FHA Fixed Rate & ARMs High Balance Matrix Matrix - AUS Approval

(Fixed and 5/1 Treasury ARMs)

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ARM Characteristics

                Weekly average yield of U.S. Treasury Securities adjusted to a Constant Maturity of one year, Constant Maturity Treasury (CMT)

                Margin- 2.250%

                Annual Cap - 1.00%

                Life Cap - 5%

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Rate At Adjustment

                Initial note rate is in effect for 60 months

                Thereafter, the annual adjustment cap as listed above begins with the first adjustment

                Rate is equal to the note margin plus index rounded to the nearest .125%. Subject to annual/life caps.

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Maximum Loan Amount

                Maximum Base Loan Amount cannot exceed the FHA Statutory Mortgage Limits for each county and under no circumstances will a county's mortgage limit be less then the "floor" or greater than the "ceiling" as outlined in the table below.

                The lowest minimum "floor" loan amounts for the FHA High-Balance produces will be based on the Base Loan amount and not the Total Loan Amount that includes financed Up-Front Mortgage Insurance (UPMIP)

                •           Purchase Mortgages using Sections 203b and 234c (excluding purchase transactions which do not permit maximum financing)

                ◦           Maximum Base Loan amount is calculated as the lesser of:

                Sales price or appraised value

                Minus any adjustments for excessive seller contributions/inducements to purchase

                Multiplied by the appropriate LTV fact

                Purchase Transactions not Permitting Maximum Financing (e.g. some identity of interest, non-occupant co-borrower transactions)

◦   Maximum Base Loan Amount is calculated as the lesser of:

                Sales Price or appraised value

                Plus borrower paid allowable closing costs

                Multiplied by appropriate LTV factor

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Qualifying Rate and Ratios

                Ratios are evaluated by AUS

                Qualify at start rate regardless of LTV

Types of Financing

                Purchase Mortgages

                •           Refinances

                ◦           Rate and Term Refinances/No Cash Out

                ▪           One year seasoning on junior liens unless documentation is provided to verify junior lien incurred for home improvements

                ◦           Equity Refinances

                Maximum Base LTV is 85%

                6 months seasoning required for all cash out refinances. Six month time frame is from the note date of the current loan to the application date of the new loan. All Borrowers on the new loan must have been in title for a minimum of 6 months.

                If subject property has been owned less than 12 months preceding the date of the loan application as the borrower's principal residence, the mortgage amount is limited to the lesser of 85% of appraised value or 85% of the sales price of the property when acquired.

                Properties owned free and clear may be financed as cash-out transactions

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Secondary Financing

                •           The borrower may receive secondary financing to cover the entire cash investment requirement from the following sources -Secondary Financing is not permitted for ARM product:

                Federal, state and local governments (must be approved by AHE Investor)

                FHA Approved Non-Profit agencies that are considered instrumentalities of government (must be approved by AHE Investor)

                Borrower may also receive secondary financing from FHA Approved non-profit agencies NOT considered instrumentalities of government provided the borrower makes a cash down payment of at least 3.5% of the sales price

                Other organizations and private individuals may provide secondary financing provided the combined amounts of the first and second liens do not exceed the applicable LTV ratio and the statutory mortgage limit for the area

                Secondary financing funds may be provided by a family member

                Family member is defined as a parent, grandparent, or a child, including son, daughter, stepson, stepdaughter, legally adopted child and foster child

                ▪           100% of funds for down payment, closing costs, prepaid expenses and discount points may be from a secured or unsecured loan from a family member

                The interest rate on the second mortgage may not exceed the interest rate on the first mortgage

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Property Types

                •           Eligible Property Types

                1-4 Units

                PUDS

                ◦           Condos

                Must be on FHA's approved list

                Site Condos do not require condominium project approval

                •           Ineligible Property Types

                Co-ops

                Manufactured Homes

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Occupancy

•   Primary Residence

Assumptions

•   Permitted/creditworthy borrowers only

Underwriting

                AUS/Approve Eligible

                •           Underwriting the HUD REO Loan (including properties sold under Special Sales Incentives) Fixed Rate Only

                Property is underwritten the same as other FHA mortgages

                Credit evaluated the same as other mortgages, including calculation of the maximum mortgage, except the standard minimum investment requirement does not apply. This means the maximum LTV calculation does not apply

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Borrower Eligibility

                •           All Borrowers must have a valid social security number. Validation of the social security number may be used by one of the following:

                Paystub

                W-2

                Passport

                Valid Tax Returns

                All Borrowers must demonstrate 2 years of employment history

                •           Permanent Resident Aliens

                Same terms as U.S. Citizens

                Evidence of lawful, permanent residency issued by the Bureau of Citizenship and Immigration Services (BCIS), formerly the INS.

                Copy of Alien Registration Card (Resident Aline Card, I-551)

                •           Non-Permanent Resident Aliens

                Primary Residence

                Borrower must eligible to work in the U.S.

                ◦           Evidence of residency and work status to be obtained through documentation from

                U.S. Bureau of Citizenship and Immigration Services (BCIS) formerly INS

                Copy of the Employment Authorization Card, I-688B. This card carries an expiration date.

                A Social Security Card is not acceptable as evidence of work status

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Co-Borrowers

                Co-borrower does not have to occupy

                Co-borrower must take title to the property and sign the Note and the Mortgage

                Co-signer does not take title to the property but must sign the loan application and the Note

                The co-borrower or co-signer cannot be the seller, builder, real estate agent, etc

                •           Loans involving non-occupant co-borrower are subject to the following restrictions:

                One unit property if the LTV exceeds 75%

                ◦           Co-borrower must be a close family member or have a long-standing relationship with the borrower

                If the co-borrower is unrelated or does not have a long-standing relationship with the borrower, the maximum LTV is 75%

                If a parent is selling to a child, the parent cannot also be the co-borrower with the child unless the new mortgage LTV is 75% or less

                Income, assets and debts from all borrowers (including co-signers) are used in qualifying

                Co-borrower must have a principal residence in the U.S.

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Credit

                Housing (Mortgage/Rental) Payment history (PITIA) is inclusive of all liens regardless of position, as well as occupancy types

                •           AUS approved loans/credit evaluated by AUS, subject to clear CAIVRS, LDP and GSA search results

                ◦ Housing (Mortgage/Rental) Delinquencies - Loans will be ineligible:

                ▪           With one or more housing (mortgage/rental) delinquency of 60,90,120,150 days or greater reported within 12 months of the date of the credit report

                Minimum FICO Score regardless of AUS Decision is 640

                Non-traditional credit is ineligible

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Assets

                •           Borrower Investment

                ◦ Purchase Transactions with Maximum Financing/Sections 203b & 234c

                Minimum down payment is 3.5% of the sales price or appraised value, whichever is less

                The 3.5% cannot be met by borrower paid closing costs, prepaid expenses, commitment fees or discount points or premium pricing

                ◦           Refinances and Purchased not Permitting Maximum Financing

                ▪ No minimum borrower investment necessary

                Premium Pricing

                ▪           Prepaid expenses and/or closing costs may be paid with premium pricing

                •           Seller Contributions

                6%

                ◦           Seller contributions limited to:

                Discount points

                Seller-paid closing costs

                Prepaid Expenses

                UFMIP

                •           Gifts

                Acceptable

                Gift given in form of cash is not acceptable

                Federal, state, local government agencies and FHA Approved non-profit agencies considered by FHA to be instrumentality of the government may provide funds for down payment, closing costs and prepaid expenses

                ◦           Charitable organizations may provide gift funds for down payment, closing costs and/or prepaid expenses. Funds derived from these sources cannot be used to payoff borrower's debts

                Evidence of Tax Identification Number for the charitable organization required

                AHE's Investor required to review the non-profit's gift documentation to ensure no repayment is required and no liens will be placed on the subject property as a result of the fit

                •           Reserves

                1 & 2 units/none

                3 & 4 units/3 months PITI

                If using "significant reserves" as a compensating factor, a minimum of 3 months PITI must be documented

                Only retirement accounts that are accessible for liquidation may be counted as reserves. Accounts that cannot be accessed for liquidation by the Borrower until retirement age may not be counted as part of the Borrower's reserves

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Limitations on other Real Estate Owned

                Borrower may own no more than one FHA loan with maximum financing

                An eligible investor may own no more than seven rental units in a contiguous/adjacent area (defined as a 2 block radius)

Appraisal

                Appraisers must be on FHA's approved list on the FHA Connection with State Certification designation of Certified General or Certified Residential

                When required, second appraisal must also be completed by an FHA Approved appraiser using Freddie Mac/Fannie Mae Form 70/1004

                Assigned Appraiser must perform the physical inspection of the property. He/she may not sign the appraisal performed by another appraiser.

                All valuation conditions, including repairs, alterations and/or required inspections will be reported within the appropriate section of the applicable Fannie Mae appraisal reporting form.

HUD REO Properties

A new appraisal is not required unless one or more of the following applies:

                •           The current "as is" appraisal is over 6 months old and a valid HUD contract was not executed prior to the expiration date of the appraisal

                ◦           In instances where the "as is" appraisal is more than 6 months old and a valid HUD sales contract was executed prior to the expiration date of the appraisal, the current "as is" appraisal should be used

                The current "as is" appraisal is over 6 months old and the purchasers have not already been approved for the loan

                A copy of the appraisal was ordered from the "Marketing and Management (M&M) contractor" but the M&M contractor is unable to provide the report

Mortgage Insurance

                Mortgage Insurance is required on all loans

                •           Sections 203b and 234c

                Upfront MIP (UPMIP) is required

                Monthly MIP is required

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Special Requirements/Restrictions

                • HUD REO properties: Refer to link for State specific program updates and availability:

                http://portal.hud.gov/portal/page/portal/HUD/topics/hud_homes

                The Energy Efficient Mortgage Program is not available

                4506T must be processed prior to closing

                •           CAIVERS, LDP AND GSA Search

                If the name of any party to the transaction appears on any of the lists below, the application is not eligible for mortgage insurance (an exception may be made when a seller appears on the LDP list and the property being sold is the seller's principal residence)

                CAIVER System will be accessed for all borrowers on the transaction. All borrowers, co-borrowers and co-signers if applicable

                LDP List will be accessed for all parties to the transaction: all borrowers, sellers, listing and selling agents, Loan Officers, appraiser, termite company and all licensed professionals contracted to provide mechanical certifications such as heating, plumbing, air conditioning, roofing and electrical companies.

                GSA will be accessed for all parties to the transactions

                •           3 & 4 Unit Properties

                Net rents from all units (including primary unit) must be equal to or exceed mortgage payment (net rent is calculated using the allowable vacancy factor for the applicable FHA HOC)

                If appraiser uses the URAR (1004) the Gross Rent Multiplier Form must be completed

                •           Non Purchasing Spouse in Community Property State

                ◦           A credit report for the non-purchasing spouse is required to determine any joint or individual debts. The spouse's authorization to pull a credit report must be obtained.

                In the event that the non-purchasing spouse does not have a social security number, the credit reporting company will need to report that the non-purchasing spouse has no credit history and public records recorded against him/her.

                Credit Reporting Company needs to be provided non-purchasing spouse information (name(s), address, birth date and any other significant information needed in order to complete records check)

                All delinquent debts, including those of the

                Wood Destroying Insects/Organism Requirements

◦   FHA no longer mandates automatic inspections. Inspections are required if:

                Evidence of active infestation

                Mandated by the state or local jurisdiction

                Customary to the area

                At lender's discretion

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Reference # 251rb100810369

Pre Qualification Form - No Credit Check Required

Full Application

Credit Resolution/Repair Form

 Loan Modification - Confidential Resolution Form