Q4 Conforming Underwriting Guidelines Final 10.14 · Page 6 AIG Investments Conforming Underwriting...

AIG Investments Conforming Underwriting Guidelines (effective October 20, 2020) Page 1

AIG Investments Conforming Underwriting Guides

October 15, 2020

© 2020 AIG Investments. All Rights Reserved.

These AIG Investments Underwriting Guidelines (Exhibit A-1) are dated October 15, 2020. The Underwriting Guidelines may be updated or modified from time to time. AIG Investments believes the information contained in this document relating to state laws and third-party requirements to be accurate and effective as of October 20, 2020. However, this information is provided for informational purposes only and may change at any time without notice. AIG Investments is providing this information without any warranties, express or implied.

MC-2-A987H-1016


Table of Contents

Conforming Underwriting Guide Introduction…………………………………………………………………………………………………………….4 Chapter One: Matrices and General…………………………………………………………………………………………………………………………5

Section 1.01 Matrices ............................................................................................................................................................... 5 Section 1.02 Eligibility .............................................................................................................................................................. 8 Section 1.03 Loan Application Standards ................................................................................................................................ 8 Section 1.04 Citizenship .......................................................................................................................................................... 8 Section 1.05 Electronically Signed Documentation ................................................................................................................. 9 Section 1.06 Escrow/Impound Waiver ..................................................................................................................................... 9 Section 1.07 Condominium and PUD Owner’s Association Obligation ................................................................................... 9 Section 1.08 Hazard and Flood Insurance Requirements ....................................................................................................... 9 Section 1.09 Property Surveys................................................................................................................................................. 9

Chapter Two: The Transaction………………….…………………………………………………………………………………………………………..10 Section 2.01 Refinance Requirements .................................................................................................................................. 10 Section 2.02 Delayed Financing ............................................................................................................................................ 10 Section 2.03 Subordinate Financing ...................................................................................................................................... 10 Section 2.04 New Construction .............................................................................................................................................. 11 Section 2.05 Interested Party Contributions .......................................................................................................................... 11 Section 2.06 Ineligible Transaction Types ............................................................................................................................. 12 Section 2.07 Deed Restrictions (Age Related) ...................................................................................................................... 12 Section 2.08 Auction Transactions ........................................................................................................................................ 13

Chapter Three: The Property………………………………………………………………………………………………………………………………..14 Section 3.01 Ineligible Property Types .................................................................................................................................. 14 Section 3.02 Condominiums .................................................................................................................................................. 14 Section 3.03 Mixed Use Properties ........................................................................................................................................ 14 Section 3.04 Hawaii Properties (Ohanas) .............................................................................................................................. 15 Section 3.05 Planned Unit Developments (PUDs) ................................................................................................................. 15 Section 3.06 Liens Using Tax Assessment or Utility Company to Ensure Payment ............................................................. 15 Section 3.07 Identity of Interest (Non-arm’s length) and At-Interest Transactions ................................................................ 15

Chapter Four: The Appraisal………………………………………………………………………………………………………………………………..17 Section 4.01 General Appraisal Requirements ...................................................................................................................... 17 Section 4.02 Disaster Policy Guidance .................................................................................................................................. 17 Section 4.03 Uniform Collateral Data Portal (UCDP) Documentation ................................................................................... 18 Section 4.04 Collateral Underwriter and Loan Collateral Advisor .......................................................................................... 18

Chapter Five: The Borrower and Title Holder……………………………..………………………………….………………………………………….19 Section 5.01 Loans to Trust ................................................................................................................................................... 19 Section 5.02 Land Trusts ....................................................................................................................................................... 19 Section 5.03 Power of Attorney.............................................................................................................................................. 20

Chapter Six: Income and Employment…………………………………………………………………………………………………………………….21 Section 6.01 Income from Unlawful Activity ........................................................................................................................... 21 Section 6.02 Self-employed Income Not Considered in Qualifying ....................................................................................... 21


Section 6.03 Tax Transcripts ................................................................................................................................................. 21 Section 6.04 Tax Filing Extensions ........................................................................................................................................ 21 Section 6.05 Employment under the Disaster Policy ............................................................................................................. 21 Section 6.06 Income Related to Cryptocurrency ................................................................................................................... 22

Chapter Seven: Credit and Liabilities……………………………………………………………………………………………………………..……….23 Section 7.01 Credit Characteristics ........................................................................................................................................ 23 Section 7.02 Credit Repair and Rapid Re-score .................................................................................................................... 23 Section 7.03 Qualifying with an Existing Home Equity Loan ................................................................................................. 23

Chapter Eight: Assets……………………..………………………………………………………………………………………………………………….24 Section 8.01 Verification of Funds for Closing ....................................................................................................................... 24 Section 8.02 Credit Card Use in the Transaction ................................................................................................................... 24 Section 8.03 Down-Payment Assistance Programs .............................................................................................................. 24 Section 8.04 1031 Tax Deferred Exchanges ......................................................................................................................... 24 Section 8.05 Mortgage Credit Certificates ............................................................................................................................. 25 Section 8.06 Ineligible Assets ................................................................................................................................................ 25

Chapter Nine: AUS Requirements…………………………………………………………………………...……………………………………………..26 Section 9.01 Acceptable DU/DO Findings and LPA Feedback Certificate ............................................................................ 26 Section 9.02 Desktop Underwriter Data and Loan Product Advisor Data ............................................................................. 26 Section 9.03 Desktop Originator Eligibility ............................................................................................................................. 26 Section 9.04 DU Day One Certainty and LPA Asset and Income Modeler (AIM).................................................................. 26 Section 9.05 Uniform Closing Dataset ................................................................................................................................... 27

Chapter Ten: Ability to Repay………………………………………………………………………………………………………..……………………..28


Conforming Underwriting Guide Introduction

The purpose of credit and property underwriting is to ensure that each loan meets the quality standards of AIG Investments. A loan meets AIG Investments’ underwriting quality standards if the borrower’s credit and capacity to make payments and the quality of the collateral are consistent with the mortgage Loan Program under which the Mortgage Loan is sold to Fannie Mae and an Approved Buyer. The likelihood of timely repayment is expected to be commensurate with the credit quality of the Loan Program and the represented value of the subject property is expected to reflect accurately its market value.

These Underwriting Guidelines set forth the underwriting standards that apply to all conforming loan programs that may be eligible for purchase by Approved Buyers. The loan originator must have conducted all origination and underwriting procedures without regard to the borrower’s race, color, religion, national origin, age, sex, marital status, handicap, income derived from a public assistance program, or status in any other class of persons protected under any applicable federal, state, or local law.

Generally, underwriting standards that vary from one Loan Program to another are described in Chapter One, as modified from time to time. In most cases, differences will not be referenced in these Underwriting Guidelines. Requirements set forth in these Underwriting Guidelines are applicable to loans underwritten by Desktop Underwriter® (DU) or Loan Product Advisor (LPA®), unless otherwise specified.

Regardless of underwriting method, additional information may be requested at the discretion of the underwriter.

All references to “agency guidelines” are based on the specific agency guides as they were stated as of the release date of these Conforming Underwriting Guidelines. For topics not specifically addressed in these Conforming Underwriting Guidelines, Sellers should refer to the applicable agency guidelines, determined by the AUS utilized.

These Underwriting Guidelines are a part of the AIG Investments Correspondent Seller’s Guide (Seller’s Guide). All capitalized terms not defined in these Underwriting Guidelines have the respective meanings set forth in the Seller’s Guide.

All new content added to these Underwriting Guidelines for the 2020 fourth quarter, will be reflected in blue. Anything in black is content contained in our current Conforming Underwriting Guidelines.


Chapter One: Matrices and General

Section 1.01 Matrices

Loan Amounts Up to $510,400 High Balance and Super Conforming $510,401–$765,600 (as designated by FHFA)

Product Description

Conventional Conforming Fixed-Rate

15, 20 & 30 year amortization terms

Fully amortizing

Conventional High Balance/Super Conforming Fixed-Rate

15, 20 & 30 year amortization terms Fully amortizing

Product Codes

15-year Fixed (FX15) 20-year Fixed (FX20) 30-year Fixed (FX30)

15-yr High Balance/Super Conforming Fixed (HFX15) 20-yr High Balance/Super Conforming Fixed (HFX20) 30-yr High Balance/Super Conforming Fixed (HFX30)

Loan Product Criteria

Eligible Occupancy types: Primary Residence, Second Homes, and Investment Properties. Eligible Transaction Types: Purchase, Rate and Term Refinance and Cash-Out Refinance. All loans must include an DU Approve/Eligible Finding or LPA Accept/Eligible feedback certificate. *Maximum DTI and LTV/CLTV/HCLTV must be in accordance with the DU Approve/Eligible or LPA Accept/Eligible and

may never exceed 95% LTV/CLTV/HCLTV. Conforming loan amounts must never exceed $510,400, regardless of property type, location of property, and number

of units for the property. Conforming High Balance and Super Conforming (High Cost areas) loan amounts must never exceed the maximum

allowable loan limit stated on the AUS findings, and may never exceed $765,600 regardless of property type, location of property, and number of units for the property.

*Loans with an LTV/ CLTV/HCLTV in excess of 95.00% are considered ineligible for an Approved Buyer.

AIG Correspondent Lending Additional Loan Criteria

Secondary Financing

Purchase and Refinance transactions with simultaneous secondary financing are eligible provided the loan meets the maximum CLTV/HCLTV requirements as outlined above.

Existing subordinate financing may be eligible, provided such financing is re-subordinated to the first lien of the Mortgage Loan and all other AIG and Agency Guidelines related to subordination are met.

Whether new subordinate financing or existing, the CLTV/HCLTV may never exceed the lesser of 95% or the guideline limits permitted by the applicable Agency with respect to the property and transaction type. HCLTV is the combination of all liens which are secured by the subject property, whether drawn or not, compared to the lesser of the sales price or appraised value.

Escrow Waivers

Escrow waivers are not permitted for loans with an LTV over 80%, unless the subject property is located in the state of California, with an LTV of 80.01–89.99%.

New Mexico loans with an LTV of 80% or greater are ineligible for escrow waivers. Partial escrow waivers are permitted provided the loan meets escrow waiver eligibility

requirements. Escrow waivers are not eligible for MI policy premiums and fees for flood insurance as

mandated by the Flood Disaster Protection Act of 1973, as amended. Identity Verification Each borrower on the loan application must have a valid Social Security number.


Ineligible Geographic Locations US Territories (Puerto Rico, Guam, US Virgin Islands), and Hawaii Lava zones 1 & 2.

Additional Underwriting Requirements

Taxpayer Consent Disclosures for each borrower must be provided in the closed loan package. The disclosure must provide express purpose and permission and should be signed at the time of application. If the borrower is a business owner; each individual business must be addressed.

QM Rebuttable Presumption are ineligible for purchase. Loans must be deemed QM Safe Harbor to be eligible for purchase.

Form 4506-T: Must be signed and processed prior to closing and a new form signed at closing for each borrower and business included in the loan review, regardless of Day One Certainty requirements.

o Additional complete and signed IRS Form 4506-T for each business is required when business tax returns are used in the loan decision.

o Additional complete and signed IRS Form 4506-T is required when the borrower has filed an extension for personal tax returns.

Tax Transcripts are required in all files; however, we will accept files without tax transcripts for any of the below scenarios:

o A loan receives full income validation through Desktop Underwriter (DU) Validation Service or Loan Product Advisor (LPA) asset and income modeler (AIM).

o A loan does not receive full income validation through DU Validation Service or LPA Asset and Income Modeler (AIM), the following apply:

All income information used to decision the loan is made up exclusively of wage earner income, is reported on a W-2, and the AUS does not require income documentation other than a paystub and W2, or;

If the file consists of fixed income, such as social security or VA benefits reported on a 1099 and the AUS does not require income documentation other than evidence of the monthly receipt and 1099.

If a file does not meet the above criteria the Seller must include the most recent year’s 1040 IRS tax transcript and business tax transcripts (if applicable) corresponding to the tax returns in the closed loan file. Transcripts must be provided when the file contains secondary income which is documented on the tax returns.

Transcripts must be obtained by the Seller directly from the IRS or Transcript Vendor. All Loan Estimates and Closing Disclosures provided to the borrower must be

included in the closed loan package. If the seller includes any Draft Documents, (documents that were not provided to the borrower), each document must be stamped with the word DRAFT. If the seller does not stamp the document, a signed attestation from a Vice President or higher, is required to document the specific disclosure is a draft only and was not provided to the borrower.

Points and Fees: A maximum of 5%, as applicable based on loan amount specified by QM guidelines, may be charged for points and fees. Fees include origination fees, underwriting fees, broker fees, finder fees, and charges that the lender imposes as a condition of making the loan, whether they are paid to the lender or a third party.

Bona Fide Discount Points: All files must contain a Discount Point Fee Disclosure document when Discount Points must be excluded to qualify as a QM.

Builder Affiliation: If an affiliation exists due to common ownership or control by a Seller over an interested party, or when there is common ownership by a third party over a Seller and interested party; then all sales and financing concessions from these parties are considered in the total allowable interested party contributions.

QM Documentation must be provided in the closed loan package to confirm Compliance, including evidence of compliance with TILA and Regulation Z.


Manually Underwritten Loans are ineligible for purchase by an Approved Buyer. Income Calculation Worksheet must be included in each file, labeled accordingly and

include the following information: o List of all monthly income types for each borrower and how the monthly

income was determined (formula calculation) for each type of income o Total qualifying income for each borrower (this would be the total of all income

types used to qualify) o Primary residence principal, interest, taxes, and insurance (PITI) with

complete breakdown of monthly PI, subordinate financing, taxes, insurance, HOA, flood insurance, mortgage insurance, etc.

o Front and back-end DTI ratios o Total of monthly debt from the final AUS, credit report, or Form 1003/65

(excluding the primary PITI) o List of any additional debts (include monthly payment) not listed on the credit

report o Explanation for any debts not included in the DTI.

Subject investment properties and 2-4-unit primary residence; must include documented gross monthly rent (per applicable Agency guidelines) for loan delivery purposes, regardless of whether the rental income is being used to qualify.

Mortgage Insurance Requirements

Standard Agency MI coverage requirements apply, unless otherwise specified below: Ineligible PMI Premium Plans

Reduced MI coverage is ineligible. Financed MI and Lender-paid monthly or annual options are ineligible. Custom MI and lower cost MI options are ineligible.

Eligible MI Companies Arch Mortgage Insurance Company Essent Guaranty, Inc. Genworth Mortgage Insurance Corporation Mortgage Guaranty Insurance Company (MGIC) National Mortgage Insurance Corporation Radian Guaranty, Inc.

Documentation Requirements: Single Premium (Up front):

“Single-Premium MI” must be written in the comment section of the 1008. Proof of payment of the full premium is required via any one of the following:

o Closing Disclosure showing premium paid at Closing. o Paid receipt if paid outside of Closing. o MI certificate indicating the premium is paid in full.

Split Premium: “Split-Premium MI” must be written in the comment section of the 1008. Proof of payment of the full premium is required via any one of the following:

o Closing Disclosure showing premium paid at Closing. o Paid receipt if paid outside of Closing. o MI certificate indicating the premium is paid in full.

New York State Irrespective of the use of appraised value or sales price for determining whether mortgage insurance is required, the standard LTV ratio calculation must be used to determine the level of mortgage insurance coverage that is required on the mortgage loan


Section 1.02 Eligibility

Approved Buyers will not purchase mortgage loans if any company or individual who is a material party to the mortgage loan transaction is listed on the Participant Validation list as provided by AIG Investment’s various investors, Department of Housing and Urban Development (HUD) Limited Denial of Participation List, Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons List, the Freddie Mac Exclusionary List (if the Seller is a Freddie Mac approved Seller/Servicer with access to such list), or the General Services Administration (GSA) Excluded Party List System. All lists must be checked for all parties to the transaction. If any party’s name appears on any list, the mortgage loan is not eligible for purchase by an Approved Buyer.

Section 1.03 Loan Application Standards

The Fannie Mae Uniform Residential Loan Application and Fannie Mae Form 1008 must be used, and the loan application must be complete, including without limitation:

Files must include a full two-year history of employment/income, residency and all personal information for each borrower. If a borrower’s employment history includes unemployment or insurance benefits, the application must reflect at least two years of previous employment, therefore covering a longer period of time. Income may not be used in calculating the borrower’s debt-to-income ratio if it comes from any source that cannot be verified, is not stable, or will not continue.

The Declarations Section must be answered for each borrower. The method of taking the application including face-to-face, by telephone, by fax or mail, by email or the internet. The borrower’s demographic information must be completed. The Loan Originator’s information, including name, telephone, and NMLS number must be completed. The initial application must be signed and dated by all Borrowers and the Loan Originator.

All loan applications must be reviewed by the Seller for reasonableness as part of the underwriting process, including without limitation:

The feasibility of occupancy claims, and the overall financial picture of the borrowers must be reasonable. Where conflicting information exists between or within documents, an adequate explanation must be provided, documented and

included in the mortgage loan file. All documents in the mortgage loan origination file that are relevant to underwriting must be reviewed by the Seller for signs of

alteration or fabrication.

The final application must be signed and dated by all borrowers and comply with the requirements set forth above, including without limitation:

The borrower’s complete and accurate financial information relied upon by the underwriter. All debt incurred during the application process and through loan closing must be disclosed on the final application. A borrower’s credit profile may be established by submitting the loan to Desktop Underwriter.

Section 1.04 Citizenship

A. All borrowers must have a valid Social Security number. B. Diplomatic Immunity- Borrowers with diplomatic immunity are ineligible for sale to an Approved Buyer. C. Foreign Nationals- Borrowers who have no lawful residency status in the U.S. are not considered non-permanent resident aliens

and are ineligible for sale to an Approved Buyer. D. Non-permanent Resident Aliens- Loans to borrowers with non-permanent residency status are ineligible for purchase by an

Approved Buyer. E. Permanent Resident Aliens- A copy of the front and back of the green card is required for all permanent resident aliens and must

be included in the Loan file.

Note: All standards for determining stable monthly income, adequate credit history and sufficient liquid assets must be applied in the same manner to each borrower.


Section 1.05 Electronically Signed Documentation

Seller must be able to represent, warrant, and demonstrate that Seller’s E-SIGN Technology fully complies with the E-SIGN Act, Uniform Electronic Transactions Act (UETA), and other applicable state electronic transactions law, as well as all other applicable laws. The following documents are ineligible for electronic signature:

Note Security instrument Notarized documents Notice of Right to Cancel

Section 1.06 Escrow/Impound Waiver

Escrow waivers are not permitted for loans with an LTV over 80%, unless the subject property is located in the state of California, with an LTV of 80.01–89.99%.

New Mexico loans with an LTV of 80% or greater are ineligible for escrow waivers. Partial escrow waivers are permitted provided the loan meets escrow waiver eligibility requirements. Escrow waivers are not eligible for MI policy premiums and fees for flood insurance as mandated by the Flood Disaster Protection

Act of 1973, as amended. Property taxes assessed on a new construction property must be based on the estimated tax figure for the fully completed property.

The estimated figure should be used for both the qualifying PITIA as well as the amount collected for escrowed taxes (if applicable). It is no longer acceptable to escrow taxes based on partially completed property tax amounts.

Section 1.07 Condominium and PUD Owner’s Association Obligation

If the subject property is part of a Condominium or PUD Association that results in a financial obligation on the part of the borrower; the file must meet the applicable Agency requirements for documentation, and the borrower must be qualified with the applicable monthly fee.

Section 1.08 Hazard and Flood Insurance Requirements

The Seller should follow the applicable Agency guidelines and applicable AIG Investment guideline requirements as they relate to Hazard and Flood Insurance requirements.

Documentation should be in the form of a declaration page or policy. Binders are not considered acceptable evidence of insurance. Maximum allowable deductible securing a first mortgage loan is 5% of the face value of the policy. Such flood insurance policy for each Mortgage Loan is in an amount representing coverage not less than the least of (A) the

outstanding principal balance of the Mortgage Loan (plus any additional amount required to prevent the Mortgagor from being deemed a co-insurer), (B) the full insurable value of the related Mortgaged Property, and (C) the maximum amount of insurance which was available under the Flood Disaster Protection Act of 1973, as amended.

Hazard Insurance policies from insurance carriers rated by Kroll Bond Rating Agency are ineligible for meeting rating category requirements. Additional requirements for homeowner’s insurance carriers must meet the below minimum standards:

o A.M. Best Company Inc. B+ o Demotech, Inc. A o Standard & Poor’s Financial Services LLC. B o Kroll Bond Rating Agency Not Eligible

Section 1.09 Property Surveys

If the title company requires a new survey in order to delete the exception, then the Seller will be required to obtain a new survey.


Chapter Two: The Transaction

Section 2.01 Refinance Requirements

Rate and Term Refinance

a. Pay off of the current mortgage (principal balance plus accrued interest, and any required prepayment penalty, only; other costs such as late fees and past due amounts may not be paid with the new loan).

b. Pay off or pay down of any subordinate mortgage lien (principal balance plus accrued interest, and any required prepayment penalty). that was used in its entirety to acquire the subject property - regardless of seasoning. Other costs such as late fees and past due amounts may not be paid with the new loan. Any remaining liens not related to acquiring the property must be re-subordinated to the new loan, and must meet LTV/CLTV/HCLTV requirements

c. A copy of the final Closing Disclosure from the borrower’s purchase of the subject property must be provided evidencing that any subordinate financing was used in its entirety to acquire the subject property.

d. Standard loan fees (e.g., Closing costs on the new mortgage; prepaids, such as interest, taxes, insurance, etc. and points). e. Incidental cash to the borrower must meet the credit requirements for the applicable Agency used in the credit decision.

Section 2.02 Delayed Financing

Properties purchased with cash and owned less than six months must meet the credit requirements for the applicable Agency used in the credit decision.

a. If the appraised value has increased more than 10% the underwriter must consider the reason for the increase and may reduce the Loan amount or take other action to ensure that the value is supported.

b. To reduce property fraud risk from inflated appraisals, loan amounts exceeding 80% of the purchase price of the transaction being refinanced are ineligible for purchase by an approved seller.

Section 2.03 Subordinate Financing

Subordinate financing is permitted unless otherwise specified in these underwriting guides.

A. Terms: For transactions including subordinate financing, the following requirements apply for both HELOC and Closed-End loans: a. The subordinate financing must be recorded and clearly subordinate to AIG’s first mortgage. b. If there is/will be an outstanding balance at the time of Closing, the payment on the subordinate financing must be included in

the calculation of the borrower's debt-to-income ratio(s). c. Negative amortization is not allowed; scheduled payments must be sufficient to cover at least the interest due. d. Equity share or shared appreciation is not allowed. e. Subordinate financing from the borrower's employer may not include a provision requiring repayment upon termination. f. Subordinate financing from the property seller (seller carry-back, including any property seller or other private party carried

financing) Allowed only after the borrower has made a 5% minimum down payment / cash investment. Maximum CLTV/HCLTV is the lesser of 95% or the published CLTV/HCLTV limits for the product/program. Must be considered in the interested party contribution limits. Should be at market rate. If the interest rate is more than 2% below Fannie Mae’s or Freddie Mac’s posted net

yield in effect for second mortgages at time of Closing it must be treated as a sales concession and a dollar-for-dollar reduction made to the sales price.

g. The CLTV ratio is calculated by adding the disbursed (or to be disbursed at Closing) amount of the HELOC to the first mortgage amount, plus any other subordinate financing, and dividing that sum by the current appraised value or the purchase price, whichever is less.

h. Texas refinance transactions which include the re-subordination of a 50(a)(6) second lien, may not exceed the lessor of the maximum product LTV/CLTV/HCLTV or 80% LTV/CLTV/HCLTV.


i. The HCLTV ratio is calculated by adding the HELOC credit line limit (rather than the amount of the HELOC in use) to the first mortgage amount, plus any other subordinate financing, and dividing that sum by the current appraised value or the purchase price, whichever is less.

B. For new and existing Closed-End subordinate financing the following also apply: a. Maturity date or amortization basis of the junior lien must not be less than five years after the date printed on the Note of

the first lien Mortgage, unless the junior lien is fully amortizing. b. The loan cannot have a balloon or call option within five years of the date printed on the Note.

Note: The terms of a HELOC may allow a balloon or call option within the first five years of the first Mortgage Note date.

C. Documentation requirements: The terms of any subordinate financing must be verified. Any one or a combination of the following sources of verification is acceptable:

Existing subordinate loans (loans that will be re-subordinated). A copy of the credit report A copy of the Mortgage Note A direct verification from the lender A copy of the loan statement A copy of the re-subordination agreement.

D. Home Equity Lines of Credit (HELOCs): If an existing HELOC is reduced without modifying the original Note, the original line limit must be used to calculate the High Combined-Loan-to-Value (HCLTV) ratio.

E. New subordinate loans obtained prior to or at Closing: A copy of the Mortgage Note A direct verification from the lender A copy of the commitment letter from the lender A copy of the final Closing Disclosure evidencing proceeds

Section 2.04 New Construction

Construction-to-permanent financing (two close) involves the granting of a long-term loan to a borrower to replace interim financing (Approved Buyers do not participate in the interim financing) used for the construction of a new home. To be considered a construction-to-permanent financing transaction, one of the following must be met:

The borrower is the primary obligor on the construction financing which is obtained through a legitimate financial institution The borrower is the owner of the lot on which the residence is constructed

AIG considers long-term financing to make a single disbursement to a builder/contractor or other party for the purchase of a completed property to be a purchase transaction and subject to guidelines for purchase transactions. Section 2.05 Interested Party Contributions

All fees, disbursements, and charges associated with the purchase transaction must be fully disclosed in the purchase agreement and available to the appraiser for consideration in the determination of the property’s market value.


Section 2.06 Ineligible Transaction Types

a. Adjustable Rate Mortgages. b. Assignment of Sales Contract transactions. c. Balloon Mortgages. d. Cash-out transactions for the purpose of investing in any type of crypto-currency. e. DU Refi Plus. LPA Caution or 500 Freddie Mac eligible A-minus offering. f. Fannie Mae Homepath, HomeStyle, and Home Ready Mortgage Loan Programs. (Including, but not limited to EEM Loans,

Renovation Mortgages, Home Opportunities Mortgages and Rehabilitation Mortgages), Lease-purchase, Community Land Trust, and High LTV Refinance Options and HFA programs.

g. Flip transactions. h. Freddie Mac Home Possible Loans, Affordable Merit Rate Mortgage, Enhanced Relief Refinance Mortgage, Streamline Refinance

Mortgages, Special Purpose Cash-out refinances, HFA mortgage programs, CHOICERenovation, GreenCHOICE mortgages and Community Land Trust.

i. Government backed loans (FHA/VA/USDA). j. HUD-184 and RD 502 Mortgages. k. Interest-only loans. l. Leasehold estates which do not ensure Fannie Mae or an Approved Buyer’s first lien enforceability. m. Life estates. n. Loans aged more than 30 days from closing. o. Loans closing in a Living/Inter Vivos Revocable Trust. p. Loans using assets as a basis for qualification. q. Loans with borrowers whose income is derived from the sale of marijuana. r. Loans with more than four borrowers. s. Loans with temporary Buydowns or Assumptions. t. Negotiated Loan Credit Variances or Pilot Programs. u. PACE loans. v. Payment abatements. w. Properties in the state of Massachusetts with septic systems requiring repair and escrow holdback funds. x. Properties with resale deed restrictions other than those restrictions related to age (see Section below). y. Purchase transactions with re-negotiated purchase prices after appraisal completion. z. QM Rebuttable Presumption loans. aa. Short Refinance Loans or Refinance of a Restructured Loan. bb. Single close construction loans. cc. Streamlined Purchase Money Mortgages. dd. Texas Section 50(a)(6), Texas Section 50(a)(3) and Texas Section 50(f)(2) loans.

Section 2.07 Deed Restrictions (Age Related)

Deed restrictions related to age are eligible for Conventional Conforming loans when the property is a primary residence or second home and for Conventional Conforming High Balance and Super Conforming loans when the property is a primary residence.

If a housing development is subject to age restriction, it must comply with one of the following Fair Housing Act exemptions: Age restrictions – 62 years of age or older – The prohibitions against discrimination on the basis of age or familial status do not

apply with respect to dwellings intended for, and solely occupied, by persons 62 years of age or older.


Age restrictions – 55 years of age or older – The prohibitions against discrimination on the basis of age or familial status do not apply with respect to dwellings intended and operated for occupancy by persons 55 years of age or older provided that all of the following apply:

At least 80% of the occupied units are occupied by persons 55 years of age or older. The housing facility or community publishes and adheres to policies and procedures that demonstrate the intent to

provide housing to persons 55 years of age or older. The housing facility or community can provide documentation for verification of occupancy, by means of:

o Reliable surveys and affidavits and o Examples of published written policies and procedures for determination of compliance with the Act.

Documentation requirements for a Housing Development with age-restriction The homeowners’ association (HOA) must provide/confirm the following information in a signed affidavit: State that, upon request, the development/association will provide the necessary documentation to support compliance with the Fair

Housing Act. Certify that the development complies with one of the following Fair Housing Act exemptions:

o Age restrictions – 62 years of age or older: The development is intended for, and solely occupied by, persons 62 years of age or older.

o Age restrictions – 55 years of age or older: At least 80% of the occupied units are occupied by persons 55 years of age or older,

The housing facility or community can provide documentation for verification of occupancy by means of: Reliable surveys and affidavits and

o Examples of published written policies and procedures for determination of compliance with the Act. o By providing this information, the HOA certifies that the housing development is in compliance with the Fair Housing

Act. This certification must be included in the closed loan package.

Section 2.08 Auction Transactions

A. The following criteria must be met when a property is being purchased through an auction transaction. The auction terms must be included as part of the sales contract provided to the appraiser for review. When the auction buyer’s premium combined with other sales and marketing charges or fees exceed 12% of the total

purchase price, the excess amount over 12% must be deducted from the purchase price. If expenses for repairs will be reflected on the seller’s Closing Disclosure, the repairs must be fully documented including but

not limited to contracts, supporting work orders, or other acceptable documentation in order to be excluded from the 12% cap. If documentation is not obtained, the fees must be included in the 12% cap.

B. Determining purchase price and maximum LTV/HCLTV Only the auction buyer’s premium may be added to the accepted bid to determine total purchase price. Maximum LTV/HCLTV is calculated from the lesser of the accepted bid plus the auction buyer’s premium, or the appraised

value.


Chapter Three: The Property

Section 3.01 Ineligible Property Types

AIG Investments does not permit Mortgage Loans secured by a property type or a property located in a project identified by Fannie Mae or Freddie Mac as Ineligible, or within any of the following project types or units containing any of the following additional property characteristics:

a. Condominiums with no master insurance policy. b. Group Homes. c. Manufactured, Mobile, and Modular Homes. d. Non-warrantable Condominium. e. Properties considered commercial. f. Co-operatives. g. Properties held in the name of an LLC or Partnership h. Second homes with seasonal limitations on year-round occupancy i. Properties included in a rental pool.

Section 3.02 Condominiums

Condominium project reviews must meet all applicable AUS and Agency requirements. The following is a list of condominium project reviews eligible for delivery to an Approved Buyer.

Fannie Mae Limited Review and Freddie Mac Streamline Review. Fannie Mae Condo Project Manager (CPM). Standard Agency Full Project Review. Final Condo Project Acceptance through Fannie Mae Project Eligibility Review Service (PERS). New and existing PERS condo

project approvals are acceptable. Refer to the Fannie Mae website for details. Fannie Mae Special Approval Designation for established Florida condos. Refer to the Fannie Mae website for details. Loans using single mortgage exceptions from Freddie Mac Condo Project Advisor are not eligible for purchase by an Approved

Buyer.

Section 3.03 Mixed Use Properties

Mixed use properties are eligible for purchase if the nature, intent, and primary purpose of the property is residential in use. The following should be considered in making this determination:

The commercial/agricultural use must be allowed by zoning and the subject must conform to zoning. In general, the commercial use should not exceed 20% of total gross living area of the property. Agricultural usage should generally not exceed 20% of the total acreage. The borrower must be both the owner and operator of the business. Income generated on property used for agricultural purposes should be minimal. Commercial use should not result in significant alteration to the property or one which could not be easily converted back to

residential. The commercial use should generate a minimal amount of traffic noise. The subject must be a single-family owner-occupied dwelling. The room layout must be reasonable for a residential home. The property must be appraised as residential real estate, with commercial/agricultural value not included in the appraiser’s market

value. The appraiser must comment on any affect the commercial/agricultural use has on marketability and compatibility with the subject’s

neighborhood.


Section 3.04 Hawaii Properties (Ohanas)

Many homes in Hawaii are constructed with accessory units, known locally as Ohanas. In addition to the guidelines for accessory units the following will also apply:

The value attributed to the Ohana will be included in the total property valuation. The Ohana can be attached or detached from the main dwelling. Improvements must be typical for the subject neighborhood.

Section 3.05 Planned Unit Developments (PUDs)

The appraisal report may not indicate marketability problems or concerns. Multi-dwelling unit PUD projects that permit an owner to hold title to more than one dwelling unit, with ownership of all his/her units

evidenced by a single deed and mortgage are ineligible. A blanket or pooled insurance policy is ineligible for purchase by an Approved Buyer.

Section 3.06 Liens Using Tax Assessment or Utility Company to Ensure Payment

Loans secured by property subject to any new or subordinated obligation that utilizes the municipal tax assessment process or a utility company to ensure payment, including, but not limited to, Property Assessed Clean Energy (PACE) obligations, are ineligible for purchase.

Section 3.07 Identity of Interest (Non-arm’s length) and At-Interest Transactions

Identity-of-interest transactions include both non-arm’s length and at-interest transactions. At-interest transactions involve persons who are not closely tied or related but may have a greater vested interest in the transaction, such as a party who plays more than one role in the same transaction (selling/listing agent and mortgage broker, for example). All non-arm’s length transactions are considered at-interest transactions; however, at-interest transactions are not always non-arm’s length.

A. Identity of Interest a. The following are eligible identity-of-interest transactions:

Family Sales –Transaction cannot appear to be bail-out. Employer/Employee Sales Gifts of equity-Gifts of equity are acceptable, as long as the amount of equity has been verified. The donor must provide

a gift letter. Equity gifts are only allowed after the required minimum down payment has been made from the borrower’s own funds.

b. Identity-of-interest transactions may be considered subject to the following additional requirements: Second home and investment properties must be one-unit, single family residences. For newly constructed properties, the Loan is ineligible if the:

o Property is a second home or investment property, and o The borrower has a relationship or business affiliation (any ownership interest, or employment) with the

builder, developer, or seller of the property. Verification that the borrower is not now, nor has been in the previous 24 months, in title to the property. If there is a relationship between the borrower and seller, the borrower must provide a written explanation stating the

relationship to the seller and the reason for purchase. A field review (Fannie Mae Form 2000/2000A or Freddie Mac Form 1032/1072) or second appraisal is required when any

of the following apply: The Uniform Collateral Data Portal Submission Summary Report indicates:

o Collateral Underwriter (CU) score greater than 4. o Unscored appraisal (CU score of 999) o Risk flag of overvaluation, eligibility, or quality (regardless of score)

Collateral or valuation risk is present as identified by the underwriter.


B. At-interest Transactions

a. The following are eligible at-interest transactions: Builder also acting as realtor/broker Realtor/broker selling his/her own property Realtor/Broker acting as listing/selling agent and Mortgage Broker.

b. Additional Risks and Red Flags to Watch For:

Absence of equity or down payment Purchase price may not represent actual consideration given Financial bailouts or attempts to hide poor credit Occupancy concerns Financing of unsold builder inventory, especially in soft real estate markets Inflated appraised value


Chapter Four: The Appraisal

Section 4.01 General Appraisal Requirements

Appraisals may not be transferred from another lender, regardless of written assurances. Interior photos must be provided in the appraisal report. Interior photos are not required when exterior inspection report Fannie Mae

Form 1075 and Fannie Mae/Freddie Mac Form 2055 are permitted and used. All appraisals in the file must contain the appraiser’s license. Sellers must ensure all applicable appraisals have been completed in compliance with the UAD specifications. Subject investment properties and 2-4-unit primary residence; must include documented gross monthly rent (per applicable Agency

guidelines) for loan delivery purposes, regardless of whether the rental income is being used to qualify. Section 4.02 Disaster Policy Guidance

A. Properties subject to a disaster policy typically fall under two categories: a. Disaster declarations allowing individual assistance issued by the Federal Emergency Management Agency (FEMA). b. The Seller has reason to believe that a property may have been damaged in a disaster (even if FEMA has not issued a

disaster declaration / notification). B. Affected area

a. AIG may redefine the areas of a disaster based on information from FEMA Declarations, market knowledge, and other sources.

C. Duration of disaster policy a. AIG disaster policy applies for 90 days following FEMA’s declaration. AIG or FEMA may extend or retract disaster

declarations. D. Assessment of property/inspection requirements

a. For appraisals with effective dates prior to the disaster, or for properties with Appraisal Waivers obtained prior to the

disaster, the following documentation requirements should be followed: If the inspection notes the property is uninhabitable, unsound, or the condition of the property has been

materially affected by the disaster and the repairs are not covered by insurance: o The repairs must be completed, and a new full appraisal obtained.

If the inspection notes the property is habitable, sound, and not been materially affected by the disaster: o Repair items do not need to be completed when the repair items are covered by insurance. Professional

estimates of the repair cost must be obtained. o The original valuation obtained can be used.

b. The following property inspection formats are acceptable: Final inspection or appraisal update of the property signed by the original appraiser, or substitute appraiser if the

original appraiser is not available Fannie Mae Desktop Underwriter Property Inspection Report (Form 2075). Freddie Mac Exterior-Only Inspection Individual Report (Form 2055).

c. For valuations developed after the disaster, the following products are not acceptable: Automated Valuation Model (AVM choice). Fannie Mae Appraisal Waiver/Freddie Mac Alternative Collateral Evaluation. Form 2075/Form 2055. Fannie Mae Exterior-Only Inspection Residential Appraisal Report (Form 2055). Fannie Mae Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Form 1075).

E. Employment Impacted by Disaster

In the event of widespread property destruction, a reverification of the borrower’s employment will be required.


F. Age of documents Mortgages secured by properties located in a designated disaster area, AIG will allow documents up to 180 days in age if documentation is provided evidencing the prior mortgage was current at the time of closing.

Section 4.03 Uniform Collateral Data Portal (UCDP) Documentation

For Loans requiring an appraisal report:

Sellers or their designated agents are required to submit appraisal data files (based on the final version of the appraisal) to both Fannie Mae and Freddie Mac prior to Loan purchase by an Approved Buyer. When a successful submission is received by only one Agency, then follow the guidance below:

When using DU a successful UCDP document file status is required from Fannie Mae.

When using LPA, a successful UCDP document file status is required from Freddie Mac.

The closed loan package must include the final UCDP Submission Summary Report (SSR) from each agency regardless of the final Document File Status.

Section 4.04 Collateral Underwriter and Loan Collateral Advisor

FNMA’s Collateral Underwriter ™ (CU™) and Freddie Mac’s Loan Collateral Advisor (LCA) provides an automated risk and quality assessment of the appraisal report. Dependent upon the AUS utilized, CU or LCA results must be included in each file to be considered for purchase by AIG unless said property type is not eligible for entry into UCDP. Additionally, Sellers must review each appraisal in detail for completeness, accuracy, and assessment of the current fair market value and are responsible to ensure the property meets all Fannie Mae or Freddie Mac eligibility requirements.

Collateral Underwriter or Loan Collateral Advisor scores must be 4.0 or lower to be considered acceptable for purchase by an Approved Buyer. Scores greater than 4 will require an acceptable secondary valuation, in the form of either a Desk Review or a Field Review that supports the appraised value.

o The following Desk Review products are acceptable to satisfy this requirement: Clear Capital © Collateral Desktop Analysis (CDA®). Summit Valuations © (SVR). Pro Teck Valuation Services © Appraisal Risk Review (ARR).

All appraisals must be performed in strict accordance with and comply with all applicable local, state, and federal laws, regulations, and orders and must conform to the current Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation.

Seller is responsible for verifying the description of the subject property as well as the accuracy and completeness of all data on the appraisal related to the subject property and project (if applicable), to include quality and condition ratings.


Chapter Five: The Borrower and Title Holder

Section 5.01 Loans to Trust

Loans closing in a Living/Inter Vivos Trust are ineligible for purchase by an Approved Buyer.

Section 5.02 Land Trusts

A. Approved Buyers will purchase Loans on properties held in land trusts in Illinois only and subject to the following:

All beneficiaries are individuals. The loan applicants are one of the beneficiaries of the trust. The trustee is a corporation or financial institution customarily engaged in the business of acting as trustee under Illinois

Land Trusts. The beneficiaries have sole power of direction over the land trust and trustee. All beneficiaries are obligated as individuals under the terms of the Note. The loan applicants are qualified borrowers under the requirements of the product. All such land trust Loans are secured by one- to four-unit properties occupied as primary residences, second homes, or

investments. The term of the trust agreement is at least as long as the term of the Security Instrument. The subject property is the only asset of the Illinois Land Trust.

B. Documentation requirements When the property is held in a land trust in the state of Illinois, all of the following documentation must be provided: Land trust rider to the Security Instrument Land trust rider to the Note Documentation evidencing the beneficiaries of the land trust hold the power of direction as provided in the trust documents

and have authorized and directed the trustee of the trust to execute the loan documents. If the trust documents require more than one beneficiary to hold the power of direction to authorize and direct the trustee, then the documentation must evidence that the requisite number of beneficiaries have directed the trustee

Certified copy of the collateral assignment of beneficiary interest, or similar form granting the lender a security interest in the beneficiary’s rights

No additions, deletions, or other riders to the standard forms are permitted. The trust agreement must indicate that no other assets are held by the land trust.

C. The Note, Security Instrument, and documents required above must be completed and executed as follows: The Note and Security Instrument must include the number of the trust and the date on which the trust was created. The beneficiaries must execute the Note and land trust rider to that Note. The trustee must execute the Security Instrument, the Note, and the land trust rider to each. The beneficiaries must assign his/her beneficial interest in the Note and trust agreement to the Seller. The trustee must agree to and/or endorse the collateral assignment of beneficiary interest. The riders must be dated and executed the same day as the Security Instrument and Note.


Section 5.03 Power of Attorney

When a borrower is using a power of attorney (POA), the following requirements apply:

The initial loan application and intervening documents must be signed by the borrower, unless one of the following scenarios exist, which permit the initial loan application to be signed using POA: o The borrower is in the military and deployed (POA must comply with Veterans Affairs requirements) o A relative or lawyer was granted attorney in fact prior to the borrower becoming incapacitated Note: In these instances, the POA may sign intervening documentation between the initial loan application and closing documents as long as the POA signed the initial loan application.

The final loan application may be signed via POA in the presence of a notary public. Parties who are connected to the transaction (at-interest) may not exercise POA on the borrower’s behalf. At-interest parties

include: o Realtors o Settlement agents o Lender, affiliates of the lender, or employees of the lender o Loan originator, employer, or employee of the loan originator

POA must be transaction-specific except when the POA is due to military duty or when the POA was drafted prior to the borrower becoming incapacitated.

A POA may not be used for cash-out refinances. Powers of Attorney must be recorded with the Mortgage or Security Instrument per State requirements.


Chapter Six: Income and Employment

Section 6.01 Income from Unlawful Activity

All sources of income must be legal in accordance with all applicable federal, state, and local laws, rules and regulations, without conflict. Indication of income obtained from illegal sources makes the transaction ineligible for purchase.

Section 6.02 Self-employed Income Not Considered in Qualifying

If the borrower is self-employed and the self-employment income is not used for qualification purposes, the Seller must obtain pages 1 and 2 of the borrower’s federal individual income tax returns, and the applicable schedules (e.g., Schedule C, Schedule E), to determine if there is a business loss that may have an impact on the stable monthly income.

If a business loss is reported and the borrower qualifies with the loss, then the Seller is not required to obtain any additional documentation relating to the business loss.

If a business loss is reported and the borrower does not qualify with the loss, then the Seller must perform a business and income analysis to determine whether depreciation adjustments or other factors such as business closure or evidence of a one-time nonrecurring event justify a reduction of the reported loss when calculating the stable monthly income. The Seller must obtain additional documentation needed in order to fully evaluate the loss and support the analysis (e.g., business tax returns, final or otherwise, evidence of a one-time nonrecurring event).

If the tax returns or other documentation in the Mortgage file (e.g., IRS tax transcripts, additional Schedule K-1’s) reflect positive income from self-employment but that income is not used to qualify, additional documentation (e.g., complete business or federal individual income tax returns) is not required.

Section 6.03 Tax Transcripts Tax Transcripts are required in all files; however, we will accept files without tax transcripts for any of the below scenarios:

A loan receives full income validation through Desktop Underwriter (DU) Validation Service or Loan Product Advisor (LPA) Asset and Income Modeler (AIM).

A loan does not receive full income validation through DU Validation Service or LPA Asset and Income Modeler; the following apply:

o All income information used to decision the loan is made up exclusively of wage earner income, is reported on a W-2, and the AUS does not require income documentation other than a paystub and W2, or;

o The file consists of fixed income, such as social security or VA benefits reported on a 1099 and the AUS does not require income documentation other than evidence of the monthly receipt and 1099.

If a file does not meet the above criteria the Seller must include the most recent year’s 1040 IRS tax transcript and business tax transcripts (if applicable) corresponding to the tax returns in the closed loan file.

Transcripts must be obtained by the Seller directly from the IRS or Transcript Vendor. Transcripts must be provided when the file contains secondary income which is documented on the tax returns.

Section 6.04 Tax Filing Extensions

Borrowers filing tax extensions for personal or business tax returns must provide the appropriate filed IRS Application for Extension (Form 4868 or Form 7004) in the closed loan file.

Section 6.05 Employment under the Disaster Policy

In the event of widespread property destruction, a reverification of the borrower’s employment is required.


Section 6.06 Income Related to Cryptocurrency

Income resulting from the sale or trade of cryptocurrency is ineligible for use in qualifying.


Chapter Seven: Credit and Liabilities

Section 7.01 Credit Characteristics

a. The original tri-merge credit report and all subsequent reports pulled during the loan process are required to be included in the closed loan package.

b. The credit report indicated on the final AUS findings must be included in the closed loan file. c. Credit reports with partially displayed Social Security numbers are not considered eligible documentation due to the increased

opportunity for fraud. AIG Investments requires the complete Social Security number to be displayed on the credit report. d. Credit reports with outstanding fraud alerts must be addressed and remedied per the applicable Agency guidelines. All fraud alert

messages appearing on the credit report must be satisfactorily addressed to ensure the information presented on the loan application is true and correct.

e. Loans requiring manual underwriting as a result of non-traditional credit or the absence of a valid credit score are ineligible for sale to an Approved Buyer.

f. Credit reports with frozen credit at the time of the credit decision are ineligible for purchase by an Approved Buyer. g. Foreign credit reports are ineligible for sale to an Approved Buyer.

Section 7.02 Credit Repair and Rapid Re-score

The use of credit repair vendors designed to help a borrower falsely repair their credit profile by intentionally manipulating data to improve their credit score for purposes of loan eligibility, pricing improvement, and/or creditworthiness is prohibited. If usage of credit repair services is revealed at any time during the loan process, the Loan will be deemed ineligible and the Seller subject to remedies for Events of Default.

Section 7.03 Qualifying with an Existing Home Equity Loan

If not shown on the credit report, payments on a home equity line of credit with an outstanding balance must be calculated at the greater of $10 or 5% of the outstanding balance, or the payment reflected on the borrower’s billing statement.


Chapter Eight: Assets Section 8.01 Verification of Funds for Closing

Bank statements or brokerage statements for the most recent two months/quarter are to be provided in lieu of a Verification of Deposit to verify sufficient funds available for closing. Certified true and exact copies must be retained in the Loan file.

Note: This is not applicable when AUS messaging indicates assets are validated using Fannie Mae DU validation service or Freddie Mac LPA Asset and Income Modeler (AIM). Sellers must comply with AUS messaging.

Section 8.02 Credit Card Use in the Transaction

A credit card may be used to pay fees associated with the Mortgage as follows: Borrower must have sufficient liquid assets to pay the amount charged (in addition to all other closing costs) The amount charged or advanced must be included in the borrower’s total outstanding debt and the repayment of that amount must

be included when determining qualifying ration (greater of $10 or 5% of the outstanding balance) A copy of the charge receipt must be included in the closed loan package

Acceptable fees to be paid with a credit card are: Appraisal Credit Report Origination fee Commitment fee Lock-in fee Extended Lock fee

Acceptable credit cards are: Visa MasterCard Discover

Note: Refer to the Fannie Mae guidelines for additional requirements.

Section 8.03 Down-Payment Assistance Programs

A first Mortgage originated in conjunction with affordable or community second programs including, but not limited to, down payment assistance programs (DAPs), up-front cost assistance programs (UCAPs), and housing assistance programs (HAPs), are eligible if the first Mortgage is not subject to any terms or conditions of a bond program and the DAP, UCAP or HAP:

Meets the applicable Fannie Mae requirements. Does not restrict the transfer of servicing rights of the first Mortgage. Does not require prior notification or approval from the sponsoring authority when the first Mortgage’s servicing rights are

transferred.

Section 8.04 1031 Tax Deferred Exchanges

1031 Tax Deferred Exchanges are eligible for an Approved Buyer. Below are the applicable restrictions and documentation requirements.

A. Restrictions 1031 exchanges to be used towards down payment for second home and investment property purchases only with the following restrictions: Reverse exchanges are ineligible because the borrower is not in title to the property at the time of Closing.


No seller provided subordinate financing. The Loan Closing must be handled by a qualified intermediary. A qualified intermediary is an entity (usually a subsidiary of a

title company) who enters into a written agreement with the taxpayer. The qualified intermediary cannot be the borrower’s agent, attorney, accountant, investment banker, or broker. This exchange agreement requires the qualified intermediary to acquire and transfer the relinquished property and to acquire and transfer the replacement property. The relinquished property is the property “sold” and the replacement property is the property “acquired.”

B. Documentation Requirements Copies of all closing documents and purchase agreement on the relinquished property must be obtained. Required documentation includes:

1031 exchange agreement Closing Disclosure Title transfer Both purchase agreements (relinquished and replacement properties) must contain appropriate language to identify

the 1031 exchange. An example of satisfactory language is: o Phase I (Sale): “Buyer is aware that seller is to perform a 1031 tax deferred exchange. Seller requests buyer’s

cooperation in such an exchange and agrees to hold buyer harmless from any and all claims, liabilities, costs, or delays in time resulting from such an exchange. Buyer agrees to an assignment of this contract by the seller.”

o Phase II (Buy): “Seller is aware that buyer is to perform a 1031 tax deferred exchange. Buyer requests seller’s cooperation in such an exchange and agrees to hold seller harmless from any and all claims, liabilities, costs, or delays in time resulting from such an exchange. Seller agrees to an assignment of this contract by the buyer.

C. Down Payment Equity from exchange can be used for all or part of the down payment.

Note: If a borrower is purchasing a seller’s 1031 investment property to occupy as a primary residence, the borrower is accommodating the seller. The transaction is not considered a 1031 tax deferred exchange and is eligible.

Section 8.05 Mortgage Credit Certificates

Seller represents, warrants and covenants the following; for each Mortgage Loan involving a Mortgage Credit Certificate (MCC), Seller is in compliance with all requirements of the MCC’s issuing authority including all required reporting to the IRS.

Copy of the MCC or a commitment letter in lieu of the certificate must be included to be eligible for purchase. Copy of the W-4 and worksheet MCC worksheet

Section 8.06 Ineligible Assets

Group Savings. Individual Development Accounts (IDAs). Assets resulting from illegal activity based on local, state or federal authorities. Foreign assets. Cryptocurrency, such as Bitcoin, are ineligible for use in the transaction, even when liquidated. Self-directed IRAs invested in real estate are ineligible for use as reserves.


Chapter Nine: AUS Requirements AIG Investments requires the use of Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Product Advisor for automated underwriting decisions on all eligible Loan Programs. DU® / DO® (Desktop Originator®) findings or LPA feedback certificate must be provided in the closed loan package. Additional information may be requested at the discretion of the underwriter.

Section 9.01 Acceptable DU/DO Findings and LPA Feedback Certificate

AIG investments will only accept Approve/Eligible or Accept/Eligible as the recommendation on the DU/DO or LPA report. The final, complete, legible, AUS report must be included in every closed loan file. See additional information in this Chapter related to acceptable DO findings.

Section 9.02 Desktop Underwriter Data and Loan Product Advisor Data

Verification documents must be reviewed and the verified values compared to the data submitted to Desktop Underwriter or Loan Product Advisor. The terms of the closed loan must match the terms and proper version control of the final loan case-file submission to the AUS. AIG will adhere to the Agencies specified DU and LPA tolerances for debt-to-income (DTI) ratios, assets, reserves, etc. Should the AIG Correspondent Lending file review result in a change to income or liabilities to the extent that said tolerances are exceeded, an updated AUS Approval will be required. If any of the loan data changes, the Seller must ensure that the loan continues to meet all requirements of these Underwriting Guidelines.

Section 9.03 Desktop Originator Eligibility

Files containing DO sponsored findings from entities other than AIG Home Loan 1-5 are ineligible for purchase by an Approved Buyer.

Section 9.04 DU Day One Certainty and LPA Asset and Income Modeler (AIM)

A Seller is responsible throughout the life of the loan for all representations and warranties related to the data accuracy, omissions, misstatements, misrepresentations, clear title, compliance with legal and lending practice requirements, and product guidelines.

Loans using any of the following services under Fannie Mae Day 1 Certainty are eligible for purchase: DU Validation service. Collateral Underwriting (CU). Appraisal Waiver.

The Loans must be underwritten to the standards and guidelines of Fannie Mae’s Selling Guide and Guide to Underwriting with Desktop Underwriter and all requirements on the DU Underwriting Findings Report, as well as AIG requirements. AIG will purchase Loans that use Freddie Mac LPA asset and income modeler. The Loans must be underwritten to the standards and guidelines of the Freddie Mac Single-Family Seller/Servicer Guide and all requirements on the LPA, as well as AIG requirements. AIG will purchase Loans that exercise an automated collateral evaluation (ACE). The Loans must be underwritten to the standards and guidelines of the Freddie Mac Single-Family Seller/Servicer Guide and all requirements on the LPA feedback certificate, as well as AIG requirements.


Section 9.05 Uniform Closing Dataset

Include the final UCD submission response from either Fannie Mae or Freddie Mac;

When submitting to Fannie Mae, a UCD finding report reflecting “Successful” with no fatal edit messages is required. (DU loans) When submitting to Freddie Mac, a Loan Closing Advisor (LCA) Feedback Certificate reflecting “Satisfied” with no red critical

messages is required. (LPA loans) o Include the latest Closing Disclosure matching the UCD file submitted to the applicable agency. o Transfer and/or assign the UCD file to AIG by the loan’s purchase date. o Ensure the DU casefile ID or LPA Key ID number matches the UCD file.


Chapter Ten: Ability to Repay Seller must comply with all federal, state, local, and municipal Ability to Repay requirements, including providing any required documentation.

© 2020 AIG Investments. All Rights Reserved. AIG Investments is an affiliate of American International Group, Inc. Desktop Underwriter, DU, Desktop Originator, DO, Homepath, Homestyle, and HomeReady, are marks of Fannie Mae., LPA, LCA and Freddie Mac Products.

Q4 Conforming Underwriting Guidelines Final 10.14 · Page 6 AIG Investments Conforming Underwriting...

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