MORTGAGE PROGRAM POLICY AND PROCEDURES FOR …

1 Effective January 24, 2022 MORTGAGE PROGRAM POLICY AND PROCEDURES FOR PARTICIPATING LENDERS Revised Nov. 2021/Eff. Jan. 24, 2022 Table of Contents Chapter/Section No. Title Page INTRO INTRODUCTION Intro DEF/ROC DEFINITIONS AND RULES OF CONSTRUCTION Definitions i Rules of Construction x Chapter 1 PARTICIPATING LENDER RELATIONSHIP Sec. 1-1 Initial Qualifications 1-1 Sec. 1-2 Participating Lender Approval Process 1-3 Sec. 1-3 Maintaining Participating Lender Approval Status 1-3 Sec. 1-4 Delegated Participating Lender Qualifications 1-6 Sec. 1-5 Loan Origination Responsibilities, Process and Requirements 1-7 Sec. 1-6 Participating Lender Compensation/Fees 1-15 Chapter 2 PARTICIPATING LENDER REPRESENTATIONS AND WARRANTIES Sec. 2-1 Participating Lender, Representations, Warranties and Covenants 2-1 Sec. 2-2 Participating Lender Integrity, Responsibility and Nondiscrimination 2-5 Chapter 3 FIRST MORTGAGE PRODUCTS Sec. 3-1 NJHMFA-Specific Guidelines Applicable to All Products 3-1 Sec.

2 3-2 NJHMFA First-Time Homebuyer PROGRAM 3-3 Sec. 3-3 NJHMFA Homeward Bound PROGRAM 3-8 Sec. 3-4 NJHMFA Stay at Home PROGRAM 3-9 Sec. 3-5 Police and Firemen s Retirement System (PFRS) MORTGAGE Loan PROGRAM 3-11 Sec. 3-6 NJHMFA 100% Financing PROGRAM 3-16 Sec. 3-7 NJHMFA HFA Advantage Loan PROGRAM 3-19 Chapter 4 ASSISTANCE PROGRAMS Sec. 4-1 Smart Start PROGRAM 4-1 Chapter 5 AGENCY UNDERWRITING PARAMETERS Sec. 5-1 Participating Lender s General Underwriting Requirements 5-1 Sec. 5-2 Credit Underwriting Guidelines 5-3 TOC - 1 TOC - 2 Revised Nov. 2021/Eff. Jan. 24, 2022 Sec. 5-3 Credit Report 5-8 Sec. 5-4 Citizenship, Permanent and Non-Permanent Residents 5-9 Sec. 5-5 PROGRAM Specific Underwriting Requirements 5-9 Chapter 6 RATE LOCK POLICY AND PIPELINE MANAGEMENT Sec. 6-1 Loan Reservation POLICY 6-1 A. Requirements 6-1 B. MORTGAGE Loan Reservation Process 6-2 C. MORTGAGE Loan Reservations - Confirmations 6-3 D. Price Guaranty Options 6-4 E. Loan Reservation Options 6-4 F.

3 POLICY for Extending MORTGAGE Loan Reservation Options and/or Repricing Options 6-5 Sec. 6-2 Loan Reservation Pipeline Management 6-6 Chapter 7 PROPERTY GUIDELINES: STANDARDS, CLASSIFICATIONS, REPORTS, CERTIFICATIONS AND INSPECTIONS Sec. 7-1 Applicability 7-1 Sec. 7-2 General Property Standards 7-1 Sec. 7-3 Appraisal Reports and Requirements 7-3 Sec. 7-4 Property Types and Classifications 7-5 Sec. 7-5 Property Certifications, Inspections, Testing and Reports: General Overview 7-10 Sec. 7-6 Property Certifications, Inspections, Testing and Reports - Requirements 7-11 Chapter 8 INSURANCE REQUIREMENTS Sec. 8-1 MORTGAGE Insurance 8-1 Sec. 8-2 Title Insurance 8-1 Sec. 8-3 Property Insurance 8-6 Sec. 8-4 General Property Insurance Coverage 8-7 Sec. 8-5 Coverage for Units in Project Developments 8-9 Sec. 8-6 Evidence of Property Insurance 8-13 Sec. 8-7 Flood Insurance 8-14 Sec. 8-8 Mortgagee Clause 8-17 Chapter 9 CLOSING THE MORTGAGE LOAN Sec. 9-1 General Information 9-1 TOC - 3 Revised Nov.

4 2021/Eff. Jan. 24, 2022 Sec. 9-2 Limitations on Cash Back 9-2 Sec. 9-3 Title Insurance 9-2 Sec. 9-4 MORTGAGE Instrument(s) and Assignment 9-2 Sec. 9-5 MORTGAGE Note 9-3 Sec. 9-6 Consistency of Borrower Names 9-4 Sec. 9-7 Co-Signers 9-5 Sec. 9-8 Non Liable Co-Occupants 9-5 Sec. 9-9 Power of Attorney 9-7 Sec. 9-10 Homeowner s Insurance POLICY 9-8 Sec. 9-11 MORTGAGE Insurance Premiums 9-8 Sec. 9-12 Taxes 9-8 Sec. 9-13 Transfer of Servicing 9-9 Sec. 9-14 1098 Reporting 9-9 Sec. 9-15 Possession of a MORTGAGE Loan File by Participating Lender/Servicer and/or Subservicer 9-9 Chapter 10 SELLING THE MORTGAGE LOAN TO NJHMFA Sec. 10-1 Performance Standards 10-1 Sec. 10-2 Submitting the Purchase Package 10-1 Sec. 10-3 Servicing PROCEDURES and Documents 10-2 Sec. 10-4 Summary Reports 10-4 Sec. 10-5 Purchase and Sale of MORTGAGE Loan 10-4 Sec. 10-6 Conditions to Purchase 10-5 Sec. 10-7 MORTGAGE Loan Benchmarks 10-6 Chapter 11 COLLATERAL DOCUMENT SUBMISSIONS Sec.

5 11-1 Delivery Deadline 11-1 Sec. 11-2 Delivery 11-1 Sec. 11-3 Collateral Document File 11-1 Sec. 11-4 Missing Documents Report 11-2 Chapter 12 PARTICIPATING LENDER NON-COMPLIANCE: BREACH, REMEDIES AND REPURCHASE Sec. 12-1 Participating Lender Non-compliance That May Lead to Fees 12-1 Sec. 12-2 Participating Lender Non-compliance That May Lead to Repurchase 12-1 Sec. 12-3 Participating Lender Non-compliance That May Result in Termination 12-4 TOC - 4 Revised Nov. 2021/Eff. Jan. 24, 2022 Sec. 12-4 Additional Agency Remedies 12-7 Chapter 13 MISCELLANEOUS 13-1 Waivers 13-1 13-2 Advertising Standards 13-1 Appendix I APPENDIX OF MORTGAGE LOAN FORMS Apx I-1 Appendix II APPENDIX OF APPLICABLE LAWS Apx II-1 Summary SUMMARY OF ADDRESSES, CLAUSES AND CONTACTS S-1 Eff. January 24, 2022 January 2022 Introduction The New jersey Housing and MORTGAGE Finance Agency s MORTGAGE PROGRAM POLICY and PROCEDURES for Participating Lenders is a handy reference manual which details the proper way to do business with NJHMFA.

6 Topics cover the requirements a lender must satisfy to become an NJHMFA-Approved Lender of residential MORTGAGE loans and how to maintain that approved status. As a member of our exclusive group of loan professionals, you are asked to comply with specific PROGRAM requirements in the following areas: Loan programs, loan file submission, underwriting, property stipulations, insurance guidelines, closing and funding PROCEDURES , purchasing PROCEDURES and, of course, the legal and regulatory requirements. January 2022 Changes Chapters Pages Changes to the Guide Definitions Definitions Clarified Annual Household Income definition to include all borrowers, co-borrowers and mortgagors that intend to occupy the dwelling within 60 days of the Closing Date. into the calculation. 3: First MORTGAGE Products Ch. 3, page 3 Added F to 3-1: The Agency requires 1 month of reserves on all Homebuyer programs.

7 This requirement does not apply to PFRS loans. If the Insurer/Investor Guidelines are more restrictive in the amount of reserves or required source of funds, the more restrictive requirement will prevail. 3: First MORTGAGE Products Ch. 3, page 4 3-2B2 Income Limit: Redefined gross annual income as Annual Household Income See above Definitions. 3: First MORTGAGE Products , page 12 Added to 3-5A: Participating Lender Qualifications and Requirements PFRS monthly servicing fee to be included in monthly payment as disclosed to borrowers and reflected on the first payment letter and their pay history. 4: Homebuyer Assistance Programs , page 2 B. Borrower Eligibility - Removed reference to Dodd-Frank Act. 4: Homebuyer Assistance Programs Ch. 4, page 2 B1 Income Limits: First MORTGAGE programs must account for (replacing refer to ) first MORTGAGE programs; changed maximum allowable housing income to Annual Household Income 4: Homebuyer Assistance Programs , page 2 B1-Asset Limits: Added gift funds to the definition of liquid assets.

8 4: Homebuyer Assistance Ch 4, page 3 1B-6- Added Exception to Housing Counseling Guidelines: Borrowers using the HFA Advantage first- MORTGAGE Eff. January 24, 2022 Programs PROGRAM may complete the FreddieMac CreditSmart Homebuyer U Counseling PROGRAM and provide the Homebuyer U Certificate of Completion in lieu of using a HUD-approved housing counseling agency. 4: Homebuyer Assistance Programs Ch. 4, page 4 4-2 Removed all Section 2 - Homeseeker DPA PROGRAM . 5 Agency Underwriting Parameters Ch .5, page 4 5-2D Credit Underwriting Guidelines, Compensating Factors Clarified guidance for exception requests under FTHBP rogram, added only permitted for the monthly housing expense-to-Income Ratio. 5 Agency Underwriting Parameters Ch. 5, page 6 5E2 Rental Income: Removed reference to Multiple Unit Dwellings and simplified language to refer to applicable Insurer/Investor guidelines.

9 5 Agency Underwriting Parameters Ch. 5, page 7 5G Verbal VOE Changed number of days from 3 to 10 in which the VOE must be obtained prior to closing date. Added: or within the investor/insurer required timeline prior to the closing date, whichever is less. 7 Property Certifications, Inspections, Testing and Reports Ch 7, page 11 7-6 Added further guidance for when appraisal notes any possible infestation or damage. Appendix 1 APX 1-1 Removed Smart Growth Locator Map, Removed Homeseeker PROGRAM and Dodd Frank references. Summary of Addresses, Clauses, and Contacts, NJHMFA General Contacts S-2,3 Updated contacts and titles. DEFINITIONS AND RULES OF CONSTRUCTION i Revised Nov. 2021/Eff. Jan. 2022 DEFINITIONS Capitalized terms, and abbreviations used herein have the following meanings unless otherwise defined as relates to a particular Agency PROGRAM . ACQUISITION COST. The cost of acquiring a residence from the seller as a completed residential unit.

10 Included in the calculation of Acquisition Cost are (i) all amounts paid (in cash or in kind) by or on behalf of the purchaser to or on behalf or the seller as consideration for the residence, (ii) the reasonable cost (irrespective of the source of funding) of completing an incomplete residential unit and (iii) the capitalized value (using a discount rate equal to the bond yield) of ground rent where a residence is purchased subject thereto. Excluded from the calculation of acquisition cost are (i) the usual and reasonable settlement costs, including title and transfer costs, title insurance, survey fees and other similar costs and (ii) the usual and reasonable financing costs, including credit reference fees, legal fees, appraisal expenses, "points" paid by the purchasers and other financing costs. "Usual and reasonable" costs include such costs only to the extent they do not exceed functionally equivalent costs where financing is not provided by a qualified MORTGAGE bond issue.