Underwriting Presentation

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Underwriting Presentation Underwriting Presentation U.S. Bank Home Mortgage U.S. Bank Home Mortgage MRBP Division MRBP Division Master Servicer Master Servicer 2007 2007 9/06

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Underwriting PresentationU.S. Bank Home Mortgage MRBP Division Master Servicer 20079/06

Fannie Mae: Conventional Products MyCommunityMortgage Suite of Products Community Solutions/HomeChoice MCM 97 MCM 100

Community Lending Suite of Products Fannie Mae Community Homebuyers Fannie 97 Fannie 3/2

Standard 80% LTV loan Standard 95% LTV loan Community Land Trust Mortgage Loans No Split Loan Products allowed. i.e. 80/20, 90/10, 80/15/5

Freddie Mac: Conventional ProductsHome Possible Home Possible 97 Home Possible 100 Home Possible Neighborhood Solutions 97 Home Possible Neighborhood Solutions 100

Standard Conventional 5/10/15/20% down - 30 year fixed rate

No Split Loan Products allowed. i.e. 80/20, 90/10, 80/15/5

Fannie Mae References Fannie Mae Selling Guide, Chapter X Section 304 Community Lending Fannie Mae Guide to Desktop Underwriting Fannie Mae website www.efanniemae.com FHA References Guide 4155.1 rev 5 FHA website www.hud.gov Other References Allregs www.allregs.com VA www.homeloans.va.gov USDA-RD www.rurdev.usda.gov

Freddie Mac References Seller Servicer Guide, Chapter A34 (HP only) Learning Center: www.FreddieMac.com/learn Website: www.FreddieMac.com Seller Servicer Guide, Chapter 37: Underwriting the Borrower

Credit Underwriting is the responsibility of the originating lender.U.S. Bank Home Mortgage (Master Servicer) does not re-underwrite your loans.

All loans are subject to internal and agency audits. Underwriters should make sound credit decisions, assure data integrity, and include all necessary documents in support of the underwriting decision.

All loans should be underwritten in compliance with the most current underwriting guidelines for FHA, VA, Rural Housing, Fannie Mae. and Freddie Mac. The loan file must comply with the Bond program guidelines for income limits, sales price limits, property types, locations and program parameters.

The following automated systems are approved for use in the bond programs. Conventional Loan Types -Fannie Mae loans (DU) -Freddie Mac (LP)

Government Loan Types -FHA & VA loans (DU or LP) If manual underwriting is necessary, full documentation is required Other lender customized automated underwriting systems are not acceptable for loan approval

Full appraisal reports are required if a manual underwrite has been performed. Correspondent Lenders, sponsored by the Master Servicer, are required to submit full appraisals. Form 2055/2075 is permitted with a DU Approve/Eligible recommendation(Appraisals MUST have a Property Value listed on them)

Full appraisal report required for Freddie Mac Home Possible loans evaluated by LP

Government Loans Manufactured Homes are permitted in the program. The loan must follow FHA, VA, Rural Housing and Program Guidelines. Manufactured homes must meet specific size and structural requirements, remain permanently affixed to a foundation, and be taxed as real estate.

Conventional Loans: Manufactured homes are not currently eligible for Fannie Mae or Freddie Mac financing with the Bond program (due to LLPA)

Down Payment Assistance Programs (DPA) The funding source for the DPA program must be stated in the source of funds section of the 1003, and stated on the HUD-1 DPA programs must meet FHA and Fannie Mae requirements Write the loan product, down payment source, and amount on the 1008 (loan transmittal), or mortgage credit analysis worksheet (MCAW)

Condo RequirementsFollow Fannie Mae, FHA and VA Condo Underwriting Guidelines US Bank Home Mortgage does not provide Condo Guidelines All Fannie Mae loans must follow the Condominium Project Acceptance guideline as outlined in the Fannie Mae Announcement 05-03 and 06-12 and Seller/Servicer guide Underwriters must indicate on the 1008 the Project Acceptance Review Type Codes Lenders having access to Fannie Maes Condo Project Manager (CPM), have the ability to verify if the Condo project is already Fannie Mae, FHA or VA approved Lenders having access to CPM have the ability to enter information on the Condo Project into CPM to see if it will get approved Lenders who do not have access to CPM can contact their Fannie Mae Representative to work at gaining access to this function

Condo Requirements FREDDIE MAC Follow the most recent Freddie Mac Condo Underwriting Guidelines next slide Underwriters must indicate on the 1077 the Project Classification Codes Lenders may use Fannie Maes Condo Project Manager to assess Condo eligibility (Freddie Mac does not have a specific assessment tool) Reference Seller Servicer Guide Chapter

Freddie Mac Standard & HP Products


Under Indiana Housings program, Cash Back is not permitted. However, reimbursement of payments such as: prepaids and earnest monies are allowable to the extent the borrower has met any minimum contribution requirements and the reimbursement is acceptable to the Agency (FHA, VA, Fannie Mae, Freddie Mac). Files must be documented.

Updates and Enhancements

For one-unit properties: $0 contribution needed from borrowers own funds! Qualifying Community Seconds on MCM loans in DU may be treated as a gift rather than a subordinate lien FannieNeighbors definition for MCM loans extended to many hurricane-impacted areas


MCM: Eligibility ParametersLoan Purpose Product Types Eligible Properties Purchase 30-year fixed rate One unit owner-occupied only (condos and PUDs are allowed )

Home Buyer Education

Required by Indiana Housing Community Development Authority


Eligible for Manual Underwriting For DU, Approve/Eligible, EA-I/Eligible, and EA-II/Eligible Nontraditional credit accepted, but for DU, at least one borrower must have a traditional credit history as determined by DU Credit and income-source flexibilities available, including boarder income from non-relatives


Community Seconds on MCM loans in DU may be treated as a gift rather than a subordinate lien The Community Seconds must meet Fannie Mae eligibility per the Selling Guide, and provide for a deferred payment structure that extends for no less than five years (with no repayment required from the borrower)


Delivery Requirements Underwriters are required to reflect the CLTV on the Fannie Mae Transmittal Summary (1008) (cannot be more then 105%) Enter Special Feature Code 118 at delivery(Does not show on DU but must be entered)

MCM loan file must be documented with all information relating to the Community Seconds transaction


Borrowers may use cash-on-hand for the down payment and closing costs, subject to specific criteria. Limited to one-unit, principal residences Cash-on-hand funds will not be used to calculate reserves (if reserves are required). DU will use the Cash-on-Hand amount to calculate the available funds to close.


The lender must verify/document the following: Borrower customarily uses cash for expenses; usage is consistent with previous payment practices. Borrower's credit report indicates limited (or no) use of credit, and no depository relationship. Borrower must provide signed statement disclosing the source of funds (and that they were not borrowed). The borrower must deposit with a financial institution at the time of application, or no less than 30 days before closing, funds sufficient for the down payment and closing costs.24

Fannie Mae Collections Policy for MCM No payoff required for collection items of $5,000 or less. Collections MUST be paid off only if the aggregate of the collections exceed $5,000 Must be submitted through DU manually underwritten loans are ineligible


MCM permitted for Approve-Eligible along with EA Levels I and II only Standard Loan Level Price Adjustments (LLPAs) for EA Levels I and II do not apply for MCM.


Benefits of using DU with MCM: Quicker approval, Standard limited waiver of reps and warrants Possible reduced documentation Greater flexibility in permitting higher qualifying ratios or lower credit scores with DU vs. manual underwriting

Please Note: Lenders should refer to the Guide to Underwriting with Desktop Underwriter and subsequent DU Release Notes for more details about submitting MCM loans through DU27

Community Solutions is a borrower option for teachers and other educational employees, police officers, firefighters, and health care workers. Eligible borrowers include full-time employees in the following positions: Employees of public or private schools, including kindergarten through post-secondary levels Employees of a state or local law enforcement agency, fire department, or other sworn law enforcement or firefighting function Certified, accredited, or licensed health care workers such as nurses, medical residents, pharmacists, technicians, or technologists28

Extra flexibilities include: Acceptance of part-time and overtime income with a 12 month history Higher qualifying ratios (for manual underwriting; otherwise, determined by DU): 45 percent single qualifying ratio (one months reserves required) 50 percent with maximum 97 percent LTV, two months reserves (may be gifted), and strong compensating factors


Community HomeChoice (continued)Extra flexibilities include: Permits non-occupying co-borrowers Higher single qualifying ratios permitted: 45 percent (one months reserves may be gifted) 43 percent with temporary interest rate buy down 50 percent with maximum 97 percent LTV, two months reserves (may be gifted), and budget-based worksheet (manual underwriting)


The next few slides will show you how to enter MCM information into Desktop Underwriter and how DU provides the loan recommendation.


1) Select correct county or MSA 2) Select MyCommunity Mortgage 3) Answer Yes or No as appropriate for FannieNeighbors and Community Seconds 4) Select HUD Median Income or use Income Adjustment Factor (115% for nonmetropolitan areas) 5) Submit Loan

Q: How do I determine if a property is in a FannieNeighbors area? A: As noted earlier, use the Property GeoCoder to determine if the property is eligible for FannieNeighbors.

After submitting the case file information, an underwriting recommendation is displayed.

Lower Mortgage Insurance CoverageLTV Minimum Coverage 20% 18% 16% 12% 6%

97.01%-100% 95.01%-97% 90.01%-95% 85.01%-90% 80.01%-85%

DU recommendations must be documented in the loan file Remember to follow the Bond Program guidelines Fannie Mae DU loans are evaluated through the Community Lending Modular (free submission) Always enter the appropriate Special Feature Code for Fannie Mae loans on the Fannie Mae Transmittal Summary - 1008 (processors and underwriters to verify) and on the USBHM Loan Submission Delivery checklist (closers /shippers to verify)

Fannie Mae Community Homebuyers 95% Fannie 97 Fannie 3/2 Section 8

061 121 074 445

Community Land Trust Mortgages 054 Community Second Mortgages 118 Bond Loans (Does not Show, make sure to add it) 088* Special Feature Codes must be listed on the Fannie Mae 1008 andthe USBHM Loan Submission Delivery Checklist

MCM 97 Loans with LTVs of 97% and below MCM100 Loan with LTVs above 97%, up to 100% MCM Community Solutions (Manual Underwrite)Teachers,Firefighters, Policemen and HealthCare workers

460 480 481

MCM Community HomeChoice Option ( DU Approval)Borrower with a disability or a family member with a disability


MCM Community HomeChoiceOption(ManualUnderwrite)


* Special Feature Codes must be listed on the Fannie Mae1008 and USBHM Loan Submission Delivery Checklist

Lenders may originate loans for borrowers who have obtained a Section 8 Homeownership Voucher. Please follow the most recent FHA and Fannie Mae guidelines as it relates to income credit for the subsidy. The Lender must show the Section 8 Voucher Assistance Program on the 1008 and the Mortgage Credit Analysis Worksheet. Contact: Sheryl Krocek Production Coordinator (216) 475-7719 [email protected]

Homebuyer Counseling Certificate must be included in the file(Note: Everyone who signs the note is required to attend counseling)

Training must take place in the following forums: Face-to-face home-buyer education *** Classroom or workshop sessions Telephone Education/Internet training currently not permitted per IHCDA Early Delinquency Counseling is provided by U S Bank Home Mortgage & acknowledged by the borrowers in the Authorization for Counseling notice.

Borrowers must Sign and lender must include in the Mortgage File the Fannie Maes Borrowers Authorization for Counseling

form located in the Fannie Selling Guide or at efanniemae.com

Home Possible Mortgages(HP) Product Training for Housing Finance Agency Lenders

Home Possible Product Features $0 contribution needed from the borrower! Loan Prospector first(all HP loans must be run through LP first)

Area Median Income qualifications assessed automatically via Loan Prospector Already licensed LP users have immediate access to originate Home Possible loans!

Home Possible Headlines - Flexibilities Four simple products, available with no special contracts, designed to meet your borrowers needs Flexible credit terms, including expanded ratios and options for borrowers with less-than-perfect credit Secondary Financing including Affordable Seconds Low Mortgage Insurance coverage levels Maximum financing with up to 100 percent LTV and up to 105% TLTV

Home Possible Headlines - Flexibilities Can use HP on all risk classes Cash-on-Hand can be acceptable Qualify with rental income from a non-relative Co-borrower with no credit can now be submitted to LP

Teachers/Teachers Aides Healthcare workers

Law enforcement officers

$0 borrower contribution for 1-unit properties

Professional and volunteer firefighters

1 months reserves required may be a gift 1-unit properties for Neighborhood Solution 100 1- to 2-unit properties for Neighborhood Solution 97

Home Possible 97 Home Possible Neighborhood Solution 97 Home Possible 100 Home Possible Neighborhood Solution 100 Affordable Housing Initiative Mortgage MRB Loans (ALL) (Does not show, need to add) Transfer of Servicing restricted (ALL) Affordable Housing Initiative Mortgage w/TLTV greater than 100% Mortgage with Affordable Seconds*Other SCCs may apply as noted on LP Findings

G00 G01 G02 G03 071 545 510 535 583

Mortgage InsuranceLTVs80.01 - 85%: 6% 85.01 - 90%: 12% 90.01 - 95%: 16% 95.01 - 97%: 18% Greater than 97%: 20%

Homebuyer Counseling Certificate must be included in the file Freddie Mac Only one borrower required for Home Possible All borrowers preferred

Training must take place in one of the following forums: Face-to-face home-buyer education Classroom or workshop sessions Telephone education/counseling program by an approved mortgage insurer sponsored by the lender Internet training: permitted by Fannie Mae and Freddie Mac through Recognized MI companies Freddie Mac also offers online homebuyer education at their website: www.FreddieMac.com/hrc

Home Possible Details for Underwritershttp://www.freddiemac.com/singlefamily/pdf/pub579.pdf

For questions related to Underwriting Underwriters only contact Lynda Davis, Underwriter 216-475-8246 [email protected] Judy Pudelski, Underwriter 216-475-8317 [email protected] Rita M. Connelly, Underwriting Manager [email protected]