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Mod Corr Seller Guide Pre-Purchase Delivery

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8 - Table of Contents 8 - PRE-PURCHASE DELIVERY ........................................................................................ 8-1

Overview .................................................................................................................... 8-1 Introduction ............................................................................................................. 8-1 Transaction Methods ................................................................................................. 8-1 Modified Correspondent Warranty ............................................................................... 8-1 Loan Quality ............................................................................................................ 8-2 LQI-Undisclosed Debt Policy ....................................................................................... 8-2 Lender Name ........................................................................................................... 8-2 Pre-Purchase Review – Mod Corr Transactions .............................................................. 8-2 Loan Submission Guidelines – Mod Corr Transaction ..................................................... 8-2 MSI Review Process – Mod Corr Transactions ............................................................... 8-3 Loan Submission Guidelines – Wholesale Transaction .................................................... 8-4 Timing Requirements ................................................................................................ 8-4 Business Day ........................................................................................................... 8-5 Property Address Validation ....................................................................................... 8-5 Loan Status ............................................................................................................. 8-5

General Loan Delivery Information ................................................................................. 8-6 Overview ................................................................................................................. 8-6 Best Efforts Delivery Schedule .................................................................................... 8-6 Original Final Documents ........................................................................................... 8-6 First Lien Position ..................................................................................................... 8-7 Funding Source ........................................................................................................ 8-7 Special Requirements Government Loans .................................................................... 8-8 Loans with Deficiency ................................................................................................ 8-8 Complete Review ...................................................................................................... 8-8 Loan Status Notification ............................................................................................. 8-9 Returned Documents – Mod Corr transactions .............................................................. 8-9 Note Corrections ..................................................................................................... 8-10 Returning Corrected Notes ....................................................................................... 8-10 Servicing Implications ............................................................................................. 8-10 Marketing Loss Fees ................................................................................................ 8-10 Seller Responsibility ................................................................................................ 8-11 Loan Purchase Summary (Purchase Advice) ............................................................... 8-11 Purchase Advice of Record: ...................................................................................... 8-11 Net Proceeds .......................................................................................................... 8-12 Unpaid Principal Balance .......................................................................................... 8-13 Amortization Policy Illustration ................................................................................. 8-14 Payment History Required ....................................................................................... 8-15 Post-Funding Condition for Amortized Loans............................................................... 8-15 Pre and Post Purchase Conditions ............................................................................. 8-16

General Standards and Policies .................................................................................... 8-17 Description ............................................................................................................ 8-17 Application – 1003 .................................................................................................. 8-17 Appraiser Independence .......................................................................................... 8-17 Amortization Policy ................................................................................................. 8-17

Continued on Next Page


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Table of Contents, Continued

Closing Protection Letter .......................................................................................... 8-17 Completion Escrows ................................................................................................ 8-17 Note Date – Audit ................................................................................................... 8-18 Doing Business As .................................................................................................. 8-18 Discount Point Policy ............................................................................................... 8-18 Disaster Policy ........................................................................................................ 8-19 Disaster Definition .................................................................................................. 8-19 Appraisal Requirements ........................................................................................... 8-20

Appraisals Completed on or before the Incident Period End Date ............................... 8-20 FHA Streamlines .................................................................................................. 8-20 Appraisals Completed up to 120-days after the Incident Period End Date .................... 8-21

Minor Damage Requirements for Disasters ................................................................. 8-21 Major Damage Requirements for Disasters ................................................................. 8-21 Damage Inspection Requirements ............................................................................. 8-22 Finance Charges ..................................................................................................... 8-23

Finance Charges Included in APR ........................................................................... 8-23 Finance Charges That May be Excluded from the APR ............................................... 8-24

Recalculation of the TIL ........................................................................................... 8-25 Financial Reform ..................................................................................................... 8-25 HPML .................................................................................................................... 8-26

Escrow Accounts .................................................................................................. 8-26 MSI Audit Points .................................................................................................. 8-26 Documentation Requirements ............................................................................... 8-27

Document Aging ..................................................................................................... 8-27 Escrow/ Impound Accounts ...................................................................................... 8-28 Escrow Waivers ...................................................................................................... 8-29 Escrow (Completion) Holdback ................................................................................. 8-30 FACTA Alert ........................................................................................................... 8-30 File Retention ......................................................................................................... 8-31 Forms ................................................................................................................... 8-31 Government Loans .................................................................................................. 8-32

Modified Correspondents with their own DE ............................................................ 8-32 Modified Correspondents Sponsored by MSI ............................................................ 8-32

Home Mortgage Disclosure Act (HMDA) ..................................................................... 8-32 Interest Accrual ...................................................................................................... 8-33 Interest Credit ........................................................................................................ 8-33 First Payment Due Date ........................................................................................... 8-33 Prepaid Interest (Interim Interest) ............................................................................ 8-33 Late Fees ............................................................................................................... 8-34 Leasehold Estate .................................................................................................... 8-34 Loan Modification .................................................................................................... 8-34 Loan Payments – Payment History ............................................................................ 8-35 Loan Payments Received ......................................................................................... 8-35 Principal Curtailment (Reduction) Policy ..................................................................... 8-36 Reduced Balance .................................................................................................... 8-37 REG Z ................................................................................................................... 8-37



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Rights of MSI ......................................................................................................... 8-38 Risk Based Pricing Rules .......................................................................................... 8-39 S.A.F.E. Act and FHFA-Data Capture ......................................................................... 8-39

S.A.F.E. Act Instructions for the 1003 .................................................................... 8-41 Delaware, Maine and Missouri-NMLS Company ID Exception ..................................... 8-41

Seasoned Loans - Purchase Limitations ..................................................................... 8-42 Subordinate Mortgages............................................................................................ 8-42 Settlement Agents .................................................................................................. 8-42 Trusts ................................................................................................................... 8-43 Illinois Land Trusts .................................................................................................. 8-43 Inter Vivos Revocable Trusts (IVRT) .......................................................................... 8-43 TILA-RESPA Integrated Disclosure (TRID) .................................................................. 8-44

Audit Points/Requirements .................................................................................... 8-44 Application Definition ........................................................................................... 8-45 Business Day Definition ........................................................................................ 8-45 Collection of Documentation and Fees .................................................................... 8-45 Notice of Intent to Proceed ................................................................................... 8-46 LE-Timing Requirements ....................................................................................... 8-46 LE-Delivery Requirements..................................................................................... 8-46 LE-Delivery Methods ............................................................................................ 8-47 LE Delivery Method Matrix .................................................................................... 8-47 Revisions/Corrections to the LE ............................................................................. 8-48 Change of Circumstance ....................................................................................... 8-49 LE-Revised - Timing Requirements......................................................................... 8-49 LE-Revised - Documentation Requirements ............................................................. 8-49 LE-Revised – Restrictions for issuing a Revised LE ................................................... 8-50 LE-Variances ....................................................................................................... 8-51 LE Variances Matrix ............................................................................................. 8-51 Ten Percent Cumulative Tolerance ......................................................................... 8-52 Charges on the LE for Services Not Performed......................................................... 8-52 Excess Charges Cure Provisions ............................................................................. 8-52 Variances after Issuing a CD ................................................................................. 8-53 Shopped Services ................................................................................................ 8-54

Closing Disclosure ................................................................................................... 8-55 CD-Content......................................................................................................... 8-55 CD Delivery Method Matrix ................................................................................... 8-56 Delivery Requirements for Transactions with Multiple Consumers .............................. 8-56 Consummation Date Defined ................................................................................. 8-57 Earliest to Close Date ........................................................................................... 8-57 Earliest Close Date Matrix ..................................................................................... 8-57 Settlement Agent Responsibility for CD .................................................................. 8-58 Average Charges for Settlement Services ............................................................... 8-58 Revisions/ Corrections to the CD ........................................................................... 8-58 Re-disclosure Timing ............................................................................................ 8-59 Other Information ................................................................................................ 8-60 Other Important Information about TRID ................................................................ 8-60



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Delivery File Standards ............................................................................................... 8-61

Overview ............................................................................................................... 8-61 Custodial (Collateral) Documents Standards .................................................................. 8-62

Overview ............................................................................................................... 8-62 Delivery Requirements ............................................................................................ 8-62 Note ..................................................................................................................... 8-62 Proper Note Endorsement ........................................................................................ 8-64 Note Addenda ........................................................................................................ 8-66 Note Allonge Sample ............................................................................................... 8-67 Power of Attorney ................................................................................................... 8-68 Name Affidavit ....................................................................................................... 8-70 Security Instruments .............................................................................................. 8-71 Riders to the Security Instrument ............................................................................. 8-71 MERS .................................................................................................................... 8-72

Acceptable MERS Memberships ............................................................................. 8-72 Assignment of Mortgage .......................................................................................... 8-73

MERS Members (MERS Ready) .............................................................................. 8-73 Non-MERS Members ............................................................................................ 8-74

Transferring Beneficial and Servicing Rights to MSI ..................................................... 8-75 MERS Organizational ID Numbers ............................................................................. 8-75 Private Mortgage Insurance Certificate ...................................................................... 8-76

Closing Documents Standards ..................................................................................... 8-77 Overview ............................................................................................................... 8-77 Document Vendors ................................................................................................. 8-77 Closed Loan Delivery Transmittal .............................................................................. 8-78 Regulatory Documents ............................................................................................ 8-78 Closing Documents ................................................................................................. 8-78 Secondary Financing ............................................................................................... 8-80 Title Commitment ................................................................................................... 8-80 MSI Title Restrictions .............................................................................................. 8-80 Chain of Title –Property Flipping ............................................................................... 8-81 Right of Redemption ............................................................................................... 8-81 Survey .................................................................................................................. 8-81 Hazard Insurance ................................................................................................... 8-82

60-Day Rule........................................................................................................ 8-82 Mortgagee Clause ................................................................................................ 8-85

Flood Zone/ Life of Loan Certificate ........................................................................... 8-86 Flood Insurance ...................................................................................................... 8-87

Additional Disclosure Regarding Flood Insurance ..................................................... 8-90 Other Insurance ..................................................................................................... 8-91 Initial Escrow Disclosure .......................................................................................... 8-92 Escrow Waiver Letter .............................................................................................. 8-92



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Final Closing Disclosure ........................................................................................... 8-93

POC Items .......................................................................................................... 8-93 Reviews and Controls ........................................................................................... 8-93 Seller Credits ...................................................................................................... 8-93 Realtor Commissions Limitations ........................................................................... 8-94 Closing Disclosure Technical Corrections ................................................................. 8-94

Payment Letter ....................................................................................................... 8-94 Tax Information Sheet ............................................................................................ 8-95 Tax Requirements ................................................................................................... 8-95

Tax Payment Rule – 60 -Day Rule.......................................................................... 8-96 Loan Application Requirements ................................................................................. 8-98 Initial/Original Loan Application ................................................................................ 8-98 Final Loan Application.............................................................................................. 8-98 Correction Agreement ............................................................................................. 8-99 Right of Rescission .................................................................................................. 8-99 Transfer of Servicing Documentation ........................................................................ 8-100 W-9 ..................................................................................................................... 8-100 4506-T ................................................................................................................. 8-101 MSI 4506-T Completion Requirements ..................................................................... 8-101 USA Patriot Act ...................................................................................................... 8-102 Photo ID ............................................................................................................... 8-103 Septic Certification ................................................................................................. 8-103 Termite Certification .............................................................................................. 8-103 Well Certification ................................................................................................... 8-103 Conditions on the Loan ........................................................................................... 8-103 High Cost/ ............................................................................................................ 8-104 Predatory Lending.................................................................................................. 8-104 Responsible Lending Policy...................................................................................... 8-104 Seller Warranty ..................................................................................................... 8-104 Rights of MSI ........................................................................................................ 8-104

Important Delivery Addresses .................................................................................... 8-105 Overview .............................................................................................................. 8-105

Mod Corr Pre-Purchase Delivery

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8 - Pre-Purchase Delivery Overview

Introduction The Pre-Purchase Delivery chapter outlines the standards and

requirements for delivery of a closed loan to Mortgage Services III. LLC (MSI) for purchase/funding.

Transaction Methods

MSI offers 2 transaction methods to our Modified Correspondents: Wholesale transactions:

• The loan is priced as Wholesale loans; MSI underwrites and the Seller closes the loan using MSI funds in MSI’s name.

• MSI draws all closing documents. Mod Corr transactions:

• The loan is prices as a Mod Corr loan; MSI underwrites and the Seller closes the loan in their own name using their own funds.

• The Seller draws all closing documents and delivers the loan as a closed loan delivery to MSI for funding/purchase.

Important Note: While the closing and document standards applies to all loans; the guidelines outlined in this chapter primarily apply contractually to those loans being delivered to MSI as Mod Corr for MSI purchase, closed in the Seller’s name.

Modified Correspondent Warranty

The Modified Correspondent, by delivery of a mortgage loan for sale to MSI, warrants that the loan was originated and closed in full compliance with all federal, state, municipal and regulatory requirements; meets all guidelines and requirements outlined in the MSI Mod Corr Seller Guide; satisfies all conditions of underwriting approval and has been delivered in accordance with the standards and requirements stated in the MSI Mod Corr Seller Guide. Loans priced/closed as Wholesale transactions must close in the

name of MSI. Loans priced/closed as Mod Corr transactions are closed in the

name of the Seller and must meet all MSI delivery requirements for closed loan delivery.

All loans must be underwritten by MSI or its designated third party underwriter.

Continued on next page



Overview, Continued

Loan Quality

See the Mod Corr Seller Guide/Underwriting for full details.

LQI-Undisclosed Debt Policy

See Mod Corr Seller Guide/Underwriting policy. MSI underwrites all loans.

Lender Name Modified Correspondent loans closed as a Mod Corr transaction must close in the Seller’s name.

Modified Correspondent loans closed as a Wholesale transaction must close in the MSI’s name; MSI must draw the closing documents.

Pre-Purchase Review – Mod Corr Transactions

All files are reviewed by MSI prior to purchase/funding. It is critical that delivery files are complete with all exhibits and instruments properly executed. Priority in the loan review and funding process is given to complete, correct and well-organized files. Missing documents and errors will prevent prompt purchase/funding of the loans, which may result in the assessment of Marketing Loss Charges.

Important: MSI reserves the right to refuse purchase or request repurchase based on the pre-purchase review or as a post-purchase quality review.

Loan Submission Guidelines – Mod Corr Transaction

To facilitate the purchase of your Mod Corr transaction loan by MSI, ensure that the closed loan package meets these delivery guidelines: The loan must have received a “clear to close” status on “Web Trac”

on www.msiloans.biz. Ensure that all at-closing conditions/stipulations are approved/cleared

and supporting documentation included in the loan file. Ensure that the closing file meets all MSI requirements.


http://www.msiloans.biz/


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Overview, Continued

MSI Review Process – Mod Corr Transactions

MSI employs not only “manual” reviews on loans submitted for purchase but does take advantage of current electronic applications that validate loan information. Information re-validated includes, but is not limited to the following: Social security OFAC Fraud detection applications Re-validation of property value Income validation through request for Tax Transcripts and other

available applications Note: MSI’s use of other methods of information re-validation does not relieve the Seller from any obligations relating to the loan, including but not limited to compliance with all Representations and Warranties to MSI.

Review Process If … Then …

The loans passes review with no issues The loan is purchased The loan has issues and is suspended (pended/placed on hold)

Additional information must be provided by the Seller. MSI will alert the Seller via email. The additional information must be submitted, reviewed and approved by MSI.

• Upon approval, the loan will be purchased. • If not acceptable, the loan will be returned as non-salable.

Misrepresentation is suspected The file will be submitted for an additional more specific review. If the loan does not prove misrepresentation, it will be purchased. If the loan proves misrepresentation, it will be returned as unsalable.




Overview, Continued

Loan Submission Guidelines – Wholesale Transaction

When loans are priced/closed as Wholesale transactions, the loan uses MSI funds to close and the loan is closed in MSI’s name. The following process applies:

When … Then … MSI Draws Docs and Provides the Funds for disbursement

Seller Requests Closing Docs applicable Doc Prep Request Form (www.msiloans.biz ) • Seller must fully complete the doc request form and provide all required

documentation. Settlement/Title Agent receives closing documents. Loan closes, funds wired and loan disburses. Settlement/Title Agent returns all closing documents to MSI. MSI reviews documents, contacts LO for any post-funding issues.

Timing Requirements

MSI applies the following timing policy for advance notice for closing/funding requests:

Advance Notice Policy – Closing/Funding Requests Purchase Transactions MSI will accept closing requests for purchase transactions within 48-hours (2-business days)

advance notice of the closing date. Funding (closing) requests for purchase transactions must be made to MSI a minimum of

48-hours (2 business days) prior to the closing date. The closing date may be the first business day after the elapse of the 2-busines-day

advance notice period. Refinance Transactions MSI will accept closing requests for refinance transactions within 72-hours (3-business days)

advance notice of the closing date. Funding (closing) requests for refinance transactions must be made to MSI a minimum of

72-hours (3 business days) prior to the closing date. The closing date may be the first business day after the elapse of the 3-busines-day

advance notice period. Important Notes: Funding requests may not be made until MSI Underwriting has rendered a “Clear to Close” status and has received all of

the requisite items for the closing (i.e. including fee sheet, hazard insurance declaration page and title commitment). During times of low volume, the Closing Department will make every effort to accommodate the LO as needed; however,

when volumes are high, Timing Requirements may be enforced.





Overview, Continued

Business Day

MSI’s definition of Business Day: MSI considers business days to be Monday through Friday with the

exception of federally mandated holidays on which the Federal Reserve is closed and/or any day for which MSI is closed for business.

Note: Loans may not be closed on a Saturday, Sunday or any federally mandated holiday.

Property Address Validation

MSI not only validates that the property address is consistent throughout the loan file (on closing documents, custodial documents and in the credit file) we also validate the address against the US Postal Service at the following Web Site http://zip4.usps.com/zip4/welcome.jsp. Although not required, MSI strongly recommends that Seller validate property addresses to expedite loan funding/purchase.

Loan Status

Loan Status Notices MSI communicates with the Seller via E-mail providing notices of

outstanding pre-purchase/funding conditions. • The Seller may view those conditions on the Web Site/Online

Tracking. www.msiloans.biz Delivery Transmittals MSI posts the Closed Loan Delivery Transmittal form on the Web Site

(Closed Loan Delivery Transmittal - Fillable ). You may complete on your computer by saving under a different file name or you may print and complete long hand. • Please use the stacking order on the form. • MSI does not require the Credit Package as we underwrite all

loans. • Do not include final documents in the closed loan delivery file.

http://zip4.usps.com/zip4/welcome.jsp


http://www.msiloans.biz/Form%20PDFs/Closed%20Loan%20Delivery%20MSI3.pdf



General Loan Delivery Information

Overview This section of the Seller Guide provides general process and procedures for delivering mortgage loans to the MSI. Following these general guidelines will facilitate the purchase (funding) of loans by MSI.

Best Efforts Delivery Schedule

Loans must be delivered for purchase in purchasable condition on or before the commitment expiration date.

Original Final Documents

Do not include the original final trailing documents in the Delivery File; they may not be properly credited to your loan file. Forward all original final trailing documents to the Post-Purchase department. Use the Final (Trailing) Doc Transmittal (Final Trailing Doc Transmittal - Fillable ) (or your equivalent form). See the Post-Purchase chapter for full details. Final (trailing) documents include, but are not limited to: Recorded Security Instrument for the subject property Final original Title Policy


http://www.msiloans.biz/Form%20PDFs/FinalDocsTransmittalFillable.pdf

http://www.msiloans.biz/Form%20PDFs/FinalDocsTransmittalFillable.pdf



General Loan Delivery Information, Continued

First Lien Position

As outlined in the Representation and Warranties chapter of the Seller Guide, each Seller is responsible to ensure that for each loan sold to MSI, MSI is in first lien position and there are no issues on the loan that would supersede MSI’s (or assignee’s) first lien position. This includes any state regulations where a HOA or any other entity

may be awarded first lien position under any circumstances. Loans sold where resulting situations interfere with MSI (or assignee)

first lien position are subject to repurchase over the life of the loan.

Funding Source

MSI validates the Seller’s funding source prior to loan purchase. MSI requires individual wire instructions for each loan funded by MSI. Mod Corr Responsibility Ensuring MSI has the correct wire instructions of record is the Sellers’s

sole responsibility. MSI is not responsible for funds wired to an incorrect account if MSI

has followed the instructions on the delivered Note and Bailee Letter and/or the wire instructions on the Delivery Transmittal.





Special Requirements Government Loans

For all Government loans, MSI underwrites and insures/guarantees the loans. When specifically permitted by MSI, a Seller may close the government loan using a Mod Corr transaction, using their own funds and closing in their own name. In those cases: MSI requires that a copy of all documents required for the insuring

package be included in the appropriate sections of the Delivery File. Include acceptable documentation that validates the Up-Front

mortgage insurance premium is paid in full. (UFMIP) (Receipt from pay.gov included in the closed loan delivery file.) • Important Reminders:

o Ensure that the monthly MIP payment on the First Payment Letter to the borrower matches the information on the 92900 LT.

o Mismatched information not only causes issues with the borrower's escrow balance, but can also result in reconciliation issues with HUD and possible penalties for insufficient payments.

o Loans with discrepancies between the monthly MIP amount on the 92900 LT and the First Payment Letter will be pended and the Seller will need to issue a revised First Payment Letter to the borrower along with a letter of explanation as to the reason for the change.

VA Funding Fee Receipt from pay.gov.

Loans with Deficiency

The following outline loans with deficiencies details.

Complete Review As a matter of customer service, MSI makes every effort to complete a thorough pre-purchase loan review upon receipt of the Closed Loan Delivery File. Each loan is subject to the receipt of the acceptable original Note. MSI makes every effort to ensure that Funding Suspension notices

include all outstanding loan defects so that the Seller knows the loan is purchasable once the conditions are satisfied.





Loan Status Notification

MSI uses email to notify the Seller of outstanding pre-purchase conditions.

Additionally, when the loan is ready to fund, MSI will forward a copy of the Seller Purchase Advice.

The Seller may see the loan status on each loan via the Web Site, www.msiloans.biz , Login/Log in to DataTrac Web. • A secure ID and Password are required. • Online Tracking provides the status of loans delivered for

purchase. • You may use this site to manage your pipeline with MSI by using

the Search function through the Reporting Tab. • A copy of the document may be found under View Document/Post

Shipping/Purchase Advice-Seller

Returned Documents – Mod Corr transactions Generally, MSI will not return original file documents for corrections. However, in the event that a document does need to be returned to the Seller, MSI will return the original document using an overnight delivery service at the Seller’s expense. Loan documentation must be returned to MSI within the applicable delivery schedule to avoid Marketing Loss Fees. See the pricing chapter for details.






Loans with Deficiency, Continued

Note Corrections Generally, MSI attempts to resolve defective Note issues using industry-accepted correction methods without returning the Note. However, if a Note does need to be returned for correction, MSI will: Return the Note(s) under separate cover (in a package containing only

Notes) using an overnight delivery service at the Seller’s expense Return Notes subject to bailment letters directly to the warehouse

bank. The Seller will be notified via telephone any time MSI returns a Note.

Returning Corrected Notes MSI expects the same care when the Seller returns the corrected Note: Always return (or send) Notes in a separate Express mail envelope to

the Bloomington, IL office. • Never include Notes with other files, checks, or documents.

Always return Notes clearly identified with the MSI loan number in the upper right corner to facilitate resolution and funding (purchase)

Servicing Implications Defective loans that are not purchased by MSI by the payment due date will require the Seller to collect the payment(s) from the borrower(s). Once the loan is eligible for purchase, it will be purchased under the Amortization (Reduced Balance) policy. See Unpaid Principal Balance for full details.

Marketing Loss Fees Loans that are placed in a Funding Suspension are subject to Marketing Loss Fees (including, but not limited to Extension Fees, Suspension Fees and/or worse case pricing) in compliance with late or defective delivery policies for Best Efforts loans. See Pricing and Commitment for full details.





Loans with Deficiency, Continued

Seller Responsibility It is the Seller’s responsibility to manage their funding suspense pipeline to ensure that all outstanding loan issues are resolved and the loan purchased/funded timely.

Loan Purchase Summary (Purchase Advice)

Purchase Advice of Record: MSI emails the Purchase Advice to the Seller at time of loan funding. MSI posts the Seller Purchase Advice with loan detail to the Web

Site/Online Loan Tracking after funds are wired. The wire date is the loan purchase (funding) date. All calculations for per diem interest, etc. are based on the funding (wire) date.

Important Notes: The Purchase Advice of Record remains static (it does not change from

the original document entered) on the Web Site (titled Purchase Advice-Seller on the Web Site. • If funding corrections are made, MSI issues a communication to

the Seller; MSI makes a note of the details of the correction in the electronic loan file held by MSI. These notes are not visible to the Seller.

• Sellers must maintain their own record of funding corrections.





Net Proceeds “Net proceeds” is the final funding amount issued to the Seller after all required additions and deductions have been made. Important: Do not include checks for escrows or fees in the Delivery File, all monies due MSI will be deducted from the purchase price of the loan. MSI is not responsible for any checks received in the Delivery file.

Deductions from Loan Proceeds Identifier on the Seller Purchase Advice

Additions to Loan Proceeds

Loan Level Price Adjustments (LLPA or price adjusters) as required for specific products LLPA that are added to price Included and shown as Yield

Spread and YSP on the Funding Worksheet

Per diem (accrued) interest (MSI calculates at 360 or 365 based on the original loan disbursement from the CD) Detailed under Interest and In Wire Calculation as Interest Escrow amounts (taxes, insurance, etc.) – Detailed under Impounds In Wire Calculation under Req Imp Setup Administration Fees and any other Fee owed MSI Under Fees In Wire Calculation under Fees Subtotal Note: Specific fees are identified in the Fees section. Marketing Gain/Loss Charge(s) – these show as on the Seller Purchase Advice as: Under Loan Information as Yield Spread $ In Wire Calculation as “YSP” Overdue (unpaid) fees which are invoiced, including but not limited to: Any price adjustment related to loan delivery Underwriting fees Miscellaneous billed fees Note: MSI has the right to “offset” for past due fees; these will be subtracted from the

Seller’s YSP

Note: See the Seller Fees Schedule on the Web Site for details. Taxes and/or insurance due within 60 days of Note Date must be paid by the Seller; the CD must reflect that payment.





Unpaid Principal Balance

Amortization Policy MSI calculates the unpaid principal balance (UPB) based on the MSI purchase/funding date. “Amortization” is the reduction of the principal balance of the loan by

the principal and interest and applicable escrows. • If MSI is unable to collect the borrower’s first payment, due to

delays in purchasing the loan, MSI will amortize that loan. Loans that are purchased by MSI at a reduced balance:

• Do not pay the private mortgage insurance (MI) or FHA Mortgage Insurance Premium (MIP) on the loan.

• MSI will net those premiums from the loan balance and make payments to the proper entity for you.

The UPB is subject to the following general amortization policy. Loans with no payments made to the Seller prior to purchase

(new loans): • First Payment Due at time of loan purchase—there must be a

minimum of 14 calendar days prior to first payment date: o Loans purchased between the 1st and 14th of the month (just

prior to the first payment date) provide enough time for servicing set-up and issuance of the hello letter and payment statement – therefore they are not amortized (bought at a reduced principal balance)

o Loans purchased between the 15th day and the end of the month (just previous to the first payment date) do not provide enough time for servicing set-up and issuance of the hello letter – therefore they are amortized (bought at a reduced principal balance); the Seller must collect the first payment.

Important Notes: Payment Histories are required for all amortized loans. All loans that are

purchased at a reduced balance must have a payment history showing that the payments collected by the Seller were made in a timely manner by the borrower (the exact amount and breakdown of the payment (PITI) must be provided). Additionally, • MSI will net all applicable MI/MIP payments from the final funding

amount, and MSI will make those payments to the applicable vendor.

• The Loan Payment History must clearly indicate that the borrower made the full payment to the Seller in a timely manner.

MSI does not purchase loans where the Note Date is greater than 30-calendar days prior to the date of loan purchase by MSI.





Amortization Policy Illustration

The following matrices provide an illustration of MSI’s amortization policy:

Loans With First Payment Due at Time of Sale to MSI (New Loan)

First Scheduled Payment Date On

Note

MSI Purchase Date

Amortize Loan

Effective Date of

Transfer (First Payment

Due MSI)

Comments

3/01 1/01 through 1/31

NO- First

Payment to MSI

3/01 The UPB for funding calculation is the scheduled principal balance of the mortgage loan as of February 1st.

3/01 2/01 through 2/14

NO- First

Payment to MSI

3/01 The UPB for funding calculation is the scheduled principal balance of the mortgage loan as of February 1st.

3/01 2/15 through 2/29

YES – First

Payment to Seller-

Payment History

Required

4/01 The UPB for funding calculation is the scheduled principal balance as of March 1st. (MSI deducts the 3/01 PI & TI from the funding amount.) The Seller is entitled to retain the scheduled payments of PI&TI due on or before March 1st. (Note: any amounts paid by the borrower to the Seller beyond the scheduled payments (principal curtailments or excess escrow), should be forwarded to MSI to apply to the borrower’s account.) MSI is entitled to receive all such payments due thereafter.





Amortization Policy Illustration (Continued)

Loans Purchased with payments Made to the Seller (Seasoned Loan)

Next Scheduled Payment

Date for the Loan

MSI Purchase Date

Amortize Loan

Effective Date of

Transfer (First Payment Due

MSI)

Comments

3/01 2/01 through 2/14

YES- First

Payment to Seller-Payment History

Required

3/01 The UPB for funding calculation is the scheduled principal balance of the mortgage loan as of March 1st. (MSI deducts all PITI for prior payments based on the Payment History) The Seller must provide a payment history for

all payments made prior to the effective date of Transfer –(3/01)

MSI is entitled to receive all such payments due thereafter.

3/01 2/15 through 2/29

YES- First

Payment to Seller-Payment History

Required

4/01 The UPB for funding calculation is the scheduled principal balance of the mortgage loan as of April 1st. (MSI deducts all PITI for prior payments based on the Payment History) The Seller must provide a payment history for

all payments made prior to the effective date of Transfer –(4/01)

MSI is entitled to receive all such payments due thereafter.

Notes: To ensure that the mortgagor’s escrow account remains correct, when amortized, applicable escrow amounts will be deducted from the principal balance. MSI will make all payments for MI/MIP and net those amounts from the balance due.

Payment History Required

Post-Funding Condition for Amortized Loans MSI will make the following post-funding condition on all amortized loans with a payment due date after the purchase date: The Seller must provide evidence (payment history) that the borrower made the amortized payments to the Seller. Additionally, the loan (payment history) must include documentation

that the monthly MI (if applicable) has been paid. This is required to demonstrate that the borrower is not delinquent in

their amortized payment on the loan.





Pre and Post Purchase Conditions

Pre-Purchase Conditions MSI will suspend deficient loans from funding pending resolution of the defect. Loans will not be funded/purchased until the Pre-Purchase Conditions have been resolved to the satisfaction of MSI. To facilitate the review process, please send all outstanding conditions

together. Note: Sellers are advised that 100% of MSI loans are subject to a post-purchase quality control audit. MSI reserves the right to request additional documentation after loan purchase to clear any post-purchase audit issues.



General Standards and Policies

Description This section outlines MSI general operational policies and standards used by MSI. Presentation To facilitate the use of this section, the topics are presented in alphabetical order.

Application – 1003

Loan Officer (LO) Signature Requirements MSI Policy for the LO signature on the 1003 is as follows: MSI will not fund/purchase a loan that does not meet this policy: The initial 1003 MUST be signed/dated by the Loan Officer (LO) at

time of initial application. The final 1003 does not need to be signed by the LO but their name

must be typed in that section on the 1003, and If the LO is no longer employed by the same company or has taken

another position within the company, there can be another (different) LO name typed on the final 1003; however, MSI requires a Letter of Explanation explaining why the same LO is not on the final 1003.

Never, under any circumstance, may another employee sign for the LO; remember also that the NMLS number must be accurate. See S.A.F.E. Act Instructions for the 1003; see Loan Application Requirements for additional requirements.

Appraiser Independence

See Underwriting/Appraiser Independence Requirements for full details.

Amortization Policy

Amortization is the reduction of the principal balance of the loan by the principal and interest and applicable escrows.

See Unpaid Principal Balance for MSI’s amortization policy.

Closing Protection Letter

MSI requires that each loan include a copy of the transaction-specific Closing Protection Letter (CPL) (or Insured Closing Letter) in each loan delivered for funding.

See Settlement Agents for additional details.

Completion Escrows

MSI currently purchases loans subject to minor completion escrows. See Underwriting/Escrow (Completion) Holdbacks for details.




General Standards and Policies, Continued

Note Date – Audit

Document Aging: For the purpose of document aging (including appraisals), in Escrow Closing States (dry closing states), MSI will use the “date of signing” and not the date on the face of the Note as the “Note Date”.

All Other Audit Purposes: For all other audit purposes, including “loan aging” (seasoning) MSI will use the Note Date on the face of the Note.

Doing Business As

The originating company business name must appear exactly the same on all legal documents in the Delivery File. If the name differs, even slightly, the Seller must deliver a master

letter to the Account Executive, signed by a corporate officer (or business principal), which addresses the name differences and certifies that the company is legally one and the same.

A copy of this letter must be included in each Delivery File.

For Example: If the Mortgage/Deed of Trust shows First Bank of Gold as mortgagee, and the endorsement shows First Bank as endorser, MSI will require a certification stating the names refer to the same business.

Discount Point Policy

REV (10/03/15)

For all loans (all products): MSI permits discount points to be charged to the borrower on a loan

only if they are bona fide discount points. • MSI defines “bona fide discount points” as a charge to the

borrower for a particular interest rate that is deemed below PAR by the lender.

• The discount points must be identified on the CD as payable to the lender closing the loan (the lender issuing the 1098 interest statement at year end).

Reminder: Compliance with all agency and/or regulatory high cost or high priced

mortgage loan regulations/standards is solely the responsibility of the Seller. By sale of a loan to MSI, the seller warrants the loan is fully compliant with all applicable, agency, state and/or federal regulations. • MSI performs certain compliance tests on each loan prior to loan

purchase. If a loan is deemed not to meet our compliance standards, the

loan is not eligible for purchase. Additionally, if at any time a subsequent investor deems the loan

not to be in compliance, the loan is subject to repurchase.





Disaster Policy

Disaster Area MSI will purchase loans that are located in a declared disaster area (natural or man-made) provided the subject property has not been negatively affected by the disaster. Seller Responsibility MSI has no responsibility to provide notification of disaster areas to the Seller. It is the Seller’s sole responsibility to be aware and fully knowledgeable regarding natural or man-made conditions that may adversely affect the subject property in the area in which they originate loans. The Seller should contact the appropriate source e.g. state office, regional Federal Emergency Management Agency (FEMA) offices, news agency, etc. to determine whether properties located in its origination regions are included in the disaster areas. See www.fema.gov for complete government information on declared

disaster areas.

Note: Prior to funding/purchase, MSI always reviews the FEMA Web Site to ensure that the property is not located in a Federally Declared Disaster Area. Loans are suspended pending applicable appraisal documentation if

the property appraisal does not meet the MSI Disaster Policy.

Disaster Definition

A major disaster is defined as one that causes substantial damage to numerous homes and community infrastructure. Disasters include, but are not limited to, hurricanes, earthquakes,

floods, landslides, tornadoes, wildfires, volcanic eruptions, civil unrest or terrorist attacks.

When a major disaster occurs, the Federal Emergency Management Agency (FEMA) issues a Disaster Declaration identifying the specific areas impacted.

Incident Period is defined as the time that the disaster affects the area. For example, a tornado is generally 1 day, while flooding could last a

week or more.

Area subject to MSI Disaster Policy MSI’s disaster policy applies to those areas identified by FEMA as

disaster areas.


http://www.fema.gov/




Disaster Policy (continued)

Appraisal Requirements

Appraisals Completed on or before the Incident Period End Date For all loans underwritten but not closed/disbursed by the Seller, or

loans closed/disbursed/delivered to MSI, but not yet purchased: • MSI requires a property inspection to verify the property is sound,

marketable, and habitable and in the same condition as when it was originally appraised. The following are acceptable forms of damage inspection: o One of the following appraisal forms is acceptable. The report

must show no damage to the subject property. o 1004D/442, signed by the original appraiser, o Fannie Mae Form 2075 or Freddie Mac 2070, or o A Disaster Compliance Inspection Report, completed either by

the original appraiser or by another certified appraiser. • Clear sharp photos of the subject and street are required. • The appraiser must address if there is any negative impact to the

property as a result of the disaster incident. • The underwriter must review the property re-inspection and “sign-

off” on the re-inspection prior to closing. If the subject property is damaged, see Minor Damage Requirements

and Major Damage Requirements.

FHA Streamlines For any FHA Streamline Refinance Without an Appraisal affected by a

Declared Disaster, MSI requires a minimum 2075 Drive-By Appraisal to confirm/validate that the property has not been negatively affected by the disaster. • The 2075 is mandated by investor delivery requirements; and MSI

retains the right to request the 2075 at our sole discretion. o The 2075 may be required for a minimum of 120 days

following the date of the incident.






Appraisals Completed up to 120-days after the Incident Period End Date A full appraisal (URAR/1004) with exterior and interior inspection with

clear sharp photos is required. The appraiser must address any lingering negative impact on value,

habitability or marketability of the Disaster occurrence.

Minor Damage Requirements for Disasters

Minor Damage defined as damage to the property that does not affect health, safety, habitability, soundness, or structural integrity of the property. MSI does not require minor damage to be repaired prior to loan

purchase; however, professional estimates of the repair costs should be obtained and a repair escrow account established with sufficient funds to guarantee completion of repairs. This account must be documented in the loan file.

Escrow Holdback to guarantee completion of the minor repairs may be waived subject to: • Maximum LTV/CLTV 95.00% • A final inspection from the appraiser (1004D/442, with clear sharp

photos) outlining the specific items not completed and their impact on marketability, health and safety is provided to the loan underwriter.

• Cost to complete minor items is < 2% of the total value of the residence.

• The escrow-holdback-waiver request is approved by the underwriter.

• The property must be repaired and the final inspection (1004D/442) forwarded to MSI, as a final trailing document, no later than 180 days after the original loan closing/disbursement.

Major Damage Requirements for Disasters

Major damage is defined as damage that affects the marketability, health, safety, habitability, soundness or structural integrity of the subject property and must be repaired before the loan is eligible for sale to MSI.






Damage Inspection Requirements

If the subject property suffered major damage, the damage must be repaired prior to funding/purchase. The subject property must be re-inspected: The damage must be repaired prior to the purchase of the loan –

evidenced by a new 442/1004D with clear sharp photos. • The extent of the damage must be addressed with a statement

that the repairs have been completed and, o The interior and exterior of the property is free from damage

from the disaster and the disaster had no effect on value or marketability of the subject property.

• New Property clear sharp Photos –Exterior, Interior and Neighborhood – taken after the disaster Incidence Period.

Employment Requirements For loans closed after the effective date of the disaster: A verbal verification of employment must be completed documenting

that the employment and income status of the borrower(s) has not changed. (Except FHA Streamlines and VA IRRRLs)

Seller Warranty By sale of the loan to MSI, the Seller warrants that the loan is fully marketable and supported by the subject property. Additionally, if the subject property is located in a disaster area, the Seller warrants the following: The loan meets all additional more restrictive requirements issued by

the applicable agency. (e.g., HUD requirements for an FHA loan, etc.)

Important: MSI, at its sole discretion, reserves the right to: Require written certification (documentation) from the Seller,

appraiser or other third party inspector that indicates the value of the mortgage property has not been negatively affected by any damage arising out of the disaster.

Require repurchase if, at any time, MSI or a subsequent investor determines that the subject property was damaged as a result of the disaster, and not in fully marketable condition, at time of sale to MSI.





Finance Charges

MSI Finance Charges matrices.

Finance Charges Included in APR “Lender” as noted herein is the entity closing the loan with the borrower. Administrative Fee Amortization Schedule Application Fee Assignment Fee - to record an assignment, unless disclosed

separately on TIL Attorney Fee – if any portion of attorney fee includes a charge for

conducting the closing Attorney Fee - any attorney fee required by the Lender Broker/Mortgage Broker Fee (Not permitted for FHA) Buydown Subsidies Cancel Closing Fee Certificate of Release Service Fee –to release servicing to another

lender Closing Agent Fee Closing Protection Letter (Insurance) Fee Commitment Fee - to purchase a forward loan commitment Copy Fee Courier Fee to Mortgage Broker Disbursement/Check Issuance Fee - to prepare a check and

disburse funds Discount Points Email Fee Escrow Fee - to hold funds in escrow Escrow Waiver Fee Fax Fee Life of Loan Flood Determination Fee Funding Fee Inspection Fee - to inspect property for completion, termites, et-

cetera if performed after closing Pre-paid Interest Lender Lock-in Fee Lo/Broker Compensation Notary Fee

Loan Placement/Submission Fee – broker to find a suitable lender for the borrower

Up-front MIP – initial premium for FHA mortgage insurance premium

Origination Fee Overnight/Express Mail Fee Package Handling Fee Up-Front PMI – initial premium for private

mortgage insurance Processing Fee QC, Audit, or Compliance Fee Rate Float-Down Fee Rate Lock/Re-lock Fee Rate Lock Extension Fee Recording Service Fee –for service only, not

for the actual expense paid to the public recorder

Redraw Doc Fee Subordination of Lien, Drafting Fee Subordination of Lien, Recording Fee Telephone Fee Title Update Fee - to update title policy after

closing Transmittal Fee Underwriting Fee USDA Fee- also known as Rural Development

Guarantee Fee VA Funding Fee Wire Fee Witness Signature Fee - to witness re-signing

of documents

Important Note: Even if the fee that affects the APR is paid outside of closing by the borrower, the charges must be disclosed on the LE/CD and included in the finance charge. If the Seller thinks a fee should be included, but it is not listed herein, the Seller should include the fee in the APR.





Finance Charges (continued)

Finance Charges That May be Excluded from the APR “Lender” as noted herein is the entity closing the loan with the borrower. The fees may be excluded ONLY if they are bona fide fees, in a reasonable amount, and paid directly to the 3rd party

vendor for actual services. Abstract or Title Search Fee Aggregate Escrow Adjustment Appraisal Fee Appraisal Review Fee – provided review performed prior to closing Attorney Fee - to represent buyer or seller at closing Credit Report Fee Deed Preparation Fee Document Preparation - Cannot charge to prepare the CD Document Review Fee - if performed prior to closing Document Stamps - to record documents Endorsement Fee –to prepare endorsement Escrow Reserves Inspection Fee - to inspect property for completion, termites, et-

cetera if performed prior closing Insurance Initial Premium Mortgage Release Preparation Fee Mortgage Release Recording Fee

Payoff Fee - charged by existing lender to prepare payoff statement

Power of Attorney Preparation Fee - if prepared by the settlement agency or an attorney.

Recording Fees - if disclosed on TIL Survey Title, Lender’s Coverage Title, Owner’s Coverage Title Examination Fee Title Insurance Title Insurance Binder Transfer Tax Fee - paid to governmental

agency to transfer title Warranty Deed Preparation Fee Warranty Deed Recording Fee

Limitations: The lists provided are not intended to be all-inclusive, and it

generalizes fees in many instances. MSI recognizes that fees may be identified uniquely in different areas

of the country, and does accommodate those differences.





Recalculation of the TIL

MSI will recalculate the Truth-in-Lending (TIL) calculation on the Closing Disclosure on all ARM loans and on a selected number of other loans. MSI will validate the TIL calculation based on the audit points below:

Audit Point MSI will use … Index Value To validate the proper index, MSI will use the index from the CLD Price sheet on the Note Date

printed on the closing document We will permit the Index value to vary in accordance with the “look back” period dictated by the Note

APR

The APR may not have increased between the Initial (Early) TIL (or the last corrective TIL) greater than 0.125% (1/8 of a percentage for Fixed) or 0.25% (1/4 of a percentage for ARM or IO loans).

Payment Stream The payment stream on the final TIL is significantly similar to the recalculated value Note: MSI is not dispensing legal advice on LE or CD; the recalculation is based solely on our assessment of the salability of the loan on the secondary market.

Financial Reform

MSI requires that all loans closed by MSI must be in full compliance with Title XIV of the 2010 Financial Reform Act (Dodd-Frank) and final rules issued by the Consumer Financial Protection Bureau (CFPB) including all applicable changes to any other regulation (e.g. Reg Z; Reg X; Reg B, etc.) See Underwriting, Financial Reform, for details.





HPML

Higher Priced Mortgage Loans (HPML) On July 14, 2008, the Board of Governors of the Federal Reserve System issued amendments to Regulation Z that provided additional consumer protections for mortgages. The new rules cover what are categorized as “Higher Priced Mortgage Loans” (HPMLs), which are separate from and should not be confused with High Cost loans.

Escrow Accounts Effective for HPML loans closed on/after 4/01/10: Each owner-occupied first mortgage loan identified as an HPML loan

that is eligible for purchase by MSI, must have an Escrow (Impound) Account, regardless of the LTV and/or any state laws.

The only exception to this rule is condos when the Association maintains a master policy that covers the individual condo units for items such as HOA and Property Tax.

Note: The Seller is responsible to ensure that the escrow (impound) account is in full compliance with all applicable HPML, RESPA and state requirements for escrow accounts.

MSI Audit Points MSI tests all owner occupied loans (closed end loan secured by the consumer’s principal dwelling) prior to loan funding/purchase to ensure that they are not considered a HPML. If the loan, based on the calculation provided at this Web Site, www.ffiec.gov/ratespread/newcalc.aspx , is an HPML loan, MSI will apply the following restrictions: The loan may not be one of the following. If it is, the loan is not

eligible for purchase/funding and will be returned to the Seller: • FHA Streamline • VA IRRRL • 5/1 ARM – All loan types. • Conventional Streamline (DU Refi Plus and LP Relief Refinances are

considered a “streamline”.) • HomePath® Mortgages.

If the loan product is acceptable, the following additional requirements must be met for the HPML loan to be eligible for purchase/funding: • Verified income and assets that clearly supports the borrower’s

ability to repay. • No prepayment penalties (MSI does not offer.) • Verification of the rate spread difference as required by Reg Z,

HMDA, as well as any other local or state statutes.


http://www.ffiec.gov/ratespread/newcalc.aspx




HPML, Continued

Documentation Requirements MSI requires proof of the lender lock-in date with borrower to ensure compliance with HPML. MSI requires the following documentation in each loan file at time of delivery for purchase: Proof of the borrower’s lock-in date with the Seller, and Copy of the actual calculation made on the “NEW FFIEC Rate Spread

Calculator” at the Web Site: (Copy of the print screen from that calculation exercise.)


Background: While MSI may re-test the loan as part of a quality control audit, we have learned that since MSI is not the lender, we cannot validate the lock date or the price in accordance with the regulation.

Document Aging

At time of loan purchase, documents in the loan file must meet current applicable agency aging requirements from the Note date. See Age of Documents for details.

• For the purpose of document aging (including appraisals), in Escrow Closing States (dry closing states), MSI will use the “date of signing” and not the date on the face of the Note as the “Note Date”.

Note: The underwriting of the loan must be performed within the credit underwriting document-aging standards outlined in the MSI Underwriting chapter.






Escrow/ Impound Accounts

Escrow/Impounds Required Escrow (reserve/impound) accounts to adequately provide for taxes and insurance (hazard, flood, mortgage insurance) are required on all loans as follows: Government and USDA Rural Development loans:

• All loans, regardless of LTV and state requirements Conventional loans that exceed 80.00 LTV, all loans, unless:

• The subject property is in a state that, by statute, requires impounds at a higher LTV, such as 90.00% in California

Conventional loans less than or equal to 80.00%, all loans unless: • The Seller has paid the applicable fee to waive impounds.

HPML Loans: All loans identified as “HPML” must have an escrow (impound) account. See Escrow Accounts for details.

Aggregate Accounting When impounds/escrows are required, the Seller must: Use aggregate accounting in the calculation of the escrow/impound

account Establish the impound accounts for payment of taxes, ground rents,

special assessments, private mortgage insurance, hazard insurance, flood insurance, etc., at loan closing

Calculate and collect at closing adequate funds to ensure that a sufficient amount will be available to pay the next installment of taxes and insurance

Maintain the 2-month maximum cushion in the escrow/impound account, unless in violation of applicable state law, except the cushion for PMI which is 0 (zero) months

Include an Initial Escrow Disclosure Statement (IED) calculated in accordance with the principles of aggregate accounting in the Delivery File





Escrow/Impound Accounts (continued)

Reminders for Aggregate Accounting: MSI validates the CD escrow balance against the escrow balance on

the IED. • If those balances do not match, the loan will be suspended for

resolution. The tolerance for discrepancy is a maximum $1.00 (1 dollar).

• MSI nets the escrow amounts from the final wire purchase amount of each loan.

Escrow Waivers MSI will permit escrow accounts to be waived on conventional loans

(all occupancy types) when the LTV is 80.00% and below (90.00% and below in certain other states), unless prohibited by the product guidelines or state law. • MSI pays a reduced price on these loans and the loans must meet

all requirements stated below: Escrow/impound waivers are permitted on conventional loans only,

not Government or USDA loans. Partial waiver of escrows/impounds for hazard insurance only is

considered the same as waived escrows, MSI will reduce the fee for the partial waiver of insurance only. • Waiver of Taxes only is not permitted. • Waiver of Mortgage Insurance is never permitted. • Important Note: If the loan has a “partial escrow account” due to

waiver of insurance, MSI requires the IED to be completed for the escrow account being used.





Escrow/Impound Accounts (continued)

Escrow Waivers, Continued Escrow/Impound Waiver Loans must be clearly marked on the Loan

Delivery Transmittal and on the Delivery File folder as Escrow/ Impounds Waived or Partial Escrow Waived (Insurance).

A copy of an Escrow Waiver Letter identified with the MSI loan number and signed by the borrower(s) which contains at least: • A statement that the mortgagors acknowledge the responsibility to

pay taxes and insurance, on or before the due date, and • A statement that the mortgagors will provide the lender with a

copy of the paid receipt, and • A statement which discloses to the mortgagors that failure to pay

taxes or insurance when due, may result in the revocation of the escrow/impound waiver and result in the Servicer's establishment of an escrow account which may include "force placed" hazard insurance, and

If a partial escrow account is to be established, an indication that funds for taxes should be held in reserve.

Notes: If a borrower has previously been in default on a mortgage, escrows

may not be waived. The Underwriter must review the request for Escrows (Impounds) to

be waived; if the borrower does not demonstrate the ability to save money, Escrow Waiver should not be permitted.

Escrow (Completion) Holdback

When a loan is purchased with a an Escrow (Completion) Holdback (see Underwriting/Escrow (Completion) Holdback) the Seller must forward the final inspection (Freddie Mac 442/Fannie Mae 1004D) to MSI as soon as the property is completed. Failure to forward the certification of completion to MSI may result in the loan becoming non-salable.

FACTA Alert

For all Loans, all products that have a FACTA (Fair and Accurate Credit Transactions Act) Alert on the Credit Report, MSI requires that the Alert must be cleared in full compliance with the Fair Credit Reporting Act (Regulation V). When MSI underwrites the loan file, MSI will complete the FACTA Alert

Notification form. To see more detail, you can access section 605A of the Fair Lending

Act.





File Retention The Seller is required to retain a complete copy of the loan file sold to MSI. MSI will accept electronic copies or copies printed from electronic file storage. It is the Seller's responsibility to provide MSI with copies of documents not included in the Delivery File that may be requested by agencies, end investors and/or MSI in routine audits.

Important: MSI employs document imaging and electronic file storage. With the exception of collateral documents held by the document custodian, MSI does not retain paper documentation.

Forms Legal Documents and Agency Forms MSI requires that the most current security instruments and Notes available be used to close loans. MSI supplies only those forms that are specifically designed by MSI. All other legal documents and industry standard forms must be obtained from document vendors and/or the agencies. When applicable, the Seller is solely responsible for providing the

applicable state-specific required forms in lieu of the multi-state form. Seller Responsibility While MSI makes every effort to inform the Seller of its requirements for documents, forms, and/or disclosures, it remains the Seller’s responsibility to use current correct documents. Sample ARM Disclosures MSI does not provide any sample ARM Disclosures, it is the Seller’s responsibility to ensure that their LOS or document vendor supplies the correct applicable disclosures.

MSI Forms: MSI has developed some forms specific to doing business with MSI. MSI Forms are maintained on www.msiloans.biz.






Forms, Continued

Accessing the Forms Use the following steps to access the MSI forms from the Web Site:

Step Action 1 From www.msiloans.biz, choose Resources/ Docs & Forms 2 From Documents & Forms, choose the applicable topic and then the form. 3 Click on the document; scroll to the bottom of the screen and choose View Document.

Government Loans

Modified Correspondents with their own DE Prior to loan purchase MSI requires evidence of the following for each government loan. MSI will accept the hardcopy electronic evidence provided by the FHA or VA official Web Sites. FHA – Payment of the correct MIP (Receipt from pay.gov) VA – Payment of the correct VA Funding Fee (Receipt from pay.gov)

Notes: MSI underwrites and insures all Government loans; the documentation

required for submission for insurance/guarantee must be delivered to MSI in the closed loan delivery file.

Modified Correspondents Sponsored by MSI MSI underwrites and insures FHA loans for Sellers with MSI FHA Sponsorship; those loans must be priced and closed as Wholesale transactions/closed in MSI’s name. Sellers are required to fully and timely cooperate with MSI to facilitate

the insuring of the FHA Sponsored loans.

Home Mortgage Disclosure Act (HMDA)

It is the Seller’s responsibility to provide MSI with HMDA-reportable information for each loan, as determined by MSI to properly complete the HMDA Loan Application Register (LAR). Loans missing the applicable HMDA-reportable data fields will be suspended from funding pending receipt of the information.





Interest Accrual

Interest Accrual also known as per diem interest is calculated by MSI on a 360- or 365-day basis, according to the days used for interest accrual on the Closing Disclosure.

Interest Credit First Payment Due Date MSI determines all first payment dates based on the Note Date on the face of the Note. All loans sold to MSI must be due on the first day of the month following the first full month after the Note date.

• For Example: If the Note date on the loan is October, the First Payment must be due December 1. It may not be due November 1 or January 1.

We will accept an interest credit for loans disbursed in the month following the Note Date month. October Note Date, loan disbursed in November with maximum 5-days interest credit. First Payment Date is December 1.

Prepaid Interest (Interim Interest) Interest must be collected in arrears from the date of the loan disbursement, including the day of disbursement, through the last day of the closing (disbursement/settlement) month.

Interest Credit MSI will purchase a loan with an “interest credit” under the following requirements: General Requirements MSI will not purchase a loan with a short first payment. MSI will always amortize the loan at the time of purchase to

accommodate Cranston-Gonzales servicing transfer requirements • As a post-funding condition the Seller must provide evidence that

the Borrower made the first payment(s) in a timely manner to the Seller

The following are the maximum number of days permitted for an interest credit • Conventional Loans 05 Days maximum • VA Loans MSI does not permit • USDA GRH MSI does not permit • FHA Loans MSI does not permit

Important Note: The first payment due MSI may not be impacted by the interest credit.





Late Fees MSI requires that the loan documents permit the servicer to collect late fees, if the payment is not received by the 15th day after it is due, at a rate of the lesser of: 5% for conventional 4% for government Or the maximum late charges permitted by law in the state where the

property is located

Leasehold Estate

The following documentation must be included in the Delivery File at time of delivery for purchase: A Copy of the Ground Lease The lease rent information must be fully and correctly completed on

the Tax Information Sheet The title policy must be the most current accepted ALTA Leasehold

Loan Policy • Additionally, for those areas where it can be obtained, the

endorsement or affirmative language that stipulates that property improvements are insured in the same manner as the land, must be included

Note: Not all products permit “leasehold estates”; confirm that the product does permit.

Loan Modification

MSI does not accept loans that have been modified after loan closing (disbursement). See Underwriting/Construction-To-Permanent Financing/Single Close for details.





Loan Payments – Payment History

If the Seller receives loan payment(s) from the borrower prior to the purchase of the loan for purchase by MSI, MSI does require evidence that the payment was received timely (payment history/ledger) prior to our purchase. Alternative Method (offered as a service to our Sellers): MSI will accept (from the Seller) the loan payment check from the

Borrower (endorsed to MSI by the Seller) in lieu of the payment history • Note: MSI will not accept a borrower’s payment drawn on the

Seller’s company account, the payment must be from the borrower’s account – if the payment has been applied, we require a payment history

In these cases, MSI will post the loan payment and not reduce the Seller’s net proceeds by the amount of the payment/escrow (as applicable)

Loan Amortized Prior to Payment Due If MSI purchases the loan at a reduced balance prior to the payment being due on the loan, a post-funding condition will be added to require the payment history ledger to evidence that the borrower made the payment due.

Note: MSI requires evidence of the receipt of the first payment in all applicable cases.

Loan Payments Received

After MSI Purchase If the Seller receives a loan payment due MSI from the borrower after the purchase of the loan by MSI: Forward the payment express mail to MSI. Include the following information for each payment:

• MSI Loan Number (must be written on the check) • Borrower’s name • Month for which payment is to be applied • Total amount of payment





Loan Payments Received After MSI Purchase, Continued

Important: Forwarding the payments timely is critical. If payments are not forwarded in a timely fashion, the borrowers may be considered delinquent (Early Payment Default-EPD). Borrower Implications: For the borrower, this type of error

creates a sense of poor customer service from MSI and the Seller. Seller Implications: For the Seller, this will impact Early Payment

Default levels for Good Standing.

Reminder: Do not notify the borrower to begin sending payments to MSI prior to purchase by MSI.

Principal Curtailment (Reduction) Policy

Important Note: MSI must reduce the Interest Rate to the lowest Note Rate available

that does not result in an additional out of pocket cost to the consumer. The excess funds at the closing table should be kept to a minimum to ensure no delays in closing. • It is critical that MSI ensure full compliance with RESPA rules

especially as they pertain to re-disclosure, Change of Circumstances and any applicable timing requirements, as well as Reg Z changes under FRB’s Final Ruling.

Conventional Loans If there are any excess funds at the closing table, they must be

applied as a principal reduction to the loan. FHA/VA/USDA Loans: If there is an Excess Premium amount that is large enough to cover

the entire “fee payment”, the Upfront Mortgage Insurance Premium/VA Funding Fee/ USDA Guaranty Funding Fee must be removed from financing and paid in cash from the excess Premium (thereby reducing the loan amount).

Any additional excess funds must then be applied as a principal reduction.

All Loans, regardless of Product: MSI does not permit the principal curtailment to exceed $1,000;

unless a lower amount is required by the end investor.





Reduced Balance

When MSI employs the amortization policy it purchases that loan at a reduced balance.

See Unpaid Principal Balance for MSI’s amortization policy.

REG Z REV (10/03/15)

Regulation Z and Mortgage Disclosure Improvement Act (MDIA) For all Sellers closing loans a Modified Correspondents (in their own names) warrant, by sale of a loan to MSI, that the loan is in full compliance with Regulation Z as currently required by the Consumer Financial Protection Bureau and all applicable regulations and requirements. See TILA-RESPA Integrated Disclosure (TRID) for full details on the

Integrated Disclosure requirements.

Important Note, the final responsibility for compliance with Reg Z and MDIA falls with the Seller. Purchase of a loan by MSI does not waive the Seller’s sole responsibility. If a loan is purchased by MSI and later determined to be out of compliance with MDIA, the loan is subject to immediate repurchase by the Seller.





Rights of MSI Pre-Purchase

MSI retains the right to perform certain pre-funding quality/salability audits for each loan delivered for purchase. (E.g. verbal verification of employment and/or assets, and/or social security number, etc.) If MSI determines significant discrepancies exist in the loan

documentation during any pre-funding audit, we retain the right to refuse purchase of that loan, regardless of commitment.

Post Purchase By sale of the loan to MSI, the Seller warrants that the loan is fully marketable, free of deficiencies and misrepresentations or fraud. Defective If, after purchase, it is discovered that the loan is not marketable or is deficient, the Seller is expected to cooperate fully and timely to correct the loan to make it fully marketable to MSI or the investor. If the Seller does not cure the deficiency within the stated timeframes

as requested, MSI retains the right to request repurchase of the loan. Misrepresentation/Fraud If, after purchase, it is discovered that the loan is subject to misrepresentation or fraud (in the sole determination of MSI or subsequent investors), the loan is subject to repurchase.





Risk Based Pricing Rules

Risk-Based Pricing rules are an amendment to The Fair and Accurate Credit Transactions Act of 2003 (FACT Act). The FACT Act amended the Fair Credit Reporting Act (FCRA). • The Risk Based Pricing notice replaces the Notice to Home Loan

Applicant Disclosure (FACTA credit score disclosure). Federal law requires that all borrowers are provided with the Risk-

Based Pricing notice within 3 business days of having credit pulled. • The notice provides borrowers with information regarding their

credit, including how their credit score compares to the credit scores of other borrowers.

MSI will accept the Risk Based Pricing Notice included on the Credit Report or a separate Notice provided by the Seller. • The notice provided must be in full compliance with the new Risk

Based Pricing Rules. Important Reminder: By sale of the loan to MSI (regardless that

MSI has underwritten the loan), the Seller warrants that the loan is in full compliance with all state and federal regulatory requirements.

S.A.F.E. Act and FHFA-Data Capture

MSI requires that all loans meet applicable State, Federal and GSE requirements for the S.A.F.E. Act. MSI will validate the ID numbers provided on each Application and

Appraisal prior to funding. • Loans underwritten by MSI: MSI will validate the ID numbers

provided against the NMLS Web Site. License ID/Numbers that are incorrect or missing will result in MSI not

closing the loan until the issue is resolved.





S.A.F.E. Act and FHFA-Data Capture, Continued

MSI currently requires the following in compliance with the GSE(Federal Housing Finance Agency) data capture requirements and the S.A.F.E. Act:

The following data elements/information must be captured: For the S.A.F.E Act:

• Loan Originator ID – Provide on the 1003, initial and final. • Loan Originator Company ID – Provide on the 1003, initial and

final. For the GSE’s:

• Field Appraiser License Number – Provide on the Appraisal – No state exceptions

• Supervisory Appraiser License Number – Provide on the Appraisal – No state exceptions.

Notes: MSI does require the information for government loans

delivered/sold to us. Federally Insured Banks/Credit Unions: All federally regulated

originators will be required to provide their NMLS identifiers and meet the requirements of the S.A.F.E. Act.

MSI uses the following web site to validate NMLS numbers (http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx

NMLS Number Tips: The NMLS Number should not:

• Be the branch ID. GSE’s require the Loan Origination Company ID to be provided.

• Include letters or special characters. • Consist of Social Security Numbers, phone numbers, state license

numbers, or your client code. • Be shorter than four or longer than twelve digits. • Include leading zeros at the beginning of a number that do not

factor into the total number of digits. • Be the same for both the Individual ID and the Company ID. The

Loan Originator Company ID will always be different from the Loan Originator Individual ID.


http://mortgage.nationwidelicensingsystem.org/Pages/default.aspx




S.A.F.E. Act and FHFA-Data Capture, Continued

S.A.F.E. Act Instructions for the 1003

Field on the 1003 (Use the Current Version) Instructions Loan Originator Name Name of the LO originating the loan. Must match the exact name of the LO

as documented in NMLS. Loan Originator Identifier Unique NMLS LO Number. Loan Originator Company Name Name of the company originating the loan. Must match the exact name of

the company as documented in NMLS. Loan Originator Company Identifier Unique NMLS Number assigned to that company (the corporate ID).

Note: If the company has multiple locations, the ID number for the corporate office is required on the 1003 – Sellers may also include the applicable Branch ID, but in that case, each number must be clearly identified: Corporate ID # and Branch ID number.

Loan Origination Company Address Branch address where the loan originated.

Delaware, Maine and Missouri-NMLS Company ID Exception For those state-regulated companies doing business solely in DE, ME and MO, the Agency-Assigned Loan Originator Identifier must be: DE = 1001 ME = 1002 MO = 1003 Important Note: When an agency assigned code is listed on the URAR, steps

must be taken to inform the borrower that the Agency Assigned Code is not a verifiable NMLS Identifier as the states of DE, ME and MO do not require a Company NMLS ID. (MSI retains the right to require evidence of that borrower notice—either in writing or by evidence of company process/procedure.)

For Sellers with a verifiable NMLS Company Identifier as a result of conducting business in other states in addition to DE, ME or MO; or those Sellers that are Federally regulated: Continue to use your verifiable NMLS Company Identifier even for those

properties located in DE, ME or MO.

Remember: MSI will not purchase loans that do not include the verifiable NMLS or Agency Assigned Company Code. MSI applies this guideline to ALL loans, even USDA and Government Loans.





Seasoned Loans - Purchase Limitations

MSI does not purchase “seasoned” loans. All loans submitted for purchase must be purchased no later than 30-

calendar days after the Note date. • If a loan is not purchased by MSI before calendar day 30 after the

Note date, that loan will not be purchased and will be returned to the Seller, regardless of Commitment. • MSI reserves the right to extend this deadline on specific loans

under review by MSI, without impact to the guideline. Notes: If a conventional loan purchase is delayed by MSI, see Age of

Documents for additional appraisal requirements. If a Government loan or USDA Loan is delayed by MSI, see the

applicable Product Suites; loans must still be insured/guaranteed to meet MSI guidelines.

Subordinate Mortgages

MSI will purchase loans that are subject to second/subordinate mortgages provided that the mortgages meet all product requirements and the second lien is clearly subordinate to the first mortgage. The loan delivered for purchase must include: Evidence of the subordinate mortgage on the Fannie Mae Transmittal

(1008) Evidence of Underwriter Approval of the subordinate mortgage. Copy of the Subordinated Note and the Subordination Agreement.

Important: The subordinate lien must be recorded after the first lien. The final title policy must evidence proper recordation of the subordinate lien.

Settlement Agents

MSI maintains a listing of Settlement Agents that are ineligible to MSI. Loans that are closed using a Settlement Agent that appears on this “Ineligible Settlement Agent List” will not be purchased by MSI, regardless of commitment. See Closing Protection Letter for additional details.





Trusts Illinois Land Trusts Acceptable on properties located in Illinois only. See Underwriting/Borrowers/Illinois Land Trust for full details and

requirements. Loans using an Illinois Land Trust must meet MSI guidelines and be in

full compliance with all governing laws and requirements. • The Final Title Policy may not take exception to the Trust. • Notification of any transfer of beneficial interest required.

Inter Vivos Revocable Trusts (IVRT) Acceptable in areas where the Trust is common and customary and

fully accepted by local and state law. See Underwriting/Borrowers/Inter Vivos revocable Trust for full details

and requirements. Loans using an IVRT must meet MSI guidelines and be in full

compliance with all governing laws and requirements. • The Final Title Policy may not take exception to the Trust.





TILA-RESPA Integrated Disclosure (TRID)

REV (10/03/15)

Truth-in-lending RESPA Integrated Disclosure implements regulation, Regulation X (12 CFR Part1024) Regulation Z (12 CFR 1026) and consolidates the Good Faith Estimate (GFE), Truth-in Lending (TIL), HUD-1 Statement, Servicing Disclosure Statement, and Right to Receive Copy of Appraisal into the following two disclosures: • Loan Estimate (LE) • Closing Disclosure (CD)

TRID applies to all federally relate closed end mortgage loans: One-to-four family structure (including individual units of condominiums and cooperatives) is located or is to be constructed using proceeds of the loan. TRID requirements apply to all loan applications dated on or after October 3, 2015.

Required Documents Audit Points/Requirements Loan Estimate (LE) Initial, subsequent and final LE

• MSI requires the initial LE to be fully executed by the borrowers (due to the other disclosure language now included in the LE).

Intent to Proceed MSI does require a “physical” “intent to proceed” to be documented and fully executed by the borrowers and/or Loan Officer (LO’s signature and date must be based upon borrowers verbal intent) to be included in the loan file. • Fees may not be charged or collected until the borrower has issued their intent

to proceed. The one exception to this rule is a fee for a bona-fide credit report. That fee may be charged prior to receiving the Intent to Proceed.

Written List of Providers MSI requires a copy of the initial List of Providers provided to the Borrowers with the initial LE.

Revised Written List of Providers MSI requires a copy of the final revised List of Providers provided to the Borrowers with the final LE.

Closing Disclosure (CD) Initial, subsequent and final CD • The final Closing Disclosure provided at closing must be signed by all

borrowers, sellers, and – if applicable – every consumer who has a right to rescind.

The file must contain evidence of the calculations of any variance (i.e. tolerance) cures.

MSI will review the final CD to ensure that the final CD reflects the correct cure amounts.

No addendum to CD is allowed. Settlement Agent Statement MSI requires any additional closing document that was used to support the

transaction by the title company to document disbursement of funds and required to be signed by All Parties - especially sellers. • This document may be referenced by different names i.e. settlement or

disbursement statement.





TRID, Continued

Application Definition An application for Disclosure purposes of the LE consists of the

submission of the following 6 pieces of information: • The consumer’s name; • The consumer’s income; • The consumer’s social security number to obtain a credit report; • The property address; • An estimate of the value of the property; and • The mortgage loan amount sought • An application can be submitted in written, electronic, and/or oral

format. MSI uses the date the initial 1003 is signed and dated by the Loan

Officer (LO) to determine the “application date” to ensure the LE was provided to the borrower within 3 business days of collecting the 6 pieces of information listed above. • If the date the LO signed the 1003 is not prior to the issuance of

the LE by a minimum of 3 days, additional documentation may be required to ensure compliance.

Business Day Definition For purposes of providing the disclosures, a business day is a day on

which the creditor’s offices are open to the public for carrying out substantially all of its business functions.

For audit purposes, MSI’s business days are defined as Monday through Friday.

Collection of Documentation and Fees No other information and/or documentation may be collected or

certified as a condition to issuing the LE. No monies (with the exception of the actual cost of a credit report)

may be collected from the applicants prior to their receipt and review of the LE and their execution of an “Intent to Proceed”.





TRID, Continued

Notice of Intent to Proceed After the consumer has received and viewed the LE the consumer may

choose to issue their intent to proceed with the LE. The issuer of the LE is responsible for obtaining, in writing, the date

the consumers expressed the Intent to Proceed. MSI requires the Intent to Proceed document to be included in the

loan package and may be signed and dated by the creditor or consumer.

Loan Estimate LE-Timing Requirements The LE must be delivered or placed in the mail to the consumer no

later than the third business day after the creditor receives the application. • The prepared date on the disclosure indicates the day the

disclosure was put in the mail. Note: If there is a Loan Estimate or Closing Disclosure delivery or waiting period timing violation, MSI cannot purchase the loan, as no cure exists for this violation.

LE-Delivery Requirements The creditor is responsible for ensuring that it delivers, or places in the

mail, the LE no later than the third business day after receiving the application. • REG Z/MDIA waiting periods apply; therefore the initial LE must

also be delivered, or placed in the mail, no later than the seventh business day before consummation of the loan.





TRID, Continued

LE-Delivery Methods See the LE Delivery Methods Matrix for acceptable methods and proof of

delivery (to document compliance with the Rule.)

LE Delivery Method Matrix Type Description Proof of Delivery (Compliance)

In Person If the application is taken face to face, it is acceptable to deliver the disclosure in person. The disclosure is considered “delivered” once the disclosure has been given to the borrower.

Signed/Dated copy of the disclosure.

Overnight It is acceptable to deliver the LE via UPS, Fed-Ex, or other

national delivery services. The disclosure is considered “delivered” once the overnight package containing the disclosure has been signed for.

Signed and dated copy of the delivery notice.

First Class Mail Delivery of the disclosure via first-class mail delivery is acceptable. For timing purposes, 4 business days for mailing, including the day the document was mailed, is required.

The document is assumed to be/considered “delivered” on the 4th day.

For example, if the document was mailed on Monday, count Monday, Tuesday, Wednesday and Thursday of the same week. Delivery is assumed to be on Thursday.

No proof of delivery is required; however a copy of the disclosure must be maintained in the file.

Note: For Compliance: A disclosure that is signed and dated by the borrower(s) can be considered delivered as of the date it was actually signed (if that date is earlier than an “assumed” delivery date).





TRID, Continued

Revisions/Corrections to the LE Creditors are typically bound by the figures disclosed on the initial LE

provided within 3 business days of the application. Creditors may provide a revised LE in the following circumstances:

Changed circumstances that occur after the LE is provided to the consumer resulting in estimated settlement charge(s) to increase more than the allowable tolerance.

Changed circumstances that occur after the LE is provided to the consumer that affects the consumer's eligibility for the terms for which the consumer applied or the value of the security for the loan.

Revisions to the credit terms or the settlement are requested by the consumer.

The interest rate was not locked when the LE was provided, and locking the rate causes the points or lender credits disclosed on the LE to change.

The consumer indicates their intent to proceed with the transaction after the LE has expired. Note: An LE must be valid for a minimum of ten (10) business days.

The loan is a new construction loan, and settlement is delayed by more than 60 calendar days; if the original LE states that at any time prior to 60 calendar days before consummation, the creditor may issue revised disclosures.





TRID, Continued

Change of Circumstance A Change of Circumstance (“COC” or “changed circumstance”) is defined as: An extraordinary event beyond the control of any interested party or

other unexpected event specific to the consumer or transaction (e.g., acts of God, war, disaster, or other emergency).

Information specific to the consumer or transaction that the creditor relied upon when providing the LE and that was inaccurate or changed after the disclosures were provided (e.g., credit quality, loan amount, property value) .

New information specific to the consumer or transaction that the creditor did not rely on when providing the LE (e.g., boundary disputes, flood zone, appraisal changes).

Note: An LE can be issued prior to collecting all required minimum

information (i.e., consumer's name, monthly income, social security number, property address, an estimate of the value of the property, or the mortgage loan amount sought), but the creditor may not collect it later and claim a changed circumstance . • For example, if a creditor provides an LE prior to receiving the

property address from the consumer, the creditor cannot claim that the receipt of the property address is a changed circumstance.

LE-Revised - Timing Requirements The creditor must deliver or place in the mail the revised LE to

the consumer no later than 3 business days after receiving the information that results in a valid circumstance (COC).

If the revised LE is not disclosed within 3 business days of the change, the increased cost cannot be passed onto the borrower.

LE-Revised - Documentation Requirements In addition to the revised LE, the loan file must contain

supporting documentation detailing the reason for the valid change of circumstance. • Every revised LE must have a corresponding Changed

Circumstance Worksheet (COC form).





TRID, Continued

LE-Revised – Restrictions for issuing a Revised LE An LE MAY NOT be reissued and/or revised due to miscalculations or

underestimations of charges. • Originated loans submitted for purchase in which the LE contains

miscalculations or underestimated charges can be corrected provided the loan is within the allowable cure timeframe.

• If the loan is outside of the allowable timeframe, the loan will be declined for purchase. Refer to the Excess Charges Cure Provisions for further details.

The creditor may not provide a revised LE on or after the date it provides the CD. • Therefore, the creditor must ensure that the consumer receives

the revised LE no later than 4 business days prior to consummation.

Important Note: No revised LE can be received by the consumer after the initial CD has

been issued. There is no cure should this happen.





TRID, Continued

LE-Variances Creditors are responsible for ensuring that the figures stated in the LE

are made in good faith and consistent with the best information reasonably available to the creditor at the time they are disclosed.

To determine if an LE was provided in good faith: an auditor compares the differences between the estimated charges disclosed on the LE and the actual charges paid by the consumer as disclosed on the CD.

Creditors may charge a consumer more than the amount disclosed on the LE in certain specific circumstances such as: • Allowed charges that may change by no more than 10% of the

originally disclosed amount; • Allowed charges that may change under any circumstance by more

than what was originally disclosed; and • Valid special circumstances as described in Change of

Circumstance. See the LE Variances Matrix for details.

LE Variances Matrix Charges that cannot Increase Charges that can increase 10% Charges that can increase without

restrictions Any fee paid to the Lender or

broker or affiliate of either (even if it is passed onto a third party);

Fees paid to an unaffiliated 3rd party for Lender-required services if the creditor DID NOT permit the consumer to shop;

Borrower credit or charge for the specific interest rate chosen; and

Transfer taxes.

Recording fees; Government charges; and Fees paid to an unaffiliated 3rd

party for Lender-required services if the creditor DID permit the consumer to shop and the consumer selects a service provider from the Settlement Services Provider List.

Initial deposit for escrow; Daily interest charges; Homeowner’s insurance; Fees paid to an unaffiliated 3rd

party for Lender-required services if the creditor DID permit the consumer to shop, and the consumer selects a service provider that is not on the Settlement Services Provider List; and

Fees paid to an unaffiliated 3rd party for non-required services.





TRID, Continued

Ten Percent Cumulative Tolerance Charges for third-party services and recording fees paid by or imposed

on the consumer are grouped together and subject to a 10% cumulative tolerance. • This means the creditor may charge the consumer more than the

amount disclosed on the LE for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the LE by more than 10%.

A creditor may charge more than 10% in excess of an individual charge in a specific category provided the total of all charges is still within the 10% cumulative tolerance.

A creditor may charge a consumer for a fee that would fall under the 10% cumulative tolerance but was not included on the LE provided the total of all charges in a specific category paid does not exceed the sum of all estimated charges by more than 10%. This would require a COC to document the fee increase.

Charges on the LE for Services Not Performed The creditor should compare the total charges actually paid by or

imposed on the consumer with the total charges on the LE that are actually performed. • If a service is not performed, the estimate for that charge should

be removed from the total amount of estimated charges for comparison/tolerances purposes.

Excess Charges Cure Provisions If the amounts paid by the consumer at closing on the CD that exceed

the amounts disclosed on the LE beyond the allowable tolerances, the creditor must refund the excess to the consumer no later than sixty (60) calendar days after consummation. • For charges subject to zero tolerance, any amount charged beyond

the amount disclosed on the LE without a COC, must be refunded to the consumer.

• For charges subject to a 10% cumulative tolerance, the amount of the total sum of the charges added together that exceeds the total amount of charges disclosed on the LE by more than 10% must be refunded to the consumer.





TRID, Continued

Variances after Issuing a CD If the changed circumstance event occurs between the fourth and

third business days from consummation ,the creditor may reflect the revised charges on the CD provided to the consumer 3 business days before consummation.

If the changed circumstance event occurs after the first CD has been provided to the consumer (within the 3 business-day waiting period before consummation), the creditor may use revised charges on the CD provided to the consumer at consummation and compare those amounts to the amounts charged for purposes of determining tolerance.

If the changed circumstance event occurs earlier than the fourth business day from consummation and a CD has already been put in the mail to the consumer, the CD previously provided to the consumer must be compared to final CD issued at closing for purposes of determining tolerances.

Note: Issuing a CD earlier in the loan process can limit the ability to pass along all costs associated with a valid change of circumstances. For record keeping every revised disclosure MSI requires a COC. (See Change of Circumstance)





TRID, Continued

Shopped Services In addition to the LE, if the consumer is permitted to shop for a

settlement service, the creditor must provide a written list of services for which the consumer can shop (SSPL). • This written list of providers is separate from the LE and must be

provided to the consumer no later than 3 business days after the creditor receives the consumer’s application. The Settlement Services Provider List (SSPL) must:

• Identify at least 1 available settlement service provider for each service;

• State that the consumer may choose a different provider of that service; and

• Must correspond to the settlement services for which the consumer can shop as disclosed on the LE.

Note: The creditor may also identify on the written list of providers, those

services for which the consumer is not permitted to shop as long as those services are clearly separated from those services that can be shopped. • If there is no evidence that an SSPL was provided, MSI will not

permit any tolerance on the fees listed on the LE or CD. See Audit Points/Requirements.)

• If the SSPL is not dated and/or there is no evidence in file documenting it was given within 3 business days of application, MSI will assume the consumer was not given the opportunity to shop and the above restrictions apply.





Closing Disclosure

CD-Content The creditor must ensure the CD contains the correct and specific

content for that transaction. The CD is a five (5) page document that generally contains the

following information found in the CD-Description of Content matrix. See CFPB-Guide to TRID for further information.

Page CD - Description of Content 1 General information of the specific loan transaction, including creditor information.

“Loan Terms Table” with descriptions of applicable information about the loan. “Projected Payments Table”. “Costs at Closing Table”.

2 Actual amounts of the Loan Costs associated with the loan, including a breakdown of items being paid by all parties.

Actual amounts of the Other Costs associated with the loan, including a breakdown of items being paid by all parties.

3 A “Calculating Cash to Close Table” to show the consumer the amount of cash required at closing. A “Summaries of Transactions Table”. Refinance loans – a “Payoff and Payments Table” (optional).

4 Loan Disclosures section, including information on Assumption Requirements; Demand Features, Late Charge Information; Partial Payment Policy; Escrow Information. (See Other Important Information about TRID)

Adjustable Payment Loans - an Adjustable Payment Table detailing how the monthly payments will change. Adjustable Rate Loans – an Adjustable Interest Rate Table detailing how the interest rate will change.

5 “Loan Calculation Table”, including Total of Payments, Finance Charge, Amount Financed, APR, and TIP. A link for consumers to ask questions or make a complaint at a website maintained by the CFPB. (CFPB

Website-Helping Consumers Shop for a Mortgage ) Contact Information for the Creditor, Mortgage Broker, Real Estate Broker(s), and Settlement Agents. Other Disclosures (See Other Important Information about TRID) An optional Signature Statement for the consumer to sign to acknowledge receipt.


http://files.consumerfinance.gov/f/201409_cfpb_tila-respa-integrated-disclosure-guide-to-form.pdf

http://www.consumerfinance.gov/mortgage-estimate/

http://www.consumerfinance.gov/mortgage-estimate/




TRID, Continued

CD Delivery Requirements: The creditor is responsible for ensuring that the CD is delivered no

later than 3 precise business days before consummation. Delivery methods may vary. See the CD Delivery Methods Matrix for acceptable methods and proof

of delivery (to document compliance with the Rule.)

CD Delivery Method Matrix Type Description Proof of Delivery (Compliance)

In Person If the application is taken face to face, it is acceptable to deliver the disclosure in person. The disclosure is considered “delivered” once the disclosure has been given to the borrower.

Signed/Dated copy of the disclosure.

Overnight It is acceptable to deliver the CD via UPS, Fed-Ex, or other

national delivery services. The disclosure is considered “delivered” once the overnight package containing the disclosure has been signed for.

Signed and dated copy of the delivery notice.

First Class Mail Delivery of the disclosure via first-class mail delivery is acceptable. For timing purposes, 4 business days for mailing, including the day the document was mailed, is required.

The document is assumed to be/considered “delivered” on the 4th day.

For example, if the document was mailed on Monday, count Monday, Tuesday, Wednesday and Thursday of the same week. Delivery is assumed to be on Thursday.

No proof of delivery is required; however a copy of the disclosure must still be maintained in the file.

Note: For Compliance: A disclosure that is signed and dated by the borrower(s) can be considered delivered as of the date it was actually signed (if that date is earlier than an “assumed” delivery date).

Delivery Requirements for Transactions with Multiple Consumers IF the loan is a THEN

Purchase Money Transaction The CD can be given to the primary applicant or any consumer with primary liability for the loan

Refinance or other rescindable transaction The CD must be given separately to each consumer that has the right to rescind under TILA.

Note: Proof of delivery is required for each party that receives a CD.





TRID, Continued

Consummation Date Defined Consummation date is defined as the date the borrower becomes legally

obligated to the transaction. MSI will use the date the mortgage note is signed or the notary signature as

the consummation date.

Earliest to Close Date The “earliest to close date” varies depending upon the delivery method and proof of delivery. See the following matrices that define the “earliest close date”. See Earliest Close Date Matrix for an illustration of a creditor not open to perform substantially of its business functions on Saturday (i.e. funding a loan). Important Notes: If a federal holiday occurs, it cannot be counted, even if the creditor is

open for business. Waiver of Waiting Period: Although permitted within the Rule; MSI

does not allow the 3-day waiting period to be waived under any circumstances.

Earliest Close Date Matrix First Class Mail Delivery IF CD Is Mailed On: THEN Assume Receipt On: THEN Business Days are: AND the loan can close on:

Monday Thursday Friday, Saturday, Monday The second Monday Tuesday Friday Saturday, Monday, Tuesday The second Tuesday

Wednesday Saturday Monday, Tuesday, Wednesday The second Wednesday Thursday Monday Tuesday, Wednesday, Thursday The second Thursday

Friday Tuesday Wednesday, Thursday, Friday The second Friday

For ALL other Delivery Methods: IF CD Is Acknowledged On: THEN Business Days are: AND the loan can close on:

Monday Tuesday, Wednesday, Thursday Thursday Tuesday Wednesday, Thursday, Friday Friday

Wednesday Thursday, Friday, Saturday Monday Thursday Friday, Saturday, Monday Monday

Friday Saturday, Monday, Tuesday Tuesday Saturday Monday, Tuesday, Wednesday Wednesday





TRID, Continued

Settlement Agent Responsibility for CD The creditor is responsible for ensuring the CD is received by the

consumer no later than 3 business days before consummation. • Creditors may contract with settlement agents to have the

settlement agent provide the CD to consumers on the creditor’s behalf.

• Creditors and settlement agents also may agree to divide responsibility with regard to completing the CD with the settlement agent assuming responsibility to complete some or all the disclosure.

The settlement agent is required to provide the property seller (seller) with the CD reflecting the actual terms of the seller’s transaction and must be provided to the seller no later than the day of consummation. • The settlement agent may comply with this requirement by

providing the seller with a copy of the CD provided to the consumer (buyer) if it also contains information relating to the seller’s transaction.

• The settlement agent may also provide the seller with a separate disclosure, including only the information applicable to the seller’s transaction from the CD.

Average Charges for Settlement Services The amount imposed on the consumer for any settlement service must

not exceed the amount the settlement service provider actually received for that service. • However, an average charge may be used instead of the actual

amount received for a particular service, as long as the average charge satisfies certain conditions.

• The creditor is responsible for developing and maintaining the documentation to meet the specific conditions.

Revisions/ Corrections to the CD Creditors must re-disclose terms or costs on the CD if certain changes

occur to the transaction after the disclosure was first provided that cause the disclosure to become inaccurate.

There are 3 categories that require a corrected CD: • Changes that occur before consummation that require a new three

(3) business day waiting period. • Changes that occur before consummation and do not require a

new three (3) business day waiting period. • Changes that occur after consummation.





TRID, Continued

Re-disclosure Timing IF the Change is: THEN the Delivery Requirement is:

APR varies by 1/8 for FRM or ¼ for ARM No later than the 3rd business day before consummation. Any numeric correction (fee, changes to seller paid amounts, etc.) that occurs during the 30 calendar day period after consummation.

Providing a corrected CD no later than 30 calendar days after receiving notification of fee change.

Any refunds for excess fess charged must be provided to the consumer no later than 60 days after consummation along with the corrected CD reflecting the refund.

Any non-numeric/clerical correction that occurs during the 60-calendar-period after consummation.

Provide a corrected CD no later than 60 calendar days after consummation.

Note: Any refund of monies to the consumer requires a revised CD.





TRID, Continued

Other Information See the matrix for additional important information regarding TRID.

Other Important Information about TRID Pre-Application Cost Estimator TRID does not prohibit a creditor or other person from providing a consumer with

estimated terms or costs prior to the consumer receiving the LE. • However, if a consumer is provided with a written estimate of terms or costs

specific to that consumer before the consumer receives the LE, it must: • Clearly and conspicuously state at the top of the front of the first page of the written

estimate "Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing the loan."

• Be in font size no smaller than 12-point font. • Not have headings, content, and format substantially similar to the LE or the CD.

Record Retention The lender must retain copies of the CD and all related documents to this disclosure for 5 years after the loan consummation.

All other documents must be maintained for 3 years after the loan closing. Right to Receive an Appraisal The LE and CD include a statement that the creditor is required to provide the

consumer a copy of the appraisal. This existing notice has been integrated into page 3 of the LE and page 5 of the CD.

Refer to Appraiser Independence Requirements (AIR) in the Underwriting Chapter for additional details.

Servicing Information The LE must include a statement of whether the creditor intends to service the loan or transfer the loan to another servicer. • This existing notice has been integrated into page 3 of the LE.

Partial Payment Notice On page 4 of the CD, a statement must be disclosed of whether the creditor: • Accepts partial payments and applies the payments to the borrower's loan; • Holds partial payments in separate account until the borrower sends the rest of

the payment, and then applies the full payment to the loan; or • Does not accept any partial payments.

Not Providing Legal Advice MSI is not providing interpretation or legal advice regarding the Truth-In-Lending Act or Regulation Z. Our sole intent is to provide the information used by our internal staff

to audit loans as clarification to our Sellers.



Delivery File Standards

Overview The closed loan file (Delivery File) that is delivered to MSI for loan purchase must be in purchasable condition. To be in purchasable condition, each Delivery File must contain

investment quality documentation that meets the three “sections” of the total loan file as defined in this section: • Custodial documents • Closing documents

Presentation The remaining sections of this chapter are presented in delivery document sections to facilitate use of this Guide.



Custodial (Collateral) Documents Standards

Overview

This chapter outlines the required purchase standards for documents defined by MSI as “custodial” documents. Presentation To facilitate the use of the sections, documents within the sections are presented in the generally accepted industry stacking order. The MSI requirements for loan purchase are stated as the first information in each topic. Custodial Documents To facilitate the pre-purchase audit of the Delivery File, MSI considers the following documents to be “custodial” documents: Note Note Addenda (Riders/Schedules or Allonge) Power of Attorney (POA) Name Affidavit MOM Security Instrument (Mortgage or Deed of Trust)

• Copies of any hard copy assignments sent for recording if not on MOM documents

Private Mortgage Insurance (MI) Certificate Copy of title binder (The actual title policy is a final (trailing)

document

Delivery Requirements

Required that the Seller use the stacking order in the MSI Delivery Transmittal. See Closed Loan Delivery Transmittal for details.

Note Original Required A copy of the original must be included in the Delivery File.

• A copy of the Bailee Letter or Wire Instructions, as applicable, must be included with the copy of the Note in the Delivery File.

The loan will not be funded/purchased until MSI is in receipt of the original Note. • By special advance permission only, MSI will purchase/fund a

loan using a Reverse Bailee Letter. In those cases, the original Note must be received by MSI no later than 3 business days from the wire date.

The Note must have the MERS identification number (MIN) written/typed in the upper right hand corner of the Original Note. • If the Seller (closing the loan as a Mod Corr transaction) is not

“MERs Ready” (assigning the loan to MSI via a paper assignment – See MERS for details); MSI will place the MIN (once assigned to MERS by MSI) on the original Note.




Custodial (Collateral) Documents Standards, Continued

Note (continued)

Proper Delivery from the Seller’s Warehouse Lender If Notes are delivered to MSI from the Seller’s warehouse, the original (live) Notes must: Always be sent “under separate cover” via express mail service for

proper identification, see the Operations Directory for mailing instructions. • The package should include only original Notes, unless the specific

Warehouse Bank has other required documents included. • Multiple Notes may be included in the same express package

Include a Bailee Letter with wire instructions for each Note. Important Note: MSI confirms that the warehouse lender is an “approved” funding

source for the Seller, and is listed under our “wire instructions of record.”

Proper Delivery directly from the Seller If the Seller does not use the services of a warehouse lender, the Delivery File must contain the original Note. The wire instructions must be provided on the Pre-Purchase

Delivery Transmittal. These instructions will be validated against the Seller’s “wire

instructions of record.”

Wire Instructions of Record As a protection for our Sellers, MSI creates and maintains a record of

each Seller’s “wire instructions of record” provided at time of initial approval.

Prior to purchasing/funding each loan, the bailee letter and/or wire instructions with the Delivery Transmittal are validated against the “wire instructions of record”.

If there is a discrepancy MSI will confirm with the Seller prior to wiring funds to ensure that the new instructions are authorized.

An officer of the company may need to forward an updated “wire authorization” in writing to MSI.





Note (continued)

Proper Note Endorsement Each original Note received must include the following endorsement to MSI:

Pay To The Order Of Mortgage Services III, LLC, Without Recourse

(Seller Company Name/typed exactly as shown on the face of the Note) Authorized Signature (Typed Name and Title of Authorized Signer)

Important: MSI requires that the Note Endorsement language be typed or stamped on the Note. “Stamped” signatures are not acceptable; the Note endorsement must

be a “live” signature. MSI is unable to accept endorsement language that is hand-written

(except for the signature). Note Endorsement signatures must meet current Fannie Mae

requirements. • The mortgage seller may not delegate its authority to execute an

endorsement, and no other party may execute the endorsement using a power of attorney.





Note (continued)

Note Requirements To be eligible for purchase, MSI requires that the original Note must: The MERS Identification Number (MIN) must be typed in the upper

right hand corner of the Note. • If the Mod Corr transaction Seller is not MERS Ready, MSI will

ensure that the MIN is placed on the applicable Assignment. Show a loan amount rounded to the nearest dollar.

• A loan amount showing cents ($150,000.11) is not acceptable for purchase by MSI.

Be the most current correct Note form required for the loan product and state (if a state-specific Note is required).

Include the applicable riders, schedules or addenda required for the loan product.

Show the correct late fees at a rate of 5% for conventional, 4% for government, or the maximum late charges permitted by law in the state where the property is located, whichever is less

Be properly executed by each borrower on the loan that will be obligated for re-payment.

Be free of whiteouts and erasures. White out is never acceptable. • MSI will accept corrections to the Note only if “lined-through” and

properly initialed by each borrower on the Note. Have all blanks completed or crossed out (by inserting XXXXX). If the borrower has signed in the wrong place, or signed twice on the

Note, the second signature must be voided (a line drawn through) and initialed by each borrower on the Note.

Be properly endorsed to MSI, see Proper Note Endorsement. • Voided endorsements, or endorsement corrections, must be

initialed by a Corporate Officer of the Seller. Borrower initials requirements (effective for all loans closed on/after

11/01/14): MSI applies Fannie Mae’s requirement for Borrower initials on each

page of the original note IF a line intended for that use is included on the Note form: • If a line for initials is present on any page, then each page,

including the signature page must, be consistently initialed by the Borrowers.

• If no line for initials is present on any page: o Initials are not required. o However, the Borrower’s may initial the pages as long as each page of

the Note form is initialed consistently, including the signature page.





Note Addenda Original Required A copy of the original must be included in the Delivery File.

• The original Note Riders/Schedules/Allonges (addenda) required for a specific loan product must be included with the Note. See Note for details.

Note Addenda Requirements When addenda to the Note is applicable, the following is required: The Note must reference the addenda. The original addenda must be submitted with the original Note. All blanks on the addenda must be completed fully and correctly. The attachment must be signed by the borrowers in the same manner

as the Note. Be free of white-outs and erasures

• MSI will accept corrections to the Note and/or Addenda only if “lined-through” and initialed by each borrower on the Note.

Allonge MSI will accept an Allonge to extend the endorsement space on the

back of the Note. To be acceptable, the Allonge must meet these requirements.

• State on the Allonge: This Allonge is to be attached to and made part of that certain Mortgage Note (or equivalent language that identifies the Allonge to the original Note)

• Note Date • Borrower(s) names exactly as they appear on the Note • Property Address, exactly as it appears on the Note • Loan Number, exactly as it appears on the Note • Loan Amount exactly as shown on the Note • The language included in the Proper Note Endorsement to MSI, see

Proper Note Endorsement for details. The signor must not be a stamp and a POA is not acceptable.

Very Important: Once an Allonge is used, further endorsement on the original Note is

not acceptable (this interferes with the “endorsement chain on the Note). • Endorsements using an Allonge must always follow each other to

properly complete the transfer chain. • See the sample for details: Note Allonge Sample





Note Allonge Sample

MSI Note Allonge – Correct Format/Language If the Note does not have enough space available for the

endorsement; use the following Allonge. The Allonge must meet the requirements below.

ALLONGE TO NOTE

DATE OF NOTE: MORTGAGOR (S): (must read exactly as it appears the signature page of the Note) PROPERTY ADDRESS: (must read exactly as it appears on the 1st page of the Note) LOAN AMOUNT: LOAN NUMBER:

PAY TO THE ORDER OF

MORTGAGE SERVICES III, LLC

WITHOUT RECOURSE

(Company name must read exactly as it appears on the 1st page of the Note)

NAME AND TITLE OF PERSON SIGNING ALLONGE(must be typed)





Power of Attorney

Copy of POA sent for recording The original executed recordable document is required as a final

(trailing) document.

Notes: Real Estate POA’s in the state of IL must be in full compliance with IL

Public Act 96-1195, effective July 1, 2011. • Please seek legal advice to ensure full compliance.

Conventional and FHA Loans: When applicable the POA in the Delivery File must: Be a Limited or Specific to the transaction POA. A General POA will

only be considered in cases where the borrower is currently serving on active military duty outside the United States. In such cases an “Alive and Well Statement from the commanding officer (to VA guidelines is required)

See Underwriting/Borrowers/Power of Attorney for additional details. The POA can be used for closing documents only, and is not

acceptable for application or credit verification documents (the initial 1003 may not be signed by the attorney in fact). • If at least one the borrowers on the loan is not going to be present

at closing, and the initial 1003 was not taken face-to-face by the originator, MSI requires a “face-to-face” letter from either the Attorney who prepared the POA or the Notary, confirming the identity of the borrower. This is a protection for the borrower granting the POA.

Authorization for the attorney-in-fact to perform specific functions related to real estate financing, or is specific to the subject property

The attorney-in-fact may not have any direct or indirect financial interest in the transaction

A statement that the POA is in full force and effect on the closing date, survives subsequent disability (durable), and has to be revoked in writing, or gives a specific expiration date which survives the closing date

A statement of the grantor's (borrower's) name exactly as it will appear on all closing documents

Notarized signature of grantor (if executed outside the U.S., it must be notarized at a U.S. Embassy or a military installation)





Power of Attorney (continued)

Conventional and FHA Loans (continued):

Recorder's stamp, if previously recorded and Must be dated no more than 180 days prior to the closing date At least one borrower must be present at closing, unless a face-to-

face interview has been conducted with all applicants A separate, executed POA must exist for each borrower not present at

closing The attorney-in-fact must execute all closing documents at settlement The title company must insure the Seller is in first lien position without

exception to the POA and The POA must be recorded along with but immediately prior to the

closing documents

VA Loans POA’s on VA loans must meet all current VA requirements, including but not limited to all other POA requirements stated herein, as well as those additional requirements stated below: A POA may be used to make application for a VA loan. It must appear that the veteran intends to occupy the property upon

his/her return from overseas service, or upon his/her termination from the Armed Forces • An immediate family member must occupy the property during the

veteran's absence and • A statement of intent to occupy the subject property as the

veteran's primary residence must be included The POA must include the following information:

• The specific property address of the subject property • The sales price of the subject property if used for a purchase,

unless the veteran has signed the sales contract • A statement authorizing use of all or a specific amount of

entitlement, for purchase or refinance If the veteran is currently in the Armed Forces, an Alive and Well and

Not Missing in Action statement must be provided. See Government Loans Product Suite/Borrowers/POA for full details.





Power of Attorney (continued)

Signature Requirements Except as noted below, documents may be drawn with either signature example shown:

Format # 1

(borrower's name signed by attorney-in-fact) TYPED name of borrower, by (attorney-in-fact's signature) TYPED attorney-in-fact's name, his/her attorney-in-fact

Format # 2

(attorney-in-fact's signature), TYPED name of attorney-in-fact, as attorney-in-fact for TYPED name of borrower

Important: The Signature formats illustrated herein, as well as others not included, must be acceptable for the local jurisdiction, and approved by the title company prior to closing. The title company must insure that the Seller is in first lien position without exception to the POA.

State Requirements Acceptable Signatures

All States except California

Any of the following examples are permitted: Mary Smith, as AIF for John Smith John Smith by Mary Smith, as AIF Mary Smith as attorney-in-fact for John Smith John Smith by Mary Smith as attorney-in-fact

California Only the following signature is acceptable: Jane Doe by John Doe, Attorney-in-fact

Name Affidavit Original Required An original name affidavit is required whenever the signature on the Note and Security Instrument do not exactly match the names as typed on those same documents. The affidavit must be signed by the borrowers and provide a listing of the variations of the borrower’s names.





Security Instruments

Copy of Security Instrument (Mortgage/Deed of Trust) sent for recording (Must be a MOM document The original recorded document is required as a final (trailing)

document. The copy of the Security Instrument sent for recording must: Be the most current, correct SI form for the state and/or product type

(e.g., government or conventional) Contain a legal description that matches the title commitment/final

title policy. Correspond to the Note as it appears in respect to the following:

• Principal balance • First and last payment date • Mortgagor's names and signatures • Property address • Interest rate • Principal and interest payment

Be dated the same as or later than the Note. Have all riders noted and attached, as required by the loan product or

property type. As required, reflect notary/acknowledgment/witness signature/ seal

and expiration. For Mod Corr transaction Sellers that are MERS Ready:

• Copy of the MERS identification number must be typed on the upper right hand corner of the SI.

Riders to the Security Instrument

Copy of applicable riders to the Security Instrument (Mortgage/Deed of Trust) sent for recording required for Purchase The original recorded document is required as a final (trailing)

document. Riders that are required by specific property types and/or products must

be attached to the recorded Security Instrument. MSI requires the following riders: Condominium Rider

• Required on all conventional and government loans when property rights are Condominium.

Planned Unit Development (PUD) Rider • Required on conventional and government loans when a property

meets the Agency definition of a PUD (This is not a type of property rights and is not determined by the title company or a survey.)





Riders to the Security Instruments (continued)

Adjustable Rate Rider • As required by specific product

1-4 Family Rider • Required for all 2-4 properties, regardless of occupancy, and for

single unit non-owner occupied properties Any rider required by specific products in the product guidelines (e.g.

Balloon products require a Balloon Rider)

The Rider(s) must meet these requirements: All borrowers who signed the security instrument must execute all

Riders (unless otherwise indicated) All signatures on the Rider(s) agree with signatures on the security

instrument Any correction to security instrument or Rider(s) has been initialed by

all borrowers who executed the security instrument

MERS

Acceptable MERS Memberships The following MERS Memberships are acceptable to MSI:

• General MERS Membership is acceptable to MSI (MERS Ready). • MERS Lite Membership is acceptable to MSI. (MERS Ready) • MERS TPO Membership is not acceptable to MSI. (Not MERS

Ready) • Sellers with a MERS TPO Membership may not sell loans to MSI

using documents with MIN’s created using a MERS TPO membership. MSI considers you a non-MERS Seller (Not MERS Ready). See Non-MERS Members.





Assignment of Mortgage

MERS Members (MERS Ready) The Mod Corr Seller must register all loans with MERS at time of

delivery to Mortgage Services III, LLC (MSI). • The Seller must be named as the servicer and investor at the time

of registration (loans may no longer be registered in the name of Mortgage Services III, LLC at time of registration).

A MERS Transfer of Beneficial Rights (TOB) and Transfer of Servicing Rights (TOS) must be initiated by the Seller to Mortgage Services III, LLC (MSI-ORG ID 1005883), no later than 24 hours (1 business day) of purchase by MSI. • CLAR: To ensure proper transfer within MERS and Investor

guidelines, MSI strongly suggests that the Seller transfer the TOB/TOS within 24 hours of MSI’s notification to purchase the loan. MSI will condition the loan for MERS transfer for your convenience.

• Fees may apply if the Beneficial and Servicing rights are not transferred within 24 hours (1 business day) of purchase by MSI, those fees are the responsibility of the Seller (MSI will invoice the Seller if necessary).

If Sellers choose to close loans on non-MOM (MERS as Original Mortgagee) documents: • Seller must make and record all assignments to MERS for all loans

in all states. • The Seller must then register and transfer these loans to

MSI on the MERS System within 48 hours (2 business days) of purchase by MSI.

Important Notes: To ensure proper transfer and avoid fees, transfer TOB and

TOS rights immediately after MSI has notified you that we will purchase your loan.

Reminder: MERS TPO Application is NOT acceptable with MSI. Contact MERS directly to fully understand what adjustments need to

made to your process to meet these new requirements. • See the Pre-Purchase Delivery chapter of the Seller Guide for any

additional details.





Assignment of Mortgage, Continued

Non-MERS Members MSI will no longer issue MERS Identification Numbers (MIN) to Sellers. If you are not a MERS member you cannot close loans on MOM

documents; therefore you will be required to do the following paper assignments: • Seller to MSI – charge to Seller by MSI- see current fee sheet. • MSI to MERS – charge to Seller by MSI –see current fee sheet. • Additionally, the Seller is responsible for all applicable recording

fees. MSI strongly encourages all Seller’s that close in their own name to become a MERS member capable of generating your own MIN to enable closing on MOM documents.





Assignment of Mortgage (continued)

Transferring Beneficial and Servicing Rights to MSI Within 24 hours of loan disbursement (purchase by MSI), the

Seller must transfer the beneficial interest/servicing and sub-servicing rights to MSI (Do you require transfer of servicing rights?).

The steps below outline the expected process:

Step Responsible Party Action 1 Seller Registers loan with MERS using company Beneficial and Servicing Rights 2 Closes loan using MOM documents 3 Delivers loan to MSI for purchase 4 MSI Purchases loan 5 Seller Within 24-hours after loan disbursement (1 business day):

Transfers the Beneficial and Servicing Rights to MSI Note: The Seller must comply with MERS requirements to properly transfer the loan’s rights to MSI. MSI will accept TOB/TOB immediately after notification to Seller of MSI intent to purchase the loan.

6 MSI Validates the transfer of the MIN to MSI (Beneficial and Servicing) via the MERS confirmation

7 If the loan has not been transferred, contacts the Seller’s secondary marketing management. Failure to properly transfer the rights in MERS negatively impacts the further sale of the

loan on the secondary market Important Audit Notes:

Prior to funding each loan: MSI will validate that the MERS registration is complete.

• If not, funding will be suspended, pending completion of registration with MERS. MSI will validate that the Transfer of Servicing (TOS) and the Transfer of Beneficial

Rights (TOB) is completed. • If not, the loan will be funded with a follow-up stipulation that the TOS/TOB is

completed within 48-hours of MSI funding. • Post funding for each loan (for which the TOS/TOB was not completed prior to

funding): On the 3rd business day after funding, MSI will validate the TOS/TOB with MERS. Sellers that consistently fail to transfer loans will be subject to disciplinary action by

MSI.

MERS Organizational ID Numbers • Use the following MERS Organizational Identification (org ID)

numbers to transfer the beneficial and servicing rights to MSI: MSI Beneficial and Servicing Rights– 1005883





Private Mortgage Insurance Certificate

Important Notes: The MI Certificate must match the Underwriting Approval, including but not limited to: The Borrower’s Name(s) Property Address Loan Amount Appraised Value of the property

Zero UpFront Mortgage Insurance Required MSI accepts only monthly mortgage insurance programs with no upfront premiums, for any product that allows monthly MI. The use of the Zero Up Front MI insures a more efficient purchase of the loan by MSI since with this MI option; no upfront premiums are collected at closing. The first MI premium comes due in the month the first payment is

made, and premiums are due monthly thereafter. If the Loan is amortized, the Seller is responsible for remitting the

mortgage insurance for any payments they receive. The first premium is due with the first payment, and no “impounds” or

other amounts should be collected at time of close. If the product is MSI-LPMI, MSI is responsible for ordering and paying

for the mortgage insurance once the loan is purchased. The Seller is fully responsible for proper disclosure of the LPMI, evidence of which must be included in the loan delivery package.

10/03/15 Under/Non- Disclosure of MI Premium MSI validates that the premium on the MI certificate is equal to or slightly less than the premium disclosed on the Final Closing Disclosure (CD). If the premium amount is not disclosed, or under-disclosed, the loan

must be corrected prior to close.



Closing Documents Standards

Overview This chapter outlines the required purchase standards for closing documents that are not considered custodial documents, defined by MSI as the Closing documentation portion of the Delivery File documents. Presentation To facilitate the use of the sections, documents within the sections are presented in the generally accepted industry stacking order.

Document Vendors

MSI, as a lender, works with certain document vendors. While MSI does not require Mod Corrs (Sellers closing in their own name) to work only with MSI-approved doc vendors, as a courtesy, we have provided a list of those doc vendors used by MSI. MSI-Approved Doc Prep companies are: Document Express, Inc. Doc Magic DocuTech Important Notes regarding closing documents: When pricing and closing the transaction as a Mod Corr, all documents

must be drawn in the name of the approved Mod Corr Seller. If an MSI-approved Doc Prep (Doc Vendor) is used by a Seller, the

relationship is between the Seller and the outside vendor, and the Seller is solely responsible to ensure that the loans are closed with proper documentation for each product and in full compliance with applicable regulations and/or laws.

It is the Seller’s sole responsibility to ensure that the closing documents are drawn in full compliance with the applicable product. Each Product Suite publishes the accepted uniform instruments for each applicable product. Loans closed on incorrect/unacceptable documents are not eligible for purchase by MSI.




Closing Documents Standards, Continued

Closed Loan Delivery Transmittal

Fully Completed Closed Loan Delivery Transmittal Each document in the correct order, as noted on the Transmittal Remaining Closing Documents Any additional Miscellaneous Documents for the loan file. Important: Proper delivery order is an MSI requirement; compliance with this policy will help your files flow through our system more efficiently and help us provide you with the best service level possible.

Regulatory Documents

Important MSI does not list required regulatory documentation (forms or disclosures), unless they are a requirement for loan purchase for a specific product (as outlined in the product guidelines). Seller Responsibility It is the Sellers’s responsibility to be in full compliance with all applicable federal, state, municipal and supervisory regulatory requirements. If copies of the applicable regulatory documentation are not included in the loan file, the Seller is responsible to provide said copies as proof of compliance upon demand by MSI.

Closing Documents

The documents received from the closing agent are the next group of documents in the Closed Loan Delivery File. Closing Documents, as applicable: (Excluding custodial documents) Subordinate (secondary) loan documents (copy of Note/Mortgage) Title Commitment Survey, if required for the jurisdiction Hazard Insurance Life of Loan Flood Certificate





Closing Documents (continued)

10/03/15 Flood Insurance Other Insurance Initial Escrow Disclosure Escrow Waiver Letter Final Closing Disclosure Payment Letter Tax Information Sheet (MSI form or equivalent) Final loan application (signed and dated) Correction Agreement Letter Right of Rescission Transfer of Servicing Documentation W-9, Tax Identification Number Birth Date Certification (USAPA CIP documents) Other Closing Documents





Secondary Financing

Copy of Note, Mortgage MSI will purchase loans with subordinate financing as permitted by the product. See the product guidelines for details. Loans subject to secondary financing must: Meet Fannie Mae requirements for the terms of the secondary

financing, unless otherwise noted in the product guidelines Include a copy of the fully executed Note, Mortgage and subordination

agreement

Title Commitment

Copy of Title Commitment or Binder The original Title Policy, Short Form Title Policy or Certificate of Title is

a final (trailing) document. See Post Purchase Document Standards for details. • All loans purchased by MSI must be covered by an acceptable form

of Title Insurance issued by a company that meets current Fannie Mae guidelines; unless otherwise specifically restricted by MSI.

• The original or copy of the "marked up" Title Commitment/Binder must be included in the delivery package.

• MSI requires that there are no outstanding survey exceptions, unpaid real estate taxes and/or special assessments against the property title.

• Note: Title Insurance coverage must equal or exceed the Mortgage Loan amount.

Iowa MSI accepts a preliminary Attorney’s Opinion/Certificate of Title on Loans secured by property in Iowa.

MSI Title Restrictions TICOR Title

• Effective with loans locked on/after 5/18/09, MSI will accept TICOR titles only if TICOR is the actual title underwriter and settlement agent.

• TICOR titles issued by settlement agents or underwriters other than TICOR are not acceptable.

• Exception: MSI will accept TICOR title insurance from TICOR affiliates if the affiliate has a valid, active E&O policy. o Documentation of the valid/active E&O policy must be included

in each loan file delivered to MSI (A copy of the current declarations page showing that the policy is current and active will be accepted.)





Title Commitment, Continued

Chain of Title –Property Flipping Purchase and Refinance MSI requires that the subject property show evidence of the property seller on title with ownership a minimum of 12-months prior to the sale. If the title does not evidence, MSI will require copies of the last recorded deed(s) for the subject property to document at least the most recent 12-month period. See Underwriting/Property Flipping for additional details.

Right of Redemption

For all Products: MSI will not fund/purchase any loan with a current/active Right of Redemption listed on the Title. If the Title references that a property is within a Right of Redemption

period and the expiration date has not passed prior to the loan closing date, the loan is ineligible for funding/purchase.

MSI will consider funding/purchase if the Right of Redemption on the Title is expired before the date of loan closing and there is no recourse.

Survey MSI does not require a survey if the Title Policy provides for a Survey

Endorsement or a Survey Affidavit and/or does not list a survey exception. Note: If the borrowers have been charged for a survey on the CD, a copy of

the original Survey is required If the title company requires a survey to remove an unacceptable title

exception, MSI requires that the Seller obtain the survey to remove the exception





Hazard Insurance

Each mortgaged property purchased by MSI must be covered by fire and hazard insurance including separate windstorm, where applicable. Mortgagors have the right to select their own hazard insurance carrier.

Evidence of Coverage MSI will accept one of the following in the Delivery File as evidence of hazard insurance coverage: Declarations Page Certificate of Insurance Insurance Binder (Accepted only in those areas where required by

law.)

Evidence of Payment MSI will accept the following in the Delivery File as evidence of the payment of the premium: Paid receipt for premium amount reflected on policy/binder; or Closing Disclosure indicating collection of premium amount reflected

on policy

60-Day Rule

The Seller is responsible for all insurance payments with Due Dates prior to loan delivery and/or within 60-days of purchase/funding by MSI.





Hazard Insurance (continued)

Information Requirements The evidence of coverage must reflect the following information: Policy Number (not required for binders) Name(s) of borrower(s) that agree with the Note. Insured Property address that agrees with the Note/Security

Instrument • Second Home or Investment – Mailing address should agree with

home address shown on the residential loan application The insurance agent’s name and telephone number should appear

Terms of Coverage The effective dates (beginning and expiration date) of the policy coverage must be clearly stated. Purchase Transactions The policy must extend for minimum 12-months from the date of closing. Refinance Transactions Existing coverage will be accepted, provided: Existing coverage extends a minimum of 60-days beyond the funding

date, and Sufficient impounds are collected by the Seller to renew coverage at

the due date If the policy expires within 60-days, MSI requires evidence of renewal

for one year

Coverage Requirements Subject to applicable state law restrictions, coverage should be of the type that provides for claims to be paid on a replacement cost basis and the amount of coverage must be equal to the lesser of 100% of the insurable value of the improvements, as established by

the property insurer; or The unpaid principal balance of the mortgage, as long as it equals the

minimum amount (80% of the insurable value of the improvements) required to compensate for damage or loss on a replacement cost basis






Important: MSI will not accept a coverage amount less than the minimum amount

necessary to fully compensate for any loss or damage on a replacement cost basis

To determine the coverage amount, MSI requires one of the following: • Guaranteed Replacement Cost • 100% Replacement Cost

If the coverage is not Guaranteed or 100% Replacement Cost, the coverage will need to be calculated. To calculate, provide one of the following: • Documentation of the “insurable value” from the insurer • “Cost to Build New” from the Appraiser • “Land Value” (to enable a rough calculation of the dwelling cost)

from the appraiser Note: While we do not require that the Cost Approach on the Appraisal be completed, we must be able to “calculate” the insurable value to validate adequate insurance coverage.

Policy Requirements Property insurance for home mortgages must protect against loss or damage from fire and other hazards covered by the standard extended coverage endorsement. Windstorm, hurricane, hail damage, other perils MSI does not accept hazard insurance policies that limit or exclude from coverage (in whole or in part) windstorm, hurricane, hail damages, or any other perils that are normally included under an extended coverage endorsement, unless They are covered by a separate policy or endorsement from another

commercial insurer that provides adequate coverage for the limited or excluded peril, or

They are covered from an insurance pool that the state has established to cover the limitations or exclusions

The policy must: Provide for a 30-day written prior notice to the borrower for any

cancellation, reduction in amount, or material changes Be properly countersigned






Mortgagee Clause MSIII LLC Its Successors and/or Assigns 502 N. Hershey Rd. Bloomington, IL 61704

If the Mortgagee clause is in the Seller’s name: A copy of the dated Request for Endorsement Change showing MSI

must be in the Delivery File The original should be mailed by the Seller to the insurance company

upon MSI’s purchase/funding

Deductible Unless a higher maximum deductible amount is required by state law, the maximum allowable deductible for a first mortgage is up to 5% of the face amount of the policy. Up to 10% for flood policy. The deductible clause may apply to either fire, extended coverage, or

both. Wind Loss When a policy provides for a separate wind-loss deductible (either in the policy itself or in a separate endorsement), that deductible may be up to 5% of the face amount of the insurance policy. Condo and PUD projects: The maximum deductible amount is 5% of the face amount of the policy.

Exception – USDA, FHA and VA Loans: MSI requires the following Hazard Insurance Deductibles for all USDA, FHA and VA loans: The maximum Hazard Insurance (for all types of Hazard except Flood)

deductible is 1% of the face value of the insurance or $1,000.00, whichever is greater.

Carrier Requirements Insurance carriers must meet the current published Fannie Mae Guidelines. MSI requires that the insurance carrier must be licensed to do business in the state where the mortgage property is located.






CLAR (3/26/15) Condominium Projects Master or Blanket policies will be accepted for Condos. A certificate of insurance must be provided which certifies acceptable building coverage with deductible for the Project. General Liability of at least $1,000,000 per occurrence is also required. There must be a reference to the unit number or borrower name(s) included. The certificate must provide the following information: Policy or certificate number Policy term Name and address of insured, which should be the Association Correct full name of the mortgagor and unit address Mortgagee clause which should meet all the requirements for insurance

policies Reminders: MSI requires the borrowers to have a “Walls-In” (H06) policy for

conventional and FHA Condo loans unless the master policy clearly documents that the interior of each unit is covered for replacement of improvements and betterments that the borrower may have made. See the Underwriting Chapter/Condos for details. • The HO-6 insurance policy must provide coverage, as determined by

the insurer, which is sufficient to repair the condo unit to its condition prior to the loss claim event.(Standard coverage is 20% of the unit value). Note: If the borrower has an impound/escrow account; the HO-6 premium must be included in the escrow account.

MSI does not fund/purchase a conventional project that meets the Fannie Mae Type P project requirements.

Seller Responsibility The Seller is responsible to ensure that the mortgage loan is adequately covered by a valid, active hazard policy that meets the more restrictive of MSI or Fannie Mae’s currently published guidelines.

Flood Zone/ Life of Loan Certificate

MSI requires a Life of Loan (LOL) Flood Zone Certificate from an MSI-Approved Vendor on each loan purchased. The LOL must be dated on the closing date or no earlier than 120 Days of the

Note Date. The Seller is responsible for ensuring that the vendor guarantees the

accuracy of the determination. The Seller is responsible for purchasing and including the LOL Flood Cert

in the underwriting package.





Flood Zone/ Life of Loan Certificate, Continued

MSI-Approved Flood Vendors Contact CoreLogic (fka First American Flood Data Services, Inc. FDSI) 800.447.1772 Elite Lender Services (an FDSI affiliate) 800.636.2711 LPS National Flood (fka FIS Flood Services /fka LSI Flood) 800.833.6347 Wells Fargo Flood Service 800.805.9423 AFR Services (fka American Flood Research, Inc) 800.995.8667 fka = formerly known as

Flood Insurance

If the FZD determines that the subject property is located in a special flood hazard area, designation with an A or V in the zone, MSI will require flood insurance. Flood insurance is not required when non-principal structures (ancillary structures that do not serve as part of the security for the mortgage) are located in the flood zone area. Survey of the structure may be required. Important: Unless otherwise addressed below, the flood policy must meet the same requirements and provisions as the hazard policy.

Evidence of Coverage and Payment MSI will accept the copy of the original Flood Insurance Application, with a paid receipt as evidence of flood insurance coverage.

Policy Requirements The flood insurance policy must be either: The standard policy issued by the members of the National Flood

Insurers Administration (NFIA), or Other policies that meet the standards of NFIA such as those issued

by licensed property and casualty insurance companies that are authorized to participate in NFIA's "Write Your Own" program

Deductible Unless a higher maximum deductible amount is required by state law, the maximum allowable deductible for a first mortgage is Individual policies : $10,000 Condo/PUD project policies: $25,000.





Flood Insurance, Continued

Coverage Requirements The minimum amount of flood insurance is the lower of

The amount required, under the terms of the coverage, to compensate for any damage or loss on a replacement cost basis (replacement cost must be at least the amount noted on the hazard insurance policy and must include the foundation of the property—the policy or a letter from the insurance agent must note that the cost of the foundation is included) or

The maximum insurance available under the appropriate National Flood Insurance Program, which is currently :

NFIP Maximum as of 9/03/13 for reference Building Type NFIP Maximum

Single Family and 1-4 Unit Dwellings $250,000 Attached Condominiums & PUDs

(covered by a blanket master insurance policy) $250,000, multiplied by the number

of units in the building Non-Residential (pool houses; sheds; barns; etc. $500,000






Non-Participating Communities Properties identified as being located in a Special Flood Hazard Area which are located in Non-Participating Communities, are not eligible for purchase by MSI, unless the following exception process is followed: A survey is performed to determine whether the property is in a flood-

prone area. • If the survey determines the loan is not in a flood prone area, the

loan is eligible for purchase without flood insurance.

If the survey determines that the property is located in a flood prone area …

Then the loan …

And the borrower is able to obtain flood insurance from a private insurance company

Is eligible for purchase by MSI

And the borrower is not able to obtain flood insurance from a private insurance company

Is not eligible for purchase by MSI

FZD Disputes and Waiver of Flood Insurance If the borrower disputes the flood zone determination, they have the right to appeal to the Federal Emergency Management Agency (FEMA). MSI will waive the flood insurance requirements if the borrower obtains a letter from FEMA stating that its maps have been amended so that the principal structure is no longer in a Special Flood Hazard Area. The letter from FEMA must be included in the Delivery File. Important: The servicer can require the borrower to obtain flood insurance based upon any subsequent determination by FEMA that the property is located in an area that requires flood insurance coverage.-See the






Additional Disclosure Regarding Flood Insurance MSI requires the following additional language be added to the Notice of Special Flood Hazard (NSFH) and the Servicing Disclosure Statement Notice to 1st Lien mortgage loan applicants:

Flood Insurance Coverage Subject to Change Disclosure: We may assign, sell, or transfer the servicing of your mortgage loan. Your new lender/servicer may require more flood insurance coverage than the minimum amount that has been identified in your Notice of Special Flood Hazards (NSFH). The new lender/servicer may require coverage in an amount greater than the minimum, and has the right to require flood coverage at least equal to 100% of the insurable value (also known as replacement cost value) of the building(s) used as collateral to secure the loan or the maximum available under the National Flood Insurance Program (NFIP) for the particular type of building. You should review your exposure to flood damage with your insurance provider, as you may wish to increase your coverage above the minimum amount required at the time of closing your loan versus what subsequently the new lender/servicer may require. Important Notes: The added disclosure language is required for all loans (all products)

regardless whether the property is in a Special Flood Zone or not. The “subject to change disclosure language” is acceptable as an

addendum to the notice(s) or as a separate disclosure; however, the language must be provided to the borrowers prior to close and must be executed to acknowledge receipt.





Flood Insurance (continued)

Projects The Homeowner's Association (HOA) must maintain a master or blanket policy of flood insurance and provide that the premiums be paid as a common expense. The flood insurance policy requirements are the same as for one to four family dwellings. Condominiums The policy should cover common element building and any other common property. When the project consists of high-rise or other vertical buildings, the HOA must have a separate flood policy for each building that houses dwelling units. PUDs The policy should cover any common areas. Each individual unit shall also carry the same flood insurance as one to four family dwellings.

Other Insurance

MSI will require evidence of any other “hazard” insurance that is required by the mortgage loan, including but not limited to: Wind, Hailstorm, Hurricane – if not included in the standard hazard

policy and issued by a commercial insurer Mine subsidence – if referenced on the title commitment and/or the

sales contract or appraisal – the insurance must provide adequate coverage to the borrower (and lender) to cover damages in the event of subsidence





Initial Escrow Disclosure

REV (10/03/15)

One aspect of the comprehensive Cranston-Gonzalez National Affordable Housing Act, which is part of the Real Estate Settlement Procedures Act (RESPA), regulates the transfer of servicing. MSI requires evidence of disclosure to the mortgagors in compliance with this act in the Delivery file The Initial Escrow Disclosure (IED) is an addendum to the Closing Disclosure (CD) that must itemize the estimated escrow payments for the first 12-months after settlement. While the regulation states that it may be issued at closing or no later than 45-days after establishing the escrow account, MSI requires that the disclosure is included in the Delivery File. MSI audits the IED against the final CD. The beginning initial escrow

balance must match the escrows on the CD. • The strict tolerance is “within $1.00.”

Borrower signatures are not required, unless the document has a signature line, in which case, the form must be signed.

See requirements for the additional disclosure language for flood insurance, see Additional Disclosure Regarding Flood Insurance for details.

FHA – Additional Requirements FHA loans require that an additional notice be given to mortgagors at time of closing regarding the prepayment of mortgages. This disclosure, Notice to Mortgagor at Loan Closing Regarding Prepayment, must include the following: Mortgagor's name and property address Date of issue (closing date) Seller loan number and FHA case number Statement notifying mortgagor that prepayment of the loan may be

made at any time without penalty, but to prevent accrual of interest on the prepaid amount, the payment must be made on the installment due date (first day of the month)

Escrow Waiver Letter

A copy of the escrow waiver letter signed by the borrowers that includes at least the following borrower acknowledgements that they: Are responsible to pay the taxes/insurance on the subject property Will provide the servicer with proof of payment of taxes/insurance.

Understand that if they fail to pay the taxes/insurance, the servicer has the right to force place insurance, and/or pay the taxes and charge the borrower accordingly





Final Closing Disclosure

The Seller is responsible for ensuring that the Closing Disclosure for all loans sold to MSI comply with all existing and subsequently enacted RESPA/REG Z and CFPB requirements and guidelines. A copy of the Final Closing Disclosure, properly executed as required for the product type, is required in each loan delivered for purchase to MSI. Signatures must include all individuals with an ownership interest in the property due to title vesting or ownership rights afforded under state law.

POC Items MSI requires documentation (evidence) of payment for all items listed

Paid Before Closing (PBC) on the Closing Disclosure (CD). Evidence may include • A receipt from the vendor or • A copy of the cancelled check evidencing payment to the vendor.

Reviews and Controls MSI requires that any disbursement equal to or greater than $5,000

on the Seller’s side of the CD that does not correlate with a lien shown on the preliminary title report must be documented as a valid disbursement to the Seller (for value gained.)

Seller Credits MSI will review loans with Seller Credits according to the following methodology:

Typically, the sales contract and/or the CD do not specifically state which fees the seller will pay for the borrower. If either document did, MSI will offset that fee and include it or not

include it in the APR calculation as applicable. • Therefore, if the contract and the CD state that the seller would

pay $2000 toward the borrower's origination fee then MSI would offset that same amount when calculating the APR.

However, if the sales contract and CD are silent, MSI distributes the credit against the borrower paid fees. • We do not start with the prepaid finance charges.





Final Closing Disclosure, Continued

Realtor Commissions Limitations MSI applies the following restriction in the CD Review: Real Estate Commissions include the commissions appearing on the

CD as well as any non-lien related disbursements such as marketing expenses, finder’s fee, consulting fees or assignments of sales fees. • Any combination of these disbursements that exceed 8% of the

sales price is considered a sales concession by MSI and must be deducted dollar-for-dollar from the sales price.

• The LTV must then be recalculated and meet all applicable guidelines.

Note: The Sales Commission restriction is separate from the contribution limitations and must be applied regardless of any interested party contributions on the loan.

Closing Disclosure Technical Corrections If a loan has been suspended by MSI for an inadvertent or technical

error on the Closing Disclosure, the Seller must provide MSI with a copy of the corrected Closing Disclosure, and a copy of the letter sent to the borrower(s) (by the Seller) with the explanation regarding the correction to the loan documentation.

Payment Letter

A copy of the First Payment Letter issued to the borrowers must be included in the Delivery File and correctly reflect the payment on the Note. First payment letters should show the first payment to the Seller.

Upon purchase of the loan by MSI, the Seller should provide a “Goodbye” letter in compliance with RESPA, showing MSI as the new servicer of record.

See Special Requirements Government Loans regarding important Monthly MIP information.





Tax Information Sheet

A copy of the fully completed MSI Tax Information Sheet (or equivalent) must be included in the Delivery File.

Tax Requirements

MSI and the Seller are required to pay tax installments in compliance with RESPA regulations. As a best practice, MSI determines the tax due date by using the “economic loss date” or “discount date”, when applicable, provided by each taxing authority, which dictate payment dates most beneficial to the borrower. The final due date issued by the tax authority is the last day taxes

may be paid without penalty or interest accruing on the installment.

Tax Information Sheet A fully completed MSI Tax Information Sheet must be included in the Delivery File for each loan delivered, the form should include the following information: Next installment due date to be paid by MSI.

• The Seller should use the “due date” (the date on which the payment is due without economic loss, i.e. The tax payment increasing) to calculate correctly.

When the last installment was paid Through what year taxes are paid How taxes are paid, annual, semi-annual, etc. Full name and address of payee(s) Parcel ID number

Seller Responsibility It is the Seller's responsibility to be knowledgeable regarding taxing requirements in their lending areas. The Seller is responsible for providing correct and complete tax information, regardless of the party who actually completes the form. Careful and correct completion of the Tax Information Sheet should reduce or eliminate later charges for tax penalties.





Tax Requirements, Continued

Tax Payment Rule – 60 -Day Rule Loans purchased/funded by MSI require that real estate taxes with a

due date within 60-days of the Note Date must be collected outside of escrows on the Closing Disclosure and paid at closing through the settlement agent.

Final CD should not show escrow reserves greater than 8 months. MSI may work individually with specific loans to negotiate a different

date; however, any exceptions will not supersede our Tax Payment Rule.

REV (10/03/15) Review of Closing Disclosure When reviewing the CD, MSI will normally consider Section G, Initial Escrow Payment at Closing as escrow/impounds that will be transferred. All other tax adjustments are viewed as disbursement amounts forwarded to the appropriate tax authorities prior to delinquency.

Tax Bills Not Available But Due Within 60-Days If the real estate tax bill is not yet available at time of loan closing

(disbursement), taxes are paid by the following process: • The Closing/Settlement Agent holds back sufficient tax escrow

funds to pay the tax bill in full before the final due date. “Sufficient” funds are 1.5 times the amount of the last known tax installment per tax authority.

• The Tax Information Sheet must reflect correct information for each tax authority: PIN or Parcel Number, Date Last Paid, Amount Last Paid, Next Due Date.

• The sufficient funds (1.5 times) to pay the Tax Authority must be shown on the CD.

Important Recap: The Seller is responsible for paying taxes due within 60-days of the Note Date, the Seller or the Closing Agent must hold funds and pay those tax bills; do not send funds collected outside of impounds to MSI.





Tax Requirements, Continued

Seller Responsibility Regarding Reimbursement for Tax Penalties The Seller is responsible to MSI and will be invoiced for: Tax penalties and interest charged due to failure to properly complete

information on the Tax Information Sheet Tax penalties and interest charged for the failure to correctly pay

taxes due The amount of any discount not received due to failure to pay taxes

within the discount period Any tax "penalty" for which the Seller is responsible prior to the

purchase of the loan Note: Some taxing authorities may be two years in arrears for assessing these penalties. MSI does bill the Seller for the "penalties" for which they are responsible, regardless of the amount of time that has passed.

Important: It is the Seller’s responsibility to ensure that the Tax Information Sheet is completed fully and correctly. The Seller must comply with any municipal-, county- or state-specific tax forms or regulations for the jurisdiction in which the subject property is located. When applicable, the Delivery File must include applicable area-specific documentation.





Loan Application Requirements

Initial/Original Loan Application MSI requires that each loan file contain the complete original application in the loan delivery file.

The initial loan application is used to validate “the date of application” and other HMDA data. The initial loan application must be signed and dated by the borrowers as a certification of the accuracy of the information. . (In compliance with “type of application” requirements.) See Application – 1003 for additional requirements. Notes: Original applications may be printed from computer generated forms

or handwritten by the applicant or originator The Loan Officer must sign and date the original application.

Final Loan Application MSI requires the completed final loan application with validated information that meets the terms of the closed loan. Government Monitoring Information and applicable signature(s) and

date is required in the Delivery File. The Final Application must always be signed/dated by the Borrowers.

Conventional Loans USDA Rural Development

Loans

Fannie Mae 1003 - (Original and Final must be the current Fannie Mae Form)

FHA Final Copy HUD 92900 - (Original and Final l Application may be the Fannie Mae Form)

VA Final Copy VA 26-1802a - (Original and Final Application may be the Fannie Mae Form) The Initial Application (1003) must be signed by the borrower(s) and the Loan Officer.

• The application must be dated and reflect/document the initial application date. The Final Application (1003) must be signed by the borrowers.

Note: MSI will refuse to purchase loans for which the application is not properly executed by the borrowers.





Loan Application Requirements, Continued

Important Note: MSI requires that all pages of the Fannie Mae 1003 (as referenced on the form by “x of y”) be included for the final application. If there is no additional information completed on the last page (“y”),

the blank page must still be signed. We recognize that some LOS may print the 1003 as a 3, 4 or 5 page

document; and that some LOS may not print a “blank” page.

Correction Agreement

MSI requires a copy of the correction agreement in each loan delivered for purchase. The agreement must be signed by the borrower(s) and clearly indicate that the borrower agrees to cooperate if documents need to be corrected by the lender after closing.

Right of Rescission

10/3/15

MSI requires a Right of Rescission (ROR) notice on primary residence refinances. The notice must be dated correctly and be signed by each consumer with an interest in the home, even if the consumer does not sign the Note. Federal holidays cannot be used in the rescission period or as a

disbursement date. Funds may not be disbursed to the borrower until the ROR period has

expired. Interim interest may not accrue until the ROR period has ended. Right of Rescission is counted from the later of the following

• Date the documents are signed, • Date the borrower receives the Right of Rescission, or • Date the borrower receives the Final CD, evidenced by signature

and date. If for any reason the Final CD is not dated or the date is illegible, MSI

will require a borrower attestation. MSI does not have a specific form for this attestation, however, it must include at least the following information and be signed and dated by the borrower: • The date the borrower received the Final TIL, • The applicable APR and Finance Charge stated on the Final TIL.

Right of Rescission (ROR) may not be waived. MSI does not require a ROR for a permanent take out of a construction loan to build the borrower's home, for a refinance of a second home, investment property or vacation home.





Transfer of Servicing Documentation

Transferor (Good-bye) Letter This disclosure notifies the borrower of the actual transfer of servicing at least 15- days prior to the first payment being due the new servicer, or at loan closing. The transferor must include the following information in the notification: Effective date of transfer (date the first payment is due the new

servicer) Name, address, toll free number of transferor and transferee (See the

Operations Directory for details.) Date payment is due transferee Statement that assignment, sale or transfer will not affect terms of

the loan HUD model form information about:

• No late fees for sixty (60) days • Rights upon making “qualified written request” • Consumer’s right to damages for violations

Important To ensure the best customer service to the borrower, do not issue the Transferor (Good-Bye) Letter until MSI has purchased the loan. MSI complies with Cranston-Gonzalez requirements for issuing the Transferee (Hello) Letter. The Amortization policy facilitates compliance.

W-9 The W-9, Request for Taxpayer Identification Number and Certification is required for each loan delivered. The W-9 must be completed and signed by the primary borrower on each loan. Primary Borrower is defined by MSI to be the borrower whose name first appears on the Note.





4506-T

MSI requires a 4506-T to be completed and signed/dated at closing by each borrower whose income has been used to qualify the loan. MSI requires a signed 4506-T for each personal and business return used to qualify the Borrower. Each return must be ordered separately on the 4506-T. Notes: Tax Transcripts are required for MSI underwriting. See Underwriting/4506-T for full details.

MSI 4506-T Completion Requirements MSI will require that all 4506-T forms:

• Be prepared on standard letter-sized paper, with legible fonts. • Be typed (printed in typed format from a computer; see the Adobe

information below). • Are fully completed with required information. • Include execution by each applicable party. • MSI requires a signed 4506-T for each personal and business

return used to qualify the Borrower. Each return must be ordered separately on the 4506-T.

• The 4506-T form may not be altered in any way. o For example: if one of the years requested has been typed and

then an additional year is added in handwriting, this is considered altered and will be rejected.

o If the year has been crossed-off and changed or otherwise altered in any way, the form will be rejected.

o Do not cross off any information on the form; that will be considered an alteration and the IRS will reject the form.

o If three years have been typed on the form, and only two years are requested, circle the years requested, do not cross off the unwanted year.





IRS 4506, Continued

Important Notes: There must be a separate tax transcript for each business ownership

of 25% or greater and the personal tax returns. (For example: If the Borrower runs a Schedule C business and a 1065 partnership, we require tax transcripts for the personal 1040 which includes the Schedule C business and the 1065 Partnership. We require in addition to the tax transcripts, two separate 4506-T’s signed at closing and included in the loan package – for QC purposes.)

If the Borrower is self-employed, but the income is not used to qualify; the most recent federal tax return must be provided to determine whether or not there was a business loss.

MSI will require “correction” of any 4506-T’s that do not meet the IRS requirements for submission on/after 5/04/09. Funding will be delayed pending receipt of acceptable 4506-T forms. (Please remember that even if we receive tax transcripts, a completed 4506-T is required for quality control purposes.)

The IRS provides an Adobe version of the 4506-T form (with 2nd page completion instructions) that can be completed on-line (to insure legibility and completion of all applicable fields) and then printed at:

http://www.irs.gov/pub/irs-pdf/f4506t.pdf

USA Patriot Act

MSI requires that the Modified Correspondent originate and close all loans in strict compliance with the USA PATRIOT Act (“USAPA”) of 2001, Section 326 as it regards the Customer Identification Program (CIP). For Mod Corr transactions:

• Applicable documentation to confirm compliance is required in the closed loan Delivery File at time of delivery to MSI.

• A “customer identification form” in full compliance with the USA Patriot Act must be completed and signed by the closing agent.

See Photo ID requirements. OFAC: Part of the Patriot Act is ensuring that the persons opening a

new account (loan) are not listed on the Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons lists. This may be certified by third party vendors, the credit-reporting agency or the Seller.


http://www.irs.gov/pub/irs-pdf/f4506t.pdf




Photo ID

MSI requires that a copy of the photo ID(s) used by the title company

(closing agent) to notarize the Security Instrument be included in each delivery package.

FHA requires a copy of the borrower’s photo(s) ID in each insuring package; MSI requires a copy of that document in each FHA loan.

Septic Certification

MSI requires a septic certification if required by the underwriter, appraiser, or sales agreement.

Termite Certification

MSI requires a termite certification if required by the underwriter, appraiser, or sales agreement.

Well Certification

MSI requires a well certification if required by the underwriter, appraiser, or sales agreement. See specific requirements for USDA Rural Development loans in the

Rural Development Product Suite.

Conditions on the Loan

MSI requires copies of any documentation required by the underwriter to satisfy “closing” (prior to doc funding) conditions on the loan. All Prior-To-Close conditions must be satisfied by the original

underwriting entity prior to actually closing the loan. Evidence of those satisfied conditions must be included in the Delivery File.

Seller Responsibility It is the Seller’s responsibility to ensure that all conditions of the loan approval have been met and approved/accepted by either the closing agent or the underwriter.





High Cost/ Predatory Lending

MSI does not purchase loans that are considered high cost or predatory within the agency, state or municipal statutes. Net Tangible Benefit Any state or municipality that has a “net tangible benefit” provision must include in the Delivery File evidence that the loan results in a tangible benefit to the borrower. Re-Test for High Cost Loans MSI tests each loan for compliance with either Section 32 or the applicable state/municipal high cost (predatory lending) prior to purchase.

Responsible Lending Policy

Additionally, MSI prohibits the purchase of loans where the origination points, non-pass-through fees and yield spread premium combined exceed five points of the original loan amount.

Seller Warranty

The Seller, by sale of the loan to MSI warrants that the loan: Meets MSI’s Responsible Lending Policy, and Is not a high cost/predatory loan in the subject property’s location

Rights of MSI MSI reserves the right to refuse purchase of any loan that, in the opinion of MSI, is a high cost/predatory loan, or a loan that does not meet MSI’s Responsible Lending policy. Additionally, if it is determined at any time after loan purchase that the loan is a high cost or predatory loan, MSI will request repurchase of the loan.



Important Delivery Addresses

Overview The following matrix provides important mailing address information.

Topic MSI Address Property Insurance Mortgagee Clause Mortgage Services III, LLC

ISAOA 502 N. Hershey Road Bloomington, IL 61704

Closed Loan Delivery Address Original Notes under Separate Cover Original Deficient Loan Outstanding Conditions

Mortgage Services III, LLC Attn: Modified Correspondent Funding 502 N. Hershey Road Bloomington, IL 61704

Deficient Loan Outstanding Conditions If the original document is not required, email or fax directly to your Funding Contact.

Payment Remittance Address Use if forwarding the borrower’s payment

to MSI May be used for overnight remittance

Mortgage Services III, LLC 502 N. Hershey Road Bloomington, IL 61704 Loan # ____________ Phone: 309.664.9100

Final Documents Delivery Mortgage Services III, LLC Attn: Final Documents 502 N. Hershey Road Bloomington, IL 61704

Goodbye Letter Information Payment Address

Mortgage Services III, LLC 502 N. Hershey Road Bloomington, IL 61704 Loan # ____________ Toll-free Phone: 888.664.9108

Goodbye Letter Information General Borrower Correspondence

Mortgage Services III, LLC Attn: Customer Service 502 N. Hershey Road Bloomington, IL 61704 Phone: 309.664.9100; Toll Free: 888.664.9108

Payoff Letters Mortgage Services III, LLC 502 N. Hershey Road Bloomington, IL 61704 Phone: 309.664.9100

Mortgage Services III, LLC - Correspondent Seller Guide ...msiloans.biz/Seller...

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