Documentation Requirements

Salaried Income

• YTD paystub


• VVOE

Hourly and Part-Time Income

• YTD paystub


• VVOE

• Stable to increasing income should be averaged over a 2 year period

Commission Income

• YTD paystub

• 2 years W2s if commissions are less than 25% of total income

• 2 years tax returns and W2 forms are required if commissions are greater than or equal to 25% of the total income

• W2 transcripts or tax transcripts (as applicable) are required to support

• VVOE


Overtime and Bonus Income

• YTD paystub

• W2s or personal tax returns for the last 2 years, with W2 transcripts or tax transcripts (as applicable) to support

• VVOE


2106 Expenses

• Employee Business Expenses must be deducted from the adjusted gross income, regardless of the income type

• Two years tax returns are required. If 2017 tax returns reflect 2106 expenses and 2018 tax returns show no expenses (due to tax law change), a 12-month average of expenses must be based on 2017 tax return and deducted from qualifying income


Alimony/Child Support/Separate Maintenance

• Considered with a divorce decree, court-ordered separation agreement, or other legal agreement

provided the income will continue for at least 3 years

• Evidence of receipt of full, regular, and timely payments for the most recent 12 months are required


• If the income is the borrower’s primary income source and there is a defined expiration date, even if it is beyond 3 years, the income may not be acceptable for qualifying purposes

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Asset Depletion


• Calculate the depletion of the asset using a 3% return over the life of the loan; same as calculating a P&I payment for a mortgage o For borrowers > 59 ½ years of age, all post-closing retirement and liquid assets may be used in

the calculation if the assets are fully vested and unrestricted o For borrowers < 59 ½ years of age, all post-closing liquid (non-retirement) assets can be included

in the calculation ▪ Minimum liquid post-closing assets of $500,000 required to include asset depletion for

qualifying income o Business funds are not allowed for income calculation

Borrowers Employed by Family

• YTD paystub

• 2 years W2s and 2 years personal tax returns, with two years tax transcripts to support

• VVOE

• Borrower’s potential ownership in the business must be addressed

Capital Gains

• Must be gains from similar assets for 3 continuous years to be considered from qualifying income

• If the trend results in a gain, it may be added as income

• If the trend results in a loss, the loss must be deducted from total income

• 3 years of personal tax returns showing a consistent history of capital gains from similar assets are required. Three years tax transcripts are required to support.

• Document assets similar to the assets reported as capital gains to support the continuation of the capital gain income

Disability Income (Long-Term)

Private policy or employer-sponsored policy:

• A copy of the policy or benefits statement must be provided to determine current eligibility for disability payments, amount of payments, frequency of payments, and if there is an established termination date

• Termination date may not be within 3 years of the Note date o Note that reaching a specific age may trigger a termination date depending on the policy

Dividends and Interest Income

• 2 years of personal tax returns, with two years tax transcripts to support

• Documented assets to support the continuation of the interest and dividend income

Foreign Income

• YTD paystub

• W2 forms or the equivalent and personal tax returns reflecting the foreign earned income. Income must be reported on 2 years US tax returns, with two years tax transcripts to support

• VVOE

• All income must be converted to US currency Back to Top

NOTE: Borrower’s potential ownership in the business must be addressed.


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K1 Income/Loss on Schedule E

• If the income is $0 or positive, stable, and not used for qualifying, the K1 is not required

• If less than 25% ownership with income used in qualifying: o Verification of Employment Requirements apply o Year-to-Date income must be verified if the most recent K1 is more than 90 days aged prior to

Note date

• If 25% or greater ownership with income used in qualifying: o Verification of Employment requirements apply o Partnership/S Corp and Self-Employment requirements apply

• If the income is negative, the K1s for the applicable years are required and if ownership is 25% or greater, see self-employment requirements

• Two years tax transcripts are required to support

Non-Taxable Income Non-taxable income includes but is not limited to child support, military rations/quarters, disability, foster care, etc.

• Documentation must be provided to support continuation for 3 years

• Income may be grossed up by applicable tax amount. Tax returns must be provided to confirm

income is non-taxable, with two years tax transcripts to support

• If the borrower is not required to file a federal tax return, income may be grossed up to 25%

Note Income

• A copy of the Note must be provided, and document the amount, frequency, and duration of the

payment

• Evidence of receipt for the past 12 months and evidence of the Note income must be reflected on personal tax returns. Tax transcripts are required to support

• Note income must have a 3 year continuance

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10.04.2021 122

Rental Income


• Lease agreements must be provided if rental income is used for qualifying purposes o Current lease for each rental property, including commercial properties listed in Part I of

Schedule E of the 1040s -OR- Form 1007 or Form 1025 Market Rent Survey o If the current lease amount is less than the rental income reported on the tax returns,

justification for using the income from the tax returns must be provided and warrant the use of the higher income. If there is no justification, the lease amount less expenses will be considered for rental income/loss



• If the property is an investment property (subject or non-subject) and is a seasonal rental, vacation rental, or short-term rental, the following requirements must be met: o Most recent 2 years tax returns reflect the property on Schedule E with consistent rents from

year to year o The county/city where the property is located does not have prohibitions or restrictions on

short-term rentals that impacts rental income received o If the property is a condominium or attached PUD, the HOA must allow for short-term rentals

and verification included in the loan file o Form 1007 or Form 1025 market rent survey to be in closed loan file o Copy of property management agreement to rent property o Copy of most recent lease agreement for property

• Personal Tax Returns – Two years o For properties listed on Schedule E, rental income should be calculated using net rental

income + depreciation + interest + taxes + insurance + HOA divided by applicable months minus PITIA

o If rental income is not available on the borrower’s tax returns, net rental income should be calculated using gross rents x 75% minus PITIA

o Two years tax transcripts are required to support o See Tax Returns for additional requirements regarding unfiled prior year returns


• If the subject property is the borrower’s primary residence (one unit property or one unit property with an accessory unit) and generating rental income, the full PITIA should be included in the borrower’s total monthly obligations

• If the subject property is the borrower’s primary residence with 2-4 units, rental income may be included for the unit(s) not occupied by the borrower as long as the requirements for a lease agreement and/or tax returns above are met.

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Departing Residence

If the borrower is converting their current primary residence to a rental property and using rental income to offset the payment, the following requirements apply:

• Copy of current lease agreement, copy of security deposit and evidence of deposit to borrower’s account.

• In lieu of a current lease agreement, Form 1007 or 1025, as applicable will be accepted to support

rents being used for departing residence

• Rent calculation is 75% of the market rent less PITIA

• Any positive rental income is disregarded for the income calculation and can only be used to offset the payment

Restricted Stock and Stock Options

• Eligible as qualifying income, provided the income has been consistently received for 2 years as identified on the paystubs, W2s, and tax returns as income, and the vesting schedule indicates the income will continue for a minimum of 2 years at a similar level as prior 2 years

• A 2 year average of prior income received from RSUs or stock options should be used to calculate

the income, with the continuance based on the vesting schedule using a stock price based on the lower of the current stock price or the 52 week average for the most recent 12 months reporting at the time of application. The income used for qualifying must be supported by future vesting based on the stock price used for qualifying and vesting schedule. Additional awards must be similar to the qualifying income and awarded on a consistent basis.


• Borrower must be currently employed by the employer issuing the RSUs/stock options in order for

the RSUs/stock options to be considered in qualifying income. Vested restricted stock units and stock options cannot be used for reserves if using for income to qualify.

• Stock must be a publicly-traded stock

• Vested restricted stock and stock options cannot be used for reserves if using for income to qualify

Retirement Income Sources

Pension, Annuity, 401(k), IRA Distributions

• Existing distribution of assets from an IRA, 401(k) or similar retirement asset must be sufficient

to continue for a minimum of three (3) years. o Distribution must have been set up at least six (6) months prior to Note date if there is no

prior history of receipt OR a 2 year history of receipt must be evidenced. o Distributions cannot be set up or changed solely for loan qualification purposes.

• Document regular and continued receipt of income as verified by any of the following: o Letters from the organizations providing the income. o Copies of retirement award letters. o Copies of federal income tax returns (signed and dated). In lieu of a signature, personal tax

transcripts for the corresponding year may be provided. o Most recent IRS W2 or 1099 forms. o Proof of current receipt with two (2) months bank statements.

Two years tax transcripts are required.

NOTE: RSU income is capped at 35% of qualifying income (50% for locks on/after August 23, 2021)


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If any retirement income will cease within the first three (3) years of the loan, the income may not be used. Social Security Income

Social Security income must be verified by a Social Security Administration benefit verification letter. If any benefits expire within the first full three years of the loan, the income source may not be used in qualifying. Benefits for children or a surviving spouse that have a defined expiration date must have a remaining term of at least 3 years.

Trust Income Income from trusts may be used if guaranteed and regular payments will continue for at least 3 years.

• Regular receipt of trust income for the past 12 months must be documented.

• A complete copy of the Trust Agreement or Trustee Statement showing: o Total amount of borrower-designated trust funds o Terms of payment o Duration of trust o Evidence the trust is irrevocable o If trust fund assets are being used for downpayment or closing costs, the loan file must contain

adequate documentation to indicate the withdrawal of the assets will not negatively affect income

Self-Employed Income Sources Self-employed borrowers are defined as those individuals who have 25% or greater ownership interest or receive a 1099 statement to document income. Year-to-date is defined as the period ending as of the most recent tax return through the most recent quarter ending one month prior to the note date. For tax returns on extension the entire unfiled year is also required. Year to date financials (profit and loss statement and balance sheet) are not required if the income reporting is positive, not declining, and not counted in qualifying income. For example: 2020 returns in file and note date is 7/14/2021 would require 2021 YTD documentation through Q1 or through March 31, 2021. Note date of 8/14/2021 would require YTD documentation covering Q1 and Q2 or through June 30, 2021.

All self-employed income is required to be analyzed on FNMA Form 1084.

• A liquidity analysis must be included in the file if the income analysis includes income from boxes 1, 2,

or 3 on the K-1 that is greater than distributions indicated on the K-1

• If a liquidity analysis is required and the borrower is using business funds for downpayment or closing costs, the liquidity analysis must consider the reduction of those assets

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NOTE: If borrowers are using trust funds as an eligible asset, then trust income is ineligible for qualifying income


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Sole Proprietorship

• YTD through current quarter P&L and Balance Sheet o Tax returns for prior year are not a substitute for balance sheet o YTD P&L and YTD Balance Sheet may be waived if the borrower is a 1099-paid borrower who

does not actually own a business if all of the following requirements are met: ▪ Schedule C in Block 28 (Total Expenses) must be analyzed in relation to income in Block 7

(Gross Income). Expenses are less than 5% of income. ▪ Analysis of Blocks 8 (Advertising), 11 (Contract Labor), 16a (Mortgage Interest), 20

(Rent/Lease), and 26 (Wages) must indicate the borrower does not have any expenses in these categories

▪ Analysis of Blocks 17 (Legal and Professional Services) and Block 18 (Office Expense) indicate nominal or $0 expense

▪ Block C (Business Name) does not have a separate business name entity ▪ YTD income in the form of a written VOE or pay history is provided by the employer paying

the 1099. YTD income must support prior year’s income.




Partnership/S-Corporation



• 2 years K1s reflecting ownership percentage, if counting any income from this source in qualifying (K1 income, W2 income, capital gains, or interest/dividends), or if Schedule E reflects a loss

• 2 years business tax returns (1065s or 1120s), signed if 25% or greater ownership. In lieu of a

signature, business tax transcripts for the corresponding year may be provided.

• Due date for business returns for Partnerships and S-Corporations is typically March 15 with an extension for 6 months or typically September 15. After the extension date, the loan is not eligible without the filed tax return

• Business returns are not required if the income reporting is $0 or positive, not declining, and not

counted as qualifying income

• YTD Profit & Loss statement and Balance Sheet if 25% or greater ownership


Corporation



• 2 years business tax returns (1120), signed if 25% or greater ownership. In lieu of a signature,

business tax transcripts for the corresponding year may be provided o Business returns must reflect percentage of ownership for borrower.

• YTD profit and loss statement and balance sheet if 25% or greater ownership.

• Stable to increasing income should be averaged for two (2) years.

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Unacceptable Income Sources • Rental income received from borrower’s primary residence (one unit property or one unit property with

accessory unit)

• Rental income received from a second home

• Income from trailing coborrowers

• Deferred compensation

• Retained Earnings

• Education Benefits

• Any unverified source

• Temporary or a one-time occurrence income

• Any income that is not legal in accordance with all applicable federal, state and local laws, rules and regulations. Federal law restricts the following activities and therefore the income from these sources is not allowed for qualifying: o Foreign shell banks o Medical marijuana dispensaries o Any business or activity related to recreational marijuana use, growing, selling or supplying of

marijuana, even if legally permitted under state or local law. o Businesses engaged in any type of internet gambling

Asset Requirements Beyond the minimum reserve requirements and in an effort to fully document the borrower’s ability to meet their obligations, borrowers should disclose and verify all other liquid assets. Eligible assets must be held in a US account.

Documentation Requirements Large deposits inconsistent with monthly income or other deposits must be verified if using for downpayment, reserves, or closing costs. It must be verified that the deposit was not the result of a new, undisclosed debt. Asset verification by a Fannie Mae approved asset validation provider is allowed in lieu of 2 months statements provided by the borrower. The asset verification must provide 60 days of account activity and include all items normally indicated on bank statements.

Checking and Savings Accounts, Money Markets, CDs • The two most recent, consecutive months’ statements (all pages) for each account are required


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Publicly Traded Stocks/Bonds/Mutual Funds • The two months most recent statements (all pages) are required.


• Non-vested stock is ineligible

• Margin account and/or pledged asset balances must be deducted

Retirement Accounts (401(k), IRAs, etc) • Most recent statement or two most recent consecutive monthly statements (all pages) covering a two

month period

• Evidence of liquidation is required when funds are used for downpayment or closing costs

• Evidence of access to funds is required for employer-sponsored retirement accounts

• If the borrower is > 59 ½ years old, 70% of the vested value of retirement accounts, after reduction of any outstanding loans, may be considered toward the required reserves

• If the borrower is < 59 ½ years old, 60% of the vested value of retirement accounts, after reduction of

any outstanding loans, may be considered toward the required reserves

• Retirement accounts that do not allow any type of withdrawal are ineligible for use as reserves

• If the asset is being used as qualifying income, then it is an ineligible asset source

Cash Value of Life Insurance/Annuities • Most recent two statement(s) covering a two (2) month period are required

• 100% of the value is eligible for calculation, unless it is subject to penalties

1031 Exchange • Allowed on second home and investment purchases only. Reverse 1031 Exchanges are not allowed

• Documentation requirements: o HUD-1s/CDs for both properties o Exchange Agreement o Sales Contract for the exchange property o Verification of funds from the Exchange Intermediary

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Business Funds 100% of business funds may be used for downpayment and/or closing costs, and for reserves with additional requirements. Cash flow analysis required using most recent 3 months business bank statements to determine no negative impact to business based on withdrawal of funds. Statements must not reflect any NSFs (non-sufficient funds) or overdrafts.

• If borrower(s) ownership in the business is less than 100%, the following requirements must be met: o Borrower(s) must have majority ownership of 51% or greater o The other owners of the business must provide an access letter to the business funds o Borrower(s) percentage of ownership must be applied to the balance of business funds for use by

the borrower(s)

• Business funds for reserves or a combination of personal/business funds for reserves will require the

total amount of reserves to be double the regular requirement for the subject property and any additional financed REO

• If business funds are used for reserves, the max LTV is reduced to 65%

Gift Funds • Gift funds are permitted after borrower has at least 5% own funds into the transaction

• Gift funds cannot be used as reserves

• Gift funds not allowed on LTVs > 80%

• Gift funds not allowed on investment properties

• Donor must be an immediate family member, future spouse, or domestic partner

• An executed gift letter with the gift amount and source, donor’s name, address, telephone number, and relationship is required

• It must be verified that sufficient funds to cover the gift are either in the donor’s account, or have been transferred to the borrower’s account. Acceptable documentation includes the following: o A copy of the donor’s check and the borrower’s deposit slip o A copy of the donor’s withdrawal slip and the borrower’s deposit slip o A copy of the donor’s check to the closing agent o A HUD-1 Settlement Statement/CD showing receipt of the donor’s check. When the funds are not

transferred prior to settlement, MiMutual must document that the donor gave the closing agent the gift funds in the form of a certified check, cashier’s check, or other official check.

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Reserve Requirements If business funds are used for reserves, the max LTV is reduced to 65%.

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Reserve Requirements Occupancy Loan Amount Number of Months of PITIA

Primary Residence

≤ $1,000,000 with LTV ≤ 80% 6

≤ $1,000,000 with LTV > 80% 12

$1,000,001 - $1,500,000 9

$1,500,001 - $2,000,000 12

$2,000,001 - $2,500,000 24

Second Home

≤ $1,000,000 12

$1,000,001 - $1,500,000 18

$1,500,001 - $2,000,000 24

$2,000,001 - $2,500,000 36


$1,000,001 - $1,500,000 24

First Time Homebuyer

≤ $1,000,000 with LTV ≤ 80% 12

≤ $1,000,000 with LTV > 80% 18

$1,000,001 - $1,500,000 15

Self-Employed Borrower Additional 3 months reserves required


Additional 6 months reserves PITIA for each property is required based on the PITIA of the additional REO. If eligible to be excluded from the count of multiple financed properties, reserves are not required. Max four (4) financed properties may be owned.

** Gift funds and borrowed funds (secured or unsecured) are not allowed for reserves **


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Financing Concessions Interested party contributions include funds contributed by the property seller, builder, real estate agent/broker, mortgage lender, or their affiliates, or any other party with an interest in the real estate transaction. Interested party contributions may only be used for closing costs and prepaid expenses, and may never be applied to any portion of the down payment or contributed to the borrower’s financial reserve requirements.

Maximum IPCs are as follows:

LTV/CLTV/HCLTV Limit and Transaction Type Percent Limit

Primary residences and Second Homes with LTVs ≤ 80% 6%

Primary residences with LTVs > 80% 3%

Investment Properties (regardless of LTV) 2%

Seller Concessions All seller concessions must be addressed in the sales contract, appraisal, and HUD-1/CD. A seller concession is defined as any interested party contribution beyond the stated limits as shown in Financing Concessions, or any amounts not being used for closing costs or prepaid expenses. If a seller concession is present, both the appraised value and the sales price must be reduced by the concession amount for the purposes of calculating LTV/CLTV/HCLTV.

Personal Property Any personal property transferred with a property sale must be deemed to have zero transfer value as indicated by the sales contract and appraisal. If any value is associated with the personal property, the sales price and the appraised value must be reduced by the personal property value for purposes of calculating the LTV/CLTV/HCLTV

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Appraisal Requirements • Full appraisals are required on all transactions (1004 or 1073). See table below for appraisal

requirements. o Investment properties must contain a comparable rent schedule o Appraisals must be completed for the subject transaction. Use of a prior appraisal, regardless of the

date of the prior appraisal, is not allowed

• Appraisals must be ordered through your MiMutual-assigned AMC on all transactions, including

correspondent.

• Transferred appraisals are not allowed.

• Appraisal Update (Form 1004D) is allowed for appraisals that are over 120 days aged but less than 180 days aged from Note date. ▪ The appraiser must inspect the exterior of the property and provide a photo. ▪ Appraiser must review current market data to determine whether the property has declined in value

since the date of the original appraisal. If the value has declined since the original appraisal, a new full appraisal is required.

▪ The Appraisal update 1004D must be dated within 120 days of the Note date

• Collateral Desktop Analysis (CDA) ordered from Clear Capital is required to support the value of the appraisal (unless two full appraisals are obtained). o If the CDA returns a value that is ‘indeterminate’ or if the CDA indicates a lower value than the

appraised value that exceeds a 10% tolerance then one of the following requirements must be met: ▪ A Clear Capital BPO (Broker Price Opinion) and a Clear Capital Value Reconciliation of Three

Reports will be used for the appraised value of the property. MiMutual is responsible for ordering the BPO and the Value Reconciliation through Clear Capital

▪ A field review or 2nd full appraisal may be provided. The lower of the two values will be used as the appraised value of the property. MiMutual is responsible for providing the field review or second full appraisal

• Escrow holdback accounts are not eligible. Any repairs or improvements must be fully completed prior

to closing, and evidence of satisfactory completion is required.

• When 2 appraisals are required, the following apply: o Appraisals must be completed by 2 independent companies o The LTV will be determined by the lower of the two appraised values as long as the lower appraisal

supports the value conclusion. The final inspection and/or recertification of value must be for the appraisal with the lower value

o Both appraisal reports must be reviewed and address any inconsistencies between the two reports. All discrepancies must be reconciled.

o When two appraisals are required, and both appraisals are done “subject to” (1004D required), it is acceptable to provide only one 1004D. If only one 1004D is provided, it should be for the appraisal that the value of the transaction is being based on.

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NOTE: If a second appraisal is required, MiMutual will cover the cost.


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• For properties purchased by the seller of the property within 90 days of the fully executed purchase contract, additional requirements will apply: o Second full appraisal is required o Property seller on the purchase contract must be the owner of record o Increases in value should be justified and documented with commentary from the appraiser and

recent paired sales

Appraisal Requirements by Loan Amount

First Lien Loan Amount Appraisal Requirement







Eligible Collateral Eligible collateral includes:





• Modular homes (not manufactured)

• Condominiums – Attached – (must be FNMA Warrantable) o CPM certificates allowed o Full review allowed, warranty to FNMA guides o Limited review allowed for attached units in established condominium projects:

▪ Eligible transactions as per FNMA guides ▪ Projects located in Florida are not eligible for limited review

o Projects with 2-4 units – no condominium review or condominium warranty is required. FNMA basic requirements only

o Florida condominiums limited to 50% LTV/CLTV/HCLTV on investment transactions o Condominium documents to support condo eligibility review must be no older than 120 days from

the Note date (continued on next page)

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NOTE: These requirements do not apply if the seller is a bank that received the property as a result of foreclosure or deed-in-lieu


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• Condominiums – Detached (including site condos) o No project review or condominium warranty is required o FNMA basic requirements apply


▪ Must be common and typical for the area, with a maximum 35% land-to-value ratio ▪ No income-producing attributes ▪ Transaction must be 10% below maximum LTV/CLTV allowed for program

• For example, if the borrower qualifies for a loan at 80% LTV based on the transaction, FICO score, loan amount, and reserves, then the maximum allowed would be 70%

▪ 20, 25, 30 year fixed rate terms only

• Properties subject to existing oil/gas leases must meet the following: o Title endorsement providing coverage to MiMutual against damage to existing improvements

resulting from the exercise of the right to use the surface of the land which is subject to an oil and/or gas lease


constructed is permitted. o Must be connected to public water

• Properties with leased solar panels must meet FNMA requirements


• Co-Ops

• Properties subject to leasehold

• Unique properties / log homes

• 2-4 unit second homes



• Model home leasebacks

• Non-warrantable condos

• Condotels

• Manufactured/Mobile homes

• Any properties with > 20 acres. Appraiser must indicate total acreage. It is unacceptable to have the property appraised with only 40 acres in order to meet eligibility.

• Working farms, ranches, or orchards

• Properties for which the appraisal indicates a Condition Rating of C5 or C6, or a Quality Rating of Q6


• Properties with a private transfer fee covenant unless the covenant is excluded under 12 CFR 1228 as an

excepted transfer fee covenant

• Tenants-in-Common (TIC) projects

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General Provisions

FEMA Declared Disaster Area Policy The FEMA Declared Disaster Area Policy applies to all areas eligible for individual and/or public assistance due to a federal government disaster declaration.

Effective Date of Disaster Policy The disaster-area policy becomes effective as of the incident period end date for the disaster/event. FEMA publishes the incident period along with the declaration date once the area is presidentially declared. For example, refer to the following dates to understand when property re-inspection requirements apply:

• Disaster Incident Period:

o Begin Date: January 15 o End Date: January 17

• Disaster Declaration Date: February 2

• Effective Date for Disaster Procedures: January 17

Based on the dates noted in the above example, all appraisals performed on or before January 17 would require the appropriate re-inspection or review. Appraisals performed after January 17 would continue to require written certification by the appraiser that indicated whether the property was free from damage and whether the disaster had any effect on value or marketability. If there was damage, the extent of that damage needs to be addressed. The disaster policy will be in effect for transactions during an ongoing disaster and transactions with a Note date that is within ninety (90) days of the end date of the disaster incident period. The disaster policy is also in effect for loans with a post-closing disaster and prior to date of sale to investor. Appraisal and Re-Inspection Requirements To ensure the property value has not been impacted by the disaster, a post-disaster property inspection is required. The inspection may be performed by the original appraiser, another licensed appraiser, or licensed property inspection company. Appraisal Performed On or Before Disaster Incident End Date The property inspection must identify the following:


• If the re-inspection indicates damage, the extent of the damage must be addressed. Completion of repairs is required as evidenced by Form 1004D/442, Appraisal Update and/or Completion Report, or other post- disaster inspection report, with photos of interior, exterior, and neighborhood.

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Standard Appraisal Performed After Incident Period End Date for Disaster Appraisal must include written certification by the appraiser that:


• If the appraisal indicates damage, the extent of the damage must be addressed. Completion of repairs is required as evidenced by Form 1004D/442, Appraisal Update and/or Completion Report, with photos of interior and exterior.

Please note that FEMA makes updates to their state lists. Closely monitor FEMA’s online reference at http://www.fema.gov/news/disasters.fema.

Power of Attorney Subject to the restrictions and requirements listed below, MiMutual will allow the use of a Power of Attorney (POA) to execute the security instrument, note and other closing documents on behalf of the borrower(s).

Requirements

• POA to be recorded along with security instrument in those states requiring recordation.

• The person(s) name(s) granting the power of attorney must match the name on the security instrument.

• The form, signatures, and recording requirements of the applicable state must be followed

• The POA must be valid at the time the affected loan documents were signed.

• The POA must be notarized and unless otherwise required by applicable law, must reference the address of the subject property.

• Only relatives (as defined by FNMA), fiancé, fiancée or domestic partners of the borrower may be named to act as an attorney-in-fact.

Restrictions on the Use of a Power of Attorney Except as required by applicable law, the following restrictions apply:

• Borrower(s) must sign at least the initial 1003/disclosures.

• POAs not allowed on Cash Out transactions.

• POAs not allowed on Texas 50(a)(6) transactions.

Title Requirements Title must be held as Fee Simple. Title to the subject property must not contain an unacceptable title impediment, including unpaid real estate taxes and/or survey exceptions. If surveys are not commonly required in a particular jurisdiction, an ALTA 9 Endorsement must be provided. If it is not customary in a particular area to supply either the survey or an endorsement, the title policy must not have a survey exception. The title commitment cannot be dated more than 90 days prior to the Note date. Unless otherwise stated here, Fannie Mae title insurance guidelines should be followed.

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http://www.fema.gov/news/disasters.fema

Jumbo Underwriting Guidelines | Jumbo Select 90

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Jumbo Select 90

This program is designed to allow a more aggressive LTV than the Jumbo Select program, but requires additional underwriting requirements as identified below. All Jumbo Select guidelines will apply unless noted

within this chapter.

Eligibility Matrix Fixed Rate (20, 25, 30 year)

Primary Residence | Purchase and Rate/Term Refinance

Transaction Type Units FICO Max LTV Max Loan Amt

Purchase or Rate/Term Refi

1 740 90% $1,500,0001

Select 90 QM Loan Notes: • 1First-Time Homebuyers are subject to a maximum loan amount of $1,000,000. Loan amounts up to $1,500,000 allowed

in CA, NJ, and WA for First-Time Homebuyers. Minimum FICO score for FTHB is 740. See Eligible Borrower section for specific requirements for First-Time Homebuyers

• Minimum LTV is 80.01% • MI not required • Secondary financing not allowed • Non-permanent resident aliens not allowed • Gift funds not allowed • Minimum loan amount is $1 over the current conforming/high balance limit set by FHFA. • Agency high balance loan amounts are ineligible • Escrow/impound accounts required for LTVs greater than 80% unless prohibited by applicable laws • 20, 25, 30-year fixed rate only

Eligible Products 20, 25, 30 year fixed rate only

Documentation Requirements Full doc. Manual underwriting requirements apply, regardless of AUS documentation waivers. Follow FNMA Selling Guide requirements for items not addressed in these guidelines / overlay matrix. However, DU findings are required on all Jumbo loans to demonstrate the borrower is not eligible for an Agency product.

All loans must meet the Price-Based QM definition:


• Rebuttable Presumption = APR ≤ 225bps above the applicable APOR (HPCT)

QM Designation must be provided in the loan file.

• QM designation is QM Safe Harbor if the loan is not a Higher- Priced Covered Transaction (HPCT).

• QM designation is QM Rebuttable Presumption if the loan is a Higher-Priced Covered Transaction (HPCT).

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In all cases, the loan file must document the 8 ATR rules.

Residual Income Calculation must be provided when applicable, and meet the residual income requirements indicated in the Income/Employment section of this guide.

If the 1003, title commitment, or credit documents indicate the borrower is a party to a lawsuit, additional documentation must be obtained to determine no negative impact exists on the borrower’s ability to repay, assets, or collateral.

Borrower affidavit specific to COVID-19 pandemic is required.

Occupancy 1 unit primary residences only

Maximum DTI • 38% for First-Time Homebuyers

• 43% for Non-First-Time Homebuyers

• Additional reserves are required for DTIs between 38.01% and 43.00%. See Assets.

Borrowers

Eligible • US Citizens

• Permanent Resident Aliens (per guidance in Jumbo Select chapter)

• Inter Vivos Revocable Trusts (per guidance in Jumbo Select chapter)

• First Time Homebuyers o Defined as a borrower who has not owned a home in the last three (3) years. For loans with more

than one (1) borrower, where at least one (1) borrower has owned a home in the last three (3) years, first time homebuyer requirements do not apply. ▪ 740 Minimum FICO score. ▪ Maximum DTI 38%. ▪ Maximum loan amount is $1,000,000; Maximum loan amount is $1,500,000 for transactions

located in CA, NJ, and WA ▪ Reserve requirements met for FTHB as specified in the Asset section

Ineligible • Non-permanent resident aliens

• All other ineligible borrowers per guidance in Jumbo Select chapter

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NOTE: Loans with application dates on or before 3/1/2021, regardless of lock date, must meet the maximum DTI of 43% and adhere to all appendix Q documentation requirements.


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Multiple Financed Properties The borrower(s) may own a total of two (2) financed, 1-4 unit residential properties, including the subject property. All financed 1-4 unit residential properties require an additional 6 months reserves for each property, unless the exclusions below apply.

1-4 unit residential financed properties held in the name of an LLC or other corporation can be excluded from the number of financed properties only when the borrower is not personally obligated for the mortgage.

Ownership of commercial or multifamily (5+ units) real estate is not included in this limitation.

Properties Listed for Sale Properties currently listed for sale (at the time of application) are not eligible for refinance transactions.

Properties listed for sale within six months of the application date are acceptable if the following requirements are met:

• Rate/term refinance only

• Primary residence only

• Documentation provided to show cancellation of listing

• Acceptable letter of explanation from the borrower detailing the rationale for cancelling the listing.

Credit

Derogatory Credit • Bankruptcy, Chapter 7, 11, 13 – not allowed

• Foreclosure – not allowed

• Short Sale/Deed-in-Lieu – not allowed

• Mortgage accounts that were settled for less, negotiated or short payoffs – not allowed

• Loan Modification – not allowed unless the modification is unrelated to hardship and there is no debt forgiveness as evidenced by supporting documentation.

• A forbearance that results in a loan modification (moving payments to the end of the mortgage) is a credit event and will be considered “due to hardship”


• Payment plans for tax liability are not permitted

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Income/Employment


• Extended gaps of employment 6 months or greater require a documented 2 year work history prior to the absence

• Exceptions may be considered on a case-by-case basis when the borrower is on the job less than 6 months, and the gap is less than 6 months

Residual Income Requirement A Residual Income Calculation is required. All Jumbo Select 90 loans must meet the residual income requirements below. Residual Income equals Gross Qualifying Income less Monthly Debt (as included in the DTI).



Rental Income


• Lease agreements must be provided if rental income is used for qualifying purposes

o Current lease for each rental property, including commercial properties listed in Part I of Schedule E of the 1040s OR Form 1007 or 1025 market rent survey.

o If the current lease amount is less than the rental income reported on the tax returns, justification for using the income from the tax returns must be provided and warrant the use of the higher income. If there is no justification, the lease amount less expenses will be considered for rental income/loss



• If the property is an investment property (non-subject) and is a seasonal rental, vacation rental, or short-term rental, the following requirements must be met: o Most recent two years tax returns reflecting the property on Schedule E with consistent returns

from year to year o The county/city where the property is located does not have prohibitions or restrictions on short-

term rentals that impact rental income received o If the property is a condo or attached PUD, the HOA must allow for short-term rentals and

verification included in the loan file o Copy of property management agreement to rent property o Copy of most recent lease agreement for property (continued on next page)

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• Personal Tax Returns – Two years o For properties listed on Schedule E, rental income should be calculated using net rental income

+ depreciation + interest + taxes + insurance + HOA divided by applicable months minus PITIA o If rental income is not available on the borrower’s tax returns, net rental income should be

calculated using gross rents x 75% minus PITIA o Two years tax transcripts are required to support


• If the subject property is the borrower’s primary residence (one unit property or one unit property with an accessory unit) and generating rental income, the full PITIA should be included in the borrower’s total monthly obligations

Departing Residence

• If the borrower is converting their current primary residence to a rental property and using rental income to offset the payment, the following requirements apply: o Copy of current lease agreement, copy of security deposit and evidence of deposit to borrower’s

account o In lieu of a current lease agreement, Form 1007 or Form 1025 as applicable to support rents being

used for departing residence o Rent calculation is 75% of the market rent less PITIA o Any positive rental income is disregarded for the income calculation and can only be used to

offset the payment.

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Assets

Gift Funds Gift funds are not permitted on Jumbo Select 90.

Reserve Requirements All applicable reserve requirements in Jumbo Select chapter, except for differences as described in table below.

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Reserve Requirements Occupancy DTI Number of Months of PITIA

First Time Homebuyer ≤ 38% 15

Non-First Time Homebuyer ≤ 38% 12

38.01 – 43.00% 18


Additional 6 months reserves PITIA for each property is required based on the PITIA of the additional REO. If eligible to be excluded from the count of multiple financed properties, reserves are not required. Max two (2) financed properties may be owned.


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Collateral

Eligible Collateral • Properties with ≤ 20 acres

o Properties > 10 acres and ≤ 20 acres must meet the following: ▪ Must be common and typical for the area, with a maximum 35% land-to-value ratio ▪ No income-producing attributes

• (all other Eligible Collateral as described in Jumbo Select guidance)

Ineligible Collateral • 2-4 unit owner occupied properties

• Second homes

• Investment properties

• (all other Ineligible Collateral as described in Jumbo Select guidance)

Appraisal Requirements by Transaction Type

Purchase One (1) Full Appraisal

Rate/Term Refinance Two (2) Full Appraisals

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Jumbo Underwriting Guidelines

Documents

Transcript of Jumbo Underwriting Guidelines