Amres ITIN Secure Guidelines

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ITIN Secure Mortgage Program
ITIN Secure Mortgage Program

Chapter 1 - General Loan File Delivery Requirements

1.1 - INTEREST CREDIT

Loans closed within the first seven (7) days of the month may reflect an interest credit to the borrower.

1.1.2 - PRINCIPAL CURTAILMENT

The maximum amount of the curtailment cannot exceed the lesser of $2,500 or 2% of the original loan amount.

1.1.3 - ASSUMABILITY

Fixed Rate loans are not assumable. ARM loans with assumability language are acceptable if the assumption is at the originator/lender’s discretion. In any case, the wording in the Note and Closing Disclosure must match.

1.1.4 - PROPERTY INSURANCE

1.1.4.1 - COVERAGE REQUIREMENTS

Property insurance for loans must protect against loss or damage from fire and other hazards covered by the standard extended coverage endorsement. The coverage must provide for claims to be settled on a replacement cost basis. Extended coverage must include, at a minimum: wind, civil commotion (including riots), smoke, hail, and damage caused by aircraft, vehicle, or explosion.

Policies that limit or exclude from coverage (in whole or in part) windstorm, hurricane, hail damage, or any other perils that normally are included under an extended coverage endorsement are not acceptable. Borrowers may not obtain property insurance policies that include such limitations or exclusions unless they are able to obtain a separate policy or endorsement from another commercial insurer that provides adequate coverage for the limited or excluded peril, or from an insurance pool that the state has established to cover the limitations or exclusions.

The hazard insurance coverage should be equal to the lesser of:

Replacement Cost Estimator from the property insurer or a 3rd party source (i.e., CoreLogic), if provided

Estimated cost to replace the dwelling from a recent appraisal, if provided

The unpaid principal balance of the mortgage

1.1.5 - COMMERCIAL GENERAL LIABILITY INSURANCE: 2-4 MIXED USE PROPERTIES (If Applicable / Currently suspended)

Not currently eligible on the ITIN product

1.1.6 - FLOOD INSURANCE

The Originator/Seller must ensure that the property securing the mortgage loan is adequately protected by flood insurance when required. Flood insurance coverage is required when a mortgage loan is secured by a property located in

a Special Flood Hazard Area (SFHA), or

a Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA). (See below for additional information.)

The Originator/Seller/servicer must determine whether or not the property is located in an SFHA by using the Standard Flood Hazard Determination form endorsed by FEMA. All flood zones beginning with the letter “A” or “V” are considered SFHAs.

The following table describes how to evaluate a property to determine if flood insurance is required. For the purpose of these requirements, the “principal structure” is the primary residential structure on the property securing the mortgage loan.

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The minimum amount of flood insurance required for first-lien mortgages is the lowest of:

100% of the replacement cost of the insurable value of the improvements,

The maximum insurance available through the NFIP, or

The unpaid principal balance (UPB) of the loan (or loan amount at the time of origination).

Minimum coverage must be equal to the dwelling coverage for hazard insurance, subject to the following:

1-4 Unit Properties: If dwelling coverage for hazard insurance is greater than $250,000 then flood coverage must be $250,000 as this is the maximum allowed per FEMA

1.1.6.1 - ACCEPTABLE FLOOD INSURANCE POLICIES

The flood insurance policy must be one of the following:

a standard policy issued under the NFIP; or

a policy issued by a private insurer as long as the terms and amount of coverage are at least equal to that provided under an NFIP policy based on a review of the full policy issued by a private insurer.

1.1.7 - TITLE POLICY REQUIREMENTS

Each loan delivered to Amres must include a title insurance policy. If the file contains the Commitment for Title Insurance, it must indicate the policy will be issued upon payment of the premium. By delivering a mortgage loan to Amres, the Originator/Seller represents and warrants that the loan is covered by the required title policy, issued by a licensed insurer, and includes any required endorsements. The title insurer and policy must conform to Fannie Mae® requirements.

1.1.7.1 - TERMS OF COVERAGE

The title insurance policy must ensure the title is acceptable and that the mortgage represents a first lien on a fee simple estate in the property. The title policy must also list all other liens and reflect they are subordinate. When the borrower is an Entity, the title insurance policy must provide protection regarding whether the signatories had the authority to validly execute the mortgage document. The policy must be written on one of the following forms:

The 2006 American Land Title Association (ALTA) standard form.

An ALTA short form if it provides coverage equivalent to the 2006 ALTA standard form.

In states in which standard ALTA forms of coverage are, by law or regulation, not used, the state-promulgated standard or short form which provides the same coverage as the equivalent ALTA form.

For Adjustable-Rate Mortgages, the policy must include ALTA Endorsement 6-06.

1.1.7.2 - EFFECTIVE DATE OF COVERAGE

The effective date of the title insurance coverage written on forms that do not provide the gap coverage included in the 2006 ALTA policies may be no earlier than the later of the date of the final disbursement of loan proceeds or the date the mortgage was recorded. Because the 2006 ALTA forms provide protection for the time between loan closing and recordation of the mortgage, policies written on those forms may be effective as of loan closing.

1.1.7.3 - AMOUNT OF COVERAGE

The amount of title insurance coverage must at least equal the original principal amount of the mortgage.

1.1.7.4 - MORTGAGE ELECTRONIC REGISTRATION SYSTEM (MERS)

If a mortgage is registered with MERS and is originated naming MERS as the original mortgagee of record, solely as nominee for the Originator/Seller named in the security instrument and the Originator/Seller's successors and assigns, then the "insured mortgage" covered by the title insurance policy must be identified in the title insurance policy as the security instrument given to MERS, solely as nominee for the Originator/Seller and Originator/Seller's successors and assigns. However, under no circumstances may MERS be named as the insured of a title policy.

1.1.7.5 - OTHER REQUIREMENTS

The title insurance coverage must include an environmental protection lien endorsement (ALTA Endorsement 8.1-06 or equivalent state form providing the required coverage).

References are to the ALTA 2006 form of endorsement, but state forms may be used in states in which standard ALTA forms of coverage are, by law or regulation, not used, provided that those endorsements do not materially impair the protection to Amres. As an alternative to endorsements, the requisite protections may be incorporated into the policy. Title policies may not include the creditors’ rights exclusion language that ALTA adopted in 1990.

1.1.7.6 - CHAIN OF TITLE

All files must contain a 24-month title history. Transfer date, price, and buyer and Originator/Seller names should be provided for any transfers that occurred within the past 24 months.

1.1.7.7 - CONDOMINIUM OR PLANNED UNIT DEVELOPMENTS (PUD)

The title insurance policy for a condominium or PUD unit mortgage must describe all components of the unit estate.

For condominium unit mortgages, an ALTA 4-06 or 4.1-06 endorsement or its equivalent is required. For PUD unit mortgages, an ALTA 5-06 or 5.1-06 endorsement or its equivalent is required. These endorsements must be attached to each policy or incorporated into the text of the policy.

If the unit owners own the common areas of the project as tenants in common, the policy for each unit’s mortgage must reflect that ownership. If the homeowners' association (HOA) owns the common elements, areas, or facilities of the project separately, the title insurance on those areas must insure that ownership.

This title policy must show that title to the common elements, areas, or facilities is free and clear of any objectionable liens and encumbrances, including any statutory or mechanic’s liens for labor or materials related to improvements on the common areas that began before the title policy was issued.

The title policy must protect Amres by insuring:

that the mortgage is superior to any lien for unpaid common expense assessments. (In jurisdictions that give these assessments a limited priority over a first mortgage lien, the policy must provide assurance that those assessments have been paid through the effective date of the policy.)

against any impairment or loss of title of the first lien caused by any past, present, or future violations of any covenants, conditions, or restrictions of the master deed for the project. (It must specifically insure against any loss that results from a violation that existed as of the date of the policy.)

that the unit does not encroach on another unit or on any of the common elements, areas, or facilities. (The policy also must insure that there is no encroachment on the unit by another unit or by any of the common elements, areas, or facilities.)

that the mortgage loan is secured by a unit in a condominium project that has been created in compliance with the applicable enabling statutes.

that real estate taxes are assessable and lienable only against the individual condominium unit and its undivided interest in the common elements, rather than against the project as a whole.

that the owner of a PUD unit is a member of the homeowners' association, and that the membership is transferable if the unit is sold.

1.1.7.8 - TITLE EXCEPTIONS

Amres will not close or purchase a mortgage secured by property that has an unacceptable title impediment, particularly unpaid real estate taxes and survey exceptions.

If surveys are not commonly required in particular jurisdictions, the Originator/Seller must provide an ALTA 9 Endorsement. If it is not customary in a particular area to supply either the survey or an endorsement, the title policy must not have a survey exception.

1.1.7.9 - MINOR IMPEDIMENTS TO TITLE

Title for a property that secures a conventional mortgage is acceptable even though it may be subject to the following conditions, which Amres considers minor impediments:

Customary public utility subsurface easements that were in place and completely covered when the mortgage was originated, as long as they do not extend under any buildings or other improvements.

Above-surface public utility easements that extend along one or more of the property lines for distribution purposes or along the rear property line for drainage purposes, as long as they do not extend more than 12 feet from the property lines and do not interfere with any of the buildings or improvements or with the use of the property itself

CHAPTER 2 - ITIN MORTGAGE

The ITIN Program offers loans with features beyond the criteria established for Qualified Mortgages. Features include alternative income documentation for self-employed borrowers, and alternative identification documentation or borrowers otherwise not eligible for traditional agency mortgage loans. ITIN loans submitted to Amres must meet the criteria of the current published Eligibility Guide as of the file submission date for review.

SECTION 2 - PRODUCT MATRACIES (12/31/22)

(See attached Loan Matracies Document)

2.1.0 - ELIGIBLE PRODUCTS (12/31/2022)

The following loan products are eligible for purchase by Amres:

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2.1.1 - QUALIFYING PAYMENT

The qualifying payment is based upon the principal and interest payment along with 1/12th of the annual real estate taxes, property insurance, any other insurance, and any association dues. The qualifying payment is based on the amortization term.

2.1.3 - LOAN AMOUNTS

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2.1.4 - MINIMUM CREDIT SCORE

2.1.5 - SOLAR PANEL REQUIREMENTS

Properties with Solar Panels The ownership and debt financing structures commonly found with solar panels are key to determining whether the panels are third-party owned, personal property of the homeowner, or a fixture to the real estate. Common ownership or financing structures include:

Borrower-owned panels,

Leasing agreements,

Separately financed solar panels (where the panels serve as collateral for debt distinct from any existing mortgage); or

Power purchase agreements

Properties with solar panels and other energy efficient items financed with a PACE loan are not eligible for delivery if the PACE loan is not paid in full prior to or at closing. Originators/lenders are responsible for determining the ownership and any financing structure of the subject property’s solar panels in order to properly underwrite the loan and maintain first lien position of the mortgage. When financing is involved, Originators/lenders may be able to make this determination by evaluating the borrower’s credit report for solar-related debt and by asking the borrower for a copy of all related documentation for the loan.

The originator/lender must also review the title report to determine if the related debt is reflected in the land records associated with the subject property. If insufficient documentation is available and the ownership status of the panels is unclear, no value for the panels may be attributed to the property value on the appraisal unless the originator/lender obtains a UCC “personal property” search that confirms the solar panels are not claimed as collateral by any non-mortgage originator/lender.

Note: A Uniform Commercial Code (UCC) financing statement that covers personal property and is not intended as a “fixture filing” must be filed in the office identified in the relevant state’s adopted version of the UCC.

The following sections summarize some of the specific underwriting criteria that must be applied depending on the details of any non-mortgage financing for the solar panels.

Scenario 1 – Solar Panel(s) Affixed to Real Estate

If the solar panels are financed and collateralized – the solar panels are collateral for the separate debt used to purchase the panels, but they are a fixture to the real estate because a UCC fixture filing has been filed for the panels in the real estate records.

The originator/lender must:

Obtain and review the credit report, title report, appraisal, and/or UCC fixture filing, related promissory note and related security agreement that reflects the terms of the secured loan;

Include the debt obligation in the DTI ratio calculation;

Provided that the panels cannot be repossessed for default on the financing terms, instruct the appraiser to consider the solar panels in the value of the property (based on standard appraisal requirements); and

Include the solar panels in other debt secured by the real estate in the CLTV ratio calculation because a UCC fixture filing is of record in the land records.

Note: If a UCC fixture filing is in the land records as a priority senior to the mortgage loan, it must be subordinated.

Scenario 2 – Solar Panel(s) Not Affixed to Real Estate

Financed and collateralized – the solar panels are reported to be collateral for separate (non-mortgage) debt used to purchase the panels, but do not appear on the title report. The originator/lender must:

Obtain and review documentation sufficient to confirm the terms of the secured loan (such as copies of the credit report, title report, and any UCC financing statement, related promissory note or related security agreement);

Include the debt obligation in the DTI ratio calculation;

Instruct the appraiser not to provide contributory value of the solar panels towards the appraised value because the panels are collateral for another debt;

Not include the panels in the LTV ratio calculation; and

Not include the debt in the other debt secured by the real estate in the CLTV ratio calculation since the security agreement of any UCC financing statement treat the panels as personal property not affixed to the home.

2.1.6 - PRIVATE MORTAGEGE INSURANCE (PMI)

Private Mortgage Insurance (PMI) is not required on ITIN Loans.

2.1.7 - LOAN DOCUMENTATION

2.1.7.1 - NOTE AND SECURITY INSTRUMENT FORMS

For consumer loan transactions, the current version of the Uniform Residential Loan Application (URLA) should be used. For business purpose loan transactions (if applicable), the originator/lender may utilize the URLA or similar originator/lender application.

Available Fannie Mae® security instruments, notes, riders/addenda, and special purpose documents can be used for owner-occupied or investment property loan documentation. The Fannie Mae® forms are available at https://singlefamily.fanniemae.com/selling-and-servicing-guide-forms-and-communications. In instances when Fannie Mae® doesn’t offer current documentation, a document vendor, such as Doc Magic or Ellie Mae should be used to obtain forms. For business purpose loans (Investment Property Only/If applicable), Amres offers a business purpose document set consisting of: Note, Loan Agreement, Personal Guaranty, and Prepayment Rider, Confession of Judgment. These documents can be accessed via the Amres operations team upon inquiry

2.1.7.2 - HYBRID CLOSING

Amres is not currently closing or purchasing ITIN loans that are closed with any form or electronic documents for the purpose of closing the loan including Hybrid closings.

2.2.0 - AGE OF DOCUMENT REQUIREMENTS

2.2.1 - CREDIT REVIEW DOCUMENTATION

The following documents may not be more than 90 days old at closing (the date the Note is signed):

Income verification / pay stubs

Mortgage /rental verification

Asset documents / bank statements

Credit Report

The following documents may not be more than 90 days old at closing (the date the Note is signed):

Title commitment / preliminary report / binder

Any credit review documents exceeding these timeframes must be updated.

2.2.2 - APPRAISAL

Residential Appraisals (1-4 units): The appraisal must be dated within 365 days of the Note date. Recertification of value required if the report would exceed 120 days of the Note Date (recertification requires new comps and new interior photos). See complete appraisal requirements in Section 3.4.1.2 – Appraisal Requirements.

Commercial Appraisals (2-4 mixed use / if applicable): Appraisals dated fewer than 120 days prior to the note date are acceptable. After 120 days, a new appraisal is required.

2.2.3 - CLARIFICATION

It may be necessary for the applicant to explain or clarify information provided on the application or for a third-party to clarify information provided on a verification request form. This should be completed in writing and included in the underwriting file.

2.3.0 - BORROWER ELIGIBILITY

2.3.1 - NON-PERMANENT RESIDENT ALIEN

An individual admitted to the United States as a lawful temporary resident. Lawful non-permanent residents are legally accorded the privilege of residing temporarily in the United States.

Eligibility Requirements:

Must have a valid ITIN/SSN

Tax-Paying Identity - is the identity used to evaluate the mortgage loan. This is the identity that is used for filing federal income tax returns. This may be an Individual Tax Identification Number (ITIN) or Social Security Number (SSN). If this is an SSN, it may also be a Wage-Earning Identity (see Primary Income).

Wage-Earning Identity - is the identity(ies) under which a borrower has earned W-2 income. It is possible that a borrower will have more than one Wage Earning Identity.

DACA eligible with ITIN/SSN

Asylum applicants eligible with ITIN/SSN and evidence of application

If multiple borrowers, one borrower must have ITIN. Other applicant(s) may have SSN.

Ineligible Restrictions:

Irrevocable or Blind Trusts

Inter-Vivos Revocable Trust

Limited partnerships, general partnerships, corporations

Power of Attorney (POA) not allowed

Documentation Requirements:

Unexpired government photo ID (passport, visa, Matricula card, etc.)

The identification number provided must be their Tax-Paying Identity. These borrowers may have other identities, such as a Wage-Earning Identity. Proof of legal residency is not required.

SSN allowed only with proof of prior ITIN documentation

Supplemental documentation: ITIN card or letter from IRS or a valid SSN

IRS form W7 is not acceptable evidence if the ITIN letter is not provided, or the ITIN letter submitted is not legible.

AUTOMATIC PAYMENT AUTHORIZATION (ACH)

Automatic Payment Authorization (ACH) Form is required for all ITIN borrowers. Funds must be from a U.S. Bank. The executed (ACH) enrollment form must be included in the closed loan submission package. The (ACH) enrollment form must include the bank routing number, account number, and account type. Borrowers may select a date within the grace period stated on the Note.

2.3.2 - NON-OCCUPANT CO-BORROWERS

Non-occupant borrowers are credit applicants on a principal residence transaction who do not occupy the subject property.

Non-occupant borrowers are ONLY permitted if they have legal permanent residency in the US.

When non-occupant income used a reduction of 5% LTV is required with a maximum 75% LTV is permitted.

Occupying borrower is required to have a 660 or better FICO

The Non-occupant borrower’s income is limited to Standard FULL Documentation only.

Borrower(s) and co-borrower(s) must complete and sign a Non-Occupant Co-Borrower Certification.

Occupying borrower(s) must have a DTI ratio of 60% or less. This excludes the income/debts of non-occupant borrower(s), and must supply at least 50% of the qualifying income.

Purchase transactions only unless it’s a rate/term refi due to inheritance.

The non-occupant co-borrower must be included on title of the subject property

2.3.3 - FIRST-TIME HOMEBUYERS

An individual is to be considered a first-time home buyer who (1) is purchasing the security property; (2) will reside in the security property as a principal residence; and (3) had no ownership interest (sole or joint) in a residential property during the three-year period preceding the application date of the security property. Note: An individual who is a displaced homemaker or single parent also will be considered a first-time home buyer if he or she had no ownership interest in a principal residence (other than a joint ownership interest with a spouse) during the preceding three-year time period.

2.3.4 - TITLE VESTING AND OWNERSHIP

Ownership Must be fee simple title. Leasehold title is not permitted. Title must be in the borrower’s name (Owner-occupied property) at the time of application for refinance transactions.

Eligible forms of vesting are:

Individuals

Joint tenants

Tenants in common

Ineligible forms of vesting are:

Land trusts

Blind trusts

IRAS

Title vesting in an inter vivos revocable trust is not permitted

2.3.4.1 - POWER OF ATTORNEY

A limited Power of Attorney is currently not acceptable.

2.3.5 - OCCUPANCY TYPES

Primary Residence – A primary residence is a property that the borrower occupies as his or her principal residence. May also be referred to as owner-occupied.

Second Home – A second home is a property occupied by the borrower for some portion of the year. The following criteria applies:

Restricted to one-unit dwellings

Must be suitable for year-round occupancy

Must be in an area considered to be of vacation characteristics

The borrower must have exclusive control over the property. Cannot be subject to any agreements giving control over occupancy to a management firm, rental pools, or timeshare arrangement.

Only permitted if owns a primary residence

Must be at least an hour minimum from primary residence

Only one second home is permitted

Investment Property – An investment property is owned but not occupied by the borrower.

2.3.6 - BORROWER STATEMENT OF OCCUPANCY

The borrower must acknowledge the intended purpose of the subject property (“Primary Residence”, “Second Home”, or “Investment”) by completing and signing the appropriate sections of the “Occupancy Certification”.

Underwriters must address any red flags that may indicate the property is not intended exclusively for investment purposes. Common occupancy red flags include:

Subject property value exceeds the value of the borrower’s primary residence.

The borrower is currently renting his/her primary residence.

Subject property could reasonably function as a second home.

2.3.7 - BORROWER STATEMENT OF BUSINESS PURPOSE (INVESTMENT PROPERTY)

All Investor Occupancy transactions require the borrower to acknowledge the loan is a business purpose loan by completing and signing the appropriate sections of the “Borrower Certification of Business Purpose” form. Amres reserves the right to decline any loan that may indicate the property is not intended exclusively for investment purposes.

Common occupancy red flags include, but are not limited to:

Subject property value significantly exceeds the value of the borrower’s primary residence.

The borrower is a first-time homebuyer and currently living rent free or renting his/her primary residence.

Subject property could reasonably function as a second home.

Borrower documents show subject property as current residence

2.4.0 - TRANSACTION TYPES

2.4.1 - ELIGIBLE TRANSACTIONS

2.4.1.1 - PURCHASE

Proceeds from the transaction are used to finance the acquisition of the subject property.

LTV/CLTV is based upon the lesser of the sales price or appraised value.

Assignment of contract or finder’s fees reflected on the purchase contract are not eligible to be included in the sales contract price or associated with the LTV/CLTV calculation.

The loan file must include a fully executed agreement (purchase contract) of sale and counteroffer (if applicable) reflecting the following:

The purchase contract cannot be expired

Borrower as the purchaser of the property

Originator/Seller as the vested owner on title

Correct sales price

Amount of down payment

Closing dates

Concessions and Originator/Seller contributions

2.4.1.2 - RATE/TERM REFINANCE

Proceeds from the transaction are used to:

Pay off an existing first mortgage loan and any subordinate loan used to acquire the property.

Pay off any subordinate loan not used in the acquisition of the subject property, provided one of the following apply:

Closed-end loan, at least 12 months of seasoning has occurred.

HELOC, at least 12 months of seasoning has occurred, and total draws over the past 12 months are less than $2,000. (For business purpose transactions, any draw over the life of the loan may not have been used for personal use. Business purpose transactions will require a draw history schedule, along with an attestation from the borrower, in the credit file, that none of the advances were used for personal/consumer use).

Buy out a co-owner pursuant to either a court executed agreement or a private agreement where both parties have legal representation and a formal binding legal agreement.

Pay off an installment land contract executed more than 12 months from the loan application date.

Other considerations:

Cash back in an amount not to exceed the lesser of 2% of the new loan amount or $2,000 can be included in the transaction.

If the subject property was acquired greater than six (6) months from application date, the appraised value will be used to determine LTV/CLTV. If the property was acquired less than or equal to six (6) months from the application date, the lesser of the current appraisal value or previous purchase price plus documented improvements (if any) will be used to determine LTV/CLTV. The purchase settlement statement and any invoices for materials/labor will be required.

Refinance of a previous loan that provided cash out, as measured from the previous note date to the application date, and is seasoned less than 12 months, will be considered a cash out refinance.

Refinances of Seller-Financed Real Estate Loans:

Contract must be executed prior to the date of the loan application,

Contract must be executed by both parties and a copy of the of contract and notice of payoff(s) are required;

Contract must be notarized for both parties or recorded

Borrower must provide evidence that the sale took place on the date of the contract (i.e. evidence of down payment, settlement statement). Subject to underwriter review.

Primary Residence, Second Home and Investment Properties are eligible collateral property types

LTV based on lesser of appraised value or original purchase price or purchase price plus improvements

Incidental cash back not to exceed $2,000.

Six (6) full months of housing payment history must be verified with 6 months cancelled checks or equivalent financial documentation (bank statements, wire transfers, etc.)

If contract was executed less than 6 months prior to the date of the loan application, the borrower’s previous housing payment history (covering 6 months) must also be verified in addition to all payments made on the loan

2.4.1.3 - CASH-OUT

A refinance that does not meet the definition of a rate/term transaction is considered cash-out.

See Loan/LTV Matrices for maximum cash-out amounts and restrictions.

A mortgage secured by a property currently owned free and clear is considered cash-out.

The payoff of delinquent real estate taxes (60 days or more past due) is considered cash-out.

If the cash-out is for personal, family, or household use, the loan must also meet all applicable federal and state requirements of a consumer loan transaction even if the borrower is a company or the loan was initially intended for business purposes, including but not limited to the requirements of the Truth in Lending Act (15 U.S.C. § 1601 et seq.), Real Estate Settlement Procedures Act (12 U.S.C. § 2601 et seq.), Gramm-Leach Bliley Act (15 U.S.C. §§ 6802-6809), Secure and Fair Enforcement Mortgage Licensing Act (12 U.S.C. § 5601 et seq.) and Homeowners Protection Act (12 U.S.C. § 4901 et seq.).

Cash-out eligible to satisfy the reserve requirements.

Loans not eligible for cash-out:

Primary Residence or Second Home properties listed for sale in the past six (6) months.

Investment properties listed for sale in the past six (6) months, unless a three (3) year prepay penalty, per requirements in Section 4.4.7 Prepayment Penalty are met.

There has been a prior cash-out transaction within the past six (6) months

Payoff of a Land Contract/Contract for Deed

Non-Owner Occupied investment property transactions when proceeds from the loan transaction are used for consumer purpose, i.e., payoff personal debt, personal tax lien(s), personal judgments, personal collection, or lines of credit secured by the subject property.

Cash-Out Seasoning is defined as the time difference between application date of the new loan and the property acquisition date.

A minimum borrower seasoning requirement of six (6) months is required for a transaction to be eligible for cash-out with the exception of delayed financing.

For properties owned 12 months or longer, the LTV/CLV is based upon the appraised value.

If the cash-out seasoning is less than 12 months, but greater than 6 months, the transaction property value is limited to the lower of the current appraised value or the property’s purchase price plus documented improvements.

Cash-out seasoning of greater than six (6) months but less than twelve (12) months is allowed to use the appraised value with the following restriction:

The Originator/Seller has documented that the borrower acquired the property through an inheritance, or was legally awarded the property through divorce, separation, or dissolution of a domestic partnership.

2.4.1.4 - DELAYED FINANCING

Delayed purchase financing is eligible when a property was purchased by a borrower for cash within 180 days of the loan application.

The original purchase transaction was an arms-length transaction.

The source of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property).

The maximum LTV/CLTV ratio for the transaction is based upon the lower of the current appraised value or the property’s purchase price plus documented improvements.

The preliminary title search or report must confirm that there are no existing liens on the subject property

The transaction is considered rate/term and rate/term pricing adjustors apply

The new loan amount can be no more than the actual documented amount of the borrower’s initial investment subject to the maximum LTV/CLTV for cash-out transactions.

Fannie Mae delayed financing rules apply unless addressed otherwise in this section (ie. Rate/term)

2.4.2 - LISTING SEASONING

For all cash-out refinances:

Primary/Second Home: Properties previously listed for sale must be seasoned at least six (6) months from the listing contract expiration date to the loan application date.

Investment properties: A listing expiration of less than six (6) months is permitted with a prepayment penalty. If a property is listed for sale, the listing must be cancelled prior to the note date.

2.4.3 - NON-ARM’S LENGTH TRANSACTIONS

2.4.3.1 - NON-ARM’S LENGTH TRANSACTION

A non-arm's length transaction occurs when the borrower has a direct relationship or business affiliation with subject property builder, developer, or seller. Examples of non-arm’s length transactions include family sales, property in an estate, employer/employee sales, and flip transactions.

When the property seller is a corporation, partnership, or any other business entity, it must be ensured that the borrower is not an owner of the business entity selling the property.

A non-arm’s length transaction is not intended to bail out a family member who has had difficulties making their mortgage payment. A thorough review of the title report in these cases is required, as well as the payment history pattern (verification of the seller’s mortgage (VOM)).

2.4.3.2 - ELIGIBLE NON-ARM’S LENGTH TRANSACTIONS

Renter(s) purchasing from landlord.

12 months of cancelled checks to prove timely payments are required along with sourcing and documenting any initial down payment applied at the time of contract.

A verification of rent (VOR) is not acceptable.

Purchase between family members.

Gift of Equity requires a gift letter, and the equity gift credit is to be shown on the CD. Donor may not reside in the subject property currently and the subject property may not be delinquent. Only permitted on 80 LTV or below.

Must provide a 12-month mortgage history on the existing mortgage securing the subject property, confirming the Family Sale is not a foreclosure bailout.

Non-occupant co-borrowers are not permitted

Borrower(s) must source reserve requirements from their own funds

2.4.3.3 - NON-ARM’S-LENGTH RESTRICTIONS

Primary residences only.

Borrower to provide verification of earnest money deposit.

Maximum LTV/CLTV of 80%.

For-Sale-By-Owner (FSBO) transactions must be arm’s-length.

Employer to employee sales or transfers are not allowed.

Property trades between buyer and Originator/Seller are not allowed.

Commission earned by buyer/borrower cannot be used for down payment, closing costs, or monthly PITIA reserves.

2.4.4 - INTERESTED PARTY CONTRIBUTINS (ORIGINATOR/SELLER CONCESSIONS)

Owner Occupied

If property is not listed for sale on open market or if the sale price is greater than the list price, then the maximum assist is 3%

Maximum contribution:

6% for LTVs < 80%

4% for LTV > 80%

Non-Owner Occupied

9% for LTVs < 60%

2% for LTVs < 70%

All Interested Party Contributions must be properly disclosed in the sales contract, appraisal, loan estimate and closing disclosure and be compliant with applicable federal, state, and local law.

Interested party contributions include funds contributed by the property Originator/Seller, builder, real estate agent/broker, mortgage originator/lender, or their affiliates, or any other party with an interest in the real estate transaction.

Interested party contributions may only be used for closing costs and prepaid expenses (Financing Concessions) and may never be applied to any portion of the down payment or contributed to the borrower’s financial reserve requirements. If an Interested Party Contribution is present, both the appraised value and sales price must be reduced by the concession amount that exceeds the limits referenced above.

2.4.5 - ESCROWS - IMPOUND ACCOUNTS

Escrow funds/impound accounts are required to be established for all loans funded/purchased by Amres. Escrows may be established for funds collected by the seller, originator or servicer as required to be paid under the security instrument. Escrow funds include, but are not limited to, taxes, insurance (hazard, flood, and mortgage) premiums, water/sewer taxes and ground rents.

2.4.6 - SECONDARY FINANCING

Secondary financing is not permitted.

2.4.7 - PREPAYMENT PENALTY

Investment Property Only Where permitted by applicable laws and regulations on an investment property, a prepayment charge may be assessed in the period between one (1) and five (5) years following the execution date of the Note. The following prepayment structures may be used (note that a hard 5% annual pre-pay will apply by default. Alternative options listed below are permitted where state requirements dictate or if requested along with appropriate LLPA’s):

A fixed percentage of no less than 3% - The prepayment charge will be equal to a fixed percentage and applied to any curtailment or the entire outstanding principal balance during the prepay period. The charge applies to loans that pay off due to sale or refinance. This is applicable to 1, 2, and 3 year PPP’s.

A fixed percentage of no less than 5% - The prepayment charge will be equal to a fixed percentage and applied to any curtailment or the entire outstanding principal balance during the prepay period. The charge applies to loans that pay off due to sale or refinance. This is applicable to 3 and 5 year PPP’s.

Declining structures that do not exceed 5% and do not drop below 3% in the first 3 years. For example:(5%/4%/3%/3%/3%) or (5%/4%/3%/2%/1%) - The prepayment charge will be equal to the percentage in effect and applied to any curtailment or the entire outstanding principal balance during the prepay period. The charge applies to loans that pay off due to sale or refinance. This is applicable to 3 and 5 year PPP’s only.

See rate sheet for further detail. The prepayment penalty can be disclosed within the body of the Note or in a separate rider.

The following state restrictions apply:

Prepayment penalties are not allowed in AK, KS, MI, MN, NM, OH, and RI.

Prepayment penalties are not allowed on loans vested to individuals in IL and NJ.

Pennsylvania - Prepayment penalties are not allowed on loan balances less than an adjusted value as determined by the Dept. of Banking & Securities. For calendar year 20222 the amount is $278,204.

Only declining prepayment penalty structures are allowed in MS.

SECTION 3 - CREDIT

3.1.0 -CREDIT REPORTS

A credit report is required for each individual borrower, including any member of an entity providing a personal guaranty. The credit report should provide merged credit data from the three major credit repositories: Experian, TransUnion, and Equifax. Either a three-bureau merged report, or a Residential Mortgage Credit Report is required.

The credit report used to evaluate a loan may not reflect a security freeze. If the borrower(s) unfreeze credit after the date of the original credit report, a new tri-merged report must be obtained to reflect current and updated information from all repositories.

3.1.1 - GAP CREDIT REPORTING

A gap credit or Undisclosed Debt Monitoring report is required no more than 10 days prior to loan closing or any time after closing. Any new debt must be included in determining the DTI ratio.

3.1.2 - FRAUD CHECK

Data integrity is crucial to quality loan file delivery and mitigation of fraud risk. All borrowers must be included in the fraud analysis performed by an automated fraud and data check vendor solution (i.e., Fraud Guard, CoreLogic, DataVerify, TransUnion TLOxp, LexisNexis: SmartLinx, Instant ID, or other industry recognized fraud and data vendor). A copy of the findings report from the vendor must be provided in the loan file with all “high” alerts, or “red flags” addressed and/or cleared by the Originator/Seller (originator/lender).

Originator/Sellers may clear “high” alerts or “red flags” directly through the vendor solution or with an attestation. The attestation must address each “high” alert, or “red flag” noted in the fraud report. Amres may request additional documentation to address high fraud risk.

3.1.3 - CREDIT INQUIRIES

Creditor must obtain verification from borrower in the form of a signed statement attesting that their current obligations are accurate. Additionally, any credit inquiries listed on the report within 90 days of the report date must be explained. If new credit was extended, borrowers must provide documentation on the current balance and payment. If no credit was extended, borrower must state the purpose of the inquiry. Originator/Sellers must inform borrowers that they are obligated to inform the Originator/Seller of any new extension of credit, whether unsecured or secured, that takes place during the underwriting process and up to the consummation of the loan.

3.1.4 - HOUSING HISTORY

A 12-month housing payment (mortgage or rental) history is required for the Amres ITIN Loan. A borrower’s combined mortgage or rental history is used for program or grade eligibility.

3.1.4.1 - MORTGAGE VERIFICATION

A 12-month mortgage history is required for all financed properties owned by the borrower

Current means the borrower has made all mortgage payments up to and including the month prior to the note date. If the credit report does not reflect the current payment history, one of the following additional documents is required:

A loan payment history from the servicer or third-party verification service,

A payoff statement (for mortgages being refinanced),

The latest mortgage account statement from the borrower, or

A verification of mortgage.

For properties owned free and clear, a property profile report or similar document showing no liens against the property should be included in the credit file. Any balloon notes with an expired maturity date exceeding 30 days requires an extension to avoid being counted as delinquent.

If a borrower’s mortgage history is not reported on the credit report, a VOM must be provided. Any VOM completed by a private-party Originator/Seller, or any non-institutional originator/lender must be supported by alternative documentation showing the most recent 6-month history (cancelled checks, mortgage statements including payment history, etc.) and also must have a copy of the promissory note.

In addition, if the subject transaction is secured by a non-institutional originator/lender, the mortgage payoff statement should be reviewed to determine that no late fees or delinquent interest is included in the payoff amount. For properties owned free and clear, a property profile report or similar document showing no lien against the property should be provided in the credit file.

Rolling late payments are not considered a single event. Each occurrence of a contractual delinquency is considered individually for loan eligibility.

3.1.4.2 - RENTAL VERIFICATION

A 12-month rental history is required for the Amres ITIN Loan when the borrower is renting their current primary residence. The following documents are required:

A verification of rent (VOR)

A third-party VOR is required for any file when the borrower is currently renting.

Any VOR completed by a private party or any non-institutional landlord must be supported by alternative documentation showing the most recent 6-month history (cancelled checks, rental statements including payment history, etc.).

3.1.4.3 - LIVING RENT-FREE

Borrowers who live rent-free or without a complete 12-month housing history are allowed, with the following restrictions:

DTI may not exceed 38%

Maximum LTV is reduced by 10% per matrix

Any available portion of a 12-month housing history must be paid as agreed.

Borrower(s) who own their primary residence free and clear are not considered living rent-free.

Borrower(s) who sold a primary residence within the past six (6) months and are currently residing rent-free until subject transaction closes are not considered living rent-free.

3.1.5 - CONSUMER CREDIT

3.1.5.1 - INSTALLMENT DEBT

Installment debt is a monthly obligation with fixed payments and terms. Payments on installments must be included in the borrower’s debt-to-income (DTI) ratio.

Payments can be excluded if there are 10 or fewer monthly payments remaining to pay the debt in full. If the payment is substantial and exceeds 5% of the borrower’s qualifying income, the overall transaction should be reviewed to ensure the remaining payments will not impact the borrower’s ability to handle the new mortgage payment.

Installment debt paid in full or prior to closing can be excluded from the debt-to-income ratio. Supporting documentation, such as a credit supplement or direct verification from the creditor, must be obtained as evidence the debt has been paid in full.

3.1.5.2 - LEASE PAYMENTS

Lease payments must be considered as recurring monthly debt obligations and included in DTI ratio calculation. This is regardless of the number of months remaining on the lease. This is because the expiration of a lease agreement for rental housing or an automobile typically leads to either a new lease agreement, the buyout of the existing lease, or the purchase of a new vehicle or house.

3.1.5.3 - STUDENT LOANS

If a monthly student loan payment is provided on the credit report, the Originator/Seller may use that amount for qualifying purposes. If the credit report does not reflect the correct monthly payment, the Originator/Seller may use the monthly payment that is on the student loan documentation (the most recent student loan statement) to qualify the borrower. If the credit report does not provide a monthly payment for the student loan, or if the credit report shows $0 as the monthly payment, the Originator/Seller must determine the qualifying monthly payment. For deferred loans or loans in forbearance, the Originator/Seller may calculate:

a payment equal to 1% of the outstanding balance (even if this amount is lower than the actual fully amortizing payment), or

a fully amortizing payment using the documented loan repayment terms.

Income based repayment plans including $0.00 monthly payments may be considered on a case-by-case basis but may have rate adjustments

3.1.5.4 - DEFERRED INSTALLMENT DEBT

Deferred installment debts must be included as part of the borrower’s recurring monthly debt obligations. For deferred installment debts other than student loans, if the borrower’s credit report does not indicate the monthly amount that will be payable at the end of the deferment period, the Originator/Seller must obtain copies of the borrower’s payment letters or forbearance agreements so that a monthly payment amount can be determined and used in calculating the borrower’s total monthly obligations.

3.1.5.5 - REVOLVING DEBT

Revolving debt is open-ended debt in which the principal balance may vary from month to month. The minimum required payment, as stated on the credit report or current account statement, should be used to calculate the debt-to income ratio. If no payment is stated on the credit report, the greater of $10 or 5% of the current balance should be included in the DTI ratio calculation

Equity lines of credit secured by real estate should be included in the housing expense. If the credit report does not show a minimum payment amount, the Originator/Seller must use 5% of the outstanding balance to be included in the DTI ratio calculation unless documentation can be provided from the creditor and supplied as a credit supplement.

Revolving accounts can be paid off prior to or at closing in order to exclude the payment from the debt ratio. Supporting documentation, such as a credit supplement or direct verification from the creditor, must be obtained as evidence the debt has been paid in full.

Any non-mortgage account can be no more than 30 days delinquent at time of application. Any delinquent account must either be brought current or paid off at closing.

All mortgage accounts must be current at application and remain paid as agreed through closing

3.1.5.6 - OPEN 30-DAY CHARGE ACCOUNTS

For open 30-day charge accounts that do not reflect a monthly payment on the credit report, or 30-day accounts that reflect a monthly payment that is identical to the account balance, Originators/lenders must verify borrower funds to cover the account balance. The verified funds must be in addition to any funds required for closing costs and reserves. Otherwise, 3.5% of outstanding balance will be used for qualifying purposes

3.1.5.7 - TIMESHARES

Timeshare obligations will be treated as a consumer installment loan

3.1.5.8 - BUSINESS DEBT

A business debt is a financial obligation of a business but may also be the responsibility of the business owner, making that person also liable for the debt. If the debt is reflected on the borrower’s personal credit report, the borrower is personally liable for the debt, and it must be included in the debt-to-income ratio. When a self-employed borrower claims that a monthly obligation that appears on his or her personal credit report (such as a Small Business Administration loan) is being paid by the borrower’s business, the originator/lender must confirm that it verified that the obligation was actually paid out of company funds to exclude the debt. Any of the following supporting documentation can be included in the credit file to exclude business debt:

Most recent six (6) months of cancelled checks drawn against the business account (or full bank statements supporting electronic payments)

Tax returns reflecting the business expense deduction (must be clearly the same debt or this is ineligible)

Business bank account statement showing assets remaining after funds to close and reserve requirements are deducted, with a balance greater than or equal to the balance of the debt.

If the debt is less than six (6) months old, the payment must be included in the DTI ratio.

3.1.5.9 - CONTINGENT LIABILITY ON COSIGNED OBLIGATIONS (DEBT PAID BY OTHERS)

Contingent liability applies, and the debt must be included in the underwriting analysis, if an individual applying for a mortgage is a cosigner/co-obligor on:

Car loan

Student loan

Mortgage

Any other obligation

If the Originator/Seller obtains proof that the borrower is not the party who is repaying the debt, the Originator/Seller may exclude the debt. In order to exclude debts from the borrower’s DTI ratio, the Originator/Seller must obtain the most recent 6 (six) months' canceled checks (or bank statements) from the other party making the payments that document a 6 (six) month payment history with no delinquent payments.

3.1.5.10 - CONSUMER CREDIT CHARGE-OFFS AND COLLECTIONS

Delinquent credit, such as charge-offs of non-mortgage accounts and collections, have the potential to affect loan position or diminish borrower equity.

Individual collection and non-mortgage charge-off accounts equal to or greater than $600, and accounts that total more than $4,000, must either be paid in full prior to or at closing or have 3.5% of the total debt included in the DTI calculation. See below for exception.

Collections and charge off’s occurring within the last twenty-four (24) months and/or still open, are ineligible with alternative credit. As such a borrower must meet all standard credit reporting seasoning and tradeline requirements if any collections or charge offs have occurred within the last twenty-four (24) months.

Collections may not be the result of a traditional or nontraditional tradeline that exceeds the number of lates allowed in the most recent 24 months. Documentation must be provided.

Medical collections may remain open with a max cumulative balance of $4,000.

A second mortgage or junior lien that has been charged off is considered equivalent to a foreclosure and therefore is ineligible.

Collections and charge-offs that have expired under the state statute of limitations on debts may be excluded from the DTI calculation. Evidence of expiration must be documented, and all other seasoning requirements are required to be met as well.

3.1.5.11 - CONSUMER CREDIT COUNSELING SERVICES

Borrower enrollment in Consumer Credit Counseling Services (CCCS) is treated the same as a bankruptcy chapter 13 and as such a thirty-six (36) month seasoning is required from its discharge. Exceptions may be considered for 0-36 months as long as the CCCS is paid in full and closed prior to the application date.

3.1.5.12 - JUDGEMENT OR LIENS

All open judgments, garnishments, and all outstanding liens must be paid off prior to or at loan closing. Exceptions may be considered.

3.1.5.13 - INCOME TAX LIENS

All income tax obligations must be paid prior to closing.

3.1.5.14 - DISPUTED ACCOUNTS

When the credit report contains tradelines disputed by the borrower, the credit file should be documented with a credit supplement showing the account(s) have been resolved. If the disputed account balance is $250 or less, the payment can be included in the total debt calculation and the account can remain in dispute. The total aggregate balance of accounts in dispute remaining unresolved can’t exceed $2,000.

3.1.5.15 - CO-APPLICANT CREDIT

Co-applicants must meet the same minimum credit requirements as primary applicants unless

The co-applicant is a spouse, in which case no additional credit is required. The spouse is not required to be a guarantor on the note but, pursuant to state community property laws pertaining to primary and secondary residences, may be required to sign the Deed of Trust (and other pertinent documents).

If the co-applicant(s) has no credit score then they will be scored as a 620.

If the co-applicant(s) is not the primary wage earner then the qualifying credit score can be the primary borrowers middle score however there may potentially be some adjustments that would apply.

3.1.6 - BANKRUPTCY HISTORY

Bankruptcies inside of 48 months will have significant pricing adjustments but are permitted. Evidence of bankruptcy resolution and/or payment history is required. If the borrower is currently in a chapter-13 then follow FHA guidelines.

3.1.7 - FORECLOSURE SEASONING

Foreclosures inside of 48 months will have significant pricing adjustments but are permitted. In the case of a foreclosure which was included in a bankruptcy, the seasoning timeline will start from the earlier of the date of discharge of bankruptcy and the foreclosure completion date. Evidence of foreclosure resolution is required but there are no seasoning requirements.

3.1.8 - SHORT SALE/DEED-IN-LIEU SEASONING

Short sale / deed-in-lieu, follow foreclosure seasoning guidelines

3.1.9 - FORBEARANCE, MODIFICATION, OR DEFERRALS

Forbearance, Modification, or deferrals, follow foreclosure seasoning guidelines.

3.1.10 - CREDIT SCORE

Loan eligibility is based upon the representative credit score, also referred to as the Decision Credit score and must be 600 or above. A valid Decision Credit score requires at least one (1) borrower to have a minimum of two (2) credit scores. To determine a borrower(s) credit score, use the lower of two (2) or middle of (3) credit scores. Borrowers with no credit scores or who do not meet the seasoning and tradeline requirements, are still eligible under the alternative credit guidelines.

For a loan file with one borrower, that borrower’s score is the decision credit score. For loan files with multiple borrowers:

Standard and Alt Documentation: The borrower with the higher monthly income is considered the primary borrower and their credit score can be used as the Decision Credit Score. When both borrowers are self-employed and jointly own the business, use the lowest score amongst the borrowers as the decision credit score.

3.1.11 - TRADELINES

3.1.11.1 - STANDARD TRADELINES

ITIN Secure: All borrowers on the ITIN Secure program applying for credit with LTV’s above 75% are required to have at least three (3) open tradelines for at least twelve (12) months or two (2) open tradelines for at least eighteen (18) months. To qualify for LTV’s above 80%, then the following additional guidelines must be met

Must have a minimum of (5) tradelines reporting for 12 months or greater

At least one (1) tradelines reporting for a minimum of 24 months

At least one (1) tradelines with a $3,000 credit line or larger

Amres does not have minimum trade line requirements for the ITIN Secure and Basic programs, but credit is highly scrutinized in making credit decisions to lend. Lack of credit will be considered a risk factor and alternative tradelines will be required. If adequate credit history cannot be established, then compensating factors will be required.

The following are not acceptable to be counted as tradelines:

“non-traditional” credit as defined by Fannie Mae®

collection accounts

self-reported tradeline

foreclosures

any liabilities in deferment status

deed-in-lieu of foreclosure

accounts discharged through bankruptcy

short sales

authorized user accounts

pre-foreclosure sales

charge-offs

3.1.11.2 - ALTERNATIVE TRADELINES

ITIN Secure: A loan may be fully underwritten using alternative credit if there is insufficient traditional credit to evaluate. If alternative credit sources are used, the minimum requirement is a 12-month history, generally verified with

lender-written verification, cancelled checks or bills marked paid. Lender-written verification for any account not listed on the credit report. The written verification should include:

Creditor’s name and address

Date account opened

Amount of high credit

Current account status

Required payment

Unpaid balance / Payment history

Contact information of the individual providing the reference

NOTE: If any late payments are indicated, the payment history must be stated in the “number of past dues” format — 30-, 60- and 90-day late payments. Proof of monthly or quarterly payment is required.

The credit history must include three (3) credit references. The housing payment confirmation from Group I (below) covering the most recent 12 months’ activity from date of application is a requirement when utilizing alternative credit.

Group I references should be exhausted prior to considering Group II (below) for eligibility purposes, as Group I is considered more indicative of a borrower’s future housing payment performance.

Group I:

Rental housing payments. This includes payments made to a landlord or management company. Also included are payments made on a privately-held mortgage loan that is not reported to the credit bureaus, contract for deed payments and other similar arrangements, provided the payments are related to the borrower’s housing

Utilities, such as electricity, gas, water, telephone service, television, and internet service providers. If utilities are included in the rental housing payment, they cannot be considered a separate source of nontraditional credit. Utilities can be considered a source of nontraditional credit only if the payment history can be separately documented.

Group II:

Insurance coverage, i.e., medical (excluding payroll deductions), auto, life or renter's insurance; payment to child care providers; school tuition; retail stores -- department, furniture, appliance stores or specialty stores; rent-to-own; payment of medical bills not covered by insurance; Internet/cell phone services; a documented 12-month history of saving by regular deposits, resulting in an increasing balance to the account; automobile leases, or a personal loan from an individual with repayment terms in writing and supported by canceled checks

3.1.12 - OBLIGATIONS NOT APPEARING ON CREDIT REPORT

3.1.12.1 - HOUSING AND MORTGAGE-RELATED OBLIGATIONS

Housing and mortgage-related obligations include property taxes, insurance premiums, and similar charges that are required by the creditor (i.e., mortgage insurance), ground rent, and leasehold payments. All properties owned by the borrower must be fully documented in this regard on the Schedule of Real Estate Owned (REO) section of the Form 1003 loan application. These obligations must be verified (subject to the program criteria) using reasonably reliable records such as taxing authority or local government records, homeowner’s association billing statements, or information obtained from a valid and legally executed contract.

3.1.12.2 - CURRENT DEBT OBLIGATIONS, ALIMONY, AND CHILD SUPPORT

An Originator/Seller may use a credit report to verify a borrower’s current debt obligations, unless the Originator/Seller has reason to know that the information on the report is inaccurate or disputed. Obligations that do not appear on the credit report, such as alimony and child support, must be documented through other methods according to Fannie Mae® guidelines.

When the borrower is required to pay alimony, child support, or separate maintenance payments under a divorce decree, separation agreement, or any other written legal agreement - and those payments must continue to be made for more than 10 months - the payments must be considered as part of the borrower’s recurring monthly debt obligations. However, voluntary payments do not need to be taken into consideration and an exception is allowed for alimony. For alimony obligations, the Originator/Seller has the option to reduce the qualifying income by the amount of the alimony obligation in lieu of including it as a monthly payment in the calculation of the DTI ratio. If the Originator/Seller exercises this option, a copy of the divorce decree, separation agreement, court order, or equivalent documentation confirming the amount of the obligation must be obtained and retained in the loan file.

3.2.0 - ASSETS

THE FOLLOWING APPLY TO ALL TRANSACTIONS UNLESS OTHERWISE STATED.

3.2.1 - ASSET REQUIREMENTS

Acceptable asset documentation is required to be included in each loan file. The borrower must meet the minimum contribution amount per the program requirements. Assets should be liquid or able to be liquidated without restriction by the borrower. The documentation requirement for all transactions is a single account statement covering the most recent month period and dated within 90-days of the loan note date.

3.2.2 - ASSET DOCUMENTATION

The following may be used as asset documentation for down payment, closing costs, and reserves. See applicable Loan/LTV matrix for minimum reserve requirement.

Account statements (e.g., checking, savings, share, or brokerage accounts)

Statements must include the following:

Name of financial institution

Reflect borrower as the account holder (Funds held jointly with a non-borrowing spouse are considered 100% of the borrower’s funds)

Account number

Statement date

Time period covered by the statement

Available balance in U.S. dollar denomination

Assets held in foreign accounts must be translated to English and verified in US Dollar equivalency at the current exchange rate via either http://www.xe.com or the Wall Street Journal conversion table.

Accounts verified using a third-party vendor participating in the Fannie Mae Day 1 Certainty® process.

Verification of Deposit completed by the verifying financial institution (Fannie Mae® Form 1006).

Large deposits on any of the above asset documentation must be sourced 60-days. Large deposits are defined as any single deposit that represents more than 50% of the borrower’s qualifying monthly income.

Stocks/bonds/mutual funds - 100% of the account(s) value may be considered for assets.

Vested retirement account (e.g., IRA, 401k, Keogh, 403b) - 100% of the vested balance may be considered for assets as long as documentation is provided supporting borrowers ability to withdraw funds from the account.

Business accounts may be considered for assets. The amount of business assets that may be utilized is limited to the borrower’s ownership percentage in the business and must be supported with a CPA letter confirming that utilizing business assets will not have a negative impact on the business. Business funds are only permitted at 80 LTV or below

Funds deposited into a personal account are not considered business assets

Cash Value of Life Insurance - 100% of the cash surrender value less any loans may be considered for assets.

Sale of Personal Assets - Proceeds from the sale of personal assets are an acceptable source of funds for the down payment, closing costs and reserves provided the individual purchasing the asset is not a party to the property sale transaction or the mortgage financing transaction.

Loan secured by borrowers assets - Proceeds from a loan secured by an asset that is owned by the borrower is an acceptable source of funds for closing provided the following criteria is met:

The loan must be secured by an asset owned by the borrower such as, certificates of deposit, stocks, bonds, real estate other than the subject property, life insurance policies, savings accounts, profit sharing plans, and automobiles.

The loan must be from an institutional lender and disclosed in the liability section of the loan application at submission to underwriting, or revised accordingly.

The borrower must qualify with the payment of the additional debt, if said additional debt has a required repayment.