Portfolio Manual Underwriting Guidelines - …

1 Page 1 of 64 Conforming and Jumbo, Alternative Access, Non-Prime Advantage LoansUnderwriting Guidelines TITLE: NICHE LENDING Guidelines Revision Date: 12/10/2018 Page 2 of 64 Table of Contents 1 PROGRAM OVERVIEW .. 6 INTRODUCTION .. 6 PROGRAM SUMMARIES .. 6 ABILITY TO REPAY .. 6 ASSUMABLE .. 7 UNDERWRITER ATR ATTESTATION .. 7 Underwriting .. 7 BORROWER BEST EXECUTION .. 7 THIRD PARTY ORIGINATIONS .. 7 AGE OF DOCUMENTS .. 8 ESCROW WAIVER POLICY .. 8 EXCEPTION POLICY .. 8 2 TRANSACTION ELIGIBILITY.

2 9 PURCHASE .. 9 REFINANCE NET TANGIBLE BENEFIT .. 9 RATE/TERM REFINANCE .. 10 CASH-OUT REFINANCE .. 10 DEBT CONSOLIDATION REFINANCE .. 11 DELAYED FINANCING .. 12 SUBORDINATE FINANCING .. 13 INELIGIBLE TRANSACTIONS .. 13 COMPLIANCE WITH LAW .. 13 CHAIN OF TITLE .. 14 CONSTRUCTION TO PERMANENT FINANCING .. 14 INTERESTED PARTY CONTRIBUTIONS ( IPC ) .. 14 3 BORROWER ELIGIBILITY .. 15 US CITIZENS / PERMANENT RESIDENT ALIENS .. 15 NON-PERMANENT RESIDENT ALIENS .. 15 CO-BORROWER(S).

3 16 NON-OCCUPANT CO-BORROWERS .. 17 MAXIMUM 17 INELIGIBLE 17 TITLE VESTING .. 17 NUMBER OF FINANCED PROPERTIES .. 18 4 PROPERTY ELIGIBILITY .. 19 ELIGIBLE PROPERTY TYPES .. 19 INELIGIBLE PROPERTY TYPES .. 20 TITLE: NICHE LENDING Guidelines Revision Date: 12/10/2018 Page 3 of PROPERTY FLIPPING .. 21 Overview .. HPML Flipping Guidelines .. Non-HPML Flipping Guidelines (Investment Properties Only) .. DISASTER AREAS .. 22 ESCROW HOLDBACKS .. 23 5 GENERAL QUALIFICATION.

4 23 OVERVIEW .. 23 CREDIT REQUIREMENTS .. 23 DEBT-TO-INCOME RATIO .. 23 RESIDUAL INCOME .. 24 PAYMENT 24 RESERVE REQUIREMENTS .. 24 LOAN-TO-VALUE ( LTV ) .. 24 6 CREDIT 25 CREDIT SCORE / CREDIT REPORT .. 25 Credit Score .. Credit Score .. Report .. TRADELINES .. 26 Tradelines .. Tradeline Requirements (Non-Traditional Credit) .. References for Supplemental Trade Line Requirement .. HOUSING PAYMENT HISTORY .. 27 Payment History .. History .. owning properties free and clear.

5 Rent-Free .. Time Homebuyers .. in Housing .. SIGNIFICANT DEROGATORY EVENTS (SS / DIL / MCO / FC / BK/MOD) .. 28 .. Period .. Significant Derogatory Events .. DEROGATORY CREDIT .. 30 subject to Payment Plan .. 307 INCOME VERIFICATION & CALCULATION .. 30 TITLE: NICHE LENDING Guidelines Revision Date: 12/10/2018 Page 4 of GENERAL POLICY .. 30 Verification .. Verification .. WAGE EARNERS .. 31 Borrowers .. / Overtime Income .. Income .. Income .. Employment.

6 Differential Payments .. Allowance and Expense Account Payable .. SELF-EMPLOYED 35 Definition .. Required: Self-Employed Borrowers .. RENTAL INCOME .. 38 .. Properties .. Rental Income .. OTHER ELIGIBLE INCOME .. 40 .. , Child Support and Maintenance Income .. Income Interest and Dividends .. Income Trust Income .. Receivable Income .. Income .. contractor or contingent worker .. MILITARY, GOVERNMENT AGENCY AND ASSISTANCE PROGRAM INCOME .. 42 Income .. Benefits.

7 Assistance Programs .. Subsidies .. NON-TAXABLE INCOME .. 44 of Non-Taxable Income .. PROJECTED INCOME .. 45 RESTRICTED STOCK UNIT INCOME .. 45 ASSET UTILIZATION .. 46 NON-BORROWER HOUSEHOLD INCOME .. 47 GAPS IN EMPLOYMENT .. 47 TITLE: NICHE LENDING Guidelines Revision Date: 12/10/2018 Page 5 of TAX TRANSCRIPT POLICY .. 48 INELIGIBLE INCOME .. 48 8 LIABILITIES VERIFICATION & CALCULATION .. 49 DEFINITION OF TOTAL MONTHLY HOUSING PAYMENT .. 49 DEFINITION OF RECURRING OBLIGATIONS.

8 49 CONTINGENT LIABILITIES / PROJECTED OBLIGATIONS .. 51 Application of Contingent Liability Policies .. 51 Projected Obligations .. 52 Student Loan Obligations .. 52 9 ASSET VERIFICATION & CALCULATION .. 52 OVERVIEW .. 52 FULL DOCUMENTATION .. 52 BUSINESS ACCOUNTS .. 53 GIFT POLICY .. 53 IRS 1031 EXCHANGE (INVESTMENT ONLY) .. 54 LARGE DEPOSITS .. 54 STOCKS/BONDS/MUTUAL FUNDS (EXCLUDING RETIREMENT FUNDS) .. 55 VESTED RETIREMENT ACCOUNT FUNDS .. 55 INELIGIBLE ASSETS .. 55 10 VALUATION REQUIREMENTS.

9 56 APPRAISAL REQUIREMENTS .. 56 Appraisal Requirements .. 56 Appraisal Overview .. 56 Collateral Review Requirements .. 56 General Documentation Requirements .. 57 TRANSFERRED APPRAISALS .. 58 BORROWER OWNS PROPERTY LESS THAN 1 YEAR .. 58 DECLINING MARKET ADJUSTMENT .. 59 VERIFICATION OF OWNER-OCCUPANCY .. 59 11 APPENDICES .. 60 APPENDIX A - SAMPLE UNDERWRITER/BORROWER ATR ATTESTATION .. 60 APPENDIX B - IRS FORM Q CALCULATIONS .. 61 APPENDIX C - RESIDUAL INCOME REQUIREMENTS.

10 63 APPENDIX D NON-WARRANTABLE CONDO Guidelines .. 64 TITLE: NICHE LENDING Guidelines Revision Date: 12/10/2018 Page 6 of 641 Program Overview Introduction These Underwriting Guidelines are designed to provide responsible credit to borrowers currently underserved by traditional Agency/Government/Prime Jumbo markets. The Guidelines ensure that all borrowers demonstrate a clear ability to repay the loan while providing flexibility to the lender to provide solutions for borrowers. These Guidelines are for the purchase and/or refinancing of a primary residence, second home or investment property.