FHA STREAMLINE GUIDELINES

(1)

LTV MATRIX

Streamline Refinance with AVM or 2055 Exterior

PRIMARY RESIDENCE

1

PROPERTY TYPE

LTV

CLTV

2

FICO

UNDW OPTIONS

1 - 4 Unit (SFR, Condo, PUD)

115%

640 MANUAL

1 - 4 Unit (SFR, Condo, PUD)

135%

680 MANUAL

SECOND HOME

PROPERTY TYPE

LTV

CLTV

2

FICO

UNDW OPTIONS

1 Unit (SFR, Condo, PUD)

1

00

%

1

00

%

640 MANUAL

Streamline Refinance with Full 1004 APPRAISAL

SECOND HOME

PROPERTY TYPE

LTV

CLTV

2

FICO

UNDW OPTIONS

1 unit (SFR, Condo, PUD)

97.75

100

680 MANUAL

1

If the borrower’s primary residence was used as an investment property in the last 12 months then max CLTV is 85% 2

Max CLTV is determined by the TOTAL loan amount + subordinate financing. See subordinate financing section for additional requirements.

NOTE: The following guidelines are to be used in conjunction with guidelines outlined in HUD

Handbook 4155.1 and subsequent applicable Mortgagee Letter.

PROGRAM OVERVIEW

The FHA Streamline refinance program is designed to lower the monthly principal and interest payments on a current FHA-insured mortgage. Streamline refinances are subject to the following requirements:

• The credit report (three-bureau merge or mortgage-only) is only used to validate the credit score and mortgage rating on FHA non-credit qualifying Streamline transactions.

• Cash-back to the borrower is not allowed with the exception of minor adjustments at closing provided the mount does not exceed $500.

• An AVM or Exterior Appraisal is required

• Must meet net tangible benefit requirements in regards to payment reduction and closing costs recapture. • Transactions that include a reduction in the mortgage term must be underwritten and closed as a rate- and-term

refinance, unless a benefit to the borrower of 5% payment reduction is met.

APPRAISALS & AVM

AVM or 2055 Exterior

CoreLogic GeoAVM Core, FHLMCE HVE, or Drive-by appraisal (2055E for SFRs/PUDs or 1075 for condos) • GeoAVM Core Report Summary: Estimated Value”

• HVE Report Valuation Results: “Estimated Market Value”

• If LTV/CLTV < 100%, the estimated market value can be used to calculate the LTV regardless of the Forecast Standard Deviation (FSD).

• If LTV/CLTV > 100%, for the estimated market value to be utilized the following conditions apply: o GeoAVM Core the FSD must be 20 or less

o HVE score must be M or H

o Note: The CoreLogic GeoCoreAVM or FHLMCE HVE must be no more than 90 days old on the date the note is signed

(5)

***Note: if ordering a 2055 to support that the value is within 135% this appraisal is NOT to be logged into FHA Connection or included in the Insuring package to FHA.

Streamline with an Appraisal (1004 full FHA Appraisal)

• An appraisal may only be ordered to establish value to meet the max CLTV requirement. • An appraisal will not allow for an increase in the max loan amount.

• All standard FHA property requirements will apply if the appraisal is provided. Refer to the matrix on page 8 for max LTV/CLTV guidelines with an appraisal

ASSETS

• If assets are needed to close, loans will require a 2 month statement showing the previous month’s ending balance.

• If the previous month’s balance is not shown, then obtain statement(s) for the most recent 3 months.

• A Verification of Deposit (VOD) is generally NOT acceptable as the only documentation for assets, but may be provided in addition to a bank statement.

• Discount points may not be included in the new Streamline mortgage.

• If the borrower has agreed to pay discount points, Bay Equity must verify the borrower has the assets to pay them along with any other financing costs that are not included in the new mortgage amount.

Sourcing of Deposits

• If the borrower has payroll direct deposit then non-payroll deposits must be documented if they will be used for funds to close or exceed $1000.

• If the borrower does not have payroll direct deposits then the Underwriter must determine that the deposits are reasonable based on the line of work indicated by the borrower on the 1003.

BORROWER(S)

• U.S. Citizens

• Permanent Resident Aliens • Non-permanent Resident Aliens

• All borrowers must have a valid social security number • Borrower(s) can only be removed under this program when:

o A borrower from the previous note is deceased (must have supporting documentation) OR

o The borrower(s) being removed do not occupy the subject property and the loan is credit qualified (must have supporting documentation)

• Borrower(s) may be added without requiring credit qualifying as long as the existing borrowers stay the same

CREDIT

Credit Report

A mortgage only credit report is acceptable as long as it meets the follow requirements • Credit scores are reflected

• The credit scores must include the factors

Credit Score Guidance

The following criteria may be used to determine each individual borrower’s Credit Score using the “middle/lower” method.

• If there are three valid credit scores for a borrower, the middle score (numerical middle of the three scores) is used.

• If there are three valid scores for a borrower but two of the score are the same, the duplicate score is used • If there are two valid scores for a borrower, the lower of the two scores is used.

(6)

Credit Score Requirements

• A minimum 640 credit score is required

• Available credit scores must be entered into FHA Connection. If more than one credit score is available, all available credit scores must be entered.

Payment History

The borrower must exhibit an acceptable payment history as described below: • For mortgages with less than a 12-month payment history

o Mortgages must have no 30 day lates during the life of the loan. AND

o Evidence that the existing loan has no 30-day or greater mortgage lates for any other first mortgage associated with the property and borrower(s) in the most recent 12 months.

• For mortgages with a 12 month payment history or greater the borrower must have: o Had no 30-day late payment in the preceding 12 months AND

o Made all mortgage payments within the month due for the 3 months prior to the date of the loan application

• The payoff of a loan that has been modified or has ever had greater than a 90 day late is NOT ALLOWED

Payment Seasoning

At the time of loan application, the borrower must have made at least 6 payments on the FHA mortgage being refinanced.

***Note: FHA requires that at least 210 days have passed since the loan closed (approximately 7 months), even if 6 payments have been made. FHA Connection will not allow a case number to be assigned until this requirement has been met. If the loan transaction is a streamline, the case number may NOT be ordered as a standard FHA refinances.

EMPLOYMENT VERIFICATION

*Non-Credit Qualifying Streamline Refinances do not Require 4506T & Tax Transcripts ***

Employed (Wage Earner and Self Employed)

Employment information must be completed on the application. NO INCOME SHOULD BE LISTED ON THE 1003. Bay Equity will perform a Verbal VOE and complete a signed and dated letter on letterhead verifying the borrower(s) was employed at the time of application.

Other Income Types Requiring Verification

• Alimony/Separate Maintenance

o Copy of divorce decree/settlement agreement or court payment record • Annuity

o Most current institutional statement • Child Support

o Copy of divorce decree/settlement agreement or court payment record • Dividend/Interest Income

o Document showing ownership of interest bearing account or copy of current statement showing interest income

• IRA/Keogh

o Most current statement or letter from administrator • Pension/Retirement

o Most current statement or benefit award letter or most current W-2/1099 • Rental Income

o Copy of current lease

• Social Security Retirement/Survivor’s Disability Income o Award letter or most current deposit statement • Trust Income

(7)

o Award letter or most current deposit statement

FORMS & DISCLOSURES

Included Forms

• Borrower’s Credit Authorization (not applicable if 1003 is signed by borrowers and LO) • SSN Authorization Form

• GFE and TIL (disclose all loan transaction fees, regardless of who is paying for them) • Notice of Intent to Proceed

• Settlement Services Provider List SSPL (including applicable Affiliated Business Agreements) • MLDS or Mortgage Broker Fee Agreement

• Servicing Disclosure Statement • FHA Informed Consumers Choice • FHA Notice to Homebuyer (assumption) • FHA Energy Efficient Mortgage Disclosure • FHA ARM Disclosure (if applicable)

Forms Not Included

• FHA Amendatory Clause /RE Certification • Right to Receive Appraisal Report • FHA Important Notice to Homebuyer

LOAN AMOUNT

FHA mortgage limits for all areas are available at: https://entp.hud.gov/idapp/html/hicostlook.cfm.

Loan Amount Calculation

***LESSER OF CALCULATION #1 OR #2 IS MAXIMUM BASE LOAN AMOUNT*** Calculation #1

$

Outstanding Principal Balance on existing first lien (from demand)

+

$

30 or 60 days interests (from demand)

$

Total

-

(

)

LESSER OF UNEARNED UFMIP (MIP Refund, from 4H Refinance Authorization

Form/FHA Connection, if applicable) OR THE NEW UPFRONT PREMIUM

3 - B = $

Maximum Mortgage BEFORE UFMIP

New Base Loan Amount

Calculation #2

$

Statutory Loan Limit for Subject County (information found on FHA

Connection)

NEW TOTAL LOAN AMT = MAX BASE + NEW MIP

3-B

$

New Base Loan Amount

+

$

X NEW MIP % (see MIP chart for correct %)

=

$

New Base Loan Amount + MIP

Outstanding Principal Balance

(8)

Primary Residence

• The payoff amount of the refinanced mortgage may include up to 60 days of interest, which consists of interest due for the month prior to the closing of the refinancing mortgage plus the interest due for the month in which the closing occurs

Second Home

• Can only be refinanced for the outstanding principal balance. Loans that exceed the outstanding principal balance must go through full credit qualification including a full appraisal

LOAN PROGRAM CODES

Standard Loan Amounts

• FHA15SR • FHA20SR • FHA25SR • FHA30SR

High Balance Loan Amounts

• FHA30HBSR

LOAN TERMS

The maximum term is the lesser of the following: • 30 years OR

• 12 years beyond the remaining term of the existing loan

Standard Loan Amounts

• 15 year Fixed • 20 year Fixed • 25 year Fixed • 30 year Fixed

High Balance Loan Amounts

• 30 year Fixed Only

LTV & CALCULATIONS

AVM or 2055 Exterior

The LTV calculations based on an AVM or a 2055 exterior are a manual calculation only. They are not to be input into the system to reflect on the LT or to be included in the insuring package.

Full 1004 FHA Appraisal

If a full 1004 Appraisal is ordered then the max LTV/CLTV for a Streamline with an appraisal must be met per the LTV matrix below.

Max LTV/CLTV Calculation

• Max LTV is determined by the TOTAL loan amount

• Max CLTV is determined by the TOTAL loan amount + subordinate financing. See subordinate financing section for additional requirement

Finance Requirements

(9)

may be financed in its entirety and/or the amount may be paid in cash or seller contributions. The UFMIP may not be partially financed.

MIP Table

LOAN AMOUNT < = $625,500

UP-FRONT MIP REQUIREMENTS:

Endorsement Date Case# Assigned on or after June 13, 2013 Case# Assigned April 1, 2012 – June 2, 2013 Case # assigned June 11, 2012 – March 31, 2013 Case # assigned April 9, 2012 – June 10, 2012 Streamline Refinance endorsed

ON OR BEFORE May 31, 2009

0.01% 0.01% 1.00% 1.75%

Streamline Refinance endorsed AFTER May 31, 2009

1.75% 1.75% 1.75% 1.75%

ANNUAL MIP REQUIREMENTS:

ON OR BEFORE May 31, 2009 0.55% 0.55% 0.55% see above

LOAN AMOUNT > $625,500

UP-FRONT MIP REQUIREMENTS:

ON OR BEFORE May 31, 2009 0.01% 0.01% 0.01% 1.75%

Streamline Refinance endorsed

AFTER May 31, 2009 1.75% 1.75% 1.75% 1.75%

ANNUAL MIP REQUIREMENTS:

ON OR BEFORE May 31, 2009

0.55% 0.55% 0.55% see above

UFMIP for Refinance Transactions

• The UFMIP for all refinance transactions is based on the loan terms. The amount of unearned premium refunded, if applicable, depends on when the mortgage was closed.

• The following requirements are applicable to Regular and streamline refinances (except those Streamline refinances of mortgages closed before July 1, 1991):

o Mortgages closed after July 1, 1991 but before January 1, 2001: The seven-year unearned premium refund schedule shown in Mortgagee Letter 94-1 remains in effect.

(10)

o Mortgages endorsed on or after December 8, 2004, that are subsequently refinanced: The mortgage will not be eligible for a refund of the UFMIP except when the borrower refinances to another mortgage to be insured by FHA. The three-year refund schedule shown in Mortgagee Letter 05-03 applies.

• Streamline Refinances of Mortgages:

o Closed before July 1, 1991: These loans remain exempt from the annual premium and are charged an upfront premium of 1.50%.

o Case numbers assigned between July 14, 2008 and September 30, 2008:  Refer to HUD Mortgagee Letter 2008-16

NET TANGIBLE BENEFIT TEST

Bay Equity must determine that there is a net tangible benefit as a result of the Streamline refinance transaction. Tangible Benefit is defined as:

1. Payment reduction AND

2. Closing cost recapture

Payment Reduction

From/To Fixed Rate One-Year ARM Fixed-Period ARM

Fixed Rate Reduction of at least 5% of principal & interest (P&I) and mortgage insurance premium (MIP)

N/A N/A

One-Year ARM New interest rate no greater than 2 percentage points above the current interest rate of the ARM

N/A N/A

Fixed-Period ARM (During Fixed Period)

Reduction of at least 5% of P&I and MIP

N/A N/A

Fixed-Period ARM (During Adjustable Period)

New interest rate no greater than 2 percentage points above the current interest rate of the Fixed- Period ARM

N/A N/A

Closing Cost Recapture

• Net Tangible Benefit shall also require that closing costs be recaptured within 48 months of closing o Based on fees listed on HUD sections 800, 1100 and 1200

PROPERTY ELIGIBILITY

Eligible Properties

• 1 unit SFR

• 2 – 4 Unit (PennyMac Allows) • PUDs Attached / Detached

• Condos – the printout from FHA Connection is NO LONGER required to verify the condo project is approved

Ineligible Properties

• Manufactured Homes

• Modular Pre-Cut/Panelized Housing

(11)

QUALIFYING RATIOS

Non-Credit Qualifying:

• DTI Ratios are not calculated for Non-credit qualifying Streamlines

Credit Qualifying:

• 31/43

o there is a 5% tolerance to the max DTI with compensating factors as required by FHA ~ refer to Compensating Factors section below)

RESERVES

Reserves are not required

SUBMISSION REQUIREMENTS

Initial 1003s & HUD ADDENDUM (92900A) Signed, dated, and completed in its entirety)

• An abbreviated version of the URLA is not allowable Lender Information to be completed • Employment and income sources are includes

• Income is not listed on the 1003 • All Boxes Marked

• Signed by all parties

• Max cash back to borrower is $500

New FHA CASE NUMBER with REFINANCE AUTHORIZATION (MIP Credit) • Order Case number by emailing request form to [email protected]

• If current FHA loan is endorsed or before 5/31/09 borrower is eligible for reduced MI

• At least 210 days must have passed from the closing date of the mortgage being refinanced CAIVRS is not required

Originator’s CREDIT REPORT

• Mortgage Only with Scores: Minimum 680 requires for all Borrowers • Mortgage rating Rated thru Current Month

o Example: If closing in June, mortgage must be paid through May

Current PAYOFF DEMAND (must have at submission to calculate loan amount) • Must reflect last mortgage payment made by the borrower

o If Borrower makes payment after the date of demand, NEW payoff required and Loan Amount to

be Recalculated

• Must reflect interest through the end of the month you wish to close (NOT future dates)

o Example: If closing in May. Interest only through May (Not June)

• Loan must close in the month it is Underwritten (No interest Credits)

Copy of MORTGAGE STATEMENT/COUPON from Current Lender (To determine MI amount) • Net tangible benefit of 5% must be met

ESTIMATED HUD

• To verify that closing costs are recaptured within 48 months (based on fees listed on HUD sections 800, 1100 and 1200)

LEGIBLE Copy PHOTO ID AND SOCIAL SECURITY CARD

Copy of EXISTING FHA NOTE & DEED (to verify borrowers, old case #, property type and rate reduction or ARM) HAZARD INSURANCE DECLARATIONS PAGE

BANK STATEMENTS Two months to support sufficient funds to close • Non Payroll Deposits must be documented

(12)

OCCUPANCY

Occupancy is determined by the current use of the subject property, not the use at origination of the existing loan.

Primary Residence

A primary residence is property that will be occupied by the borrower the majority of the calendar year and meets the following criteria:

• At least one borrower must occupy the property and sign the Note and security instrument for the property to be considered owner-occupied.

• If the borrower’s primary residence was previously an investment property then max LTV is 85%

Second Homes

• Allowed

Investment Properties

• Not Allowed

SEASONING

Loans with less than a 6 month payment history on the date of the FHA case number assignment are not eligible

SUBORDINATE FINANCING

• For Streamline refinance transactions without an appraisal: the CLTV is based on the original appraised value of the property per the Refinance Authorization.

• An appraisal may be provided to support that the value is currently higher to meet the CLTV requirements.

UNDERWRITING

Case Number Review

• The Underwriter must ensure that at least 210 days have passed since the loan closed (approximately 7 months), even if 6 payments have been made.

• FHA Connection must reflect the loan transaction is a streamline, the case number may NOT be ordered as a standard FHA refinances.

Qualification Requirements

• The borrower must be credit qualified if you are removing a borrower.

o NOTE: when reducing the loan term a 5% tangible benefit is still required (so this will rarely qualify for a Streamline

• Streamline Refinances are manually underwritten

• Per Mortgagee letter 2011-11 TOTAL Scorecard is not to be used for any Streamline refinance.

Compensating Factors

Compensating Factor

Description

Housing Expense Payments (VOR)

The borrower has successfully demonstrated the ability to pay housing expenses greater than or equal to the proposed monthly housing expenses for the new mortgage over the past 12-24 months.

Accumulated Savings The borrower has demonstrated an ability to accumulate savings, and a conservative attitude toward using credit.

(13)

Compensation or income Not Reflected in Effective Income

The borrower receives documented compensation or Income that is not reflected in effective income, but directly affects his/her ability to pay the mortgage. This type of income includes food stamps, and similar public benefits.

Substantial Non-Taxable Income The borrower has substantial non-taxable income. NOTE: This applies if no

adjustment was previously made when computing ratios.

FHA STREAMLINE GUIDELINES

Table of Contents

LTV MATRIX

Streamline Refinance with AVM or 2055 Exterior

PRIMARY RESIDENCE

PROPERTY TYPE

LTV

CLTV

FICO

UNDW OPTIONS

1 - 4 Unit (SFR, Condo, PUD)

115%

115%

640

MANUAL

1 - 4 Unit (SFR, Condo, PUD)

135%

135%

680

MANUAL

SECOND HOME

PROPERTY TYPE

LTV

CLTV

FICO

UNDW OPTIONS

1 Unit (SFR, Condo, PUD)

1

%

1

%

640

MANUAL

Streamline Refinance with Full 1004 APPRAISAL

SECOND HOME

PROPERTY TYPE

LTV

CLTV

FICO

UNDW OPTIONS

1 unit (SFR, Condo, PUD)

97.75

100

680

MANUAL

NOTE: The following guidelines are to be used in conjunction with guidelines outlined in HUD

Handbook 4155.1 and subsequent applicable Mortgagee Letter.

PROGRAM OVERVIEW

APPRAISALS & AVM

AVM or 2055 Exterior

Streamline with an Appraisal (1004 full FHA Appraisal)

ASSETS

Sourcing of Deposits

BORROWER(S)

CREDIT

Credit Report

Credit Score Guidance

Credit Score Requirements

Payment History

Payment Seasoning

EMPLOYMENT VERIFICATION

*******Non-Credit Qualifying Streamline Refinances do not Require 4506T & Tax Transcripts *********

Employed (Wage Earner and Self Employed)

Other Income Types Requiring Verification

FORMS & DISCLOSURES

Included Forms

Forms Not Included

LOAN AMOUNT

Loan Amount Calculation

$

Outstanding Principal Balance on existing first lien (from demand)

+

$

30 or 60 days interests (from demand)

$

Total

-

(

)

LESSER OF UNEARNED UFMIP (MIP Refund, from 4H Refinance Authorization

*Non-Credit Qualifying Streamline Refinances do not Require 4506T & Tax Transcripts ***