Docstoc

Nationstar Mortgage

Document Sample
Nationstar Mortgage Powered By Docstoc
					                         Nationstar Mortgage
                         FHA Product Guidelines




FHA Product Guidelines                                     Updated 07/23/2012   1
                            Nationstar Mortgage Internal
SECTION I: GENERAL GUIDELINES ......................................................................................................6
  1.0    Documentation Age .....................................................................................................................6
  1.1    Maximum Points and Fees Allowed ............................................................................................6
  1.2    High Cost Loans ..........................................................................................................................6
  1.3    Eligible Applicants .......................................................................................................................6
  1.4    Age of Borrowers ........................................................................................................................6
  1.5    Non-Occupant Co-Borrowers ......................................................................................................6
  1.6    Resident Aliens ...........................................................................................................................7
    Non-Permanent Resident Aliens ........................................................................................................7
  1.7    Social Security Number Evidence ...............................................................................................7
  1.8     Mortgage Insurance ...................................................................................................................7
    Upfront Premiums ..............................................................................................................................7
    Monthly Premiums ..............................................................................................................................8
  1.9    Disclosures ................................................................................................................................10
  1.10 Maximum Loan-to-Value/CLTV ...................................................................................................10
  1.11 Qualifying Ratios ........................................................................................................................12
  1.12 Eligible Transactions .................................................................................................................12
    Purchase ..........................................................................................................................................12
    Rate/Term Refinance .......................................................................................................................12
  Three and Four Unit Properties ...........................................................................................................12
  1.13 Loan Terms ...............................................................................................................................12
  1.14 Minimum Loan Size ...................................................................................................................13
  1.15 Maximum Loan Size ..................................................................................................................13
  1.16 Escrow Waivers ........................................................................................................................13
  1.17 Duplicate Case Number/Mortgage Credit Reject ......................................................................13
  1.18 Rejection/Denial of a Loan .......................................................................................................13
  1.19 Case Number Cancellations and Reinstatements .......................................................................13
    Case Number Assignments..............................................................................................................13
    Case Number Cancellations.............................................................................................................14
    Case Number Reinstatements .........................................................................................................14
SECTION II: Credit ..................................................................................................................................15
  2.0    Credit History/Letters of Explanation ........................................................................................15
  2.1    AUS Approvals ..........................................................................................................................15
    Disputed Accounts ...........................................................................................................................15
  2.2    Manual Approvals .....................................................................................................................15
  2.3    Credit Reports ...........................................................................................................................16
  2.4    Minimum Credit History .............................................................................................................17
    Traditional Credit ..............................................................................................................................17
    Nontraditional Credit-Verification .....................................................................................................17
      Group I ..........................................................................................................................................17
      Group II .........................................................................................................................................17
    Nontraditional Credit Evaluation .......................................................................................................18
  2.5    Determination of Indebtedness .................................................................................................18
    Revolving Credit ...............................................................................................................................18
    Installment Loans .............................................................................................................................19
  2.6    Additional Delinquency Verification ...........................................................................................19
    HUD Limited Denial of Participation (LDP) ......................................................................................19
    List of Parties Excluded from Federal Procurement and Non-Procurement Programs (GSA) ........19
    Credit Alert Interactive Voice Response System (CAIVRS) ............................................................19
  2.7    Non-Purchasing Spouses .........................................................................................................19
  2.8    Verification of Mortgage/Rent ...................................................................................................20
    Verification of Mortgage ...................................................................................................................20
    Verification of Rent ...........................................................................................................................20
  2.9    Contingent Liabilities .................................................................................................................20
    Co-Signed Loans/Student Loans .....................................................................................................20
    Mortgage Assumptions .....................................................................................................................20
    Debts Addressed in Divorce Decrees ..............................................................................................20
    Deferred Student Loans ...................................................................................................................21


FHA Product Guidelines                                                                                                Updated 07/23/2012                2
                                                      Nationstar Mortgage Internal
  2.10 Short Sales and Short Payoffs ..................................................................................................21
     Short Sales .......................................................................................................................................21
     Short Payoffs on Refinance Transactions ........................................................................................21
  2.11 Derogatory Credit ......................................................................................................................21
     Assumptions and Divorces ...............................................................................................................21
     Delinquent Open Accounts...............................................................................................................21
     Timeshares .......................................................................................................................................21
     Delinquent Child Support or Alimony ...............................................................................................21
     Rolling Delinquencies on Mortgages ................................................................................................22
     Bankruptcy/Consumer Credit Services/Foreclosures ......................................................................22
        Bankruptcy ....................................................................................................................................22
        Consumer Credit Services ............................................................................................................22
        Foreclosures .................................................................................................................................22
     Collections/Charge-offs/Judgments .................................................................................................23
SECTION III: Income ...............................................................................................................................24
  3.0     Employment history...................................................................................................................24
  3.1     Employment Verification ...........................................................................................................24
  3.2     Self-Employment .......................................................................................................................24
     Individual Tax Returns (IRS Form 1040) ..........................................................................................25
     Corporate Tax Returns (IRS Form 1120) .........................................................................................26
     S Corporation Tax Returns...............................................................................................................26
     Partnership Tax Returns ..................................................................................................................28
  3.3     Fixed Income .............................................................................................................................28
  3.4     Other Income ............................................................................................................................29
     Alimony/Child Support ......................................................................................................................29
     Bonus/Commission ..........................................................................................................................29
     1099 Income .....................................................................................................................................29
     Statutory Employees ........................................................................................................................29
     Part-Time Employment (Second Job) ..............................................................................................29
     Interest/Dividends .............................................................................................................................30
     Note Income .....................................................................................................................................30
     Military Income .................................................................................................................................30
     Government Assistance ...................................................................................................................30
     Temporary Agency Employment ......................................................................................................30
     Trust/Inheritance ..............................................................................................................................30
     Housing Allowance ...........................................................................................................................31
     Auto Allowance .................................................................................................................................31
     Commission from Subject Sale ........................................................................................................31
     Unacceptable Forms of Income .......................................................................................................31
  3.5     Rental Income ...........................................................................................................................31
     Converting Primary Residence to Rental .........................................................................................32
        Exceptions ....................................................................................................................................32
     Rental Income from Subject Property ..............................................................................................33
     All Other Rental Properties...............................................................................................................33
     Rental Property ................................................................................................................................33
  3.6     Additional Income Verification ...................................................................................................33
SECTION IV: Assets ...............................................................................................................................34
  4.0     Verification of Deposit ...............................................................................................................34
  4.1     Acceptable sources of down payment: .....................................................................................34
  4.2     Gifts from Relatives ...................................................................................................................34
  4.3     Earnest Money Deposit .............................................................................................................35
  4.4     Sale of Personal Property .........................................................................................................35
  4.5     Cash Reserves ..........................................................................................................................35
  4.6     Large Deposits ..........................................................................................................................36
SECTION V: Appraisal ............................................................................................................................37
  5. 0 Limitation on Number of FHA loans ..........................................................................................37
  5.1      Acceptable Property Types ......................................................................................................37
     Unacceptable Property Types ..........................................................................................................38
  5.2     Condominiums ..........................................................................................................................38


FHA Product Guidelines                                                                                                Updated 07/23/2012                3
                                                      Nationstar Mortgage Internal
    Site Condominiums ..........................................................................................................................39
  5.3    Leasehold Properties ................................................................................................................39
  5.4 Land Contract/Contract for Deed .................................................................................................39
  5.5    Lease with Option to Buy ..........................................................................................................39
  5.6    Seasoning Requirements/Gifted Property ................................................................................40
    Building on Own Land ......................................................................................................................40
  5.7    Properties under Construction or Existing Less than One Year ...............................................40
    Criteria for Maximum Financing .......................................................................................................40
  5.8    Appraisal Format .......................................................................................................................41
    Required Forms ................................................................................................................................41
    Required Photos ...............................................................................................................................41
    Required Exhibits .............................................................................................................................42
    1004MC ............................................................................................................................................42
    Cost Approach ..................................................................................................................................42
    FMV Approach .................................................................................................................................42
  5.9    Required Signatures .................................................................................................................42
  5.10 Required Statements & Addendum ..........................................................................................43
  5.11 Comparable Sales .....................................................................................................................43
    Age of Sales .....................................................................................................................................43
    Distance............................................................................................................................................43
    Property Type ...................................................................................................................................43
  5.12 Declining Markets ......................................................................................................................43
  5.13 Sales Concessions ....................................................................................................................44
  5.14 Second Review of Appraisal .....................................................................................................44
  5.15 Second Appraisal/Anti-Flipping ................................................................................................44
    Resales Occurring Less than 90 Days Following Acquisition ..........................................................44
    Applicable When the Sales Price is Less Than a 20% Increase Over Acquisition Cost:.................45
    Applicable When the Sales Price is a 20% or More Increase Over Acquisition Cost: .....................45
    Resales Occurring Between 91 and 180 Days Following Acquisition .............................................45
    Resales Occurring Between 91 Days and 12 Months Following Acquisition ...................................45
  5.16 Appraisal Validity Periods .........................................................................................................45
  5.17 Appraiser Independence ...........................................................................................................45
  5.18 Appraisal Portability ..................................................................................................................46
  5.19 Adoption of Fannie Mae1004D/Freddie Mac 442 for Existing Construction .............................46
  5.20 Rural Properties ........................................................................................................................46
    Zoning...............................................................................................................................................46
    Private Septic or Water ....................................................................................................................47
    Community Septic or Water .............................................................................................................47
    Shared Wells ....................................................................................................................................47
    Foundations ......................................................................................................................................47
    Bedroom Egress/Captive Bedrooms ................................................................................................48
    Properties in Close Proximity to an Airport ......................................................................................48
    Operating and Abandoned Oil and Gas Wells .................................................................................48
    Overhead High-Voltage Transmission Lines ....................................................................................48
    Stationary Storage Tanks .................................................................................................................48
    Oil and Gas Pipelines .......................................................................................................................48
    Private Roads ...................................................................................................................................48
    Private Driveways .............................................................................................................................48
    Heating Sources ...............................................................................................................................48
    Bathrooms ........................................................................................................................................49
    Acreage ............................................................................................................................................49
  5.21 Property Requirements .............................................................................................................49
    Obsolescence and Repairs ..............................................................................................................49
    Property Condition ............................................................................................................................49
    Square Footage ................................................................................................................................49
    Multiple Lots/Parcels ........................................................................................................................49
    Structural ..........................................................................................................................................49
    Pest Inspections ...............................................................................................................................50
    Outbuildings......................................................................................................................................50


FHA Product Guidelines                                                                                                Updated 07/23/2012                 4
                                                      Nationstar Mortgage Internal
    Additional Dwellings .........................................................................................................................50
    Unpermitted Additions ......................................................................................................................50
    Lead Based Paint .............................................................................................................................50
  5.22 Survey Requirements ................................................................................................................50
  5.23 Acknowledgement of Receipt of Appraisal ...............................................................................50
SECTION VI: Loan Purpose ....................................................................................................................51
  6.0    Purchase Contract ....................................................................................................................51
  6.1    Minimum Cash Investment........................................................................................................51
  6.2    Down Payment Assistance Programs/Government Grants ......................................................51
    Required Documentation ..................................................................................................................52
  6.3    Seller Concessions ...................................................................................................................52
  6.4    First Time Homebuyers .............................................................................................................52
  6.5    Payment Shock .........................................................................................................................52
  6.6    Special Requirements for Purchase Transactions ....................................................................53
  6.7    REO Properties .........................................................................................................................53
SECTION VII: Refinance Guidelines .......................................................................................................54
  7.0    Refinance Types .......................................................................................................................54
    Cash Out Refinances .......................................................................................................................54
    Refinance Transaction Involving Occupancy of Former Investment Property .................................55
  7.1    Streamline Refinances ..............................................................................................................55
    Adding and Deleting Individuals on Title ..........................................................................................55
    Existing Second Liens ......................................................................................................................55
    Maximum Term ................................................................................................................................55
    Refinance Authorization ...................................................................................................................55
    FHA Secure ......................................................................................................................................55
    Revisions for ALL Streamline Refinance Transactions ....................................................................56
       Seasoning .....................................................................................................................................56
       Payment History ...........................................................................................................................56
       Net Tangible Benefit .....................................................................................................................57
       Credit Score ..................................................................................................................................57
       Maximum Combined Loan-to-Value (CLTV) ................................................................................57
       Uniform Residential Loan Application (URLA) ..............................................................................58
    Revised Streamline Refinance Transactions WITHOUT an Appraisal ............................................58
    Revised Streamline Transaction WITH an Appraisal .......................................................................58
    For Case Numbers Dated Prior to 4/18/2011...................................................................................58
  7.2    FHA Negative Equity Program (NEP) AVAILABLE FOR RETAIL ONLY .................................59
    Eligibility for Negative Equity Position (NEP) ...................................................................................59
    Secondary Financing ........................................................................................................................59




FHA Product Guidelines                                                                                              Updated 07/23/2012                5
                                                      Nationstar Mortgage Internal
                      SECTION I: GENERAL GUIDELINES

1.0     Documentation Age
Written Verification of Employment (VOE), Verification of Mortgage (VOM), Verification of Rent (VOR),
Verification of Deposit (VOD), paycheck stubs, and bank statements, should be no more than 120 days
old for existing and new construction as of the date of the note. The most recent documentation must
be provided and must be dated no earlier than 30 days from the date of application.



1.1     Maximum Points and Fees Allowed
Refer to the most recent compliance requirements on InfoNET. The borrower may not be charged
excessive fees. FHA regulations allow the borrower to pay all closing costs that are normal and
customary in the area. The borrower may not be charged a tax service fee or application fee.



1.2     High Cost Loans
Nationstar Mortgage does not allow Section 32 or High Cost Loans (State or Federal).



1.3     Eligible Applicants
All borrowers must be individual persons. Corporations, partnerships, or individuals acting on behalf of
a business entity within a proposed transaction will not be considered.



1.4     Age of Borrowers
All applicants must be of legal age to enforce the note in the jurisdiction that the property is located.
There is no maximum age.



1.5     Non-Occupant Co-Borrowers
Non-occupant co-borrowers’ income may be used (with proof of immediate family relationship)
providing that the occupying borrower(s) have sufficient established credit. These types of borrowers
should only be used to strengthen income and cannot be used to supplement insufficient or derogatory
credit. Non-occupant co-borrowers may not be added to title on cash-out refinances.




FHA Product Guidelines                                                             Updated 07/23/2012       6
                                      Nationstar Mortgage Internal
1.6     Resident Aliens
Permanent Resident Aliens
Documentation will be required to verify permanent resident alien status. An applicant’s Alien
Registration Receipt Card I551 commonly referred to as a green card is typically provided. The
borrower may also provide documentation provided by the Bureau of Citizenship and Immigration
Services (BCIS) to meet this requirement. BCIS documentation must be valid for one year from the
date of the note unless proof of previous renewal can be established. All borrowers must provide proof
of Social Security number (SSN).

Non-Permanent Resident Aliens
Non-permanent resident alien borrowers require a passport and visa evidencing that they have legal
entry to the U.S. for temporary residence and work authorization (if income is used to qualify the loan).
Non-income qualifying co-borrowers/cosigners must also verify legal entry for temporary residency if
applicable. There are a number of work and temporary visa classifications. Refer to the Loans to Non-
U.S. Citizen Borrowers Policy.



1.7     Social Security Number Evidence
A valid SSN number is required for all borrowers and non-purchasing spouses on title. FHA Connection
will run an SSN check to verify a valid number, but it is the lender’s responsibility to document the
information. Acceptable documentation includes:

       Copy of SSN card
       W-2s or paycheck stubs
       military or student ID


1.8      Mortgage Insurance
Upfront Premiums

FHA will charge an upfront premium in an amount equal to the following percentages of the mortgage:

       Purchase Money Mortgages and Full-Credit Qualifying Refinances = 1.75%
       Streamline Refinances (all types) = 1.75% (.01% if original endorsement date was on or before
        05/31/2009)



The upfront premium may be financed or paid in cash, but may not be split between financed and paid
in cash.




FHA Product Guidelines                                                           Updated 07/23/2012         7
                                     Nationstar Mortgage Internal
Monthly Premiums

An annual premium, shown in basis points below, to be remitted on a monthly basis, will also be
charged based on the initial loan-to-value ratio and length of the mortgage according to the following
schedule.

Purchase Money Mortgages, Full-Qualifying Refinances, and Streamline Refinances:

Effective for all case number dated on or after 6/11/2012 there will be an additional increase of .25%
monthly for all loans over $625,500.

                      Mortgage Insurance Premiums for loan amounts >$625,500
                                             Loans > 15 Years
                                                   Annual Premiums
  UFMIP
                    1.00%                                             1.75%
                After 4/18/2011                                                 On/After 6/11/2012**
   LTV                                        On/After 4/9/2012**
                Before 4/9/2012
    <
                     110 bps                        120 bps                            145 bps
 95.00%
    >
                     115 bps                        125 bps                            150 bps
 95.00%
                                             Loans < 15 years
                                                   Annual Premiums
  UFMIP
                    1.00%                                             1.75%
                After 4/18/2011                                                 On/After 6/11/2012**
   LTV                                        On/After 4/9/2012**
                Before 4/9/2012
 78.01%-                                                                                60 bps
                     25 bps                          35 bps
 90.00%
    >                                                                                   85 bps
                     50 bps                          60 bps
 90.00%




FHA Product Guidelines                                                          Updated 07/23/2012       8
                                     Nationstar Mortgage Internal
MIP Changes for FHA Streamline Refinances where the existing FHA Case was endorsed on
or before 05/31/2009. The original endorsement date is on the Case Query screen in FHA
Connection.

            Mortgage Insurance Premiums for Streamline Refinances (as defined above)
                                          Loans > 15 Years
                                                Annual Premiums
  UFMIP
                    1.00%                         1.75%                      .01%
                After 4/18/2011                                       On/After 6/11/2012**
   LTV                                     On/After 4/9/2012**
                Before 4/9/2012
    <
                    110 bps                      120 bps                     55 bps
 95.00%
    >
                    115 bps                      125 bps                     55 bps
 95.00%
                                          Loans < 15 years
                                                Annual Premiums
  UFMIP
                    1.00%                         1.75%                      .01%
                After 4/18/2011                                       On/After 6/11/2012**
   LTV                                     On/After 4/9/2012**
                Before 4/9/2012
 78.01%-                                                                     55 bps
                     25 bps                       35 bps
 90.00%
    >                                                                        55 bps
                     50 bps                       60 bps
 90.00%




FHA Product Guidelines                                                Updated 07/23/2012     9
                                  Nationstar Mortgage Internal
1.9      Disclosures
Applicants must be provided with the required disclosures on all transactions within 72 hours of
application. Refer to the FHA Required Disclosures document and the Wholesale Government Forms
and Disclosures document for a complete list of all FHA required disclosures by specific transaction
type.

        Good Faith Estimate
        Settlement Costs and You booklet
        Truth-In-Lending disclosure
        Transfer of Servicing disclosure
        Right to Receive Appraisal notice
        Handbook on Adjustable Rate Mortgages (if applicable)
        For Your Protection-Get a Home Inspection
        Informed Consumer Choice Disclosure Notice
        Important Notice to Homebuyer
        Notice to Homeowner
        Assumption notification
        FHA Certification
        Amendatory clause
        92561 Hotel and Transient Use of Property (two-unit properties only)
        State-specific pre-disclosures

The initial and all subsequent issues of disclosures must be documented in compliance with RESPA
2010 and MDIA.

1.10 Maximum Loan-to-Value/CLTV
       Purchase: 96.50% maximum LTV/CLTV*
         Borrower must contribute 3.5% from acceptable funds in addition to any closing costs/prepaids.
       Rate/Term Refinance: 97.75%/97.75%
       Streamline refinance: 97.75/125%
       Cash out Refinance: 85.00%/85%
       NEP: 97.75%/115%
       HUD REO: see example below

*CLTV may be exceeded only with secondary financing provided by a government agency or an
instrumentality of the government. The CLTV may never exceed 100% of the acquisition cost (sales
price plus any borrower paid closing costs and prepaids). In no instance may the borrower receive
cash back in excess of verified earnest money and POC items.

         HUD REO transactions which allow less than the standard 3.5% downpayment are
         further restricted to an LTV of 100% of the total loan amount (including upfront MIP)
         based on the sales price. Repair escrows may be added to the loan amount after the
         minimum required investment is calculated.




FHA Product Guidelines                                                          Updated 07/23/2012   10
                                       Nationstar Mortgage Internal
Example:

HUD REO with $100 down payment-                  HUD REO with $100 down payment-
appraised value equals sales price               appraised value exceeds sales price
Sales Price: $100,000                            Sales Price: $100,000
Appraised value: $100,000                        Appraised value: $102,000
Maximum loan amount including UFMIP:             Maximum loan amount including UFMIP: $101,
$100, 000                                        000
Total loan amount divided by 1% (upfront         Total loan amount divided by 1% (upfront
factor): $99,000                                 factor): $100,000
Actual required down payment: $1, 000            Actual required down payment: $100


Certain types of purchase transactions may be limited to a lesser LTV.

Identity-of-Interest Transactions

Identity-of-Interest transactions on principal residences are restricted to a maximum LTV ratio of 85%.

Identity-of-Interest is defined as a sales transaction between parties with family relationships or
business relationships. However, maximum financing above 85 percent LTV is permissible under the
following circumstances:

        1.      A family member purchases another family member's home as a principal residence.
                If a property is sold from one family member to another and is the seller's investment
                property, the maximum mortgage is the lesser of either:
                         a. 85% of the appraised value
                            or
                         b. The appropriate LTV ratio percentage applied to the sales price, plus or
                            minus required adjustments.

                The 85 percent limit may be waived if the family member has been a tenant in the
                property for at least six months.

        2.      An employee of a builder purchases one of the builder’s new homes or models as a
                principal residence.
        3.      A current tenant purchase the property that he or she has rented for at least six
                months immediately predating the sales contract.
        4.      A corporation transfers an employee to another location, purchases that employee’s
                home, and then sells the home to another employee.

Definition of family member to be used for the purposes of Identity of Interest
Transactions
The definition has been expanded to include

       Child (including son, stepson, daughter, or stepdaughter) , parent (including step- and foster
        parent), or grandparent (including step-and foster grandparent)
       Spouse
       Legally adopted son or daughter, including a child who is place with the borrower by an
        authorized agency for legal adoption
       Foster child
       Brother, stepbrother
       Sister, stepsister
       Uncle
       Aunt


FHA Product Guidelines                                                          Updated 07/23/2012       11
                                     Nationstar Mortgage Internal
1.11 Qualifying Ratios
31%/43%

The ability of the borrower(s) to repay the loan in a timely manner is a critical underwriting
consideration. The housing ratio may only be exceeded when documented properly, and no increase in
housing expense exists. At no time should the housing ratio exceed 35%. The maximum debt ratio on
all products is 50%. Ratios should not exceed 31%/43% on manually underwritten loans.

In addition to those items listed on the credit report, these items must be included as debts:

           Child support (alimony may be deducted from income)
           Property taxes
           Homeowners insurance
           Leasehold, condo, PUD Association Fees
           Seller second mortgages
           Second homes
           Debts not listed on credit report but stated on 1003

Deductions on paycheck stubs should always be reviewed carefully for undisclosed debts. Loans
secured by 401K accounts do not have to be counted in qualifying ratios.


1.12 Eligible Transactions
Purchase

       One- to four-unit properties
       New construction (100% complete at the time of closing)
       Existing properties

Rate/Term Refinance

       No Cash out-Non Streamline: (full credit qualifying)
       Streamline without appraisal: (FHA to FHA only)
       Streamline with appraisal: (FHA to FHA only) – ineligible for case numbers issued after
        4/16/2011
       Cash-out*: (full credit qualifying)
        *Allowed in all states except Texas

Three and Four Unit Properties
4155.2B.4, which previously addressed only purchase transactions, also applies to refinance
transactions as follows:

       The maximum mortgage amount is limited so that the ratio of the monthly mortgage payment
        divided by the net rental income does not exceed 100%.
       The borrower must have three months PITI reserve. Reserves cannot be derived from a gift.

1.13 Loan Terms
Minimum loan term is 15 years. Maximum loan term is 30 years.


FHA Product Guidelines                                                           Updated 07/23/2012   12
                                     Nationstar Mortgage Internal
1.14 Minimum Loan Size
There is no minimum loan size; however, loan amounts under $50,000 require underwriting manager
approval.

1.15 Maximum Loan Size
For an FHA mortgage, the maximum loan amount is based on median family income. Base limits are:

                                   Low Cost                            High Cost

One-unit                           $271,050                            $729,750

Two-unit                           $347,000                            $934,200

This amount may be exceeded in specific areas. Statutory loan limits will be reflected on the AU
findings based on the county where the property is located. Go to the FHA Mortgage Limits page to
look up FHA mortgage limits for a specific area.


1.16 Escrow Waivers
FHA does not allow a waiver of escrows. All payments must include principal, interest, taxes,
homeowners insurance (including HO6 for condominiums), all taxes/special assessments, and HOA
dues (if applicable).

1.17 Duplicate Case Number/Mortgage Credit Reject
FHA will not insure a loan when more than one case number exists for the subject property address. All
duplicate case numbers must be cancelled prior to final underwriting approval. If additional case
numbers exist on other properties, the borrower must provide a statement explaining the transaction
and the underwriter must insure that no other FHA loans resulted from the case number.

The DE underwriter should also check to make sure that the borrower was not previously rejected by
another lender. Thorough research should be completed before overturning a rejection made by
another lender, and justification for the approval must be documented on the 92900-LT.

1.18       Rejection/Denial of a Loan
In addition to the normal HMDA guidelines, the lender is required to enter denial information in FHA
Connection. A Mortgage Credit Reject must be entered to specify the reason for the denial.



1.19 Case Number Cancellations and Reinstatements

Case Number Assignments

A new case number may only be requested when there is an active loan application for the subject
borrower and property. FHA Connection will be updated to require the following:

       Certification at the time of case number assignment of active application.
       Provide borrower's name and Social Security number for all new construction, including
        proposed and existing that is less than one year old.


FHA Product Guidelines                                                          Updated 07/23/2012     13
                                     Nationstar Mortgage Internal
Case Number Cancellations

Beginning April 18, 2011, FHA Connection will automatically cancel any uninsured case number where
there has been no activity for six months from the last action date. This will apply to all case
numbers regardless of the case number assignment date.

In addition, effective July 25, 2011 fax requests will no longer be accepted in the Denver or
Philadelphia Homeownership Centers. All case number cancellations must be directed to the following
electronic email boxes:

        Denver: Send request to email box: denhocinsure@hud.gov
        Philadelphia: Send request to email box: PHOCInsure@hud.gov
        Santa Ana: Send request to email box: snahocinsure@hud.gov
        Atlanta: Send request to email box: ATLInsurance&Underwriting@hud.gov

All HUD-1 Statements must also be attached in PDF format to the emails.

Eligible action dates are:

       Case number assigned

       Appraisal information entered (appraisal logging)

       Firm Commitment issued by FHA

       MIP remittance
       Insurance application entered

       Insurance application updated

       Notice of Return and resubmissions

Ineligible dates are:

       Borrower information changes

       Property address changes

Case Number Reinstatements

Case numbers will not be reinstated without the following:

       Proof is provided that the case number cancellation was after the closing date, as evidenced
        by a fully executed HUD-1 Statement.

       The mortgagee provides evidence that not reinstating the case number causes an undue
        hardship to the borrower that is unrelated to recent changes to premiums or underwriting
        guidelines.




FHA Product Guidelines                                                        Updated 07/23/2012       14
                                     Nationstar Mortgage Internal
                                    SECTION II: Credit

2.0     Credit History/Letters of Explanation
For Refer/Eligible findings, the borrower must provide a signed explanation for any bankruptcy,
judgment, foreclosure, or Federal lien within the last seven years, as well as any late payments,
collections, or charge-offs within the last two years. The borrower must also explain any inquiries in the
last 90 days, and state whether they resulted in a new debt for both manual and automated approvals.
Credit score requirements posted on the product matrix apply regardless of AU findings.

2.1     AUS Approvals
Nationstar Mortgage will accept FHA loan approvals using either DU or LP provided they meet all FHA
and Nationstar underwriting guidelines. All conditions of the AUS approval must be documented. DU
and LP will generate a condition stating that the loan must meet all conditions of the FHA Handbook
4155. There is also a provision to downgrade the findings to a Refer if any conditions exist that cannot
be read by the AUS, including but not limited to: debts not listed on the credit report, NSFs on bank
statements, and disputed accounts.

Disputed Accounts

If the credit report reveals that the borrower is disputing any credit accounts or public records, the
mortgage loan application must be downgraded to a refer unless the disputed account has a zero
balance; is marked as "paid in full" or "resolved"; or has both a balance less than $500 and the date of
the dispute is more than 24 months old. Multiple disputed accounts which may affect the credit score
require that the loan be downgraded, or the disputed accounts must be removed and the credit report
re-scored.


        Note: It is important to remember that DU and LP are not updated each time FHA guidelines
        change, so the matrix should always be consulted.


2.2     Manual Approvals
Loans that do not qualify through the AUS system can be reviewed by underwriting for exception
approval if significant compensating factors exist. There are no additional minimum credit score
requirements for manual approvals.

TOTAL Scorecard will issue Refer findings for excessive payment-to-income ratios and debt-to-income
ratios; and from the credit files, a previous mortgage foreclosure within three years, a bankruptcy
discharged within two years, and late mortgage payments. TOTAL will refer the application for
underwriting analysis if any mortgage trade line, including HELOCs, has serious derogatory history
during the most recent 12 months and shows:

       Three or more late payments of greater than 30 days
        or
       One or more late payments of 60 days plus one or more 30-day late payments
        or
       One payment greater than 90 days late




FHA Product Guidelines                                                           Updated 07/23/2012     15
                                     Nationstar Mortgage Internal
Manual approvals will not be granted for Refer findings due to excessive ratios or delinquent mortgage
history. Loans receiving a Refer for public records may be eligible for manual underwriting if they meet
the following criteria:

       Approval authority level: Underwriting Manager
            o    Chapter 7 discharged a minimum of two years from date of application; three years, if
                 real estate was included in discharge.
            o    Chapter 13 discharged a minimum of one year from date of application.
            o    Foreclosure-trustee’s deed must evidence effective date of sale was a minimum of
                 three years from date of application.
            o    Maximum ratios 31/43.
            o    Minimum three traditional lines of re-established credit with a 12-month pay history.
            o    VOM/VOR with 0X30 in the last 12 months.
            o    No derogatory credit after the date of the bankruptcy discharge.
            o    LOE must support reason for Refer findings.

       Approval authority level: VP of Underwriting

            The following exceptions may be elevated to VP for review:

            o    Chapter 13 discharged less than one year.
            o    Ratios exceeding 31/43 with documented compensating factors.
            o    Minor derogatory and medical collections with acceptable letter of explanation from the
                 borrower.

All manual documentation requirements apply, including complete copies of all bankruptcy
documentation, discharge, and pay histories for Chapter 13 bankruptcies.

2.3     Credit Reports
All applicants must sign and date a credit authorization form, FNMA 1003, or have given verbal consent
which must be documented in the file before credit can be requested. A tri-merged credit bureau report
containing information from all three primary credit bureaus is required on all FHA loans. Acceptable
credit repositories include Experian, Trans Union, and Equifax. The report must be generated within the
prior 60 days of the initial submission to AU/FHA Total Scorecard, and must contain a credit score (Fair
Isaac, Empirica, and Beacon).

All wholesale transactions are subject to a Nationstar audit credit report at management discretion.

Installment and mortgage loans not reporting on the credit bureau must be included on the 1003 and
require direct verification or current statements to determine status. All credit reports must be originals,
have numbered pages, OFAC findings, and an ending statement.

The representative credit score is determined by taking the lowest middle score for all borrowers.

A credit report and CAIVRS must be present for all borrowers to determine any debts that may affect
title or lien position. Any Federally insured delinquent debt must be paid prior to closing. A credit report
must also be obtained for a non-purchasing spouse if either the borrower or the property is in a
community property state. The debts of the non-purchasing spouse must be considered in qualifying
unless state law provides differently.



FHA Product Guidelines                                                             Updated 07/23/2012     16
                                      Nationstar Mortgage Internal
2.4     Minimum Credit History
Applicants with little or no credit history can represent additional risk when qualifying a loan. Use of
nontraditional credit may be appropriate where a borrower has insufficient tradelines with Equifax,
Experian, or TransUnion and a score cannot be derived. Nationstar also may use nontraditional credit
verification to augment “thin-file” credit reports where a credit score was generated but based on only a
few trade lines. However, nontraditional credit reports may not be used to enhance any poor credit
history on a traditional credit report. Nationstar minimum credit requirements are outlined below in this
section.

Traditional Credit
Acceptable traditional credit must consist of a minimum of three satisfactory credit references, reported
on a credit report through the credit bureaus, covering the most recent 12 months activity from date of
application. As an alternative to three credit references, two credit references reported on the credit
report plus a 12 month satisfactory rental history is acceptable traditional credit.

If one or more of the borrowers do not meet the above criteria then the non-traditional credit guidelines
must be applied.


Nontraditional Credit-Verification

Acceptable nontraditional credit must consist of a minimum of three credit references, including at least
one from Group I below, covering the most recent 12 months activity from date of application. Group I
references should be exhausted prior to considering Group II for eligibility purposes, as Group I is
considered more indicative of a borrower’s future housing payment performance. Borrowers with no
Group I trade references are ineligible.

Group I

   Rental housing payments (subject to independent verification if the borrower is a renter)
   Utility company reference (if not included in the rental housing payment), including gas, electricity,
    water, land-line home telephone service, cable TV.

If the borrower is renting from a family member, request independent documents to prove regularity of
payments, such as cancelled checks.

Group II

   Insurance coverage, e.g., medical, auto, life, renter’s insurance (not payroll deducted)
   Payment to child care providers – made to a business providing such services
   School tuition
   Retail stores – department, furniture, appliance stores, specialty stores
   Rent-to-own – e.g., furniture, appliances
   Payment of that part of medical bills not covered by insurance
   Internet/cell phone services
   A documented 12-month history of saving by regular deposits (at least quarterly/non-payroll
    deducted/no NSF checks reflected), 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 cancelled checks to document the payments


FHA Product Guidelines                                                            Updated 07/23/2012     17
                                      Nationstar Mortgage Internal
All nontraditional credit references must be verified by a credit bureau and reported back to the lender
as a nontraditional mortgage credit report (NTMCR) in the same manner as traditional credit
references.

Accounts prior to a Bankruptcy may not be considered as trade lines; however, payment history on a
Chapter 13 or consumer credit service can be counted as re-established credit. Either of these sources
would count as one of the required references.

Nontraditional Credit Evaluation

The following offers guidance in evaluating borrowers with nontraditional credit histories. A satisfactory
credit history, at least 12 months in duration, is to include:

       No history of delinquency on rental housing payments
       No more than one 30-day delinquency on payments due to other creditors
       No collection accounts/court records reporting (other than medical) filed within the past 12 months

The following offers guidance in evaluating nontraditional credit borrowers with no rental history. A
satisfactory credit history, at least 12 months in duration, is to include:

           No more than one 30-day delinquency on payments due to other creditors
           No collection accounts/court records reporting (other than medical) filed within the past 12
            months

In addition, for such borrowers, to enhance the likelihood of homeownership sustainability, the following
underwriting guidelines are required:

       Qualifying ratios are to be computed only on those occupying the property and obligated on the
        loan, and may not exceed 31% for the payment-to-income ratio and 43% for the total debt-to-
        income ratio.
       Borrowers should have two months of cash reserves following mortgage loan settlement from their
        own funds (no cash gifts from any source should be counted in the cash reserves for borrowers in
        this category).

2.5     Determination of Indebtedness
All accounts reported to have outstanding balances in the credit bureau report and 1003 must be
included in the debt calculation. The monthly payments listed on the credit bureau are used when
calculating the debt ratio.

Revolving Credit
If no payment is stated on the credit bureau, use 5% of the outstanding balance, or obtain a copy of the
monthly statement illustrating the minimum payment. This applies to American Express accounts
unless the borrower can evidence monthly payment in full for a 12-month period, and adequate
reserves to cover the current balance. Revolving credit must be counted in qualifying ratios regardless
of balance/term.




FHA Product Guidelines                                                            Updated 07/23/2012     18
                                      Nationstar Mortgage Internal
Installment Loans
Installment loans with less than 10 payments left are not included in the debt ratio unless the
underwriters feels that the payment is significant enough to negatively impact the borrower’s ability to
meet all obligations. Payments over $100 that are not used in qualifying will require cash reserves,
demonstration of no increase in housing expense, or other compensating factors, and must be
documented with a letter from the underwriter justifying the decision for approving the loan without the
debt being included. Any debt secured by a cash asset (savings, CD, 401K) does not need to be
considered in qualifying (the asset may not be used as reserves or cash to close). All automobile lease
payments must be counted regardless of balance.

2.6     Additional Delinquency Verification
Prior to final approval, the DE underwriter must review the following FHA specific sources.

HUD Limited Denial of Participation (LDP)

This list can be checked by going to https://www5.hud.gov/ecpcis/main/ECPCIS_List.jsp.
All parties in the transaction including borrowers, sellers, realtors, and loan officers must be checked,
and a copy of the page should remain in the file.

List of Parties Excluded from Federal Procurement and Non-Procurement
Programs (GSA)

This list can be checked by going to http://www.epls.gov/. All parties must be checked. The only
exception which is allowable is for a seller that appears on the excluded list that is selling their principal
residence.

Credit Alert Interactive Voice Response System (CAIVRS)

Only the borrowers (including any non-purchasing spouses that will be on title) should be checked on
this system. CAIVRS will reflect presently delinquent Federal debts including VA mortgage, student
loans, SBA loans, or other federally-related debt that may not appear on the credit report. The borrower
is not eligible for FHA financing unless the debts are brought current, paid, or the borrower has a 12-
month established satisfactory repayment plan. The system will provide an authorization code which
must be placed on the HUD 92900-LT.

Detailed procedures to follow when closing a loan with an outstanding CAIVRS can be found in the
FHA 4155.1.

2.7     Non-Purchasing Spouses
Except for the obligations specifically excluded by state law (typically only those incurred prior to the
marriage), the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios
if the borrower resides in a community property state or the property to be insured is located in a
community property state. Although the non-purchasing spouse's credit history is not to be considered
a reason for credit denial, a credit report that complies with the requirements in section 2.3 must be
obtained for the non-purchasing spouse in order to determine the debt-to-income ratio.




FHA Product Guidelines                                                              Updated 07/23/2012      19
                                       Nationstar Mortgage Internal
2.8     Verification of Mortgage/Rent
Verification of Mortgage

A 12-month written verification of mortgage payment history is required. In addition, written verification
of balance, payment amount, tax, and insurance information is necessary.

       Credit bureau reports which provide a 12-month payment history, current balance, and
        payment amount may be use. The information must have been reported within the prior 30
        days of closing or updated information is required.
       A written VOM signed by the lending institution, or a payoff statement with 12 months
        cancelled checks must be obtained when credit bureau reporting does not provide adequate
        information. Any delinquencies in the prior 365 days must be strongly reviewed and
        compensating factors documented.


       If real estate taxes, insurance and/or HOA are not escrowed, then a monthly payment amount
        must be calculated. Determine annual taxes due from the title commitment and annual
        homeowner’s premium from the declaration page. If the property is to be retained after closing,
        these amounts must be included in the qualifying ratios.

Verification of Rent

Renters will require 12 months cancelled checks to verify payment history. A written institutional VOR
or credit bureau history in lieu of cancelled checks where rent is paid to a rental agency (such as
Century 21or RE/MAX) or an apartment complex is also acceptable. A directory listing printout for the
rental agency or apartment complex is required by the underwriter. Listings to an individual are
unacceptable.

Verification of rent is not required with DU/LP approval unless specified on the product matrix.

2.9     Contingent Liabilities
Co-Signed Loans/Student Loans

If the borrower is listed as co-signer on a loan, they are responsible for the debt and monthly payment.
However, these debts can be excluded from the debt ratio with a copy of the note showing both parties
are obligated, and 12 consecutive months checks are obtained showing the other borrower is paying
the debt satisfactorily. Exceptions are not allowed to the 12-month history, even if the debt was
incurred during the last year. If the loan reflects late payments within the last 12 months, proof must be
obtained that it has been brought current, and the debt must be included in the borrower’s ratios.

Mortgage Assumptions

Previous mortgages that were assumed without a release of liability require a 12-month payment
history and proof that the mortgage amount does not exceed 75% of the previous sales price or current
appraised value.

Debts Addressed in Divorce Decrees

For AUS approved loans, three months documentation must be provided to demonstrate the other
party’s ability and willingness to meet the monthly obligation. For manual approvals, a 12-month history
must be documented. The presence of late payments will require the debt to be counted against the
borrower.




FHA Product Guidelines                                                            Updated 07/23/2012     20
                                      Nationstar Mortgage Internal
Deferred Student Loans

Deferred student loans will not be counted against the borrower. Evidence must be provided in the
submission package that the student loan is deferred for at least one year from the note date.


2.10 Short Sales and Short Payoffs
Short Sales
Short sales are only acceptable if:

       Property in question must be a previously owned home; may not be currently owned.
       The mortgage and all other installment debts must have been current at the time of the short
        sale.
       The proceeds from the short sale serve as payment in full.

Borrowers are ineligible if they pursued a short sale agreement on their principal residence to take
advantage of declining market conditions, and used it to purchase a similar or superior property within
a reasonable commuting distance.

Short Payoffs on Refinance Transactions

FHA will insure the first mortgage where the existing note holder(s) writes off the amount of
indebtedness that cannot be refinanced into the new mortgage due to a decline in property value
and/or reduction in income.

In both instances the mortgage must be current. Borrowers making payments under a modification
agreement in which a temporary or permanent agreement allows for payments less than those
designated in the original note are not acceptable.

2.11 Derogatory Credit
Assumptions and Divorces

Borrower is still eligible for FHA financing provided they can prove that the account was current at the
time of the assumption or issuance of final divorce decree.

Delinquent Open Accounts

All accounts that are 30 days or more delinquent must be brought current or paid in full.

Timeshares

Timeshares will be treated as an installment debt.

Delinquent Child Support or Alimony

All delinquent child support or alimony must be paid current before loan closing unless a twelve month
satisfactory repayment plan is documented. When no payment plan exists, the source of funds to pay
off the debt must be provided, along with a strong letter of explanation. If the delinquency resulted in a
judgment or lien, a release must be obtained prior to closing. This can be included in the cash-out loan
calculations in all states but Texas.




FHA Product Guidelines                                                            Updated 07/23/2012       21
                                      Nationstar Mortgage Internal
Rolling Delinquencies on Mortgages

Mortgages that have consecutive 30-day delinquencies may not be considered as a single late. FHA
does not recognize “rolling” late payments.


Bankruptcy/Consumer Credit Services/Foreclosures

Borrowers who have previously filed bankruptcy may still be considered for an FHA loan. The borrower
must have re-established good credit or provide sufficient explanation why they have decided not to
establish new credit. Additional non-traditional credit must be adequately documented.

Bankruptcy

The following are conditions that apply to prior bankruptcy customers.

       Discharge of bankruptcy must be verified with one of the following:
            o   Copy of discharge notice
            o   Trustee confirmation
            o   Credit bureau report

       Debt ratios may not exceed 31%/43%.
       Any derogatory credit (30 days or more delinquent) after a bankruptcy are not acceptable and
        will require exception approval. Cash-out refinances are not allowed.
       A Chapter 7 must be discharged two years from the date of application.
       A Chapter 13 is acceptable if the borrower has been discharged. Documentation is required to
        verify that all plan payments were made on time.
       No foreclosure actions allowed in prior 36 months on any applicant with a prior bankruptcy.
        The effective date of the foreclosure must be obtained from the trustee’s deed.
       Mortgages must be 0 x 30 last 12 months on any borrower with a bankruptcy discharged in last
        three years.
       All legal matters from the bankruptcy must have been resolved.

Consumer Credit Services

All consumer credit services are viewed the same as a Chapter 13 bankruptcy.

Foreclosures

The effective date of the foreclosure (date of trustee deed verifying transfer of ownership) must be a full
three years from the date of loan approval. If the foreclosure involved a government insured loan which
resulted in a CAIVRS claim, the applicant is not eligible for FHA financing for a period of three years
from the date the claim was paid.




FHA Product Guidelines                                                            Updated 07/23/2012    22
                                       Nationstar Mortgage Internal
Collections/Charge-offs/Judgments

Collections/charge-off accounts do not have to be paid off if they do not affect title or lien position
unless specified to be paid by AU findings.

Court-ordered judgments must be paid off unless an agreement exists between the borrower and
creditor to make regular payments. The borrower must have a history of 12 months satisfactory
payments, and the judgment must be subordinated if it will affect title or lien position

All judgments and State or Federal tax liens found on title must be paid in full or subordinated. All non-
Nationstar Mortgage subordination agreement forms must be reviewed and approved prior to closing.




FHA Product Guidelines                                                              Updated 07/23/2012    23
                                       Nationstar Mortgage Internal
                                   SECTION III: Income
3.0     Employment history
All income must have a two-year history, and be likely to continue for a minimum of three years.
Borrowers returning to the workforce after an extended absence must be on the job for a minimum of
six months, and a two-year history must be provided prior to the absence. A signed letter of explanation
must be provided for any employment gap exceeding one month.

3.1     Employment Verification
Two years employment information must be obtained on the 1003 for all borrowers. In addition, two
years employment verification must be documented in the file. FHA allows two types of verification: full
documentation and alternate documentation. Borrowers employed by family members must provide
personal and business returns to verify percent of ownership (if any) in the family members’ business.
Any manually underwritten file must condition full documentation as listed below:

       A written VOE signed by the employer(s) covering two years
        and
       Most recent paycheck stub covering a full 30 days of employment (30 days of paycheck stubs
        for a manual approval)

Pay stubs must be computer generated and show the borrower’s name, full or truncated Social
Security number, and year-to-date earnings. Inability to obtain paystubs with this information will
require additional documentation as follows:

       A written VOE signed by the employer
        and
       Prior two years W-2's and 1040’s

Alternative documentation is acceptable with an AU approval.

If written VOEs are not obtained, a verbal verification of employment is required for all employers in the
last 24 months. Gaps must be documented in accordance with AU findings.

A Nationstar Mortgage employee verbal verification of current employment must be performed on all
loans prior to final approval, and within ten days of closing. A verbal VOE from processing must be
completed, dated, and signed by the Nationstar Mortgage employee performing the verbal VOE. Loan
Officers/Account Executives may not perform verbal verifications.

3.2     Self-Employment
A self-employed applicant is defined as having a 25% or greater ownership interest in the business.
The applicant must be able to establish a consistent earning history to support the requested loan
payment. All self-employed borrowers must provide a minimum of one full year tax return and a profit
and loss statement. If two years of self-employment cannot be verified with tax returns, documentation
should be provided establishing a prior work history in a related field and/or formal education and
training.




FHA Product Guidelines                                                           Updated 07/23/2012     24
                                     Nationstar Mortgage Internal
The following documentation may be required to meet AU conditions:

       Two years signed 1040s, 1065s, 1120s, 1120-Ss, K-1s, including all schedules.
       A signed P&L statement for current year.
       A signed IRS form 4506-T or 8821 may be required at underwriter’s discretion prior to
        approval, and will be required at closing.
       A verbal verification with directory assistance or internet crosscheck that business name is
        listed and address matches 1003. Businesses not listed require further investigation and
        Underwriting Manager approval.

Income from self-employment requires the latest two years tax returns be averaged to determine
income. A three-year average may be used with underwriter justification.

Declining income may never be considered as qualifying income. If is decrease is noted, the file must
contain proof that the income has stabilized and is no longer declining. Use of a conservative recent
average is not acceptable in the absence of proof that the income is no longer decreasing.

An unaudited P&L and balance sheet is required if more than a calendar quarter has elapsed since the
date of the most recent calendar or fiscal-year end tax return that was filed by the customer.

Example 1

Schedule C borrower with most recent filed tax return for calendar year 2011

P&L and balance sheet required for all loans receiving final approval on or after 4/1/2012

Example 2

Corporate business return with fiscal year indicated with most recent fiscal year ending 2/29/2011

P&L and balance sheet required for all loans receiving final approval on or after 5/31/2012

An audited P&L and balance sheet or signed quarterly tax return is required if the income used to
qualify the borrower exceeds the two year average of tax returns.

Self-employed applicants require Nationstar Mortgage employee verbal verification with directory
assistance that the business is listed under the business name and address on the loan application.

There are four basic types of business structures: sole proprietorships, corporations; limited liability (S
corporations); and partnerships. Each type requires slightly different forms of analysis.

The following provides additional information on analyzing tax returns.

Individual Tax Returns (IRS Form 1040)

The amount shown on the IRS Form 1040 as "adjusted gross income" either must be increased or
decreased based on the lender's analysis of the individual tax returns and any related tax schedules.
Particular attention must be paid to the following:

       Wages, Salaries, and Tips: An amount shown under this heading may indicate that the
        individual is a salaried employee of a corporation or has other sources of income. It also may
        indicate that the spouse is employed, in which case the income must be subtracted from the
        adjusted gross income in the analysis.
       Business Income or Loss (from Schedule C): The sole proprietorship income calculated on
        Schedule C is business income. Depreciation or depletion may be added back to adjusted



FHA Product Guidelines                                                             Updated 07/23/2012     25
                                      Nationstar Mortgage Internal
        gross income. Any “nondeductible” percentages of expenses, such as meals and
        entertainment, which are reflected must be deducted from income.
       Rents, Royalties, Partnerships, Etc. (from Schedule E): Any income received from rental
        properties or royalties may be used as income after adding back any depreciation shown on
        Schedule E.
       Capital Gain or Loss (from Schedule D): This transaction generally occurs only one time,
        and it should not be considered in determining effective income. However, if the business has
        a constant turnover of assets resulting in gains or losses, the capital gain or loss may be
        considered in determining the income, provided the borrower has at least three years' tax
        returns evidencing capital gains. An example includes an individual who purchases old houses,
        remodels them, and sells them for a profit.
       Interest and Dividend Income (from Schedule B): This income, which is taxable and tax-
        exempt, may be added back to the adjusted gross income only if it has been received for the
        past two years and is expected to continue. (If the interest-bearing asset will be liquidated as a
        source of the cash investment, the lender must adjust accordingly.)
       Farm Income or Loss (from Schedule F): Any depreciation shown on Schedule F may be
        added back to the adjusted gross income.
       IRA Distributions, Pensions, Annuities, and Social Security Benefits: The non-taxable
        portion of these items may be added back to the adjusted gross income, if the income is
        expected to continue for the first three years of the mortgage.
       Adjustments to Income: Certain adjustments to income shown on the IRS Form 1040 may be
        added back to the adjusted gross income. Among these adjustments are IRA and Keogh
        retirement deductions, penalties on early withdrawal of savings, health insurance deductions,
        and alimony payments.
       Employee Business Expenses: These expenses are actual cash expenses that must be
        deducted from the borrower's adjusted gross income. These are typically reported on form
        2106.

Corporate Tax Returns (IRS Form 1120)
Corporations are state-chartered businesses owned by their stockholders. Compensation to its
officers, generally in proportion to the percentage of ownership, is shown on the corporate tax returns
and will appear on individual tax returns. If the borrower's percentage of ownership is not shown, it
must be obtained separately from the corporation's accountant, with evidence that the borrower has the
right to those funds. Once the adjusted business income is determined, it should be multiplied by the
borrower's percentage of ownership in the business.

In analyzing the corporate tax returns, lenders must adjust for the following:

       Depreciation and Depletion: The corporation's depreciation and depletion must be added
        back to after-tax income.
       Taxable Income: Taxable income is the corporation's net income before federal taxes. It must
        be reduced by the tax liability.
       Fiscal Year vs. Calendar Year: If the corporation operates on a fiscal year that is different
        from the calendar year, an adjustment must be made by the lender to relate corporate income
        to the individual tax return.
       Cash Withdrawals: The borrower's withdrawal of cash from the corporation may have a
        severe negative impact on the corporation's ability to continue operating. This would typically
        only pertain to purchase transactions.

S Corporation Tax Returns



FHA Product Guidelines                                                           Updated 07/23/2012       26
                                      Nationstar Mortgage Internal
An S corporation is generally a small, start-up business, with gains and losses passed on to
stockholders in proportion to each stockholder's percentage of business ownership. The income for the
owners comes from W-2 wages and is taxed at the individual rate.

The compensation of officers line on the IRS Form 1120-S is transferred to the borrower's IRS Form
1040. Both depreciation and depletion may be added back to income in proportion to the borrower's
share of income. However, income also must be deducted proportionately by the total obligations
payable by the corporation in less than one year. The borrower's withdrawal of cash from the
corporation may have a severe negative impact on the corporation's ability to continue operating, and
must be considered in the analysis (typically applies to purchase transactions).




FHA Product Guidelines                                                        Updated 07/23/2012   27
                                    Nationstar Mortgage Internal
Partnership Tax Returns
A partnership is formed when two or more individuals form a business and share in profits, losses,
and responsibility for running the company. Each partner pays taxes on his or her proportionate share
of the partnership’s net income.

Both general and limited partnerships report income on the IRS Form 1065. This form must be
reviewed by the lender to assess the viability of the business. The partner's share of income is carried
over to Schedule E of IRS Form 1040. Both depreciation and depletion may be added back to income
in proportion to the borrower's share of income. However, income also must be deducted
proportionately by the total obligations payable by the partnership in less than one year. The borrower's
withdrawal of cash from the partnership may have a severe negative impact on the partnership's ability
to continue operating and must be considered in the analysis (typically applies to purchase
transactions).

3.3     Fixed Income
Verification that all income will continue for a minimum of three years is required. The following are
acceptable forms of verification:

       Social Security: Copy of a recent monthly SSI check or 1099 SSA, or bank statement showing
        direct deposit is required to verify income.

            o   SSI award letters used to verify income will require phone verification with the Social
                Security office and must be in borrower’s name.
            o   Benefits paid for dependents (children or adults) must continue for a minimum of three
                years from note date, and all statements must reflect borrower’s name.


       Disability: (Permanent disability only)

            o   Award letter stating amount and duration.
            o   Non-permanent disability will be reviewed on a case-by-case basis. The type of
                disability and reason for use must be provided when submitting for special
                consideration.
            o   For disability income requiring an SSA review prior to three years, a doctor’s statement
                or other documentation showing that income should continue for three years must be
                provided. Sufficient information should be included in the file to support the use of the
                income.

       Pension and Retirement: Direct deposit, bank statement, copy of check, W2-P or 1040s
        required to verify income.

Note: Fixed income may only be grossed up if tax returns are provided to validate the non-taxable
      amounts.

Debt ratios on fixed income borrowers cannot exceed 45%.




FHA Product Guidelines                                                            Updated 07/23/2012      28
                                      Nationstar Mortgage Internal
3.4     Other Income
Alimony/Child Support

       A copy of the divorce decree is required.
       Proof of consistent payment must be included. Any one of the below will be an acceptable form
        of verification:
            o   12 months canceled checks for AUS approved loans (TOTAL scorecard may reduce
                required documentation to three months in some cases.)
            o   Court records
       Payments must continue for a minimum of three years.

Bonus/Commission

A written VOE should always be used to support income if overtime, bonus, commissions, or
inconsistent income on paystubs are used to qualify.

A review of the last two years earnings is required to determine the trend of income. A two-year
average must be used if the income trend is increasing. If a decrease is noted, the most current year
income should be used. An indication of significant decline will render the income unusable unless
documentation can be obtained from the employer verifying expected current/future levels of income.

Borrowers with commission income must provide two years full tax returns. Tax returns should be
reviewed to verify any applicable deductions that may appear on Schedule 2106 or Schedule C.

1099 Income

If paid by 1099s, two years signed 1040s and Schedule C are required.

Statutory Employees

Many commissioned employees, such as insurance agents, are considered Statutory Employees and
are able to file a Schedule C for deductions, even though their earnings are reflected on a W-2 form.
The W-2 should be reviewed carefully. If the Statutory Employee box on the bottom is checked, a
review of the tax returns is required.

Part-Time Employment (Second Job)

Income may be used from a second job provided a minimum of 24 months of uninterrupted job history
for the part-time job is verified.

       Verification of the prospects of continued employment is required.
       Seasonal employment will be considered on a case-by-case basis, with a minimum of two
        years employment history and a VOE confirming employment will continue.




FHA Product Guidelines                                                         Updated 07/23/2012       29
                                     Nationstar Mortgage Internal
Interest/Dividends

       Must document last two years of income (1040s - all schedules).
       If decreasing, must use the most current year's income.
       If used as part of down payment, the amount of income derived for these funds must be
        subtracted.

Note Income

       A copy of the note illustrating terms of agreement.
       Must verify receipt of income for the most recent one-year period (1040s). Income not reflected
        on the tax return must be supported with 12 months cancelled checks or bank statements.
       This income must be received for a minimum of three years from the closing date.

Military Income

Acceptable income may include:

       Variable housing allowance
       Clothing allowance
       Flight and hazard pay
       Rations
       Proficiency pay

All income must be documented for a three year continuance.

Government Assistance

Income with a two-year history and three years continuance may be counted for assistance, such as
unemployment benefits for seasonal workers and union members.

Temporary Agency Employment
Documentation for a minimum of two years must be averaged, and the most recent 12 months should
be closely reviewed for declining income.

Trust/Inheritance

       A copy of the trust agreement reflecting borrower’s name.
       A statement from attorney or executor stating amount of trust, monthly income and expenses.
       Expected duration of trust (minimum three years).
       Two-year history of income (1040s).




FHA Product Guidelines                                                         Updated 07/23/2012    30
                                     Nationstar Mortgage Internal
Housing Allowance

This is supplemental income common to clergy and military.

       Military: A copy of paystubs showing various monthly allotments.
       Clergy: A copy of church budget or letter from church treasurer itemizing allowances.

Auto Allowance

Only the amount which exceeds any expenses reflected on the tax returns may be used. The net
amount must be added to income and cannot be used to offset the payment.

Commission from Subject Sale

If a borrower is a licensed real estate agent that is entitled to commission, that amount may be used for
the cash investment and is not considered a sales concession.

Unacceptable Forms of Income

       VA school benefits
       Capital gain or loss not documented for three years
       Expense allowances
       Room and board unless documented with two years returns

Temporary Leave Income (including Maternity Leave)
Temporary leave from work is generally short in duration and for reasons of maternity or parental leave,
short-term medical disability, or other temporary leave types that are acceptable by law or the
borrower's employer. Borrowers on temporary leave may or may not be paid during their absence from
work.

If Nationstar Mortgage is made aware that a borrower will be on temporary leave at the time of closing
of the mortgage loan and that borrower's income is needed to qualify for the loan, the lender must
determine allowable income and confirm employment as described below.

Requirements

       The borrower's employment and income history must meet standard eligibility requirements.

       A written verification of employment is required confirming the borrower’s statutory right to
        return to work or the employer’s commitment to permit the borrower to return to work. The date
        the borrower is scheduled to return to work, position of employment and income must be
        confirmed.

       A verbal verification of employment is required as described in section 3.1, Employment
        Verification.

       The borrower must provide written statement of his or her intent to return to work and the
        agreed upon date of return as evidenced by written verification of employment.




FHA Product Guidelines                                                          Updated 07/23/2012     31
                                     Nationstar Mortgage Internal
Income Used for Qualifying

The income stated on the written verification of employment that will be received once the borrower
returns to work must be used for qualifying.

These requirements apply only if Nationstaar Mortgage becomes aware through the employment and
income verification process that the borrower is on temporary leave. If a borrower is not currently on
temporary leave, Nationstar Mortgage must not ask if he or she intends to take leave in the future.


3.5     Rental Income
Obtain a schedule of real estate owned, along with the 1003, if applicant owns more than one rental
property.

Converting Primary Residence to Rental

Effective with case number assignments on or after September 19, 2008, and until further notice, the
underwriting analysis may not consider any rental income from the property being vacated, except
under the following provisions. The exclusion of rental income from property being vacated is being
instituted on a temporary basis while FHA further analyzes this situation to determine whether
permanent measures may need to be taken.

Exceptions

Rental income on the property being vacated, reduced by the appropriate vacancy factor, may be
considered in the underwriting analysis under the following circumstances:

       Relocations: The homebuyer is relocating with a new employer, or being transferred by the
        current employer to an area not within reasonable and locally recognized commuting distance.
        A properly executed lease agreement (a lease signed by the homebuyer and the lessee) of at
        least one year duration after the loan is closed is required, and evidence of the security deposit
        and/or first month’s rent has cleared the borrower’s account.
       Sufficient Equity in Vacated Property: The homebuyer has a loan-to-value ratio of 75% or less,
        as determined by either a current (no more than four months old) residential appraisal or by
        comparing the unpaid principal balance to the original sales price of the property. The
        appraisal, in addition to using forms Fannie Mae 1004/Freddie Mac 70, may be an exterior-only
        appraisal, using form Fannie Mae/Freddie Mac 2055, and for condominium units, form Fannie
        Mae 1075/Freddie Mac 466.




FHA Product Guidelines                                                           Updated 07/23/2012     32
                                     Nationstar Mortgage Internal
Rental Income from Subject Property
FHA guidelines allow the rent for a multiple unit property, where the borrower resides in one or more
units and charges rent to tenants of other units, to be used for qualifying purposes. The maximum rent
(less appropriate vacancy factor) must be based on the market rent schedule supplied by the
appraiser. Underwriter discretion must be used before counting rental income when any of the following
factors exist:

       First time homebuyer
       No current rental history and/or increase in housing expense
       Gift funds being used
       Lack of two months reserves and previous landlord experience

All Other Rental Properties

       If the rental has been owned more than one year: One year signed 1040, including Schedule
        E. Rental income must be shown on Schedule E or full PITI payment will be included in the
        debt ratio.

       If rental owned less than one year:

            o   Current lease required.
            o   Bank deposit statements/receipts to verify rental payments are being received.
            o   Rental amount must be equal to or less than appraiser’s estimate of rents.

Rental Property

The rental income is multiplied by the appropriate vacancy factor minus the PITI payment and is added
to the income unless tax returns provided show a greater percentage of expenses. Actual expenses
are used if tax returns are supplied any time they exceed the required percentage. A negative amount
is added to debt in debt ratio calculation.

The gross rental amount must be reduced for vacancies and maintenance by the following
percentages:

       Santa Ana HOC: 10%
       Philadelphia HOC: 15%
       Atlanta HOC: 15%
       Denver HOC: See below:
            o   10% for Colorado, Iowa, Minnesota, Montana and Wisconsin
            o   15% for Kansas, Louisiana, Missouri, Nebraska, New Mexico, North Dakota, South
                Dakota, Texas, and Wyoming
            o   20% for Arkansas, Oklahoma and Utah

3.6     Additional Income Verification
Tax transcripts for all borrowers must be obtained prior to final approval. For salaried employees, only
the most recent tax year must be provided. Transcripts for most recent two years of tax returns are
used for qualification purposes (such as self-employed, commissioned) and must be reviewed by the
underwriter. IRS stamped copies of tax returns are not acceptable.



FHA Product Guidelines                                                           Updated 07/23/2012    33
                                     Nationstar Mortgage Internal
                                      SECTION IV: Assets


4.0     Verification of Deposit
Source of funds may be verified with the most recent bank statement(s). Written VODs provided for
updated balances must be accompanied by a minimum of one bank statement. Written VODs must be
no more than 120 days old as of the note date or an updated VOD is required. Any large deposits must
be sourced and documented, as well as explanation and verification of any undisclosed debt revealed
on the documentation.

For AU approved loans, the borrower must provide the two most recent bank statements showing
beginning and ending balance. As an alternative, a VOD and most recent bank statement is
acceptable. For a manually underwritten loan, a VOD and two bank statements are required, or three
bank statements if the beginning and ending balance is not reflected.

4.1     Acceptable sources of down payment:
       Savings, checking accounts, CDs, 401Ks, IRA accounts, stocks, bonds.
       Proceeds from sale of prior home or investment property.
       Borrowed funds secured by an asset (CD, 401K, IRA, stock, bonds, automobiles, other real
        estate). The debt must be counted in qualifying ratios only on loans secured by items other
        than cash assets.
       Gift from immediate relative.
       Employee relocation plan proceeds.

Unacceptable sources of down payment:

       Borrowed funds (unsecured) or gifts from non-relatives
       Bridge loans
       Property trades

4.2     Gifts from Relatives
When gift money from a relative is to be used in a purchase transaction, a signed gift letter must be
provided. This letter must:

       Specify relationship of parties.
       Indicate that payment is not expected or required.
       Include name, address, and phone number of donor.
       Include property address.
       Include amount of the gift.

A bank statement from the gift provider must be provided showing evidence of funds. Sourcing of gift
provider funds is not required. Documentation must be in the file to show the funds coming out of the
donor’s account, and being deposited into the borrower’s account.




FHA Product Guidelines                                                          Updated 07/23/2012      34
                                        Nationstar Mortgage Internal
4.3     Earnest Money Deposit
The lender must always verify earnest money funds have been deposited with the title company
regardless of the amount; however, only if the funds exceed 2% of the sales price must they be
sourced.

4.4     Sale of Personal Property
Complete documentation must be obtained to verify the fair market value of the asset, including a
receipt or bill of sale, verification of funds received (cashiers check, money order, or personal check),
and proof that funds were deposited in the borrower’s account.

4.5     Cash Reserves
FHA guidelines do not require cash reserves.

Additional cash reserves may be used to compensate for lower credit scores or derogatory credit.
Examples of types of assets that may be used as cash reserves are:

       Checking and savings.
       Certificate of Deposit and money market funds.
       401K accounts:
            o   60% of the vested portion may be used for reserves (after deducting any outstanding
                loans).
            o   The file must be documented with verification of ability to withdraw from the account.
            o   Use retirement accounts as compensating factors and as cash reserves only if the
                account allows for withdrawals by the borrower(s).
            o   Retirement accounts that restrict withdrawals only in connection with the borrower’s
                employment separation, retirement or death should not be considered.
       Cash value of stocks, bonds, or other investment accounts.
       Sale of real property.
       Gift funds (individual or non-profit).

The following types of assets cannot be included in reserves:

       Equity in other real estate
       Funds from a cash-out refinance
       TRS and other retirement sources that cannot be accessed

Copies of money orders or cashiers checks are not acceptable. Source of funds must be verified and
deposited on the most recent bank statement(s). A HUD-1 statement must be provided if funds are to
be derived from the sale of a residence.




FHA Product Guidelines                                                            Updated 07/23/2012        35
                                       Nationstar Mortgage Internal
4.6       Large Deposits
If there is a large increase in an account, or the account was recently opened, the lender must obtain
from the borrower a credible explanation and documentation of the source of the funds. Sufficient
documentation must be provided to verify that any recent debts were not incurred to obtain part, or all,
of the required cash investment on a property being purchased.


Large deposits are defined as:

Refinance

         The cumulative amount of all non-payroll deposits which exceed 20% of all borrower's gross
          monthly income.

Purchase

         2% of the property sales price.




FHA Product Guidelines                                                         Updated 07/23/2012    36
                                      Nationstar Mortgage Internal
                                 SECTION V: Appraisal

5. 0 Limitation on Number of FHA loans
Borrowers may ONLY have more than one FHA loan with the following exceptions:

       Relocations: A borrower relocating for employment purposes may retain an existing FHA
        mortgage.
       Significant increase in family size: The file must document that the current housing is no longer
        feasible for family size, and the existing FHA mortgage must be paid down to 75% based on
        current appraised value. The property being purchased must have increased bedroom count.
        Only above grade bedrooms may be counted.
       Vacating a jointly owned property: Acceptable situations include divorce or co-borrowers who
        will be retaining residency in the FHA insured property.
       Non-occupying co-borrower: Borrowers who have co-signed FHA mortgages for immediate
        family members (who owner-occupy the property) are still eligible to obtain an FHA loan for
        their primary residence.
       Investment properties: Only allowed on streamline refinances (FHA-to-FHA) without appraisals,
        and the new loan must be a fixed rate.

5.1      Acceptable Property Types
Only the following residential dwellings (owner occupied or non-owner occupied) are acceptable
collateral on a secured loan.

       One-to-four units
       Condominiums
       Duplexes
       Townhomes
       Row homes
       Modular Homes (stick built quality)
       PUD Homes




FHA Product Guidelines                                                          Updated 07/23/2012     37
                                     Nationstar Mortgage Internal
Unacceptable Property Types

       Commercial property
       Mixed-use property
       Environmental Hazard Properties
       Timeshares
       Mobile Homes/Manufactured homes
       Cooperatives
       Agricultural/farm properties
       Vacant property/land/uninhabitable property
       Properties with excessive deferred maintenance
       Unique homes (such as homes without heating, sanitary systems, well or public water,
        overbuilt homes, earth homes, dome homes)


5.2     Condominiums
This form of collateral must be treated differently than the above listed properties. A condominium is a
dwelling that has shared common walls, common land or no land, and has various restrictions enforced
through the association by-laws. Any portion of utilities that are included in the HOA dues may be
deducted from the monthly expense if properly documented.

The condominium must be approved by FHA or qualify for Spot Condo Approval (spot approval
authority expires 02/01/2010). This form is available on InfoNET. Only fully completed projects are
allowed. The effective date of an apartment conversion must be at least 12 months prior to the date of
the application. Refer to the FHA and FNMA Condo Approvals Policy for detailed policy information.

       Projects consist of two units or more.
       Projects must be covered by hazard, liability, and flood insurance. The master policy must be a
        minimum of $1,000,000, and must include flood insurance if required. HO6 coverage must be a
        minimum of 25% of the total unit value.
       Right of first refusal is permitted unless it violates discriminatory conduct under the Fair
        Housing Act regulation in 24 CFR 100.
       No more than 25% of the property’s total floor area in a project can be used for commercial
        purposes.
       No more than 10% of the units may be owned by one investor.
       No more than 15% of the total units can be in arrears (more than 30 days past due) of their
        condominium association fee payment.
       At least 50% of the units of a project must be owner-occupied.


The underwriter must complete and sign a certification for compliance with the owner occupancy
requirement.




FHA Product Guidelines                                                             Updated 07/23/2012   38
                                       Nationstar Mortgage Internal
Site Condominiums
A site condominium is a single family detached property classified as a condominium. The land must
be owned and conveyed with the dwelling. Site condominiums do not require any type of approval.

5.3     Leasehold Properties
Allowed on a restricted basis in those areas of the country where they are a common form of
ownership, and when they are not used as a special financing mechanism to facilitate a purchase. An
underwriter certification is required documenting that full leasehold documentation will not be required
by the HOC.

5.4 Land Contract/Contract for Deed
A land contract is an unrecorded or recorded contract of sale on a property where the seller retains title
until the contract is paid in full. Nationstar Mortgage will consider paying off a land contract under the
following circumstances:

       All transactions must be treated as cash-out refinance. Land contracts will require a three-day
        rescission notice be signed at closing and funded accordingly.
       A copy of the executed land contract is required. Land contracts must be recorded or
        notarized.
       The land contract must be over six months old, and the property must be owner-occupied.
       Large increases in value must be documented and justified.
       The last six months canceled checks and VOM must be used to verify the pay history (cash
        receipts are unacceptable).
       Current value for the land may be used with six months seasoning.


5.5     Lease with Option to Buy
Nationstar Mortgage will consider lease options under the following conditions:

       A rescission notice must be executed at closing and funded accordingly.
       Last 12 cancelled checks are needed for verification of rent payment.
       Contract purchase price must be used for LTV calculation if less than 12 months.
       Copy of executed lease option is required.
       Appraiser must address market rent. Any amount over documented rent paid by the borrower
        must be considered a sales concession and deducted from the maximum loan amount.




FHA Product Guidelines                                                            Updated 07/23/2012    39
                                     Nationstar Mortgage Internal
5.6     Seasoning Requirements/Gifted Property
Building on Own Land
Any transaction where a borrower is building on land, or they already own the land, requires the
completion of Worksheet #5 to calculate the acquisition cost and maximum mortgage amount.

If the property has been owned less than six months, the value will be based on the lower of the
original purchase price or current appraised value. The purchase price must be verified from the
appraisal, title commitment, HUD-1, and/or a copy of the deed. Consideration may be given to
documented home improvements at underwriter discretion.

Gifted or inherited properties do not require seasoning.

5.7     Properties under Construction or Existing Less than One Year
Criteria for Maximum Financing
The table below describes the criteria that properties must meet to be eligible for greater than 90
percent financing, whether or not the property has been previously occupied.

In all cases, the file must contain a fully executed NCPA form 99a and 99b, along with completed forms
92541 (Builders Certification of Plans, Specifications & Sites) and 92544 (Warranty of Completion of
Construction).


Criteria                                               Description

Approval of Dwelling Site Plans                        The dwelling's site plans and materials were
                                                       approved before construction began by:
                                                                The Department of Veterans Affairs (VA)
                                                                An eligible DE underwriter, i.e. Conditional
                                                                 Commitment issued prior to framing
                                                                 or
                                                                An early start letter issued by a DE
                                                                 underwriter

Local Jurisdiction Building Permit and Certificate     The local jurisdiction has issued both:
of Occupancy
                                                                A building permit or equivalent prior to
                                                                 construction
                                                           and
                                                                Certificate of Occupancy or equivalent
                                                       Note: This does not apply to condominiums or
                                                             manufactured housing. These properties
                                                             have special circumstances for financing
                                                             approval.

Builder's Warranty                                     The dwelling is covered by a builder's 10-year
                                                       insured warranty plan that is acceptable to HUD.




FHA Product Guidelines                                                              Updated 07/23/2012      40
                                      Nationstar Mortgage Internal
Properties that are proposed under construction or existing construction less than one year old that do
not meet the criteria above are limited to 90% financing.

The 90% financing for properties proposed, under construction, or existing construction less than one
year old is calculated by using the lesser of the:

       Appraiser's estimate of value
        or
       Sales price, plus or minus required adjustments for:
             o   Seller contributions
             o   Inducements to purchase
                 and/or
             o   Additions to the mortgage amount

5.8     Appraisal Format
Appraisal reports must meet USPAP appraisal standards.

Required Forms

All appraisals must be completed on the most recent revision of the appropriate FNMA form with all
appropriate addenda:

       Form 1004 for detached, single family unit
       Form 1004C for manufactured
       Form 1073 for condominium
       Form 1025 for two unit properties
       Form 1004MC Market Conditions Addendum
       Form 1004D final inspection/recertification for existing properties (effective 2/15/2010)
       Form 92051 final inspection for new construction properties

No reduced documentation forms are allowed.

Required Photos

Original 35mm or similar quality laser/digital color photos:

  1. Front and rear (must show both sides of home) and street scene of subject.
  2. Front of all Comparable sales. MLS photos should only be used when the appraiser is unable to
     obtain new photos.
  3. Outbuildings, pools, and special features.
  4. Interior photos (including extra photos of repairs in process, recently rehabbed or deferred
     maintenance).




FHA Product Guidelines                                                           Updated 07/23/2012     41
                                        Nationstar Mortgage Internal
Required Exhibits

    1. HUD Form 92800.5B Conditional Commitment completed and signed by underwriter.
    2. Copy of successfully completed case number assignment.
    3. Detailed location map showing location of subject and all comparable sales.
    4. Floor plan showing exterior dimensions and room layout.
    5. Report pages with original or protected laser/digital signature(s) of appraiser(s).
    6. Form 439 (Statement of Limiting Conditions).
    7. Supplemental Addendum.
    8. Cost approach. Marshall and Swift calculations are required for cost approach on new
       construction and construction under one year old.
    9. 1004MC Market Conditions Addendum.
    10. 1004D Completion Certificate/Recertification of Value Report (existing construction appraised
        as “subject to repairs” or expired).
    11. HUD 92051 Compliance Inspection Report (new construction appraised as “subject to repairs”
        or “subject to completion”).
    12. HUD 92541-A Agreement to Execute Builder's Warranty of Completion of Construction (new
        construction or completed less than 12 months).
    13. HUD 92544 Warranty of Completion of Construction in Substantial Conformity with Approved
        Plans and Specifications (new construction only).
1004MC

All appraisals must contain a completed 1004MC. Per the instructions on the form, the information
used on the 1004MC should be taken from the Neighborhood section of the appraisal. Any
discrepancies in number of sales require a comment from the appraiser. All sections left blank or
marked NA must also be addressed in the comment section by the appraiser.

Cost Approach

Marshall and Swift is to be used to provide a full cost approach for new construction. Existing
construction requires only site value. When the estimated site value exceeds 30% of the estimated
market value of the subject, comment by the appraiser on the impact to marketability and whether it is
common to the area is required.

FMV Approach

The appraiser must consider the three traditional approaches in estimating the value of the property
(cost, sales comparison, and income). If the subject property is a multi-unit rental property, the
appraiser must complete the income approach. Both exterior and interior inspection of the property is
required. All rooms of the subject must be inspected.

5.9     Required Signatures
The appraisal must be complete by an FHA-approved roster appraiser. Supervisory signatures are not
acceptable.




FHA Product Guidelines                                                           Updated 07/23/2012     42
                                     Nationstar Mortgage Internal
5.10 Required Statements & Addendum
If any guidelines are exceeded, an addendum explaining the impact on marketability and whether it is
common and customary for the area is required. All properties classified as legal non-conforming use
must include a statement from the appraiser as to whether the property can be rebuilt in its existing
design, use, and utility, and any impact on marketability.

Significant increases in value over the last 24 months must be addressed by the appraiser (such as
market conditions, home improvements, and additions).

The appraisal report must include verbiage stating that all mechanical systems were inspected, as well
as attic and basement if applicable, and a statement acknowledging that the property meets HUD
Minimum Property Standards.

The appraiser is required to review the sales contract and report all pertinent data as well as a
complete listing history.

5.11 Comparable Sales
Age of Sales

Comparable sales should be dated within six months of the date of the appraisal. At least one
comparable within 90 days should be provided. If no recent comparable sales are available, older sales
may be used. Comparables over six months require a statement from the appraiser, justifying use.
Comparables over one year old may never be used as comparables 1-3 without a waiver from HUD.
Sale number 4 and greater may be over one year when used to support major areas of concern. The
comparables provided should bracket the subject property in sales price and square footage with a
maximum of 10% variance.

Distance

For urban properties, all comparable sales should be within one mile or 10 city blocks of the subject
property. Urban properties should have some sales located on the same street or within three city
blocks. For suburban properties, comparables may be up to three miles, and rural will allow a distance
up to 20 miles, with the proper supporting documentation.

Sales should not be located across major natural or man-made boundaries (rivers, lakes, interstate
highways, or county or state lines) without extensive explanation and support by the appraiser. At least
one sale should always be in the same subdivision, condo project, or HOA.

Property Type

The appraiser should make an attempt to provide comparable sales that are the same age, design,
appeal, and quality as the subject property. Condominiums also require all condominium comparables.
If the subject property is new construction located in a tract development, at least one comparable sale
should be a resale or located outside the specific housing tract or development in which the subject
property is located to support marketability.

5.12 Declining Markets
Second appraisals are no longer required for properties in declining markets. The primary appraisal
must include two active listings if either page 1 or the 1004MC indicate that the property is in a
declining market. A careful review of the comparables and 1004MC must be performed by the DE
Underwriter to determine that the value is substantiated.




FHA Product Guidelines                                                           Updated 07/23/2012     43
                                      Nationstar Mortgage Internal
5.13 Sales Concessions
Sales concessions must be listed on the appraisal. The appraiser must also note any third-party
contributions on the subject mortgage, and verify that he/she has reviewed the sales contract.

The sales price of properties which offer the purchaser a cash refund by means of a monthly payment
reduction plan (buydown or similar arrangement) is not to be used as comparable sales data unless the
worth of the total refund is deducted from the sales price to reflect the true all-cash payment to the
seller.

Appraisers must make a dollar-for-dollar adjustment to comparables where the seller's contribution
exceeds limits established by HUD, currently 6%. Seller buydowns are payments for discount points,
any type of interest payments, or seller payment of closing costs normally (under local market practice)
paid by the buyer (including the 1% loan origination fee). The sales price of the comparable is selected
as the base for making the adjustment in order to simplify the process.

5.14 Second Review of Appraisal
A second review by an underwriting or operations manager must be performed if:

       The underwriter considers the appraisal to be "poor quality" or the value is not supported within
        tolerance.
       All loans >$350,000.
       Appraisals not performed by a Nationstar vendor.

The manager may forward to the Appraisal Review department for a formal response.

The Appraisal Review department must confirm value for non-Appraisal Independence Requirements
(AIR)/VMC appraisals.

5.15 Second Appraisal/Anti-Flipping
A second appraisal may be required either by FHA or as an internal policy. The second appraisal must
be completed by an FHA approved appraiser but does not require a case number to be assigned,
since only one case number can be associated with the property at any time.

Resales Occurring Less than 90 Days Following Acquisition
Effective for all FHA mortgages with sales contracts dated on or after February 1, 2010, the 90-day
waiting period for resale of a property has been waived in its entirety. This temporary waiver will expire
on December 31, 2012.

The following guidelines apply to all transactions:

       Must be arms-length with no identity of interest.
       12-month chain of title must evidence only a transaction involving an REO sale to the current
        seller. No other sales in the last 12 months.
       Documentation is required that the property was marketed openly and fairly-including “For Sale
        by Owner” transactions.
       Original HUD-1 is required to document seller’s acquisition cost.

Additional requirements apply when the new purchase price exceeds the seller’s original acquisition
cost of the property. Acquisition cost is defined as the original purchase price plus any closing costs
reflected on the HUD-1.


FHA Product Guidelines                                                            Updated 07/23/2012    44
                                      Nationstar Mortgage Internal
Applicable When the Sales Price is Less Than a 20% Increase Over Acquisition
Cost:

An internal appraisal review is required.

Applicable When the Sales Price is a 20% or More Increase Over Acquisition
Cost:
Ineligible.

Resales Occurring Between 91 and 180 Days Following Acquisition

If the resale date is between 91 and 180 days following acquisition by the seller, the lender is required
to obtain a second appraisal made by another appraiser if the resale price is 100 percent or more over
the price paid by the seller when the property was acquired.

As an example, if a property is resold for $80,000 within six months of the seller’s acquisition of that
property for $40,000, the mortgage lender must obtain a second independent appraisal supporting the
$80,000 sales price. The mortgage lender may also provide documentation showing the costs and
extent of rehabilitation that went into the property resulting in the increased value, but must still obtain
the second appraisal. The cost of the second appraisal may not be charged to the homebuyer.

FHA also reserves the right to revise the resale percentage level at which this second appraisal is
required by publishing a notice in the Federal Register.

Resales Occurring Between 91 Days and 12 Months Following Acquisition

If the resale date is more than 90 days after the date of acquisition by the seller, but before the end of
the twelfth month following the date of acquisition, FHA reserves the right to require additional
documentation from the lender to support the resale value if the resale price is 5% or greater than the
lowest sales price of the property during the preceding 12 months. At FHA’s discretion, such
documentation may include, but is not limited to, an appraisal from another appraiser.

5.16 Appraisal Validity Periods
The expiration date for all appraisals on existing, proposed, and under construction properties will be
120 days. The appraisal expiration may be extended for 30 days as long as the sales contract is
executed prior to the expiration date of the appraisal. For refinance transactions, the initial DU/LP
findings must be dated prior to the expiration. The case number will be valid in FHA Connection for
approximately one year from the date of the last status change. An FHA appraisal may not be used in
more than one transaction. When refinancing an existing FHA loan to a new FHA, a new appraisal
must be ordered for the subsequent transaction.

5.17 Appraiser Independence
No appraisal may be ordered by a mortgage broker or any employee of the lender that is compensated
based on the successful completion of the loan. All retail and wholesale transactions must comply with
AIR requirements as of this date.




FHA Product Guidelines                                                              Updated 07/23/2012       45
                                      Nationstar Mortgage Internal
5.18 Appraisal Portability
A second appraisal may now be ordered in accordance with the following guidelines:

       The first appraisal contains material deficiencies as noted by the DE underwriter.
       The first appraiser is on Nationstar’s exclusionary list.
       The first lender did not provide the appraisal in a timely manner. A copy of the initial appraisal
        must be obtained prior to funding, and placed in the case binder.

In all cases, the underwriter must document the file with an explanation.

In accordance with USPAP, the lender is not permitted to request that the appraiser change the name
of the client on the appraisal report.

5.19 Adoption of Fannie Mae1004D/Freddie Mac 442 for Existing
Construction
       Part A Appraisal Update Report: To extend the validity period of an existing appraisal. Each
        extension is valid for 120 days with an expiration date not to exceed one year from the effective
        date of the appraisal. Must be completed by the original appraiser who is currently in good
        standing on the FHA roster.
            o   May not be used if the property has declined in value, the building improvements
                cannot be observed from the street, or the exterior inspection reveals deficiencies or
                significant changes.
       Part B Completion Report: To report the satisfactory completion of repair items for existing
        construction only. May be completed by the original appraisal or any other appraiser currently
        in good standing on the FHA Appraiser roster.
            o May not be used in lieu of Form 92051 for new construction and manufactured
                housing.

5.20 Rural Properties
Rural properties may exceed the standard comparable distance and age requirements with proper
underwriter consideration. The following items are also typically found on rural properties.

Zoning

       Forest or Farm Property Deferrals are acceptable.
       Dual zoning is acceptable as long as there are no exemptions for agricultural.
       “No zoning” is acceptable on existing, if common for the area. May require letter from county
        zoning.
       Agricultural zoning that does not provide for residential use is unacceptable.
       Commercial zoning is unacceptable.




FHA Product Guidelines                                                            Updated 07/23/2012     46
                                      Nationstar Mortgage Internal
Private Septic or Water

The appraiser must state that connection to public system is not feasible and does not negatively affect
marketability (normal and customary). Feasibility is typically defined as a cost of 3% or more of sales
price.

Well and septic inspections are required on any purchase involving a property that has been vacant for
30 days or more, and on any property for which the appraiser notes a possible system deficiency.

Properties containing both private septic and wells must meet minimum distance requirements between
them to prevent water contamination.

The property must typically be a minimum of one-half acre unless the local authority requires a larger
tract. Many counties also require an aerobic system.

For existing properties, FHA requires that a domestic well be located a minimum of 100 feet from the
septic tank’s drain field, and a minimum of 10 feet from the property line. If state or local regulations
require greater distances, those must be met.

Community Septic or Water

Community septic systems must be approved through the local authority (typically county or state) and
certifications must be retained in the file.

Community water systems require proof of a satisfactory water test within the past year, as well as
proof that the system is approved and monitored by the local authority (typically county or state). The
approval document is known in most states as a Certificate of Convenience and Necessity. Any water
system serving more than four properties must be incorporated.

Shared Wells

A private well may serve up to four properties. If there are more than four properties included, FHA
deems this a community system and additional conditions will apply. The following requirements must
be met:

       Share well must be capable of providing at least three gallons per minute.
       Provide a letter from the local health authority stating the well will provide safe and potable
        water.
       Have a valve on each dwelling service line as it leaves the well so that water may be shut off to
        each served dwelling without interrupting service to other properties.
       The well must be directly connected to the pumping energy source (not through a dwelling),
        and energy used for pumping must be separately metered.
       The well must be covered by an acceptable well-sharing agreement.

Foundations

Properties with pier and beam foundations must have adequate access in the crawl space for proper
inspection. In most instances, the appraiser will require an inspection by a structural engineer. The
report must contain the engineer’s seal and license number.




FHA Product Guidelines                                                            Updated 07/23/2012        47
                                      Nationstar Mortgage Internal
Bedroom Egress/Captive Bedrooms

Each bedroom must have access to the exterior of the home without passing through another
bedroom.

Properties in Close Proximity to an Airport

Additional information from the appraiser must be provided to support marketability. If the property is
located in a Runway Clear zone, the borrower must sign a Notice to Prospective Buyers of Properties
located in a Runway Clear Zone.

Operating and Abandoned Oil and Gas Wells

Must be a minimum of 300 feet from the dwelling.

Overhead High-Voltage Transmission Lines

The property may not lie within the fall line of the pole.

       High voltage is defined as 12-60 kV.
       Low wattage for power to homes, typically 12kV, is acceptable.

Stationary Storage Tanks

For tanks over 1000 gallons, the property must be 300 feet away.

Oil and Gas Pipelines

The pipeline must be noted on the survey, and for new construction, the dwelling must lie at least 220
feet from the centerline of the pipeline easement. The dwelling must also be a minimum of 10 feet from
any easements. Existing construction must be 10 feet from the easement and meet all local building
and zoning codes.

Private Roads
FHA no longer requires a road maintenance agreement unless the appraiser notes that the road is not
an all-weather surface or is in serious need of repair. The subject property must still be protected by an
easement granting permanent ingress and egress.

Private Driveways
The subject property must be protected by an easement granting permanent ingress and egress.

Heating Sources
FHA does not prohibit use of space heaters, propane tanks, or other sources of heating. They must
meet local health and building codes, be in proper working order, and the appraiser must not make any
note of deficiency or health hazard.




FHA Product Guidelines                                                           Updated 07/23/2012     48
                                       Nationstar Mortgage Internal
Bathrooms
Exhaust fans are required if there is no operable window.

Acreage

In cases where the total area is greater than 10 acres, the property value is based on the total acreage.
A minimum of one comp, with equal acreage, and an additional comp, with at least a third of the
acreage, must be provided.

5.21 Property Requirements
Obsolescence and Repairs

The appraiser must comment on all forms of physical, functional, and economic obsolescence, and
specify the cause of each. If repairs are needed, the appraiser must list and estimate the cost of the
repairs.

Appraisal reports "subject to completion per plans and specs" are only acceptable for review if the
property is greater than 90% completed as of the date of the report, and then conditioned upon the
receipt of a 92051 (Compliance Inspection) with front and rear photos prior to closing. The DE
Underwriter is to sign off on the 92051 Compliance Inspections.

Properties determined to be unique in design, functionally or economically obsolete, or physically
unacceptable as collateral should be noted, and necessary adjustments must be made to the value.

Property Condition

Properties rated by the appraiser as “Fair Condition” or “Average Minus” are unacceptable.

Square Footage

Subject properties with living areas of less than 800 square feet are generally not acceptable as
collateral.

Multiple Lots/Parcels

Each appraisal report should represent the value of only one parcel of land and improvements thereon.
On occasion, reports are received which include more than one lot or Assessor’s Parcel Number
(APN). In the case of multiple lots with separate APNs, the parcels must be combined by the taxing
authority. It may be necessary to obtain a survey showing location of improvements and rights to
ingress and egress.

Structural

Any recommendation by the appraiser regarding structural issues or settlement must be addressed in a
licensed engineer’s report. The report must reflect that no corrective action is required and the structure
is sound. If repairs are required, repairs must be completed prior to closing, with a copy of the
transferrable foundation warranty provided prior to closing. No escrow holdbacks are allowed.




FHA Product Guidelines                                                            Updated 07/23/2012     49
                                      Nationstar Mortgage Internal
Pest Inspections

A notation by the appraiser referencing pest infestation will require an inspection by a licensed pest
control specialist. All recommended treatment must be performed prior to closing. Verification will be a
completion certificate and paid receipt from the pest company performing the work, specifying the type
of treatment used. The report must be signed by the buyer and seller.

Outbuildings

The appraiser must state that all barns, sheds, and other structures on the property meet HUD
Minimum Property Standards regardless of value given, and should provide comparable properties with
the same amenities.

Additional Dwellings

Properties having more than one living unit (separate from the main house) must be appraised as
multi-unit properties. Similar comparable properties must be provided with two separate structures, and
zoning/ordinance compliance must be documented. Multiple dwellings must be on separate utilities but
share a common APN. Internal, or accessory units, must share utilities.

Unpermitted Additions

Permits are not required unless the addition violates local code or the appraiser notes substandard
construction or deficiencies. Converted garages should include replacement of the original garage door
with a fully finished interior and exterior wall.

Lead Based Paint

Properties constructed in 1978 or earlier may contain lead-based paint. The appraiser must note any
chipping, peeling, or defective paint surfaces. The defect must be remedied prior to closing.

5.22 Survey Requirements
The title commitment must be reviewed (specifically Schedule B) for any reference to an exception for
encroachments or other items that may be reflected on a survey. This clause must be deleted from the
final title policy and can be removed by either providing a survey affidavit or an actual survey.
Purchase transactions will require a survey less than 10 years old that is acceptable by the title
company. For a refinance, a previous survey or a survey affidavit may be provided.

5.23 Acknowledgement of Receipt of Appraisal
FHA requires that all borrowers sign either a copy of the Conditional Commitment 92900-b, or a
statement acknowledging that they have received a copy of the appraisal. This documentation must be
obtained prior to final approval and should be place on the right side of the file on top of the Conditional
Commitment.




FHA Product Guidelines                                                             Updated 07/23/2012     50
                                      Nationstar Mortgage Internal
                             SECTION VI: Loan Purpose

6.0     Purchase Contract
An original or true certified copy of the executed purchase contract and addenda signed by the buyer
and seller is required. The contract must be reviewed for the following:

       Purchase price
       Seller concessions
       Seller financing
       Buyer(s) name(s) must match applicant(s)
       Seller(s) name must match owner(s) name on title commitment

Expired contracts will require a fully executed extension.



6.1     Minimum Cash Investment
The borrower must make a minimum cash investment of 3.5% of the purchase price in addition to any
discount, closing costs, or prepaids required. The borrower may pay for the appraisal and credit report
with a credit card. However, if any fees are paid in this manner they may not be counted in meeting the
minimum required investment.



6.2     Down Payment Assistance Programs/Government Grants
Assistance provided in conjunction with the ARRA (American Reinvestment and Recovery Act) and
Neighborhood Stabilization program are acceptable sources of cash investment. The agency providing
the assistance must be an approved non-profit organization with the IRS, or a government
agency/instrumentality. A complete list of non-profit agencies and their current status can also be
accessed through FHA Connection at:
Single Family Origination > FHA Approval Lists > Non-Profits.

A print-out must be provided, showing the current status of the non-profit being used, prior to loan
approval.

All providers must be approved by Nationstar Mortgage prior to acceptance of the borrower’s
application. Requests for approval must be submitted to underwriting.support@nationstarmail.com.




FHA Product Guidelines                                                           Updated 07/23/2012    51
                                     Nationstar Mortgage Internal
Required Documentation
In addition to proof of eligibility for the non-profit, the following information must be provided and
approved by underwriting:

       Preliminary loan approval from the non-profit listing the terms, fees, and all documentation that
        will require signatures from the borrower at the time of closing.
       Instructions to the lender for document filing/return to the non-profit, and any special
        requirements to be met at or prior to funding.

The following must me provided prior to funding:

       Fully executed copy of all documentation required by the non-profit, including second lien note
        and security instrument, promissory note.
       Copy of wire transfer or other receipt of funds by the title company.
       HUD-1 to reflect total amount of advance applied to down payment/closing costs.

6.3     Seller Concessions
Points and closing costs paid by the seller cannot exceed 6% of the purchase price. If points and
closing costs paid by seller exceed 6%, the amount (exceeding 6%) must be deducted from the
purchase price. All other seller concessions must be deducted from purchase price.

Inducements to purchase, including repair allowances, decorating allowances, and personal property,
will result in a dollar-for-dollar reduction in the loan amount.

Any transaction involving a purchaser currently renting the subject property will require a market rent
schedule and proof of the rental amount being paid. Rental payments that are less than current market
rent constitute an inducement to purchase.

6.4     First Time Homebuyers
FHA has no restrictions for first time homebuyers. Special attention must be focused on pay history for
current rental, payment shock, and ratios.

6.5     Payment Shock
For borrowers increasing their housing expenses substantially, evidence of ability to handle the
increase should be documented, including cash reserves, minimal use of revolving credit, and evidence
that a higher portion of income is available to contribute to housing.




FHA Product Guidelines                                                              Updated 07/23/2012   52
                                       Nationstar Mortgage Internal
6.6     Special Requirements for Purchase Transactions
       Purchase Money Loans without a realtor will require Underwriting Manager approval.
       Purchase Money Loans where the broker, seller, and/or realtor are the same party will require
        an Underwriting Manager approval. The broker cannot be the buyer or seller.
       When the broker and realtor are the same party, the broker and realtor fee to broker cannot
        exceed 6%.
       The purchase price cannot be increased after the initial application to cover seller-paid closing
        costs.
       The purchase price may not exceed the list price shown on the appraisal.

6.7     REO Properties
The waiver of the 90-day flipping rule for foreclosing lenders does not grant immunity from second
appraisal requirements (refer to full guideline in the Appraisal section). A trustee’s deed must always be
provided to document the foreclosing entities’ cost basis in the property. In lieu of this documentation, if
the deed has already been filed, a RealQuest report can be obtained. For states that do not include
previous lien balance information in the Trustee’s Deed, written documentation from the current
lender/servicer must be attached to document the basis.




FHA Product Guidelines                                                            Updated 07/23/2012     53
                                      Nationstar Mortgage Internal
                      SECTION VII: Refinance Guidelines
Maximum loan-to-value calculations vary, based on the type of the existing loan and documentation.
These guidelines apply to all case numbers issued on or after 11/18/09.

7.0     Refinance Types
       Borrowers may not skip a mortgage payment; delinquent mortgages must be brought current
        prior to closing.

        Example: For a loan closing in the month of June, the May 1st payment must have been made
        prior to closing.

       If an FHA loan is being refinanced to an FHA loan, the refinance must fund and a wire must be
        received by the existing lender by the first day of the month. Any loan funding after the first day
        of the month would require the borrower to pay the previous month’s payment.
        Example: For a loan funding on May 2, the borrower would owe interest for the entire month of
        May for the prorated interest. So the May 1 payment must be paid by the borrower and may
        not be rolled in to the loan.

       If required, a new appraisal must be used. Appraisals on the subject property from previous
        transactions cannot be used regardless of age.
       Funds advanced on an equity line of credit in excess of $1000 within the past 12 months for
        purposes other than repairs and rehabilitation of the property: The line of credit is not eligible
        for inclusion in the new mortgage except for a cash-out refinance.
       Closed end subordinate liens dated at least 12 months prior to the date of application can be
        included on a rate/term refinance.
       No cash out is allowed for properties in the state of Texas
       Initial fees (such as credit report and appraisal) may not be added to the loan amount if paid by
        a credit card.
       The maximum LTV/CLTV on a rate/term refinance is 97.75%.
       Transfer of escrows-when the existing lender provides a payoff statement reflecting a credit for
        the existing escrow balance, the new mortgage amount should be calculated on the gross
        payoff amount prior to netting out the credit. The details of transaction on the 1003 should
        reflect the full payoff amount on line d and the credit must be listed in l. For Nationstar to
        Nationstar transactions the credit will show in the line that reads "NSM Refinance Escrow
        Transfer Credit". The HUD-1 must also reflect the full payoff amount in the top section of page
        one with the credit being indicated on the bottom section of page one.

Cash Out Refinances

An acceptable payment history must be included in the file documentation that reflects both of the
following:

       The loan is current.
       All payments have been made in the month due for the previous 12 months.

For mortgages with more than six and less than 12 months of payment history, all payments must have
been made on the due date, not simply in the month due. A payment history from the current servicer
must in the file.

Mortgages with less than six months mortgage history are not eligible for a cash-out transaction.


FHA Product Guidelines                                                             Updated 07/23/2012        54
                                      Nationstar Mortgage Internal
Refinance Transaction Involving Occupancy of Former Investment Property

Occupancy of Former Investment Property                     Eligible Financing

12 months or more prior to the loan application date of     Maximum financing at the same level as an
the refinancing mortgage.                                   owner-occupant.

Less than 12 months prior to the loan application date      Rate-and-term refinancing only (no streamline
of the refinancing mortgage.                                allowed) with an LTV not to exceed 85%.


Refer to the following worksheets:

No Cash-Out/Non Streamline – Refinance Maximum Mortgage Worksheet #1
Cash-Out/Non Streamline – Refinance Maximum Mortgage Worksheet #2

7.1     Streamline Refinances
Adding and Deleting Individuals on Title

Borrowers may be added or deleted with credit qualifying. Deletion of a borrower that does not trigger
the due-on-sale clause (death of a borrower or court order such as divorce) does not require credit
qualification

When deleting a borrower, the remaining borrower(s) must prove that the last six payments were made
from non-joint funds by the remaining borrower or credit qualification will be required.

Existing Second Liens

Existing second liens may remain in place subject to a subordination agreement. For HELOC seconds,
the credit limit must be used to determine compliance with CLTV guidelines. A copy of the note must
be provided.

Maximum Term

The term may not exceed the existing term plus 12 years.

Refinance Authorization

Refinance authorization must be obtained from FHA Connection to calculate the refund of the Upfront
Mortgage Insurance Premium.

FHA Secure

Borrowers who refinanced their delinquent non-FHA ARM into an FHASecure mortgage are not
eligible to streamline refinance their FHASecure mortgage. The refinance transaction subsequent to
the FHASecure mortgage must be a fully qualifying refinance.




FHA Product Guidelines                                                          Updated 07/23/2012       55
                                     Nationstar Mortgage Internal
Revisions for ALL Streamline Refinance Transactions

Seasoning

At the time of loan application, the borrower must have made at least six payments on the FHA-insured
mortgage being refinanced. On the date that the case number is assigned, all three of the seasoning
requirements below must be met:

       The mortgagor must have made six payments.
       At least six full months must have passed since the first payment date.
       At least 210 days must have passed from the closing date of the loan being refinanced.

Payment History

At the time of loan application, the borrower must exhibit an acceptable payment history as described
below.

       For mortgages with less than a 12-month payment history, the borrower must have made all
        mortgage payments within the month due.
       For mortgages with a 12-month payment history or greater, the borrower must have:

            o   Experienced no more than one 30-day late payment in the preceding 12 months.
                AND
            o   Made all mortgage payments within the month due for the three months prior to the
                date of loan application.




FHA Product Guidelines                                                            Updated 07/23/2012    56
                                    Nationstar Mortgage Internal
Net Tangible Benefit

Important Note: Reducing the term of a mortgage is acceptable on a streamline refinance only if the
new mortgage meets the net tangible benefit guidelines below.


From                     To

                         Fixed Rate                 One-Year ARM                 Hybrid ARM

Fixed Rate               Reduction of at least      New interest rate at least   Reduction of at least 5%
                         5% of P&I and MIP          two percentage points        of P&I and MIP
                                                    below the current
                         (new guidance)                                          (new guidance)
                                                    interest rate of the fixed
                                                    rate mortgage
                                                    (existing guidance)

One-Year ARM             New interest rate no       Reduction of at least 5%     New interest rate at least
                         greater than two           of P&I and MIP               two percentage points
                         percentage points                                       below the current interest
                                                    (new guidance)
                         above the current                                       rate of the ARM
                         interest rate of the ARM
                                                                                 (existing guidance)
                         (existing guidance)

Hybrid ARM During        Reduction of at least      New interest rate at least   Reduction of at least 5%
Fixed Period             5% of P&I and MIP          two percentage points        of P&I and MIP
                                                    below the current
                         (new guidance)                                          (new guidance)
                                                    interest rate of the ARM
                                                    (existing guidance)
                         New interest rate must
Hybrid ARM During                                   Reduction of at least 5%     New interest rate at least
                         be no greater than two
Adjustable Period                                   of P&I and MIP               two percentage points
                         percentage points
                                                                                 below the current interest
                         above the current          (new guidance)
                                                                                 rate of the ARM
                         interest rate of the ARM
                                                                                 (existing guidance)
                         (existing guidance)

If assets are needed to close, the lender must verify and document those assets.

Credit Score

FHA requires that the credit score(s) be entered into FHA Connection. If more than one credit score is
available, lenders must enter all available credit scores.

Maximum Combined Loan-to-Value (CLTV)

If subordinate financing is remaining in place, the maximum combined loan-to-value ratio is 125%.

For streamline refinance transactions…           The CLTV is based on…

With an appraisal.                               The new appraised value.
*Ineligible if case number is dated 4/18/11
or after.

Without an appraisal.                            The original appraised value of the property.


FHA Product Guidelines                                                             Updated 07/23/2012       57
                                       Nationstar Mortgage Internal
Uniform Residential Loan Application (URLA)

A fully completed 1003 must be provided. The application and HUD 92000A addendum must be signed
and dated by the borrower(s) before the loan is underwritten.

Revised Streamline Refinance Transactions WITHOUT an Appraisal

The maximum insurable mortgage cannot exceed:

       The outstanding principal balance* minus the applicable refund of the UFMIP

        Plus

       The new upfront mortgage insurance premium (UFMIP) that will be charged on the refinance.

*The outstanding principal balance may include interest charged by the servicing lender when the
payoff is not received on the first day of the month, but may not include delinquent interest, late
charges, mortgage insurance premiums, recording fees, escrow shortages or any miscellaneous fees.

For information on MIP refunds contact FHA’s Monthly Insurance Premium Support System at 800-
697-6967.

Refer to the Streamline Refinance Without Appraisal Maximum Mortgage Worksheet (FHA to FHA).


Revised Streamline Transaction WITH an Appraisal

For case numbers ordered 4/16/11 or after, the streamline with appraisal option is not
eligible.


For Case Numbers Dated Prior to 4/18/2011
The maximum insurable mortgage is the lower of:

       Outstanding principal balance minus the applicable refund of UFMIP, plus closing costs,
        prepaid items to establish the escrow account, and the new UFMIP that will be charged on the
        refinance.

        Or

       97.75% of the appraised value of the property plus the new UFMIP that will be charged on the
        refinance.


Discount points may not be included in the new mortgage. If the borrower has agreed to pay discount
points, assets must be verified to cover the cost, along with any other financing costs that are not
included in the new mortgage amount.

Refer to the Streamline Refinance With Appraisal Maximum Mortgage Worksheet (FHA to FHA).




FHA Product Guidelines                                                        Updated 07/23/2012       58
                                    Nationstar Mortgage Internal
7.2 FHA Negative Equity Program (NEP) AVAILABLE FOR RETAIL
ONLY

Eligibility for Negative Equity Position (NEP)

       The borrower must be in a negative equity position.
       The existing mortgage must be current.
       Owner-occupied only.
       The borrower must qualify under standard FHA underwriting requirements.
       The lender must write off at least 10% of the unpaid principal.
       Maximum LTV 97.75%. Maximum CLTV 115%.
       Maximum ratios for manually underwritten loans are 31%/50%.
       For borrowers currently on Home Affordable Modification Program (HAMP) modifications, the
        loan may close the month following the date the modification was permanent.
       For borrowers on non-HAMP modifications, the borrower must have made three payments on
        time and the modified mortgage must be current for the month due.
       Temporary and trial modifications are ineligible.
       The lender may not, through premium pricing or other manner, make mortgage payments or
        pay off debt to qualify the borrower for the new loan.

Secondary Financing
New or existing subordinate financing must meet the following guidelines:
       Maximum CLTV 115%.
       The term must not provide for a balloon payment before 10 years.
       No prepayment penalty allowed.
       All payments must be included in qualifying ratios unless they are deferred for a minimum of 36
        months from the date of closing.

Two specific disclosures will be available for this product:

    1. Borrower must be advised of negative impact to their credit report and to consult with their tax
       advisors regarding possible tax consequences of cancellation of debt.
    2. Borrower will be required to certify that he/she has not been convicted of a mortgage or real
       estate felony larceny, theft, fraud, forgery, or money laundering in the last 10 years.




FHA Product Guidelines                                                          Updated 07/23/2012     59
                                      Nationstar Mortgage Internal

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:33
posted:8/22/2012
language:Latin
pages:59